May 25, 2026
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to a letter submitted by ***** (the “Taxpayer”) requesting guidance for the acceptance of the retail sales and use tax exemption certificate for use by the Commonwealth of Virginia, a political subdivision of the Commonwealth of Virginia, or the United States (Form ST-12).
This response is based on the facts provided as summarized below. Any change in facts or the introduction of new facts may lead to a different result.
FACTS
The Taxpayer is a marketplace facilitator for caterers and restaurants. It conducts and facilitates a large number of sales with the departments and entities of various governments within the Commonwealth. The Taxpayer requests a clarification of the application of Form ST-12 for transactions involving government entities.
RULING
Government Exemption
Virginia Code § 58.1-609.1 4 sets out an exemption for “[t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States.” Title 23 of the Virginia Administrative Code (VAC) 10-210-690 interprets the statute, explaining that generally, “[s]ales to the United States, or to the Commonwealth of Virginia or its political subdivisions, are exempt from the tax if the purchases are pursuant to required official purchase orders to be paid out of public funds.” Under Virginia Tax Bulletin (VTB) 16-3 (5/2/2016), federal, state, and local government entities are permitted to make purchases of food, meals, and any services provided in connection with the sale of food and meals exempt from the retail sales and use tax.
Exemption Certificates
The Taxpayer poses a number of questions regarding the following certification clause on Form ST-12:
The undersigned, for and on behalf of the governmental agency named below, hereby certifies that all tangible personal property purchased or leased from the above dealer on and after this date will be for use or consumption by a governmental agency, that each such purchase or lease will be supported by the required official purchase order, and that such tangible personal property will be paid for out of public funds.
Question 1
When a government employee is certifying that they will spend Commonwealth funds appropriately, what is the Taxpayer’s responsibility for verifying whether the Virginia employee has the authority to make the purchase?
Pursuant to Virginia Code § 58.1-623 A, “All sales or leases are subject to the tax until the contrary is established. The burden of proving that a sale, distribution, lease, or storage of tangible personal property is not taxable is upon the dealer unless he takes from the taxpayer a certificate to the effect that the property is exempt under this chapter.” Title 23 VAC 10-210-280 A further explains, in part, that “a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable, either before or after notice.”
Title 23 VAC 10-210-280 B provides that reasonable care and judgment must be exercised by both the purchaser and dealer when ensuring the completeness and correctness of exemption certificates. An exemption certificate may be accepted in good faith when the certificate has been:
1. Submitted as part of the original transaction,
2. Filled out completely,
3. Afforded reasonable care by both parties to the transaction to ensure correctness (i.e., there are no obvious errors in the form’s completion), and
4. Submitted to purchase the tangible personal property covered by the exact wording of the certificate.
In International Paper Company v. Virginia Department of Taxation, CL-2009-360, Circuit Court of Fairfax County (July 29, 2010), also issued as Public Document (P.D.) 10-258 (10/25/2010), the court held that a dealer could “satisfy its burden of good faith and reasonable care and judgment in taking a certificate to the effect that the property purchased is exempt” if:
Upon a facial examination of the certificate, a dealer could reasonably conclude that the items purchased could potentially be used for any of the exempt purposes claimed on the certificate of exemption; or
Based upon the actual dealer's knowledge of the business of its purchaser, the dealer could reasonably determine in good faith that the specific purchaser intended to use the items purchased for one or more of the exempt purposes claimed on the certificate of exemption.
The standard addressed in International Paper Company is applicable only when a valid certificate is received and retained at the time of sale. Thus, once the Taxpayer obtains a properly completed and signed certificate of exemption from a political subdivision or a governmental agency certifying that the purchase qualifies for an exemption under the Virginia retail sales and use tax law, and has used reasonable care in receiving the exemption certificate, the Taxpayer would be considered to have satisfied its responsibility for verifying signature authority and would be absolved from collecting the tax on the sale.
Question 2
Purchase orders are not always available or provided timely. Some entities do not have a purchase order requirement. How does the Taxpayer know if a purchase order is required?
Title 23 VAC 10-210-690 A states “[s]ales to the United States, or to the Commonwealth of Virginia or its political subdivisions, are exempt from the tax if the purchases are pursuant to required official purchase orders to be paid out of public funds. Sales made without the required purchase orders and not paid for out of public funds are taxable.” See P.D. 24-102 (10/3/2024).
A taxpayer should be able to provide sufficient information that allows an auditor to verify the exempt sale and connects the sale to the exemption certificate provided by the entity. See P.D. 20-132 (8/11/2020). As such, the Department has determined that exempt sales may be made to the federal government, Virginia government agencies, and Virginia local governments entities provided that either the purchase is made pursuant to an official purchase order or the purchaser provides a taxpayer with a valid government exemption certificate. See P.D. 89-309 (11/7/1989), P.D. 04-184 (10/8/2004), 07-55 (5/10/2007), and P.D. 13-9 (1/31/2013). As such, if the Taxpayer is unable to provide an official purchase order, the Department will accept a valid Form ST-12.
Question 3
How does the Taxpayer validate purchases in which a government purchasing card is used?
Purchases by governments can be paid through direct billing to the agency or via an approved government credit card. Sales that are billed directly to the government and paid for by the government's electronic funds transfer, check, or credit card are exempt of the tax. Only those credit card purchases for which the credit of the government is bound and billings are sent directly to and paid by the federal government are exempt from the retail sales and use tax. See P.D. 13-9 (1/31/2013).
A purchase with a government purchase card would be controlled by the approving government agency. Information concerning federal government purchase cards can be obtained from the General Services Administration’s SmartPay website at https://smartpay.gsa.gov/. For Virginia government transactions, the Taxpayer should review the information provided on the Charge Card Administration page of the Virginia Department of Account’s website at https://www.doa.virginia.gov/reference/chargeCardAdmin/.
Question 4
What happens when purchase orders are received after the order has been placed?
Optimally, all necessary documents to verify the taxability of a sale would be provided simultaneously with the transfer of the property. This, however, is not always possible or realistic. When a valid certificate is not received at the time of sale, the “good faith acceptance” privilege is invalidated, and the dealer becomes subject to the tax that was not applied to the transaction. See P.D. 98-29 (2/20/1998) and P.D. 23-99 (8/17/2023). While the dealer has the responsibility to prove the transaction is exempt, the Department also applies “greater scrutiny” to determine whether the transaction is exempt in order to avoid collecting tax when it is not due. See P.D. 98-29 (2/20/1998), P.D. 04-75 (8/25/2004), P.D. 10-201 (8/31/2010), P.D. 17-114 (6/29/2017), and P.D. 22-69 (4/13/2022).
Under Virginia Code § 58.1-633, every dealer is required to keep and preserve suitable records of the sales, leases, or purchases, as the case may be, subject to the retail sales and use tax. Title 23 VAC 10-210-470 similarly provides that a dealer is “required to keep and preserve for three years adequate and complete records necessary to determine the amount of tax liability.”
The retail sales and use tax is a transactional tax. The determination as to the taxation of a specific transaction is based on the underlying documents that support the transaction. See P.D. 00-100 (5/25/2000) and P.D. 25-30 (2/27/2025). Thus, so long as a purchase order can verify and support the treatment of a transaction, the timing of the receipt of such purchase order is inconsequential.
Question 5
How is the Taxpayer able to determine whether purchases were paid out of the public funds?
As indicated in the response to Question 3, a purchase with a government purchase card would be determined by the approving government agency. As long as the Taxpayer receives a government purchase order or valid Form ST-12 from a government entity and practices reasonable care, it will have satisfied its obligations under the law and would not be responsible for tax on such transactions.
The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****.
Sincerely,
Kristin L. Collins
Tax Commissioner
Commonwealth of Virginia
AR/5005.B