Tax Type
Retail Sales and Use Tax
Description
Communication system for government; Research and development
Topic
Exemptions
Date Issued
06-13-1988
June 13, 1988
Re: §58.1-1821 Application/ Sales and Use Tax
Dear***************
This will reply to your letter of December 1, 1987 on behalf of ************* (taxpayer) seeking correction of a sales and use tax assessment for the period January 1983 through December 1985.
FACTS
The taxpayer, a government contractor, was recently audited and held liable for the tax on a variety of untaxed purchases from suppliers. The taxpayer contests the assessment contending that these purchases were either, (1) made for resale to the government, (2) intended for direct and exclusive use in the design, development, integration, testing, installation, support and maintenance of computer driven communications systems for the government, or (3) purchased for use in a systematic study or search directed toward the development of new knowledge and understanding of automated communications systems into usable products, processes or systems for the government.
The taxpayer also seeks a reduction of the interest and the waiver of all penalties assessed in the audit.
DETERMINATION
Based on a January 4, 1988 determination of the department, (copy enclosed), in which the industrial processing and research and development exemptions were applied to material and equipment purchases made by a government contractor engaged in the manufacture, design, integration and installation of command, control, and communication systems, I find basis for extending these exemptions to the taxpayer's development of computer driven communication systems and research and development into automated communications systems.
Accordingly, the department's audit will be revised in a manner consistent with the enclosed January 4, 1988 determination. In addition, I find basis for the waiver of all penalties assessed in this case. After the adjustments indicated above, a revised notice of assessment will be sent to the taxpayer under separate cover.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner