Tax Type
Retail Sales and Use Tax
Description
Government contractor; Exemptions
Topic
Property Subject to Tax
Date Issued
12-18-1993
December 28, 1993
Re: §58.1-1821 Application: Sales and Use Tax
Dear*************
This will reply to your letter of November 17, 1993, which supplemented your letter of August 3, 1993, to the department's********** District Office. As your last letter was received after my November 16, 1993, determination, and based upon our later telephone conversation, I will treat it as a request for reconsideration.
Although sympathetic to your client's situation, upon further review the facts and precedents set forth in your most recent letter do not appear to differ materially from those set forth in your earlier letter. As such, I do not see any basis for changing my November 16, 1993, determination.
In short, you argue that your client is entitled to the limited contractor's "temporary storage" exemption provided in Va. Code §58.1-609.3 with respect to property that could have been purchased tax free in another state. The basis for your argument is that North Carolina law provides a refund of tax paid by a contractor, in effect providing for a tax free purchase. In reality, however, North Carolina law does not exempt government contractors or provide for a refund to the contractor for sales and use tax he has paid to the state -- rather, the refund is provided to the governmental entity that entered into the contract.
As (1) your client clearly would have been required to pay the tax had it purchased the materials in North Carolina and (2) any refund from North Carolina would have been provided to the governmental entity rather than your client, an exemption would not be available to your client even under a liberal reading of Va. Code §58.1-609.3 (of course, Virginia law requires exemptions to be strictly construed, with any doubts resolved in favor of the taxing authority). Also, your client's situation differs markedly from that of the taxpayer in Public Document 91-89, where Massachusetts law clearly provided an outright exemption for government contractors.
While I am unable to grant the exemption under Va. Code §58.1-609.3, as agreed to in my earlier determination, the department will waive the penalty assessed to your client and issue a revised notice of assessment. Such notice will be due and payable within 30 days of its issuance.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/7441
Rulings of the Tax Commissioner