Tax Type
Retail Sales and Use Tax
Description
Certificates of exemption
Topic
Exemptions
Date Issued
01-11-1994
January 11, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear********
This will reply to your letter of April 15, 1993 in which you seek correction of a sales and use tax assessment for ****************(the "Taxpayer").
FACTS
A recent audit of the Taxpayer revealed that it failed to collect sales tax on sales to certain customers and did not maintain the proper certificates of exemption. You protest the assessment of tax on the basis that the sales were to customers who enjoy a statutory exemption from the sales and use tax. Specifically, you assert the sales were made to government entities, federal credit unions, institutions of learning and an educational telecommunications entity. You maintain that sales to the foregoing entities are exempt from sales tax regardless of whether the Taxpayer had an exemption certificate on file and request that those sales be removed from the assessment.
You also request that the assessment be reduced for sales tax refunded to the Taxpayer's customers for the audit period pursuant to federal receivership proceedings. You also file a protective claim for refund with respect to sales tax collected for the period from March 1990 through October 1992 which will be refunded to customers.
Exempt sales: Va. Code §58.1-603 imposes a tax upon every person who engages in the business of selling tangible personal property at retail in Virginia. Regulation (VR) 630-10-20 provides that all sales of tangible personal property are subject to the tax until the contrary is established. The burden of proving the tax does not apply rests with the dealer unless he receives, in good faith, a certificate of exemption from the purchaser indicating that the property is exempt under Virginia law.
Exemptions from the sales and use tax are contained in Va. Code §§58.1-609.1 through 58.1-609.10. Va. Code §58.1-609.1(4) exempts sales to the Commonwealth or any political subdivision of the Commonwealth. Virginia Regulation (VR) 630-10-45 provides that sales to federally chartered credit unions are also exempt. Va. Code §58.1-609.4(2) exempts sales to colleges or other institutions of learning and to noncommercial educational telecommunications entities. To qualify for the exemptions, the property sold must be for use or consumption by the specified entity.
In this case, the customers at issue fall within groups or organizations recognized as exempt. The property sold (office supplies) is of a type consistent with the exemption, and the sales invoices clearly show the customers' names. Because the property sold on the surface appears clearly to have been for the use or consumption of statutorily exempt entities, and as it would be difficult for the Taxpayer to obtain certificates of exemption (as it ceased business in 1992), sales to the federal credit unions, the government entities, the college and the broadcasting entity will be removed from the audit.
Offset for taxes refunded to customers: The Taxpayer made sales to customers during the period on which it collected sales tax but did not deliver all of the ordered goods. As part of current federal receivership proceedings, the Taxpayer will refund a portion of the sales proceeds, including sales tax, to its customers for goods that were not delivered. You believe the sales tax refunded to its customers should be taken into consideration in determining the Taxpayer's correct tax liability for the audit period and should offset any assessment for this period.
The liability in this case resulted from the Taxpayer's failure to collect sales tax on certain sales. Consequently, the potential refunds which might be made to the Taxpayer's customers do not relate to the audit liability, as no tax was collected on the sales at issue. Therefore, any sales tax refunded to the Taxpayer's customers will not offset the outstanding assessment.
Protective claim: You submit a protective claim for refund of sales and use tax paid by the Taxpayer for the period March, 1990 through October, 1992, with respect to sales tax refunded to customers for goods that were not delivered.
Under the authority granted the Tax Commissioner by Va. Code §58.1-1824, I will hold your protective claim for refund without action pending the issuance of refunds to your Virginia customers pursuant to federal receivership proceedings. Upon notification that all refunds to Virginia customers have been issued pursuant to the proceedings, I will render a determination on the merits of your protective claim and, if necessary, issue a refund to the Taxpayer.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6941F
Rulings of the Tax Commissioner