Tax Type
Retail Sales and Use Tax
Description
Exemption Certificates
Topic
Exemptions
Property Subject to Tax
Date Issued
12-15-1995
December 15, 1995
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***********
This will reply to your letters in which you seek correction of sales and use tax assessed to *************(the "Taxpayer"), for the period November 1987 through October 1992.
FACTS
The Taxpayer is a manufacturer of desktop hardware and software products for use by businesses and governments in making presentations and conducting seminars and workshops. The Taxpayer sells its products worldwide through a network of dealers and distributors. The Taxpayer's manufacturing facilities are located outside Virginia; however during the audit period the Taxpayer maintained a sales office within Virginia.
As a result of the department's audit, an assessment was generated for sales made exempt of the tax in the absence of exemption certificates. The Taxpayer protests the tax and asserts that the sales qualify as sales for resale. The Taxpayer offers information in lieu of valid resale exemption certificates to support its claim. The Taxpayer concedes one of the sales and has submitted payment of the tax.
DETERMINATION
Code of Virginia § 58.1-623, copy enclosed, provides that "all sales or leases are subject to the tax until the contrary is established. The burden of proving that a sale...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..." Virginia Regulation (VR) 630-10-20, copy enclosed, cautions, however, that "a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable..."
Further, certificates of exemption obtained during or after an audit situation will be accepted only if the department can confirm that the customer's use of the certificate was valid and proper for the specific transaction.
The Taxpayer asserts that at one time the exemption certificates were on file regarding the disputed sales, however, due to moving and changing personnel, the certificates were lost. The Taxpayer was given additional time by the auditor to obtain the exemption certificates but was unable to because the dealers are no longer in business or could not be located. Nevertheless, to support its claim that the sales constitute exempt sales for resale, the Taxpayer submits documentation relating to resale agreements. Based on the information provided and the department's verification that two of the businesses in question were Virginia registered dealers during the audit period, I will agree to remove the tax assessed on lines 1,2,3,5,and 7. Lines 4,8, and 9 will remain taxable as the Taxpayer has not submitted convincing evidence regarding these sales.
The audit will be revised in accordance with the determination reached in this letter and a revised Notice of Assessment will be sent to the Taxpayer under separate cover. The assessment will reflect the accrual of interest through the date of the Taxpayer's initial letter to the department.
In addition, the Taxpayer has indicated that its business has shifted to providing sales to end users at retail. As such, l have enclosed Form R-1 (combined registration application) and Form R-4 (instructions). Completion of the R-1 will allow the department to add sales tax to the Taxpayer's current registration. Please return the completed R-1 to ***** Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23282-1880. You may also contact her if you have additional questions at*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10267J
Rulings of the Tax Commissioner