Tax Type
Retail Sales and Use Tax
Description
Exemption certificates; Certificates of exemption
Topic
Exemptions
Date Issued
08-06-1996
August 6, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear********
This will reply to your letter of June 26, 1996, in which you seek correction of a sales and use tax assessment to ********** (the Taxpayer) for the period April 1993 through March 1996.
FACTS
The Taxpayer operates a hardware store. As a result of a recent audit you contest the tax assessed with respect to certain untaxed sales to churches. The Taxpayer maintains that it accepted from its customer a certificate of exemption ST--13A in good faith for such items held taxable in the audit. The Taxpayer further indicated in its letter that if a supplier fails to collect the tax on any taxable purchases, it is the liability of the consumer to report and pay the use tax on such purchases.
DETERMINATION
In Virginia, all sales, leases and rentals of tangible personal property are subject to the tax unless the contrary is established. Virginia Regulation (VR) 630-10-20 (B) (copy enclosed) explains that the burden of proving that the tax does not apply rests with a dealer unless he takes, in good faith from the purchaser or lessee, a certificate of exemption indicating that the property is exempt under the law. A certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable.
The regulation further provides that "[a]n exemption certificate cannot be used to make a tax-free purchase of any item of tangible personal property not covered by the exact wording of the certificate." As such, the seller must use reasonable care and judgement in selling tangible personal property exclusive of the tax, even when an exemption certificate from the purchaser is in his file. See the enclosed P.D. 94-69 (3/18/94) which further addresses the acceptance of exemption certificates for purchases by churches.
In this case, the particular transactions involve the sale of small tools, spackling, locksets, and accessories to churches. The church exemption certificate, ST-13A, was provided. This certificate does not allow an exemption for building and construction materials. Accordingly, this certificate was not valid at the time of acceptance and the transaction was appropriately held taxable.
In the future, the Taxpayer must exercise due caution in selling small tools and other related items exempt of the tax. A seller should not accept a certificate of exemption if he has a good reason to believe that an article is not being purchased for use in a proper exempt manner. Further, a seller should not accept a certificate for purchases which are not covered by the exact wording of the certificate.
Lastly, while it is true that a purchaser should remit use tax on any untaxed purchases, dealers are legally obligated to collect and report the tax on their sales to customers. As provided in the enclosed Code of Virginia § 58.1-625, the department may look to either the dealer or the purchaser for such tax liability.
Based on the foregoing, I find no basis for adjusting the assessment. The Taxpayer will receive an updated notice of assessment shortly and this should be paid within 30 days to avoid the accrual of additional interest. If you have any other questions regarding this letter, please contact ****** at**********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11406T
Rulings of the Tax Commissioner