Tax Type
Retail Sales and Use Tax
Description
Exemption certificates; Out-of-state resale exemption certificate
Topic
Exemptions
Date Issued
01-24-1997
January 24, 1997
Re: Request of Ruling: Retail Sales and Use Tax
Dear******************
In your letter of November 4, 1996, you request a ruling on whether an out-of-state resale exemption certificate is acceptable under the circumstances described in your letter.
Facts
Company A is engaged in selling maintenance contracts and providing services on the actual repair of equipment. Company A sells a maintenance contract (the property) to Company B located in Massachusetts. Company B resells the property to Company C in Virginia who is the end-user. Company A ships the property directly to Company C. Company A's invoice shows the "bill to" address as Company B and the "ship to" address as Company C.
Company B is not registered with Virginia and furnishes Company A with a completed Massachusetts resale exemption certificate. You ask whether the department will honor the exemption certificate in exempting the transaction from the tax.
Ruling
The department's policy on exemption certificates is set out in Virginia Regulation 630-10-20 which provides, in part, the following:
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- All sales, leases and rentals of tangible personal property are subject to the tax until the contrary is established. The burden of proving that the tax does not apply rests with the 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.
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- Accordingly, it is imperative for dealers to obtain an exemption certificate whenever a purchaser claims an exemption under the law so that the dealer does not become directly liable for the tax.
Based on the facts presented, the sale transaction between companies A and B is a nontaxable sale for resale, provided that Company A obtains a resale exemption certificate from Company B. Company A's role is that of a supplier of property to Company B for resale. Since Company C is not making a purchase from Company A but from Company B, Company A is not obligated to collect the Virginia tax from Company C. Instead, Company C would be required to remit use tax directly to the department.
A Massachusetts resale exemption certificate is the appropriate certification to obtain for the transaction between companies A and B. Alternatively, a Virginia resale exemption certificate, Form ST-10, may be used for the transaction between companies A and B. If used, Company B's Massachusetts registration or account number should be (I) entered in the space marked "Certificate of Registration No." shown on the ST-10 and (ii) noted as a Massachusetts registration.
If you have any questions about this response, please contact ********************** at *************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11858R
- Accordingly, it is imperative for dealers to obtain an exemption certificate whenever a purchaser claims an exemption under the law so that the dealer does not become directly liable for the tax.
Rulings of the Tax Commissioner