Tax Type
Retail Sales and Use Tax
Description
Exemption certificates; Blanket exemptions; Substantial conformance
Topic
Exemptions
Date Issued
08-29-1997
August 29, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***********
This is in reply to your letter in which you seek a correction of the department's sales and use tax audit assessment issued to********** (the "Taxpayer"), for the periods May 1993 through June 1995, and July 1995 through March 1996.
FACTS
A recent audit disclosed that the Taxpayer did not collect tax on certain sales. The Taxpayer presented the auditor with copies of blanket certificates of exemption taken from its purchasers. In addition, the Taxpayer exempted other specific sales based on a letter from the purchaser stating that the tax would be accrued on its purchases, and that the Taxpayer was not to include tax on its sales invoices. The department's audit disallowed the use of the exemption certificates and the letter, and assessed tax on the sales.
The Taxpayer disagrees with the application of the tax, and states that the exemption certificates and letter were taken in "good faith" from the customers. The Taxpayer requests that the assessment be adjusted to exclude the sales in question.
DETERMINATION
Generally
Title 23 of the Virginia Administrative Code (VAC) 10-210-280(A) sets out the general rule that all sales, leases and rentals 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 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, either before or after notice by the department.
Exemption certificates are issued by the department and are available upon request. Form ST-10 is the department's resale exemption certificate and can be used to make an exempt purchase of tangible personal property when the purchaser is buying the item only for resale or for lease or rental purposes. The Taxpayer is required to have on file only one exemption certificate properly executed by the purchaser.
Blanket/Generic Resale Exemption Certificates
Historically, the department has not allowed blanket certificates of exemption. Specific exemption forms are available from the department for the varied exemptions allowed by Virginia law. In Public Document (P.D.) 91-105 (06/28/91), the department allowed the resale exemption for an out-of-state dealer, who was not registered with Virginia, provided it used the department's Form ST-10 and referenced the out-of-state registration number on the ST-10.
The department will also accept other state's resale exemption certificates, provided all of the criteria set out by Code of Virginia § 58.1-623, and all of the areas of information vital to the proper giving and receiving of the certificate are met. I have enclosed copies of previous rulings P.D.'s 95-316 (12/15/95), and 97-95 (02/21/97) which further detail and illustrate the department's policy with respect to such certificates.
Based on a review of the blanket certificates submitted, l will agree to remove from the audit the sales made pursuant to these certificates, as they are substantially in the format required by the department. Please note that for the future, the Taxpayer will be required to adhere to the policy established by the foregoing public documents.
Customer letter
Code of Virginia § 58.1-623 states that "The burden of proving that a sale ... of tangible personal property is not taxable is upon the dealer unless he takes from the taxpayer [customer] a certificate to the effect that the property is exempt."
In this instance there is no certificate of exemption form either from Virginia or in the form of a generic or blanket certificate. It has been the department's longstanding position that documents not in conformance with the requirements of the Code of Virginia or the supporting regulations, are not sufficient to overcome the Taxpayer's burden of proving that the assessment is erroneous. Accordingly, l am unable to accept the Taxpayer's submission of a letter from its customer as proof of exemption.
Based on the foregoing, the department's audit has been adjusted to exclude from the sample calculation those sales supported by blanket exemption certificates. Please return your payment for the balance of tax and interest totaling ***** to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880 within 30 days. If payment is not received within that time, interest will continue to accrue on the balance due. If you should have any questions regarding this matter, please contact ******** of the department's Office of Tax Policy at**********
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12536Q
Rulings of the Tax Commissioner