Tax Type
Retail Sales and Use Tax
Description
Application of sales and use taxes; Presumption of taxability; Exemption certificates
Topic
Taxability of Persons and Transactions
Date Issued
09-19-1997
September 19, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***************
This will reply to your letter in which you seek the correction of assessments issued to ***************(the Taxpayers), for the periods of February 1993 through December 1995 and February 1993 through January 1996, respectively. I apologize for the delay in responding to your letter.
FACTS
The Taxpayers were audited by the department and tax was assessed on exempt sales for which they could not provide valid exemption certificates. The Taxpayers maintain that exemption information for the exempt sales was provided on their own forms and that these forms provide the same information contained in the department's exemption certificates. For this reason, the Taxpayers seek the correction of the assessments with respect to the exempt sales.
DETERMINATION
Code of Virginia § 58.1-623(A) (copy enclosed) provides that "[a]ll sales or leases are subject to the tax until the contrary is established. The burden of proving that a sale, distribution, lease, or storage 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 under this chapter." Paragraph B of this same section states that "[t]he certificate mentioned in this section shall relieve the person who takes such certificate from any liability for the payment or collection of the tax ...."
The department recently issued the enclosed copy of Public Document 97-95 (2/21/97) which discusses the use of exemption certificates and the criteria required by the department for resale exemption certificates. The information required for resale exemption certificates is listed in this document. The department must also approve exemption certificates and forms designed by taxpayers prior to their use.
The department's records indicate that the Taxpayers have been audited several times prior to this audit and, at the conclusion of the last audit, were notified to obtain valid exemption certificates for exempt sales. The notes from the previous audit indicate that the auditor provided instructions to the Taxpayers for implementing procedures to comply with the department's exemption certificate requirements. The auditor also noted that the Taxpayers were told that all unsupported exempt sales would be disallowed in future audits. It is apparent that the Taxpayers did not change their procedures to comply with the auditor's instructions from the previous audit.
Title 23 of the Virginia Administrative Code (VAC) 10-210-280(A)(copy enclosed) provides that "a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable, either before or after notice." The Taxpayers have not provided the department with exemption documentation that meets the department's requirements nor have they received approval to use their own exemption forms. Based on the above, I have no alternative but to hold the assessments taxable. However, I will allow the Taxpayers one final opportunity to provide valid exemption certificates to the department for the exempt sales held in the audit. I understand the department's auditor provided the Taxpayers with copies of all exemption certificates currently in use for Virginia sales and use tax purposes.
The Taxpayers will be allowed ninety days to provide valid exemption certificates for the department to review. The Taxpayers should contact the department's ***** Audit Unit at***** to arrange a time to review this information. If no information is provided within ninety days, the assessments will be considered correct and updated notices of assessment with accrued interest will be issued to the Taxpayers. If you have any questions, please contact ****** at**************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11583S
Rulings of the Tax Commissioner