Tax Type
Retail Sales and Use Tax
Description
Deficiency assessments, Taxpayer sells and services trucks and logging equipment
Topic
Collection of Delinquent Tax
Date Issued
07-27-1999
July 27, 1999
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 period May 1995 through March 1998. I note that a portion of the assessment has been paid. I apologize for the delay in our response.
FACTS
The Taxpayer sells and services trucks and logging equipment. The ***** department's audit disclosed that certain sales were subjected to the tax on the basis that either no sales taxes were charged, or there were no valid certificates of exemption on file. The Taxpayer contends that the sales at issue should be regarded as exempt on the basis that the Taxpayer accepted exemption certificates in good faith from its customers.
DETERMINATION
Certificates of Exemption
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....
This same section further provides that:
Comments by the auditor indicate that the sales held taxable represent sales on which no tax was charged, or sales on which the exemption certificate was incomplete, invalid, infirm or inconsistent upon receipt. As the Taxpayer failed to apply the tax to certain sales and secure a valid certificate of exemption, the auditor was correct in including the sales of equipment and supplies in the audit calculations.
The Taxpayer believes its sales to businesses engaged in harvesting forest products may be made exempt of the tax pursuant to Code of Virginia § 58.1-609.2(6). However, not all sales of tangible personal property to such businesses qualify for the exemption. Further, as noted above, a dealer may make sales exempt of the tax only when a complete and valid certificate of exemption is presented by the purchaser. In this case, the Taxpayer did not receive and maintain complete and valid exemption certificates for the sales at issue. Therefore, the auditor properly assessed tax on the sales.
With regard to the Taxpayer's reference to the litigation of such machinery, equipment and supplies purchased and used by harvester's of forest products, my staff and I are not aware of any current petitions before the courts at this time.
Exemption Expanded Effective July 1,1999
As a matter of interest, the 1999 Virginia General Assembly passed legislation (Senate Bill 864, 1999 Acts of Assembly, Chapter 229) which amends the agricultural exemption under Code of Virginia § 58.1-609.2(6), copy enclosed. This bill expands the current exemption available to machinery used directly in the harvesting of forest products by applying the exemption to machinery used in certain pre-harvesting and post harvesting activities. This bill became effective July 1,1999, and is not retroactive. Accordingly, on and after July 1,1999, a dealer may make sales of qualifying machinery, equipment and supplies exempt of the tax provided that the purchaser presents a complete and valid certificate of exemption.
Based on the foregoing, the department's assessment is correct and remains due and payable. The Taxpayer should return its payment for the balance of the tax, interest and accrued interest totaling ***** to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218- 1880, within 30 days from the date of this letter. 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/17454Q
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 period May 1995 through March 1998. I note that a portion of the assessment has been paid. I apologize for the delay in our response.
FACTS
The Taxpayer sells and services trucks and logging equipment. The ***** department's audit disclosed that certain sales were subjected to the tax on the basis that either no sales taxes were charged, or there were no valid certificates of exemption on file. The Taxpayer contends that the sales at issue should be regarded as exempt on the basis that the Taxpayer accepted exemption certificates in good faith from its customers.
DETERMINATION
Certificates of Exemption
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....
This same section further provides that:
-
- The certificate mentioned in this section shall relieve the person who takes such certificate from any liability for the payment or collection of the tax, except upon notice from the Tax Commissioner that such certificate is no longer acceptable. Such certificate shall be ... substantially in such form as the Tax Commissioner may prescribe.
- The certificate mentioned in this section shall relieve the person who takes such certificate from any liability for the payment or collection of the tax, except upon notice from the Tax Commissioner that such certificate is no longer acceptable. Such certificate shall be ... substantially in such form as the Tax Commissioner may prescribe.
Comments by the auditor indicate that the sales held taxable represent sales on which no tax was charged, or sales on which the exemption certificate was incomplete, invalid, infirm or inconsistent upon receipt. As the Taxpayer failed to apply the tax to certain sales and secure a valid certificate of exemption, the auditor was correct in including the sales of equipment and supplies in the audit calculations.
The Taxpayer believes its sales to businesses engaged in harvesting forest products may be made exempt of the tax pursuant to Code of Virginia § 58.1-609.2(6). However, not all sales of tangible personal property to such businesses qualify for the exemption. Further, as noted above, a dealer may make sales exempt of the tax only when a complete and valid certificate of exemption is presented by the purchaser. In this case, the Taxpayer did not receive and maintain complete and valid exemption certificates for the sales at issue. Therefore, the auditor properly assessed tax on the sales.
With regard to the Taxpayer's reference to the litigation of such machinery, equipment and supplies purchased and used by harvester's of forest products, my staff and I are not aware of any current petitions before the courts at this time.
Exemption Expanded Effective July 1,1999
As a matter of interest, the 1999 Virginia General Assembly passed legislation (Senate Bill 864, 1999 Acts of Assembly, Chapter 229) which amends the agricultural exemption under Code of Virginia § 58.1-609.2(6), copy enclosed. This bill expands the current exemption available to machinery used directly in the harvesting of forest products by applying the exemption to machinery used in certain pre-harvesting and post harvesting activities. This bill became effective July 1,1999, and is not retroactive. Accordingly, on and after July 1,1999, a dealer may make sales of qualifying machinery, equipment and supplies exempt of the tax provided that the purchaser presents a complete and valid certificate of exemption.
Based on the foregoing, the department's assessment is correct and remains due and payable. The Taxpayer should return its payment for the balance of the tax, interest and accrued interest totaling ***** to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218- 1880, within 30 days from the date of this letter. 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/17454Q
Rulings of the Tax Commissioner