Tax Type
Retail Sales and Use Tax
Description
Selling tangible personal property.
Topic
Appropriateness of Audit Methodology
Exemptions
Property Subject to Tax
Date Issued
01-22-2002
January 22, 2002
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**
This is in reply to your letter of September 14, 2001, in which you seek correction of the department's retail sales and use tax audit assessment issued to ***** (the "Taxpayer"), for the period January 1998 through December 2000.
FACTS
The Taxpayer is a retailer of farm equipment and supplies. The department's audit disclosed that the Taxpayer made sales of tangible personal property on which tax was not properly collected and sales on which tax was not charged that were not properly supported by a valid certificate of exemption. The Taxpayer has submitted additional information that it states supports the exemption from the sales tax and seeks an adjustment of the sample computation and a revision of the audit results.
DETERMINATION
In Virginia, all sales, leases and rentals of tangible personal property are taxable unless the contrary is established. Title 23 of the Virginia Administrative Code (VAC) 10-210-280 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.
Title 23 VAC 10-210-280 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." Therefore, the seller must use reasonable care and judgment in selling tangible personal property exclusive of the tax, even when an exemption certificate from the purchaser is in his file. Furthermore, certificates of exemption obtained during or after an audit will be accepted only if the department can confirm that the customer's use of the certificate was valid and proper for the specific transaction. See the enclosed Public Document 95-44 (03/15/95), which provides further detail on the department's longstanding position.
With regard to the assessed items for which exemption certificates have been provided after the audit, only the invoices numbered *** and *** will be removed from the department's sample as they have been determined to be purchases for resale. As is the department's policy with exemption certificates presented after an audit, the auditors reviewed the customers' use of purchases represented by invoices *** and ***. Their review disclosed that the purchases were for the customers' own use and consumption and not for resale. Additionally, exemption certificates that are invalid and not complete support invoices *** and ****. A review of the exemption certificates received after the audit reflect that the customer was never registered for the indicated period and the certificate received did not provide if the purchase was for resale or for another exempt purpose. In any event, the Taxpayer received invalid certificates of exemption after the audit was completed, and those certificates are not acceptable for the reasons noted above.
Concerning the remaining contested transactions, the Taxpayer did not receive a valid certificate of exemption on the date of the transaction, and has not presented one to date. Accordingly, there can be no claim that certificates of exemption were accepted in "good faith" when the certificates were never received. Consequently, I do not find sufficient cause to adjust the department's sample for these sales.
Based on the information presented, the department's audit will be revised as noted above and a revised bill with interest accrued to date will be sent to the Taxpayer. Additional interest will not accrue if the revised assessment is paid within thirty days of the date of the revised bill. If payment is not received within 30 days, interest will accrue on the outstanding balance.
If you should have any questions regarding this matter, please contact ***** of the department's Office of Policy and Administration, Appeals and Rulings, at *****@tax. state.va.us or at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/37136Q
Related Documents
Rulings of the Tax Commissioner