April 6, 2021
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you seek the correction of the calculation of interest on a refund of retail sales and use tax requested by ***** (the “Taxpayer”) for the period April 2014 through September 2016. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a multinational computer technology corporation specializing primarily in developing and marketing database software and technology, cloud engineered systems, and enterprise software products. The Taxpayer entered into a Memorandum of Understanding (MOU) with the Virginia Economic Development Partnership Authority (VEDA) on January 16, 2013, which entitled the Taxpayer to retroactively request refunds for data center assets placed into service beginning in April 2014. The main contention in the appeal is the incorrect calculation of interest on a refund of overpayments of the Virginia retail sales and use tax. Interest on the requested refund was calculated from the date the completed refund request was received, which was March 2018. The Taxpayer contends the interest calculated on the Department’s refund is understated and that such interest should have been calculated pursuant to the provisions of Virginia Code § 58.-1833 A.
DETERMINATION
Virginia Code § 58.1-1833 A states that interest shall be allowed and paid upon the overpayment of any tax administered by the Department. Such interest shall accrue from a date sixty days after payment of the tax, or sixty days after the last day prescribed by law for such payment, whichever is later.
In this case, the date for interest accrual calculation was based on Virginia Code § 58.1-623 E, which sets out an exception to the general rule for interest payments found in Virginia Code § 58.1-1833 A. Virginia Code § 58.1-623 E provides that if a taxpayer fails to give a dealer an exemption certificate previously issued by the Department, no interest shall be paid on a refund claim for any period prior to the date the taxpayer makes a complete refund claim to the Department. The Taxpayer was issued an exemption certificate in accordance with the provisions of Virginia Code § 58.1-609.3 18, which requires, among other things, the execution of a MOU. Here, while the certificate of exemption has an effective date beginning in January 2013, the MOU was executed by the Taxpayer in February 2017. Therefore, the certificate of exemption could not have been issued prior to February 2017, but was retroactively dated to January 2013.
Virginia Code § 58.1-623 E specifically applies to instances in which “a taxpayer fails to give the dealer at the time of purchase an exemption certificate previously issued by the Department”. [Emphasis added.] Because the exemption certificate could not have been issued prior to the signing of the MOU (February 2017), and the period for which the refund is being requested is April 2014 to September 2016, the Taxpayer could not have provided the certificate of exemption to its vendors because it was not yet in existence. Therefore, the provisions of Virginia Code § 58.1-623 E do not apply in this instance.
Because the exception to the calculation of interest provided in Virginia Code § 58.1-623 E does not apply, the interest should be calculated pursuant to Virginia Code § 58.1-1833 A. Therefore, the audit will be returned to the appropriate field audit staff to make the adjustments to interest.
The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s website. If you have any questions concerning this determination, please contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/2106.A