August 13, 2024
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”) in which you seek correction of the retail sales and use tax assessment issued for the period September 2015 through December 2018. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer operated a paper mill that contained a wastewater treatment facility in Virginia. Following an audit by the Department, the Taxpayer was issued an assessment for tax, penalty, and interest due on untaxed purchases. The Taxpayer contests the portion of the assessment related to the untaxed purchases of eight chemicals, claiming such purchases are exempt from taxation because the chemicals are used in its facility to abate or control pollution.
DETERMINATION
Virginia Code § 58.1-609.3 9 provides an exemption from the sales and use tax for “[c]ertified pollution control equipment and facilities as defined in § 58.1-3660, except for any equipment that has not been certified to the Department of Taxation by a state certifying authority or subdivision certifying authority pursuant to such section.” [Emphasis added]. Virginia Code § 58.1-3660 B then defines certified pollution control equipment and facilities to include:
[A]ny property, including real or personal property, equipment, facilities, or devices, used primarily for the purpose of abating or preventing pollution of the atmosphere or waters of the Commonwealth and which the state certifying authority or subdivision certifying authority having jurisdiction with respect to such property has certified to the Department of Taxation as having been constructed, reconstructed, erected, or acquired in conformity with the state program or requirements for abatement or control of water or atmospheric pollution or contamination…
Subsection C of Title 23 of the Virginia Administrative Code 10-210-2090 states that the exemption for pollution control equipment and facilities is not applicable until the property for which the exemption is sought has been certified by an officially certified authority.
The chemicals at issue were included in the audit because they were not pollution control equipment. In addition, the Taxpayer lacked documentation to show that they are certified pollution control equipment. With its appeal, the Taxpayer provided a letter from the State Water Control Board that certifies certain projects and equipment used to control or abate water pollution in the construction of its treatment plant.
The Taxpayer further claims that the chemicals at issue are exempt from tax because they are used with the certified equipment to abate or control water pollution. To support its position, it cites Public Document (P.D.) 10-262 (12/14/2010). In this public document, a business contested the assessment of tax on chemicals purchased for use in its wastewater system. As indicated above, the definition set forth in Virginia Code § 58.1-3660 B includes any property used for controlling pollution. Based on the inclusiveness of the definition, the Department ruled in P.D. 10-262 that the business was eligible for a refund of the tax paid for chemicals so long as the chemicals were certified by the appropriate agency and such certification was provided to the Department. In this case, the Taxpayer has provided documentation certifying the chemicals are used directly in pollution control.
In accordance with this determination, the purchases for chemicals that have received appropriate certification as property used for pollution control will be removed from the audit. The assessment will be returned to the audit staff to remove the contested purchases. A revised audit reported showing revised tax and penalty will be issued to the Taxpayer. Once the revisions are complete, an updated bill, with interest accrued to date, will be sent to the Taxpayer. The Taxpayer should pay the amount due within 30 days from the date on the bill to avoid the accrual of additional interest or possible collection action.
The Code of Virginia sections, regulation, and public document cited are available online at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department’s website. If you have any questions about this response, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at (804) *****.
Sincerely,
Kristin L. Collins
Deputy Tax Commissioner
Commonwealth of Virginia
AR/3251.F