Tax Type
Retail Sales and Use Tax
Description
Novelties and speciality items
Topic
Exemptions
Date Issued
01-03-1986
January 3, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear ******************
This will reply to your letter of July 31, 1985, seeking correction of an assessment issued in the above referenced case for the period December 1981 through August 1984.
FACTS
************* is engaged in the sale of novelty and specialty items to a variety of clubs, and organizations, both public and private. Pursuant to the department's audit, taxpayer was assessed sales and use tax for its failure to pay tax on certain of its purchases, as well as to collect and report the tax in making certain sales to customers. Taxpayer contests the imposition of the tax on such sales to customers pursuant to exemption certificates taken in good faith, or where such sales were made out of public funds. Taxpayer contends further that due to its large number of tax exempt and taxable customers, any technical errors it may have made in making sales to such customers were made in good faith and were unintentional.DETERMINATION
Based on an examination of additional information submitted by taxpayer subsequent to the audit, the department has found specific basis to hold tax exempt certain transactions which were held taxable in the audit. §630-10-20 of the Virginia Sales and Use Tax Regulations provides that, "[t]he burden of proving that a sale, distribution, lease or storage of tangible personal property is not taxable is upon the person who makes the sale, distribution, lease or storage, unless he takes, in good faith from the purchaser or lessee, a certificate of exemption indicating that the property is exempt under the law." However, this section continues, "reasonable care and judgment must be exercised by all concerned in giving or receiving exemption certificates, to the end that no one will give or knowingly receive a false, fraudulent or bad faith exemption certificate." Furthermore, "[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."
As indicated above, the audit will be adjusted to remove those transactions for which taxpayer has been able to provide supportive documentation showing that certificates of exemption were taken in good faith or where public funds have been established. However, those transactions for which taxpayer has not been able to provide such documentation remain subject to the tax pursuant to the audit.
Based on all of the foregoing, I find basis to adjust the assessment as indicated, and a new bill will be issued for the balance of the assessment.
Sincerely,
W. Forst
Tax Commissioner
Rulings of the Tax Commissioner