Tax Type
Retail Sales and Use Tax
Description
Government purchases with petty cash; Exemption certificates
Topic
Exemptions
Date Issued
07-02-1986
July 2, 1986
Re: Ruling Request/ Sales and Use Tax
Dear ****************
This will reply to your letter of April 1, 1986 seeking clarification of the sales and use tax law and regulations as applied to sales made by *********** (taxpayer).
FACTS
Taxpayer is an office supply company with three retail stores and a commercial sales department. Many county and federal government agencies purchase supplies from taxpayer by walking in to one of taxpayer's retail establishments or by calling in orders which taxpayer then delivers on a C.O.D. basis. Many of such purchases are paid for by the government agencies out of petty cash funds maintained by such agencies for small purchases.
Taxpayer requests a ruling whether it is required to charge agencies of the U.S. Government and/or county governments sales tax on purchases they make with such petty cash funds. Taxpayer asks further whether it is responsible for determining if each person making a petty cash purchase on behalf of federal or local government is authorized to do so on a tax exempt basis.
RULING
§58.1-608(18) of the Virginia Code exempts from the sales and use tax, "[t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States."
Therefore, based on the facts and circumstances of this case, as long as the C.O.D. and petty cash purchases are paid for out of government funds, are for use or consumption by the government, and are supported by valid certificates of exemption, such sales will qualify for the exemption cited above.
§58.1-623(A) of the Code states the general rule that, "[a]ll sales are subject to the tax until the contrary is established..[and] [t]he burden of proving that a sale.., lease, or storage 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 under this chapter."
§630-10-20 of the Virginia Retail Sales and Use Tax Regulations provides further that a certificate, "will remain in effect except upon notice from the Department of Taxation that it is no longer acceptable. However, a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable, either before or after notice." This regulation section also provides numerous examples of the correct use-and misuse of exemption certificates. (See copy of §630-10-20 enclosed)
In addition, please find attached a copy of a determination in a previous case which addresses the issue of taxpayer's responsibility for determining if individual purchasers are authorized to make tax exempt purchases on behalf of the government.
I hope that all of the above has answered your questions but please let me know if we can be of further assistance.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner