Tax Type
Retail Sales and Use Tax
Description
Exemption certificates; Invalid certificates
Topic
Exemptions
Date Issued
11-07-1989
November 7, 1989
Re: Request for Ruling: Sales and Use Tax
Dear****************
This will reply to your letter of September 18, 1989, regarding the use of sales and use tax exemption certificates.
I will address below the concerns that were raised in your letter.
Sales to Governments
Exempt sales may be made to the federal government, the Virginia state government, and Virginia local governments provided that either the purchase is pursuant to an official government purchase order or the purchaser provides you with a valid government exemption certificate, Form ST-12. Once a Form ST-12 is furnished to you, you will not be required to receive an official purchase order each time that an exempt sale is made to the governmental agency.
Sales for Resale
A dealer must obtain a valid resale exemption certificate, Form ST-10, in order to make an exempt sale for resale. The certificate will not be deemed valid unless the purchaser's sales tax certificate of registration number is listed. In cases where a dealer cannot locate a resale exemption certificate for a customer, the department's auditors will allow the dealer a reasonable period of time to obtain the certificate or other documentation from the customer.
Judicial Appeals
Va. Code §58.1-1825 permits any taxpayer to appeal to the Circuit Court any assessment issued by the department. However, the law requires that the assessment first be paid in full and that the suit be filed within three years from the date of assessment.
Invalid Exemption Certificates
Virginia Regulation 630-10-20 provides that "reasonable care and judgment must be exercised by all concerned to prevent the giving or receiving of false, fraudulent or bad faith exemption certificates." As such, dealers must be alert for instances in which exemption certificates may be misused, such as the purchase of property not covered by the exact wording of the certificate or the use of a resale exemption certificate by an unregistered dealer. VR 630-10-20, a copy of which is enclosed, provides other examples of unacceptable exemption certificates.
However, so long as the exemption certificate is valid on its face and is taken by the dealer in good faith, the dealer will be relieved of the responsibility of collecting sales tax on the transaction.
Finally, I have enclosed for your information a copy of Va. Code §58.1-623.1, which was enacted by the 1989 session of the General Assembly. This statute permits the Tax Commissioner to suspend the sales and use tax exemption of any organization or taxpayer that misuses an exemption certificate in making purchases from a dealer, or to levy a penalty of up to $1,000 in lieu of suspension.
I trust that this will answer your concerns, but please contact us if you require any additional clarification.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner