Tax Type
Retail Sales and Use Tax
Description
Resale certificates
Topic
Exemptions
Date Issued
02-21-1997
February 21, 1997
Re: Request for Ruling: Virginia Retail Sales and Use Tax
Dear*****************
This is in response to your letter requesting a ruling on the application of the sales and use tax with respect to drop shipments and registration requirements of a nonresident seller. Copies of all references are attached.
FACTS
A California seller (Company A) makes retail sales of tangible personal property to Virginia customers (Company B). The seller contracts with Virginia merchants (Company C) for the drop shipment delivery of goods to its buyers. The seller has no physical presence or sales personnel in Virginia.
You ask whether Company A is required to register with Virginia in order to issue a valid resale exemption certificate to Company C. If Company A is not required to register, you ask whether Company C may accept in good faith (I) an out-of-state resale certificate from a nonregistered vendor, or (ii) a Virginia authorized resale certificate with an out-of-state registration number. If a state-specific resale exemption certificate is not required, you ask what other resale certificate documentation would be acceptable in lieu of a state-specified resale certificate.
RULING
Registration requirements
The Virginia Department of Taxation has no authority to require out-of-state dealers to register for collection and remittance of the sales and use tax unless they have sufficient nexus with the state. Code of Virginia § 58.1-612(C) provides the criteria for determining whether a dealer has sufficient activity with Virginia to require registration. However, these statutory provisions contain no requirement that nonresident sellers must register with Virginia for sales and use tax purposes in order to issue valid resale exemption certificates to Virginia dealers.
Taxation of drop shipments
If Company A is not registered to collect Virginia use tax, Company B is responsible for reporting and remitting the use tax to the department on its untaxed purchases. Company A may purchase tangible personal property exempt of the tax from Company C, provided it furnishes Company C with a valid resale exemption certificate as described below.
Resale exemption certificates
Code of Virginia § 58.1-623 sets out the minimum criteria needed for exemption certificates. These criteria include a requirement that an exemption certificate "shall be substantially in such form as the Tax Commissioner may prescribe." Accordingly, the department has prescribed Form ST-10 as the certificate of exemption for dealers to use when making purchases of tangible personal property for resale purposes only. In P.D. 91-105 (6/28/91), the department allowed the resale exemption for an out-of-state dealer, who was not registered with Virginia, provided it used the department's Form ST-10 and appropriately referenced the out-of-state registration number on the ST-10.
Notwithstanding the foregoing, the department will also accept resale exemption certificates issued by state tax government agencies of other states, provided all of the criteria set out by Code of Virginia § 58.1-623 and all of the areas of information vital to the proper giving and receiving of the certificate are met as contained on the department's Form ST-10. For example, a resale exemption certificate must contain the following minimum information:
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- the legal and trade name and physical address of the purchaser,
the type of business engaged in by the purchaser,
the certificate of registration number of the purchaser issued by the Virginia Department of Taxation (or the registration or account number issued by the purchaser's state tax agency, if the out-of-state purchaser is not registered to collect the Virginia use tax),
the date (month, day and year) on which the certificate is signed by the purchaser,
the name and physical address of the supplier,
a statement that "all tangible personal property purchased from the named supplier on and after this date will be purchased for resale purposes only, unless otherwise specified on each order, and that this certificate shall remain in effect until revoked in writing by the Virginia Department of Taxation,"
the signature and title of the person authorized to sign the certificate,
a statement that "the person signing the certificate is an authorized officer of the corporation if the dealer is a corporation, an authorized partner if the dealer is an unincorporated association, or the owner or an authorized member if a sole proprietorship, "
a statement certifying that the person signing the certificate is "authorized to sign the certificate of exemption and that, to the best of my knowledge and belief, it is true and correct and made in good faith pursuant to the retail sales and use tax laws of Virginia," and
a statement that the supplier is required to keep and maintain one copy of this resale exemption certificate.
- the legal and trade name and physical address of the purchaser,
In limited instances, the department will accept resale exemption certificates or resale affidavits designed by taxpayers, provided all of the criteria set out above are included on the document and the document has been approved by the department prior to its use for Virginia retail sales and use tax purposes. Accordingly, unless the taxpayer knows that the Virginia Department of Taxation has previously approved the nonresident resale exemption certificate for use in connection with purchases from Virginia vendors, it should not be used.
I trust that this has answered your questions. If you have any questions about this ruling, please contact *********of the department’s Office of Tax Policy at ********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11680R
Rulings of the Tax Commissioner