Virginia – Incomplete Exemption Certificates

SALT Report 1639 – The Virginia Tax Commissioner ruled that a Taxpayer’s sales of tires and automotive repair services to Virginia customers was properly assessed sales tax on certain protested sales because the Taxpayer failed to obtain valid exemption certificates from his customers.
Generally, all sales and leases, unless proven to be exempt, are subject to sales and use tax under Virginia Code § 58.1-623 which states, “All sales or leases are subject to tax until the contrary is established.”  In Virginia, the burden of proving that a sale is not taxable is on the Taxpayer unless the Taxpayer obtains a properly executed, valid, exemption certificate from his customer.
All valid exemption certificates must include the following:
  • Signature of taxpayer
  • The name and address of the taxpayer,
  • Certificate of registration number issued to the taxpayer,
  • A description of the tangible personal property sold, distributed, leased, or stored, and
  • Must be in the format prescribed by the Tax Commissioner
If a Taxpayer does not receive a valid exemption certificate from his customer or fails to collect and remit tax on a taxable sale, Virginia Code § 58.1-625, provides that “any dealer who neglects, fails, or refuses to collect tax upon every taxable sale…shall be liable for and pay the tax himself.”
Based on the above tax code the Commissioner determined that the exemption certificates presented by the Taxpayer during his audit appeal were incomplete and invalid because many of the certificates were missing tax registration numbers, addresses or a description of the type and use of the property that was purchased. Therefore the Commissioner determined that the Taxpayer was liable for all unpaid taxes.
The Virginia Tax Commissioner urges Taxpayers to exercise caution when accepting exemption certificates for the reason that any certificate that is deemed incomplete, invalid, or inconsistent will not be accepted by the Department and any exemption certificates obtained after the start of an audit will be subject to greater scrutiny.
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