Virginia – Missing or Invalid Exemption Certificates

SALT Report 1810 – The Virginia Tax Commissioner partially reversed a Taxpayer’s assessment of sales and use tax that resulted from an audit. The Taxpayer is a manufacturer and wholesale distributor of drive train components.  During an audit, the Taxpayer was assessed sales tax on several untaxed sales of tangible personal property.   In most cases, the certificates of exemption were either missing or the auditor determined they were invalid.  The Taxpayer appealed the assessment based on the fact that it had accepted the certificates in good faith.

Customer One

The Taxpayer provided the auditor with several certificates for Customer One. The first certificate was Virginia Form ST-10 which was found to be missing the date and therefore was considered incomplete and invalid.  The second certificate was a resale exemption certificate dated August 17, 2011.  This certificate was found to be complete in all respects; however, it did not apply to the audit period as the audit period preceded the date on the certificate. The third certificate was a multi-jurisdiction exemption certificate that was not issued by the Virginia Department of Taxation.  This certificate was dated January 7, 1999 and certified that Customer One was purchasing for resale and included the customer’s Virginia account number.

For Customer One, the Commissioner determined that the third certificate, although not a Virginia exemption certificate had sufficient information, was valid, and could be considered accepted in good faith. Accordingly, sales made to Customer One under this certificate were removed from the audit.  All others remained.

Customer Two

The resale exemption certificate that was presented for sales made to Customer Two was denied because a federal employer identification number (FEIN) was used rather than a Virginia certificate of registration number.  The Tax Commissioner has previously ruled that a FEIN cannot be used on Form ST-10.  Further, the Commissioner notes that the customer was not registered to collect sales tax and therefore not entitled to claim the resale exemption.

Customer Three

The resale exemption certificate presented for Customer Three was denied because a FEIN was used instead of a Virginia certificate of registration number. Further, the space provided on the certificate for the “kind of business engaged in by dealer” was left blank.

The Commissioner ruled that because the customer failed to provide all of the necessary information on the certificate, the certificate could not be considered accepted in good faith. Furthermore, the Commissioner found that the FEIN may belong to another taxpayer because the name and address issued to that FEIN was different than what was written on the exemption certificate.  All sales related to this certificate remained in the audit sample.

Commissioner’s Ruling

Because the Commissioner ruled that certain certificates were valid and accepted in good faith the audit staff was ordered to revise the audit assessment and pursuant to Va. Code § 58.1-1833 the Taxpayer was issued a refund of the overpaid amounts as well as interest.

For Further Information:

Virginia Rulings of the Tax Commissioner – Ruling 12-155