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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department Of Taxation
Chapter 210. Retail Sales and Use Tax
2/25/2021

23VAC10-210-280. Certificates of exemption.

A. Generally. All sales, leases and rentals of tangible personal property are subject to the tax until the contrary is established. The burden of proving that the tax does not apply rests with the dealer unless he takes, in good faith from the purchaser or lessee, a certificate of exemption indicating that the property is exempt under the law. The 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.

Certificates of exemption in the various categories will be furnished to dealers on request. Each certificate explains its use, and it may be reproduced by the dealer for use on purchase orders, sales slips or other documents relating to the transaction. (See subsection E of this section for an exception).

B. Legitimate use of exemption certificates is vital. Reasonable care and judgment must be exercised by all concerned to prevent the giving or receiving of false, fraudulent or bad faith exemption certificates. An exemption certificate cannot be used to make a tax free purchase of any item of tangible personal property not covered by the exact wording of the certificate.

C. Illustrations of the misuse of exemption certificates.

1. Purchases under Form ST-10 (resale exemption certificate) by a registered dealer, who is operating a grocery store, for example, of items such as adding machines, typewriters, cash registers, or showcases for use in the business. Such items are subject to the tax. No exemption certificate offered in making such a purchase is acceptable.

2. Purchases under Form ST-10 (resale exemption certificate) by a registered automobile dealer, garage or service station operator, of items such as jacks or hand tools for use in the business. Such items are subject to the tax. No exemption certificate offered in making such a purchase is acceptable.

3. Purchases under Form ST-10 (resale exemption certificate) by a registered operator of a hotel, motel, inn or restaurant, of items such as furniture or fixtures; fuel oil, coal or bottled gas for heating or cooking; linens, refrigerators or stoves, for use in the business. Such items are subject to the tax. No exemption certificate offered in making such a purchase is acceptable.

4. Purchases under Form ST-11 (manufacturers exemption certificate) by the operator of a manufacturing, processing or mining business of items such as tires, batteries or repair parts for delivery equipment; tools for use in repairing machinery; office furniture or office machines; or office supplies. Such items are not used directly in manufacturing, mining, processing, refining or converting products for sale or resale and are subject to the tax. No exemption certificate offered in making such a purchase is acceptable.

5. Purchases under Form ST-18 (agricultural exemption certificate) of items such as tires, batteries or repair parts for off-the-farm vehicles; feed for pets; feed for riding or pleasure horses; or household equipment or supplies. Such items are not for use in agricultural production for market and are subject to the tax. No exemption certificate offered in making such a purchase is acceptable. A person who calls himself a "farmer" but who is not engaged in the business of producing agricultural products for market is not entitled to claim any agricultural exemption. No exemption certificate offered by him in making a purchase is acceptable.

D. Taxable use of property after tax-exempt purchase makes property subject to sales tax. If a purchaser or lessee who gives an exemption certificate makes any use of the property other than an exempt use or retention, demonstration or display while holding property for resale, distribution or lease in the regular course of business, the use is treated as a taxable sale by the purchaser or lessee at the time the property is first used by him. The cost of the property to him is the sales price of such retail sale. If the sole use of the property other than retention, demonstration or display in the regular course of business is the rental of the property while holding it for sale, distribution or lease, the purchaser may elect to pay the tax on the amount of the rental charged, rather than the cost of the property to him. For example, a grocer may purchase lollipops tax exempt under the resale exemption but subsequently elect to give some of these away to children on Halloween. Because the items were purchased tax exempt and used by the grocer rather than sold, he is liable for accruing and remitting use tax based upon the cost price of the lollipops. The same principle is applicable to items donated to charitable organizations, civic groups, etc. and to free product samples distributed by manufacturers or wholesalers.

E. Exemption certificates issued only by department. As noted in subsection A of this section, exemption certificates are generally available on request from the department. However, persons seeking exemption for property to be used in a certified pollution control project (see 23VAC10-210-2090) or contractors purchasing exempt manufacturing or processing equipment or construction materials for use in an exempt project outside of Virginia which are temporarily stored in Virginia (see 23VAC10-210-410 and 23VAC10-210-920) must apply in writing to the department for the issuance of an exemption certificate, Form ST-11A. The request for the certificate must include a description of the project, the items being purchased and, if applicable, the owner of the project. Upon receipt of this information, the department will issue exemption certificates.

Statutory Authority

§§ 58.1-203 and 58.1-623 of the Code of Virginia.

Historical Notes

Derived from VR630-10-20; revised July 1, 1969; January 1, 1979; amended, eff. January 1, 1985.

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