Virginia Law

A. Generally. The state sales and use tax does not apply to purchases of artificial or propane gas, firewood, coal or heating oil for domestic consumption.

B. Domestic consumption defined. "Domestic consumption" is the use of artificial or propane gas, firewood, coal, or home heating oil by an individual for other than business, commercial, or industrial purposes. The renting or leasing of residential units is considered commercial usage.

Domestic consumption is restricted to fuels used by individuals; purchases of fuel by groups or organizations will be subject to the tax unless the fuel purchased is for domestic consumption by an individual. For example, an organization may purchase firewood to be given away to indigent persons for use in heating their own homes; this transaction would be deemed a purchase for domestic consumption. Purchases by groups or organizations for use in their own facilities are not purchases for domestic consumption.

Domestic consumption usage is not restricted to heating purposes, but may also include cooking or heating water.

The term "domestic consumption" includes purchases of fuel by: (i) an owner or lessee for use in a single-family dwelling in which he resides; (ii) individual residents for use in apartments, townhouses, trailer courts, condominiums or other multi-family dwellings in which they reside; and (iii) a condominium or similar owner cooperative association provided such association is comprised solely of the owners of the dwelling and more than 50% of the fuel purchased is for use in owner-occupied units.

The term "domestic consumption" does not include purchases by: (i) nonprofit churches, civic or other charitable groups, except as set forth above; (ii) businesses operated by nonprofit groups; (iii) profit hospitals, nursing homes or homes for adults; (iv) profit schools or institutions of learning; (v) lessors of apartments, trailer courts, condominiums, rooming houses or other multi-family dwellings; fraternities or sororities; (vi) hotels, motels, inns, cabins or lodges; and (vii) any commercial, business or industrial operations.

Purchases of heating fuels for their own use or consumption by persons or entities who are entitled to a general sales tax exemption (for example: (i) nonprofit schools and institutions of learning; (ii) licensed nonprofit hospitals, nursing homes, and homes for adults; (iii) nonprofit volunteer fire and rescue squads; and (iv) federal, state, or local governments) are not subject to sales and use tax (state or local).

C. 1. Classifying purchases as domestic or nondomestic. In determining when tax is to be collected by the dealer on a purchase used for both domestic and nondomestic purposes, a principal usage test shall apply. A purchase shall be classified as exempt if more than 50% of the fuel purchased is for domestic consumption. However, if 50% or less of the fuel purchased is for domestic consumption, the entire purchase shall be taxable and the tax shall be collected by the dealer at the time of the sale.

2. Subdivision 1 of this subsection establishes when a fuel dealer must collect tax at the time of sale, and it does not establish any rule of exemption for consumers. The ultimate taxability of a fuel purchase depends on its actual usage. The purchaser will be liable for payment to the department of use tax on any portion of a domestic purchase (i.e., a purchase on which no sales tax was paid to the dealer) subsequently used for nondomestic purposes. A purchaser who has paid tax under the rules in subdivision 1 of this subsection, however, may apply to the department for a refund of tax paid on that portion which is actually used for domestic consumption. Refund claims must be filed on forms prescribed by the department between January 1 and April 15 of the year following the year of purchase. Refund applications pursuant to this exemption will be denied if post-marked after April 15 of the year following the year of purchase.

D. Exemption certificates. Sales and Use Tax Certificate of Exemption, Form ST-15, is available for use by dealers to substantiate sales of heating fuel for domestic consumption. A purchaser need file only one such certificate with a dealer to qualify for exemption. However, the certificate will be valid only for purchases of fuel made by the person named on the certificate and for use at his residence, the address of which is also listed on the certificate. Any change of address of purchaser will require completion of a new certificate of exemption.

A dealer is not required to obtain a certificate of exemption for each transaction if the record of the sale is clearly identifiable as a sale of fuel for domestic consumption. However, this should not be construed as altering the fact that the burden of proof is on the dealer to demonstrate that each untaxed transaction is legitimately exempt from the tax.

Dealers will not be required to obtain a certificate of exemption on sales of small quantities of kerosene, firewood, or other fuels, provided sales receipts or daily sales records are available which clearly indicate the number of gallons (or other measure) of the specific type of fuel sold and the number of purchasers.

E. Local sales and use tax. The local 1.0% sales and use tax will continue to apply to all purchases for domestic consumption of artificial or propane gas, firewood, coal and home heating oil unless the locality adopts an ordinance specifically exempting such fuels.

1. Sales tax. The local 1.0% sales tax will be allocated to the locality in which the place of business from which the sale is made is located. Place of business is defined as an established business location at which orders are regularly received. Therefore the situs of sale shall be the business location that first takes the purchaser's order, either in person, by purchase order, or by letter or telephone, regardless of the location of the merchandise or the point of acceptance of the order or shipment.

2. Use tax. The local use tax on sales made to Virginia residents by out-of-state dealers and the local use tax remitted by consumers on any portion of a domestic purchase used for nondomestic consumption will be allocated to the locality in which the fuel is delivered. The following examples will clarify this.

Example 1: A resident of a city or county which imposes the 1.0% local sales and use tax on fuels for domestic consumption purchases fuel from an out-of-state dealer who delivers it to the purchaser's residence in Virginia. The 1.0% local tax will apply to the transaction.

Example 2: A resident of a city or county which imposes the 1.0% local tax purchases fuel for domestic consumption from a dealer located in a city or county which does not impose the 1.0% local tax. The purchaser uses a portion of the fuel for nondomestic purposes and is therefore liable for payment of the use tax on that portion. The purchaser will therefore be required to remit the 5.3% use tax (4.3% state; 1.0% local) or 6.0% use tax in the Hampton Roads and Northern Virginia Regions (4.3% state, 0.7% regional, and 1.0% local). For definitions of the "Hampton Roads Region" and the "Northern Virginia Region" see 23VAC10-210-2070.

Example 3: A resident purchases fuel for domestic consumption from a dealer located in a locality which imposes the 1.0% local tax and therefore pays the 1.0% on the purchase of the fuel. The purchaser uses a portion of the fuel for nondomestic purposes and is consequently liable for payment of the use tax on that portion. The purchaser will be required to remit only 4.3% (5.0% in the Hampton Roads and Northern Virginia Regions) state tax; the 1.0% local tax was paid on the original fuel purchase. This applies regardless of whether the purchaser's city or county of residence does or does not impose the 1.0% local tax on fuels.

3. Local exemption. As of 2014, the department is aware that the following cities and counties have adopted ordinances exempting fuel for domestic consumption from the local 1.0% sales and use tax. Additional localities may adopt ordinances at any time and localities having exemption ordinances in effect may rescind such ordinances at any time.