Did a nonprofit sale lose its Virginia exemption because the certificate used the customer's legal name while the invoice used its trade name?

Subject

Contested sale meets the criteria for exemption.

Plain-English summary

Virginia removed the sale from the audit and abated the bill. The medical-device wholesaler had accepted a complete, signed nonprofit exemption certificate, but the certificate showed the customer's legal name while the invoice used a different purchaser name. The auditor treated that inconsistency as invalidating the exemption.

On appeal, the wholesaler supplied the certificate, purchase order, and invoice. A Department registration search confirmed that the invoice name was the same customer's trade name. The goods were shipped to that customer's Virginia facility, and the customer paid directly from its own funds.

Those records established that the purchaser was the nonprofit organization named on the certificate. The sale therefore met the nonprofit exemption in Va. Code § 58.1-609.11 despite the legal-name/trade-name difference.

What this means for you

• A facial name mismatch can trigger an audit exception even when the sale is substantively exempt.
• Keep documents connecting legal names, trade names, delivery locations, and payment sources.
• A certificate that is incomplete or inconsistent on its face is not automatically acceptable; the seller bears the burden unless it takes a valid certificate in good faith.
• This ruling resolved the mismatch with official registration information and transaction records.

Common questions

Was the certificate itself incomplete or unsigned?

No. The ruling described it as complete, signed, and issued by the Department.

What facts tied the invoice to the exempt organization?

The Department confirmed the trade name, the sale shipped to the customer's Virginia facility, and payment came directly from the customer's funds.

Citations and references

• Va. Code § 58.1-623.
• 23 VAC 10-210-280.
• Va. Code § 58.1-609.11.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-67

Original ruling text

May 6, 2011

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This is in response to your letter in which you seek correction of a retail sales and use tax assessment issued to * (the "Taxpayer") for the period July 2007 through June 2010. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer is a wholesaler of medical devices and primarily sells to hospitals, clinics and nursing homes. As a result of the Department's audit, an assessment was issued for a sale made exempt of the tax. The auditor denied the certificate of exemption because the name on the certificate of exemption for the customer was inconsistent with the purchaser's name on the invoice. The auditor held the sale taxable. The Taxpayer protests the tax assessment and asserts that the sale qualifies for exemption. The Taxpayer provides additional information to support its claim.

DETERMINATION

Certificates of Exemption

Virginia Code § 58.1-623 states that all sales or leases are subject to the tax until the contrary is established. The burden of proving that a sale or lease of tangible personal property is not taxable is upon 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. This requirement is further explained in Title 23 of the Virginia Administrative Code 10-210-280, which provides that a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable.

The Taxpayer has furnished a complete and signed nonprofit organization exemption certificate issued by the Department, a purchase order and an invoice for the contested sale. On the certificate, the customer's legal name is indicated which is different from the purchaser's name on the invoice. Based on a search performed in the Department's registration system, the name on the invoice is the customer's trade name. The contested sale was made to the customer under its trade name and shipped to the customer at its facility in Virginia. The contested sale was paid directly from the funds of the customer. Accordingly, I find that the contested sale meets the criteria for exemption set out in Va. Code § 58.1-609.11 as a sale to a nonprofit organization. As such, the exempt sale made to this customer will be removed from the audit.

CONCLUSION

The assessment represents the tax and interest assessed on the contested sale. Based on the above determination, the Department will abate the bill.

The Code of Virginia sections and regulation cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Linda D. Foster

Deputy Tax Commissioner

AR/1-4549541669.T