Could mobile pollution-control equipment qualify for Virginia's sales-tax exemption without being permanently attached, and who had to certify it?

Plain-English summary

Mobile equipment could qualify, but the sales-tax exemption required certification from DEQ or the authorized state pollution-control board. The statutory definition included real or personal property, equipment, facilities, and devices used primarily to prevent or abate Virginia air or water pollution.

Permanent attachment was not a requirement. Tangible personal property intended for mobile use at multiple Virginia locations could fall within the definition.

Certification remained mandatory, however, and the Department of Taxation had no authority to make or override DEQ's certification decision. The taxpayer had not supplied descriptions of the rejected equipment or written DEQ determinations, so Virginia could not decide whether a misinterpretation had occurred.

Without certification, no credit or refund was available. If DEQ later certified the property, the taxpayer could amend consumer-use-tax returns for tax remitted directly to Virginia, or request a vendor refund of sales tax within the three-year period.

Common questions

Q: Must qualifying pollution-control equipment be permanently attached?
A: No. The ruling says mobile tangible personal property can qualify.

Q: Can the Department of Taxation certify the equipment?
A: No. Certification had to come from DEQ or the authorized state board.

Citations and references

• Va. Code §§ 58.1-602, 58.1-609.3(9), and 58.1-3660(B).
• Va. Code § 58.1-1823.
• 23 VAC 10-210-2090(B), (C).

Subject

DEQ; Certified pollution control equipment and facilities

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-96

Original ruling text

June 13, 2012

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This is in response to your letter in which you request a ruling on the application of the retail sales and use tax to certified pollution control equipment purchased by * (the "Taxpayer"). I apologize for the delay in responding to your letter.

FACTS

The Taxpayer represents that most of its purchases of pollution control equipment are used on multiple sites within the Commonwealth to abate and prevent pollution. The Taxpayer claims that the Virginia Department of Environmental Quality (DEQ) is not certifying its pollution control equipment because it believes that the equipment is not a permanent part of the job or actually fixed to the job. The Taxpayer seeks exemption for its purchases of tangible personal property used for pollution control purposes.

The Taxpayer seeks guidance on how to obtain certification for its qualifying pollution control equipment. The Taxpayer is also interested in the options available in claiming a credit for the sales and use taxes already paid on pollution control equipment that should have been certified by DEQ.

A member of my Appeals and Rulings staff spoke to you on October 5, 2011. It was his understanding that more specific details would be forthcoming from you, especially as to what was or was not certified by DEQ. Because sufficient time has passed to furnish this information, this ruling is issued without the requested information.

RULING

Virginia Code § 58.1-609.3 9 provides an exemption from the retail sales and use tax for "[c]ertified pollution control equipment and facilities as defined in § 58.1-3660, except for any equipment that has not been certified to the Department of Taxation by a state certifying authority pursuant to such section."

Virginia Code § 58.1-3660 B defines certified pollution control equipment and facilities, to mean:

any property, including real or personal property , equipment , facilities, or devices , used primarily for the purpose of abating or preventing pollution of the atmosphere or waters of the Commonwealth and which the state certifying authority having jurisdiction with respect to such property has certified to the Department of Taxation as having been constructed, reconstructed, erected, or acquired in conformity with the state program or requirements for abatement or control of water or atmospheric pollution or contamination. Such property shall include, but is not limited to, any equipment used to grind, chip, or mulch trees, tree stumps, underbrush, and other vegetative cover for reuse as mulch, compost, landfill gas, synthetic or natural gas recovered from waste or other fuel, and equipment used in collecting, processing, and distributing, or generating electricity from, landfill gas or synthetic or natural gas recovered from waste, whether or not such property has been certified to the Department of Taxation by a state certifying authority. [Emphasis added.]

Interpreting the above cited exemption is Title 23 Virginia Administrative Code 10­-210-2090. Subsection B of that regulation provides that "[p]ollution control equipment and facilities, means any real or tangible personal property, equipment, facilities or devices used primarily for the purpose of abating or preventing air or water pollution in Virginia." [Emphasis added.] This regulation goes on to state that "[a]ny property which is certified as used for these purposes is not subject to the tax . . . ." However, subsection C of this regulation provides that "[t]he exemption . . . is not applicable until the property for which such exemption is sought has been certified by the State Water Control Board or State Air Pollution Control Board as used primarily for abating or preventing pollution." In other words, such certification must be provided by such Boards or the DEQ to the Department of Taxation before the exemption can be claimed.

The above statute and regulation make it clear that the DEQ certification may apply to tangible personal property that is used in accordance with the pollution control exemption criteria. Virginia Code § 58.1-602 defines the term "tangible personal property" as "personal property which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the services." As so defined, this term generally includes personal property, equipment and devices that are not permanently attached to real property and that are intended for mobile use primarily to prevent air borne or water pollution at multiple locations in Virginia.

The Taxpayer has not furnished any specific details as to the type of mobile equipment that was not certified by DEQ or provided any written determinations from DEQ denying the pollution control certification on certain equipment. Accordingly, the Department has no means to confirm whether any misinterpretation has occurred.

Furthermore, DEQ is the state agency that is authorized by state law to certify pollution control equipment for purposes of the exemption under Va. Code § 58.1-609.3 9. Without DEQ's certification, the pollution control exemption is not applicable. Because DEQ is the agency responsible for evaluating and issuing these certifications and the Department of Taxation has no authority in these certification matters, the Taxpayer is still be required to seek future pollution control certifications from DEQ.

As for the Taxpayer's concerns about available credit and refund options, I would note that no credit or refund option is available to the Taxpayer for sales or use taxes paid in connection with purchases of pollution control equipment that have not been certified by DEQ as used primarily for the purpose of abating or preventing pollution of the atmosphere or waters of the Commonwealth. On the other hand, if such certification is subsequently received from DEQ, a credit may be applied against the consumer use tax remitted by the Taxpayer to the Department by amending its return(s) in accordance with Va. Code § 58.1-­1823. For sales tax paid to a vendor, a tax refund on exempt certifies' pollution control equipment may be sought from the vendor that sold the item provided such refund request is made within the 3 year statute of limitations.

This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.

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 ruling, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4862343803.R