New Guidance Issued by Virginia Regarding Sales and Use Tax Refunds

05/30/2013

Effective July 1, 2013, House Bill 2313 (Acts of Assembly 2013, Chapter 766) increases the rate of the statewide Retail Sales and Use Tax and imposes an additional state Retail Sales and Use Tax in the Northern Virginia and Hampton Roads Regions. Just recently the Virginia Department of Taxation issued its guidelines respecting associated refunds.

Click Here to view the guidance on the Tax Department’s website (last accessed 5.30/2013).

My law partner Pat Genzler offers the following summary of and thoughts regarding the new guidelines:
The increase statewide is .3 % (from 4% to 4.3%), but in Northern Virginia and Hampton Roads is an additional .7 %. Adding the new additional 1% local tax increase, the total tax for Northern Virginia and Hampton Roads will now be 6% (4.3% state, plus .7% regional, and plus 1% local).
Available refunds relate to “bona fide real estate construction contracts” entered into before April 3, 2013 that have: a) a specified completion date; and b) finished plans and specifications at award.
If the project qualifies, a refund is available through the end of the contract. Changes to either the completion date or adding new work are not available for the credit.
The finished plans and specifications at award likely excludes many design-build contracts since the plans and specifications for those projects are not typically “finished” at the time of award; but interpretation remains to be seen.
There is an unaddressed difference between the Guideline’s language and that of the statute – specifically the statute only requires plans and specifications and does not use the word “finished” that is being applied as a qualifier by the Guidelines. Whether this was intentional or not, such as being specifically intended to exclude design-build contracts, is unclear.

Tax issues are generally complicated at best, and these Guidelines, while intended as clarification, are seemingly wanting in terms of that intended goal. Perhaps (hopefully) the Department of Taxation will choose to clarify further some of these issues.

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