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Gas Station Owners and Petroleum Distributors: Virginia Recognizes Pollution Control Exemption for Pit Liners and Storage Tanks

As many of you are aware, I have been closely following the Gate Fuel Services & Gate Petroleum in Florida. Those cases involved settled refund claims for gas stations that had purchased equipment for pollution control and were used in the manufacturing process. In January of 2013, a Virginia company took advantage of a creative similar sales tax planning strategy.

Specifically, the Virginia taxpayer operated an oil and natural gas well drilling operation. As the result of a sales tax audit, the Department of Taxation issued an assessment for use of equipment and supplies in the taxpayer’s business. The equipment and supplies at issue were pit liners and storage tanks.
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The taxpayer believed that the pit liners and storage tanks qualified for the “pollution control” exemption because the equipment was used “primarily for the purpose of abating or preventing pollution of the atmosphere or waters” of Virginia. Conversely, the Department asserted that the equipment was not exempt because the Department only recognized pollution control equipment certified by the Virginia Department of Mines, Minerals, and Energy (DMME) for periods through 2006.

Following the contest of the taxpayer for the particular equipment, the Virginia Department of Taxation changed its position. In fact in P.D. 12-73, The Department “immediately and retroactive to July 1, 2006, recognize[d] the pollution control equipment administered by DMME.” Further, the taxpayer had its audit referred back to the audit division for the period at issue and was even issued a refund!

This case is one of many over the past several months that have allowed companies in the petroleum related industries to claim a refund on equipment purchases. Odds are that, if you or your client has purchased any business equipment in the last three years, there is probably an exemption of sales tax available. Please feel free to call or email me for a consultation.

About the author: Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law firm Moffa, Gainor, & Sutton, PA, based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU. If you have any questions please do not hesitate to contact him via email or phone listed on this page.

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