When a Virginia dealer or marketplace facilitator sells to a government agency, what does it need to accept the ST-12 exemption certificate and not charge sales tax?

Plain-English summary

A marketplace facilitator that handles catering and restaurant sales to Virginia government agencies asked the Tax Commissioner how to correctly accept Virginia's government sales-tax exemption. The ruling confirms that sales to the U.S. government, the Commonwealth of Virginia, and Virginia localities are exempt from retail sales and use tax when the purchase is backed by either a required official government purchase order paid out of public funds or a properly completed Form ST-12 government exemption certificate — as long as the dealer uses reasonable care.

The Commissioner answered five practical questions:

1. Signature authority. Once the dealer holds a properly completed and signed ST-12 taken in good faith, it does not have to independently verify that the government employee had authority to make the purchase. It is "absolved from collecting the tax."
2. When is a purchase order required? If the agency has no purchase-order requirement or can't provide one, a valid Form ST-12 is accepted in its place.
3. Government purchase cards. A card purchase is exempt only when the government's credit is bound and the billing goes directly to and is paid by the government (direct billing, EFT, check, or an approved government card). Federal card rules are on GSA's SmartPay site; Virginia card rules are on the Department of Accounts charge-card page.
4. Late purchase orders. Because sales tax is a transactional tax, the timing of receiving a purchase order is "inconsequential" as long as the documents support the exempt treatment. But if no valid certificate exists at the time of sale, the "good faith acceptance" protection is lost and the dealer becomes liable for the tax.
5. Paid out of public funds. As long as the dealer receives a government purchase order or valid Form ST-12 and practices reasonable care, it has met its obligations and is not responsible for the tax.

The "good faith and reasonable care" standard comes from 23 VAC 10-210-280 and the International Paper Company case (issued as P.D. 10-258): the certificate must be part of the original transaction, filled out completely, free of obvious errors, and match the exact wording covering the property. A certificate that is "incomplete, invalid, infirm or inconsistent on its face is never acceptable."

What this means for you

Dealers and marketplace facilitators selling to government

Collect a complete, signed Form ST-12 (or keep the official purchase order) at the time of sale, and keep it for at least three years. If the certificate is complete, consistent on its face, and taken in good faith, you're protected from the tax even if it later turns out the signer lacked authority. Never accept a certificate that is incomplete or inconsistent on its face — it is never valid.

Caterers, restaurants, and food sellers

Government buyers may purchase food, meals, and related services exempt under Virginia Tax Bulletin 16-3. The same "purchase order or ST-12" documentation rule applies to those sales.

Accountants and auditors

The protection hinges on when the certificate is obtained. A valid certificate received at the time of sale gives "good faith acceptance." A certificate produced only after the sale invalidates that privilege, and the Department then applies "greater scrutiny" — the dealer must otherwise prove the sale was exempt or owe the tax, penalties, and interest.

Common questions

Q: Do I have to verify that the government employee is authorized to sign?
A: No. Once you take a properly completed, signed ST-12 in good faith and with reasonable care, you have satisfied the signature-authority requirement and are not liable for the tax.

Q: What if the agency doesn't issue purchase orders?
A: A valid Form ST-12 is accepted in place of a purchase order.

Q: Are government credit-card purchases exempt?
A: Only when the government's credit is bound and the bill is sent directly to and paid by the government. Check GSA SmartPay for federal cards and the Virginia Department of Accounts charge-card page for state transactions.

Q: The purchase order arrived after the sale — is that a problem?
A: No, as long as it supports the exempt treatment; sales tax is transactional and the timing of the purchase order is "inconsequential." But if no valid certificate existed at the time of sale, you lose good-faith protection and owe the tax.

Q: Can another Virginia business rely on this ruling?
A: It is the Department's published interpretation and useful guidance, but it was issued on this taxpayer's specific facts. Your outcome depends on your own facts and the law in effect, and it is not a substitute for professional advice.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-609.1(4) — exemption for tangible personal property for use or consumption by the Commonwealth, its political subdivisions, or the United States
• Va. Code § 58.1-623 A — all sales are taxable until the contrary is established; burden of proof on the dealer absent a valid certificate
• Va. Code § 58.1-633 — dealer must keep suitable records of sales subject to the tax
• 23 VAC 10-210-690 — sales to governments (official purchase order, paid out of public funds)
• 23 VAC 10-210-280 — reasonable care and good-faith acceptance of exemption certificates
• 23 VAC 10-210-470 — dealer records kept for three years

Guidance and cited public documents (Virginia):

• Virginia Tax Bulletin 16-3 (5/2/2016) — government purchases of food and meals
• International Paper Company v. Virginia Dept. of Taxation, CL-2009-360 (Fairfax Cir. Ct. July 29, 2010), issued as P.D. 10-258 — good-faith/reasonable-care standard

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 26-27

Original ruling text

May 25, 2026

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This is in response to a letter submitted by * (the “Taxpayer”) requesting guidance for the acceptance of the retail sales and use tax exemption certificate for use by the Commonwealth of Virginia, a political subdivision of the Commonwealth of Virginia, or the United States (Form ST-12).

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

FACTS

The Taxpayer is a marketplace facilitator for caterers and restaurants. It conducts and facilitates a large number of sales with the departments and entities of various governments within the Commonwealth. The Taxpayer requests a clarification of the application of Form ST-12 for transactions involving government entities.

RULING

Government Exemption

Virginia Code § 58.1-609.1 4 sets out an exemption for “[t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States.” Title 23 of the Virginia Administrative Code (VAC) 10-210-690 interprets the statute, explaining that generally, “[s]ales to the United States, or to the Commonwealth of Virginia or its political subdivisions, are exempt from the tax if the purchases are pursuant to required official purchase orders to be paid out of public funds.” Under Virginia Tax Bulletin (VTB) 16-3 (5/2/2016), federal, state, and local government entities are permitted to make purchases of food, meals, and any services provided in connection with the sale of food and meals exempt from the retail sales and use tax.

Exemption Certificates

The Taxpayer poses a number of questions regarding the following certification clause on Form ST-12:

The undersigned, for and on behalf of the governmental agency named below, hereby certifies that all tangible personal property purchased or leased from the above dealer on and after this date will be for use or consumption by a governmental agency, that each such purchase or lease will be supported by the required official purchase order, and that such tangible personal property will be paid for out of public funds.

Question 1

When a government employee is certifying that they will spend Commonwealth funds appropriately, what is the Taxpayer’s responsibility for verifying whether the Virginia employee has the authority to make the purchase?

Pursuant to Virginia Code § 58.1-623 A, “All sales or leases are subject to the tax until the contrary is established. The burden of proving that a sale, distribution, lease, or storage of tangible personal property is not taxable is upon the dealer unless he takes from the taxpayer a certificate to the effect that the property is exempt under this chapter.” Title 23 VAC 10-210-280 A further explains, in part, that “a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable, either before or after notice.”

Title 23 VAC 10-210-280 B provides that reasonable care and judgment must be exercised by both the purchaser and dealer when ensuring the completeness and correctness of exemption certificates. An exemption certificate may be accepted in good faith when the certificate has been:

1. Submitted as part of the original transaction,
2. Filled out completely,
3. Afforded reasonable care by both parties to the transaction to ensure correctness ( i.e., there are no obvious errors in the form’s completion), and
4. Submitted to purchase the tangible personal property covered by the exact wording of the certificate.

In International Paper Company v. Virginia Department of Taxation , CL-2009-360, Circuit Court of Fairfax County (July 29, 2010), also issued as Public Document (P.D.) 10-258 (10/25/2010), the court held that a dealer could “satisfy its burden of good faith and reasonable care and judgment in taking a certificate to the effect that the property purchased is exempt” if:

Upon a facial examination of the certificate, a dealer could reasonably conclude that the items purchased could potentially be used for any of the exempt purposes claimed on the certificate of exemption; or

Based upon the actual dealer's knowledge of the business of its purchaser, the dealer could reasonably determine in good faith that the specific purchaser intended to use the items purchased for one or more of the exempt purposes claimed on the certificate of exemption.

The standard addressed in International Paper Company is applicable only when a valid certificate is received and retained at the time of sale. Thus, once the Taxpayer obtains a properly completed and signed certificate of exemption from a political subdivision or a governmental agency certifying that the purchase qualifies for an exemption under the Virginia retail sales and use tax law, and has used reasonable care in receiving the exemption certificate, the Taxpayer would be considered to have satisfied its responsibility for verifying signature authority and would be absolved from collecting the tax on the sale.

Question 2

Purchase orders are not always available or provided timely. Some entities do not have a purchase order requirement. How does the Taxpayer know if a purchase order is required?

Title 23 VAC 10-210-690 A states “[s]ales to the United States, or to the Commonwealth of Virginia or its political subdivisions, are exempt from the tax if the purchases are pursuant to required official purchase orders to be paid out of public funds. Sales made without the required purchase orders and not paid for out of public funds are taxable.” See P.D. 24-102 (10/3/2024).

A taxpayer should be able to provide sufficient information that allows an auditor to verify the exempt sale and connects the sale to the exemption certificate provided by the entity. See P.D. 20-132 (8/11/2020). As such, the Department has determined that exempt sales may be made to the federal government, Virginia government agencies, and Virginia local governments entities provided that either the purchase is made pursuant to an official purchase order or the purchaser provides a taxpayer with a valid government exemption certificate. See P.D. 89-309 (11/7/1989), P.D. 04-184 (10/8/2004), 07-55 (5/10/2007), and P.D. 13-9 (1/31/2013). As such, if the Taxpayer is unable to provide an official purchase order, the Department will accept a valid Form ST-12.

Question 3

How does the Taxpayer validate purchases in which a government purchasing card is used?

Purchases by governments can be paid through direct billing to the agency or via an approved government credit card. Sales that are billed directly to the government and paid for by the government's electronic funds transfer, check, or credit card are exempt of the tax. Only those credit card purchases for which the credit of the government is bound and billings are sent directly to and paid by the federal government are exempt from the retail sales and use tax. See P.D. 13-9 (1/31/2013).

A purchase with a government purchase card would be controlled by the approving government agency. Information concerning federal government purchase cards can be obtained from the General Services Administration’s SmartPay website at https://smartpay.gsa.gov/ . For Virginia government transactions, the Taxpayer should review the information provided on the Charge Card Administration page of the Virginia Department of Account’s website at https://www.doa.virginia.gov/reference/chargeCardAdmin/ .

Question 4

What happens when purchase orders are received after the order has been placed?

Optimally, all necessary documents to verify the taxability of a sale would be provided simultaneously with the transfer of the property. This, however, is not always possible or realistic. When a valid certificate is not received at the time of sale, the “good faith acceptance” privilege is invalidated, and the dealer becomes subject to the tax that was not applied to the transaction. See P.D. 98-29 (2/20/1998) and P.D. 23-99 (8/17/2023). While the dealer has the responsibility to prove the transaction is exempt, the Department also applies “greater scrutiny” to determine whether the transaction is exempt in order to avoid collecting tax when it is not due. See P.D. 98-29 (2/20/1998), P.D. 04-75 (8/25/2004), P.D. 10-201 (8/31/2010), P.D. 17-114 (6/29/2017), and P.D. 22-69 (4/13/2022).

Under Virginia Code § 58.1-633, every dealer is required to keep and preserve suitable records of the sales, leases, or purchases, as the case may be, subject to the retail sales and use tax. Title 23 VAC 10-210-470 similarly provides that a dealer is “required to keep and preserve for three years adequate and complete records necessary to determine the amount of tax liability.”

The retail sales and use tax is a transactional tax. The determination as to the taxation of a specific transaction is based on the underlying documents that support the transaction. See P.D. 00-100 (5/25/2000) and P.D. 25-30 (2/27/2025). Thus, so long as a purchase order can verify and support the treatment of a transaction, the timing of the receipt of such purchase order is inconsequential.

Question 5

How is the Taxpayer able to determine whether purchases were paid out of the public funds?

As indicated in the response to Question 3, a purchase with a government purchase card would be determined by the approving government agency. As long as the Taxpayer receives a government purchase order or valid Form ST-12 from a government entity and practices reasonable care, it will have satisfied its obligations under the law and would not be responsible for tax on such transactions.

The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at or **.

Sincerely,

Kristin L. Collins
Tax Commissioner
Commonwealth of Virginia

AR/5005.B

Related Documents

89-309

00-100

98-29

01-36

04-184

04-75

07-55

10-258

10-201

11-8

13-9

16-3

17-114

19-50

20-132

24-102

25-30

23-99

22-69