The District of Columbia Court of Appeals affirmed the denial of George Washington University Hospital’s (GWUH) refund claim for nearly $1,000,000 in sales tax collected between 2016 and 2019.
GWUH purchased prepared meals during the 2016 and 2019 tax periods with the intention of being resold. While D.C. requires sales tax to be paid on tangible personal property, D.C. Code § 47-2001 states that a purchaser is exempt from paying sales tax if purchase will be resold to the end consumer. However, the purchaser is required to provide the seller with a resale certificate at the time of purchase and GWUH did not follow the statue to claim the exemption for resale.
Subsequently, GWUH filed a claim for a refund with the Office of Tax and Revenue (OTR) who denied the claim due to the divergence from the statute. The D.C. Court of Appeals affirmed the OTR’s decision.
To claim exemptions it is important to follow the statutes as defined, for example, D.C. Code § 47-2010 clearly outlines the need for a resale certificate at the time of purchase. This left GWUH’s legal team to argue specific semantics of other clauses in D.C. code. These arguments largely failed because D.C. Code § 47-2010 is a flat rule, and tax collected in this situation without a resale certificate is not considered erroneously or illegally collected.
This case also illustrates the necessity of certificates beyond the legal requirement. Certificates serve a very important role in the documentation for the seller and the purchaser, not just governing authorities. Thoughtful investigation into your sales tax requirements prior to purchasing or selling can save your company time and money.
(District Hospital Partners v. District of Columbia)