Sales Tax Articles
Sales Tax State Activity Update - May 2008
Zero Validity for Zero Rate on VAT ID Alone
The Supreme Tax Court has ruled that the VAT ID number of the customer was not adequate proof of the customer's identity and that the supplier should have obtained further proof of the customer's status.
In the case, representatives of a dormant Portuguese company purchased six luxury cars with cash from a car dealer in Germany. The supplier verified the customer's VAT ID number but made no further attempts to verify the identity of the customer or the validity of the representative of the customer who took possession of the cars. The supplier zero rated the supply as an intra community supply.
It was subsequently found that the business was dormant and the cars were not purchased for the business, but rather for the owners own use. The tax office refused the zero rating saying the supplier had not taken the proper steps to establish the identity of the customer.
The Supreme Tax Court upheld the position of the tax office ruling that it was reasonable to expect further evidence, beyond the VAT ID number, to verify customer identity. It was also reasonable to expect the supplier to verify the power of authority of the representative purporting to act for the customer especially in large cash transactions.
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