January 25, 2022
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”) in which you seek correction of the retail sales and use tax assessment issued for the period January 2016 through March 2019.
FACTS
The Taxpayer operates a restaurant in Virginia. The auditor attempted to contact the Taxpayer to arrange a meeting and to review records to conduct an audit. When the Taxpayer did not respond to the auditor’s requests, the auditor issued an estimated assessment, pursuant to Virginia Code § 58.1-618. The Taxpayer submits an appeal claiming that the audit report was not mailed to the Taxpayer’s current address. The Taxpayer also claims the estimated assessment is overstated and sales tax was incorrectly remitted to North Carolina during the audit period.
DETERMINATION
Pursuant to Virginia Code § 58.1-1820 2, “[a]ssessments made by the Department of Taxation shall be deemed to be made when a written notice of assessment is delivered to the taxpayer by an employee of the Department of Taxation, or mailed to the taxpayer at his last known address.” [Emphasis added.] The auditor attempted to conduct a field visit and requested documentation from the Taxpayer to perform the audit. When the Taxpayer did not respond to the auditor’s requests, the assessment was issued. The auditor mailed the audit report to the address on file with the Department. The Taxpayer is responsible for ensuring that accurate and updated information is on file with the Department.
Appeal Not Timely Filed
Virginia Code § 58.1-1821 states that "[a]ny person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner." Title 23 of the Virginia Administrative Code (VAC) 10-20-165 interprets Virginia Code § 58.1-1821 and sets out guidelines for the filing of administrative appeals. Subsection D 4 of this regulation states: "An incomplete appeal or notice of intent to appeal does not satisfy or extend the 90-day limitation period."
Pursuant to Virginia Code § 58.1-1821 and Title 23 VAC 10-20-165, the Taxpayer was required to file a complete administrative appeal no later than September 2, 2019. The Taxpayer's correspondence to the Department was sent on December 2, 2020 and, therefore, is not a timely appeal filed with the Department.
Estimated Assessment
The estimated assessment was issued to the Taxpayer in accordance with Virginia Code § 58.1-618. Pursuant to Virginia Code § 58.1-618, the Department is authorized to use the best information available to reconstruct a dealer's sales or purchases to determine whether a tax liability exists. In this instance, the Taxpayer failed to provide records during the performance of the audit for review by the auditor. Accordingly, the auditor used the best information available to estimate the Taxpayer's liability.
Burden of Proof
Virginia Code § 58.1-205 provides that any assessment of tax by the Department is deemed to be prima facie correct and that the burden is on the taxpayer to prove the assessment is erroneous or incorrect. In this instance, the Taxpayer has not provided documentation to support its contention that the assessment of tax is incorrect. Therefore, the Taxpayer has not met the burden of proof requirement.
CONCLUSION
Based on this determination, the assessment is correct. The only recourse the Taxpayer has for the correction of the assessment is to submit an offer in compromise based on doubtful liability. The Taxpayer must include a basis for the correction and documentation that proves the assessment is overstated or incorrect. If the Taxpayer wishes to pursue a settlement based on doubtful liability, please complete and return the enclosed OIC B - 2 form to: Tax Commissioner, Virginia Department of Taxation, Post Office Box 2475, Richmond, Virginia 23218-2475. The Department will review the facts and documentation submitted with the Taxpayer’s request. Upon completion of the Department’s review, a response will be issued based upon the information provided.
The Taxpayer is given 90 days to submit an offer in compromise based upon doubtful liability, as provided above. If the forms are not received within the allotted time frame, an updated bill, with interest accrued to date, will be mailed to the Taxpayer. If the taxpayer has questions concerning payment of the assessment or bill, the taxpayer may contact the Delinquent Collections Unit at *****.
The Code of Virginia sections cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3625.G