May 24, 2023
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 May 2015 through April 2018. I apologize for the delay in responding to your request.
FACTS
Under this first generation audit, the Taxpayer, a supplier of industrial, medical and specialty gases along with welding equipment and related products to customers in Virginia, was unable to provide complete and accurate records of its sales or purchases. As a result, the auditor used available information to calculate the audit liability. The Taxpayer appealed, contending it received documentation supporting an exempt sale after the audit was closed. The Taxpayer has paid the assessment and requests a refund based on documentation provided with its appeal.
DETERMINATION
Pursuant to Virginia Code § 58.1-205, any assessment of tax by the Department is prima facie correct, meaning the burden of proof is upon the Taxpayer to show that the assessment is in error. Additionally, Virginia Code § 58.1-633 and Title 23 of the Virginia Administrative Code (VAC) 10-210-470 provide that every dealer required to make a return and collect sales tax must keep and preserve adequate and complete records to determine the amount of tax liability. This requirement necessarily includes invoices for each individual transaction showing the amount of tax charged or paid and any relevant exemption documentation. When a dealer fails to maintain adequate records, the Department is authorized by Virginia Code § 58.1-618 to use the best information available to reconstruct a dealer’s sales and purchases to determine whether tax liability exists.
With its appeal, the Taxpayer provided a direct pay permit from one of its customers along with a corresponding invoice. Virginia Code § 58.1-624 D provides that:
Persons who hold a direct payment permit which has not been cancelled shall not be required to pay the tax to the dealer as otherwise herein provided. Such persons shall notify each dealer from whom purchases or leases of tangible personal property are made of their direct payment permit number and that the tax is being paid directly to the Tax Commissioner. Upon receipt of such notice, such dealer shall be absolved from all duties and liabilities imposed by this chapter for the collection and remittance of the tax with respect to sales, distributions, leases, or storage of tangible personal property to such permit holder. Dealers who make sales upon which the tax is not collected by reason of the provisions of this section shall maintain records in such manner that the amount involved and identity of each such purchaser may be ascertained.
The documentation will be referred to the appropriate field audit staff for review. Once the information has been confirmed, the assessment will be adjusted as appropriate and a refund will be issued.
The Code of Virginia sections and regulations cited 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/4380.Y