Tax Type
Retail Sales and Use Tax
Description
Prior audit and assessment of the revalued assets.
Topic
Appropriateness of Audit Methodology
Penalties and Interest
Property Subject to Tax
Date Issued
04-08-2002
April 8, 2002
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter in which you seek correction of the department's retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period August 1997 through July 2000. I apologize for the delay in the department's response.
FACTS
The Taxpayer is a real property construction contractor installing gas pipelines. During a prior audit period, the Taxpayer's out-of-state parent company transferred assets to Virginia in an effort to start a Virginia location. In a prior audit of the Taxpayer (for the period January 1994 through July 1997), this transfer of assets was assessed. That assessment was subsequently paid, and the Taxpayer did not protest the assessment to the Tax Commissioner.
During the current audit period, and by federal mandate, there was an increase in the valuation of the assets transferred in the prior audit period. I understand that the Taxpayer did not amend its prior income tax returns but did adjust its books in 1999, the year in which the assets were revalued. The department's auditor assessed the sales and use tax on the increased valuation. The Taxpayer disagrees with the current assessment of the revalued assets. Further, the Taxpayer now questions the prior audit assessment.
DETERMINATION
Current AuditCode of Virginia § 58.1-602 defines "sale" to mean a "transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property... for a consideration . . . ."
With regard to the revalued assets, there is no transfer of tangible personal property. Title and possession of the revalued assets were transferred to the Taxpayer during the prior audit period, and not the current audit period. Consequently, there is no taxable sale of these assets during the current audit period. Accordingly, the department's audit will be revised to remove this issue. I note the noncontested issues of the current audit have been paid. Accordingly, removing this contested issue will result in no further sales and use tax liability.
Protest of Prior Audit
The assessment for the prior audit was issued November 10, 1997. Pursuant to Code of Virginia § 58.1-1821, any person who is assessed a tax may apply for relief from the Tax Commissioner within 90 days of the notice of assessment. Further, under Code of Virginia § 58.1-1825, any Taxpayer may petition the courts for correction of an assessment. The application must be filed with the court within three years from the date of assessment or one year from the Tax Commissioner's determination, whichever is later. In the instant case, the statute of limitations for applying to court for the prior audit assessment expired on November 10, 2000.
The Code of Virginia section cited above and other reference documents are available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us.
If you have any additional questions regarding this matter, please contact ***** in the department's Office of Policy and Administration, Appeals and Rulings, at ***** @tax.state.va.us or at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/33182I
Rulings of the Tax Commissioner