Tax Type
Retail Sales and Use Tax
Description
Sales tax not reported to the Department
Topic
Accounting Periods and Methods
Records/Returns/Payments
Date Issued
12-18-2012
December 18, 2012
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer"), for the audit period March 2006 through February 2012.
FACTS
The Taxpayer operates an automotive repair business. The Department's audit disclosed that the Taxpayer has not reported any sales to the Department. Accordingly, because sales tax returns had not been filed with the Department, the assessment was issued based on Va. Code § 58.1-618. The Taxpayer disagrees with the assessment, contending that its business was closed in 2005. The Taxpayer states that the auditor's use of the Taxpayer's business license information, rather than returns, as a basis for the assessment is erroneous. The Taxpayer asserts that its business is not operational, and the business license was kept active for purposes of keeping the location zoned for business. The Taxpayer requests that the assessment be abated.
DETERMINATION
Virginia Code § 58.1-633 states that every dealer required to make a return "shall keep and preserve suitable records of the sales, leases, or purchases . . . taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner." The record keeping requirement is further explained in Title 23 of the Virginia Administrative Code 10-210-470.
When a dealer fails to maintain adequate records, the Department is authorized by Va. Code § 58.1-618 to use the best information available to reconstruct a dealer's sales or purchases to determine whether a tax liability exists. In this case, the Taxpayer failed to maintain adequate records during the audit period to determine actual tax liabilities. Therefore, the auditor used the best available information. The auditor used statutory business license assessments issued by the municipality in which the Taxpayer's business is located to estimate the Taxpayer's sales tax liability. I note that the Taxpayer was contacted by the auditor several times in an effort to review sales information that the Taxpayer stated it possessed. The auditor documents that the Taxpayer would not supply valid data to complete a current review of the Taxpayer's actual tax liabilities. I also note that while the Taxpayer asserts that its business is not operational, recent inquiries at the Taxpayer's business address reflect that the business is open and operating.
Virginia Code § 58.1-205 provides that any assessment of tax by the Department is deemed prima facie correct. The burden is on the Taxpayer, to prove the assessment is erroneous. Lacking the documentation to support its claim, the Taxpayer has not met the burden of proof in this case.
Based on the foregoing and absent evidence to the contrary, I find that the audit methodology applied in this case is acceptable. Accordingly, there is no basis to revise the audit findings at this time. I will, however, allow the Taxpayer 45 days from the date of this letter to provide documentation to the auditor sufficient to determine the actual tax liability for the audit period at issue. If the information is not provided within the time allotted, the assessment will be upheld and become due and payable.
The Code of Virginia sections and regulation cited are available on-line in the Laws, Rules and Decisions section of the Department's website located at www.tax.virginia.gov. If you have any questions regarding this matter, please contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5139634134.Q
Rulings of the Tax Commissioner