Tax Type
Consumer Use Tax
Retail Sales and Use Tax
Description
Provider of meal services for various facilities; tax on untaxed sales and purchases
Topic
Penalties
Records/Returns/Payments
Tangible Personal Property
Taxable Transactions
Taxable Income
Date Issued
10-31-2013
October 31, 2013
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to the letter submitted by ***** requesting correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") as a result of an audit for the period June 2006 through December 2010. I understand that you are now the contact person for the Taxpayer in this matter.
FACTS
The Taxpayer provides meal services for various facilities. An audit resulted in the assessment of sales and use tax on untaxed sales and purchases of tangible personal property. The Taxpayer takes exception to several sales included in the audit. In addition, the Taxpayer requests abatement of the assessed penalty on the basis that it acted in good faith.
DETERMINATION
Sales Exceptions
The Taxpayer disputes the tax assessed on line items 1, 3, 4, and 5 included in the Department's sales exceptions list on the basis that these sales were to exempt clients. Based on the documentation provided, I find basis for the removal of these items from the audit.
Penalty
The assessment of penalty on tax audit deficiencies is mandatory. See Title 23 of the Virginia Administrative Code (VAC) 10-210-2032 B 1. Notwithstanding, the penalty regulation allows for its waiver if a certain level of compliance is achieved or if exceptional mitigating circumstances exist. See Title 23 VAC 10-210-2032 B 5 and 8.
Pursuant to Title 23 VAC 10-210-2032 B 5, penalty may be waived on third and subsequent audits if the Taxpayer's compliance ratio for sales tax meets or exceeds 85%. Based on the above sales tax revision, the compliance ratio for sales tax is recomputed from 62% to 99.9%.
Because the recomputed sales tax compliance ratio on this fifth audit is greater than 85%, the penalty assessed with respect to the sales tax will be waived. This waiver does not apply to the penalty assessed on the unremitted sales tax. See Title 23 VAC 10-210-2032 B 3.
Also, pursuant to Title 23 VAC 10-210-2032 B 5, penalty may be waived on third and subsequent audits if the Taxpayer's compliance ratio for use tax meets or exceeds 85%. In this regard, penalty was assessed with respect to the use tax because the use tax compliance ratio is only 9%. Pursuant to Title 23 VAC 10-210-2032 B 8, penalty may also be waived for exceptional mitigating circumstances. Good faith actions to collect, pay and accrue the tax do not constitute exceptional mitigating circumstances. Lacking any exceptional mitigating circumstances or a sufficient level of use tax compliance, I find no basis for relief of the penalty assessed regarding the consumer use tax in this audit.
CONCLUSION
The audit will be revised in accordance with this determination. A revised bill, with interest accrued to date, will be sent to the Taxpayer for the remaining balance owed. The outstanding balance should be paid within 30 days of the bill date to avoid additional interest charges. The Taxpayer should remit its payment to: Virginia Department of Taxation, 600 East Main Street, 23rd Floor, Richmond, Virginia 23219, Attn: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.
Although you asked to be notified prior to the issuance of a determination letter if it was not consistent with the relief requested in your appeal, the Department does not provide such notifications. A taxpayer that is issued a determination that is not in its favor in whole or in part may request a reconsideration provided it meets certain conditions as described in § 6 A of Public Document 06-140 (11/29/06).
The Code of Virginia section, regulation and public document 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 determination, please contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5389379986.R
Rulings of the Tax Commissioner