June 27, 2016
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** trading as ***** (the “Taxpayer”), in which you seek correction of the retail sales and use tax assessment issued for the period May 2008 through April 2014. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is in the business of selling various types of signs. During the audit period, the Taxpayer did not charge the sales tax on the sale of manufactured signs to its customers. As a result of the Department's audit, the Taxpayer was assessed tax on its sales of signs that were made exempt of the tax. The Taxpayer disputes the tax based on instructions it received from a Department employee.
DETERMINATION
Manufactured Signs
Virginia Code § 58.1-603 imposes the retail sales tax on “every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth . . . .” Virginia Code § 58.1-602 defines tangible personal property, in pertinent part, as “Personal property which may be seen, weighted, measured, felt, or touched, or is in any other manner perceptible to the senses...The term ‘tangible personal property’ shall include...manufactured signs.”
The 2005 Virginia General Assembly (House Bill 2774) amended the definition of tangible personal property to include manufactured signs, effective July 1, 2005. This legislative change effectively deemed sales of manufactured signs as retail sales subject to
the sales tax. See also, Legislative Summary 05-101(6/30/05) issued by the Department that provides further information regarding this change.
Based upon these authorities, all dealers of manufactured signs, including the Taxpayer, are responsible for charging and collecting the tax on sales of manufactured signs to customers. Accordingly, the sales tax assessed in the audit with respect to the manufactured signs is correct as issued.
Department Guidance
The Taxpayer states that upon taking over the business, it was told by other sign contractors that if the Taxpayer had been paying sales tax on the materials it purchased, that it was not required to collect the sales tax from its customers. The Taxpayer further states that it contacted the Department to verify how the tax should be applied. The Taxpayer maintains that a Department employee instructed the Taxpayer to pay the sales tax when purchasing the materials used to produce the signs, and the Taxpayer was not required to charge sales tax to its customers on the sale of the signs.
Virginia Code § 58.1-1835 provides that:
The Tax Commissioner shall abate any portion of any tax, interest, and penalty attributable to erroneous advice furnished to the taxpayer in writing by an employee of the Department acting in his official capacity if:
1. The written advice was reasonably relied upon by the taxpayer and was in response to a specific written request by the taxpayer;
2. The portion of the penalty or tax did not result from a failure by the taxpayer to provide adequate or accurate information; and
3. The facts of the case described in the written advice and the request therefor are the same, and the taxpayer's business or personal operations have not changed since the advice was rendered.
In order for relief to be granted for the erroneous application of the tax, the application must be based on erroneous written guidance from the Department. In this instance, the Taxpayer did not receive written guidance from the Department regarding the application of the sales tax on the sale of manufactured signs to its customers. Without full knowledge of the facts presented by the Taxpayer and the information provided by the Department employee, I am unable to determine whether the Taxpayer applied the tax based upon erroneous information. Additionally, the criteria found in Va. Code § 58.1-1835 have not been met. Accordingly, I am unable to grant relief to the Taxpayer as provided in Va. Code § 58.1-1835.
My decision here is supported by Public Document 05-5 (2/1/05), in which the Tax Commissioner addressed abating an assessment when written guidance was not provided by a Department employee to the taxpayer. In that instance, the taxpayer did not provide evidence that it relied upon written advice from the Department, and the assessment at issue was upheld. Additionally, the Tax Commissioner cited his concern with verbal information received by the taxpayer because it was difficult to determine what specific questions were asked and what information regarding the taxpayer's business operations was presented to the Department.
CONCLUSION
Based on the facts in this case and the cited authorities, it is clear that the Taxpayer was required to collect the sales tax on its sales of manufactured signs. However, the Taxpayer did not comply with this requirement. Accordingly, I find the audit assessment covering the period May 2008 through April 2014 is correct, and there is no basis to abate any portion of the assessment.
A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of the bill. The Taxpayer should remit its payment to: Virginia Department of Taxation, 600 E. Main Street, 15th Floor, Richmond, Virginia 23219, Attn: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.
The Code of Virginia sections, legislative summary 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, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-6044911553.P