November 30, 2018
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter in which you seek reconsideration of the Department’s determination letter issued to ***** (the “Taxpayer”) on May 4, 2018. The determination letter was issued in response to the Taxpayer’s appeal seeking correction of the retail sales and use tax assessments issued for period July 2009 through June 2015.
FACTS
The Taxpayer operates as a construction company. The Taxpayer requests reconsideration of the determination related to purchases it made during the audit period from ***** (Line Items 12, 32, 35 and 36) and ***** (Line Item 23). The auditor held the purchases at issue subject to the use tax in the audit because the Taxpayer did not have proper documentation to support its contention that the sales tax had been paid on the purchases at the time the transactions occurred. The Taxpayer provided with its appeal hardcopies of the documentation provided during the audit. The Taxpayer also provided emails it received from the vendors related to the contested purchases, which included the electronic versions of the aforementioned hardcopies.
In accordance with Virginia Code § 58.1-633, it was determined that the documentation did not comply with the requirements of the statute. It was further determined that the documentation did not substantiate the purchases made from the vendor, and the documentation did not allow the Department to verify that the sales tax was properly paid on the purchases at the time the transactions were made. Accordingly, the purchases were not removed from the audit.
In its reconsideration, the Taxpayer provides additional documentation related to the contested purchases. The Taxpayer requests that the additional documentation be reviewed, and based on the documentation, the purchases at issue be removed from the audit. The Taxpayer also requests an abatement of the interest due to the amount of time that lapsed between when the original appeal was filed and when the determination letter was issued.
DETERMINATION
Contested Purchases
Virginia Code § 58.1-633 A provides that dealers:
Required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases, as the case may be, 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.
Based upon a review of the additional documentation provided with the Taxpayer’s reconsideration, I find that the documentation supports the Taxpayer’s contention that the sales tax was properly charged and collected at the time the contested purchases took place. The documentation shows the sales tax charged for the purchases, as well as the sales tax being paid by the Taxpayer on the purchases. Accordingly, I find that the documentation provided sufficiently supports removal of the contested purchases from the audit.
Interest
Virginia Code § 58.1-1812 mandates the application of interest to any tax assessment. Interest is not assessed as a penalty for noncompliance with the tax laws. Rather, it simply represents a fee for the use of money over a period of time. Taxpayers have the option of remitting outstanding liabilities to the Department while the Department reviews pending appeals, to avoid the accrual of additional interest. Therefore, I find no basis to waive the interest assessed as a result of the Department's audit.
CONCLUSION
Based upon this determination, the audit will be returned to the appropriate field audit staff to make the revisions noted above. Once the revisions have been completed, the Taxpayer will receive a revised audit report and revised bills, with interest accrued to date. No further interest will accrue provided the bills are paid within 30 days from the date of the bill. The Taxpayer should remit 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 assessments, you may contact ***** at *****.
The Code of Virginia sections 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/1724P