March 30, 2022
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ***** :
This will reply to your letter in which you seek correction of the sales and use tax assessment issued to ***** (the “Taxpayer”) as a result of an audit for the period January 2015 through December 2017. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer, a ***** (State A) business entity, was engaged in installing commercial canopies onto real property in Virginia during the periods at issue. As result of an audit by the Department, an assessment was issued because of the Taxpayer’s failure to remit its total collected use tax. The Taxpayer appeals the assessment, asserting that previously collected and remitted use tax should reduce its assessed liability.
DETERMINATION
Virginia Code § 58.1-604 imposes the use tax on the use or consumption of tangible personal property in Virginia. In addition, subsection 3 provides that “[a] transaction taxed under [the sales tax] shall not also be taxed under this section, nor shall the same transaction be taxed more than once under either section.”
As a real estate contractor in accordance with Title 23 of the Virginia Administrative Code (VAC) 10-210-410 A, the Taxpayer was required to “remit the use tax on any tangible personal property purchased,” and is prohibited from passing the sales or use tax on to anyone else as a tax. In addition, Title 23 VAC 10-210-340 C provides:
Erroneous collection of tax on nontaxable transactions. All sales and use tax collected by a dealer is held in trust for the state. Therefore, any dealer collecting the sales or use tax on nontaxable transactions must remit to the Department of Taxation such erroneously or illegally collected tax unless he can show that the tax has been refunded to the purchaser or credited to the purchaser’s account.
In this case, the auditor found that a separately stated “estimated use tax” amount on some of its invoices was paid by certain customers. As a result, the auditor issued an assessment for the amount of use tax charged because it had not been remitted to the Department.
The Taxpayer explains that the “estimated use tax” was included at the request of some customers, but the Taxpayer remitted use tax to the Department based upon the actual amount due. The Taxpayer requests that the Department reduce its assessment to reflect those use tax remittances already provided to the Department. The auditor, however, determined that the Taxpayer was liable for the use tax it accrued and remitted in addition to the amount charged to its customers.
The Department has addressed a similar issue in Public Document (P.D.) 00-65 (4/26/2000). In that determination, a real estate contractor installed components for gas stations and erroneously charged sales tax on the transactions. The Department upheld the resulting assessment for the contractor’s failure to remit the charged and collected sales tax, finding that “by itemizing sales tax on invoices for real or tangible property installations, the taxpayer has called for payment of the tax. In other words, it is collecting tax. Anyone who collects sales tax is obligated to remit it to the Department.” However, the contractor was also given a credit for tax paid on the purchase of the property transferred to its customers to avoid double taxing those items.
The information provided shows the Taxpayer separately stated estimated sales tax on invoices paid. As a contractor, the Taxpayer is deemed to have erroneously charged its customer sales tax and was required to remit the tax collected. Accordingly, the Department correctly included the amount of use tax the Taxpayer collected from its customer in its audit computation.
As indicated in P.D. 00-65, however, the Taxpayer is entitled to a credit for the amount of use tax previously remitted for the same transactions. As such, this case will be remanded to the auditor to adjust the assessment in accordance with this determination.
If additional information is needed to determine the amount of the Taxpayer’s use tax payment that was applicable to transactions at issue, the auditor should request that information from the Taxpayer and allow at least 60 days for the Taxpayer to respond. An assessment of tax by the Department is deemed prima facie correct, meaning the burden of proof is upon the Taxpayer to show that the assessment should be adjusted. See Virginia Code § 58.1-205.
If the Taxpayer is unable or fails to provide any necessary information in the time provided, an updated bill with accrued interest to date will be issued. The Taxpayer should pay the amount due within 30 days of the date on the bill to avoid the accrual of additional interest or possible collection action. If the Taxpayer continues to disagree, it will be provided 90 days from the issuance of the update assessment to file another appeal pursuant to Virginia Code § 58.1-1821.
The Code of Virginia sections, regulations, and public document cited are available online at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department’s website. If you have any questions regarding this determination, please contact ***** in the Office of Tax Policy, Appeals and Rulings at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1929.C