November 18, 2024
Re: Request for Reconsideration: Retail Sales and Use Tax
Dear *****:
This will respond to your letter submitted on behalf of ***** (the “Taxpayer”) in which you request reconsideration of the Department’s final determination letter, issued as Public Document (P.D.) 21-7 (2/2/2021).
FACTS
The Taxpayer, an information technology service provider, relocated its headquarters to Virginia in 2008. As part of the relocation, the Taxpayer’s aircraft was moved to a hanger in Virginia. In April 2008, the Taxpayer accrued use tax on an airplane based on the aircraft sales and use tax rate at the time and reported and remitted the tax on its March 2008 retail sales and use tax return.
In October 2018, the Taxpayer requested a refund of retail sales and use tax inaccurately reported on the March 2008 return. The Department denied the request because documentation failed to show the refund was warranted. In response, the Taxpayer filed an application for correction. In P.D. 21-7, the Department upheld the denial on the basis that the request was submitted beyond the statute of limitations and that insufficient evidence had been provided to show that the aircraft use tax was paid. The Taxpayer seeks a reconsideration of the Department’s determination, claiming that the original refund request was timely filed and that the Department relied on misstated facts and misapplied law in denying the requested refund.
DETERMINATION
Timeliness of Refund Request
Virginia Code § 58.1-1823 states in pertinent part that “[A]ny person filing a tax return or paying an assessment required for any tax administration by the Department of Taxation may file an amended return…three years from the last day prescribed by law for the timely filing of the return….” Title 23 of the Virginia Administrative Code (VAC) 10-210-3040 addresses the refund of sales tax to dealers and provides, in pertinent part, that “[r]efunds cannot be authorized unless the request is made within three years from the due date of the return.”
In P.D. 21-7, the Department accurately concluded that the refund claim was filed outside the three-year limitations period. However, the determination failed to account for a waiver that had been executed between the Taxpayer and the Department with regard to an audit that included the March 2008 period.
In P.D. 03-52 (7/3/2003), the Department opined that a refund claim would be considered to be timely filed if such request was made within the general three-year statute of limitations from the due date of the original return or within the time covered by a waiver of the statute agreed to by a dealer and the Department. In this case, the Department and the Taxpayer agreed to extend the time for an audit for the August 2007 through October 2010 period until February 2019. Because the refund claim for March 2008 was received in October 2018, the request was made within the permitted waiver period.
Use Tax Refund
The Taxpayer requests a refund of the Virginia retail sales and use tax, contending the tax was remitted twice for an aircraft that was licensed in Virginia. As indicated in P.D. 21-7, a sales and use tax is imposed on the sale price of each aircraft sold in Virginia or either the sales price or the market value of an aircraft not sold in Virginia but required to be licensed for use in the Commonwealth. See Virginia Code § 58.1-1502.
Upon review of the original request in conjunction with the request for reconsideration, the Department finds issue with the original refund claim. In the claim, the Taxpayer clearly states that it is seeking a refund of retail sales and use tax. However, in its description of the amount of the refund, the Taxpayer characterized the overpayment as aircraft sales and use tax. As permitted under Virginia Code § 58.1-1502, the tax was computed at a rate of 2% of the market value of the aircraft, which was originally purchased in another state a number of years before it was moved to Virginia. As such, the Taxpayer failed to clearly indicate the tax for which it was claiming a refund.
Regardless, the Taxpayer admits that it obtained a license for the aircraft from Virginia’s Department of Aviation in 2010. Because Virginia Code § 58.1-1506 requires the tax to be paid prior to applying to the Department of Aviation for a license, the Taxpayer argues that the tax must have been paid. It asserts that the tax it remitted on its March 2008 sales and use tax return was in addition to the aircraft sales and use tax that was due when the aircraft was licensed in June 2010. However, the Taxpayer’s aircraft sales and use tax account, which was opened in June 2010, lacks any record of returns being filed or payments made. Although the Department has requested evidence to the contrary, the Taxpayer has failed to provide any evidence to show that the aircraft sales and use tax was paid on the aircraft either in Virginia or elsewhere aside from the payment on the March 2008 retail sales and use tax return.
The Taxpayer argues that the Department failed to timely request such documentation. However, it is incumbent upon a taxpayer requesting a refund to gather and maintain all related documentation in order for the Department to make an informed determination as to the validity of the request. Absent any information or documentation to the contrary, the Department will consider the aircraft sales and use tax remitted on the March 2008 retail sales and use tax return to be the tax required to be paid prior to obtaining the aviation license.
In addition, the Department occasionally receives taxes that are remitted on the incorrect tax returns. Virginia Code § 58.1-202 1 grants the Department the authority to “[s]upervise the administration of the tax laws as they relate to taxable state subjects and assessments thereon . . . ” and “effecting equitable assessments . . .” As part of its authority to ensure that state taxes are properly paid, the Department may transfer misapplied payments to the correct account, tax, and period. Therefore, the appropriate resolution in this case would be to transfer the payment from the retail sales and use tax account to the aircraft sales and use tax account.
Based on the facts and documents presented, the Taxpayer has not shown that it is entitled to a refund of either aircraft sales and use tax or retail sales and use tax. Accordingly, the Taxpayer’s request for a refund of use tax for the March 2008 period cannot be granted.
This is the Department’s final determination with regard to this matter. The Code of Virginia sections and regulation cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at ***** or *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/3742.B