Tax Type
Retail Sales and Use Tax
Description
Contractor unable to substantiate payment of tax on purchases
Topic
Collection of Delinquent Tax
Date Issued
05-06-1988
May 6, 1988
Re: Virginia Code §58.1-1821 Application
Retail Sales and Use Tax
Dear*****************
This is in reply to your letter in which you make application for correction of the sales and use tax assessment issued to your client,****************(Taxpayer).
FACTS
Taxpayer, a general contractor, was recently audited for compliance with the Virginia Retail Sales and Use Tax. During the course of this audit Taxpayer was unable to substantiate the amount of tax paid to certain suppliers. In lieu of providing new invoices, which separately state the amount of tax paid to these suppliers, you ask that the department accept letters from each supplier, which generally state that tax was charged on each transaction. You contend that due to the fact that this was a six-year audit by the department, Taxpayer nor its suppliers are able to provide the corrected invoices. You contend that these letters are the best evidence available due to the difficulty of going back more than three years to produce records.
DETERMINATION
Under both Virginia Code §58.1-625 and Virginia Regulation 630-10-24 dealers are required to "separately state the amount of the tax." Furthermore, the legal incidence of the tax is on the purchaser. Although the seller is legally obligated to collect the tax from the purchaser, the statute makes the tax the legal debt of the purchaser. United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), aff'd, 569 F. 2d 811 (4th Cir. 1978).
Generally, it has been the department's operating policy to only accept copies of invoices, separately stating the amount of tax, as evidence that such tax was paid. In exceptional cases, where it is impossible to reconstruct the actual sales invoice, the department has accepted detailed statements from suppliers which separately identify the amount of tax paid.
In this case, more than 92% of the taxable measure was related to the-three most recent years of the audit. In addition, the statements provided by your client's suppliers fail to provide any detail relating to the actual amount of tax paid. Accordingly, I find no basis at this time to grant your application f or correction.
The department will allow your client an additional 30 days to provide the requested information regarding the amount of tax paid Also, the department will remove from the audit any transactions involving any suppliers who were registered during the audit period for the collection of the sales tax and who will attest that the tax was collected from Taxpayer and paid to the department. Unless your client can provide the department with the requested information, there can be no adjustment to the amount of the assessment.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner