Tax Type
Retail Sales and Use Tax
Description
Audit for unreported tax; Alcoholic Control Board reported sales
Topic
Collection of Delinquent Tax
Date Issued
12-20-1989
December 20, 1989
Re: §58.1-1821 Application: Sales and Use Tax
Dear***************
This will reply to your letter of September 13, 1989 seeking correction of a sales tax assessment against your company for the period January 1986 through December 1988 and the resulting income tax adjustments. In previous correspondence with the department you had made an offer in compromise pursuant to Virginia Code §58.1-105.
FACTS
***************(the "Taxpayer") was assessed as the result of a recent audit for having understated its sales tax. The Taxpayer alleges that the gross income figures upon which its audit deficiency is predicated are unfounded as inappropriate assumptions were used in arriving at the figures. It further alleges that the department's auditors refused to consider additional costs that would have been incurred if such sales had been made. Finally, it contends that the auditors were inconsistent in their approach.
DETERMINATION
Virginia Code §58.1-603 imposes a sales tax upon "every person who engages in the business of selling at retail or distributing tangible personal property...or furnishes any of the things or services taxable under this chapter...in this Commonwealth." The term "sale" is defined in §58.1-602 as:
-
- any transfer of title or possession or both...of tangible personal property and any rendition of a taxable service for a consideration...and includes...the furnishing, preparing, or serving for a consideration of any tangible personal property consumed on the premises of the person furnishing, preparing, or serving such tangible personal property.
Virginia Retail Sales and Use Tax Regulation 630-10-64, copy enclosed, clarifies that retail sales of meals by restaurants, hotels, motels, clubs, caterers, cafes and others are taxable. It also clarifies that cover, minimum and room service charges in connection with the provision of meals are a part of the sales price and are taxable.
In the instant case, the Taxpayer provided no records to the auditors to support its sales figures. Further, it had no cash register, no records of admission ticket sales or banquet sales/rentals and reported that for tax purposes it relies upon its bank deposit tickets to support its sales. Accordingly, the auditors had to use the only available information in completing their audit which consisted of figures reported to the Department of Alcoholic Beverage Control and figures previously reported to the Department of Taxation. The entire sales tax liability produced by the audit was due to the difference between the sales figures reported to the department on Form ST-9's and sales figures reported to the Department of Alcoholic Beverage Control. Adjustments were made to the Taxpayer's income tax returns to reflect the increase in gross sales resulting from the sales tax audit.
The courts have held that a tax assessment issued by the proper assessing authorities is prima facie correct and that the burden of evidence is upon the taxpayer to prove otherwise. Since the Taxpayer has provided no documentation or evidence to refute the assessments, I find no basis for correction of either the sales and use tax or income tax assessments in this case.
Despite the foregoing, please note that as the result of legislation enacted by the 1989 General Assembly, a Tax Amnesty program will be conducted from February 1 to March 31, 1990. At that time, you will be able to receive a waiver of penalties which have been assessed provided that you are eligible for the amnesty program, complete an amnesty application, and pay in full the tax and interest assessed on all bills and non-filer periods that are due.
Further collection action on these penalties will be suspended pending the start of the amnesty program provided you complete the attached form and return it to this office within 15 days, along with your payment for the total tax and interest due. As stated on the attached form, the suspension of collection activity by the department does not relieve you from the responsibility to formally apply for amnesty during the amnesty period. In addition, interest will continue to accrue on the unpaid penalties during the period collection is suspended.
In light of the fact that the Taxpayer was unable to provide the auditors with records to support its sales figures, I have enclosed a copy of VR 630-10-30 which explains what records must be maintained by dealers.
If your have any questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner