Tax Type
Individual Income Tax
Retail Sales and Use Tax
Description
Illegal drug sales
Topic
Collection of Delinquent Tax
Date Issued
01-30-1989
January 30, 1989
Re: § 58.1-1821 Application
§ 58.1-313 Jeopardy Assessment; Individual Income Tax
§ 58.1-631 Jeopardy Assessment; Retail Sales and Use Tax
Dear ****
This is in response to your letters of October 8 and 21, 1988, in which you applied for correction of assessments of individual income tax and Retail Sales and Use tax for 1984 and 1985.
Facts
At the time of your arrest in October of 1985 police seized a substantial quantity of marijuana and cash. Subsequently you were convicted of possession with intent to distribute. Based on information furnished by the police, the department determined that you had unreported income and sales tax liability from sales of marijuana in 1984 and 1985. After this liability was assessed the department asserted a lien against the seized funds and in due course the funds were turned over to the department and applied toward the sales tax liability.
Subsequently, after extensive contacts between you and members of my staff, the unpaid balance of the assessments was abated based on a determination that your financial situation rendered it uncollectible. You now protest the original assessments and seek the return of the funds applied toward the assessments.
Discussion
When an assessment is challenged in an administrative or judicial proceeding, the assessment is presumed to be correct and the taxpayer has the burden of proving the correct tax liability. You have not presented any evidence but simply deny that you have any income or sales tax liability from sales of marijuana.
I have reviewed the information received from police, the facts and circumstances of your arrest (including the amount of marijuana and cash seized in relation to your reported income), and statements you made to a police investigator after your conviction. In particular, the police investigator stated that you admitted purchasing about 20 pounds of marijuana from a man in Chicago on several occasions which you then brought back to Virginia. Evidence of several purchases of marijuana in such large quantities creates a strong inference that most, if not all, of each 20 pound purchase was sold in Virginia. Your conviction of possession with intent to distribute also supports the inference that each 20 pound purchase had been sold before the next 20 pounds was purchased. The fact that you were not convicted of the crime of selling marijuana does not prevent the department from estimating and assessing your civil tax liability arising from such sales.
I find that there is substantial evidence that you had unreported income and sales tax liability from the sale of marijuana; that the department used the best information available to estimate that liability; and that the department's estimate of that liability is reasonable under the circumstances. You have not proven that the assessments are erroneous.
Determination
Accordingly, the assessments, which have already been partially abated on the grounds of uncollectibility, will not be adjusted further and your request for a refund is denied.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner