Tax Type
Retail Sales and Use Tax
Description
Dealers; Failure to Collect Tax from Purchaser
Topic
Collection of Delinquent Tax
Date Issued
10-23-1991
October 23, 1991
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This will reply to your letter of March 4, 1991 in which you seek correction of sales and use tax assessed to ***********(the Taxpayer) as a result of an audit for the period August, 1987 through October, 1990.
FACTS
The Taxpayer has been unable to recover tax and/or interest assessed on sales made to certain customers that was not collected at the time of the sale. The Taxpayer contends that it should not be held liable for the tax because the customer is the end user and ultimately responsible for the payment of tax.
DETERMINATION
VR 630-10-29.1(c) (copy enclosed} defines a dealer as a person who:
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- [s]ells at retail, or who offers for sale at retail, or who has in his possession for sale at retail, or for use, consumption or distribution or for storage to be used or consumed in this state, tangible personal property.
- [s]ells at retail, or who offers for sale at retail, or who has in his possession for sale at retail, or for use, consumption or distribution or for storage to be used or consumed in this state, tangible personal property.
And finally, Va. Code §58.1-625 (copy enclosed) provides that "any dealer who neglects, fails, or refuses to collect such tax upon every taxable sale, distribution, lease, or storage of tangible personal property made by him, his agents, or employees shall be liable for and pay the tax himself..." Under the Code and regulations cited above, the Taxpayer is being held liable as a dealer for the tax it did not collect and for which it did not take a valid certificate of exemption.
While it is true that the Taxpayer's customers should have remitted use tax on any untaxed purchases, dealers are legally obligated to collect and report the tax on their sales to customers. As such, the department may look to either the dealer or the purchaser for such tax liability.
It is my understanding that some adjustments have already been made to the Taxpayer's assessment. As to the balance of the assessment, the Taxpayer certainly has the option of retroactively billing its customers for the tax that should have been paid at the time of purchase. Once this is done, Va. Code §58.1-625 makes the tax the legal debt of the purchaser. As the Taxpayer has this remedy available, there is no basis for any further adjustment to the amount of tax assessed.
I also do not find basis for relief where a customer has paid the retroactively billed tax but refused to pay the interest charged to him by the Taxpayer. The interest in this case was validly assessed to the Taxpayer by the department for its failure to collect and timely remit the sales tax from customers who failed to provide a certificate of exemption, and as such is the liability of the Taxpayer itself.
Based upon the foregoing, I find no basis for further relief of the department's assessment. The remaining balance is now due and payable.
If you have additional questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5119J
Rulings of the Tax Commissioner