Tax Type
Retail Sales and Use Tax
Description
Audit assessment, Inadequate taxpayer records
Topic
Computation of Tax
Returns/Payments/Records
Date Issued
02-29-2000
February 29, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter of December 8, 1999, in which you seek a correction of the department's retail sales and use tax audit assessment issued to ****** (the "Taxpayer"), for the period July 1997 through September 1999.
FACTS
The Taxpayer provides technical training and technology management services. The department's audit disclosed that data on purchases for the audit period was not available. As a result, the auditor used the best available information to determine untaxed purchases for the period. The Taxpayer requests that the audit be revised to exclude from the sample calculations a purchase from a computer vendor. The Taxpayer states that the purchase relates to the downloading of a client list, and contends that this is a service provided by the vendor rather than a purchase of tangible personal property. Accordingly, the Taxpayer seeks an adjustment of the audit.
DETERMINATION
Code of Virginia § 58.1-633 requires every dealer "to keep and preserve suitable records of the sales, leases, or purchases, . . . and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner." Emphasis added. This record keeping requirement is further explained in Title 23 of the Virginia Administrative Code (VAC) 10-210-470, copy enclosed.
When a dealer fails to maintain adequate records, the department is authorized by Code of Virginia § 58.1-618, copy enclosed, to use the best information available to reconstruct a dealer's sales or purchases to determine whether a tax liability exists. Assessments issued under these circumstances and under the above cited statute are deemed to be prima facie correct. The burden is upon the Taxpayer to prove that the audit methodology applied in this case is flawed in some manner so as to render the assessment invalid.
With regard to the item at issue, it is my understanding that the auditor has attempted to secure proper documentation from the Taxpayer which will provide evidence sufficient to adjust the audit. However, the auditor has been unsuccessful. Consequently, I do not find sufficient cause to allow for any adjustment to the department's audit, and the balance of the assessment remains due and payable.
However, I will allow an additional thirty days for the Taxpayer to present the required information to the department's auditor. If the Taxpayer does not respond within that time, the balance of the assessment, inclusive of accrued interest, will become due and payable. If you should have any additional questions regarding this matter, please contact ***** of the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/26295Q
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter of December 8, 1999, in which you seek a correction of the department's retail sales and use tax audit assessment issued to ****** (the "Taxpayer"), for the period July 1997 through September 1999.
FACTS
The Taxpayer provides technical training and technology management services. The department's audit disclosed that data on purchases for the audit period was not available. As a result, the auditor used the best available information to determine untaxed purchases for the period. The Taxpayer requests that the audit be revised to exclude from the sample calculations a purchase from a computer vendor. The Taxpayer states that the purchase relates to the downloading of a client list, and contends that this is a service provided by the vendor rather than a purchase of tangible personal property. Accordingly, the Taxpayer seeks an adjustment of the audit.
DETERMINATION
Code of Virginia § 58.1-633 requires every dealer "to keep and preserve suitable records of the sales, leases, or purchases, . . . and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner." Emphasis added. This record keeping requirement is further explained in Title 23 of the Virginia Administrative Code (VAC) 10-210-470, copy enclosed.
When a dealer fails to maintain adequate records, the department is authorized by Code of Virginia § 58.1-618, copy enclosed, to use the best information available to reconstruct a dealer's sales or purchases to determine whether a tax liability exists. Assessments issued under these circumstances and under the above cited statute are deemed to be prima facie correct. The burden is upon the Taxpayer to prove that the audit methodology applied in this case is flawed in some manner so as to render the assessment invalid.
With regard to the item at issue, it is my understanding that the auditor has attempted to secure proper documentation from the Taxpayer which will provide evidence sufficient to adjust the audit. However, the auditor has been unsuccessful. Consequently, I do not find sufficient cause to allow for any adjustment to the department's audit, and the balance of the assessment remains due and payable.
However, I will allow an additional thirty days for the Taxpayer to present the required information to the department's auditor. If the Taxpayer does not respond within that time, the balance of the assessment, inclusive of accrued interest, will become due and payable. If you should have any additional questions regarding this matter, please contact ***** of the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/26295Q
Rulings of the Tax Commissioner