May 3, 2023
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will respond to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the “Taxpayer”) for the periods May 2017 through April 2020. I apologize for the delay in responding to your request.
FACTS
In this first generation audit, the Department’s auditor noted that the Taxpayer provided returns and forms showing sales and exempt sales by month but was unable to provide a detailed listing of invoices or exemption certificates. The auditor found that the Taxpayer collected but failed to remit sales tax when a service call involved the transfer of tangible personal property; did not provide sufficient evidence of the claimed exempt sales; and failed to charge sales tax on the lump-sum rental of real estate and equipment. Due to individual sales records not being available, the audit exceptions were estimated. The Department issued an assessment for tax, penalty, and interest. The Taxpayer timely appealed, contending that extenuating circumstances prevented the audit staff from reviewing the relevant business records and requesting that it be given another opportunity to provide the records to the audit staff for review.
DETERMINATION
Virginia Code § 58.1-633 mandates that every dealer required to make a return and pay or collect the retail sales and use tax must keep and preserve suitable records to determine the amount of tax due. When adequate records are not provided during an audit, the Department is required to estimate the amount due based on the best information available pursuant to Virginia Code § 58.1-618. An estimated assessment issued by the Department is deemed prima facie correct, meaning the burden of proof is on the taxpayer to show that an assessment is incorrect.
In this case, the Taxpayer did not provide the necessary records during the audit or with its appeal. However, the Taxpayer continues to insist that such records are available and show that the assessment is erroneous. The Taxpayer will be given one final opportunity to provide the necessary records and information to the Department’s audit staff. The Taxpayer must provide records definitively showing that the disputed assessment is incorrect. This includes, but is not limited to, detailed invoices of all transactions occurring during the audit period, exemption certificates for any transactions claimed to be exempt during the audit period, and records related to the rental of the Taxpayer’s real property and equipment.
The Taxpayer will be given 60 days from the date of this letter to provide the additional information necessary. The additional information should be sent to the Senior Auditor, *****, who may be contacted at ***** or *****. Once received, the Department’s auditor will review any new information provided and may request additional information if necessary. The auditor will then adjust the audit and assessment if warranted based on the information provided. The auditor will send the Taxpayer a written explanation of any adjustments. If the Taxpayer continues to disagree with the auditor’s decision, the Taxpayer will be given 90 days from the date of the adjustment or written explanation to appeal pursuant to Virginia Code § 58.1-1821.
If no new information is received within 60 days from the date of this letter, the Department’s assessment will be considered correct as issued, and an updated bill with accrued interest to date will be mailed to the Taxpayer. The Taxpayer should remit payment of the amount due on the updated bill to avoid the accrual of additional interest and possible collection action.
The Code of Virginia sections cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****, or via email at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4357-C