February 21, 2024
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”) in which you seek correction of the retail sales and use tax assessment issued for the period August 2019 through July 2022.
FACTS
The Taxpayer operates a restaurant and bar located in Virginia and was held liable for untaxed sales and purchases. Purchase and sales records were sampled by the auditor, in agreement with the Taxpayer. The purchase records provided to the auditor did not demonstrate if sales tax had been paid or use tax accrued and remitted to the Department. Net sales from the Taxpayer’s point of sale records did not reconcile with amounts reported on its sales and use tax returns. Further, the auditor noted sales tax collected on the Taxpayer’s records that was not remitted to the Department.
The Taxpayer filed an application for correction asserting additional invoices that were provided had not been reviewed. It appears the Taxpayer also provided information to the auditor concurrently with the application for correction. The auditor reviewed the invoices submitted after the closure of the audit, removed certain purchases, updated the exception list, and submitted the updated list to the Taxpayer in late December 2023. The auditor has received no response from the Taxpayer after the submission of the updated exception list was sent.
DETERMINATION
Virginia Code § 58.1-102 provides as follows:
It shall be the duty of every taxpayer to retain suitable records and documents substantiating all information contained on any return required by this subtitle and any such other pertinent records or documents as the Tax Commissioner may require by regulation. The records and documents shall be preserved for a period of three years from the required date for filing a return to which such records or documents pertain.
Virginia Code § 58.1-103 further provides that “All records and documents required by this subtitle or by rule or regulation shall be available during regular business hours for inspection by the Tax Commissioner or his duly authorized agents.”
Virginia Code § 58.1-633 A requires that dealers “keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, 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.” Title 23 of the Virginia Administrative Code (VAC) 10-210-470 also provides for sales and use tax purposes that the taxpayer is “required to keep and preserve for three years adequate and complete records necessary to determine the amount of tax liability.”
The Tax Commissioner has previously addressed instances in which taxpayers failed to provide records for review by the Department and, as a result, assessments were estimated based on the best available information. See Public Document (P.D.) 98-4 (1/4/1998), P.D. 16-75 (5/11/2016), P.D. 18-83 (5/9/2018), P.D. 20-28 (2/7/2020), and P.D. 22-108 (6/9/2022).
Contrary to the Taxpayer’s assertion, the auditor has reviewed the additional purchase documentation. Also, the Taxpayer never responded to the auditor or submitted documentation to reconcile the variance in the business’s point of sale records and sales amounts reported on the monthly sales and use tax returns.
Virginia Code § 58.1-205 provides that any assessment of tax by the Department is deemed to be prima facie correct and that the burden is on the taxpayer to prove the assessment is erroneous or incorrect. In addition, Virginia Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the assessment was attributable to a taxpayer’s willful failure or refusal to provide the Department with necessary information as required by law.
Because the Department has considered the documentation provided by the Taxpayer and are reflected in the revised audit, the remainder of the assessment is correct. Accordingly, the audit liability as adjusted is upheld. Updated bills, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 60 days from the date of this letter.
The Code of Virginia sections and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4792.Z