Tax Type
Retail Sales and Use Tax
Description
Estimated Sales Tax Collection Procedure; Validity
Topic
Collection of Delinquent Tax
Date Issued
01-12-1978
This is in reply to your inquiry pertaining to the legality of Virginia's recently adopted accelerated sales tax collection procedure, as embodied in § 58-441.21:1 of the Code of Virginia (1950), as amended. You raise two specific questions in regard to its validity:
- 1) "whether this procedure is valid since it represents a prepayment by one party of taxes which it does not itself owe, but merely collects,' and
2) whether "the failure of the law to provide for interest payments where the prepayment turns out to be in excess of the amount later collected' is valid.
In response to your first question, the new payment procedure is not the prepayment by one party of taxes which it does not itself owe. Pursuant to § 58-441.4, the sales tax is
"a license or privilege tax upon every person who engages in the business of selling at retail or distributing tangible personal property in this State, . . . .'
Under §§ 58-441.4, -441.18, and -441.21, the tax is both owed and paid by the retailers. The levy of the sales tax is against the retailer, and the burden of remitting such revenues to the State falls upon the retailer. If a retailer fails to collect the tax from a purchaser, it has to pay the tax. The retailer's relationship to the State is that of taxpayer. Williams v. Bear's Den, Inc., 214 Ga. 240, 104 S. E. 2d 230 (1958).
Except as to sales on credit, the procedure adopted by § 58-441.21:1 is not a prepayment procedure. It is merely a convenient means of accelerating retailer sales tax remittances to the State at a minimum administrative cost to both the taxpayer and the tax collector. The method used previously had retailers reporting and paying sales taxes due and owing the State on the twentieth of the month following the month in which the sales tax was collected or charged to customers' accounts. Thus, when a retailer filed his monthly return on the twentieth of each month, in addition to the previous month's liability, the retailer also owed, but did not pay, twenty days of tax collected or charged during the current month. A one-time windfall in State revenues was found through accelerating the payment of sales tax from retailers to the State, based on an estimate to reflect those twenty days of tax collected or charged by the twentieth of a month, but not paid over to the State until the following month.
I am of the opinion that the accelerated sales tax collection procedure is valid. It is merely a method of accelerating the time in which the State receives its sales tax revenues. The procedure decreases the time State tax monies are in retailers' hands. Moreover, even if the acceleration procedure is considered a prepayment program, such a requirement is not illegal or unconstitutional. An analogous situation is presented by the Virginia and Federal income tax laws, which require certain individuals and corporations to pay estimated income taxes at a rate based on projected income for the year. See §§ 58-151.22 and -151.38 of the Code of Virginia (1950); I. R. C. §§ 6153-6154. Those sections require certain individual and corporate taxpayers to estimate and pay in advance their yearly income taxes. In Erwin v. Granquist, 253 F. 2d 26 (9th Cir.), cert. denied, 356 U. S. 950 (1958), the Ninth Circuit Court of Appeals considered the constitutionality of Int. Rev. Code of 1939, §§ 58-59, the predecessor of §§ 6153 and 6154, and held that they were appropriate means for collecting the income tax.
From the foregoing, it is apparent that requiring a taxpayer to estimate taxes to be incurred on future income and to remit payments based upon those estimates is not a deprivation of property without due process of law, nor in any other sense, violative of the mandates of the United States Constitution. The power to impose a tax necessarily implies reasonable methods for collecting such tax. The estimated income tax and withholding tax procedures are valid methods of collection [of] the income tax because they are reasonable approximations of income tax liability on a "pay as you go' basis. The same can be said of the accelerated sales tax procedure. The States of Georgia, Illinois, South Carolina, and New York have all implemented various methods of accelerating sales tax remittances to the State Treasury, and except for New York, none of those statutes has encountered any legal challenges. The Appellate Division of the New York Supreme Court (that State's intermediate court) found the New York tax collection prepayment procedure to be constitutional. Ames Volkswagen Ltd. v. State Tax Commission, 336 N. E. 2d , 3 New York State Tax Reporter (CCH) par. 99-992f (1977).
For these reasons, I am of the opinion that the Virginia accelerated sales tax procedure is valid. Though such a provision may work a hardship upon a retailer in certain circumstances, particularly where there is a large volume of credit sales, relief must be sought in the General Assembly, as the procedure is constitutionally valid.
The general rule is that absent specific statutory authorization for the awarding of interest, no interest can be awarded against the State. See Railway Express Agency v. Commonwealth, 196 Va. 1069, 87 S. E. 2d 188 (1955), Railway Express Agency v. Commonwealth, 196 Va. 1059, 87 S. E. 2d 183 (1955), Commonwealth v. The Safe Deposit and Trust Co., 155 Va. 458, 153 S. E. 897 (1930). The aforementioned cases all dealt with refund statutes that were silent on the issue of interest running against the State; yet the Supreme Court of Virginia held that the legislative intent in such instances was that no interest be awarded. § 58-441.21:1 specifically states that "no refunds to dealers under this section shall bear or include interest.' Where the General Assembly specifically states its intent that no interest be paid on refunds pursuant to § 58-441.21:1, such procedure is clearly valid.
Attorney General's Opinion