Tax Type
Corporation Income Tax
Description
Maintenance contracts; Collection of tax
Topic
Collection of Tax
Date Issued
03-08-2000
March 8, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you seek a correction of the department's retail sales and use tax audit assessments issued to ****** (the "Taxpayers"), for the period November 1995 through December 1998. I apologize for the delay in our response.
FACTS
The Taxpayers are dealer installers of commercial automated doors and controllers. At times, the Taxpayers operate in a dual capacity, as a contractor with respect to new construction contracts, and as repairmen on maintenance contracts and repairs to door controllers.
The Taxpayers disagree with the department's audit assessments of tax on maintenance contract sales. They contend that the taxes on these contracts were either: (1) accrued and paid by their customers, or (2) received by the department from the customers as a result of department audits of such customers. The Taxpayers seek an adjustment of the department's audits regarding the sales at issue. The Taxpayers base their position on Code of Virginia § 58.1-625, and United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), which recognize that the legal incidence of the sales and use tax is imposed on the purchaser.
DETERMINATION
While I agree that Code of Virginia § 58.1-625 and the court's decision in Forst make the sales tax the legal debt of the purchaser, l would also note that Code of Virginia §58.1-612 legally requires the dealer to collect and remit the sales tax on all sales or leases of tangible personal property. It has been the department's longstanding position that the department may proceed against either the retailer or the purchaser for the payment of the tax liability. I have enclosed prior Public Documents (P.D.) 96-216 (09/05/96), 97-208 (04/29/97), 97-320 (04/30/97), and 98-29 (02/20/98), which further detail the department's policy.
In addition, Code of Virginia § 58.1-205 deems any tax assessment issued by the Department of Taxation as prima facie correct. Thus, the burden of proof is upon the Taxpayer to establish through convincing evidence that a tax assessment is erroneous. Consequently, as no such evidence has been submitted, l must deny the Taxpayers' appeal.
I will allow the Taxpayer an additional 45 days to submit documentation demonstrating that taxes were paid by its customers on the contested issues. Please notify ****** of the department's Office of Tax Policy, once the information has been collected. If no documentation has been made available within the time allowed, the assessment will be considered correct as issued, and the outstanding balance, inclusive of accrued interest, will become due and payable.
If you should have any questions regarding this matter, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/25009Q
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you seek a correction of the department's retail sales and use tax audit assessments issued to ****** (the "Taxpayers"), for the period November 1995 through December 1998. I apologize for the delay in our response.
FACTS
The Taxpayers are dealer installers of commercial automated doors and controllers. At times, the Taxpayers operate in a dual capacity, as a contractor with respect to new construction contracts, and as repairmen on maintenance contracts and repairs to door controllers.
The Taxpayers disagree with the department's audit assessments of tax on maintenance contract sales. They contend that the taxes on these contracts were either: (1) accrued and paid by their customers, or (2) received by the department from the customers as a result of department audits of such customers. The Taxpayers seek an adjustment of the department's audits regarding the sales at issue. The Taxpayers base their position on Code of Virginia § 58.1-625, and United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), which recognize that the legal incidence of the sales and use tax is imposed on the purchaser.
DETERMINATION
While I agree that Code of Virginia § 58.1-625 and the court's decision in Forst make the sales tax the legal debt of the purchaser, l would also note that Code of Virginia §58.1-612 legally requires the dealer to collect and remit the sales tax on all sales or leases of tangible personal property. It has been the department's longstanding position that the department may proceed against either the retailer or the purchaser for the payment of the tax liability. I have enclosed prior Public Documents (P.D.) 96-216 (09/05/96), 97-208 (04/29/97), 97-320 (04/30/97), and 98-29 (02/20/98), which further detail the department's policy.
In addition, Code of Virginia § 58.1-205 deems any tax assessment issued by the Department of Taxation as prima facie correct. Thus, the burden of proof is upon the Taxpayer to establish through convincing evidence that a tax assessment is erroneous. Consequently, as no such evidence has been submitted, l must deny the Taxpayers' appeal.
I will allow the Taxpayer an additional 45 days to submit documentation demonstrating that taxes were paid by its customers on the contested issues. Please notify ****** of the department's Office of Tax Policy, once the information has been collected. If no documentation has been made available within the time allowed, the assessment will be considered correct as issued, and the outstanding balance, inclusive of accrued interest, will become due and payable.
If you should have any questions regarding this matter, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/25009Q
Rulings of the Tax Commissioner