Tax Type
Retail Sales and Use Tax
Description
Vendor registration; Lack of nexus
Topic
Returns/Payments/Records
Date Issued
07-31-2000
July 31, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in response to your letter in which you seek correction of a retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period January 1996 through June 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer operates as a retail furniture store located outside of Virginia. In a prior audit, the Tax Commissioner determined that the Taxpayer had nexus with Virginia. That determination, dated March 4, 1994, was based on the Taxpayer's use of delivery companies that were not licensed as common carriers to deliver its products to Virginia customers. To settle that prior audit, the Tax Commissioner accepted an offer in compromise whereby the Taxpayer agreed: (1) to register for collection of the tax on a prospective basis, and (2) pay a portion of the audit assessment. Accordingly, the Taxpayer held a certificate of registration effective July 1, 1994.
Further, you maintain that effective 1992, you changed the method of delivery to your Virginia customers. In this regard, you indicate that for the current audit period you used, and continue to use, common carriers with whom the Taxpayer has no financial or other relationship. It is your contention that by using these common carriers, none of the Taxpayer's sales to Virginia customers are taxable, regardless that the Taxpayer was a registered dealer. Accordingly, although the Taxpayer filed monthly returns during the period it was registered, it did not collect and remit the tax on any of its sales to Virginia customers.
In effect, the Taxpayer believes it was required to collect the tax only on those Virginia sales for which it had nexus. In this respect, the Taxpayer maintains it was never informed to collect the tax on all sales to Virginia customers. Further, the Taxpayer maintains it contacted the department's Customer Service representatives and was told that being a registered dealer did not require the Taxpayer to collect sales tax on sales delivered via common carrier.
DETERMINATION
As part of an offer in compromise which included a substantial reduction in an audit assessment, the Taxpayer voluntarily agreed to register with the department. By voluntarily registering with the department, the Taxpayer consented to the jurisdiction of the state and agreed to remit the proper amount of use tax required under Virginia law.
Although the Taxpayer did not have sufficient contact with Virginia during the audit period to establish nexus, it was a registered dealer. Nexus is not an issue when a taxpayer voluntarily registers to collect the tax. As a registered dealer under Code of Virginia §58.1-615, the Taxpayer is required to collect and remit the tax on all taxable transactions. This issue is addressed in Public Documents 93-141 (6/7/93) and 97-440 (10/31/97).
There are other points you raise in your letter which I will address. First, none of your Virginia customers were assessed by the department during the current audit period. I understand that one of your customers was contacted in 1998. Based on that contact, the audit staff realized you were not collecting tax on sales delivered to Virginia. Accordingly, the current audit was scheduled. Further, I have spoken with the department's Customer Service staff regarding the July 30 and July 31, 1998 phone conversations. Although one of the representatives you spoke with cannot recall the specific conversation, there was complete understanding that a registered dealer was liable to collect and remit the Virginia tax on all taxable sales, regardless that the registered dealer does not have nexus. He was also aware that there are a number of out-of-state vendors who voluntarily registered with Virginia and who collect and remit the tax on sales to their Virginia customers, regardless that these out-of-state vendors almost exclusively deliver their products via common carrier or U.S. mail. Again, once an out-of-state dealer voluntarily registers, nexus is no longer an issue.
In this case I find that the assessment is correct. Because of the delay in responding to your appeal, interest will be accrued on the assessment only through the date of your letter. No additional interest will accrue provided the assessment is paid within 45 days afrom the date of this letter.
If you have any questions regarding this letter, please contact ***** in the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21952I
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in response to your letter in which you seek correction of a retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period January 1996 through June 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer operates as a retail furniture store located outside of Virginia. In a prior audit, the Tax Commissioner determined that the Taxpayer had nexus with Virginia. That determination, dated March 4, 1994, was based on the Taxpayer's use of delivery companies that were not licensed as common carriers to deliver its products to Virginia customers. To settle that prior audit, the Tax Commissioner accepted an offer in compromise whereby the Taxpayer agreed: (1) to register for collection of the tax on a prospective basis, and (2) pay a portion of the audit assessment. Accordingly, the Taxpayer held a certificate of registration effective July 1, 1994.
Further, you maintain that effective 1992, you changed the method of delivery to your Virginia customers. In this regard, you indicate that for the current audit period you used, and continue to use, common carriers with whom the Taxpayer has no financial or other relationship. It is your contention that by using these common carriers, none of the Taxpayer's sales to Virginia customers are taxable, regardless that the Taxpayer was a registered dealer. Accordingly, although the Taxpayer filed monthly returns during the period it was registered, it did not collect and remit the tax on any of its sales to Virginia customers.
In effect, the Taxpayer believes it was required to collect the tax only on those Virginia sales for which it had nexus. In this respect, the Taxpayer maintains it was never informed to collect the tax on all sales to Virginia customers. Further, the Taxpayer maintains it contacted the department's Customer Service representatives and was told that being a registered dealer did not require the Taxpayer to collect sales tax on sales delivered via common carrier.
DETERMINATION
As part of an offer in compromise which included a substantial reduction in an audit assessment, the Taxpayer voluntarily agreed to register with the department. By voluntarily registering with the department, the Taxpayer consented to the jurisdiction of the state and agreed to remit the proper amount of use tax required under Virginia law.
Although the Taxpayer did not have sufficient contact with Virginia during the audit period to establish nexus, it was a registered dealer. Nexus is not an issue when a taxpayer voluntarily registers to collect the tax. As a registered dealer under Code of Virginia §58.1-615, the Taxpayer is required to collect and remit the tax on all taxable transactions. This issue is addressed in Public Documents 93-141 (6/7/93) and 97-440 (10/31/97).
There are other points you raise in your letter which I will address. First, none of your Virginia customers were assessed by the department during the current audit period. I understand that one of your customers was contacted in 1998. Based on that contact, the audit staff realized you were not collecting tax on sales delivered to Virginia. Accordingly, the current audit was scheduled. Further, I have spoken with the department's Customer Service staff regarding the July 30 and July 31, 1998 phone conversations. Although one of the representatives you spoke with cannot recall the specific conversation, there was complete understanding that a registered dealer was liable to collect and remit the Virginia tax on all taxable sales, regardless that the registered dealer does not have nexus. He was also aware that there are a number of out-of-state vendors who voluntarily registered with Virginia and who collect and remit the tax on sales to their Virginia customers, regardless that these out-of-state vendors almost exclusively deliver their products via common carrier or U.S. mail. Again, once an out-of-state dealer voluntarily registers, nexus is no longer an issue.
In this case I find that the assessment is correct. Because of the delay in responding to your appeal, interest will be accrued on the assessment only through the date of your letter. No additional interest will accrue provided the assessment is paid within 45 days afrom the date of this letter.
If you have any questions regarding this letter, please contact ***** in the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21952I
Rulings of the Tax Commissioner