Tax Type
Retail Sales and Use Tax
Description
Tax collected using the bracket system; Refund of excess taxes paid
Topic
Collection of Tax
Date Issued
05-21-2001
May 21, 2001
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you request a ruling regarding your client's (the "Taxpayer") reporting of sales taxes under a dealer's consolidated registration. I apologize for the delay in the department's response and any inconvenience it may have caused. I assure you that your future correspondence with the department will be handled professionally and promptly.
FACTS
The Taxpayer files a single consolidated return for its stores in Virginia. In computing the amount of tax to be paid, the Taxpayer calculates taxable retail sales for each store based on the combined total of all register reports within each store. The Taxpayer determines the amount of the sales tax due for each store by multiplying the net taxable sales by the tax rate to arrive at total tax due. The Taxpayer then compares the tax actually due to the amounts charged in the register reports based on the tax bracket system contained in Code of Virginia § 58.1-628. Where the comparison reflects that the taxes collected under the bracket system are less than what is actually due when the 4.5% tax rate is applied to net taxable sales, the Taxpayer pays and remits the tax based on the 4.5% rate. In situations where the tax collected based on the bracket system exceeds the actual amount due, the Taxpayer remits the correct amount due plus the "excess amount" collected under the bracket system.
Totals for all stores are combined on the Taxpayer's consolidated return. The Taxpayer's concern is that the overall effect for all stores reflects taxes collected plus excess taxes collected. The Taxpayer seeks to report its collection of the tax by combining all register sales for all stores for the reporting period rather than determining taxable liability on a store-by-store basis.
Additionally, you ask if the Taxpayer is entitled to a refund of any excess collections reported in the prior three years in which an under collection existed for a particular store but was not offset by the over collection of another store.
RULING
Title 23 Virginia Administrative Code (VAC) 10-210-340 addresses the collection of the tax by dealers. Subsection D of this regulation provides the following:
Any dealer who collects tax in excess of a 42% rate or who otherwise overcollects the tax, except as may be authorized under the bracket system or the special provisions relating to vending machine sales, must remit any amount overcollected to the state on a timely basis.
Code of Virginia § 58.1-628 sets out the applicable bracket system for the combined state and local tax. Title 23 VAC 10-210-220(A) provides an interpretation of that section, stating that the bracket system is to be used to eliminate fractions of $.01 and must be used to compute tax on transactions of $5.00 or less. On those transactions exceeding $5.00, the tax is computed at a straight 4.5%. The regulation specifically provides that "Any dealer who collects the tax in accordance with the bracket system set forth herein shall not be deemed to have overcollected the tax."
Based on the foregoing and the information before me, the proposed method of combining all register sales for all stores for the reporting period is a method currently in existence and used by other consolidated filers. Accordingly, the Taxpayer may use this same method of reporting.
With regard to a refund of "excess taxes" paid within the statutory period, the Taxpayer is entitled to a refund of such taxes computed with respect to the bracket system, as provided in Title 23 VAC 10-210-220(A). Before issuing a refund, the department must verify the Taxpayer's computations. The Taxpayer should contact ***** of the department's Office of Tax Policy at ****, once the Taxpayer has calculated the refund it seeks. ***** will then contact the appropriate department field representative, who will arrange a meeting time with the Taxpayer for verification purposes.
I trust that this response is helpful. If you should have any additional questions concerning this matter, please contact *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/29100Q
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you request a ruling regarding your client's (the "Taxpayer") reporting of sales taxes under a dealer's consolidated registration. I apologize for the delay in the department's response and any inconvenience it may have caused. I assure you that your future correspondence with the department will be handled professionally and promptly.
FACTS
The Taxpayer files a single consolidated return for its stores in Virginia. In computing the amount of tax to be paid, the Taxpayer calculates taxable retail sales for each store based on the combined total of all register reports within each store. The Taxpayer determines the amount of the sales tax due for each store by multiplying the net taxable sales by the tax rate to arrive at total tax due. The Taxpayer then compares the tax actually due to the amounts charged in the register reports based on the tax bracket system contained in Code of Virginia § 58.1-628. Where the comparison reflects that the taxes collected under the bracket system are less than what is actually due when the 4.5% tax rate is applied to net taxable sales, the Taxpayer pays and remits the tax based on the 4.5% rate. In situations where the tax collected based on the bracket system exceeds the actual amount due, the Taxpayer remits the correct amount due plus the "excess amount" collected under the bracket system.
Totals for all stores are combined on the Taxpayer's consolidated return. The Taxpayer's concern is that the overall effect for all stores reflects taxes collected plus excess taxes collected. The Taxpayer seeks to report its collection of the tax by combining all register sales for all stores for the reporting period rather than determining taxable liability on a store-by-store basis.
Additionally, you ask if the Taxpayer is entitled to a refund of any excess collections reported in the prior three years in which an under collection existed for a particular store but was not offset by the over collection of another store.
RULING
Title 23 Virginia Administrative Code (VAC) 10-210-340 addresses the collection of the tax by dealers. Subsection D of this regulation provides the following:
Any dealer who collects tax in excess of a 42% rate or who otherwise overcollects the tax, except as may be authorized under the bracket system or the special provisions relating to vending machine sales, must remit any amount overcollected to the state on a timely basis.
Code of Virginia § 58.1-628 sets out the applicable bracket system for the combined state and local tax. Title 23 VAC 10-210-220(A) provides an interpretation of that section, stating that the bracket system is to be used to eliminate fractions of $.01 and must be used to compute tax on transactions of $5.00 or less. On those transactions exceeding $5.00, the tax is computed at a straight 4.5%. The regulation specifically provides that "Any dealer who collects the tax in accordance with the bracket system set forth herein shall not be deemed to have overcollected the tax."
Based on the foregoing and the information before me, the proposed method of combining all register sales for all stores for the reporting period is a method currently in existence and used by other consolidated filers. Accordingly, the Taxpayer may use this same method of reporting.
With regard to a refund of "excess taxes" paid within the statutory period, the Taxpayer is entitled to a refund of such taxes computed with respect to the bracket system, as provided in Title 23 VAC 10-210-220(A). Before issuing a refund, the department must verify the Taxpayer's computations. The Taxpayer should contact ***** of the department's Office of Tax Policy at ****, once the Taxpayer has calculated the refund it seeks. ***** will then contact the appropriate department field representative, who will arrange a meeting time with the Taxpayer for verification purposes.
I trust that this response is helpful. If you should have any additional questions concerning this matter, please contact *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/29100Q
Rulings of the Tax Commissioner