Tax Type
Retail Sales and Use Tax
Description
Tax on sales or leases of tangible personal property
Topic
Accounting Periods and Methods
Taxability of Persons and Transactions
Date Issued
06-26-2003
June 26, 2003
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter in which you seek correction of the Department's retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period November 1997 through May 1998. I apologize for the delay in the Department's response.
FACTS
The Taxpayer owns and operates a motel. The Taxpayer was assessed use tax on furniture and fixtures included in the purchase price of the motel. In a prior protest, the Taxpayer stated that the furniture and fixtures had no value and were not in a useable condition after the purchase. In a letter dated August 4, 2000, the Department advised the Taxpayer to provide evidence showing that the value of the furniture and fixtures at issue was lower than the values included in the audit. The Taxpayer has not provided any such evidence to date.
The Taxpayer now requests a reconsideration and suggests (1) the purchase of the furniture and fixtures associated with the purchase of the motel from a national chain was part of an exempt occasional sale, or (2) that any tax liability is due from the seller. The Taxpayer also questions the statutory limitations period for the conversion of the assessment to his client (the "Individual") after three years, and whether the Individual should be considered a responsible officer pursuant to Va. Code § 58.1-1813.
DETERMINATION
Occasional Sale
The Department's policy regarding this issue is well established and set forth in existing public documents. In P.D. 92-5 (3/13/92), for example, the Department indicated:
-
- You contend that the sale of a single hotel constitutes the sale of a "business" within the meaning of the statute and Virginia Regulation 630-10--75 [now Title 23 of the Virginia Administrative Code (VAC) 10-210-1080]. Had the corporation operated only one hotel, your conclusion would be correct. However, the corporation is engaged in the business of operating a chain of hotels; as such, the sale of a single hotel does not constitute the sale of all or substantially all of the corporation's assets, either nationwide or in Virginia.
In the instant case, the national chain did not sell its entire interest in its Virginia locations but rather sold only a single location to the Taxpayer. Consequently, the sale is not deemed an exempt occasional sale, and the Department's auditor properly held the tangible personal property portion of the sale subject to the tax.
Responsibility for Payment of the Tax
While Va. Code § 58.1-612 legally requires dealers to collect and remit the sales tax on all sales or leases of tangible personal property, Va. Code § 58.1-625, copy enclosed, makes the tax the legal debt of the purchaser. This has been recognized by the federal courts, which have held that "the legal incidence of the Virginia sales and use tax is on the purchaser." See United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), copy enclosed. As such, the Department may proceed against either the seller or the purchaser in instances where the tax has not been collected or paid. In this instance, the Department has audited and properly assessed the Taxpayer (the purchaser).
Liability of Corporate Officer
Virginia Code § 58.1-1813, copy enclosed, defines the term "corporate officer" as an officer of the corporation who is under a duty to perform on behalf of the corporation the act in respect of which the violation occurs and who (1) had knowledge of the failure and (2) had the authority to prevent it. Under the standard of willfulness applied by the courts, all that needs to be shown is that the act was "voluntary, conscious, and intentional." Hewitt v. U.S., 377 F.2d 921, 924 (C.A. Tex.).
In correspondence submitted to the Department in conjunction with the appeal, the Individual specifically stated there were no other persons or investors that had any authority in the operation of the motel. Also, the Individual explicitly states that only he operates the bank accounts. Based on the information before me, I find that the Individual, by his own admission, had final approval in making the day-to-day decisions for the operation of the motel.
With regard to the conversion of the Department's assessment to the Individual, Va. Code § 58.1-1813 also specifically provides that the responsible officer shall be liable for the assessment of "a penalty of the amount of the tax evaded, or not paid, or accounted for and paid over, to be assessed and collected in the same manner as such taxes are assessed and collected." (Emphasis added.) Virginia Code § 58.1-634, copy enclosed, provides for the assessment of taxes "...within three years from the date on which such taxes became due and payable." The statute then further provides that "in the case of ...a failure to file a return, the taxes may be assessed ...at any time within six years from such date."
The Taxpayer failed to file sales tax returns for the operation of its business. Accordingly, the foregoing statutes allow for the conversion of the assessment, when returns are not filed, within six years from the date such taxes became due and payable. Consequently, I find that the conversion of the Department's assessment from the business to the Individual to be valid.
Conclusion
Based on the above, and in light of the prior determination, the Taxpayer (or the Individual) is liable for the payment of the Department's assessment. An updated bill, with interest accrued to date, will be sent to the Taxpayer shortly. The Taxpayer should return its payment to the Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Attention:**********, Richmond, Virginia 23230. No additional interest will accrue provided the updated bill is paid within 30 days from the date indicated on the bill notice. Additionally, once the assessment is paid, the assessment issued to the Individual will be withdrawn. If payment is not received within the allotted time, the Department will continue collection proceedings temporarily halted because of the Department's review of the Taxpayer's protest.
Questions concerning payment of the assessment may be directed to ********* at **********. If you have any questions regarding this response, please contact *********** of the Department's Office of Policy and Administration, Appeals and Rulings, at ********************@tax.state.va.us or at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
-
-
-
-
-
-
AR/38681Q
Rulings of the Tax Commissioner