Tax Type
Retail Sales and Use Tax
Description
Selling collectibles and antiques via the Internet and television programming
Topic
Accounting Periods and Methods
Taxpayers' Remedies
Date Issued
09-17-2004
September 17, 2004
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 1998 through September 2000. I apologize for the delay in the Department's response.
FACTS
The Taxpayer sells collectibles and antiques via the Internet and television programming. The Department's audit resulted in the assessment of tax on certain purchases. In addition, sales made during May 1999 were held taxable because no documentation was available for review. The Taxpayer disagrees with the assessment and provides information to support its position. The Taxpayer seeks an adjustment to the assessment, which has been paid in full.
DETERMINATION
Dealers who are registered for sales and use tax purposes are under a legal obligation to collect and report the proper amount of sales tax to the Department. As part of this legal obligation, Va. Code § 58.1-633 requires every dealer "to keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner." This record keeping requirement is further explained in Title 23 of the Virginia Administrative Code (VAC) 10-210-470.
When a dealer fails to maintain adequate records, the Department is authorized by Va. Code § 58.1-618 to use the best information available to reconstruct a dealer's sales or purchases to determine whether a tax liability exists. When an assessment is issued under these circumstances, it is deemed to be prima facie correct. The burden is upon the taxpayer to prove that the audit methodology is flawed in some manner as to render the assessment invalid.
In this case, the information provided by the Taxpayer with its appeal has been reviewed previously by the auditor and does not present any new information regarding the validity of the assessment based on the Taxpayer's records. To prove the assessment is erroneous, it is not sufficient for the Taxpayer to assert a particular transaction should not be included in the audit assessment because sales tax was paid to another state, or the assessed item represents a service contract that is exempt from tax. The Taxpayer must furnish the documentation to support each transaction it believes is not subject to tax. Absent such documentation, the transaction is subject to tax. See Va. Code § 58.1-623, which states that all sales or leases are subject to tax until the contrary is established.
I have reviewed the audit report and find the methodology used by the auditor is reasonable based on the records available. Therefore, absent complete documentation as required under Va. Code § 58.1-633, the assessment is proper as issued and there is no basis to issue a refund.
The Code of Virginia sections and regulation cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department's web site, located at www.tax.state.va.us. If you have any questions regarding this determination, please contact ***** of the Department's Office of Policy and Administration, Appeals and Rulings, at *****@tax.state.va.us or at *****.
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Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/46889Q
Rulings of the Tax Commissioner