Tax Type
Retail Sales and Use Tax
Description
Taxpayer failed to provide the documentation assessment upheld
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
07-18-2005
July 18, 2005
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter submitted on behalf of ***** (the "Taxpayer"), in which you seek correction of the retail sales and use tax assessment issued for the period July 1999 through May 2002. I apologize for the delay in the Department's response.
FACTS
The Taxpayer, a limited liability company, operates a golf course, which includes a pro shop, restaurant, bar and banquet facility.******* (the "Corporation"), which owns the Taxpayer, purchased the course in April 2000. An audit by the Department resulted in the assessment of tax on fixed assets and other items of tangible personal property associated with the purchase of the course. The Department's assessment was issued based on successor business liability.
The Taxpayer contends that the purchase of the course should not have resulted in successor business liability because the purchase of the course was a sale of stock, and money did not transfer from the purchaser to the seller. Additionally, the Taxpayer contends that the Virginia retail sales and use tax has been paid on the leases assessed in the audit. As such, the Taxpayer believes it is not liable for the assessed sales tax and seeks abatement of the assessment.
DETERMINATION
Successor Liability
Code of Virginia § 58.1-629 provides, in part, that when a dealer sells his business or stock of goods, his successors or assigns, if any, must "withhold sufficient of the purchase money to cover the amount of such taxes, penalties, and interest due and unpaid" until the former owner produces a receipt from the Tax Commissioner showing no taxes, penalties or interest are due. If the purchaser fails to withhold the purchase money, he becomes personally liable for the payment of the taxes, penalties, and interest due and unpaid on account of operation of the business by the former owner.
Virginia Code § 58.1-629 requires the sale of a business or the sale of the stock of goods before successor liability can be imposed. The provisions of Va. Code § 58.1629 are limited to those instances in which actual money, and not stock or other property, passes from the purchaser to the seller.
In this instance, the Taxpayer has not demonstrated that the sale of the golf course with its fixed assets and other tangible personal property to the Corporation was the sale of stock, and actual money did not pass from the Corporation to the seller. Documents indicating that a stock sale did occur have been requested but not provided.
Leases
Virginia Code § 58.1-603 imposes the retail sales tax on every person who sells, leases or rents tangible personal property in Virginia. The sales tax is imposed upon the gross proceeds derived from the lease or rental of tangible personal property.
In this instance, the Taxpayer has not demonstrated that retail sales tax has been paid on the leases assessed in the audit. The lease documents, as well as documentation supporting the payment of tax on such leases, has been requested but not provided.
CONCLUSION
On numerous occasions, the Department has requested the Taxpayer to provide documentation supporting its claims that (1) the purchase of the course was a sale of stock, and (2) sales tax was paid on the leases at issue. The Taxpayer has failed to provide the documentation, despite assurances that it would. Because the Taxpayer has failed to provide the necessary documentation to prove the assessment is erroneous, I find that the assessment is correct as issued.
An updated bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding balance is paid within 30 days from the date indicated on the bill. The Taxpayer should remit its payment to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attn: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.
The Code of Virginia sections cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department of Taxation's website, located at www.policylibrary.tax.virginia.gov. If you have any questions about this determination, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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Tax Commissioner -
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AR/48781.i
Rulings of the Tax Commissioner