Tax Type
Retail Sales and Use Tax
Description
Taxpayer states assessment of tax on the barter transactions is erroneous
Topic
Taxability of Persons and Transactions
Date Issued
06-01-2007
June 1, 2007
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you seek the correction of a retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period January 2003 through March 2005.
FACTS
The Taxpayer was audited by the Department and assessed use tax on tangible personal property acquired in barter transactions. The Taxpayer contends that the assessment of tax on the barter transactions is erroneous. The Taxpayer has paid the contested assessment but requests a refund of the payment.
DETERMINATION
Virginia Code § 58.1-603 imposes a sales tax on retail sales of tangible personal property in Virginia. Virginia Code § 58.1-602 defines the term "sale" to include the barter of tangible personal property. The Taxpayer does not dispute the fact that the barter transactions are subject to Virginia sales and use tax. Rather, the Taxpayer suggests that the barter transactions included the applicable sales tax and that the retailers were responsible for payment of the tax to the Department.
Virginia Code § 58.1-625 states, in part, "The tax levied by this chapter shall be paid by the dealer, but the dealer shall separately state the amount of the tax and add such tax to the sales price or charge. Thereafter, such tax shall be a debt from the purchaser, consumer, or lessee to the dealer until paid . . . "
Based on this statute and the regulation that interprets this statute, Title 23 of the Virginia Administrative Code 10-210-340, although the seller is legally obligated to collect the tax from the purchaser, the tax is the legal debt of the purchaser. Pursuant to Va. Code § 58.1-604, the Department can look to the purchaser for payment of use tax when a retailer fails to charge sales tax on the transaction. This position has been supported by the courts in United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), aff'd, 569 F.2d 811 (4th Cir. 1978).
In this instance, the Taxpayer's records did not show a separate charge for sales tax on the barter transactions, and the Taxpayer has not provided any evidence that the tax was remitted to the Department by the retailers. The audit comments note that other barter transactions were reviewed in which the applicable sales tax was charged. These transactions were not included in the audit. The audit comments also show that some of the barter invoices contained statements that the transactions were tax-exempt. The evidence does not support the Taxpayer's contention that it was implied that the sales tax was included in the barter transactions. The statute and its supporting regulation clearly support the audit findings that the Taxpayer is liable for use tax on the untaxed barter transactions.
Based on the above, the audit assessment is correct and there is no basis to refund the Taxpayer's payment of the assessment. The Code of Virginia and regulation sections cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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Janie E. Bowen
Tax Commissioner
AR/1-736818201S
Rulings of the Tax Commissioner