Document Number
09-7
Tax Type
Retail Sales and Use Tax
Description
A registered dealer that failed to collect the sales tax on taxable transactions
Topic
Collection of Tax
Date Issued
02-04-2009
February 4, 2009




Re: § 58.1-1821 Reconsideration: Retail Sales and Use Tax

Dear *****:

This is in response to your letter requesting reconsideration of the determination of June 18, 2008 made to ***** (the "Taxpayer") with respect to the retail sales and use tax assessment issued for the period January 2004 through December 2006. The Taxpayer's check of ***** has been applied as partial payment of the contested assessment.

FACTS


In the prior determination, the sales tax assessed on sales made to a real property construction contractor was upheld because the sales were made to a consuming contractor and thus taxable. You take exception to this treatment based on Title 23 of the Virginia Administrative Code (VAC) 10-210-410 A, which specifically states, "If a supplier of a contractor doing work in Virginia does not collect the Virginia tax from the contractor, the contractor will be liable for the use tax on his purchases from the supplier." You contend that the Taxpayer has no sales tax liability because the contractor is liable for payment of the use tax on its untaxed purchases.

DETERMINATION


Pursuant to Va. Code § 58.1-612, the Taxpayer is a dealer required to collect the sales tax. Pursuant to Va. Code § 58.1-615, the Taxpayer is required to file a sales and use tax return showing all taxable transactions made within the period covered by the return. Pursuant to Va. Code § 58.1-616, the Taxpayer is required to remit the amount of tax due to the Department. Also, the contractor regulation set out in Title 23 VAC 10-210-410 A states, "The dealer (supplier) making the sale, distribution, or lease to or storage for such a contractor must collect the tax from him." [Emphasis added.] Based on these authorities, the Taxpayer is clearly obligated under the law and regulation to properly collect, report, and remit the tax on all taxable sales to consumers. Otherwise, Va. Code § 58.1-625 provides that the Taxpayer becomes liable for the tax when it has neglected, failed, or refused to collect the sales tax on a taxable sale.

Under long settled principles of sales and use tax law, the Department may seek payment of the tax from either the seller or the purchaser of tangible personal property. The case of United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977) aff'd, 569 F.2d 811 (4th Cir. 1978) held that while "the seller is legally obligated to collect the tax from the purchaser, the statute makes the tax the legal debt of the purchaser." Thus, the courts fully recognize that legal obligations apply to both the seller and the purchaser. As such, the Department is well within its rights to audit the Taxpayer for compliance with its sales tax collection responsibilities and to assess a sales tax when full sales tax collection compliance is not achieved.

In this case, the Taxpayer is a registered dealer that failed to collect the sales tax on taxable transactions. Under the laws and court case cited above, the Taxpayer is required to collect the tax and failure to collect the tax makes the Taxpayer liable for the tax. I recognize that contractors have responsibilities also, such as to pay the use tax if the supplier does not collect it. However, the Department audited the Taxpayer and determined that as a registered dealer, it was required to collect the tax from the contractor at issue. Accordingly, I find no basis to further revise the audit assessment. This is my final determination.

CONCLUSION


Based on the above determination, the revised assessment is correct. An updated bill, with interest accrued to date, will be sent to the Taxpayer. The outstanding balance should be paid within 30 days of the bill date to avoid additional interest charges. 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 section and regulation cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this final determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,


                • Janie E. Bowen
                  Tax Commissioner




AR/1-2649613602.R


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46