Document Number
10-129
Tax Type
Retail Sales and Use Tax
Description
Tax account records indicate that the Taxpayer did not remit the full amount of the tax collected.
Topic
Collection of Tax
Records/Returns/Payments
Taxable Income
Date Issued
07-07-2010


July 7, 2010



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

Dear *****:

This is in response 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 January 2007 through November 2009. I apologize for the delay in responding to your appeal.

FACTS


The Taxpayer operates as an ice cream parlor. The Taxpayer contests the tax assessed in the audit. The Taxpayer asserts that it is eligible to charge the reduced food tax rate because it is an ice cream parlor. The Taxpayer contends that based on Virginia Tax Bulletin (VTB) 05-7 (5/31/05) it believes that it correctly filed its sales tax returns.

DETERMINATION


Reduced Food Tax Rate

Pursuant to VTB 05-7, ice cream shops are among the list of retailers that generally should charge the reduced sales tax rate on sales of eligible food and beverages. The reduced rate applies to all sales of food for home consumption. The definition of food for home consumption includes "most staple grocery food items and cold prepared foods packaged for home consumption."

The Taxpayer operates as an ice cream parlor, and pursuant to VTB 05-7 is eligible to charge the reduced sales tax rate on its sales of eligible foods. Eligible sales include sales of food that are packaged for home consumption. Any foods sold for immediate consumption are not eligible for the reduced food tax rate, and the general sales tax rate must be charged in these instances.

Sales Tax Collected

In this instance, the Department conducted an audit of the Taxpayer's Virginia sales tax account. Based on this review, it was determined that the Taxpayer collected tax on its sales at the general sales tax rate. The review further indicated that the Taxpayer remitted the tax to the Department based on the reduced food tax rate. Accordingly, the Taxpayer was assessed in the audit for the tax collected, but not remitted to the Department.

Virginia Code § 58.1-625 provides that all dealers must collect the tax on sales to purchasers, consumers, or lessees, and must pay the tax over to the Tax Commissioner. "All sums collected by a dealer . . . shall be deemed to be held in trust for the Commonwealth." Pursuant to Va. Code § 58.1-625, a dealer must pay over to the Tax Commissioner all tax that it collects.

In accordance with Va. Code § 58.1-625, the Taxpayer is required to remit to the Tax Commissioner the full amount of tax it collects on its retail sales. In this instance, the Taxpayer's sales tax account records indicate that the Taxpayer did not remit the full amount of the tax collected. Accordingly, the tax assessed in the audit is correct.

Financial Hardship

The Taxpayer indicates that the audit assessment has placed a financial burden upon the business. Accordingly, the Taxpayer requests that the tax, interest and penalties assessed be waived.

Virginia Code § 58.1-105 authorizes the Tax Commissioner to "compromise and settle doubtful or disputed claims for taxes or tax liability of doubtful collectibility." In order for an offer based on doubtful collectibility to be considered by the Tax Commissioner, evidence of doubtful collectibility must be presented to support your claim. If you wish to pursue an offer based on doubtful collectibility, please complete and return the enclosed Form CS-21, Collection Information Statement for Businesses. This form will allow the Department to review and analyze the Taxpayer's financial situation. Upon completion of the Department's review, a response will be issued based on the information presented. Please return the completed Form CS-21 to the Department's Collections Section, Offer in Compromise Team, Post Office Box 1880, Richmond, Virginia 23218-1880. You may also contact a member of this team at (804) 367-8045. If the Department does not receive the Taxpayer's completed Form CS-21 within 60 days from the date of this letter, it will be presumed that no additional information will be submitted, and the outstanding liability will become immediately due and payable.

The Code of Virginia sections and Virginia Tax Bulletin 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 response, your may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,

                • Linda Foster
                  Deputy Tax Commissioner




AR/1-4170182289.P


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46