Tax Type
Retail Sales and Use Tax
Description
Dealer fails to maintain adequate records
Topic
Accounting Periods and Methods
Records/Returns/Payments
Date Issued
04-12-2012
April 12, 2012
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period June 2007 through May 2010. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is engaged as a contractor selling and installing floor coverings. At the beginning of the audit, the Taxpayer provided the auditor with three unsigned federal tax returns and monthly income statements. The auditor asked the Taxpayer to reconcile the differences between the monthly income statement revenues and the sales reported on the sales tax returns. The Taxpayer did not provide the reconciliation. Because there was no other informational data provided to the auditor, the Department's audit assessment was estimated based on the Department's prior audit of the Taxpayer. The Taxpayer contends the auditor reviewed a minimal amount of records and because of seasonal variances in the business, a revision of the Department's assessment is warranted.
DETERMINATION
Virginia Code § 58.1-633 states that every dealer required to make a return and collect sales tax "shall keep and preserve suitable records of the sales, leases, or purchases . . . 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." The record keeping requirement is further explained in Title 23 of the Virginia Administrative Code 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. As the Taxpayer failed to maintain adequate records during the audit period to substantiate actual tax liabilities, the auditor used the best available information (the Department's prior audit) to estimate the Taxpayer's tax liability. While I note that the Taxpayer contends that the auditor only reviewed one month's worth of records of its seasonal business, the auditor documents that the Taxpayer would not supply valid data to complete a current review of the Taxpayer's actual tax liabilities.
Virginia Code § 58.1-205 provides that any assessment of tax by the Department is deemed prima facie correct. The burden is on the taxpayer to prove the assessment is erroneous. Lacking the documentation to support its claim, the Taxpayer has not met the burden of proof in this case.
Based on the foregoing, and absent evidence to the contrary, I find that the audit methodology applied in this case is acceptable. Accordingly, there is no basis to revise the audit findings at this time. I will, however, allow the Taxpayer 45 days from the date of this letter to provide documentation to the auditor sufficient to determine the actual tax liability for the current audit period. If the information is not provided within the time allotted, the assessment will be upheld and become due and payable.
The Code of Virginia sections and regulation cited are available on-line in the Tax Policy Library section of the Department's website located at www.tax.virginia.gov. If you have any questions regarding this matter, please contact ***** of the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
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- Tax Commissioner
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AR/1-4827999937.Q
Rulings of the Tax Commissioner