Tax Type
Retail Sales and Use Tax
Description
Assessed for unremitted tax and a portion of the sales that were estimated without documentation.
Topic
Computation of Tax
Records/Returns/Payments
Taxable Income
Date Issued
05-09-2012
May 9, 2012
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This reply is in response to your letter in which you request correction of the retail sales and use tax assessment issued to ***** for the period May 2007 through October 2009. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer sells area rugs, tile, flooring and carpeting, as well as, installation services. The Department's audit disclosed that the Taxpayer was invoicing its customers for lump sum charges and collected sales tax on the entire amount. However, when remitting the tax to the Department, the Taxpayer reported those same charges as separately stated sales of labor and tangible personal property and remitted tax related to the sale of tangible personal property only. The auditor assessed the Taxpayer for unremitted tax. In addition, the tax was assessed on a portion of the Taxpayer's sales that were estimated, as the Taxpayer was unable to produce missing and voided invoices.
The Taxpayer contends the assessment is unfair; however, it offers no basis or documentation to support its protest.
DETERMINATION
Unremitted Sales Tax
Virginia Code § 58.1-625 provides that all taxes collected by a dealer shall be deemed to be held in trust for the Commonwealth. Accordingly, the dealer is required to remit such taxes to the Department in the same amounts collected.
Virginia Code § 58.1-609.5 2 and Title 23 of the Virginia Administrative Code 10-210-4040 C 3 provide an exemption from the sales and use tax for separately stated labor or service charges for the repair, installation, application or remodeling of tangible personal property.
When invoicing its customers, the Taxpayer did not separately state charges for labor and materials and collected the tax based on the total price. The audit indicated that the Taxpayer subsequently changed those same invoices to indicate that taxes were collected on separately stated sales of tangible personal property. The Taxpayer remitted the tax indicated on the revised invoices and did not return the unremitted tax to its customers.
In accordance with the foregoing authorities, the total tax collected by the Taxpayer on behalf of the Commonwealth must be remitted to the Department. Accordingly, I find the Taxpayer was correctly assessed for unremitted sales tax and there is no basis for adjustment.
Missing and Voided Invoices
Virginia Code § 58.1-618 authorizes the Tax Commissioner to estimate the dealer's liability if the dealer has failed to present adequate financial records for examination. Virginia Code § 58.1-205 deems such assessments to be prima facie correct. The burden of proving the assessment incorrect is upon the Taxpayer.
The Taxpayer was unable to produce invoices recorded as void in its sales journals. The Taxpayer also failed to produce missing invoices for the months of January, February and March of 2010. Therefore, the Taxpayer's sales were estimated for the applicable periods and assessed as unreported sales. The Taxpayer has presented no additional documentation in its appeal to refute the assessed sales. In accordance with the foregoing authorities, I find the assessment to be correct and there is no basis for adjustment.
Based on this determination, the assessment is correct. A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of the bill. Please remit payment to: Virginia Department of Taxation, 600 E. Main Street, 15th Floor, Richmond, Virginia 23219, Attn: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.
The Code of Virginia sections and regulation cited 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 Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-4913876268.M
Rulings of the Tax Commissioner