Rulings of the Tax Commissioner

May 9, 2018

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 request reconsideration of the Department's determination letter issued as Public Document (P.D.) 16-190 (9/20/16) for the period January 2011 through December 2013.  I apologize for the delay in responding to your request.

FACTS

The Taxpayer provides information and technology products and services to government and commercial customers.  The Taxpayer received four retail sales and use tax assessments as a result of an audit for the period at issue. The Taxpayer contested the sales tax assessed with respect to the untaxed sales made in July 2011 for a data warehouse appliance and maintenance support.  The Taxpayer asserted that the sale was properly made exempt of the tax because its customer resold the appliance to the federal government.  With its appeal, the Taxpayer provided resale exemption certificates from its customer to support making the sale exempt of the sales tax.  In response to the Taxpayer's appeal, the Department issued a determination letter that upheld the contested assessments.  The Tax Commissioner found that the exemption certificates were invalid and did not support the exempt sale.  The Taxpayer requests reconsideration of the Department's determination and seeks removal of the transaction at issue from the audit.

DETERMINATION

Title 23 of the Virginia Administrative Code (VAC) 10-210-165 F 1 permits taxpayers to request a reconsideration of a determination issued under Virginia Code § 58.1-1821.  Such requests, however, must meet one of the four following requirements:

1. The facts upon which the original determination is based are misstated by the Tax Commissioner or are inaccurate, and the determination would have a different result based on a correction of the Tax Commissioner's misstatement of the facts presented or a clarification of the original facts presented in the taxpayer's administrative appeal;
2. The law upon which the original determination is based has been changed by legislation, court decision or other authority effective for the tax period(s) at issue;
3. The policy upon which the original determination is based is misapplied, and the determination would have a different result based on the application of the proper policy; or
4. The taxpayer has discovered additional evidence or documentation that was not available to the taxpayer at the time the original administrative appeal was filed with the department, and the additional evidence or documentation could produce a result different from the original determination.

In this instance, the Taxpayer provides additional documentation to support its contention that the assessments are incorrect and that the sale at issue was properly made exempt of the tax.  However, based upon a review of the documentation provided, I find that the documentation does not produce a result different from the original determination.  The documentation does not verify that the sale of the data warehouse appliance and maintenance support to the Taxpayer's customer represents a sale for resale.  Additionally, the documentation provided does not verify that the property at issue was resold to a federal government agency and does not verify the parties to the referenced government contract. Accordingly, the documentation provided with the Taxpayer's reconsideration request does not support the Taxpayer's contention that the sale at issue was properly made exempt of the sales tax.

Virginia Code § 58.1-205 1 provides that any assessment of a tax by the Department shall be deemed prima facie correct. Taxpayers have the burden of proving that an assessment is incorrect.  In this instance, the Taxpayer has not met its burden of proving that the assessments are incorrect or that the sale at issue was properly made exempt of the sales tax.

CONCLUSION

Based on the foregoing, there is no basis to change my prior determination. Accordingly, the assessments are correct as issued and remain due and payable. An updated bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding assessments are 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 section, regulation and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site.  If you have any questions about this response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1131.P