Rulings of the Tax Commissioner

August 18, 2020

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

Dear *****:

This is in response to your letter submitted on behalf of ***** (the “Taxpayer”), in which you seek reconsideration of the refund denial issued as a result of amended tax returns submitted for the period August 2010 through February 2013.

FACTS

The Taxpayer is a university that submitted amended returns to the Department and requested a refund of sales tax paid on sales of textbooks to students. The Department denied the request on the basis that it appeared the tax had been collected from students. As such, it was determined that the Taxpayer was not due a refund unless the Taxpayer could demonstrate that the tax had been refunded to the students.

The returns filed by the Taxpayer indicated that the sales tax was collected on the sale of textbooks to students. The Taxpayer contends that it did not collect sales tax on the sales, as legislation extending an exemption had been passed years earlier. Rather, the Taxpayer contends that it erroneously calculated and submitted the tax on its sales of exempt textbooks. The Taxpayer requests the opportunity to gather documentation to demonstrate that the sales tax was not collected from its students.

DETERMINATION

Virginia Code § 58.1-609.10 8 provides an exemption from the retail sales and use tax for:

School textbooks sold for use by students attending a college or other institution of learning, when sold (i) by such institution of learning or (ii) by any other dealer, when such textbooks have been certified by a department or instructor of such institution of learning as required textbooks for students attending courses at such institution.

Virginia Code § 58.1-625 provides that “any dealer collecting sales or use tax on transactions exempt or not taxable under this chapter shall transmit to the Tax Commissioner such erroneously or illegally collected tax unless or until he can affirmatively show that the tax has since been refunded to the purchaser or credited to his account.”

The issue of the appeal is whether the Taxpayer collected and remitted the sales tax as reported on the amended returns. The Taxpayer contends it did not collect the tax from students and an error was made on the tax returns due to oversight. 

The Taxpayer has subsequently provided excel spreadsheets documenting every textbook sale during the refund period, along with a sample of the corresponding invoices and receipts. After reviewing a sample of the documentation, it is noted that tax was not collected on the sales transactions. In order to properly determine that the sales tax was not collected for all textbook sales within the refund period, the Department will need to review the invoices and receipts corresponding to every transaction in the excel spreadsheets.

The Taxpayer is granted 60 days from the date of this letter to provide the Department the required documentation described above. The documentation will be reviewed to determine if it is sufficient to warrant granting the refund. If the documentation is not provided within the allotted time, the denial of the refund request will be upheld.

The Code of Virginia sections cited, along with other reference documents, 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/1434L