September 22, 2020
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 assessments issued for the period April 2011 through March 2017. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a dermatology practice that performs skin and cosmetic treatments and surgeries. The Department conducted an audit of the Taxpayer, and the auditor assessed use tax on certain purchases of tangible personal property made by the Taxpayer. The Taxpayer did not pay sales tax on the transactions at the time they were made. The Taxpayer contests the assessment on several transactions for the reasons stated below.
DETERMINATION
The Virginia retail sales and use tax applies to the sale or the use of tangible personal property. Virginia Code § 58.1-603 imposes the sales tax “upon every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth.” Virginia Code § 58.1-604 imposes the use tax “upon the use or consumption of tangible personal property in this Commonwealth, or the storage of such property outside the Commonwealth for use or consumption in this Commonwealth
Virginia Code § 58.1-625 provides that “The tax levied by this chapter shall be paid by the dealer, but the dealer shall separately state the amount of the tax and add such tax to the sales price or charge. Thereafter, such tax shall be a debt from the purchaser, consumer, or lessee to the dealer until paid and shall be recoverable at law in the same manner as other debts.”
Virginia Code § 58.1-633 A provides that:
Every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases, as the case may be, 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.
In accordance with these authorities, the sales tax applies to sales of tangible personal property. In instances where the sales tax is not collected or paid at the time the transaction takes place, the purchaser becomes liable for the use tax. Further, taxpayers are required to maintain accurate books and records of transactions for review by the Department. In light of the above authorities, I will address the issues raised in the Taxpayer’s appeal.
Fixed Assets Exceptions
Line Item 3
The transaction at issue is for the purchase of chairs by the Taxpayer. The transaction was held taxable in the audit because the invoice reviewed by the auditor did not include a charge for sales tax. The amount held taxable in the audit is for the charge for the chairs, less the freight charge.
The Taxpayer maintains it has two separate invoices related to the purchase of the chairs, and one chair was returned to the vendor during the audit period. The Taxpayer has not provided additional invoices, credit memos or other documentation to demonstrate that the sales tax was properly charged and paid at the time the transaction took place, or that part of the purchase was returned and a refund was issued. Accordingly, the transaction will remain in the audit.
Line Item 8
The Taxpayer states that the transaction at issue is for the purchase of a printer. The Taxpayer claims that the printer was subsequently returned to the vendor. The transaction was held taxable in the audit because the Taxpayer did not provide an invoice during the audit for review. The Taxpayer has likewise not provided an invoice with the appeal. Without such documentation, the Department is unable to determine whether the sales tax was properly charged and paid at the time the transaction occurred. Accordingly, the transaction will remain in the audit.
Contested Purchases (Line Items 1 through 8)
These transactions were held taxable because the Taxpayer did not provide invoices for review during the performance of the audit. The Taxpayer provides the invoices with its appeal and the invoices include a charge for sales tax. Accordingly, these transactions will be removed from the audit.
Non-Contested Purchases
The Taxpayer made several purchases from vendors for personal expenses during the audit period. The Taxpayer states these purchases were made using the company credit card, and the charges were later reimbursed to the Taxpayer. These purchases were held taxable in the audit because the Taxpayer did not provide invoices for review.
The Taxpayer provides invoices with its appeal for line items 22, 23, 24, 25, 30, 31, 32, 33, 36, 37, 38, 39, 40, 41 and 78. These line items will be removed from the audit because the invoices provided with the appeal include a charge for sales tax. Line items 26, 27, 28, 34 and 35 will remain in the audit because the documentation provided with the appeal does not demonstrate that the sales tax was charged and paid at the time of purchase. Line items 49, 81, 96 and 97 will remain in the audit because invoices were not provided with the appeal. With respect to line item 98, the invoice was reviewed during the audit and it was confirmed that the transaction is for books and that sales tax was not charged and paid on this transaction. Accordingly, this transaction will remain in the audit.
CONCLUSION
The audit will be returned to the appropriate field audit staff to make the adjustments in accordance with this determination. The Taxpayer will receive a revised audit report reflecting the adjustments. The assessments at issue have been paid in full. Accordingly, the Taxpayer will receive a refund with accrued interest based upon the audit adjustments required by this determination.
The Code of Virginia sections 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 determination, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1821P