February 16, 2021
Re: § 58.1-1821: Retail Sales and Use Tax
Dear *****:
This is in response to your letter in which you seek clarification of the retail sales and use tax assessment issued to ***** (the "Taxpayer"), for the period of February 2016 through June 2019.
FACTS
The Taxpayer operates a restaurant in Virginia. The Department’s audit disclosed that the Taxpayer made untaxed sales and untaxed purchases. The Taxpayer seeks clarification of the revisions made to the audit based on documentation provided to the auditor. The Taxpayer includes the previously reviewed documentation with its appeal correspondence.
DETERMINATION
Complete Appeal
Virginia Code § 58.1-1821 states that "[a]ny person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner." Title 23 of the Virginia Administrative Code (VAC) 10-20-165 interprets Virginia Code § 58.1-1821 and sets out guidelines for the filing of administrative appeals. Subsection D 4 of this regulation states: "An incomplete appeal or notice of intent to appeal does not satisfy or extend the 90-day limitation period."
Title 23 VAC 10-20-165 A defines a "complete appeal" as "an administrative appeal containing sufficient information, as prescribed in subsection D of this section, so that the grounds upon which the taxpayer relies in contesting an assessment are fully set forth to allow the Tax Commissioner to make an informed final determination." Subsection D provides a list of the information required for a complete appeal. The required information includes alleged errors in the assessment, the grounds upon which the taxpayer relies and all facts relevant to the taxpayer's contention. In addition, taxpayers must provide the legal authority (statutes, regulations, rulings of the Tax Commissioner, court decisions, etc.) which is the basis for the taxpayer's position in the appeal.
In this instance, the correspondence submitted by the Taxpayer does not constitute a complete appeal. The correspondence neither alleges any errors in the assessment, nor provides any legal authority upon which the Taxpayer’s position is based. Because the Taxpayer has not alleged any grounds upon which the Department may act, the appeal must be denied as incomplete.
Revised Audit
While the Taxpayer did not provide any legal authority or alleged errors to provide for a complete appeal, I will address the revision of the audit. The auditor notes that many of the invoices submitted by the Taxpayer were not in the same sample year as the transactions listed on the exceptions list. The auditor used 2017 as the purchases sample period and the Taxpayer provided some invoices from 2015, 2016, and 2018. These invoices were not acceptable because they did not show proper taxation for the specific transactions in the sample year. Other invoices submitted by the Taxpayer included taxable items upon which no tax was paid on the invoice. There were some invoices reviewed by the auditor that showed proper taxation and these transactions were removed from the exceptions list.
In addition, the Taxpayer questions why the draft of the audit assessment was different from the final assessment amount. I would like to note that the difference between the estimated draft assessment and the final assessment the Taxpayer received was due to unsubstantiated differences between gross sales reported on its ST-9 returns and sales reported in the Taxpayer’s general ledger. The auditor concluded that the Taxpayer’s gross sales were underreported after comparing its ST-9 returns for 2016, 2017, and 2018 with its general ledger sales for each month of the year.
The Taxpayer requests a conference to discuss the audit results. It is my understanding that the auditor gave the Taxpayer multiple deadlines to respond to documentation requests. During a post-audit conference with the Taxpayer, the auditor allowed for a final review of documentation and the audit was revised according to the documentation received. The auditor explained to the Taxpayer that any additional documentation would have to be reviewed during an appeal due to the sufficient amount of time allowed for documentation review during the audit. The Taxpayer has not submitted a complete appeal with alleged errors and has not provided any new documentation for review. Accordingly, the Taxpayer’s request for a conference cannot be granted.
Based on this determination, the assessment is correct. An updated 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 60 days from the date of the bill.
The Code of Virginia section and regulation 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 Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3420.G