January 18, 2022
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter in which you seek correction of the retail sale and use tax assessment converted ***** (the “Taxpayer”) as a result of liabilities incurred by ***** (the “Company”) for various periods between October 2018 and December 2019.
FACTS
The Taxpayer was president and minority shareholder of the Company, which was engaged in the operation of a restaurant in Virginia. During the periods at issue, the Company incurred unpaid sales and use tax liabilities, which resulted in assessments against the Company. Thereafter, the unpaid tax liabilities of the Company were converted to the Taxpayer as a responsible officer pursuant to Virginia Code § 58.1-1813. The Taxpayer appeals, contending that he has documentation to adjust the underlying retail sales and use tax assessments to the Company.
DETERMINATION
Virginia Code § 58.1-633 states that every dealer required to make a return and collect sales tax "shall keep and preserve suitable records of the sales, leases, or purchases. . . taxable under this chapter, and such other books of account as may be necessary to determine the amount of the tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner.” When a dealer fails to maintain adequate records, the Department is authorized by Virginia Code § 58.1-618 to use the best information available to reconstruct a dealer's sales or purchases to determine whether a tax liability exists.
The Taxpayer was unable to provide documentation on which to base the assessments to the Company. In his appeal, the Taxpayer indicates that such information was being collected. The Taxpayer requested 30 days from the date of the letter, July 27, 2021, to submit the information. As of the date of this letter, the Taxpayer’ has failed to provide the information pursuit to his request.
Virginia Code § 58.1-205 1 deems any tax assessment issued by the Department as prima facie correct. This means that the burden of proof is upon the Taxpayer to prove that the assessment is incorrect. The Taxpayer has not met this burden, and the tax liability assessed to the Company and converted to the Taxpayer is upheld. In the event the Taxpayer is able to location said records, corrected returns should be filed with the Department in order to adjust the liability.
The Taxpayer should be aware of the approaching statute of limitations to receive a refund due to the filing of a return. Virginia Code § 58.1-1823 states in pertinent part that “Any person filing a tax return or paying an assessment required for any tax administered by the Department of Taxation may file an amended return ... three years from the last day prescribed by law for the timely filing of the return....” Title 23 of the Virginia Administrative Code 10-210-3040 addresses the refund of sales tax to dealers and provides, in pertinent part, that “Refunds cannot be authorized unless the request is made within three years from the due date of the return.”
The Code of Virginia sections and regulations 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 Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3884.A