June 25, 2025
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 assessment issued for the period July 2020 through June 2023.
FACTS
An audit was conducted on the books and records of the Taxpayer, a consuming contractor, for the period as issue. An assessment of Virginia sales and use tax and interest was issued for untaxed purchases.
The Taxpayer filed an application for correction contending that (1) credit for use taxes paid in 2020 and 2021 was not applied during the audit and (2) the audit span incorporated periods when the business was closed.
ANALYSIS
Offset for Use Tax Paid
The Taxpayer accrued and paid use tax on some of its purchases on its 2022 sales and use tax returns (Form ST-9). Based on this information, the auditor offset the reported taxable purchases against the taxable measure. However, no offset was given for the 2020 and 2021 periods because the Taxpayer could not substantiate the accrual. The Taxpayer has included sales tax return documents for the 2020 and 2021 periods with its application for correction.
Assessment for Inactive Periods
The Taxpayer’s business ceased operation in December of 2022. This was confirmed by audit staff. The Taxpayer contends that the periods of January 2023 through June 2023 should be removed from the audit. The review of the auditor’s exception listing confirmed that no purchases from January 2023 through June 2023 were assessed as part of this audit. Therefore, the fact that these periods were included in the audit is immaterial. Further, it benefits the Taxpayer to have these periods remain in the audit, as those periods are now closed for review in the future.
DETERMINATION
This case will be returned to audit staff for revision. They will review the documentation and make adjustments, as appropriate. At this time the appeal matter is being closed. At the conclusion of the auditor’s review, should any issues remain, the Taxpayer may submit an appeal within 90 days of the audit revision in accordance with Virginia Code § 58.1-1821 and Title 23 of the Virginia Administrative Code 10-20-165.
The Code of Virginia section and regulation cited are available online at law.lis.virginia.gov. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/5075.Z