Tax Type
Retail Sales and Use Tax
Description
Relationship of landlord to tenant
Topic
Accounting Periods and Methods
Taxability of Persons and Transactions
Date Issued
12-02-1982
December 2, 1982
Re: 58-1118 Application: Sales and Use Tax
This will reply to your correspondence of October 5, 1982, application for relief of sales tax assessed as the result of an audit.
FACTS
******** was the owner of the building and furniture and fixtures therein used by the *******. The restaurant was operated by ********** and members of his family on the basis of a verbal lease.************** operated the restaurant from May 6 to July 4, 1982 at which time he abandoned the business, leaving estimated debts of $**********. As owner of the property and an adjacent motel, ********* assumed control and reopened the restaurant on July 9, 1982, later registering for business as the ***********.
A subsequent audit revealed that tax was not remitted on taxable sales for the period May 6 through July 4, 1982 when ******** operated the restaurant. As the successor to ******** in the business, ******* was assessed sales tax for that period. **********contests this assessment, asserting that his is not a successor business, but rather his relationship with ******* was that of landlord to tenant.
DETERMINATION
§ 58-441.30 of the Code of Virginia provides that if a dealer shall sell or quit his business, his successor shall withhold sufficient purchase money to cover any tax owed by the dealer. If the purchaser fails to withhold sufficient purchase money to cover tax due, he shall be personally liable for the payment of tax due. This presumes that a sale has taken place and that purchase money has changed hands. In this instance, however, ***** stepped in to take over a business abandoned by its operator with no advance notice. A sale or transfer of ownership did not take place and purchase money did not change hands thus successor liability cannot be established in this case.
Therefore, based on the foregoing, I find basis for relief of sales tax assessed. All assessments will be abated to reflect my determination in this matter.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner