Tax Type
Retail Sales and Use Tax
Description
Audit sample techniques
Topic
Collection of Delinquent Tax
Date Issued
08-24-1984
August 24, 1984
Re: §58-1118 Application/Sales and Use Tax
Dear ******************
This will reply to your letter of June 11, 1984 in which you submit additional information relating to the department's recent sales and use tax audit of *****.
In its application for correction of the instant assessment, your client ***** asserted that the assessment issued was not proper because the amount of additional tax was determined through the use of a sample period. It was noted in my determination of December 9, 1983 that sampling was a valid audit technique and that the assessment would be deemed accurate until proven otherwise.
Based upon the information contained in your letter, I find basis for revising the ***** on audit to remove charges from the sample involving customers who had certificates of exemption on file, charges for converting paper, and a charge to ***** in which the customer remitted tax to the state directly. Such revisions will be performed upon the provision of copies of appropriate supporting information.
I find no basis though for the removal of charges to ***** from the audit sample. The fact that that concern was not a customer during the entire audit period does not by itself render the sample inaccurate inasmuch as the sales to ***** included in the sample are apparently of the same nature as sales to other customers during the audit period. While that customer made purchases during the sample period but not throughout the entire audit period, there are likely other regular customers who did not make purchases during the sample period. In addition, I do not feel that a specific assessment for the customers included in the sample is necessary inasmuch as already possesses this information and may proceed to bill such customers for the appropriate amount of tax.
Lastly, I will address two points raised in our hearing. First, a review of the last audit of ***** subsidiary reveals that while some additional issues were involved, it was conducted in substantially the same manner as the instant audit. Secondly, I find some merit to your proposal for requiring a detailed audit in certain cases in which a sample audit was proven to be inaccurate. However, I feel that an audit would have to be proven grossly inaccurate and then a detailed audit would be conducted only if a representative sample period could not be identified. In this case though, no evidence has been submitted to show the sample months to be nonrepresentative.
Therefore, based on the foregoing, the instant audit will be revised to remove the transactions described in the third paragraph from the audit sample, provided that documentation is submitted to the department within the next 45 days. Such information should be submitted to our Technical Services Section, P.O. Box ****, Richmond, Virginia *****.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner