Tax Type
General Provisions
Description
All Taxes Administered by the Department of Taxation
Topic
Reports
Date Issued
01-01-1984
see date
INTRODUCTION
These general regulations for all taxes administered by the Department of Taxation are published by the authority granted the State Tax Commissioner under Virginia Code § 58-48.6 (§ 58.1-203 effective January 1, 1985) and are subject to amendment, revision and supplemental regulations as required or appropriate.
Amendments, revisions and updates to these regulations will be issued as replacement pages, each replacement page having on it the date of revision.
Each regulation section is numbered to reference the section of Title 58.1 of the Code of Virginia which it interprets. The first three digits, 630, identify these regulations, for purposes of the Virginia Register of Regulations, as regulations of the Department of Taxation. The digits following the first hyphen indicate the tax type, and the digits following the second hyphen indicate the section of Title 58.1 being interpreted. For example, the section number 630-1-3 identifies the agency (630), the sections of general applicability (1), and the section of Title 58.1, Code of Virginia, which is interpreted (3).
W. H. Forst
State Tax Commissioner
Virginia Department of Taxation
P. O. Box 6-L
Richmond, Virginia 23282
EFFECTIVE DATE: January 1, 1985 with retroactive effect according to Virginia Code § 58-48.6 (recodified as § 58.1-203).
EXPIRATION DATE: N/A
SUPERSEDES: All previous documents and any oral directives in conflict herewith.
REFERENCES: The following sections of the Virginia Code are interpreted by these regulations:
53.1-3 58.1-15 58.1-105 58.1-1821
58.1-8 58.1-16 58.1-1804 58.1-1823
58.1-9 58.1-101 58.1-1805 58.1-1824
58.1-10 58.1-102 58.1-1812 58.1-1833
58.1-12 58.1-104 58.1-1820
AUTHORITY: Virginia Code § 58-48.6 and § 58.1-203 on and after January 1, 1985.
SCOPE: Applicable to all persons subject to any tax administered by the Department of Taxation.
SUMMARY: These are the initial regulations interpreting certain provisions of Title 58.1 consisting of nineteen sections set forth in the Table of Contents.
These regulations interpret provisions of Title 58.1 of the Code of Virginia relating to secrecy of return information, due dates falling on a holiday, mailing returns, taxes accrued prior to repeal, bad checks, interest on delinquencies and refunds, overcollection of sales and withholding taxes, retention of records, collection from third parties, memorandum of lien, the period of limitations on assessments and waivers thereof, and also set forth the procedure for seeking administrative review of an assessment, including statutory provisions for accepting an offer in compromise, applying to the Tax Commissioner for correction of an erroneous assessment, filing an amended return claiming a refund or a protective claim for a refund.
ADOPTION DATE: September 19, 1984
Section Subject Page
630-1-3 SECRECY OF INFORMATION
Written authorization and Powers of Attorney
630-1-8 FILING & PAYMENT; DUE ON HOLIDAY
630-1-9 FILING & PAYMENT BY MAIL
630-1-10 COLLECTION OF TAXES ACCRUED PRIOR TO
630-1-15 RATE OF INTEREST
630-1-16 OVERCOLLECTION OF TAX
630-1-101 WAIVER OF TIME LIMITATION ON ASSESSMENT
630-1-104 PERIOD OF LIMITATIONS
630-1-105 OFFERS IN COMPROMISE
OR DEBTS DUE BY THIRD PARTY
630-1-1805 MEMORANDUM OF LIEN FOR COLLECTION OF
TAXES
630-1-1812 ASSESSMENT OF OMITTED TAXES
630-1-1820 IN GENERAL; DEFINITIONS
Remedies
Forms
Person assessed
Definition of assessment
630-1-1821 APPLICATION FOR CORRECTION (BEFORE
PAYMENT)
Application
Collection and billing
Statute of limitations
630-1-1823 AMENDED RETURN CLAIMING A REFUND
Filing
Final determination
Assessment
630-1-1824 PROTECTIVE CLAIM (AFTER PAYMENT)
Filing
Issues held pending litigation
Statute of limitation
630-1-1833 INTEREST ON OVERPAYMENT OR
IMPROPER COLLECTION
In general
Income tax
Erroneous assessments
Sales tax
§ 630-01-3 SECRECY OF INFORMATION.
A) Generally. Except in accordance with proper judicial order or as otherwise provided by law, it shall be unlawful for the Tax Commissioner or any agent, clerk, commissioner of the revenue, treasurer, or any other State or local tax or revenue officer, employee, or any former officer or employee of any of the aforementioned offices to divulge any information acquired by him or her in respect to the transactions, property, income, or business of any person, firm, or corporation while in the performance of his or her public duties. Such prohibition extends to, but is not limited to, any copy of a federal return or federal return information required by Virginia law to be attached to or included in the Virginia return. Any person violating the provisions of this section shall be guilty of a Class 2 misdemeanor.
B) Exceptions. 1) The prohibition does not extend to any matter required by law to be entered on any public assessment roll or book.
2) The prohibition does not extend to any act performed or words spoken or published in the line of duty under the law. This includes communications required in the performance of duty to any person or persons authorized to receive such information.
3) The prohibition does not extend to inquiries and investigations to obtain information as to the process of real estate assessments by a duly constituted committee of the General Assembly, or when such inquiry or investigation is relevant to its study, provided that any such information obtained shall be privileged.
4) The prohibition does not extend to the sales price, date of construction, physical dimensions or characteristics of real property, or to any information required for building permits.
5) The prohibition does not extend to the publication of statistics so classified as to prevent the identification of particular reports or returns.
6) The prohibition does not extend to the publication of delinquent lists showing names of taxpayers who failed to timely pay their taxes, together with any relevant information which in the opinion of the Department of Taxation may assist in the collection of such delinquent taxes.
7) The prohibition does not extend to a local tax official for disclosing whether or not a person, firm or corporation is licensed to do business in that locality.
8) The Tax Commissioner is authorized to divulge or cause to be divulged tax information to any Commissioner of the Revenue, Director of Finance or other similar collector of county, city or town taxes who, for the performance of his or her official duties, requests the same in writing setting forth the reasons for the request.
9) The Tax Commissioner is authorized to enter into written agreements with duly constituted tax officials of other states and the United States for the inspection of tax returns, the making of audits, and the exchange of information relating to any tax administered by the Department of Taxation.
(10) The Tax Commissioner is authorized to supply the State Department of Welfare with all information on hand relative to the location, income and property of responsible persons who have abandoned or deserted, or are failing to support, children and their caretakers receiving public assistance and in the prosecution of welfare fraud under Va. Code § 63.1-287.
(11) The Tax Commissioner is authorized to exchange information with claimant agencies participating in the Set-off Debt Collection program under Va. Code § 58.1-533. (I2) The Tax Commissioner is authorized to comply with a subpoena or other judicial order requiring production of confidential tax returns under Va. Code § 58.1-109.
(C) Other Disclosures. Confidential tax information may be given to the following persons:
1) Individual taxpayers. Return information may be given to the individual taxpayer, a third person in the presence of the taxpayer or to the spouse of the taxpayer if the return information relates to a joint or combined return with such spouse.
2) Corporate taxpayers. Return information may be given to:
(a) the president of the corporation,
(b) an officer or employee of the corporation who is authorized to sign tax returns for the corporations upon presentation of satisfactory evidence of such authorization,
(c) any person designated by the Board of Directors of the corporation to receive confidential tax information upon presentation of a certified extract from the minutes of the corporation indicating such authorization,
(d) any person presenting a properly executed power of attorney.
(3) Tax practitioners. An accountant, attorney, return preparer or other tax practitioner may not receive confidential tax information unless the taxpayer is present or has authorized disclosure to the tax practitioner in writing.
(4) Partnership. Confidential tax information may be given to any ' person who was a member of the partnership during any part of the period covered by the return.
(5) Estates and trusts. Confidential tax information may be given to the executor, administrator or trustee of the estate or trust. An heir at law or beneficiary under the will or trust agreement may be given confidential tax information if the heir or beneficiary has a financial interest which will be affected by the information.
(D) Procedure. The Department prefers that requests for disclosure of confidential tax information be made in writing and may refuse to make any disclosure until a written request is received. Copies of returns and other documents may only be requested in writing. Other information, such as account status, will be given to those who request it in person or over the telephone only after establishing their identity and right to receive the information. The Department may refuse to provide confidential tax information over the telephone or in person and instead mail the requested information to the taxpayer at the address shown on the return.
(E) Written Authorization and Powers of Attorney. (1) Any written authorization to disclose confidential tax information to a third party must contain the following:
(2) Any ambiguity in the authorization will be resolved against disclosure. However, where there is a direct relationship between information authorized to be disclosed and other information the Department may disclose such other information. For example, if the Department has received authorization to disclose information from an income tax return which claims a net operating loss deduction, the return for the year of the loss would be considered directly related to the return which claims a net operating loss deduction and may be disclosed if sufficient justification is shown.
(3) The Department and the Internal Revenue Service have both provided Power of Attorney forms for the convenience of taxpayers. An I.R.S. power of attorney form authorizing disclosure of federal income or estate tax information will also authorize disclosure of the corresponding Virginia income or estate tax information.
(4) A taxpayer may grant power of attorney to a person for reasons unrelated to tax returns, for example, to close a real estate transaction or handle financial matters while the taxpayer is traveling. Such a power of attorney will not be accepted by the Department unless it clearly authorizes the disclosure of confidential tax information.
§ 630-01-8 FILING OF TAY RETURNS AND PAYMENT OF TAXES WHICH FALL DUE ON SATURDAY, SUNDAY OR LEGAL HOLIDAY
A) Generally. When the last day prescribed by law for filing a return or paying a tax falls on a Saturday, Sunday or legal holiday, then the return may be filed or the payment may be made without penalty or interest on the next succeeding business day. If an extension has been obtained, and the last day of the extension falls on a Saturday, Sunday or legal holiday the return may be filed or the payment may be made without penalty on the next succeeding business day.
B) Definitions. 1) Legal holiday. "Legal holidays" shall be those defined in Va. Code § 2.1-21.
2) Business day. A "business day" means a Monday, Tuesday, Wednesday, Thursday, or Friday which is not a legal holiday.
§ 630-01-9 FILING OF TAX RETURNS OR PAYMENT OF TAXES BY MAIL.
A) Generally. (1) When remittance of a tax return or a tax payment is made by mail, receipt of the return or payment by the person with whom the return is required to be filed or the payment is required to be made shall constitute timely filing or payment, provided that a) the tax return or tax payment is received in a sealed envelope with sufficient postage; and b) the envelope bears a postmark on or before midnight of the day the return is required to be filed or the payment be made without penalty or interest.
(2) Returns mailed with insufficient postage shall not be deemed filed until actually received or remailed with adequate postage.
B) Definitions. (1) Person. The term "person" includes, but is not limited to, a Commissioner of the Revenue, a Director of Finance or the Department of Taxation.
(2) Postmark. A "postmark" means the United States Post Office cancellation mark stamped upon the envelope. A mark made by a postage meter under control of a person other than the U.S. Post Office is not a postmark.
C) Example. Taxpayer X is required to file a sales tax return on February 20, which falls on a Saturday. Monday, February 22, is a legal holiday (Washington's birthday). The Department of Taxation receives the return on Friday, February 26 in a sealed envelope bearing a postmark of February 23 (Tuesday). No interest or penalties for late filing or late payment will be assessed.
§ 630-01-10 COLLECTION OF TAXES ACCRUED PRIOR TO REPEAL.
When statutory provisions which impose a tax are repealed all taxes which were due and payable prior to the effective date of the repeal remain due and payable. The Department may audit returns and assess additional taxes for the appropriate period specified in Va. Code § 58.1-104.
§ 630-01-12 PAYMENT OF TAX BY BAD CHECK.
(A) In general. If any check tendered for any tax administered by the Department is not paid by the bank on which it is drawn, the taxpayer for whom the check was tendered shall remain liable for the payment of the tax the same as if such check had not been tendered. Penalties for failure to pay the tax may be imposed.
(B) Penalty. A penalty of twenty-five dollars will be assessed against the taxpayer if the taxpayer fails to pay the amount shown on the face, of the check within five days after notice of nonpayment by the bank has been mailed by certified or registered mail to the taxpayer. Such penalty will be in addition to any and all other penalties provided by law.
(C) Bank. For the purpose of this section and any other section of Title 58.1 of the Virginia Code referring to bad checks, "bank" means any financial institution which permits its customers to write negotiable instruments drawn upon it including, but not limited to, commercial banks, savings banks, savings and loan associations, credit
unions, and money market funds.
§ 630-01-15 RATE OF INTEREST
A) In general. (1) Unless otherwise specifically provided, interest on omitted taxes, taxes paid after the date prescribed for payment, assessments and refunds shall be computed at a rate equal to the rate of interest established pursuant to § 6621 of the Internal Revenue Code of 1954, as amended.
(2) Separate computations shall be made for each period during which the interest rate differs from the current rate by multiplying the deficiency or overpayment outstanding during each period by the rate of interest applicable to that period.
(3) The Internal Revenue Code requires that interest accruing after December 31, 1982 be compounded daily. Although Virginia uses the nominal interest rate established pursuant to I.R.C. § 6621, Virginia applies simple interest computations without compounding.
(4) The rates of interest applicable to deficiencies and overpayments under this section and prior law is as follows:
(5) Interest is computed by excluding the due date and including the date of payment in the number of days. For example, interest on $100 tax due June 20, 1983 and paid July 10, 1983 would be computed as follows:
Total Interest Factor 0.007396 x $100 = $0.74 interest
Note that June 20, the due date, is not counted, and that July 10 and all intervening days are counted.
(B) § 6621 The text of I.R.C. § 6621 as amended through December 31, 1983 is set forth below:
§ 630-01-16 OVERCOLLECTION OF TAX
(A) In General. (1) Any person responsible for collecting Retail Sales Tax, Watercraft Sales Tax, Aircraft Sales Tax, Motor Vehicle Fuel Sales Tax (in certain transportation districts), who overcollects any such tax and fails to account for and pay such over-collection to the Department shall be liable for the overcollection and a penalty of 25% of such overcollection.
(2) In the case of the sales taxes, any overcollection must be accounted for and paid to the Department when the regular monthly or quarterly return is due for the period in which the overcollection occurred.
(3) Any person who has been assessed a penalty under this section and who believes he has good cause for failing to account for and pay the overcollection to the Department may petition the Tax Commissioner to waive the penalty by following the procedures for submitting an offer in compromise under Reg. § 630-01-105.
(B) Sales Taxes. (1) The term "overcollection" means, in respect to the sales taxes, an amount collected at a rate in excess of the proper rate and which has not been refunded or credited to the consumer.
(2) Dealers who use the bracket method to calculate the sales tax may find that their accounting records show slightly more sales tax has been collected than is due when the tax is calculated on gross sales. Such excess is not an overcollection for purposes of this section. See Sales and Use Tax Regulations for an explanation of the bracket method.
§ 630-01-101 WAIVER OF TIME LIMITATION ON ASSESSMENT OF TAXES.
(A) Assessments. The Tax Commissioner and a taxpayer may agree to extend the period for assessing a tax prescribed by Va. Code §§ 58.1-104 (period of limitations in general), 58.1-312 (relating to income tax only), 58.1-634 (relating to retail sales and use tax only) and 58.1-1812 (assessment of omitted taxes). Such agreements shall be in writing, on forms prescribed by the Tax Commissioner, and shall extend the period for assessing a tax for all issues relevant to the tax and taxable period for which the agreement is executed.
(B) Refunds. Any such agreement will also extend the period for filing an amended return claiming a refund. However, taxpayers who desire to extend the period for claiming a refund. See also regulation § 630-01-1824 relating to protective claims.
§ 630-01-102 RETENTION OF RECORDS BY TAXPAYER.
(A) In General. Every taxpayer must retain suitable records and documents substantiating all information contained on any return for any tax administered by the Department. Such records and documents shall be preserved for a period of three years from the required date for filing a return to which such records or documents pertain. If an extension of the date for filing a return has been granted such records and documents shall be preserved for a period of three years from the extended date.
(B) Net Operating Loss Deductions. When an income tax return contains a net operating loss deduction the records and documents pertinent to such return shall include:
§ 630-01-104 PERIOD OF LIMITATIONS.
(A) In general. Except as provided by Va. Code §§ 58.1-312 (relating to income tax) and 58.1-634 (relating to retail sales and use tax), any tax administered by the Department shall be assessed within three years of the date on which such taxes became due and payable. A tax may be assessed within six years of the date the tax became due and payable in the case of a false or fraudulent return with the intent to evade any tax administered by the Department or a failure to file a return. For further information see Reg. § 630-01-1812.
§ 630-1-105 Offers in Compromise.
(A) In general. (1) The Commissioner has the authority to accept an offer in compromise of a penalty, or to abate a penalty in its entirety, if he determines that such action is justified.
(2) The Commissioner has the authority to accept an offer in compromise of taxes if he determines that the assessment is based upon a doubtful and disputed claim or that the tax liability is of doubtful collectibility.
(B) Form of submission. An offer in compromise shall be submitted in the form of a letter addressed to the State Tax Commissioner, Virginia Department of Taxation, P.O. Box 6-L, Richmond, Virginia 23282. The letter should state that it is an offer in compromise and identify the taxpayer, type of tax involved, taxable period, date and amount of the assessment and contain a complete statement of the reasons for acceptance of the offer. A check payable to the Department of Taxation in the amount of the offer may be attached to the letter in addition to any supporting documents. In the case of an offer in compromise based upon doubtful collectibility the taxpayer shall submit signed financial statements in sufficient detail to indicate the financial condition of the taxpayer.
§ 630-01-1804 COLLECTION OUT OF ESTATE IN HANDS OF OR DEBTS DUE BY
THIRD PARTY
(A) If an assessment of any tax, penalty and interest remains unpaid thirty days after the assessment, or if there has been an immediate assessment of income or sales tax where collection would be jeopardized by delay pursuant to Va. Code §§ 58.1-313 (relating to income tax) or 58.1-631 (relating to retail sales and use tax), the Tax Commissioner may apply in writing to any person who is indebted to the taxpayer or who has in his possession or control property or estate belonging to the taxpayer and require payment of the assessment out of the debt or estate of the taxpayer.
(B) The assessment of taxes, penalties and interest shall constitute a lien on the debt or estate due the taxpayer from the time the application is received by the person applied to.
(C) For each application served, the person applied to shall be entitled to a fee of twenty dollars which shall constitute a charge or credit against the debt to or estate of the taxpayer.
(D) As soon as practicable after service of the application, but in no event later than 10 days after service, the Tax Commissioner shall mail a copy of the application to the taxpayer with a notice informing him of the remedies provided in chapter 18 of Title 58.1.
§ 630-01-1805 MEMORANDUM OF LIEN FOR COLLECTION OF TAXES
(A) If an assessment of any tax, fees, penalty or interest remains unpaid thirty days after the assessment, or if there has been an immediate assessment of income or sales tax where collection would be jeopardized by delay pursuant to Va. Code §§ 58.1-313 (relating to income tax) or 58.1-631 (relating to sales tax), the Tax Commissioner may file a memorandum of lien in the circuit court clerk's office of the county or city in which the taxpayer's place of business is located, or in which the taxpayer resides. If the taxpayer has no place of business or residence within Virginia, such memorandum may be filed in the clerk's office of the Circuit Court of the City of Richmond. A copy of such memorandum may also be filed in the circuit court clerk's office of all counties in which the taxpayer owns real estate.
(B) The recordation of a memorandum of lien shall not prevent a taxpayer from seeking refund or exoneration under Va. Code §§ 58.1-1821 (application to Tax Commissioner), 58.1-1823 (amended return claiming a refund), 58.1-1824 (protective claim) or 58.1-1825 (application to Court).
§ 630-01-1812 ASSESSMENT OF OMITTED TAXES BY THE DEPARTMENT OF
TAXATION.
(A) In general. (1) If any person fails to make a proper return or fails to pay in full any proper tax administered by the Department such person shall be assessed the proper tax, penalties and interest.
(2) In addition to the proper tax a penalty for failure to file a return will be added if such a penalty is prescribed by law.
(3) In addition to the proper tax a penalty for failure to pay the tax shall be added.
(a) The penalty for failure to pay the tax shall be the amount prescribed by law for the tax. If no penalty is prescribed for failure to pay the particular tax the penalty shall be five percent of the unpaid tax.
(b) If the failure to pay the tax was due to fraud a penalty of 100 percent of the unpaid tax shall be added to the proper tax in lieu of the 5 percent or other penalty prescribed for failure to pay the tax.
(4) In addition to the proper tax, interest on the outstanding tax and penalty be added at the rate established under Va. Code § 58.1-15 for the period between the due date and the date of assessment.
(5) Upon assessment the Department will send a written notice of assessment to the taxpayer. If the full amount of the assessment of taxes, penalties and interest is not paid to the Department within thirty days interest shall accrue on the assessment at the rate established under Va. Code § 58.1-15 from the date of the assessment until payment.
(B) Period for assessing taxes. The taxes imposed by Title 58.1 which are administered by the Department shall be assessed in accordance with this section and Va. Code § 58.1-104 (relating to the general period of limitations) as follows:
(1) If a return is filed on or before the last day prescribed by law for filing a return, including any extensions that may have been granted, the tax shall be assessed within three years of the date the tax was due and payable.
(2) If the taxpayer fails to file a return on or before the last day prescribed by law, including any extensions that may have been granted, the tax may be assessed at any time within six years of the date the tax was due and payable.
(3) If a false or fraudulent return is filed with intent to evade the payment of tax, the tax may be assessed at any time but in no event more than six years after the tax was due and payable.
(4) If the tax owed is an income tax imposed under Chapter 3 of Title 58.1 there are additional exceptions to the general three or six year periods set forth above. See Va. Code § 58.1-312 and the regulations thereunder.
(5) See Va. Code § 58.1-634 for the period of limitations applicable to the Retail Sales and Use tax.
§ 630-1-1820 In general; definitions.
(A) Types of Remedies. Article 2, Chapter 18, Code of Virginia 1950, as amended provides several administrative and judicial remedies for taxpayers who believe an assessment to be erroneous. In addition, Va. Code § 58.1-105 authorizes the Commissioner to accept an offer in compromise in certain circumstances. The various remedies available for taxes administered by the department may be summarized as follows:
(1) Offer in compromise under § 58.1-105, which may be used to waive or compromise a penalty for good cause or to compromise a tax based on a doubtful or disputed claim or a liability of doubtful collectibility.
(2) Application for correction of an erroneous assessment under § 58.1-1821 before payment of the assessment, which may be used to protest any or all issues connected with an assessment.
(3) Amended return claiming a refund under § 58.1-1823, which may be used to amend a return based upon new or newly discovered facts such as errors discovered in the original return or a change in federal taxable income.
(4) Protective claim under § 58.1-1824 after payment of the assessment, which may be used to protest any or all issues connected with an assessment and, in certain circumstances, may extend the time in which taxpayer may apply to a court.
(5) If the above administrative remedies are not satisfactory to the taxpayer, the assessment may be paid and an application to a court made under § 58.1-1825.
(B) Exhaustion of administrative remedies. Although not required by law, taxpayers are encouraged to exhaust their administrative remedies before resorting to litigation. Administrative reviews remain confidential pursuant to §§ 58.1-3 and 58.1-204. Even if a dispute cannot be resolved administratively, the issues in dispute may be significantly narrowed allowing expeditious court review.
(C) Forms. (1) There is no form for applications for correction of assessments or protective claims but the information required for both is similar. The Department will accept any submission which sufficiently identifies the taxpayer, type of tax, taxable period, remedy sought, date of assessment and, if paid, the date of payment, and a statement signed by the taxpayer or duly appointed or authorized agent or attorney setting forth each alleged error in the assessment, the grounds upon which taxpayer relies and all facts relevant to taxpayer's contention.
(2) When a dealer is applying for a refund of sales tax, the dealer shall attach a list of the purchasers from whom the tax was collected and to whom the refund and interest, if allowed, will be paid.
(3) When a consumer is applying for a refund of sales or use tax assessed against a dealer or contractor, the consumer shall identify the dealer or contractor, explain the circumstances surrounding the payment by the consumer and explain why the claim for refund could not, or would not, tie made by the dealer or contractor.
(4) An application for correction or a protective claim filed on behalf of a taxpayer by an attorney, accountant or tax preparer must be signed by the taxpayer or accompanied by a duly executed power of attorney in favor of such representative who signs the application or claim.
(D) Person assessed. Any person assessed with any tax, as such term is defined in § 58.1-1820(1), may file an application for correction or a protective claim.
(E) Definition of assessment. (1) When referring to taxes administered by the Department, the terms "assess" and "assessment" mean the act of determining that a tax (or additional tax) is due and the amount of such tax. An assessment may be made by the Department or by the taxpayer (self-assessment).
(2) When an assessment is made by the Department, a written notice of the assessment must be delivered to the taxpayer by an employee of the Department or mailed to the taxpayer at his last known address. The date that such notice is mailed or delivered is the date of the assessment for the purpose of any limitations on the time in which administrative and judicial remedies are available and for any other administrative purposes.
(3) The written notice of an assessment made by the Department is made on a form clearly labeled "Notice of Assessment" which sets forth the date of the assessment, amount of assessment, the tax type, taxable period and taxpayer. Subsequent statements which merely report payments and additional accrued interest are not assessments or notices of another assessment. An assessment may be preceded by correspondence proposing adjustments to a filed return based on an audit or other information received by the Department. Such correspondence is not an assessment but is intended to provide taxpayers an opportunity to correct any errors before an assessment is made.
(4) A self-assessment is usually made when the taxpayer files a return. If an annual, quarterly or monthly return is not required to be filed for a tax then the self-assessment is usually made when the tax is paid. The date of assessment is the date of filing or payment except that:
(a) A return filed or tax paid before the last day prescribed by law for the filing or payment thereof, including extensions granted pursuant to law, shall be deemed to be filed or paid on such last day.
(b) After the Department has mailed or delivered a notice of assessment a return filed or tax paid shall be deemed filed or paid pursuant to the notice. Such filing or payment is not a self assessment. The date of assessment shall be the date the notice of assessment was mailed or delivered, not the date the return was filed or the tax paid.
(c) In certain circumstances the date a return or payment is mailed will be deemed the date of filing or payment. See Va. Code § 58.1-9.
(5) A jeopardy assessment under Va. Code §§ 58.1-313 or 58.1-631 occurs when the Commissioner finds that collection of income, sales or use taxes will be jeopardized by delay, terminates the current taxable period and assesses tax, penalty and interest. A jeopardy assessment is an assessment for purposes of administrative remedies and a taxpayer may protest either the finding of jeopardy or the amount of liability, or both.
(6) The date of an assessment is not affected if the amount of the assessment is later corrected, whether the correction is the result of an application under Va. Code §§ 58.1-1821 or 58.1-1824 or made on the Department's own initiative after receiving additional information. The Department will not correct an assessment by increasing the amount of liability (except for additional accrued interest).If the Department determines that the proper tax is greater than the amount previously assessed and paid the Department will make a second assessment unless the period for assessing additional tax has expired. The second assessment may be for the total amount due (in which .case the first assessment will be abated) or for only that portion of the tax due which has not yet been assessed, whichever is appropriate in the opinion of the Department.
(7) Amended returns claiming refunds under Va. Code § 58.1-1823 are not assessments or self-assessments. However, for the purpose of allowing a taxpayer to pursue administrative and judicial remedies, the denial or failure to act upon a refund claim is deemed, to be an assessment, but only as to matters first raised in the amended return claiming a refund. A matter shall not be considered first raised in an amended return claiming a refund if it was previously the subject of an audit or an application under §§ 58.1-1821, 58.1-1824 or 58.1-1825. The date of such deemed assessment shall be the date of an order of the Department denying the refund claim or three months from the date the amended return was filed with the Department, whichever is earlier.
§ 630-1-1821 Application for Correction (before payment)
(A) Application. (1) A taxpayer may apply to the Commissioner for correction of an erroneous assessment before payment of the assessment. The application must contain all of the information specified in Regulation § 630-1-1820(C). The application will be handled within the Department in the manner best determined by the Commissioner to resolve the dispute, which may include submission of additional documents and memoranda, further audit, holding a conference with the taxpayer or the taking of testimony. Applications should be addressed to: State Tax Commissioner, Virginia Department of Taxation, P.O. Box 6-L, Richmond, VA 23282.
(2) After receiving a written notice of assessment taxpayers sometimes contact the auditors or other Department personnel with additional information seeking a corrected assessment. Such informal contact will not be considered an application under this section.
(B) Collection and billing. When an application has been duly filed the Commissioner will not take any action to collect the tax, penalty and interest assessed unless he determines that collection is in jeopardy. Interest under Va. Code § 58-1812 and additional incremental penalties for nonpayment of taxes may accrue while the application is pending. After the Commissioner has made a determination on the application, the assessment, as it may have been modified by such determination, shall become immediately collectible with accrued interest.
(C) Statute of limitations. An application under this Va. Code § 58.1-1821 does not extend the period in which taxpayer may apply to a court under Va. Code § 58.1-1825. See Regulation § 630-1-1824(C).
§ 630-1-1823 Amended Returns Claiming a Refund (A)
Filing. (1) Amended returns claiming a refund of any tax administered by the Department are governed by Va. Code § 58.1-1823. Amended returns claiming a refund must be filed within three years from the last day prescribed by law for the timely filing of the original return or, if later, within 60 days from the final determination of any change or correction in the liability of the taxpayer for any federal tax upon which the Virginia tax is based.
(2) The amended return shall supply all the information required in an original return and, in addition, taxpayer must attach a statement explaining the changes made and the reasons for the changes. If the refund claim is due to a change in federal taxable income or estate the taxpayer must furnish a copy of the Revenue Agent's Report or other appropriate notice that the change has been accepted by the Internal Revenue Service. For additional information required from dealers claiming a refund of sales and use tax see regulation § 630-1-1820(C).
(3) The time limit specified above applies only to amended returns claiming a refund and does not apply to amended returns showing a tax due. The period for assessing taxes due may vary for each type of tax and may also depend on circumstances such as fraud or failure to file a return.
(4) See Va. Code § 58.1-9 for provisions relating to filing a return by mail.
(B) Final determination. For the purposes of this regulation, any one of the following shall be deemed a final determination of a change in liability for the federal tax:
(1) Payment or refund of any federal income or estate tax, not the subject of any other final determination described in paragraphs (2), (3), (4), or (5) of subsection (B). The payment of a federal income or estate tax is a final determination for Virginia purposes even though a refund suit may be pending or contemplated which could result in another "final determination";
(2) The receipt of an assessment or other notice that the amount of deficiency or overassessment stated on federal form 870 or similar form has been agreed to by the
I. R. S.;
(3) The expiration of the 90-day time period (150-day period in the case of notice addressed to a person outside the states of the union and the District of Columbia) within which a petition for redetermination may be filed with the U.S. Tax Court with respect to a statutory notice of deficiency issued by the Internal Revenue Service, if a petition is not filed with that court within such time;
(4) A closing agreement entered into with the Internal Revenue Service under § 7121 of the Internal Revenue Code. The "final determination" shall occur when the taxpayer receives notice of the signing by the Commissioner of Internal Revenue;
(5) A decision by the U.S. Tax Court, U.S. District Court, U.S. Claims Court, U.S. Court of Appeals or the United States Supreme Court which has become final, or the date the court approves a voluntary agreement stipulating disposition of the case.
(C) Assessment. The denial in whole or in part of taxpayer's claim for refund, or the department's failure to act within three months, is treated as an assessment for the purpose of permitting taxpayer to pursue other administrative and judicial remedies, but only as to matters first raised by the amended return. Therefore an amended return should not be filed if the claim for refund involves issues that were previously considered in the course of an audit, application for correction or protective claim.
§ 630-1-1824 Protective claims (after payment)
(A) Filing. (1) If all assessed taxes, penalties and accrued interest have been paid and taxpayer desires to preserve his judicial remedies he may file a protective claim with the Commissioner within three years of the assessment. The protective claim must furnish all information specified in paragraph (C) of regulation § 630-1-1820 and, if appropriate, should show that determination of the facts or law applicable to taxpayer depends upon the outcome of another case pending in the Department or the courts. Protective claims shall be addressed to the State Tax Commissioner, Virginia Department of Taxation, P.O. Box 6-L, Richmond, VA 23282.
(2) Taxpayer may submit a protective claim even if the merits have already been administratively considered under either § 58.1-1821 or § 58.1-1823.
(B) Issues held pending litigation. If the Commissioner determines that the protective claim involves facts or law which depend upon resolution of a pending case, he may in his discretion, hold that portion of the protective claim without decision until the pending case has been decided. Upon resolution of the pending case the Commissioner will decide those issues held pending such resolution. The provisions of this subsection will be strictly limited to those issues which actually depend upon resolution of a pending case; all other issues will be decided on the merits. The Commissioner may require additional information about the protective claim as limited to particular issues involved in a pending case. Taxpayer will be advised as to what portion, if any, of his protective claim is being held without decision pending resolution of another case.
(C) Statute of limitations. (1) Taxpayer may apply to the court under Va. Code § 58.1-1825 within one year after decision on taxpayer's protective claim, or three years from the assessment, whichever is later.
(2) If an application for correction is pending under § 58.1-1821 and taxpayer desires to extend his right to apply to a court under § 58.1-1825, taxpayer may pay all assessed taxes, penalties and accrued interest and, within three years of the assessment, re-apply under this section. Such reapplication may simply refer to the pending § 58.1-1821 application, state that the assessment has been paid and request consideration under § 58.1-1824.
§ 630-01-1833 Interest on Overpayments or Improper Collection.
(A) In general. Interest will be allowed and paid upon the overpayment of any tax administered by the Department, the refund of which is either permitted or required under Title 58.1, Chapter 18, Article 2, at a rate equal to the rate of interest established pursuant to Va. Code § 58.1-15. Such interest will accrue from a date sixty (60) days after the date of the payment of the tax, except as set forth below, to a date determined by the Department of Taxation which will not be more than thirty (30) days prior to the date of the refund check.
(B) Income Tax. Refunds appearing on the face of an income tax return will accrue interest from a date sixty (60) days after the due date for filing the return or the date on which such return was filed, whichever is later. Refunds resulting from payments of estimated tax or withholding tax can only be claimed on the face of the income tax return to which such payments apply.
(C) Erroneous Assessment. (1) Refunds pursuant to an erroneous assessment accrue interest from the date the assessment was paid.
(2) If the assessment is a self assessment paid upon filing a return, the date the assessment is paid is the date the return is filed and the tax paid or the last day prescribed by law for filing the return, whichever is later.
(3) If the assessment is a written assessment made pursuant to notice by the Department, the date the assessment is paid is the date the Department receives payment.
(4) A refund is the result of an erroneous assessment if the refund is pursuant to an application for correction of an erroneous assessment or improper collection under § 58.1-1821, an amended return under § 58.1-1823, a protective claim under § 58.1-1824 or an application to a court for correction of an erroneous assessment or improper collection under § 58.1-1825.
(D) Sales Tax. No interest will be paid on sales taxes refunded to a dealer unless the dealer agrees to pass such interest on to the purchaser. (See Paragraph (C)(2) of Regulation § 630-01-1820 for procedure).
(E) Net Operating Loss. Any overpayment of tax resulting from the carryback of a net operating loss or net capital loss will be deemed to have been made on the day on which the return for the year in which the loss occurred was filed, or the last day prescribed by law for such filing, whichever is later.
GENERAL PROVISIONS
Applicable to all Taxes Administered
by the Department of Taxation
by the Department of Taxation
VIRGINIA DEPARTMENT OF TAXATION
January 1, 1985
INTRODUCTION
These general regulations for all taxes administered by the Department of Taxation are published by the authority granted the State Tax Commissioner under Virginia Code § 58-48.6 (§ 58.1-203 effective January 1, 1985) and are subject to amendment, revision and supplemental regulations as required or appropriate.
Amendments, revisions and updates to these regulations will be issued as replacement pages, each replacement page having on it the date of revision.
Each regulation section is numbered to reference the section of Title 58.1 of the Code of Virginia which it interprets. The first three digits, 630, identify these regulations, for purposes of the Virginia Register of Regulations, as regulations of the Department of Taxation. The digits following the first hyphen indicate the tax type, and the digits following the second hyphen indicate the section of Title 58.1 being interpreted. For example, the section number 630-1-3 identifies the agency (630), the sections of general applicability (1), and the section of Title 58.1, Code of Virginia, which is interpreted (3).
W. H. Forst
State Tax Commissioner
Virginia Department of Taxation
P. O. Box 6-L
Richmond, Virginia 23282
GENERAL PROVISIONS
EFFECTIVE DATE: January 1, 1985 with retroactive effect according to Virginia Code § 58-48.6 (recodified as § 58.1-203).
EXPIRATION DATE: N/A
SUPERSEDES: All previous documents and any oral directives in conflict herewith.
REFERENCES: The following sections of the Virginia Code are interpreted by these regulations:
53.1-3 58.1-15 58.1-105 58.1-1821
58.1-8 58.1-16 58.1-1804 58.1-1823
58.1-9 58.1-101 58.1-1805 58.1-1824
58.1-10 58.1-102 58.1-1812 58.1-1833
58.1-12 58.1-104 58.1-1820
AUTHORITY: Virginia Code § 58-48.6 and § 58.1-203 on and after January 1, 1985.
SCOPE: Applicable to all persons subject to any tax administered by the Department of Taxation.
SUMMARY: These are the initial regulations interpreting certain provisions of Title 58.1 consisting of nineteen sections set forth in the Table of Contents.
These regulations interpret provisions of Title 58.1 of the Code of Virginia relating to secrecy of return information, due dates falling on a holiday, mailing returns, taxes accrued prior to repeal, bad checks, interest on delinquencies and refunds, overcollection of sales and withholding taxes, retention of records, collection from third parties, memorandum of lien, the period of limitations on assessments and waivers thereof, and also set forth the procedure for seeking administrative review of an assessment, including statutory provisions for accepting an offer in compromise, applying to the Tax Commissioner for correction of an erroneous assessment, filing an amended return claiming a refund or a protective claim for a refund.
ADOPTION DATE: September 19, 1984
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- TABLE OF CONTENTS
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Section Subject Page
630-1-3 SECRECY OF INFORMATION
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- Generally
Exceptions
Other disclosures
- Generally
Written authorization and Powers of Attorney
630-1-8 FILING & PAYMENT; DUE ON HOLIDAY
630-1-9 FILING & PAYMENT BY MAIL
630-1-10 COLLECTION OF TAXES ACCRUED PRIOR TO
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- REPEAL
- REPEAL
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630-1-15 RATE OF INTEREST
630-1-16 OVERCOLLECTION OF TAX
630-1-101 WAIVER OF TIME LIMITATION ON ASSESSMENT
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- OF TAXES
- OF TAXES
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- In general
630-1-104 PERIOD OF LIMITATIONS
630-1-105 OFFERS IN COMPROMISE
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- In general
Form of submission
- In general
OR DEBTS DUE BY THIRD PARTY
630-1-1805 MEMORANDUM OF LIEN FOR COLLECTION OF
TAXES
630-1-1812 ASSESSMENT OF OMITTED TAXES
630-1-1820 IN GENERAL; DEFINITIONS
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- Types of remedies
Remedies
Forms
Person assessed
Definition of assessment
630-1-1821 APPLICATION FOR CORRECTION (BEFORE
PAYMENT)
Application
Collection and billing
Statute of limitations
630-1-1823 AMENDED RETURN CLAIMING A REFUND
Filing
Final determination
Assessment
630-1-1824 PROTECTIVE CLAIM (AFTER PAYMENT)
Filing
Issues held pending litigation
Statute of limitation
630-1-1833 INTEREST ON OVERPAYMENT OR
IMPROPER COLLECTION
In general
Income tax
Erroneous assessments
Sales tax
§ 630-01-3 SECRECY OF INFORMATION.
A) Generally. Except in accordance with proper judicial order or as otherwise provided by law, it shall be unlawful for the Tax Commissioner or any agent, clerk, commissioner of the revenue, treasurer, or any other State or local tax or revenue officer, employee, or any former officer or employee of any of the aforementioned offices to divulge any information acquired by him or her in respect to the transactions, property, income, or business of any person, firm, or corporation while in the performance of his or her public duties. Such prohibition extends to, but is not limited to, any copy of a federal return or federal return information required by Virginia law to be attached to or included in the Virginia return. Any person violating the provisions of this section shall be guilty of a Class 2 misdemeanor.
B) Exceptions. 1) The prohibition does not extend to any matter required by law to be entered on any public assessment roll or book.
2) The prohibition does not extend to any act performed or words spoken or published in the line of duty under the law. This includes communications required in the performance of duty to any person or persons authorized to receive such information.
3) The prohibition does not extend to inquiries and investigations to obtain information as to the process of real estate assessments by a duly constituted committee of the General Assembly, or when such inquiry or investigation is relevant to its study, provided that any such information obtained shall be privileged.
4) The prohibition does not extend to the sales price, date of construction, physical dimensions or characteristics of real property, or to any information required for building permits.
5) The prohibition does not extend to the publication of statistics so classified as to prevent the identification of particular reports or returns.
6) The prohibition does not extend to the publication of delinquent lists showing names of taxpayers who failed to timely pay their taxes, together with any relevant information which in the opinion of the Department of Taxation may assist in the collection of such delinquent taxes.
7) The prohibition does not extend to a local tax official for disclosing whether or not a person, firm or corporation is licensed to do business in that locality.
8) The Tax Commissioner is authorized to divulge or cause to be divulged tax information to any Commissioner of the Revenue, Director of Finance or other similar collector of county, city or town taxes who, for the performance of his or her official duties, requests the same in writing setting forth the reasons for the request.
9) The Tax Commissioner is authorized to enter into written agreements with duly constituted tax officials of other states and the United States for the inspection of tax returns, the making of audits, and the exchange of information relating to any tax administered by the Department of Taxation.
(10) The Tax Commissioner is authorized to supply the State Department of Welfare with all information on hand relative to the location, income and property of responsible persons who have abandoned or deserted, or are failing to support, children and their caretakers receiving public assistance and in the prosecution of welfare fraud under Va. Code § 63.1-287.
(11) The Tax Commissioner is authorized to exchange information with claimant agencies participating in the Set-off Debt Collection program under Va. Code § 58.1-533. (I2) The Tax Commissioner is authorized to comply with a subpoena or other judicial order requiring production of confidential tax returns under Va. Code § 58.1-109.
(C) Other Disclosures. Confidential tax information may be given to the following persons:
1) Individual taxpayers. Return information may be given to the individual taxpayer, a third person in the presence of the taxpayer or to the spouse of the taxpayer if the return information relates to a joint or combined return with such spouse.
2) Corporate taxpayers. Return information may be given to:
(a) the president of the corporation,
(b) an officer or employee of the corporation who is authorized to sign tax returns for the corporations upon presentation of satisfactory evidence of such authorization,
(c) any person designated by the Board of Directors of the corporation to receive confidential tax information upon presentation of a certified extract from the minutes of the corporation indicating such authorization,
(d) any person presenting a properly executed power of attorney.
(3) Tax practitioners. An accountant, attorney, return preparer or other tax practitioner may not receive confidential tax information unless the taxpayer is present or has authorized disclosure to the tax practitioner in writing.
(4) Partnership. Confidential tax information may be given to any ' person who was a member of the partnership during any part of the period covered by the return.
(5) Estates and trusts. Confidential tax information may be given to the executor, administrator or trustee of the estate or trust. An heir at law or beneficiary under the will or trust agreement may be given confidential tax information if the heir or beneficiary has a financial interest which will be affected by the information.
(D) Procedure. The Department prefers that requests for disclosure of confidential tax information be made in writing and may refuse to make any disclosure until a written request is received. Copies of returns and other documents may only be requested in writing. Other information, such as account status, will be given to those who request it in person or over the telephone only after establishing their identity and right to receive the information. The Department may refuse to provide confidential tax information over the telephone or in person and instead mail the requested information to the taxpayer at the address shown on the return.
(E) Written Authorization and Powers of Attorney. (1) Any written authorization to disclose confidential tax information to a third party must contain the following:
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- -Taxpayer's name and address
-Taxpayer's social security or other I.D.-number
-Third party's name
-Tax type, taxable period and return involved
-Sufficient facts to enable the Department to determine the nature and extent of the disclosure authorized.
-Taxpayer's signature and date signed.
- -Taxpayer's name and address
(2) Any ambiguity in the authorization will be resolved against disclosure. However, where there is a direct relationship between information authorized to be disclosed and other information the Department may disclose such other information. For example, if the Department has received authorization to disclose information from an income tax return which claims a net operating loss deduction, the return for the year of the loss would be considered directly related to the return which claims a net operating loss deduction and may be disclosed if sufficient justification is shown.
(3) The Department and the Internal Revenue Service have both provided Power of Attorney forms for the convenience of taxpayers. An I.R.S. power of attorney form authorizing disclosure of federal income or estate tax information will also authorize disclosure of the corresponding Virginia income or estate tax information.
(4) A taxpayer may grant power of attorney to a person for reasons unrelated to tax returns, for example, to close a real estate transaction or handle financial matters while the taxpayer is traveling. Such a power of attorney will not be accepted by the Department unless it clearly authorizes the disclosure of confidential tax information.
§ 630-01-8 FILING OF TAY RETURNS AND PAYMENT OF TAXES WHICH FALL DUE ON SATURDAY, SUNDAY OR LEGAL HOLIDAY
A) Generally. When the last day prescribed by law for filing a return or paying a tax falls on a Saturday, Sunday or legal holiday, then the return may be filed or the payment may be made without penalty or interest on the next succeeding business day. If an extension has been obtained, and the last day of the extension falls on a Saturday, Sunday or legal holiday the return may be filed or the payment may be made without penalty on the next succeeding business day.
B) Definitions. 1) Legal holiday. "Legal holidays" shall be those defined in Va. Code § 2.1-21.
2) Business day. A "business day" means a Monday, Tuesday, Wednesday, Thursday, or Friday which is not a legal holiday.
§ 630-01-9 FILING OF TAX RETURNS OR PAYMENT OF TAXES BY MAIL.
A) Generally. (1) When remittance of a tax return or a tax payment is made by mail, receipt of the return or payment by the person with whom the return is required to be filed or the payment is required to be made shall constitute timely filing or payment, provided that a) the tax return or tax payment is received in a sealed envelope with sufficient postage; and b) the envelope bears a postmark on or before midnight of the day the return is required to be filed or the payment be made without penalty or interest.
(2) Returns mailed with insufficient postage shall not be deemed filed until actually received or remailed with adequate postage.
B) Definitions. (1) Person. The term "person" includes, but is not limited to, a Commissioner of the Revenue, a Director of Finance or the Department of Taxation.
(2) Postmark. A "postmark" means the United States Post Office cancellation mark stamped upon the envelope. A mark made by a postage meter under control of a person other than the U.S. Post Office is not a postmark.
C) Example. Taxpayer X is required to file a sales tax return on February 20, which falls on a Saturday. Monday, February 22, is a legal holiday (Washington's birthday). The Department of Taxation receives the return on Friday, February 26 in a sealed envelope bearing a postmark of February 23 (Tuesday). No interest or penalties for late filing or late payment will be assessed.
§ 630-01-10 COLLECTION OF TAXES ACCRUED PRIOR TO REPEAL.
When statutory provisions which impose a tax are repealed all taxes which were due and payable prior to the effective date of the repeal remain due and payable. The Department may audit returns and assess additional taxes for the appropriate period specified in Va. Code § 58.1-104.
§ 630-01-12 PAYMENT OF TAX BY BAD CHECK.
(A) In general. If any check tendered for any tax administered by the Department is not paid by the bank on which it is drawn, the taxpayer for whom the check was tendered shall remain liable for the payment of the tax the same as if such check had not been tendered. Penalties for failure to pay the tax may be imposed.
(B) Penalty. A penalty of twenty-five dollars will be assessed against the taxpayer if the taxpayer fails to pay the amount shown on the face, of the check within five days after notice of nonpayment by the bank has been mailed by certified or registered mail to the taxpayer. Such penalty will be in addition to any and all other penalties provided by law.
(C) Bank. For the purpose of this section and any other section of Title 58.1 of the Virginia Code referring to bad checks, "bank" means any financial institution which permits its customers to write negotiable instruments drawn upon it including, but not limited to, commercial banks, savings banks, savings and loan associations, credit
unions, and money market funds.
§ 630-01-15 RATE OF INTEREST
A) In general. (1) Unless otherwise specifically provided, interest on omitted taxes, taxes paid after the date prescribed for payment, assessments and refunds shall be computed at a rate equal to the rate of interest established pursuant to § 6621 of the Internal Revenue Code of 1954, as amended.
(2) Separate computations shall be made for each period during which the interest rate differs from the current rate by multiplying the deficiency or overpayment outstanding during each period by the rate of interest applicable to that period.
(3) The Internal Revenue Code requires that interest accruing after December 31, 1982 be compounded daily. Although Virginia uses the nominal interest rate established pursuant to I.R.C. § 6621, Virginia applies simple interest computations without compounding.
(4) The rates of interest applicable to deficiencies and overpayments under this section and prior law is as follows:
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- Prior to July 1, 1976 6%
July 1, 1976 through January 31, 1978 7%
February 1, 1978 through January 31, 1980 6%
February 1, 1980 through January 31, 1982 12%
February 1, 1982 through December 31, 1982 20%
January 1, 1983 through June 30, 1983 16%
July 1, 1983 through December 31, 1984 11%
- Prior to July 1, 1976 6%
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(5) Interest is computed by excluding the due date and including the date of payment in the number of days. For example, interest on $100 tax due June 20, 1983 and paid July 10, 1983 would be computed as follows:
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- June 20 through June 30 = 10 days at 16%
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- July 1 through July 10 = 10 days at 11%
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- 10 x 0.11 = 0.003013
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Total Interest Factor 0.007396 x $100 = $0.74 interest
Note that June 20, the due date, is not counted, and that July 10 and all intervening days are counted.
(B) § 6621 The text of I.R.C. § 6621 as amended through December 31, 1983 is set forth below:
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- I.R.C. § 6621. Determination of rate of interest.
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- (a) In general. The annual rate established under this section shall be such adjusted rate as is established by the Secretary under subsection (b).
(b) Adjustment of interest rate.-
- (1) Establishment of adjusted rate. - If the adjusted prime rate charged by banks (rounded to the nearest full percent)-
(A) during the 6-month period ending on September 30 of any calendar year, or
(B) during the 6-month period ending on March 31 of any calendar year, differs from the interest rate in effect under this section on either such date, respectively, then the Secretary shall establish, within 15 days after the close of the applicable 6-month period, an adjusted rate of interest equal to such adjusted prime rate.
(2) Effective date of adjustment. Any adjusted rate of interest established under paragraph (1) shall become effective.
(A) on January 1 of the succeeding year in the case of an adjustment attributable to paragraph (1)(A), and
(B) on July 1 of the same year in the case of an adjustment attributable to paragraph (1)(B).
- (1) Establishment of adjusted rate. - If the adjusted prime rate charged by banks (rounded to the nearest full percent)-
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- (a) In general. The annual rate established under this section shall be such adjusted rate as is established by the Secretary under subsection (b).
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- (c) Definition of prime rate.- For purposes of subsection (b), the term "adjusted prime rate charged by banks" means the average predominant prime rate quoted by commercial banks to large businesses, as determined by the Board of Governors of the Federal Reserve System.
§ 630-01-16 OVERCOLLECTION OF TAX
(A) In General. (1) Any person responsible for collecting Retail Sales Tax, Watercraft Sales Tax, Aircraft Sales Tax, Motor Vehicle Fuel Sales Tax (in certain transportation districts), who overcollects any such tax and fails to account for and pay such over-collection to the Department shall be liable for the overcollection and a penalty of 25% of such overcollection.
(2) In the case of the sales taxes, any overcollection must be accounted for and paid to the Department when the regular monthly or quarterly return is due for the period in which the overcollection occurred.
(3) Any person who has been assessed a penalty under this section and who believes he has good cause for failing to account for and pay the overcollection to the Department may petition the Tax Commissioner to waive the penalty by following the procedures for submitting an offer in compromise under Reg. § 630-01-105.
(B) Sales Taxes. (1) The term "overcollection" means, in respect to the sales taxes, an amount collected at a rate in excess of the proper rate and which has not been refunded or credited to the consumer.
(2) Dealers who use the bracket method to calculate the sales tax may find that their accounting records show slightly more sales tax has been collected than is due when the tax is calculated on gross sales. Such excess is not an overcollection for purposes of this section. See Sales and Use Tax Regulations for an explanation of the bracket method.
§ 630-01-101 WAIVER OF TIME LIMITATION ON ASSESSMENT OF TAXES.
(A) Assessments. The Tax Commissioner and a taxpayer may agree to extend the period for assessing a tax prescribed by Va. Code §§ 58.1-104 (period of limitations in general), 58.1-312 (relating to income tax only), 58.1-634 (relating to retail sales and use tax only) and 58.1-1812 (assessment of omitted taxes). Such agreements shall be in writing, on forms prescribed by the Tax Commissioner, and shall extend the period for assessing a tax for all issues relevant to the tax and taxable period for which the agreement is executed.
(B) Refunds. Any such agreement will also extend the period for filing an amended return claiming a refund. However, taxpayers who desire to extend the period for claiming a refund. See also regulation § 630-01-1824 relating to protective claims.
§ 630-01-102 RETENTION OF RECORDS BY TAXPAYER.
(A) In General. Every taxpayer must retain suitable records and documents substantiating all information contained on any return for any tax administered by the Department. Such records and documents shall be preserved for a period of three years from the required date for filing a return to which such records or documents pertain. If an extension of the date for filing a return has been granted such records and documents shall be preserved for a period of three years from the extended date.
(B) Net Operating Loss Deductions. When an income tax return contains a net operating loss deduction the records and documents pertinent to such return shall include:
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- 1)the return for the year of the loss with supporting records and documents, and
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- 2)the returns for all years to which any portion of the loss has been or could have been carried under -federal law together with the supporting records and documents for such returns.
§ 630-01-104 PERIOD OF LIMITATIONS.
(A) In general. Except as provided by Va. Code §§ 58.1-312 (relating to income tax) and 58.1-634 (relating to retail sales and use tax), any tax administered by the Department shall be assessed within three years of the date on which such taxes became due and payable. A tax may be assessed within six years of the date the tax became due and payable in the case of a false or fraudulent return with the intent to evade any tax administered by the Department or a failure to file a return. For further information see Reg. § 630-01-1812.
§ 630-1-105 Offers in Compromise.
(A) In general. (1) The Commissioner has the authority to accept an offer in compromise of a penalty, or to abate a penalty in its entirety, if he determines that such action is justified.
(2) The Commissioner has the authority to accept an offer in compromise of taxes if he determines that the assessment is based upon a doubtful and disputed claim or that the tax liability is of doubtful collectibility.
(B) Form of submission. An offer in compromise shall be submitted in the form of a letter addressed to the State Tax Commissioner, Virginia Department of Taxation, P.O. Box 6-L, Richmond, Virginia 23282. The letter should state that it is an offer in compromise and identify the taxpayer, type of tax involved, taxable period, date and amount of the assessment and contain a complete statement of the reasons for acceptance of the offer. A check payable to the Department of Taxation in the amount of the offer may be attached to the letter in addition to any supporting documents. In the case of an offer in compromise based upon doubtful collectibility the taxpayer shall submit signed financial statements in sufficient detail to indicate the financial condition of the taxpayer.
§ 630-01-1804 COLLECTION OUT OF ESTATE IN HANDS OF OR DEBTS DUE BY
THIRD PARTY
(A) If an assessment of any tax, penalty and interest remains unpaid thirty days after the assessment, or if there has been an immediate assessment of income or sales tax where collection would be jeopardized by delay pursuant to Va. Code §§ 58.1-313 (relating to income tax) or 58.1-631 (relating to retail sales and use tax), the Tax Commissioner may apply in writing to any person who is indebted to the taxpayer or who has in his possession or control property or estate belonging to the taxpayer and require payment of the assessment out of the debt or estate of the taxpayer.
(B) The assessment of taxes, penalties and interest shall constitute a lien on the debt or estate due the taxpayer from the time the application is received by the person applied to.
(C) For each application served, the person applied to shall be entitled to a fee of twenty dollars which shall constitute a charge or credit against the debt to or estate of the taxpayer.
(D) As soon as practicable after service of the application, but in no event later than 10 days after service, the Tax Commissioner shall mail a copy of the application to the taxpayer with a notice informing him of the remedies provided in chapter 18 of Title 58.1.
§ 630-01-1805 MEMORANDUM OF LIEN FOR COLLECTION OF TAXES
(A) If an assessment of any tax, fees, penalty or interest remains unpaid thirty days after the assessment, or if there has been an immediate assessment of income or sales tax where collection would be jeopardized by delay pursuant to Va. Code §§ 58.1-313 (relating to income tax) or 58.1-631 (relating to sales tax), the Tax Commissioner may file a memorandum of lien in the circuit court clerk's office of the county or city in which the taxpayer's place of business is located, or in which the taxpayer resides. If the taxpayer has no place of business or residence within Virginia, such memorandum may be filed in the clerk's office of the Circuit Court of the City of Richmond. A copy of such memorandum may also be filed in the circuit court clerk's office of all counties in which the taxpayer owns real estate.
(B) The recordation of a memorandum of lien shall not prevent a taxpayer from seeking refund or exoneration under Va. Code §§ 58.1-1821 (application to Tax Commissioner), 58.1-1823 (amended return claiming a refund), 58.1-1824 (protective claim) or 58.1-1825 (application to Court).
§ 630-01-1812 ASSESSMENT OF OMITTED TAXES BY THE DEPARTMENT OF
TAXATION.
(A) In general. (1) If any person fails to make a proper return or fails to pay in full any proper tax administered by the Department such person shall be assessed the proper tax, penalties and interest.
(2) In addition to the proper tax a penalty for failure to file a return will be added if such a penalty is prescribed by law.
(3) In addition to the proper tax a penalty for failure to pay the tax shall be added.
(a) The penalty for failure to pay the tax shall be the amount prescribed by law for the tax. If no penalty is prescribed for failure to pay the particular tax the penalty shall be five percent of the unpaid tax.
(b) If the failure to pay the tax was due to fraud a penalty of 100 percent of the unpaid tax shall be added to the proper tax in lieu of the 5 percent or other penalty prescribed for failure to pay the tax.
(4) In addition to the proper tax, interest on the outstanding tax and penalty be added at the rate established under Va. Code § 58.1-15 for the period between the due date and the date of assessment.
(5) Upon assessment the Department will send a written notice of assessment to the taxpayer. If the full amount of the assessment of taxes, penalties and interest is not paid to the Department within thirty days interest shall accrue on the assessment at the rate established under Va. Code § 58.1-15 from the date of the assessment until payment.
(B) Period for assessing taxes. The taxes imposed by Title 58.1 which are administered by the Department shall be assessed in accordance with this section and Va. Code § 58.1-104 (relating to the general period of limitations) as follows:
(1) If a return is filed on or before the last day prescribed by law for filing a return, including any extensions that may have been granted, the tax shall be assessed within three years of the date the tax was due and payable.
(2) If the taxpayer fails to file a return on or before the last day prescribed by law, including any extensions that may have been granted, the tax may be assessed at any time within six years of the date the tax was due and payable.
(3) If a false or fraudulent return is filed with intent to evade the payment of tax, the tax may be assessed at any time but in no event more than six years after the tax was due and payable.
(4) If the tax owed is an income tax imposed under Chapter 3 of Title 58.1 there are additional exceptions to the general three or six year periods set forth above. See Va. Code § 58.1-312 and the regulations thereunder.
(5) See Va. Code § 58.1-634 for the period of limitations applicable to the Retail Sales and Use tax.
§ 630-1-1820 In general; definitions.
(A) Types of Remedies. Article 2, Chapter 18, Code of Virginia 1950, as amended provides several administrative and judicial remedies for taxpayers who believe an assessment to be erroneous. In addition, Va. Code § 58.1-105 authorizes the Commissioner to accept an offer in compromise in certain circumstances. The various remedies available for taxes administered by the department may be summarized as follows:
(1) Offer in compromise under § 58.1-105, which may be used to waive or compromise a penalty for good cause or to compromise a tax based on a doubtful or disputed claim or a liability of doubtful collectibility.
(2) Application for correction of an erroneous assessment under § 58.1-1821 before payment of the assessment, which may be used to protest any or all issues connected with an assessment.
(3) Amended return claiming a refund under § 58.1-1823, which may be used to amend a return based upon new or newly discovered facts such as errors discovered in the original return or a change in federal taxable income.
(4) Protective claim under § 58.1-1824 after payment of the assessment, which may be used to protest any or all issues connected with an assessment and, in certain circumstances, may extend the time in which taxpayer may apply to a court.
(5) If the above administrative remedies are not satisfactory to the taxpayer, the assessment may be paid and an application to a court made under § 58.1-1825.
(B) Exhaustion of administrative remedies. Although not required by law, taxpayers are encouraged to exhaust their administrative remedies before resorting to litigation. Administrative reviews remain confidential pursuant to §§ 58.1-3 and 58.1-204. Even if a dispute cannot be resolved administratively, the issues in dispute may be significantly narrowed allowing expeditious court review.
(C) Forms. (1) There is no form for applications for correction of assessments or protective claims but the information required for both is similar. The Department will accept any submission which sufficiently identifies the taxpayer, type of tax, taxable period, remedy sought, date of assessment and, if paid, the date of payment, and a statement signed by the taxpayer or duly appointed or authorized agent or attorney setting forth each alleged error in the assessment, the grounds upon which taxpayer relies and all facts relevant to taxpayer's contention.
(2) When a dealer is applying for a refund of sales tax, the dealer shall attach a list of the purchasers from whom the tax was collected and to whom the refund and interest, if allowed, will be paid.
(3) When a consumer is applying for a refund of sales or use tax assessed against a dealer or contractor, the consumer shall identify the dealer or contractor, explain the circumstances surrounding the payment by the consumer and explain why the claim for refund could not, or would not, tie made by the dealer or contractor.
(4) An application for correction or a protective claim filed on behalf of a taxpayer by an attorney, accountant or tax preparer must be signed by the taxpayer or accompanied by a duly executed power of attorney in favor of such representative who signs the application or claim.
(D) Person assessed. Any person assessed with any tax, as such term is defined in § 58.1-1820(1), may file an application for correction or a protective claim.
(E) Definition of assessment. (1) When referring to taxes administered by the Department, the terms "assess" and "assessment" mean the act of determining that a tax (or additional tax) is due and the amount of such tax. An assessment may be made by the Department or by the taxpayer (self-assessment).
(2) When an assessment is made by the Department, a written notice of the assessment must be delivered to the taxpayer by an employee of the Department or mailed to the taxpayer at his last known address. The date that such notice is mailed or delivered is the date of the assessment for the purpose of any limitations on the time in which administrative and judicial remedies are available and for any other administrative purposes.
(3) The written notice of an assessment made by the Department is made on a form clearly labeled "Notice of Assessment" which sets forth the date of the assessment, amount of assessment, the tax type, taxable period and taxpayer. Subsequent statements which merely report payments and additional accrued interest are not assessments or notices of another assessment. An assessment may be preceded by correspondence proposing adjustments to a filed return based on an audit or other information received by the Department. Such correspondence is not an assessment but is intended to provide taxpayers an opportunity to correct any errors before an assessment is made.
(4) A self-assessment is usually made when the taxpayer files a return. If an annual, quarterly or monthly return is not required to be filed for a tax then the self-assessment is usually made when the tax is paid. The date of assessment is the date of filing or payment except that:
(a) A return filed or tax paid before the last day prescribed by law for the filing or payment thereof, including extensions granted pursuant to law, shall be deemed to be filed or paid on such last day.
(b) After the Department has mailed or delivered a notice of assessment a return filed or tax paid shall be deemed filed or paid pursuant to the notice. Such filing or payment is not a self assessment. The date of assessment shall be the date the notice of assessment was mailed or delivered, not the date the return was filed or the tax paid.
(c) In certain circumstances the date a return or payment is mailed will be deemed the date of filing or payment. See Va. Code § 58.1-9.
(5) A jeopardy assessment under Va. Code §§ 58.1-313 or 58.1-631 occurs when the Commissioner finds that collection of income, sales or use taxes will be jeopardized by delay, terminates the current taxable period and assesses tax, penalty and interest. A jeopardy assessment is an assessment for purposes of administrative remedies and a taxpayer may protest either the finding of jeopardy or the amount of liability, or both.
(6) The date of an assessment is not affected if the amount of the assessment is later corrected, whether the correction is the result of an application under Va. Code §§ 58.1-1821 or 58.1-1824 or made on the Department's own initiative after receiving additional information. The Department will not correct an assessment by increasing the amount of liability (except for additional accrued interest).If the Department determines that the proper tax is greater than the amount previously assessed and paid the Department will make a second assessment unless the period for assessing additional tax has expired. The second assessment may be for the total amount due (in which .case the first assessment will be abated) or for only that portion of the tax due which has not yet been assessed, whichever is appropriate in the opinion of the Department.
(7) Amended returns claiming refunds under Va. Code § 58.1-1823 are not assessments or self-assessments. However, for the purpose of allowing a taxpayer to pursue administrative and judicial remedies, the denial or failure to act upon a refund claim is deemed, to be an assessment, but only as to matters first raised in the amended return claiming a refund. A matter shall not be considered first raised in an amended return claiming a refund if it was previously the subject of an audit or an application under §§ 58.1-1821, 58.1-1824 or 58.1-1825. The date of such deemed assessment shall be the date of an order of the Department denying the refund claim or three months from the date the amended return was filed with the Department, whichever is earlier.
§ 630-1-1821 Application for Correction (before payment)
(A) Application. (1) A taxpayer may apply to the Commissioner for correction of an erroneous assessment before payment of the assessment. The application must contain all of the information specified in Regulation § 630-1-1820(C). The application will be handled within the Department in the manner best determined by the Commissioner to resolve the dispute, which may include submission of additional documents and memoranda, further audit, holding a conference with the taxpayer or the taking of testimony. Applications should be addressed to: State Tax Commissioner, Virginia Department of Taxation, P.O. Box 6-L, Richmond, VA 23282.
(2) After receiving a written notice of assessment taxpayers sometimes contact the auditors or other Department personnel with additional information seeking a corrected assessment. Such informal contact will not be considered an application under this section.
(B) Collection and billing. When an application has been duly filed the Commissioner will not take any action to collect the tax, penalty and interest assessed unless he determines that collection is in jeopardy. Interest under Va. Code § 58-1812 and additional incremental penalties for nonpayment of taxes may accrue while the application is pending. After the Commissioner has made a determination on the application, the assessment, as it may have been modified by such determination, shall become immediately collectible with accrued interest.
(C) Statute of limitations. An application under this Va. Code § 58.1-1821 does not extend the period in which taxpayer may apply to a court under Va. Code § 58.1-1825. See Regulation § 630-1-1824(C).
§ 630-1-1823 Amended Returns Claiming a Refund (A)
Filing. (1) Amended returns claiming a refund of any tax administered by the Department are governed by Va. Code § 58.1-1823. Amended returns claiming a refund must be filed within three years from the last day prescribed by law for the timely filing of the original return or, if later, within 60 days from the final determination of any change or correction in the liability of the taxpayer for any federal tax upon which the Virginia tax is based.
(2) The amended return shall supply all the information required in an original return and, in addition, taxpayer must attach a statement explaining the changes made and the reasons for the changes. If the refund claim is due to a change in federal taxable income or estate the taxpayer must furnish a copy of the Revenue Agent's Report or other appropriate notice that the change has been accepted by the Internal Revenue Service. For additional information required from dealers claiming a refund of sales and use tax see regulation § 630-1-1820(C).
(3) The time limit specified above applies only to amended returns claiming a refund and does not apply to amended returns showing a tax due. The period for assessing taxes due may vary for each type of tax and may also depend on circumstances such as fraud or failure to file a return.
(4) See Va. Code § 58.1-9 for provisions relating to filing a return by mail.
(B) Final determination. For the purposes of this regulation, any one of the following shall be deemed a final determination of a change in liability for the federal tax:
(1) Payment or refund of any federal income or estate tax, not the subject of any other final determination described in paragraphs (2), (3), (4), or (5) of subsection (B). The payment of a federal income or estate tax is a final determination for Virginia purposes even though a refund suit may be pending or contemplated which could result in another "final determination";
(2) The receipt of an assessment or other notice that the amount of deficiency or overassessment stated on federal form 870 or similar form has been agreed to by the
I. R. S.;
(3) The expiration of the 90-day time period (150-day period in the case of notice addressed to a person outside the states of the union and the District of Columbia) within which a petition for redetermination may be filed with the U.S. Tax Court with respect to a statutory notice of deficiency issued by the Internal Revenue Service, if a petition is not filed with that court within such time;
(4) A closing agreement entered into with the Internal Revenue Service under § 7121 of the Internal Revenue Code. The "final determination" shall occur when the taxpayer receives notice of the signing by the Commissioner of Internal Revenue;
(5) A decision by the U.S. Tax Court, U.S. District Court, U.S. Claims Court, U.S. Court of Appeals or the United States Supreme Court which has become final, or the date the court approves a voluntary agreement stipulating disposition of the case.
(C) Assessment. The denial in whole or in part of taxpayer's claim for refund, or the department's failure to act within three months, is treated as an assessment for the purpose of permitting taxpayer to pursue other administrative and judicial remedies, but only as to matters first raised by the amended return. Therefore an amended return should not be filed if the claim for refund involves issues that were previously considered in the course of an audit, application for correction or protective claim.
§ 630-1-1824 Protective claims (after payment)
(A) Filing. (1) If all assessed taxes, penalties and accrued interest have been paid and taxpayer desires to preserve his judicial remedies he may file a protective claim with the Commissioner within three years of the assessment. The protective claim must furnish all information specified in paragraph (C) of regulation § 630-1-1820 and, if appropriate, should show that determination of the facts or law applicable to taxpayer depends upon the outcome of another case pending in the Department or the courts. Protective claims shall be addressed to the State Tax Commissioner, Virginia Department of Taxation, P.O. Box 6-L, Richmond, VA 23282.
(2) Taxpayer may submit a protective claim even if the merits have already been administratively considered under either § 58.1-1821 or § 58.1-1823.
(B) Issues held pending litigation. If the Commissioner determines that the protective claim involves facts or law which depend upon resolution of a pending case, he may in his discretion, hold that portion of the protective claim without decision until the pending case has been decided. Upon resolution of the pending case the Commissioner will decide those issues held pending such resolution. The provisions of this subsection will be strictly limited to those issues which actually depend upon resolution of a pending case; all other issues will be decided on the merits. The Commissioner may require additional information about the protective claim as limited to particular issues involved in a pending case. Taxpayer will be advised as to what portion, if any, of his protective claim is being held without decision pending resolution of another case.
(C) Statute of limitations. (1) Taxpayer may apply to the court under Va. Code § 58.1-1825 within one year after decision on taxpayer's protective claim, or three years from the assessment, whichever is later.
(2) If an application for correction is pending under § 58.1-1821 and taxpayer desires to extend his right to apply to a court under § 58.1-1825, taxpayer may pay all assessed taxes, penalties and accrued interest and, within three years of the assessment, re-apply under this section. Such reapplication may simply refer to the pending § 58.1-1821 application, state that the assessment has been paid and request consideration under § 58.1-1824.
§ 630-01-1833 Interest on Overpayments or Improper Collection.
(A) In general. Interest will be allowed and paid upon the overpayment of any tax administered by the Department, the refund of which is either permitted or required under Title 58.1, Chapter 18, Article 2, at a rate equal to the rate of interest established pursuant to Va. Code § 58.1-15. Such interest will accrue from a date sixty (60) days after the date of the payment of the tax, except as set forth below, to a date determined by the Department of Taxation which will not be more than thirty (30) days prior to the date of the refund check.
(B) Income Tax. Refunds appearing on the face of an income tax return will accrue interest from a date sixty (60) days after the due date for filing the return or the date on which such return was filed, whichever is later. Refunds resulting from payments of estimated tax or withholding tax can only be claimed on the face of the income tax return to which such payments apply.
(C) Erroneous Assessment. (1) Refunds pursuant to an erroneous assessment accrue interest from the date the assessment was paid.
(2) If the assessment is a self assessment paid upon filing a return, the date the assessment is paid is the date the return is filed and the tax paid or the last day prescribed by law for filing the return, whichever is later.
(3) If the assessment is a written assessment made pursuant to notice by the Department, the date the assessment is paid is the date the Department receives payment.
(4) A refund is the result of an erroneous assessment if the refund is pursuant to an application for correction of an erroneous assessment or improper collection under § 58.1-1821, an amended return under § 58.1-1823, a protective claim under § 58.1-1824 or an application to a court for correction of an erroneous assessment or improper collection under § 58.1-1825.
(D) Sales Tax. No interest will be paid on sales taxes refunded to a dealer unless the dealer agrees to pass such interest on to the purchaser. (See Paragraph (C)(2) of Regulation § 630-01-1820 for procedure).
(E) Net Operating Loss. Any overpayment of tax resulting from the carryback of a net operating loss or net capital loss will be deemed to have been made on the day on which the return for the year in which the loss occurred was filed, or the last day prescribed by law for such filing, whichever is later.
Rulings of the Tax Commissioner