Tax Type
Retail Sales and Use Tax
Description
Audit sample techniques; Error factor
Topic
Collection of Delinquent Tax
Date Issued
06-06-1985
June 6, 1985
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of August 13, 1984 in which you submit an application for correction of sales and use tax assessed to ***** as the result of a recent audit.
Specifically, you note that the general expense purchases to which an error factor was applied in the department's sample audit included purchases of bags, boxes, etc. that were purchased exclusive of the sales and use tax by *****. In addition, you provide a letter from a vendor stating that the tax was paid on various purchases included in the department's audit.
Inasmuch as the cost of bags, boxes, and similar packaging materials is included in the selling price of the items with which they are provided, they may be purchased exclusive of the sales and use tax under a resale exemption certificate. However, this fact alone would not be sufficient to remove purchases of bags and boxes from the total purchases to which the error factor was applied. This is the case because the error factor was computed by dividing untaxed purchases for a one month period by total purchases (taxable and exempt) for the same period; thus, the computation of the error factor and audit deficiency in each instance was based upon total purchases (taxable and exempt). Nor do I find basis for the removal of such purchases from total general expense purchases for the audit period because those bag, box, and packaging material purchases were of a general and recurring nature. While the purchases in question were made only once each year, such purchases certainly were not unusual for a retailer inasmuch as bags, boxes, and other packaging materials were likely used in great numbers each day and could easily have been made on a more frequent basis.
As to your other point of contention, it will be necessary to obtain further documentation as to the payment of tax to *****. The assessment will be revised to abate tax assessed on transactions involving ***** upon the provision of proper documentation. Also, the specific transactions involving ***** that were included in our audit should be identified. Such information should be directed to our Technical Services Section at P. 0. Box 6-L, Richmond, Virginia 23282 within the next 45 days. In addition, you may wish to review your records to determine if any of the transactions included in the fixed assets/leasehold improvements portion of the audit represented charges by contractors for furnishing and affixing tangible personal property to real estate. If so, the tax might not be applicable to . under the provisions of Section 58.1-610 of the Code of Virginia and Section 630-10-27 of the Virginia Retail Sales and Use Tax Regulations, copy enclosed. If any such transactions are found to exist, information should be furnished to our Technical Services Section for review within 45 days.
Sincerely,
W. H. Forst
Tax Commissioner
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of August 13, 1984 in which you submit an application for correction of sales and use tax assessed to ***** as the result of a recent audit.
Specifically, you note that the general expense purchases to which an error factor was applied in the department's sample audit included purchases of bags, boxes, etc. that were purchased exclusive of the sales and use tax by *****. In addition, you provide a letter from a vendor stating that the tax was paid on various purchases included in the department's audit.
Inasmuch as the cost of bags, boxes, and similar packaging materials is included in the selling price of the items with which they are provided, they may be purchased exclusive of the sales and use tax under a resale exemption certificate. However, this fact alone would not be sufficient to remove purchases of bags and boxes from the total purchases to which the error factor was applied. This is the case because the error factor was computed by dividing untaxed purchases for a one month period by total purchases (taxable and exempt) for the same period; thus, the computation of the error factor and audit deficiency in each instance was based upon total purchases (taxable and exempt). Nor do I find basis for the removal of such purchases from total general expense purchases for the audit period because those bag, box, and packaging material purchases were of a general and recurring nature. While the purchases in question were made only once each year, such purchases certainly were not unusual for a retailer inasmuch as bags, boxes, and other packaging materials were likely used in great numbers each day and could easily have been made on a more frequent basis.
As to your other point of contention, it will be necessary to obtain further documentation as to the payment of tax to *****. The assessment will be revised to abate tax assessed on transactions involving ***** upon the provision of proper documentation. Also, the specific transactions involving ***** that were included in our audit should be identified. Such information should be directed to our Technical Services Section at P. 0. Box 6-L, Richmond, Virginia 23282 within the next 45 days. In addition, you may wish to review your records to determine if any of the transactions included in the fixed assets/leasehold improvements portion of the audit represented charges by contractors for furnishing and affixing tangible personal property to real estate. If so, the tax might not be applicable to . under the provisions of Section 58.1-610 of the Code of Virginia and Section 630-10-27 of the Virginia Retail Sales and Use Tax Regulations, copy enclosed. If any such transactions are found to exist, information should be furnished to our Technical Services Section for review within 45 days.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner