Tax Type
Retail Sales and Use Tax
Description
Overcollection of tax by dealers.
Topic
Collection of Tax
Penalties and Interest
Returns/Payments/Records
Date Issued
03-04-1985
March 4, 1985
RE: §58-1118 Application/Sales and Use Tax
Dear ****
This will respond to your application dated December 10, 1984, on behalf of ***** requesting relief from the assessment of sales and use tax for the period September 1, 1981 through July 31, 1984.
FACTS
It is our understanding that in order to arrive at the amount of sales tax payable to the State, taxpayer divided his net sales by 1.04, instead of separately reporting the sales tax actually collected on his register tapes. It is also our understanding that taxpayer failed to distinguish between manufacturers and retailers coupons in arriving at the sales tax due from his customers at the point of sale. Taxpayer argues that he has accounted for sales tax in a lawful and proper manner and pursuant to a formula customary in business, and therefore should be relieved of the assessment made in this case.
DETERMINATION
Section 58.1-633 of the Virginia Code requires that "every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner."
Furthermore, Section 630-10-27.2 of the Virginia Sales and Use Tax Regulations states that in computing the amount of sales and use tax due and payable by a retailer or dealer, "the value of a manufacturer's coupon is included in the sales price [while] the value of a retailers coupon is not." This is because the retailer's coupon has no value to the retailer and is actually an advertisement of a discount.
Failure on the part of a dealer to distinguish between manufacturers and retailers coupons in computing sales tax, results in the overcollection of tax from the customer.
In the present case, taxpayers method of computing and reporting tax of dividing total sales by 1.04 produces the same inequitable result -overcollection of taxes. Section 630-10-24(D) of the Sales and Use Tax Regulation states that "any dealer who collects tax in excess of a 4% rate or who otherwise overcollects the tax...must remit any amount overcollected to the state on a timely basis. Failure to do so will result in a penalty of 25% of the amount of the overcollection."
Taxpayer's error in the present case was in overcollecting the tax and then not remitting such tax to the state on a timely basis. Furthermore, taxpayers formula for computing tax due of dividing net sales by 1.04 is an inaccurate method of reporting sales tax actually collected.
Therefore, taxpayer is liable to the Department for the entire amount stated in the assessment, and such amount is presently due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
RE: §58-1118 Application/Sales and Use Tax
Dear ****
This will respond to your application dated December 10, 1984, on behalf of ***** requesting relief from the assessment of sales and use tax for the period September 1, 1981 through July 31, 1984.
FACTS
It is our understanding that in order to arrive at the amount of sales tax payable to the State, taxpayer divided his net sales by 1.04, instead of separately reporting the sales tax actually collected on his register tapes. It is also our understanding that taxpayer failed to distinguish between manufacturers and retailers coupons in arriving at the sales tax due from his customers at the point of sale. Taxpayer argues that he has accounted for sales tax in a lawful and proper manner and pursuant to a formula customary in business, and therefore should be relieved of the assessment made in this case.
DETERMINATION
Section 58.1-633 of the Virginia Code requires that "every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner."
Furthermore, Section 630-10-27.2 of the Virginia Sales and Use Tax Regulations states that in computing the amount of sales and use tax due and payable by a retailer or dealer, "the value of a manufacturer's coupon is included in the sales price [while] the value of a retailers coupon is not." This is because the retailer's coupon has no value to the retailer and is actually an advertisement of a discount.
Failure on the part of a dealer to distinguish between manufacturers and retailers coupons in computing sales tax, results in the overcollection of tax from the customer.
In the present case, taxpayers method of computing and reporting tax of dividing total sales by 1.04 produces the same inequitable result -overcollection of taxes. Section 630-10-24(D) of the Sales and Use Tax Regulation states that "any dealer who collects tax in excess of a 4% rate or who otherwise overcollects the tax...must remit any amount overcollected to the state on a timely basis. Failure to do so will result in a penalty of 25% of the amount of the overcollection."
Taxpayer's error in the present case was in overcollecting the tax and then not remitting such tax to the state on a timely basis. Furthermore, taxpayers formula for computing tax due of dividing net sales by 1.04 is an inaccurate method of reporting sales tax actually collected.
Therefore, taxpayer is liable to the Department for the entire amount stated in the assessment, and such amount is presently due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner