Tax Type
Retail Sales and Use Tax
Description
Illegal drug sales
Topic
Collection of Delinquent Tax
Date Issued
01-04-1988
January 4, 1988
Re: §58.1-1821 Application; Individual Income and Sales Tax
§58.1-313 Jeopardy Assessment of Income Tax
§58.1-631 Jeopardy Assessment of Sales and Use Tax
Dear*********************
This is in response to your letter of September 22, 1986, in which you applied for correction of assessments of income and sales tax, and a conference held on November 17, 1987.
Fact
The taxpayer was assessed for estimated income and sales tax liability arising from sales of marijuana for the period from September, 1985, through May 30, 1986. The information on which the estimates were based came from information furnished by police and evidence seized when a search warrant was executed The taxpayer pleaded guilty to felony possession of marijuana with intent to distribute.
We have furnished you with the information and reasoning on which the assessments were based, together with an alternative computation which also supports the amount assessed. You have presented no evidence or other information as to the correct liability for income and sales tax. You simply deny that any tax is due and challenge the department to prove every detail of the estimate.
Discussion
The law does not require the department to prove every detail of the assessment. §§ 58.1-111 and 58.1-313 of the Code of Virginia specifically permit an assessment based on estimates of liability. The department has limited its assessments to the amount reasonably supported by the information available. The taxpayer bears the burden of showing that the assessment is incorrect. You have not provided any information whatever as to the taxpayer's correct liability.
To accept your assertion that the assessments must be abated because the department does not have evidence proving the exact amount sold over the period, or the exact amount earned over the period, would mean that taxpayers could easily evade tax liability by destroying records or failing to keep records.
Determination
The assessment is based on credible information that the taxpayer made unreported sales of marijuana and had unreported income from such sales. The estimates of income and sales tax liability appear to be reasonable under the circumstances. In the absence of any information showing that the department's estimate of income and sales tax liability is erroneous I have no alternative but to uphold the assessment.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner