Tax Type
Retail Sales and Use Tax
Description
Penalties and interest; Liability of corporate officer
Topic
Collection of Delinquent Tax
Penalties and Interest
Date Issued
06-15-1992
June 15, 1992
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear***************:
This will reply to your letter of October 30, 1991 in which you seek correction of a sales and use tax assessment for****************(the "Taxpayer").
FACTS
The Taxpayer was President and sole director of********(the "Corporation"). An audit of the Corporation resulted in an assessment for unpaid sales taxes for the period January 1, 1987 to December 31, 1989. Upon failure to collect the deficiency from the Corporation, the department assessed the Taxpayer with the deficiency plus accrued interest under Va. Code §58.1-1813 on August 9, 1991. The Taxpayer seeks correction of the assessment to remove the interest and penalty from the conversion assessment on the basis that while the tax was subject to conversion, there is no provision in Virginia law or regulations that allows corporate penalties and interest to be so converted. The Taxpayer cites §6672 of the Internal Revenue Code and several U.S. court cases in support of his argument.
DETERMINATION
IRC §6672 imposes a 100% penalty for failure to collect, truthfully account for, and pay over any tax. The Taxpayer contends that the restriction in IRC §6672 that precludes penalties from the responsible corporate officer liability is analogous to Va. Code §58.1-1813 because the Virginia statute is similar in wording. Va. Code §58.1-1813 is similar, but not identical, to IRC §6672 in that the Virginia statute does not contain the provision of IRC §6672 that states "[n]o penalty shall be imposed...for any offense to which this section is applicable."
In the present case, the Taxpayer contends that the Commonwealth cannot include any penalty in the conversion because, by analogy, the federal statute does not allow the inclusion of a fraud penalty in a federal conversion assessment. Clearly, the General Assembly, when adopting language similar to IRC §6672 in 1972, chose to leave out the restrictive conversion clause, thereby permitting the inclusion of the underlying penalty when computing the total amount subject to conversion. Further, Va. Code §58.1-1813 provides that the penalty against a corporate or partnership officer is "to be assessed and collected in the same manner as such taxes are assessed and collected "
Va. Code §58.1-635 provides in part that "[a]ll interest and penalties imposed...shall be...collectible by the Tax Commissioner in the same manner as if they were a part of the tax imposed." This clearly provides that the interest and penalties under a retail sales and use tax assessment are subject to conversion. Additionally, Va. Code §58.1-1812 requires that, after making the initial assessment for the original taxes due from a corporation, the Tax Commissioner must add to that amount the penalty for failure to file or pay and any applicable amount of interest.
Thus, any penalty or interest imposed against a corporation becomes part of that entity's assessment and is passed on to the responsible corporate officer under Va. Code §58.1-1813, with interest accruing on the total of outstanding tax, penalty and interest. Accordingly, the penalty and interest in the present case are subject to the Va. Code §58.1-1813 conversion.
However, because the present assessment was based on a period that is partially outside of the statute of limitations, I find basis for an abatement that portion of the present assessment prior to July 1988. While you had requested a meeting on this matter, the department's established policy in this area is clear. However, if upon review of this determination you have additional factual information which you would like the department to review, please contact the department's Tax Policy Division within 30 days of the date of this letter. If we do not hear from you within the specified time period, the revised assessment will become immediately due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5715I
Rulings of the Tax Commissioner