Tax Type
Retail Sales and Use Tax
Description
Audit sample; Item included in sample
Topic
Collection of Delinquent Tax
Date Issued
06-09-1993
June 9, 1993
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This will reply to your letter in which you seek correction of a sales and use tax assessment against *************(the Taxpayer).
FACTS
The Taxpayer operates as a vendor of computer hardware and software. An audit for the period January 1989 through December 1991 produced an assessment for certain untaxed sales and untaxed purchases. However, I understand that the assessment was revised subsequent to your correspondence and that the only issue remaining under protest is the error factor utilized by the auditor.
The Taxpayer maintains that an invoice for the licensing of a computer software program to********** (the Customer) was improperly included in the percentage of error computation and contends that this transaction should be removed from the sales sample because it was not representative of the audit period.
DETERMINATION
Despite the Taxpayer's contentions, I find no basis for the removal of the software licensing agreement from the audit sample. The courts have held that a tax assessment is prima facie correct and the burden is upon the Taxpayer to prove that the assessment is incorrect. The Taxpayer has not met this burden.
For an item to be removed from the audit sample, the Taxpayer must show that the transaction was isolated in nature and not a normal part of the Taxpayer's operation. Yet you indicate that versions of the same software were sold or licensed to other customers albeit such sales were generally made to customers outside Virginia. Furthermore, the agreement specifically provides that the Taxpayer may sell the same software system to the Customer's affiliates. As such, I cannot agree that the contested transaction was outside the Taxpayer's normal operations.
Accordingly, I find that the assessment is correct and is now due and payable. The Taxpayer will shortly receive a bill with interest accrued to date which must be paid within 30 days to avoid accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner