Tax Type
Retail Sales and Use Tax
Description
Audit penalty; Use tax compliance ratio
Topic
Penalties and Interest
Date Issued
08-26-1993
August 26, 1993
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This will reply to your letter of March 11, 1993 in which you seek correction of a retail sales and use tax assessment for********************(the "Taxpayer").
FACTS
The Taxpayer was audited for the period May 1, 1988 through April 30, 1991. While the Taxpayer does not contest the tax assessed, it asserts that the use tax compliance ratio calculated by the auditor is in error. The Taxpayer believes that the use tax compliance ratio should be computed on the combination of sales tax paid to vendors and use tax accruals. The Taxpayer contends the compliance ratio should be 90% and, therefore, no penalty should apply.
DETERMINATION
The department has previously ruled that the purpose of the use tax compliance ratio is to determine how well the taxpayer has complied with Virginia tax laws in accruing and remitting use tax on untaxed purchases. To include sales tax paid to vendors in computing the use tax compliance ratio would inaccurately portray the taxpayer's compliance with the Virginia use tax laws. P.D. 92-100 (06/15/92) (copy enclosed).
The procedures used by the auditor in computing the use tax compliance ratio were correct. Based on the auditor's computation, the Taxpayer's use tax compliance ratio was 33%. is not deemed acceptable for a fourth generation audit. The Taxpayer has not presented any exceptional mitigating circumstances to warrant waiver of the penalty in this case. Therefore, the penalty was properly applied in this case.
Accordingly, I find no basis for an abatement of the assessed penalty.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6855F
Rulings of the Tax Commissioner