Tax Type
Retail Sales and Use Tax
Description
Manufacturer and retailer of computer systems
Topic
Accounting Periods and Methods
Appropriateness of Audit Methodology
Date Issued
05-25-1994
May 25, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear************
This will reply to your letter of November 22, 1993 in which you seek correction of a sales and use tax assessment issued to *****************("the Taxpayer").
FACTS
The Taxpayer operates as a manufacturer and retailer of computer systems. Two assessments were issued: For the period January 1991 through September 1991 when the Taxpayer was organized as a sole proprietorship, and for the period October 1991 through November 1992 during which time the Taxpayer operated as a corporation.
The Taxpayer maintains that specific untaxed sales, made during the later audit period, were erroneously assessed and are exempt for a variety of reasons. The Taxpayer further maintains that the district office provided inaccurate information concerning the date of sale, and that such information adversely affected the audit results.
DETERMINATION
Each of the Taxpayer's concerns will be addressed separately as follows:
EXEMPT SALES: For the later audit period the Taxpayer identifies four groups of specific invoices and indicates that the sales represented by these invoices are exempt as follows:
Certificates on file: Nine invoices are identified for which you claim certificates of exemption are on file. Copies of these certificates may be presented to the Northern Virginia District Office. Based on a review of the certificates, the assessment will be revised if applicable.
As a precaution, however, Virginia Regulation (VR) 630-10-20 provides that "a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable...." Furthermore, certificates of exemption obtained during or after an audit situation will be accepted only if the department can confirm that the customer's use of the certificate was valid and proper for the specific transaction. Therefore, the certificates of exemption which the Taxpayer presents to the district office will be reviewed under these criteria.
Sales on which tax was paid: You indicate that four invoices represent sales on which the tax was paid to the state. The department will require clear evidence in support of this claim, and, upon review of that evidence, the assessment will be revised as warranted.
Out-of-state deliveries: Identified are nine sales which you indicate as being exempt because the products were delivered out--of-state. Again, clear evidence needs to be submitted to the district office to verify this claim.
Sales awaiting information: I understand that the customer shown on invoices 298P and 423 has recently been identified, and that you will be able to contact that customer for payment of the tax which was not originally charged.
DATE OF SALE: You indicate that the basis of the appeal is that the audit erroneously assumed that the Taxpayer's collection liability begins upon receipt of funds. You further indicate that the Taxpayer's products are often delivered ten days after order or payment.
As defined in Va. Code §58.1-602, "gross sales" means "the sum total of all retail sales of tangible personal property and services...." For purposes of determining the timing of the gross sales, §58.1-602 defines a "sale" to mean "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property and any rendition of a taxable service for a consideration...."
Further, Va. Code §§58.1-615 and 58.1-616 provide that every dealer required to pay the sales or use tax file a return and pay the tax by the twentieth day of the month for the gross sales of the previous month. Therefore, sales tax must be paid by the dealer on every sale, whether the sale is an installment sale, charge sale or cash sale. For purposes of the sales and use tax law, the sale is complete in any case. Accordingly, taxable sales must be reported based upon the month of the sale and not the month in which the tax is collected unless, of course, both events occur during the same month.
Generally/ a sale must be reported for the month in which ownership or possession of the property is taken by the customer. The order date is not necessarily the date of sale provided that transfer of title or possession occurs at a later time. Furthermore, if the Taxpayer merely takes a deposit on property which is to be delivered at a later time, that deposit does not constitute a sale, since the sale is not deemed to be consummated until title changes hands or delivery is made.
In the instant case I understand that the date of sale was determined by the auditor using the date shown on the Taxpayer's document titled "Purchase Quotation/Invoice." I also understand that for the earlier audit period the Taxpayer documented its monthly sales on a report titled "$ Sales by Period" which listed each sale by invoice number, order date, sales tax and other charges relating to the transaction.
However, notwithstanding the Taxpayer's claim that its sales often occur at a later date than shown on these documents, the Taxpayer did not provide any alternative date on which to compute the due date of the sales tax. Inasmuch as no documents were provided during the audit to substantiate your claims, the date of sale was determined by the available records, and I find no basis at this time to revise the assessment.
Nevertheless, if the Taxpayer can provide documents showing that the date of sale is later than the date shown on its "Purchase/Quotation Invoice" or its "$ Sales by Period," the department will review such documents.
Accordingly, based on the information currently before me, I find no grounds to revise the audit liability. However, the information relating to exempt sales and to the date of sales needs to be directed to the department's ***********District Office within 30 days of the date of this letter. If the necessary information is not timely supplied, the information on which the assessment was originally based will be presumed to be the best available.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7522I
Rulings of the Tax Commissioner