Tax Type
Retail Sales and Use Tax
Description
Audit penalty; Use tax compliance ratio
Topic
Penalties and Interest
Date Issued
05-06-1994
May 6, 1994
Re: Protective Claim: Retail Sales and Use Tax
Dear****
This will reply to your letter of March 22, 1994 in which you submit a protective claim for refund of revised audit penalty charges assessed to *******("the Taxpayers") for the period October 1986 through November 1990.
In submitting your claim, you maintain that the Taxpayers complied with the waiver of penalty provisions of Virginia Regulation (VR) 630-10-80(C) and that the compliance error factor of the revised assessments was less than one percent. You further maintain that the revised audit penalty was erroneously assessed at 30 percent.
VR 630-10-80 provides that audit penalty may be waived "based upon the extent of a dealer's compliance with requirements for collection and payment of sales tax and requirements for payment of use tax..." (emphasis added)
In the instant case it is apparent that the Taxpayers paid the sales tax to vendors on the preponderance of their taxable purchases. However, the Taxpayers showed a zero use tax compliance ratio in those instances when vendors did not charge the tax. Accordingly, penalty was properly assessed since the Taxpayers did not satisfactorily comply with the requirement for paying the use tax.
As you are aware, the department's policy in regard to this issue is based on a clear distinction between a sales tax and a use tax, and that policy has been consistently applied as addressed in the enclosed Public Document 92-100.
However, I agree that the penalty charges were overstated on the revised assessments and should have been imposed at a maximum of 25 rather than 30 percent. I regret any inconvenience caused by this oversight.
Accordingly, the penalty charges will be recalculated to reflect the 25 percent penalty rate and a refund will be issued as soon as practicable.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7751I
Rulings of the Tax Commissioner