Tax Type
Retail Sales and Use Tax
Description
Out-of-state sales; Audit compliance ratio; Penalty and interest
Topic
Collection of Delinquent Tax
Penalties and Interest
Date Issued
03-17-1994
March 17, 1994
Re: §58.1-1821 Application: Sales and Use Tax
Dear**********
This will reply to your letter of January 5, 1993, in which you submit an application for correction of sales and use tax assessed to your affiliate as the result of an audit.
As the disputes in this matter are primarily factual in nature, I do not see the need for a personal appearance or hearing. You note that tax was paid to vendors on various purchases included in the audit; however, documentation on those transactions has not been provided. You similarly note that in the case of various untaxed sales that delivery to the purchaser occurred outside Virginia. The records examined by our auditor indicated that the purchasers actually took delivery within Virginia and again no documentation has been provided to show otherwise.
As I understand that you were in the process of obtaining documentation when the appeal was filed last year, I am returning this audit to the department's Interstate Audit Unit for final resolution. Our auditor, ********** will contact you shortly to make arrangements for the review of the documentation that you have accumulated on the transactions in question.
You also contest the assessment of penalty and interest. The assessment of interest is mandatory by statute. Although the application of penalty is discretionary, I do not find basis for its waiver in this instance. It is well established that retailers are the taxable users or consumers of all tangible personal property utilized in the operation of their businesses, yet in the third audit of your corporation, use tax compliance was only 34%. The department traditionally has expected compliance of 75% or more in third and subsequent audits, and I would point out that Virginia Regulation 630-10-80, recently adopted by the department, raises the expected level of compliance level in third and subsequent audits to 85%.
As noted above, the department will review any additional documentation that you wish to provide on the contested purchase and sales transactions. After the review of this information, a revised notice of assessment will be issued.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
Rulings of the Tax Commissioner