Tax Type
Retail Sales and Use Tax
Description
Corporate officer's personal liability, penalties, and interest
Topic
Collection of Delinquent Tax
Date Issued
07-31-1995
July 31, 1995
Re: §58.1-1821 Application: Retail Sales Tax and Vending Machine Tax
Dear****************
This will reply to your letter of April 15, 1995 in which you seek correction of the department's sales tax and vending machine tax assessments on behalf of your client, ********** ("the "Taxpayer").
FACTS
The Taxpayer is an officer of **********(the "Corporation"). The Corporation was issued assessments for sales and vending machine taxes. Upon failure to collect the tax, interest, and penalty deficiencies from the Corporation, the department converted the assessments, pursuant to Code of Virginia §58.1-1813, to the president of the corporation.
You seek a correction of the portion of the converted assessments attributable to penalty and interest, contending that there is no provision in Virginia law or regulations that allows corporate penalties and interest to be converted. Additionally, you contend that the "local" portion of the converted assessments also be abated because of a statutory change to Code of Virginia §58.1-1813, by the Virginia General Assembly effective July 1, 1994. The change altered the wording from "any state tax administered by the Department of Taxation" to "...any tax administered by the Department of Taxation." Lastly, you seek to have the entire assessment abated.
DETERMINATION
The department has previously ruled that any penalty or interest imposed against a corporation becomes part of that entity's assessment and is passed on to the responsible corporate officer as provided for in Code of Virginia §58.1-1813, with interest accruing on the total outstanding tax, penalty and interest. See P.D. 92-99 (06/15/92) (copy enclosed). Also, although not referenced in P.D. 92-99, Code of Virginia §58.1-1832 very specifically provides that Chapter 18 of Title 58.1 (including Code of Virginia §58.1 -1813) "shall be construed to include taxes, levies, penalties and interest or all of them." (Emphasis added). Accordingly, the penalty and interest portions of the converted assessments are correct.
With regard to your position on the issue of local taxes included in the converted assessments, I refer, once again, to P.D. 92-99. That ruling provides that Code of Virginia §58.1-1812 allows for the Tax Commissioner to assess "...the taxes prescribed by law...", when a taxpayer has failed to file a proper return and pay the proper amount. Code of Virginia §58.1-1813 then allows for the conversion of that assessed amount against a responsible officer of the corporation.
The actions of the Virginia General Assembly clarify the intent which has been consistently applied as evidenced in past rulings and as shown in P.D. 92-99. I have also enclosed a copy of the 1994 Legislative Impact Statement which specifically provided that HB 1136 would codify the department's existing policy "...by permitting conversions of any tax administered by the Department...." Consequently, there is no basis to adjust the department's assessment for this area.
Concerning the remainder of the Taxpayer's arguments, I have enclosed P.D. 91-313 which responded to similar issues. In light of that ruling and the circumstances involved herein, I must conclude that the Taxpayer had knowledge of the outstanding tax liability as evidenced by the Taxpayer's May 15, 1994 letter. In that letter the Taxpayer related that since starting his business in February 1992, sales taxes had not been paid. The Taxpayer also provided that the filing and paying of the sales taxes was continually "put off". As a result of the foregoing and in view of the Taxpayer's default of the partial payment agreement, I find the Taxpayer to be liable for the outstanding assessment issued under the provisions of Code of Virginia §58.1-1813.
Your client will shortly receive the department's updated bill with accrued interest. The assessments should be paid within 30 days to avoid the accrual of additional interest.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9625Q
Rulings of the Tax Commissioner