95-194 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Statute of limitations; Previous audit; Concrete Fabricator/Installer

Topic

Collection of Delinquent Tax

Statute of Limitations

Date Issued

07-31-1995

July 31, 1995

Re: §58.1-1821 Application: Sales and Use Tax

Dear*************

This will reply to your letter of June 7, 1995 in which you seek correction of the sales and use tax audit of *************(the "Taxpayer") for the period of March 1991 through February 1994.

FACTS

The Taxpayer is in the business of fabricating and installing precast concrete structures. In June 1987, during the course of a sales and use tax audit, it was determined that the nature of the Taxpayer's operation had changed from that of a manufacturer to a using and consuming contractor. At this time the Taxpayer was assessed use tax on all the raw materials in their inventory and was advised of the proper method to operate as a contractor.

Prior to commencing the second audit of the Taxpayer, the Taxpayer discovered they had overpaid sales taxed based on fabricated cost of material as opposed to raw material cost. The department approved and issued a large refund to the Taxpayer. The second audit of the Taxpayer, March 1988 through February 1991, produced a liability resulting from the Taxpayer not paying the tax on material fabricated in Virginia for use in out-of-state construction projects. During this audit, fixed assets were examined in detail and no liability was discovered.

The present audit, March 1991 through February 1994, revealed that the Taxpayer was still not operating as a contractor in accordance with Virginia Regulation (VR) 6301-0-27, copy enclosed. The auditor also discovered that the Taxpayer had not paid the sales tax at the time of purchase for fixed assets acquired during the March 1988 through February 1991 audit. The auditor picked up these assets in this audit and assigned a value to them based on the book value as of December 31, 1991.

The Taxpayer is taking exception to the taxing of fixed assets which were acquired during the previous audit period and not addressed during the previous audit. It is the Taxpayer's position that these assets were accounted for during the previous audit.

DETERMINATION

Code of Virginia §58.1-634 provides for the period of limitations in which the department can assess sales and use taxes and states, in part, the following:

- The taxes imposed under this chapter shall be assessed within three years from the date on which such taxes became due and payable.... The Tax Commissioner shall not examine any person's records beyond the three-year period of limitations unless he has reasonable evidence of fraud, or reasonable cause to believe that such person was required by law to file a return and failed to do so.

Based on the above, and the fact that the department had previously audited the Taxpayer's records for the period of March 1988 through February 1991,1 will agree to remove all fixed assets acquired during this period from the current audit. An auditor from our ******District Office will make the appropriate revisions and issue a revised assessment to the Taxpayer.

If you should have any further questions, please feel free to contact********* Office of Tax Policy, at***********.

Sincerely,

Danny M. Payne
Tax Commissioner

Rulings of the Tax Commissioner