Tax Type
Retail Sales and Use Tax
Description
Statute of limitations; Failure to file returns
Topic
Collection of Delinquent Tax
Date Issued
09-19-1995
September 19, 1995
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**************:
This will reply to your letter seeking correction of a sales and use tax assessment for your company, **************(the "Taxpayer"), for the period January 1989 through December 1992.
The Taxpayer, an engineering company which frequently contracts with the federal government, was audited and held liable for the tax in connection with two service contracts with the federal government. It is my understanding that while you no longer contest the auditor's findings with respect to the nature of the contracts, you contest several other issues, including the sampling methodology, qualification for the research and development exemption, the purchase and use of property outside of Virginia, and the audit period itself.
The additional information supplied regarding the first four issues above has been referred to the **************. It is my understanding that the auditors already are working with you to resolve the issues.
Thus, the only issue to be addressed herein is the statute of limitations. You contest the inclusion of the first 22 months of the audit period. The auditors extended the audit period beyond the standard three years provided in Code of Virginia § 58.1-634 due to the Taxpayer's failure to file returns. Code of Virginia § 58.1-634 provides that in the case of a failure to file a return, the taxes may be assessed at any time within six years from the date such taxes became due and payable.
You maintain that the Taxpayer did not file sales and use tax returns after June 1989 because it had received correspondence from the department indicating that it was no longer required to file the returns. You suggest that had the Taxpayer not been told this, it would have continued to file the returns. Accordingly, you propose that the months of July 1989 through April 1991 should be deleted from the audit as they were beyond the standard three year period.
The letter from the department to the Taxpayer in July 1989 was a form letter that merely stated that based on information provided, it appeared that the Taxpayer was no longer required to file a use tax return. The letter also stated that the Taxpayer should contact the department if it believed that it should continue to be registered for remittance of the tax and filing the returns. This computer generated form letter typically is sent when a taxpayer has filed zero returns for a period of time, which was the case with the Taxpayer.
Although I am sympathetic, the burden was on the Taxpayer to verify if the discontinuance of registration and filing requirements was appropriate. Had the Taxpayer contacted the department regarding this, it would have learned that continued registration and the filing of returns was appropriate.
Based on the foregoing, the department finds that the auditors were correct in extending the audit period beyond the standard three year period. Once the auditors have completed their revisions based upon the additional information you have provided, if you continue to have problems with the assessment, please let me know.
Danny M. Payne
Tax Commissioner
OTP/8438H
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**************:
This will reply to your letter seeking correction of a sales and use tax assessment for your company, **************(the "Taxpayer"), for the period January 1989 through December 1992.
FACTS
The Taxpayer, an engineering company which frequently contracts with the federal government, was audited and held liable for the tax in connection with two service contracts with the federal government. It is my understanding that while you no longer contest the auditor's findings with respect to the nature of the contracts, you contest several other issues, including the sampling methodology, qualification for the research and development exemption, the purchase and use of property outside of Virginia, and the audit period itself.
DETERMINATION
The additional information supplied regarding the first four issues above has been referred to the **************. It is my understanding that the auditors already are working with you to resolve the issues.
Thus, the only issue to be addressed herein is the statute of limitations. You contest the inclusion of the first 22 months of the audit period. The auditors extended the audit period beyond the standard three years provided in Code of Virginia § 58.1-634 due to the Taxpayer's failure to file returns. Code of Virginia § 58.1-634 provides that in the case of a failure to file a return, the taxes may be assessed at any time within six years from the date such taxes became due and payable.
You maintain that the Taxpayer did not file sales and use tax returns after June 1989 because it had received correspondence from the department indicating that it was no longer required to file the returns. You suggest that had the Taxpayer not been told this, it would have continued to file the returns. Accordingly, you propose that the months of July 1989 through April 1991 should be deleted from the audit as they were beyond the standard three year period.
The letter from the department to the Taxpayer in July 1989 was a form letter that merely stated that based on information provided, it appeared that the Taxpayer was no longer required to file a use tax return. The letter also stated that the Taxpayer should contact the department if it believed that it should continue to be registered for remittance of the tax and filing the returns. This computer generated form letter typically is sent when a taxpayer has filed zero returns for a period of time, which was the case with the Taxpayer.
Although I am sympathetic, the burden was on the Taxpayer to verify if the discontinuance of registration and filing requirements was appropriate. Had the Taxpayer contacted the department regarding this, it would have learned that continued registration and the filing of returns was appropriate.
Based on the foregoing, the department finds that the auditors were correct in extending the audit period beyond the standard three year period. Once the auditors have completed their revisions based upon the additional information you have provided, if you continue to have problems with the assessment, please let me know.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8438H
Rulings of the Tax Commissioner