Tax Type
Retail Sales and Use Tax
Description
Failure to provide records; Audit assessment
Topic
Collection of Delinquent Tax
Date Issued
09-26-1995
September 26, 1995
Re: § 58.1-1821 Application: Sales & Use Tax
Dear ****
This will follow up with the department's determination letter of December 28, 1992 to your company, * * * * *. (the "Taxpayer"), regarding an audit assessment for the period January 1988 through May 1991, and recent information provided by our auditors on the most recent audit assessment of the Taxpayer for the period November 1991 through July 1994. It is my understanding that you were informed that this matter would be referred to my Office of Tax Policy for review and resolution.
FACTS
The Taxpayer has been audited twice by the department and found liable for the tax on purchases primarily made in connection with one contract with the federal government. By letter dated December 28, 1992 (P.D. 92-256), the department agreed to revise the assessment based upon information provided, and possibly revise it further upon the review of the classified contract by department personnel with the appropriate security clearance. However, it is my understanding that our personnel have been denied access to the contract. Furthermore, this same contract is the source of the majority of the items held taxable in the second audit of the Taxpayer.
DETERMINATION
The department's policy on the taxability of items provided in connection with various types of federal government contracts is summarized in P.D. 88-159 (6/23/88) and Virginia Regulation (VR) 630-10-45, copies enclosed. The department's policy has also been upheld in the federal courts in United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), aff'd. 569 F.2d 811 (4th Cir. 1978).
You should further note that the courts have held that a tax assessment issued by the proper assessing authorities is prima facie correct and that the burden of evidence is upon the taxpayer to prove otherwise.
In the instant case, the contract in question is confidential. While department personnel with the appropriate level of security clearance have attempted to review the contract, they were denied access to such by governmental authorities. In addition, the Taxpayer has provided no further information substantiating its claim that the items purchased were for resale to the federal government.
Unless granted access to the contract or additional information is provided regarding the nature of such, the department has no choice but to uphold the assessments. I will agree, however, to give the Taxpayer an additional 60 days to work out an arrangement with governmental authorities to allow department personnel with security clearance to review the contract, or to provide the additional information. If access is not granted or information illustrating the resale nature of the contract is not provided within that time frame, I have no alternative other than to uphold the assessments and mail revised assessments with accrued interest to the Taxpayer.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner