Tax Type
Retail Sales and Use Tax
Description
Application of sales and use tax; Use tax liability of purchaser
Topic
Taxability of Persons and Transactions
Date Issued
03-03-1995
March 3, 1995
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear******************
This will reply to your letter of August 11, 1994, in which you apply for correction of a sales and use tax assessment issued to**************(the "Taxpayer"), for the period July 1991 through June 1994.
FACTS
The Taxpayer is a government contractor and was assessed the tax on purchases and leases of tangible personal property. The Taxpayer argues that its Virginia vendors should be held liable for failure to charge and remit the sales tax on the transactions included in the audit. The Taxpayer maintains that the department has no evidence that the vendors did not remit sales tax to the department on the contested transactions.
DETERMINATION
Virginia Regulation (VR) 630-10-109(A) states that "The use tax applies to the use .... of tangible personal property in Virginia when the Virginia sales or use tax is not paid at the time the property is purchased." This issue is also addressed in P.D 90-172 (9/21 /90, copy enclosed) .
Further, 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), mandated that the legal incidence of the sales and use tax is on the purchaser, and although the seller is legally obligated to collect the tax, the tax is a legal debt of the purchaser. Therefore, in cases where the seller has failed to charge Virginia sales tax, the department can look to the purchaser for payment of the complimentary use tax.
It has been well established by Virginia courts that a tax assessment made by the department is correct and the burden of proving that the assessment is incorrect rests with the taxpayer. Accordingly, and based on the information currently before me, there is no evidence that the tax was charged on the contested transactions by either vendor.
The Taxpayer has also requested that assessed penalty be waived. Based on the circumstances of this case, and under the authority granted the Tax Commissioner by Code of Virginia §58.1-105,1 find basis to waive penalty of**********. Please note, however, that the Taxpayer's compliance ratio should be at least 85% in future audits to avoid penalty charges.
A revised notice of assessment with interest accrued to date will be mailed to the Taxpayer under separate cover. You may contact
if you have any questions concerning this letter.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/8805S
Rulings of the Tax Commissioner