Tax Type
Retail Sales and Use Tax
Description
Lease included in sample; Representative sample
Topic
Taxability of Persons and Transactions
Date Issued
05-24-1996
May 24, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**************
This will reply to your letter of February 27, 1996 in which you seek correction of the sales and use tax audit of ********* (the "Taxpayer") for the period of May 1992 through April 1995.
FACTS
The Taxpayer is in the computer leasing business. During the course of a recent sales and use tax audit, the auditor performed a three-month sample on the sales portion of the audit. The Taxpayer is taking exception to the department including in the audit sample an untaxed lease purchased from a third party and extrapolating this lease over the entire three year audit period. The Taxpayer is requesting that the purchased lease be removed from the audit sample and detailed separately in the audit.
DETERMINATION
Sampling is an audit technique of significant value that is used in the public and private sectors in all types of audits where a detailed audit would not prove beneficial to either the auditor or the client. The courts have consistently held that a tax assessment issued by the proper authorities is prima facie correct and valid and that the burden of proof is upon the taxpayer to prove otherwise. As such, the Taxpayer must demonstrate that the sample used is not representative of the audit period or that it is flawed in some other manner to invalidate the sample.
The Taxpayer maintains that the purchase of the lease from the third party is not representative of the sample population. It is the understanding of this office that it is a common practice for the Taxpayer to purchase existing leases from third parties. While this transaction may be unique to the three-month sample period, the Taxpayer has not demonstrated that the transaction is not representative of the audit period or that it is flawed in some manner to invalidate the sample. For this reason, the department finds no basis for revising the audit sample. If the Taxpayer has any additional information to show that the sample is invalid, l will be glad to review this matter further. Please provide this additional information, if available, within 30 days. Absent this information the audit assessment will be considered correct as issued and Taxpayer will receive an updated bill with interest.
If you should have any questions, please contact ***** Office of Tax Policy, at ******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11141K
Rulings of the Tax Commissioner