Tax Type
Retail Sales and Use Tax
Description
Sample used in audit, Out-of-state HVAC contractor
Topic
Collection of Delinquent Tax
Date Issued
12-04-1996
December 4, 1996
Re: §58.1-1821 Application: Retail Sales & Use Tax
O
Dear********************
This will reply to your letter of July 3,1996 in which you request a correction of the department's assessment issued to** (the "Taxpayer"), for the period May 1993 through April 1996.
FACTS
The Taxpayer is an out-of-state HVAC contractor performing contract work in Virginia. The department's audit disclosed that the Taxpayer purchased material for use in its Virginia contracts on which Virginia tax was not paid. The Taxpayer is in disagreement with the sample methodology used to derive the deficiency for tax and interest. The Taxpayer also questions the calculations used to determine the amount of interest due on the disclosed deficiency.
DETERMINATION
Sampling is a widely used audit technique which is employed when a detailed audit would not prove beneficial either to the auditor or the client. The use of a statistical analysis has been proven to produce final results within a narrow percentage range of the actual amount that would have been determined by a detailed audit.
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 entire audit period or that it is flawed in some other manner which would invalidate the sample. Statements by the auditor indicate that all vendor files were reviewed and that the sampling of the files were representative of a typical operational year of the Taxpayer. I note that the Taxpayer was in agreement to the use of the sample. I have enclosed a copy of a previous ruling, P.D. 96-23 (03129196), which helps to further explain the department's position.
With regard to the department's calculation of interest, please refer to the tax and interest computations included in the audit report provided by the auditor. I have enclosed a copy of the computations in the event that you were not provided with them. Please note that each period reflects a use (purchase) measure to which the applicable rate of tax is applied for the Commonwealth (3.5%) and the locality (1 %). As an example, for the period March 1993 (9303), the appropriate taxes are calculated. Since the tax, as calculated, was due to have been filed by the twentieth day of the following month (04120193), interest is due upon that tax from April 20, 1993 through the date of assessment (06120/96).
Code of Virginia § 58.1-1812 mandates the application of interest to any assessment of tax. Interest on the outstanding tax is charged at the rate established under Code of Virginia 58.1 -15 for the period between the due date and the date of full payment.
Based on the foregoing, and absent any documentation demonstrating the current assessment is incorrect, there is no basis to adjust the audit. Please return your payment for tax and interest totaling ********* to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within 30 days. If payment is not received within 30 days interest will accrue on the balance due. If you have any questions regarding this matter, please contact***********of the department's Office of Tax Policy at*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11417Q
Rulings of the Tax Commissioner