Tax Type
Retail Sales and Use Tax
Description
Audit procedures; Sample purchases
Topic
Collection of Delinquent Tax
Date Issued
12-09-1996
December 9, 1996
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear**************
This will reply to your letter in which you seek correction of a sales and use tax assessment issued to ******** (the Taxpayer) for the period January 1991 through July 1995. 1 apologize for the delay in responding to your correspondence.
FACTS
The Taxpayer Is an operator of a paper mill. As a result of the department's audit, an assessment was made for untaxed purchases. Of the untaxed purchases picked up in the audit sample, the Taxpayer is taking exception to the inclusion of three transactions. The Taxpayer claims the transactions skew the audit sample and overstate the liability for recurring purchases.
DETERMINATION
Sampling is an audit technique of significant value that is widely used in the public and private sectors. The department uses sampling in all types of sales and use tax audits where a detailed audit would not prove beneficial to either the auditor or the taxpayer. When sampling techniques are properly applied, the final result should be within a narrow percentage range of the actual amount that would be determined by a detailed audit.
In a conversation with one of my staff members, the Taxpayer stated that the transactions in question represent the purchase of award plaques given to employees. The Taxpayer maintains that the transactions are isolated and unusual as the award plaques represent a one time occurrence.
Based on the information provided, and the fact that the transactions in question comprise a disproportionate amount of the total audit sample liability, the transactions at issue which were included in the sample will be removed from the sample base and treated separately in the audit. Accordingly, a revised notice of assessment with interest accrued through the date of the letter of protest will be issued shortly. If you have questions regarding this letter, please contact***************in my Office of Tax Policy at***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/1 0868T
Rulings of the Tax Commissioner