Tax Type
Retail Sales and Use Tax
Description
Services-professional or personal; Medical professionals; Tangible personal property
Topic
Taxability of Persons and Transactions
Date Issued
06-12-1997
June 12, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*****************
This is in reply to your letter of February 14, 1997, in which you seek correction of a sales and use tax assessment issued to *********** (the Taxpayer) for the period January 1991 through December 1996.
FACTS
The Taxpayer is a podiatrist. As a result of the department's audit an assessment was made for untaxed purchases of tangible personal property used in the Taxpayer's practice. The auditor extended the audit period beyond the three year limitations period due to the Taxpayer's failure to accrue and remit use tax on untaxed purchases. The Taxpayer protests the assessment and maintains that December 1996 was the first time that it was made aware of consumer use tax responsibilities. The Taxpayer feels that the entire assessment should be abated and the Taxpayer be allowed to comply with the consumer use tax laws on a prospective basis.
DETERMINATION
The department employs various methods to disseminate information concerning the sales and use tax and other taxes it administers. Under Code of Virginia § 58.1 -204, the department is required to publish regulations and written rulings or other interpretations of Virginia law which are of interest to taxpayers and practitioners. The department published regulations in 1966, 1969, 1979, and 1985 which were widely distributed and made freely available to the general public. The regulations provide guidance in the registration of dealers and the application of the tax to sales and purchases of tangible personal property. In addition, the department issues tax bulletins to clarify areas of concern and interest. The department also has several district offices located throughout the Commonwealth to assist taxpayers and provide necessary information.
Title 23 of the Virginia Administrative Code (VAC) 10-210-2060, adopted January 1, 1966, provides that "[p]hysicans, surgeons and other "practitioners of the healing arts" are the consumers of all tangible personal property used in performing their professional services. They must pay the tax to their suppliers at the time of purchase...." If the supplier fails to collect the tax, the practitioner must pay the tax on a Consumer's Use Tax Return, Form ST-7. The only exception is the purchase of controlled drugs, hemodialysis, and peritoneal equipment and supplies by licensed physicians for use in their professional practice. In addition, purchases by a licensed physician of durable medical equipment and similar items are exempt from the tax if purchased on behalf of a specific patient.
Title 23 VAC 10-210-6030, published at the same time, sets out the procedures for payment of the use tax. As the consumer of tangible personal property, the Taxpayer must either pay the sales tax to its supplier at the time of the purchase or remit use tax directly to the department.
The Taxpayer's failure to file use tax returns in compliance with the cited regulations provided sufficient evidence to extend the audit period beyond the established three year limitations period and apply the tax. This determination is consistent with prior department rulings that upheld the assessment of tax beyond the limitations period for failure to properly file returns. Further, the fact that the Taxpayer and its accountant were not aware of the tax or did not obtain information necessary to fully comply with the Commonwealth's tax laws is not a sufficient ground for the abatement of a valid tax assessment. I have enclosed a sampling of rulings for your information.
You have indicated that the liability resulting from the audit could put an undue hardship on the Taxpayer's business. Based on the circumstances surrounding this case, there is basis for establishing a payment plan to pay the outstanding assessment. I will refer this case to the department's Collections Unit, which will contact the Taxpayer to establish terms of the payment plan.
If you have any questions regarding this determination, please contact *********** of my Office of Tax Policy at ******* .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12516T
Rulings of the Tax Commissioner