Tax Type
Retail Sales and Use Tax
Description
Remittance of tax; Failure to separately state tax, over-collected tax
Topic
Returns/Payments/Records
Date Issued
07-30-1997
July 30, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***************************
This will reply to your letter in which you seek the correction of an assessment issued ***********(the "Taxpayer"), for the period January 1993 through November 1995. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer makes retail sales of meats through sales representatives who sell door to door. An audit of the Taxpayer resulted in an assessment for sales taxes that were collected and not remitted to the department. The assessment also includes sales tax on sales made by the Taxpayer which were not reported to the department. This portion of the assessment was generated by the Taxpayer's failure to separately state sales taxes on its sales invoices.
The Taxpayer maintains that while it did not separately state sales taxes on the sales invoices, the Taxpayer's intent was to remit all sales taxes to the department. The Taxpayer computed its monthly sales tax liability based on a percentage of gross receipts which takes into account the inclusion of the sales tax. The Taxpayer also maintains that invoices clearly stated that applicable sales taxes were included and that the Taxpayer's agents clearly intended to remit sales taxes on taxable sales.
DETERMINATION
Untaxed Sales
The Taxpayer states that while Code of Virginia § 58.1-625 requires dealers to separately state sales taxes, it ignores the Taxpayer's intent to remit sales taxes to the department. The Taxpayer feels it has demonstrated intent to report the tax by using a computation method which computes the tax on total receipts based on the assumption that sales taxes are included in total receipts. The Taxpayer maintains that the assessment of additional sales tax results in double taxation.
Title 23 of the Virginia Administrative Code (VAC) 10-210-340(A) (copy enclosed) states that "[t]he tax must be paid to the state by the dealer, but the dealer must separately state the amount of the tax and add the tax to the sales price or charge... Identification of the tax by a separate writing or symbol is not required provided the amount of the tax is shown as a separate item on the record of the transaction." (Emphasis added).
The statute and the regulation clearly set forth the requirement that the tax must be separately stated and added to the price of goods sold at retail. The auditor noted many instances in which the Taxpayer did not list a separate tax amount on its invoices. Some examples include listing the sale amount on the line for the invoice total while leaving the other lines blank, listing the sale amount and leaving the tax and total lines blank, leaving the line for tax blank on the invoice and listing a sale amount and total amount, entering $0.00 on the line for the tax amount, and writing "included" on the line for the tax while listing the sale amount and total amount.
The Taxpayer failed to meet the requirements of Code of Virginia § 58.1-625 and Title 23 VAC 10-210-340(A) when it included the tax in the invoice totals. Virginia law allows the inclusion of the sales tax in the selling price only in very limited situations. Code of Virginia § 58.1-614(D) (copy enclosed) provides that when a dealer is able to demonstrate to the satisfaction of the Tax Commissioner that it is impractical to collect the tax in accordance with the bracket system provided for in Code of Virginia § 58.1-628, the taxpayer may be authorized to remit an amount based on a percentage of gross receipts which takes into account the inclusion of the sales tax. In this case, the Taxpayer did not have permission to account for the tax in the manner described above.
The Taxpayer maintains that the assessment issued by the department for untaxed sales results in double taxation. The assessment was based on those amounts which were not reported as taxable sales by the Taxpayer. Amounts previously reported on the Taxpayer's sales tax returns were not assessed in the audit. Accordingly, there is no basis for revising the assessment.
Unremitted Taxes
The auditor also noted some sales invoices in which the Taxpayer overcharged sales tax to its customers. In such cases, the Taxpayer's staff adjusted the taxable sale amounts so that the sales price plus the sales tax listed on the invoice would equal the invoice total. In effect, the Taxpayer was underreporting the amount of sales taxes collected from its customers to the department. Title 23 VAC 10-210-340(D) discusses the overcollection of sales tax by dealers and provides that when the tax is overcollected, dealers are required to remit any overcollected amount to the state on a timely basis.
An updated bill with interest accrued through the date of the Taxpayer's letter will be mailed to the Taxpayer and should be paid within 30 days to avoid the accrual of additional interest. If you have any questions concerning this determination, please contact *********in the Office of Tax Policy at********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11589S
Rulings of the Tax Commissioner