Tax Type
Retail Sales and Use Tax
Description
Penalties and Interest; First time audit
Topic
Taxability of Persons and Transactions
Date Issued
09-10-1997
September 10, 1997
Re: Ruling Request: Sales and Use Tax
Dear**************
This will reply to your letter of July 16, 1997, in which you seek information on the application of the Virginia sales and use tax laws as it applies to radio broadcasting stations. In addition, you request waiver of penalty and interest assessed on the aircraft sales and use tax audit of**** (the Taxpayer).
FACTS
Based on your conversation with a member of my staff, the Taxpayer operates a nonprofit noncommercial radio station in Virginia under the regulation and supervision of the Federal Communications Commission. As indicated in your letter, other states in which you have radio stations do not charge the sales tax to such nonprofit noncommercial organizations. You seek information regarding Virginia's policy regarding this issue.
With respect to the penalty and interest issue, a review of the audit reveals that the Taxpayer was assessed the 2% aircraft sales and use tax on the purchase of a Piper Tri-pacer aircraft. The auditor assessed penalty because the Taxpayer did not file a return and pay the full amount of the tax by the required due date. The Taxpayer maintains that it was unaware of the tax and therefore requests waiver of the assessed penalty and interest.
RULING
Radio Broadcasting: Code of Virginia § 58.1-609.6(2) provides an exemption for "[b]roadcasting equipment and parts and accessories thereto and towers used or to be used by commercial radio and television companies,... or concerns which are under the regulation and supervision of the Federal Communications Commission and amplification, transmission and distribution equipment used or to be used by cable television systems."
Based on the information provided, the Taxpayer's radio station qualifies for the broadcasting exemption under the above cited statute. I am enclosing Public Document 93-96 (4/12/93) which addresses radio broadcasting. For your information, I am including a copy of the Exemption Analysis for the broadcasting exemption which appears in the department's December 1991 Virginia Sales and Use Tax Expenditure Study. This explains the exemption in detail. I have also enclosed several copies of the exemption certificate Form ST-20A.
Penalty and Interest: Title 23 of the Virginia Administrative Code (VAC) 10--220-90 (copy enclosed) explains the application of interest to audit deficiencies. The regulation clearly states that interest on an assessment accrues from the date of the assessment until payment is made. The application of interest to all audit deficiencies is mandatory.
While I am sympathetic to the Taxpayer's situation, it must be pointed out that interest is not assessed as a penalty for noncompliance with the tax laws. Rather, it simply represents a fee for the use of money over a period of time. The interest in this case was correctly calculated under the law.
With respect to penalty, Code of Virginia § 58.1-105 authorizes the Tax Commissioner to accept an offer in compromise in cases which a penalty is imposed upon the taxpayer for failure to comply with the requirements of the tax laws. Generally, absent indications of fraud, penalty will be waived on first time audits. Based upon the circumstances outlined in your letter and the fact that this is the Taxpayer's first audit pertaining to this issue, I find basis for waiver of the penalty portion of the assessment. Upon receipt of your payment in the amount of ***the department will abate the penalty. If you have any questions concerning this letter, you may contact ****at*******
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12760T
Rulings of the Tax Commissioner