Document Number
Tax Type
Retail Sales and Use Tax
Deficiency assessments; Relief for taxes paid
Collection of Delinquent Tax
Date Issued
February 20,1997

Re: § 58.1-1821 Application: Retail Sales and Use Tax


This is in response to your letter seeking correction of the sales and use tax audit assessment issued to you, trading as********** (the Taxpayer). I apologize for the delay in responding to your letter.


The Taxpayer owns and operates an automobile and truck repair business. A six year audit for the period January 1990 through December 1995, resulted in the assessment of tax on untaxed purchases, untaxed sales and taxes collected but not remitted on sales.

According to the facts presented, the Taxpayer has been paying tax on its purchases of parts and collecting the sales tax when such parts are resold, but the Taxpayer was not reporting and remitting the sales tax to the department. In April 1995, the Taxpayer registered with the department to collect and remit the sales tax.

Soon after the conclusion of the audit, the Taxpayer sought refunds from its vendors for the tax paid on parts purchased for resale purposes during the past three years. Since Code of Virginia § 58.1-1823 imposes a three year statute of limitations on refunds, the Taxpayer is prevented from seeking refunds of the sales tax paid to vendors on parts resold during the years 1990, 1991, and 1992. Accordingly, the Taxpayer seeks relief on the tax assessed for the period January 1990 through December 1992, and requests that it only be held liable for the sales tax owed on its markup (i.e., the difference between the purchase price and the sales price of the parts resold).


Code of Virginia § 58.1-634 authorizes the department to examine a taxpayer's sales records beyond the three year period of limitations, but not to exceed a six year period, if the department has reasonable cause to believe that the taxpayer was required by law to file a return and failed to do so.

In this case, it is my understanding that the Taxpayer has been operating its business for over ten years and registered for the first time in April 1995, to file sales tax returns and remit the sales tax to the department. There is no question that the Taxpayer sells tangible personal property at retail in Virginia and is therefore deemed a dealer as defined in Code of Virginia § 58.1-612 and is required to be registered with the Department of Taxation for the collection and remittance of the sales tax. Because no sales tax returns were filed as required, a six year examination of the Taxpayer's records is proper in this case.

In addition, Code of Virginia § 58.1-633 provides that every dealer required to make a return and collect and remit sales tax is required to keep and preserve suitable records and books of accounts of its sales, leases and purchases to determine the amount of its tax liability. Furthermore, when any dealer fails to file a return, Code of Virginia § 58.1-618 authorizes the department to make an estimate of the Taxpayer's sales tax liability based on the best available information.

For the period in which the Taxpayer seeks relief, it is my understanding that the Taxpayer does not have any records to allow the department to substantiate the Taxpayer's claim that it paid sales tax to its suppliers on parts resold. Lacking such evidence, the department is also unable to determine the amount of sales tax that the Taxpayer may have paid to vendors or collected from its customers on parts resold. As there are no purchase or sales records to enable the department to substantiate the Taxpayer's claims, and since the Taxpayer's purchases and sales of parts are separate and distinct transactions, the department may estimate the Taxpayer's sales tax liability without deduction for sales taxes which the Taxpayer claims to have paid to its vendors.

Based on all of the foregoing, and although I am sympathetic to the Taxpayer's circumstances, I find no basis to revise of the department's assessment in this case.

For the future, the Taxpayer may purchase parts to be resold exempt of the tax by submitting a completed resale exemption certificate, Form ST-10, to its vendors. The Taxpayer is required to collect, report and remit the sales tax to the department on all taxable sales and is required to pay the use tax on any untaxed purchases of tangible personal property which it uses or consumes in its business.

If you have any questions about the application of the tax, please do not hesitate to contact the department's ******District Office at *************** or the department's customer services office at ************* .


Danny M. Payne
Tax Commissioner


Last Updated 08/25/2014 16:46