Tax Type
Retail Sales and Use Tax
Description
Audit Procedures
Topic
Collection of Delinquent Tax
Date Issued
10-21-1998
October 21, 1998
Re: Sec. 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This will reply to your letter in which you seek correction of the retail sales and use tax audit of ***** (the ``Taxpayer') for the audit period of October 1991 through September 1997.
FACTS
The Taxpayer is in the landscaping and lawn maintenance business. The department's audit of the Taxpayer's business revealed that sufficient records were not maintained to determine the source of Taxpayer's receipts. Due to the nature of the Taxpayer's operation, the auditor assessed sales tax based on the gross receipts reported on Schedule C of the owner's income tax returns. You claim that the Taxpayer is solely in the business of providing lawn maintenance service and does not make taxable sales. You request that the entire audit liability be waived.
DETERMINATION
In regard to the landscaping portion of your business, the department's policy with respect to landscape contractors is well established. Title 23 of the Virginia Administrative Code (VAC) 10-210-610, copy enclosed, specifically states that the tax applies to the retail sale of ``flowers, potted plants, shrubbery, nursery stock, sod, wreaths, bouquets, and similar items.' It is only when a landscape contractor goes beyond the sale of shrubbery, trees, sod, etc., and contracts to grade, seed and fertilize, that the contractor becomes the user and consumer of all tangible personal property use-In providing such services. The regulation is clear that a landscape contractor is considered a retailer with respect to shrubbery, sod and similar items, whether the contractor cultivates and transplants such items or purchases them for resale.
In order to determine if the Taxpayer was operating as a landscape contractor and making retail sales, or merely providing nontaxable services, it is necessary for the Taxpayer to provide sufficient records to make such a determination. Code of Virginia Sec. 58.1-633 provides that:
When records are not available for inspection and examination by the department in the course of an audit, the auditor must resort to other measures to determine the tax liability. This being the case in the present audit, the auditor had no alternative but to find the gross receipts of the Taxpayer, as reported on the Taxpayer's Schedule C's, to be fully taxable. For this reason, I find no basis for revising the audit liability at this time. However, should you provide additional information to substantiate the claim that the Taxpayer made no retail sales during the audit period in question, the department will revisit the issue and review any documentation you provide.
Please send the requested documentation to the department's ***** District Office within 60 days from the date of this letter. If additional documentation is not provided within the allotted time, the department will consider the assessment correct as issued. If you should have any questions regarding this letter, please contact ***** Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/16442K
Re: Sec. 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This will reply to your letter in which you seek correction of the retail sales and use tax audit of ***** (the ``Taxpayer') for the audit period of October 1991 through September 1997.
FACTS
The Taxpayer is in the landscaping and lawn maintenance business. The department's audit of the Taxpayer's business revealed that sufficient records were not maintained to determine the source of Taxpayer's receipts. Due to the nature of the Taxpayer's operation, the auditor assessed sales tax based on the gross receipts reported on Schedule C of the owner's income tax returns. You claim that the Taxpayer is solely in the business of providing lawn maintenance service and does not make taxable sales. You request that the entire audit liability be waived.
DETERMINATION
In regard to the landscaping portion of your business, the department's policy with respect to landscape contractors is well established. Title 23 of the Virginia Administrative Code (VAC) 10-210-610, copy enclosed, specifically states that the tax applies to the retail sale of ``flowers, potted plants, shrubbery, nursery stock, sod, wreaths, bouquets, and similar items.' It is only when a landscape contractor goes beyond the sale of shrubbery, trees, sod, etc., and contracts to grade, seed and fertilize, that the contractor becomes the user and consumer of all tangible personal property use-In providing such services. The regulation is clear that a landscape contractor is considered a retailer with respect to shrubbery, sod and similar items, whether the contractor cultivates and transplants such items or purchases them for resale.
In order to determine if the Taxpayer was operating as a landscape contractor and making retail sales, or merely providing nontaxable services, it is necessary for the Taxpayer to provide sufficient records to make such a determination. Code of Virginia Sec. 58.1-633 provides that:
-
- Every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases ... taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner.
When records are not available for inspection and examination by the department in the course of an audit, the auditor must resort to other measures to determine the tax liability. This being the case in the present audit, the auditor had no alternative but to find the gross receipts of the Taxpayer, as reported on the Taxpayer's Schedule C's, to be fully taxable. For this reason, I find no basis for revising the audit liability at this time. However, should you provide additional information to substantiate the claim that the Taxpayer made no retail sales during the audit period in question, the department will revisit the issue and review any documentation you provide.
Please send the requested documentation to the department's ***** District Office within 60 days from the date of this letter. If additional documentation is not provided within the allotted time, the department will consider the assessment correct as issued. If you should have any questions regarding this letter, please contact ***** Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/16442K
Rulings of the Tax Commissioner