Tax Type
Retail Sales and Use Tax
Description
Deficiency assessments, asphalt supplier and paving contractor located in Virginia
Topic
Collection of Delinquent Tax
Records/Returns/Payments
Date Issued
07-15-1999
July 15, 1999
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*******
In your letter of June 2, 1999, you request correction of the retail sales and use tax audit assessment issued to ***** (the "Taxpayer').
FACTS
The Taxpayer is an asphalt supplier and paving contractor located in Virginia. An audit for the period January 1995 through December 1997 resulted in an assessment of use tax on untaxed purchases of tangible personal property used in its operations.
The Taxpayer takes exception to the use tax assessed on purchases of materials from a Maryland vendor. The materials were delivered by the vendor to the Taxpayer in Virginia. The vendor charged a 5% sales tax on sales made to the Taxpayer and remitted it to Maryland. The Taxpayer maintains that it has met its obligations to pay the sales tax.
DETERMINATION
It is my understanding that the Maryland vendor had not designated the sales tax amount as a Maryland, Virginia or other state's sales tax. Rather, the sales tax is only shown as a separately stated amount on the invoice to the Taxpayer. It is also my understanding that this vendor sold and delivered the materials to the Taxpayer in Virginia. Accordingly, these sales are subject to the Virginia sales and use tax, not a Maryland sales or use tax.
The Virginia use tax applies to the use, consumption or storage of tangible personal property in Virginia when the Virginia sales or use tax is not paid at the time the property is purchased. Under subsection 3 of the Code of Virginia Sec. 58.1-604 which imposes the use tax, "[a] transaction taxed under Sec. 58.1-603 (the statute imposing the sales tax) shall not also be taxed under this section, nor shall the same transaction be taxed more than once under either section.' (Insert added). In this case, the transactions at issue have not been taxed under either the sales or use tax statutes cited above. Rather, the facts show that the Maryland vendor collected a 5% sales tax from the Taxpayer and remitted it to Maryland, not Virginia. Accordingly, no Virginia sales and use tax has been charged or remitted to Virginia for the transactions at issue.
In examining this issue, a question arises as to whether the Taxpayer exercised reasonable care and judgment to ensure that it was properly paying a Virginia retail sales or use tax on its purchases from this vendor. Clearly, a 5% charge for sales tax is not the same as a 4.5% sales tax charge. As the vendor's sales tax charges to the Taxpayer were not of the amount imposed by Virginia, no presumption may be relied upon that the vendor was charging and collecting a Virginia sales or use tax.
Furthermore, had the Taxpayer examined the amount of sales tax charged by the vendor, it would have realized that it was being overcharged or that the wrong state's sales tax was being collected by the vendor. Reasonable effort by the Taxpayer would have revealed this error and prompted a vendor remedy for correcting the error. Instead, the error was found during an audit by the department.
The Taxpayer cites Title 23 of the Virginia Administrative Code (VAC) 10-210-340(A) to support its position that its obligation for paying the sales tax ceased when it paid the tax to the Maryland vendor. Although dealers with sufficient nexus are legally obligated to register with Virginia for collection of the sales or use tax, the courts have ruled that the ultimate liability for the tax rests with the purchaser. United States v. Forst, 442 F.Supp. 920 (W.D. Va. 1977), aff'd, 569 F.2d 811 (4th Cir. 1978). Thus, the Taxpayer's obligation for payment of the tax does not cease when it pays the wrong state's sales tax to a vendor.
Based on the foregoing and the circumstances of this case, it appears that the Taxpayer did not make a reasonable effort to ensure that the Virginia sales or use tax was paid on the transactions at issue. As such, I find no basis for removing these sales from the department's audit.
To avoid further interest charges, the assessment should be paid in full within 45 days of the date of this letter. If not already done so, the Taxpayer should request the Maryland vendor to refund the Maryland sales tax erroneously collected on the transactions at issue.
If you have any questions about this response, please contact ***** of my tax policy staff at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23306R
Rulings of the Tax Commissioner