Document Number
99-99
Tax Type
Corporation Income Tax
Description
Contest the Assessment of Tax and Interest
Topic
Collection of Tax
Date Issued
05-06-1999

May 6, 1999


Re: § 58.1-1821 Application: Corporate Income Tax


Dear**********

This will reply to your letters in which you contest the assessment of additional corporate income tax and interest against ***** (the "Taxpayer') for the taxable years ended June 30, 1993 and 1995. I apologize for the delay in responding.

FACTS

The Taxpayer was audited for the taxable years ended June 30, 1993 through 1995. The Taxpayer was assessed additional tax and interest for the taxable year ended June 30, 1995. The Taxpayer contends that interest should not be assessed for the taxable year ended June 30, 1995, because the estimated tax paid to Virginia for that year exceeded the additional tax due on the audit assessment.

In addition, the auditor added government sales to the numerator of the sales factor for the taxable year ended June 30, 1992. The Taxpayer contends that under the Uniform Division of Income for Tax Purposes Act ("UDITPA'), sales to the United States government are assigned to the state of origin, instead of the state of destination.

DETERMINATION

Interest

Title 23 of the Virginia Administrative Code (VAC) 10-120420, copy enclosed, states that [e]very corporation which expects its income tax to exceed $1,000 for the taxable year is required to file a declaration of estimated tax and to pay the tax in installments during the taxable year.' Title 23 VAC 10-120-440, copy enclosed, further provides:
    • All payments of estimated tax shall be applied toward the income tax liability of the taxpayer for the taxable year ... [p]ayments of estimated tax may not be applied toward any other tax or taxable year unless and until an income tax return is filed showing a refund.

It is the department's position that estimated taxes may only be applied towards the income taxes due for that taxable year. Once a return has been filed for that taxable year, any excess estimated payments may be returned to the taxpayer as a refund or applied to estimated payments toward the next tax year. Overpayments credited to the next tax year may not be applied retroactively to a prior years underpayment.

In support of your position, you attached Revenue Ruling 88-98 which held that interest could be only be charged when the tax was both due and unpaid. Although Virginia is a conformity state, it does not conform with every area of the Internal Revenue Code (IRC). Virginia's conformity to federal law is set forth in Code of Virginia § 58.1-301, copy enclosed, which provides that the terms used in the Virginia income tax statutes will have the same meaning as used in the IRC. Virginia does not follow Internal Revenue Code (IRS) revenue rulings which contradict Virginia's statutory and regulatory laws. Code of Virginia § 58.1-1812 mandates the application of interest when additional tax is assessed. Since additional tax was properly assessed, the corresponding assessment of interest is proper. In fact, Revenue Ruling 88-98 points out that it is only applicable in the absence of statutory or regulatory indication to the contrary'.

Sales Factor

The UDITPA guidelines have not been adopted in Virginia by statute or regulation. While Virginia's standard method of allocation and apportionment is similar to UDITPA in some respects, there are also significant differences. Furthermore, Code of Virginia § 58.1-415 and 23 VAC 10-120-220, copies enclosed, state that the "[s]ales of tangible personal property are in Virginia if such property is received in Virginia'. The Taxpayer sells tangible personal property to the United States Government which is received in Virginia. Since Virginia does not follow UDITPA, all such sales are deemed to have occurred in Virginia.

Accordingly, the auditors' adjustments for the taxable years ended June 30, 1993 and June 30, 1995 are correct. The enclosed schedule shows the updated tax liability and interest. Please send your payments to ***** Office of Tax Policy, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia 23218-1880 within 30 days to avoid additional interest charges. If you have any questions, you may contact ***** at *****.

Sincerely,



Danny M. Payne
Tax Commissioner
OTP/12393B



Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46