Could a Virginia retailer remove audited assets when Virginia or another state's tax was already paid?

Plain-English summary

Virginia agreed to remove ten asset-purchase amounts from the use-tax audit because invoices showed that Virginia use tax or another state's similar sales tax had already been paid. Virginia grants a credit for qualifying tax paid to another state, limited to the Virginia tax otherwise due.

The retailer operated a clothing and housewares store and had been assessed use tax on asset purchases. Its invoice documentation substantiated payment on the listed items, so Virginia returned the audit for adjustment.

Because the taxpayer had already paid part of the assessment and only a small balance remained, Virginia said any overpayment produced by the revisions would be refunded with interest.

What this means for you

• Keep purchase invoices showing the jurisdiction, tax type, and tax amount paid on business assets.
• Reconcile each claimed credit to the audit's asset-exception line.
• Virginia credit is limited to a similar tax actually paid and cannot exceed Virginia's tax on the item.
• Paid assessments can still produce a refund with interest after supported audit adjustments.

Common questions

Q: Does Virginia allow credit for another state's sales tax?
A: Yes, for a similar tax paid on property used in Virginia, up to the Virginia tax imposed.

Q: How many audit lines were removed here?
A: Ten listed amounts were removed from the Asset Exceptions list.

Q: Could the taxpayer receive a refund?
A: Yes. Virginia said any overpayment after the revisions would be refunded with interest.

Citations and references

• Va. Code §§ 58.1-603 and 58.1-611.

Subject

VA use tax has been paid or another state's tax has been paid on several of the items

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-42

Original ruling text

March 21, 2013

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

Dear *:

This is in response to your letter in which you seek correction of the retail sales and use tax assessment issued to * (the "Taxpayer") for the period of July 2008 through June 2011. I apologize for the delay in responding to your request.

FACTS

The Taxpayer operates a retail store that sells clothing and housewares. As a result of the Department's audit, the Taxpayer was assessed use tax on its asset purchases. The Taxpayer protests the application of tax to such purchases and provides documentation to support its position that the assessment of use tax on several assets is erroneous. The Taxpayer provides invoices that indicate another state's sales tax was charged at the time of purchase. In addition, the Taxpayer states it accrued use tax on some of the assessed purchases.

DETERMINATION

Virginia Code § 58.1-603 imposes the sales tax on the gross sales price of tangible personal property when sold at retail in Virginia.

Virginia Code § 58.1-611 provides:

A credit shall be granted against the taxes imposed by this chapter with respect to a person's use in this Commonwealth of tangible personal property purchased by him in another state. The amount of the credit shall be equal to the tax paid by him to another state or political subdivision thereof by reason of the imposition of a similar tax on his purchase or use of the property. The amount the credit shall not exceed the tax imposed by this chapter.

Based on a review of the invoices presented, a Virginia use tax has been paid or another state's sales tax has been paid on several of the items at issue. As such, I will agree to remove the following invoice amounts from the Asset Exceptions list.

Line 2 — 4,686.25

Line 10 — 1.922.89

Line 13 — 607.69

Line 14 — 2,996.09

Line 15 — 229.52

Line 21 — 901.85

Line 22 — 2.643.20

Line 23 — 1,702.40

Line 24 — 1,395.80

Line 25 — 1,372.29

Based on the determination, the audit will be returned to the appropriate audit staff. The necessary adjustments will be made to the audit within 30 days of the date of this letter. I am aware that a portion of the assessment has been paid and only a small balance remains. Therefore, if any refund is due after the appropriate revisions are complete, it will be issued to the Taxpayer with refund interest included.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website. If you have any questions about this response, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5114648669.M