Could an advertising business reduce a consumer-use-tax assessment without records supporting its tax-paid, resale, and sampling objections?

Subject

Taxpayer has not furnished any documentation in support of its contentions

Plain-English summary

Virginia upheld the consumer-use-tax assessment because the taxpayer produced no supporting records. The advertising business argued that some purchases were tax-paid or already reported, were acquired only for resale, or appeared in an unrepresentative audit sample. It received a 60-day extension but did not document those claims.

Virginia tax assessments are presumed correct, and the taxpayer bears the burden of proving an assessment erroneous. Without evidence, the Commissioner found no basis for an adjustment.

The ruling allowed the taxpayer to seek reconsideration within 45 days if it found the missing documentation. It also directed payment after an updated bill and warned that failure to pay within the stated period could trigger the ruling's specified Amnesty penalty.

What this means for you

• Keep invoices, exemption or resale documentation, returns, and proof of tax payment tied to disputed audit items.
• An unsupported explanation generally does not overcome the presumption that an assessment is correct.
• If records surface after a determination, check the exact reconsideration procedure and deadline that applies.

Citations and references

• Va. Code §§ 58.1-205 and 58.1-1825(D).
• 23 VAC 10-20-165(F).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-23

Original ruling text

February 26, 2014

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

Dear *:

This is in response to your letter in which you request correction of the retail sales and use tax assessment issued to * (the "Taxpayer") as a result of an audit for the period January 2007 through June 2012. I apologize for the delay in responding to your request.

FACTS

The Taxpayer is an advertising business. An audit resulted in the assessment of consumer use tax on untaxed purchases of assets and other tangible personal property. The Taxpayer takes exception to the assessment and contends that certain purchases should not be included in the assessment because they were either purchased tax paid or reported as taxable on returns, were bought for resale purposes only, or were included in a test period that was not representative of transactions throughout the audit period.

The Taxpayer requested and was granted a sixty-day extension to submit documentation in support of its contentions.

DETERMINATION

Virginia Code § 58.1-205 sets out that any assessment of a tax by the Department is deemed prima facie correct. This means that the burden of proving that the assessment is erroneous is upon the Taxpayer. For appeals to the court, subsection D of Va. Code § 58.1-1825 similarly sets out that it is the taxpayer's burden "to show that the assessment or collection or action on a transferred credit or other tax attribute complained of is erroneous or otherwise improper."

As of the date of this letter, the Taxpayer has not furnished any documentation in support of its contentions, although ample time was allowed. In the absence of convincing evidence to support the Taxpayer's contentions, I find no basis for an adjustment to the assessment.

CONCLUSION

Under these circumstances, it is my determination that the assessment is correct. An updated bill, with interest accrued to date, will be sent to the Taxpayer. The outstanding balance should be paid within 30 days of the bill date to avoid additional interest charges. The Taxpayer should remit its payment to: Virginia Department of Taxation, 600 East Main Street, 23 rd Floor, Richmond, Virginia 23219, Attn: *. If you have any questions concerning payment of the assessment, you may contact at **.

Please note that failure to remit full payment within the 30-day period may result in the imposition of an additional 20% penalty on the tax due under the terms of Virginia's Amnesty Program. See the enclosure entitled "Important Payment Information."

If the documentation at issue is found, the Taxpayer may submit a request for reconsideration of this determination, along with the supporting documentation, provided such reconsideration request is submitted to the Department within 45 days of the date of this determination. For information on reconsideration requests, see Title 23 of the Virginia Administrative Code 10-20-165 F.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5524269101.R