What happened when a medical-equipment seller supplied new documents after a Virginia sales-tax audit?

Subject

Taxpayer has provided additional documentation, the audit will be returned to the audit staff to review the additional documentation

Plain-English summary

A medical-equipment seller and lessor challenged use tax assessed on sales to the United States and sales tax assessed on durable medical equipment allegedly purchased by or for specific individuals. It lacked sufficient documentation when the audit ended but submitted additional records with its appeal.

Virginia emphasized that an assessment is presumed correct under Va. Code § 58.1-205 and that taxpayers must retain records supporting their returns under Va. Code § 58.1-102. Without documentation at audit, the taxpayer had not yet met its burden.

The Department nevertheless returned the audit to staff to review the new material. It did not rule that either category was exempt; it directed the auditor to revise the assessments if the document review warranted an adjustment and otherwise issue updated assessments.

Citations and references

• Va. Code §§ 58.1-205 and 58.1-102.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-76

Original ruling text

May 11, 2016

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

Dear *:

This will reply to your letter in which seek correction of the retail sales and use tax audit assessments issued to * (the "Taxpayer") for the periods January 2011 through June 2013 and July 2013 through December 2013.

FACTS

The Taxpayer sells and leases medical equipment. The Taxpayer takes exception to two areas in the audit findings: (1) use tax assessed on sales made to the United States; and (2) sales tax assessed on durable medical equipment purchased by or on behalf of a specific individual. The Taxpayer provides additional documentation to substantiate the above exceptions and requests a review of this documentation and adjustments be made to the audit accordingly.

DETERMINATION

Pursuant to Va. Code § 58.1-205, "Any assessment of tax by the Department shall be deemed prima facie correct." The burden of proving that an assessment issued by the Department is incorrect rests with the taxpayer.

Virginia Code § 58.1-102 states:

It shall be the duty of every taxpayer to retain suitable records and documents substantiating all information contained in any return required by this statute and any such other pertinent records or documents as the Tax Commissioner may require by regulation. The records and documents shall be preserved for a period of three years from the required date for filing a return to which such records or documents pertain.

At the completion of the audit, the Taxpayer did not have sufficient documentation to support the claims in this appeal. Because the Taxpayer was unable to provide documentation, it failed to meet its burden of proving that the tax assessed in the audit was incorrect.

In light of the fact that the Taxpayer has provided additional documentation, the audit will be returned to the audit staff to review the additional documentation. Following the completion of the document review, the audit assessments will be revised if warranted and updated assessments will be issued. If there is a balance remaining, please remit payment to: Virginia Department of Taxation, 600 E. Main Street, 15 th Floor, Richmond, Virginia 23219, Attn: *.

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 web site. If you have any questions concerning this determination, please contact * in the Office of Tax Policy, Appeals and Rulings, at . Questions concerning the documentation review should be directed to in the Office of Compliance, Field Audit, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-6245896439.T