After an assessment was upheld because a business never produced its records, can it get one more chance to provide them?

Plain-English summary

A gas station and convenience store operator had a retail sales and use tax assessment for January 2013 through April 2017 upheld on May 9, 2018 -- because it had never provided documentation and so failed to meet its burden of proof under Va. Code § 58.1-205. It then asked the Department to reconsider and offered to make the records available through another person who had access to them.

The Department granted one final opportunity to produce the records.

• The recordkeeping duty. Under Va. Code § 58.1-633, every dealer must keep and preserve suitable records of sales, leases, and purchases sufficient to determine the tax due.
• The conditions. The auditor will contact the taxpayer to schedule the review. Within 15 days of that contact, the taxpayer must give the auditor an alternate point of contact; within 30 days, the taxpayer must provide all audit-period documentation.
• The consequences. If only some records are provided, the audit will be based on what was provided. If none is provided in time, the assessment stands and becomes immediately due with interest. The Department stated this is the final time it will address the matter.

What this means for you

Not producing records loses -- the assessment is presumed correct. Under § 58.1-205 the burden is on you to prove an assessment wrong, and you can't do that without your records.

A final chance comes with hard deadlines. When the Department reopens the door, the 15-day contact requirement and 30-day production deadline are strict. Missing them locks in the assessment.

Have your records ready and reachable. Designating someone with real access to the books, and organizing the audit-period documentation in advance, is what makes a final-opportunity review work.

Common questions

Q: My assessment was upheld because I didn't turn over records -- is it over?

A: Not necessarily. Here the Department granted one last opportunity to provide the documentation, but with firm 15- and 30-day deadlines.

Q: What if I only provide some of the records?

A: The audit will be based on whatever you provide. Incomplete records mean the assessment is adjusted only to the extent your documentation supports.

Q: What happens if I miss the deadlines?

A: The assessment stands as issued and becomes immediately due and payable with interest, and the Department will not revisit it again.

Citations and references

• Va. Code § 58.1-205 -- an assessment by the Department is deemed prima facie correct; the taxpayer bears the burden of proving it wrong
• Va. Code § 58.1-633 -- dealers must keep and preserve suitable records sufficient to determine the tax due

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-199

Original ruling text

December 7, 2018

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

Dear *:

This is in response to your letter submitted on behalf of * (the “Taxpayer”) in which you seek correction of the retail sales and use tax assessment issued for the period January 2013 through April 2017.

FACTS

The Taxpayer operates a gas station and convenience store. In response to an appeal letter submitted by the Taxpayer, a determination letter was issued on May 9, 2018, upholding the assessment issued for the period at issue. The assessment was upheld because the Taxpayer had not provided documentation for review and had not met its burden of proving that the assessment is incorrect, pursuant to Virginia Code § 58.1-205.

In its most recent letter, the Taxpayer requests that the tax assessment be reconsidered, and the Taxpayer be allowed to provide the records so that the audit can be performed. The Taxpayer states that it has made available another person who has access to the records to provide to the Department’s auditor. The Taxpayer further states that the records will be available at the auditor’s earliest convenience.

DETERMINATION

Virginia Code § 58.1-633 provides that:

Every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner.

Based upon the information provided in your most recent letter and your conversation with a member of my staff, the Taxpayer will be given one final opportunity to provide documentation related to the audit period at issue for review by the Department’s audit staff. In order for such review to occur, the Taxpayer must adhere to the requirements stated below.

The Department’s auditor will contact the Taxpayer to schedule a time for the Taxpayer to provide the required documentation and for the aforementioned review to take place. Within fifteen days from the date of the contact with the auditor, the Taxpayer must provide the auditor with the name and contact information of an alternate point of contact designated by the Taxpayer to assist with providing the documentation related to the audit period at issue. Within 30 days from the date of contact with the auditor, the Taxpayer must provide all documentation related to this audit, in accordance with Virginia Code § 58.1-633. If all documentation is not provided within the allotted timeframe, the audit of the Taxpayer’s records will be based upon the documentation that has been provided to the Department’s auditor. If the Taxpayer does not provide any documentation within the allotted timeframe, the assessment will be upheld as issued, and the liability will become immediately due and payable with interest accrued to date. This is the final time that this matter will be addressed by the Department. If the Taxpayer does not comply with the requirements stated in this letter, the Taxpayer will not be given another opportunity to provide documentation to the Department for the audit period at issue.

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 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/1716P