If Virginia returns my sales tax refund request because it was submitted on a CD, does the three-year filing deadline still count against me?

Plain-English summary

A Virginia taxpayer that provides Internet services asked for sales and use tax refunds for January 2013 through December 2014. In December 2015, the Taxpayer's representative mailed in two refund requests, each with a cover letter, a schedule apportioning the refund based on Internet-service revenue, invoice copies, and other paper backup -- plus a CD containing a copy of the same schedules.

The Department cannot accept external media like CDs for security reasons. Its policy is to mail the whole submission back and send a separate "Data Submission" letter telling the taxpayer to resubmit using secure email or paper only. That's what happened here: the refund requests were returned, and a Data Submission letter went to the Taxpayer's place of business. But nobody acted on it -- the Taxpayer said it never received the requests back or the Data Submission letter. Nearly three years later, in August 2018, the Department's auditor told the Taxpayer the original requests had never been reviewed. The Taxpayer resubmitted, and the Department denied the requests as untimely, since Virginia law gives taxpayers only three years from the return's due date to file a refund claim (§ 58.1-1823).

The Taxpayer appealed that denial. The Tax Commissioner sided with the Taxpayer on the timeliness question: because the Data Submission letter itself confirmed the Department had received the refund requests in December 2015, and because that letter never set a deadline for sending the paper copies or secure email version, the Commissioner found the refund requests were timely filed in December 2015 -- inside the three-year window. That doesn't mean the refund itself is approved, though. The ruling only reopens the door: the Taxpayer must resubmit the supporting documentation (the same package provided in August 2018) within 60 days of the ruling, coordinated with the Department's auditor, or the original denial will be upheld.

What this means for you

Businesses with pending refund claims

If the Department returns your refund submission because of a technical problem (like unsupported media) and later treats your claim as never filed, that return-and-resend cycle doesn't automatically restart or extend your three-year filing clock. What saved this Taxpayer was that the Department's own Data Submission letter documented receipt of the original filing within the three-year period, and that letter didn't set its own deadline for compliance. Keep proof of your original submission date and any correspondence from the Department acknowledging receipt.

Anyone submitting sales tax refund documentation

Don't send data on CDs, DVDs, USB drives, or other external media -- the Department will not accept it and will return the entire submission. Use secure email or paper. If you get a letter back from the Department about a rejected submission format, respond immediately and confirm your mailing address and contact information are current, since a missed or lost notice can lead to your claim being treated as abandoned.

Accountants and tax professionals representing refund claimants

This ruling illustrates how the three-year limitations period in § 58.1-1823 and 23VAC10-210-3040 is measured from the original filing date, not from when the Department finally reviews the claim. When a client's refund request is administratively bounced back, document the mailing date and, if possible, get delivery confirmation, since that record may be what preserves the claim years later if the file gets lost in Department processing.

If you're facing a resubmission deadline

Note that this ruling does not grant the refund -- it only restores the Taxpayer's right to have the claim reviewed, conditioned on resubmitting proper documentation within 60 days of the letter and coordinating with the Department's auditor. Missing that window would let the original denial stand.

Common questions

Q: Did Virginia grant this taxpayer's refund?
A: Not yet. The Tax Commissioner ruled only that the refund requests were timely filed in December 2015 and are eligible for review. The Taxpayer still has to resubmit its supporting documentation within 60 days, and the Department's auditor will then evaluate the substance of the refund claim.

Q: Why were the original refund requests rejected?
A: Not for being late -- they were returned because the Taxpayer included a CD, and the Department's security policy does not allow it to accept external media. The Department mailed the requests back and sent a separate Data Submission letter directing the Taxpayer to resubmit by secure email or on paper.

Q: How did the Department conclude the December 2015 filing was still timely, three years later?
A: The Data Submission letter itself, which the Department had sent in December 2015, acknowledged that the Department had received the refund requests for the period at issue. Since that letter also did not set any deadline for providing the paper or secure-email version, the Commissioner treated the original December 2015 submission as the operative (and timely) filing date.

Q: What is the deadline to request a Virginia sales and use tax refund?
A: Under § 58.1-1823 and 23VAC10-210-3040, a refund request must be made within three years from the last day prescribed by law for timely filing the return in question.

Q: What happens if the Taxpayer misses the 60-day resubmission window?
A: The ruling states that if the resubmitted refund requests are not received within the allotted timeframe, the denial of the refund requests will be upheld.

Citations and references

• § 58.1-1821, Code of Virginia (refund application procedure)
• § 58.1-1823, Code of Virginia (three-year limitations period for refund requests)
• 23VAC10-210-3040 (refunds cannot be authorized unless requested within three years of the return due date)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-162

Original ruling text

September 15, 2020

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

Dear *:

This is in response to your letters submitted on behalf of * (the “Taxpayer”) in which you contest the denial of the sales and use tax refund requests for the period January 2013 through December 2014. I apologize for the delay in responding to your appeal.

FACTS

In a letter dated December 9, 2015, the Taxpayer, through its representative, submitted two refund requests for the period at issue. The submission that was received by the Department contained a CD for each refund request. The Department is unable to except external media, and pursuant to Department policy, the refund requests were returned to the address of the Taxpayer’s representative in December 2015. Additionally, a Data Submission letter from the Department was sent to the Taxpayer’s place of business, indicating that because the documentation was received in the form of a CD, the Department was unable to process the refund requests in accordance with the Department’s security policy. The letter instructed the Taxpayer to resubmit the refund requests using secure email or on paper. In August 2018, the Department’s auditor informed the Taxpayer that its refund requests for the period at issue had been returned to the Taxpayer and had not been reviewed by the Department. The Taxpayer resubmitted the refund requests, and was subsequently informed by the Department’s auditor that the refund requests were not timely filed, and the refund requests were denied.

The Taxpayer is contesting the denial of the refund requests. The Taxpayer maintains that refund requests submitted in December 2015 were timely filed. The Taxpayer states that each request included a cover letter, noting submission of a corresponding sales tax refund claim; a schedule apportioning the requested refund based on the Taxpayer’s revenue derived from providing Internet services; copies of invoices; and other paper documentation. The Taxpayer further states that it provided a CD with each refund request, containing a copy of the schedules that had been provided on paper. The Taxpayer maintains that the information on the CDs was supplemental to the paper documentation, and was not intended to be the sole documentation source to substantiate the refund requests. The Taxpayer contends that the paper documentation could have been used by the Department to make a decision regarding the refund requests, and that the CDs did not include any information that was vital to processing the refunds. The Taxpayer requests that the paper documentation previously filed be used by the Department to review the refund requests. The Taxpayer maintains that the refund requests were not returned to it or its representative. The Taxpayer further maintains that it nor its representative received the Department’s Data Submission letter prior to it being provided in August 2018 by the Department’s auditor.

DETERMINATION

Pursuant to Virginia Code § 58.1-1823, a refund request must be made by a taxpayer within “three years from the last day prescribed by law for the timely filing of a return….” Title 23 of the Virginia Administrative Code 10-210-3040 provides that “Refunds cannot be authorized unless the request is made within three years from the due date of the return.”

Based upon the information before me, it is my understanding that the Department received the refund requests at issue in December 2015. However, the refund requests were not processed and reviewed because the refund requests contained CDs. The Department’s records show that the original refund requests submitted were mailed back to the Taxpayer’s representative and that the Data Submission letter was issued to the Taxpayer. The resubmitted refund requests were denied by the Department in August 2018 because the statute of limitations to file had expired.

The Data Submission letter acknowledges the filing and receipt of the refund requests for the period at issue. Further, the Data Submission letter does not provide a deadline for when the paper documents or secure email submission must be provided. Accordingly, I find that the refund requests were timely filed by the Taxpayer in December 2015, and the Taxpayer is authorized to resubmit the refund requests for the period at issue. The refund requests must be provided to the Department within 60 days of the date of this letter. The Department’s auditor will contact the Taxpayer to coordinate the delivery of the requests. The documentation provided by the Taxpayer in August 2018 is proper for review of the refund requests and should be provided again. If the resubmitted refund requests are not received within the allotted timeframe, the denial of the refund requests will be upheld.

If you have questions regarding the documentation that needs to be provided please contact the Department’s auditor. If during the review, the Department’s auditor determines that additional documentation is needed, the Taxpayer must provide such documentation within the timeframe established by the auditor in order for the documentation to be considered in the review of the refund requests.

The Code of Virginia section and regulation 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/2142P