What does Virginia Ruling of the Tax Commissioner P.D. 21-26 conclude about a dealer's failure to file a retail sales and use tax return?

Plain-English summary

A Virginia retail dealer did not file its retail sales and use tax return for the January-March 2019 period. The Department notified the dealer in a letter dated June 8, 2020 that the return was missing and gave it until July 8, 2020 to file the return and pay. The dealer still did not file, so the Department issued a statutory assessment dated September 14, 2020. The dealer appealed, arguing the assessment was incorrect.

The Tax Commissioner upheld the assessment. Under Va. Code § 58.1-612 A, every dealer must collect and remit retail sales and use tax on sales or leases of tangible personal property, and under 23 VAC 10-210-480 A, every dealer must file a return by the 20th of the month following each reporting period -- even if no tax is due for that period. Because the dealer was required to file a return for the period at issue and simply never did, the Commissioner found no basis to disturb the assessment on the record presented.

The ruling did leave the dealer a path forward: if it filed the missing return and remitted payment for the January-March 2019 period, it could resolve the matter that way. But if it did not file that return within 60 days of the ruling letter, the assessment would be considered due and payable as issued.

What this means for you

Dealers who missed a filing deadline

Filing late is not a defense to a statutory assessment, and simply believing no tax was owed for a period is not a defense either. 23 VAC 10-210-480 A requires a return every reporting period even when no tax is due. If the Department has already sent a notice and follow-up deadline and you still have not filed, expect a statutory assessment based on the Department's own information rather than your actual sales.

Businesses appealing a "failure to file" assessment

This ruling shows that an appeal contending an assessment is "incorrect" will not succeed on its own once the underlying problem is an unfiled return. The fastest way to correct a statutory assessment built on an estimate is to file the actual return and pay any tax due -- here, the Department gave the dealer a fixed 60-day window from the ruling to do exactly that before the assessment became final.

Accountants and tax professionals

When a client's assessment stems from a missing sales tax return, look first at whether the return has actually been filed. A determination like this one does not evaluate the accuracy of the assessment amount; it only confirms the dealer's statutory obligation to file existed and was not met. Filing the delinquent return is usually the mechanism the Department expects will produce a corrected liability.

Common questions

Q: Did the Tax Commissioner rule that the assessment amount was accurate?
A: No. The ruling does not evaluate the dollar amount of the assessment. It simply confirms that the dealer was legally required to file a return for the period and failed to do so, so the assessment stood.

Q: Does a dealer have to file a sales tax return even if no tax is due for that period?
A: Yes. 23 VAC 10-210-480 A requires every dealer to file a return by the 20th of the month following each reporting period, even if no tax is due.

Q: What could the dealer do to resolve the assessment after this ruling?
A: File the missing return for January-March 2019 and remit any payment due. The ruling gave the dealer 60 days from the date of the letter to do this before the assessment would be considered due and payable.

Q: What happens if the dealer still doesn't file within 60 days?
A: The ruling states the assessment would then be considered due and payable as issued.

Q: Does this ruling apply to other dealers with unfiled returns?
A: Not automatically. This is a fact-specific, redacted determination based on this dealer's own filing history and the specific notices it received. It illustrates how the Department treats an unfiled-return assessment, but another taxpayer's situation may differ.

Citations and references

Statutes:

• Va. Code § 58.1-612 A (dealers required to collect and remit retail sales and use tax on sales or leases of tangible personal property)
• Va. Code § 58.1-1821 (application for correction of an assessment)
• 23 VAC 10-210-480 A (every dealer must file a return each reporting period, even if no tax is due)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-26

Original ruling text

March 2, 2021

Re: § 58.1-1821: 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 2019 through March 2019.

FACTS

The Taxpayer, a retailer located in Virginia, failed to file a retail sales and use tax return for the period January 2019 through March 2019. The Taxpayer was notified by the Department that the return was not filed in a letter dated June 8, 2020. The letter required the Taxpayer to file the return and send payment by July 8, 2020. When the return was not filed, the Department issued a statutory assessment dated September 14, 2020. The Taxpayer appealed contending the assessment is incorrect.

DETERMINATION

Subsection A of Virginia Code § 58.1-612 requires all dealers to collect and remit the retail sales and use tax on all sales or leases of tangible personal property. Title 23 of the Virginia Administrative Code 10-210-480 A states that “every dealer is required to file a return on or before the 20th day of the month following each reporting period even if no tax is due.” The Taxpayer was required to file a return for the period at issue and failed to do so.

To resolve this matter, the Taxpayer must file a return and remit payment for the period January 2019 through March 2019. If the return for the period January 2019 through March 2019 is not filed within 60 days from the date of this letter, the assessment at issue will be considered due and payable.

The Code of Virginia section and regulation cited, along with other reference documents, 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, a***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/3622.G