I missed Virginia's 90-day appeal deadline for a sales tax audit because the audit notice was mailed to an old business address -- can I still get the assessment corrected?

Plain-English summary

A restaurant operator was selected for a sales and use tax audit covering January 2016 through March 2019. The auditor tried to schedule a field visit and requested records, but the taxpayer never responded. With no records to review, the auditor used Virginia's "best information available" authority to issue an estimated assessment. The taxpayer eventually appealed -- but the appeal letter wasn't sent until December 2020, well over a year after the assessment issued. The taxpayer argued the audit report never reached them because it went to an outdated address, and separately claimed the estimate was overstated and that some sales tax during the period had actually (and mistakenly) been remitted to North Carolina.

The ruling resolves the case on a threshold procedural point before even reaching those substantive arguments: Virginia law deems an assessment "made" once notice is mailed to the taxpayer's last known address on file with the Department -- it doesn't matter whether that address happens to still be current, because keeping the Department's records updated is the taxpayer's own responsibility. The 90-day appeal window (Va. Code § 58.1-1821) ran from that mailing, making the deadline September 2, 2019; the taxpayer's letter didn't arrive until December 2020, well over a year late, so the appeal itself was time-barred regardless of the underlying facts. On the merits, the estimated assessment was also upheld separately: Virginia Code § 58.1-618 authorizes exactly this kind of best-information-available estimate when a dealer doesn't provide records, and because a Department assessment is presumed correct (§ 58.1-205), the taxpayer's unsupported claims about overstatement and North Carolina remittance weren't enough to meet the burden of proving it wrong. The only avenue left open was an Offer in Compromise based on doubtful liability, which requires the taxpayer to actually submit documentation proving the assessment is incorrect.

What this means for you

Any business that has moved or changed addresses since registering with Virginia

Update your address on file with the Department promptly. An assessment mailed to your last known address on file is legally valid even if you never actually see it -- there's no exception for outdated contact information the Department wasn't told to change.

Anyone who receives (or suspects they've received) an estimated sales tax assessment after not responding to an audit request

Respond to audit document requests even if you think the request is mistaken or you're too busy -- an unanswered request leads directly to a best-information-available estimate that's very difficult to challenge later, since the burden shifts to you to disprove it.

Anyone appealing a Virginia tax assessment

The 90-day appeal window is measured from when the assessment notice is mailed, not from when you actually see it, and an incomplete appeal or a mere notice of intent to appeal doesn't stop that clock. If you miss the window, an Offer in Compromise based on doubtful liability -- with real supporting documentation -- may be the only remaining path.

Common questions

Q: Is a Virginia tax assessment still valid if it was mailed to an old address I no longer use?
A: Yes, as applied in this ruling -- an assessment is deemed made once mailed to the taxpayer's last known address on file with the Department, and it's the taxpayer's responsibility to keep that address current.

Q: What happens to the 90-day appeal deadline if I never actually received the assessment notice?
A: Based on this ruling, the deadline still runs from the mailing date to the address on file. There's no extension built in for a taxpayer's own outdated contact information.

Q: What can I do if I've missed the 90-day appeal deadline but believe my Virginia assessment is wrong?
A: This ruling points to an Offer in Compromise based on doubtful liability as the remaining option -- you'll need to submit a specific basis and documentation proving the assessment is overstated or incorrect, since a missed appeal deadline forecloses the normal administrative appeal route.

Citations and references

• Va. Code § 58.1-1820 (2) (an assessment is deemed made when notice is delivered or mailed to the taxpayer's last known address)
• Va. Code § 58.1-1821 (90-day deadline to file an administrative appeal from an assessment)
• 23 VAC 10-20-165 D 4 (an incomplete appeal or notice of intent to appeal does not extend the 90-day deadline)
• Va. Code § 58.1-618 (Department may use best information available to reconstruct sales/purchases when a dealer doesn't provide records)
• Va. Code § 58.1-205 (an assessment is prima facie correct; burden of proof on the taxpayer)

Subject

Administration: Appeals - Statute of Limitations, Burden of Proof; Audits - Estimated Assessments;

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-18

Original ruling text

January 25, 2022

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 2016 through March 2019.

FACTS

The Taxpayer operates a restaurant in Virginia. The auditor attempted to contact the Taxpayer to arrange a meeting and to review records to conduct an audit. When the Taxpayer did not respond to the auditor’s requests, the auditor issued an estimated assessment, pursuant to Virginia Code § 58.1-618. The Taxpayer submits an appeal claiming that the audit report was not mailed to the Taxpayer’s current address. The Taxpayer also claims the estimated assessment is overstated and sales tax was incorrectly remitted to North Carolina during the audit period.

DETERMINATION

Pursuant to Virginia Code § 58.1-1820 2, “[a]ssessments made by the Department of Taxation shall be deemed to be made when a written notice of assessment is delivered to the taxpayer by an employee of the Department of Taxation, or mailed to the taxpayer at his last known address .” [Emphasis added.] The auditor attempted to conduct a field visit and requested documentation from the Taxpayer to perform the audit. When the Taxpayer did not respond to the auditor’s requests, the assessment was issued. The auditor mailed the audit report to the address on file with the Department. The Taxpayer is responsible for ensuring that accurate and updated information is on file with the Department.

Appeal Not Timely Filed

Virginia Code § 58.1-1821 states that "[a]ny person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner." Title 23 of the Virginia Administrative Code (VAC) 10-20-165 interprets Virginia Code § 58.1-1821 and sets out guidelines for the filing of administrative appeals. Subsection D 4 of this regulation states: "An incomplete appeal or notice of intent to appeal does not satisfy or extend the 90-day limitation period."

Pursuant to Virginia Code § 58.1-1821 and Title 23 VAC 10-20-165, the Taxpayer was required to file a complete administrative appeal no later than September 2, 2019. The Taxpayer's correspondence to the Department was sent on December 2, 2020 and, therefore, is not a timely appeal filed with the Department.

Estimated Assessment

The estimated assessment was issued to the Taxpayer in accordance with Virginia Code § 58.1-618. Pursuant to Virginia Code § 58.1-618, the Department is authorized to use the best information available to reconstruct a dealer's sales or purchases to determine whether a tax liability exists. In this instance, the Taxpayer failed to provide records during the performance of the audit for review by the auditor. Accordingly, the auditor used the best information available to estimate the Taxpayer's liability.

Burden of Proof

Virginia Code § 58.1-205 provides that any assessment of tax by the Department is deemed to be prima facie correct and that the burden is on the taxpayer to prove the assessment is erroneous or incorrect. In this instance, the Taxpayer has not provided documentation to support its contention that the assessment of tax is incorrect. Therefore, the Taxpayer has not met the burden of proof requirement.

CONCLUSION

Based on this determination, the assessment is correct. The only recourse the Taxpayer has for the correction of the assessment is to submit an offer in compromise based on doubtful liability. The Taxpayer must include a basis for the correction and documentation that proves the assessment is overstated or incorrect. If the Taxpayer wishes to pursue a settlement based on doubtful liability, please complete and return the enclosed OIC B - 2 form to: Tax Commissioner, Virginia Department of Taxation, Post Office Box 2475, Richmond, Virginia 23218-2475. The Department will review the facts and documentation submitted with the Taxpayer’s request. Upon completion of the Department’s review, a response will be issued based upon the information provided.

The Taxpayer is given 90 days to submit an offer in compromise based upon doubtful liability, as provided above. If the forms are not received within the allotted time frame, an updated bill, with interest accrued to date, will be mailed to the Taxpayer. If the taxpayer has questions concerning payment of the assessment or bill, the taxpayer may contact the Delinquent Collections Unit at *.

The Code of Virginia sections 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, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/3625.G