Did documentation support refunds for Virginia sales tax allegedly paid in error to two vendors during an audit period?

Subject

Vendor-tax refund was granted for one claim and denied for another

Plain-English summary

Virginia granted the refund claim for tax paid to Vendor A but denied the claim for Vendor B because the supporting documentation differed. The Vendor A records sufficiently showed erroneous Virginia sales tax, so the taxpayer received a refund plus accrued refund interest.

The Vendor B records did not prove that Virginia sales tax had been paid erroneously, so that portion of the refund request was denied. Separately, documents submitted with the administrative appeal supported revisions to the audit assessment, and the taxpayer agreed with the revised result.

The remaining revised assessment was due. Virginia stated that no further bill interest would accrue if it was paid within 30 days of the revised bill.

What this means for you

• Vendor-tax refund claims are evaluated transaction by transaction and vendor by vendor.
• Proof must show both the tax paid and why the payment was erroneous.
• Strong documentation can support both an audit adjustment and refund interest.
• A partial refund does not eliminate a separately revised assessment balance.

Citations and references

• Va. Code § 58.1-1821.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-143

Original ruling text

August 26, 2014

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 2005 through December 2008. The Taxpayer also presents a refund request to the Department for the period January 2005 through September 2009. I apologize for the delay in responding to your appeal.

FACTS

Pursuant to Va. Code § 58.1-1821, the Taxpayer filed an appeal with the Department, contesting the assessment of tax on certain transactions that occurred during the audit period. The Taxpayer provided documentation in support of its contention that the transactions at issue had been improperly included in the audit. Along with its appeal, the Taxpayer included a copy of the refund claim that had been previously filed during the performance of the audit at issue. The appeal and refund claim will be addressed separately below.

DETERMINATION

Appeal

The documentation provided with the Taxpayer's appeal has been reviewed. Based upon this review, revisions have been made to the audit assessment. It is my understanding that the Taxpayer agrees with the revisions that have been made and with the revised assessment. Accordingly, this serves as a final determination with respect to the issues appealed by the Taxpayer for the audit period at issue.

Refund Claim

The Taxpayer requested a refund, maintaining that it erroneously paid Virginia sales tax to two of its vendors - * ("Vendor A") and *** ("Vendor B"). Documentation provided by the Taxpayer was reviewed by the Department's audit staff during the performance of the audit. Based upon this review, the documentation was deemed sufficient to grant the Taxpayer's refund request with respect to Vendor A. However, the documentation provided for purchases made from Vendor B is insufficient to prove that the Taxpayer erroneously paid the Virginia sales tax to Vendor B. Therefore, the Taxpayer's refund request with respect to Vendor B cannot be granted.

CONCLUSION

The revised audit assessment is due and payable. The Taxpayer will be allowed a refund, plus refund interest accrued to date, with respect to the erroneous tax paid to Vendor A. A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of the bill. The Taxpayer should remit its payment to: Virginia Department of Taxation, 600 E. Main Street, 23 rd Floor, Richmond, Virginia 23219, Attn: *. If you have any questions concerning payment of the assessment, you may contact at **.

The Code of Virginia section cited is 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/1-5321753524.P