What happens if a Virginia audit is completed without giving the taxpayer the audit report or a chance to discuss the findings?

Plain-English summary

This tobacco-tax taxpayer's appeal turned on documentation it couldn't provide during the audit. The taxpayer said it tried to reach the auditor to submit records but was unsuccessful, and it provided the documentation with its appeal. The Commissioner noted a more basic problem: the taxpayer was not given the opportunity to discuss the findings with the auditor, and was not provided the audit report at the time of the audit — both required under the Taxpayer Bill of Rights.

Because of those shortfalls, the taxpayer's gross-sales documentation was returned to the Tobacco Tax Unit audit staff for further review. After the review, the audit staff will meet with the taxpayer; if adjustments are warranted, a revised audit report and bill (with accrued interest) will follow. If contested issues remain after the review, the taxpayer retains 90 days to file an appeal under Va. Code § 58.1-1821 and 23 VAC 10-20-165.

What this means for you

Virginia's Taxpayer Bill of Rights entitles you to receive the audit report and to discuss the auditor's findings before an assessment is finalized. If that didn't happen — or if you were effectively shut out from submitting records during the audit — raise it on appeal: the Department can send the audit back for a proper review and meeting rather than deciding against you. Keep any documentation that supports your gross sales; it can be reviewed on remand, and you preserve a fresh 90-day appeal right on anything still in dispute.

Common questions

Q: I never got the audit report or a chance to discuss it. Does that matter?
A: Yes. The Taxpayer Bill of Rights requires both, and here their absence caused the Commissioner to return the audit to the Tobacco Tax Unit for a proper review.

Q: Can I submit documentation I couldn't get to the auditor during the audit?
A: Yes. The taxpayer's gross-sales records were sent back to the audit staff for review, followed by a meeting to discuss the results.

Citations and references

• Va. Code § 58.1-1821 — application to the Tax Commissioner for correction of an assessment (90-day appeal window)
• 23 VAC 10-20-165 — administrative appeal procedures
• Virginia Taxpayer Bill of Rights — right to receive the audit report and discuss audit findings

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-127

Original ruling text

July 21, 2020

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

Dear *:

The Department previously acknowledged receipt of your appeal submitted on behalf of * (the “Taxpayer”). The main contention in the appeal regarded documentation the Taxpayer was not able to provide during the audit review. The Taxpayer claims it attempted to contact the auditor to provide such documentation but was unsuccessful. The Taxpayer has provided this documentation upon appeal.

It is my understanding that the Taxpayer was not provided the opportunity to discuss the findings with the auditor. Further, the Taxpayer was not provided the report at time of audit as outlined in the Taxpayer Bill of Rights. Therefore, the Taxpayer’s gross sales documentation will be returned to the Tobacco Unit audit staff for further review.

Once the review is complete, the audit staff will meet with the Taxpayer to discuss the results of the review. If adjustments to the audit and assessment are warranted, the Taxpayer will be provided a copy of the revised audit report and a revised bill to include accrued interest. If there are remaining contested issues after the review, the Taxpayer will have 90 days to submit an appeal in accordance with Virginia Code § 58.1-1821 and Title 23 of the Virginia Administrative Code 10-20-165.

If you have any questions regarding the review of documentation, you should contact * in the Department’s Tobacco Tax Unit at . If you have any questions about the appeals process, please contact in the Department’s Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR\1099L