What happens to a Virginia sales and use tax appeal if the taxpayer submits the missing documentation after filing it?

Plain-English summary

This is a short procedural ruling, not a substantive tax determination. A taxpayer had appealed a sales and use tax audit under § 58.1-1821 because it could not provide certain documentation during the audit review. By the time the Department responded, the taxpayer had submitted that documentation along with the appeal. The Tax Commissioner did not rule on any tax question -- instead, the Department closed the appeal and referred the documentation to the field audit staff who will review it and make any adjustments they find warranted.

The letter preserves the taxpayer's rights going forward: if, after the auditor reviews the new documentation, any issues remain, the taxpayer may file another appeal within 90 days of the audit revision under § 58.1-1821 and 23VAC10-20-165.

What this means for you

Businesses under sales and use tax audit

If you are missing records during a field audit, you are not necessarily out of options. This ruling shows that the Department will accept late-submitted documentation through the appeals process and route it back to the auditor for review, rather than resolving the substantive dispute itself. The underlying tax question here (what the documentation was meant to prove) was never decided -- it was sent back for the auditor to work out.

Accountants and tax professionals

Note the two-step appeal structure Virginia uses: an initial appeal under § 58.1-1821 can be closed administratively once the documentation gap that caused it is resolved, and a second appeal window (90 days from any resulting audit revision) stays open under the same statute and 23VAC10-20-165 if the client still disagrees with the auditor's adjustments after reviewing the new records.

Common questions

Q: Did the Tax Commissioner decide whether the Taxpayer owed the tax at issue?
A: No. The letter does not reach that question. It simply closes the appeal because the missing documentation had been provided, and sends the matter back to field audit staff to review and adjust as warranted.

Q: What if the taxpayer still disagrees after the auditor reviews the documentation?
A: The taxpayer may submit a new appeal within 90 days of the audit revision, under § 58.1-1821 and Title 23 of the Virginia Administrative Code 10-20-165.

Q: Who should the taxpayer contact with questions?
A: The letter directs questions about the documentation review to the auditor, and questions about the appeals process to the Department's Office of Tax Policy, Appeals and Rulings.

Citations and references

• § 58.1-1821, Code of Virginia (application for correction of assessment / appeal)
• Title 23 of the Virginia Administrative Code 10-20-165 (appeals procedure)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-164

Original ruling text

September 15, 2020

Re: § 58.1-1821 Application: 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 has provided documentation with its appeal. The documentation will be referred to the appropriate field audit staff to review and make adjustments, as warranted. At this time the appeal matter is being closed. At the conclusion of the auditor’s review, should any issues remain, the Taxpayer may submit an appeal within 90 days of the audit revision 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 may contact the auditor. 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/3411L