I paid use tax on my company plane when we moved to Virginia, then years later got charged a separate aircraft tax to license it -- can I get the earlier payment refunded as a double payment?

Plain-English summary

A company relocated its headquarters to Virginia in 2008, moving its aircraft to a Virginia hangar in the process. On its March 2008 retail sales and use tax return, it accrued and remitted use tax on the aircraft based on the aircraft sales and use tax rate then in effect. Ten years later, in October 2018, the company requested a refund of that payment, arguing it had been reported incorrectly. The Department denied the refund for lack of supporting documentation, and on the resulting appeal (P.D. 21-7, 2021) upheld the denial on the additional ground that the refund request came in after the three-year statute of limitations had run. The company sought reconsideration of that determination, arguing its request had actually been timely and that the Department had relied on misstated facts and misapplied the law.

A genuine correction on timeliness. Virginia Code § 58.1-1823 and 23 VAC 10-210-3040 generally require a refund request within three years of the return's due date — which would normally make an October 2018 request for a March 2008 payment far too late. But on reconsideration, the Department found its earlier ruling had missed something: the company and the Department had agreed to a waiver extending the statute of limitations for an audit covering August 2007 through October 2010, running until February 2019. Under the Department's own prior policy (P.D. 03-52), a refund claim is timely if filed either within the standard three-year window OR within an agreed waiver period — and since the October 2018 request fell within that waiver period, the Department reversed itself and found the request WAS timely after all.

But the merits still failed. Winning on timeliness didn't get the company its refund. It argued it had effectively been taxed twice for the same aircraft: once through the March 2008 use tax payment, and again through Virginia's separate aircraft sales and use tax (2% of the aircraft's market value under Va. Code § 58.1-1502) that must be paid before licensing an aircraft with Virginia's Department of Aviation (§ 58.1-1506) — which the company did in 2010. The problem: the company's aircraft-tax account, opened in 2010, showed no record of any return filed or payment made. Despite Department requests, the company never produced evidence that a separate aircraft tax payment was actually made — either in Virginia or elsewhere — beyond the original March 2008 remittance. Taxpayers, not the Department, bear the burden of gathering and keeping the documentation needed to substantiate a refund claim.

The resolution: reallocation, not refund. Rather than treat the 2008 payment as an overpayment to be refunded, the Department used its general authority under Va. Code § 58.1-202 1 to supervise proper tax administration and correct misapplied payments — concluding the March 2008 remittance was actually the aircraft sales and use tax payment the company owed before licensing, just filed on the wrong account. The Department directed that payment be transferred from the retail sales and use tax account to the aircraft sales and use tax account, rather than issuing any refund.

What this means for you

Anyone who moves an aircraft to Virginia and later applies for a Virginia aircraft license

Virginia's aircraft sales and use tax (2% of sale price or market value) is a distinct tax from ordinary retail sales/use tax, with its own account. Make sure your payment is recorded against the CORRECT account — a payment reported on your general sales and use tax return, even if intended for the aircraft tax, may need to be administratively reallocated rather than treated as a separate, refundable overpayment.

Anyone requesting a refund of an old tax payment

Keep records of any audit waiver agreements you sign with the Department — they can extend your refund window well beyond the standard three years, as they did here, even years after the fact.

Businesses relying on documentation gaps to support a refund claim

The burden is on you to produce evidence a tax was actually paid (or overpaid) — the Department isn't required to assume payment happened just because you say it did, especially when your own account records show no return or payment at all.

Common questions

Q: Can a refund request filed more than three years after the original return still be timely?
A: Yes, if it falls within an audit waiver period the Department and taxpayer agreed to extend — even years after the original due date, as in this ruling.

Q: Is Virginia's aircraft sales and use tax the same as the general retail sales and use tax?
A: No — it's a separate tax (2% of the aircraft's sale price or market value) with its own account, generally paid before the aircraft can be licensed through Virginia's Department of Aviation.

Q: If I can't prove I paid a tax, will the Department still assume I did?
A: No. The burden is on the taxpayer to produce documentation supporting a refund claim; without it, the Department will not assume a payment was made.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-1823 — three-year statute of limitations to file an amended return/refund claim
• 23 VAC 10-210-3040 — dealer refund requests must be made within three years of the return's due date
• Va. Code § 58.1-1502 — aircraft sales and use tax; 2% of sale price or market value of an aircraft licensed for use in Virginia
• Va. Code § 58.1-1506 — aircraft tax must be paid before applying to the Department of Aviation for a license
• Va. Code § 58.1-202 1 — Department's authority to supervise tax administration and make equitable assessments, including reallocating misapplied payments

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-121

Original ruling text

November 18, 2024

Re: Request for Reconsideration: Retail Sales and Use Tax

Dear *:

This will respond to your letter submitted on behalf of * (the “Taxpayer”) in which you request reconsideration of the Department’s final determination letter, issued as Public Document (P.D.) 21-7 (2/2/2021).

FACTS

The Taxpayer, an information technology service provider, relocated its headquarters to Virginia in 2008. As part of the relocation, the Taxpayer’s aircraft was moved to a hanger in Virginia. In April 2008, the Taxpayer accrued use tax on an airplane based on the aircraft sales and use tax rate at the time and reported and remitted the tax on its March 2008 retail sales and use tax return.

In October 2018, the Taxpayer requested a refund of retail sales and use tax inaccurately reported on the March 2008 return. The Department denied the request because documentation failed to show the refund was warranted. In response, the Taxpayer filed an application for correction. In P.D. 21-7, the Department upheld the denial on the basis that the request was submitted beyond the statute of limitations and that insufficient evidence had been provided to show that the aircraft use tax was paid. The Taxpayer seeks a reconsideration of the Department’s determination, claiming that the original refund request was timely filed and that the Department relied on misstated facts and misapplied law in denying the requested refund.

DETERMINATION

Timeliness of Refund Request

Virginia Code § 58.1-1823 states in pertinent part that “[A]ny person filing a tax return or paying an assessment required for any tax administration by the Department of Taxation may file an amended return…three years from the last day prescribed by law for the timely filing of the return….” Title 23 of the Virginia Administrative Code (VAC) 10-210-3040 addresses the refund of sales tax to dealers and provides, in pertinent part, that “[r]efunds cannot be authorized unless the request is made within three years from the due date of the return.”

In P.D. 21-7, the Department accurately concluded that the refund claim was filed outside the three-year limitations period. However, the determination failed to account for a waiver that had been executed between the Taxpayer and the Department with regard to an audit that included the March 2008 period.

In P.D. 03-52 (7/3/2003), the Department opined that a refund claim would be considered to be timely filed if such request was made within the general three-year statute of limitations from the due date of the original return or within the time covered by a waiver of the statute agreed to by a dealer and the Department. In this case, the Department and the Taxpayer agreed to extend the time for an audit for the August 2007 through October 2010 period until February 2019. Because the refund claim for March 2008 was received in October 2018, the request was made within the permitted waiver period.

Use Tax Refund

The Taxpayer requests a refund of the Virginia retail sales and use tax, contending the tax was remitted twice for an aircraft that was licensed in Virginia. As indicated in P.D. 21-7, a sales and use tax is imposed on the sale price of each aircraft sold in Virginia or either the sales price or the market value of an aircraft not sold in Virginia but required to be licensed for use in the Commonwealth. See Virginia Code § 58.1-1502.

Upon review of the original request in conjunction with the request for reconsideration, the Department finds issue with the original refund claim. In the claim, the Taxpayer clearly states that it is seeking a refund of retail sales and use tax. However, in its description of the amount of the refund, the Taxpayer characterized the overpayment as aircraft sales and use tax. As permitted under Virginia Code § 58.1-1502, the tax was computed at a rate of 2% of the market value of the aircraft, which was originally purchased in another state a number of years before it was moved to Virginia. As such, the Taxpayer failed to clearly indicate the tax for which it was claiming a refund.

Regardless, the Taxpayer admits that it obtained a license for the aircraft from Virginia’s Department of Aviation in 2010. Because Virginia Code § 58.1-1506 requires the tax to be paid prior to applying to the Department of Aviation for a license, the Taxpayer argues that the tax must have been paid. It asserts that the tax it remitted on its March 2008 sales and use tax return was in addition to the aircraft sales and use tax that was due when the aircraft was licensed in June 2010. However, the Taxpayer’s aircraft sales and use tax account, which was opened in June 2010, lacks any record of returns being filed or payments made. Although the Department has requested evidence to the contrary, the Taxpayer has failed to provide any evidence to show that the aircraft sales and use tax was paid on the aircraft either in Virginia or elsewhere aside from the payment on the March 2008 retail sales and use tax return.

The Taxpayer argues that the Department failed to timely request such documentation. However, it is incumbent upon a taxpayer requesting a refund to gather and maintain all related documentation in order for the Department to make an informed determination as to the validity of the request. Absent any information or documentation to the contrary, the Department will consider the aircraft sales and use tax remitted on the March 2008 retail sales and use tax return to be the tax required to be paid prior to obtaining the aviation license.

In addition, the Department occasionally receives taxes that are remitted on the incorrect tax returns. Virginia Code § 58.1-202 1 grants the Department the authority to “[s]upervise the administration of the tax laws as they relate to taxable state subjects and assessments thereon . . . ” and “effecting equitable assessments . . .” As part of its authority to ensure that state taxes are properly paid, the Department may transfer misapplied payments to the correct account, tax, and period. Therefore, the appropriate resolution in this case would be to transfer the payment from the retail sales and use tax account to the aircraft sales and use tax account.

Based on the facts and documents presented, the Taxpayer has not shown that it is entitled to a refund of either aircraft sales and use tax or retail sales and use tax. Accordingly, the Taxpayer’s request for a refund of use tax for the March 2008 period cannot be granted.

This is the Department’s final determination with regard to this matter. The Code of Virginia sections and regulation cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at or **.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR/3742.B

Related Documents

03-52

21-7