On trend with other states’ tactics and consistent with its prior decisions, Virginia Tax Commissioner, Craig M. Burns, (Commissioner) upheld the Virginia Department of Taxation’s (Department) decision which converted a sales tax and a withholding tax assessment against an individual as a “responsible officer” of a corporation when the corporation failed to pay the assessment.
“Interest is not assessed as a penalty, but represents a fee for the use of money that was properly due to the Commonwealth.”
the assessments
For the tax periods at issue, the corporation was issued assessments for withholding and sales and use tax liabilities, penalties and interest but failed to pay them. Subsequently, the delinquent assessments were converted to the individual Taxpayer as a responsible officer.
THe intent
Disagreeing with the assessment, she appealed alleging she was not a responsible officer because she lacked the requisite intent and authority necessary to convert the assessments. Further, the Taxpayer stated that she never owned 100% of the corporation.
As set forth in Virginia Administrative Code, a taxpayer who disagrees with the Department’s final determination issued pursuant to an administrative appeal may request a reconsideration.
THE DECISION
In contradiction with her statement in her appeal to the Commissioner that she never owned 100% of the corporation, in a previous appeal letter she stated that she was the sole shareholder during the time of the assessments.
As to her claim that her responsibilities did not include paying the tax, the Department had already analyzed the Taxpayer’s responsibilities and found that no evidence was produced to show that someone other than the Taxpayer was responsible for the tax.
Additionally, the Commissioner denied the Taxpayer’s request for abatement of accrued interest, pointing out that the application of interest is mandatory under Virginia law, and the Taxpayer did not make a full payment of interest to prevent the accrual.
THE TAKEAWAY
Understanding the elements of a law as applied to your facts is an integral part of crafting your position, whether on audit or subsequent appeal. If your facts do not align with the statute, regulations or related guidance, perhaps a return on investment business decision is warranted before moving forward.