Rulings of the Tax Commissioner
Document Number: 12-92
Tax Type:Retail Sales and Use Tax
Brief Description:Emergency Guidelines for the Accelerated Sales Tax Payment
Topics:Guidelines
Date Issued:06/07/2012


EMERGENCY GUIDELINES FOR THE
ACCELERATED SALES TAX PAYMENT

June 7, 2012

Effective beginning with the accelerated sales tax payment due in June, 2012, legislation enacted in the 2012 Session of the General Assembly, House Bill 1300 (Acts of Assembly 2012 Special Session I, Chapter 2), increases the annual threshold for dealers and direct payment permit holders (“Dealers”) who are required to make an accelerated sales tax payment from $5.4 million of taxable sales and/or purchases to $26 million of taxable sales and/or purchases.

These Guidelines have been revised to conform to this legislative change and are effective for the additional payment made by Dealers who are required to make an accelerated sales tax payment in June, 2012.

House Bill 29, the Appropriations Act for the 2008-10 Biennium (Acts of Assembly 2010, Chapter 872), and House Bill 30, the Appropriations Act for the 2010-12 Biennium (Acts of Assembly 2010, Chapter 874), required Retail Sales and Use Tax dealers and direct payment permit holders (“Dealers”) with $1 million or more in taxable sales and purchases in the previous year to make an additional payment in June of each year. House Bill 1500 (Acts of Assembly 2011, Chapter 890) increased the threshold for the 2011 accelerated sales tax payment to taxable sales and/or purchases of $5.4 million or greater in the previous fiscal year. Beginning in 2012, House Bill 1300 (Acts of Assembly 2012 Special Session I, Chapter 2) increases the threshold to taxable sales and/or purchases of $26 million or greater in the previous fiscal year. Each Dealer meeting this threshold is required to make a payment in June equal to 90 percent of its Retail Sales and Use Tax liability for June of the previous year. Each affected Dealer will be entitled to take a credit for the amount of the accelerated sales tax payment on its payment for June of the current year due July 20. The Department of Taxation (the “Department”) will notify each affected Dealer in May of each year of his obligation to make an accelerated sales tax payment. On or about June 1, the Department will provide each affected dealer with payment instructions, a payment voucher for the additional payment, and a worksheet to assist the dealer in reconciling its payment for its June tax liability due in July with the accelerated sales tax payment.

The General Assembly has declared its intent that this accelerated sales tax payment requirement be phased out beginning in Fiscal Year 2013 until fully eliminated not later than June 2021. (Source: Item 3-5.08, Acts of Assembly 2012 Special Session I, Chapter 2)

These guidelines (“Guidelines”) are issued by the Department to provide guidance to taxpayers regarding the accelerated sales tax payment. These guidelines are exempt from the provisions of the Administrative Process Act (Va. Code 2.2-4000 et seq.) and only apply to the additional payment made by Dealers who are subject to the accelerated sales tax payment requirement. Unless noted otherwise below, the applicable Retail Sales and Use Tax Regulations (23 Virginia Administrative Code (VAC) 10-210-10 et seq.) continue to apply. To the extent that the legislative change requiring the accelerated sales tax payment conflicts with the regulations, the legislation supersedes the regulations, and these Guidelines, developed pursuant to the legislation, should be followed. As necessary, additional guidelines will be published and posted on the Department’s web site, www.tax.virginia.gov.

Accelerated Sales Tax Payment Requirement

Effective calendar year 2012, any Dealer having taxable sales and/or purchases of $26 million or greater during the 12-month period beginning July 1 and ending June 30 of the immediately preceding calendar year must make a payment equal to 90 percent of his Retail Sales and Use Tax liability for the previous June on or before each June 30 if paying by electronic funds transfer. If payment is made by another method, the payment must be made on or before June 25. In the event that either June 25 or June 30 falls on a Saturday or Sunday, any payment made on or before the next succeeding business day will be considered timely. For the June 2012 accelerated sales tax payments, payments made by electronic funds transfer are due July 2, since June 30 falls on a Saturday. Dealers who are required to remit the Retail Sales and Use Tax for specific accounts by electronic funds transfer pursuant to Va. Code 58.1-202.1 are also required to remit the accelerated sales tax payment for those accounts by electronic funds transfer. Dealers who are not currently required to remit the Retail Sales and Use Tax for specific accounts by electronic funds transfer may remit the accelerated sales tax payment for those accounts by either electronic funds transfer or by mail. (Source: Item 3-5.08, Acts of Assembly 2011, Chapter 890)

Under prior law, the accelerated sales tax payment requirement for 2011 applied to any Dealer having taxable sales and/or purchases of $5.4 million or greater during the prior fiscal year. (Source: Acts of Assembly 2012 Special Session I, Chapter 2)

Affected Dealers

For the purposes of the Accelerated Sales Tax Payment, “Dealer” includes every person who is required to collect and remit sales tax and also every person who is required to remit use tax to the Commonwealth.

Under current law, in general, and with limited exceptions, every Dealer must file his Retail Sales and Use Tax return and remit the tax due for transactions occurring during the month on or before the twentieth day of the following month. (Source: Va. Code 58.1-615)

The applicability of the accelerated sales tax to each Dealer will be determined each year by the Department based on the Dealer’s taxable sales or purchases in the previous fiscal year (July 1 – June 30) without regard to whether the Dealer was subject to the accelerated sales tax payment in the past. Taxable sales or purchases will be computed without regard to the number of certificates of registration held by the Dealer. The accelerated sales tax payment will not apply to persons who are required to file only a Form ST-7, Consumer's Use Tax Return. In addition to the sales and purchases reported by each dealer on his returns, a Dealer's taxable sales and purchases includes those sales and purchases assessed to the Dealer by the Department for the previous fiscal year, including audit assessments and other adjustments to returns for the previous fiscal year.
Exceptions

A Dealer who would otherwise be required to make an accelerated sales tax payment but is no longer in business, will not be required to make the accelerated sales tax payment. In making the determination regarding whether a Dealer is exempt from the requirement to make an accelerated tax payment, a corporate or similar reorganization that simply results in the use of a new Virginia Retail Sales and Use Tax registration number or Federal Employer Identification Number (FEIN) will not relieve the Dealer from having to make an accelerated sales tax payment. Likewise, Dealers who have filed a petition for a bankruptcy reorganization on or before June 30 would not be exempted from the requirement of making an accelerated sales tax payment.

Example 3:
Example 4:

Accelerated Sales Tax Payment and Reconciliation

On or about June 1 of each year that a Dealer is subject to the accelerated sales tax payment requirement, the Department will mail the Dealer a notice and voucher listing the amount of the accelerated payment due. Unless the dealer has received a hardship waiver from the Department (see below), the amount due will be equal to 90 percent of his Retail Sales and Use Tax liability for the previous June. The accelerated sales tax payment will be due on June 25 for Dealers paying by mail and on June 30 (July 2 for 2012) for Dealers paying electronically. The Department will not bill an account with a tax liability that is de minimus. Each mailing will also contain a reconciliation worksheet (see below). If a Dealer does not receive a mailing and believes that he is liable to make the accelerated sales tax payment, he should contact the Department at (804) 367-8037 for assistance. Live Chat assistance is available at www.tax.virginia.gov or https://www.business.tax.virginia.gov.

In July, Dealers will reconcile their actual tax liability for June against the accelerated payment using their regular filing procedures. If a Dealer files electronically using iFile or Web Upload, the Department will automatically reconcile the Dealer's tax liability. If a Dealer files by mail, the Dealer should fill out his regular June Retail Sales and Use Tax return and compute his actual tax liability for June on the return, without regard to the accelerated sales tax payment. The Dealer should then use the reconciliation worksheet to subtract the amount of the accelerated sales tax payment from his actual June Retail Sales and Use Tax liability to determine the amount of the payment due with the return. The Dealer will be responsible for filing his regular June Retail Sales and Use Tax return and paying the amount due on or before July 20. The Department will verify that the accelerated sales tax payment and the payment made with the June return equal the actual tax liability shown on the June return. If the accelerated payment creates an overpayment for June, the Dealer should follow the same procedure for the July return due in August. To the extent that a Dealer is not able to claim the credit in its entirety on the July return, the Department will automatically issue the Dealer a refund.

Dealers may remit the accelerated sales tax payment and file returns online through iFile or Web Upload or by mail. More information regarding iFile and Web Upload may be found on the Department's website, www.tax.virginia.gov, or the Department's Online Services for Businesses page, www.business.tax.virginia.gov.


Penalties and Interest

Except with respect to fraudulent returns, the failure to make a timely and full payment of the accelerated sales tax will subject the Dealer to a penalty of six percent of the amount of tax underpayment. No other penalty for delinquent returns or payments will apply. (Source: Item 3-5.08, Acts of Assembly 2011, Chapter 890)

In the case of a false or fraudulent return where willful intent exists to defraud the Commonwealth of this tax, or in the case of a willful failure to file a return with the intent to defraud the Commonwealth of this tax, a penalty of 50 percent of the amount of the proper tax shall be assessed. (Source: Va. Code 58.1-635(A))

The rate of interest on omitted taxes and assessments is the “Underpayment Rate” established pursuant to Va. Code 58.1-15. (Source: Item 3-5.08, Acts of Assembly 2011, Chapter 890)

Dealers are also responsible for timely filing their return and paying the tax due for May on or before June 20 and their return for June on or before July 20. Failure to file or pay the full amount of tax due by the due date will result in the assessment of a penalty of six percent per month in addition to the tax owed. The maximum penalty is 30 percent, and the minimum penalty is $10.00. The minimum penalty applies to late returns even if there is no tax owed.

Hardship Exceptions

The Tax Commissioner may waive the requirement for Dealers to make the accelerated sales tax payment or allow the Dealer to pay a lesser amount upon a finding that the accelerated payment requirement would cause an undue hardship. Any Dealer otherwise required to make an accelerated sales tax payment must request a waiver from the Tax Commissioner in writing and clearly demonstrate the nature of the hardship with documentation and financial records. In general, if the Dealer can show an undue hardship, the Tax Commissioner will allow the Dealer to make an accelerated sales tax payment equal to 90 percent of the Dealer's average monthly Retail Sales and Use Tax liability for the first quarter of the current calendar year. Undue hardship would include, but is not limited to:

The Tax Commissioner will not waive the requirement for payment of the accelerated sales tax payment except for in extraordinary circumstances
Hardship waiver requests must be accompanied by full and complete documentation containing sufficient information so that the grounds upon which the Dealer relies in requesting a hardship waiver are fully set forth to allow the Tax Commissioner to make an informed determination.

Dealers should make every effort to submit requests for waivers as soon as possible in order to receive a timely decision from the Department. However, all requests for hardship waivers must be received by the Department by June 18. Applications for hardship waivers should be mailed to:


Applications for hardship waivers may also be sent by fax to (804) 254-6119. The Department is not responsible for delays resulting from a Dealer using other addresses or fax numbers.

Until a Dealer who is otherwise required to make an accelerated sales tax payment is notified by the Department that he may pay a different amount or is not required to make an accelerated sales tax payment, the Dealer must make an accelerated sales tax payment equal to 90 percent of his Retail Sales and Use Tax liability for the previous June on or before June 25 if paying by mail and on or before June 30 (July 2 for 2012) if paying electronically.

Requests for Reconsideration

In cases where a Dealer is able to demonstrate that the Department’s determination on its request for a hardship exception was not based on correct or complete facts, the Dealer may request reconsideration of the Department’s determination. Requests for reconsideration should be mailed to:

Requests for reconsideration may also be sent by fax to (804) 254-6119.

In order for the Tax Commissioner to grant a request for reconsideration, the dealer must demonstrate one of the following:

Requests for reconsideration will be reviewed as time permits. Although the Department will make every effort to answer each request for reconsideration in a timely fashion, until a Dealer who is otherwise required to make an accelerated sales tax payment is notified by the Department that he may pay a different amount or is not required to make an accelerated sales tax payment, the Dealer must make an accelerated sales tax payment equal to 90 percent of his Retail Sales and Use Tax liability for the previous June by June 25 if paying by mail and on June 30 (July 2 for 2012) if paying electronically.

Disposition of Revenues

With the exception of revenues attributable to the local Retail Sales and Use Tax imposed at the rate of 1%, all revenues collected from the accelerated sales tax payment will be considered General Fund revenue. However, no distribution of the state or local Retail Sales and Use Tax revenues will be made until the Tax Commissioner certifies the revenues. The Tax Commissioner shall certify the Retail Sales and Use Tax revenues generated by the accelerated sales tax payments as soon as practicable after the funds have been paid into the state treasury in any month for the preceding month. If the Governor determines on July 31 of each year that funds are available to transfer the state Retail Sales and Use Tax revenues in accordance with Va. Code 58.1-638 and 58.1-638.1, he shall direct the State Comptroller to make such allocation. (Source: Item 3-5.08, Acts of Assembly Special Session I, Chapter 2)

Additional Information

These Guidelines are available on-line in the Tax Policy Library section of the Department's website, located at www.policylibrary.tax.virginia.gov. For additional information, please contact the Department at (804) 367-8037 or visit www.tax.virginia.gov. Live Chat assistance is available at www.tax.virginia.gov or https://www.business.tax.virginia.gov.



Approved:

Craig M. Burns
Tax Commissioner