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One Good Reason to Stay on Top of Tax Law Changes

  • Jan 15, 2014 | Gail Cole

 Virginia Tax Commissioner says, "Not any more."

If you don’t stay on top of tax law changes, you may be found owing taxes. And penalties. Oh, and interest.

A seller of motor vehicle fuel discovered this when the Virginia Tax Commissioner ruled that it was liable for uncollected motor vehicle sales tax during the period January 2010 through September 2011.

The seller (Taxpayer) is located in another state but “sells motor vehicle fuel to distributors and end users in Virginia.” The Taxpayer also “sells residential and commercial fuel oil and provides heating and air conditioner services and repairs.”

During an audit covering January 2010 through September 2011, the Taxpayer was found to owe “tax on sales of fuel in a transportation district that were not supported by a valid certificate of exemption.” The Taxpayer claims the buyer, referred to as VFD, is a local government entity and therefore exempt from the tax.

The rub

At one point VFD was liable for an exemption. During the audit period, however, it was not.

A change in the law

The Virginia Tax Commissioner points to a law change requiring the Taxpayer to “pay the motor vehicle fuel sales tax on sales of fuel to the end consumer.” The ruling reads, in pertinent part:

 "The Taxpayer's audit covers the period of the law change that requires the Taxpayer to pay the motor vehicle fuel sales tax on sales of fuel to the end consumer. Prior to January 1, 2010, the retail sale of fuel to the VFD qualified for the exemption granted to nonprofit organizations.... However, beginning January 1, 2010, the imposition of the motor vehicle fuel sales tax changed from the retail sale of the fuel to the end consumer, to the wholesale of fuel from the distributors to the retailers. Because the basis for the imposition of the tax changed from retail to wholesale, the nonprofit exemption .... was no longer available to the VFD, and no other exemption from the motor vehicle fuel sales tax exists for the VFD. Accordingly, the Taxpayer was required to charge the motor vehicle fuel sales tax on its sale of fuel to the VFD. Because it failed to do so, the Taxpayer is liable for the tax on such sales assessed in the audit."

So. That was a law change that should not have been overlooked.

Silver lining

The news isn’t all bad. The auditor assessed tax on the retail sales price of the fuel instead of the calculating the tax owed based on the Taxpayer’s cost price. As a result, the Tax Commissioner wrote that he would “allow the Taxpayer 30 days from the date of this letter to provide the Department documentation to adjust the audit liability based on the cost price of the fuel sold to the VFD.”

If the Taxpayer does not provide the required information within 30 days, “the assessment will be considered correct based on the best information available during the audit.”

Another important change to note

The Virginia motor vehicle fuel sales tax was administered by the Virginia Department of Taxation until July 1, 2013, when “the administration and collection of the Virginia motor vehicle fuel sales tax transferred from the Department to the DMV [Department of Motor Vehicles].” The DMV refers to the tax as the Virginia Fuels Wholesale Tax.

Interested in the specifics? Read the complete ruling of the Tax Commissioner.

Interested in staying on top of sales tax changes? Automate.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.