Virginia – Updated Guidelines for Accelerated Tax Payments

SALT Report 1565 – The Virginia Department of Taxation issued revised guidelines regarding accelerated sales tax payments. Recently enacted legislation increases the annual threshold for dealers and direct pay permit holders who are required to make accelerated sales tax payments from $5.4 million in taxable sales and purchases to $26 million in taxable sales and/or purchases.

The department will notify dealers in May of each year of their obligation to make an accelerated sales tax payment.  Following the notification the Department will provide each dealer with payment instructions, a payment voucher for the additional payment, and a worksheet to assist the dealer in reconciling his or her payment for the June tax liability due in July.

Affected Dealers

The term “Dealer” now includes every person who is required to collect and remit sales tax and every person who is required to remit use tax to the state of Virginia. The applicability of the accelerated sales tax payment will be determined each year based on the dealer’s taxable sales or purchases during the previous year. However, the accelerated sales tax payment will not apply to anyone who is only required to file a Form ST-7, Consumer’s Use Tax Return.

In addition to the sales and purchases reported by each dealer on their returns, a dealer’s taxable sales and purchases will includes sales and purchases assessed by the department for the previous year, including any audit assessments and adjustments to returns.

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 an accelerated sales tax payment.  A corporate or other type of reorganization that results in the use of a new Virginia retail sales and use tax registration number or Federal Employer Identification Number or a petition for bankruptcy reorganization will not alleviate the dealer of having to make an accelerated sales tax payment.

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 if it would cause an undue hardship.  Dealers must request a waiver from the commissioner in writing and must clearly demonstrate the nature of the hardship with documentation and financial records.  All requests for hardship waivers must be received by the department by June 18.

Undue hardship would include, but is not limited to:

  • The selling or closing of a part of the dealer’s business that results in the sales and use tax liability in current months being substantially lower than the liability for the previous June,
  • A substantial decline in sales since the previous June,
  • Extenuating circumstances, such as a major change in the dealer’s business model, such that the accelerated payment amount would cause a financial hardship on the dealer,
  • Out-of-state dealers who no longer make sales in Virginia,
  • A dealer who is eligible for the accelerated sales tax payment because of a one-time extraordinary event in the previous fiscal year, and
  • A dealer whose tax liability for the previous June included a one-time extraordinary event
The commissioner will not waive the requirement for payment of the accelerated sales tax payment except for extraordinary circumstances.
Penalties and Interest
Dealers will be subject to a penalty of 6% of the amount of tax underpaid for failure to make a timely and full payment of the accelerated sales tax. However, in the case of a false or fraudulent return where willful intent exists to defraud the commonwealth a penalty of 50% will be assessed.
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