Virginia – Guidelines for Accelerated Tax Payments Updated

SALT Report 2464 – The Virginia Department of Taxation has updated its guidelines regarding accelerated sales tax payments. House Bill 1300 increased the threshold that would require a dealer to make an additional accelerated payment to anyone with taxable sales and/or purchases of $26 million or more in the previous fiscal year.

Any dealer who meets the new threshold is required to make a payment in June that is equal to 90% of its retail sales and use tax liability for June of the previous year. Every 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 that is due on July 20.

The Department will notify each affected Dealer in May of each year of its obligation to make an accelerated sales tax payment. By June 1, the Department will provide all affected Dealers with payment instructions, a payment voucher for the additional payment, and a worksheet to assist the Dealer in reconciling its accelerated sales tax payment for its June tax liability due in July.

The accelerated sales tax payment requirement will be phased out beginning in Fiscal Year 2013 and will be eliminated by 2021. Until that time the following rules are in effect.

Affected Dealers

Each year the Department will determine whether the accelerated sales tax payment is applicable to a particular Dealer. The determination will be based on the Dealer’s taxable sales or purchases in the previous fiscal year regardless of whether the Dealer was subject to the accelerated sales tax payment in the past.

In addition to the sales and purchases reported by each Dealer on its returns, a Dealer’s taxable sales and purchases will include sales and purchases assessed to the Dealer by the Department for the previous fiscal year; this includes audit assessments or any adjustments to a return for the previous fiscal year.

Exceptions

A Dealer that would generally be required to make an accelerated sales tax payment but is no longer in business will not be required to make the accelerated payment. However, if the business is purchased or reorganized and that results in a new Virginia retail sales and use tax registration number or Federal Employer Identification Number this will not relieve the Dealer of the obligation to make an accelerated sales tax payment. Additionally, Dealers who file a petition for bankruptcy on or before June 30 will not be exempted from the requirement of making an accelerated sales tax payment.

Hardship Exception

The Commissioner may waive the requirement for a Dealer to make an accelerated sales tax payment or allow the Dealer to pay a lesser amount if the Commissioner determines that the payment would cause an undue hardship. If the Dealer can demonstrate an undue hardship, the Commissioner will allow the Dealer to make an accelerated sales tax payment equal to 90% of the Dealer’s average monthly retail sales and use tax liability for the first quarter of the current calendar year. Undue hardships include:

  • The selling or closing of a significant part of the Dealer’s business that results in the Dealer’s recent sales and use tax liabilities being substantially lower than its liability for the previous June,
  • A substantial decline in sales since the previous June,
  • A major change in the Dealer’s business model that results in lower sales,
  • Out-of-state Dealers who no longer make sales in Virginia,
  • A Dealer who is only 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

Hardship waiver requests must be accompanied by documentation that contains sufficient information to support a hardship waiver. Until the Dealer is notified by the Department that it may pay a different amount or that it is not required to make an accelerated sales tax payment, the Dealer must make its accelerated sales tax payment on or before June 25 if paying by mail and on or before June 30 if paying electronically.

Penalties and Interest

Failure to make a timely and full payment of the accelerated sales tax will subject the Dealer to a penalty of 6% of the amount of tax underpayment. The maximum penalty is 30%, and the minimum penalty is $10. The minimum penalty will apply to late returns even if there is no tax owed. However, in the case of a false or fraudulent return where willful intent exists to defraud the state, a penalty of 50% will be assessed.

For Further Information

Virginia Department of Taxation – Ruling of Commissioner #PD 13-61