Sales Tax Articles
Sales Tax State Activity Update - February 2007
Hear Ye! Hear Ye! Hearing Aid Reseller Gets Some Erroneous Advice
Background
The Petitioner is in the business of dispensing hearing aids to individuals and operated a sole proprietorship since April, 1994. In June, 2002, the sole proprietorship was incorporated. In terms of the functions performed and the services provided, the two businesses were one and the same.
When the petitioner commenced operations, he asked the State Tax Commissioner's office which taxes he would be required to collect and pay. He testified that the office informed him he was not required to collect consumers' sales and service tax on the product the business sold to its customers, but that the business was required to pay purchasers' use tax on items purchased and used or consumed in the conduct of its operations.
The Petitioner and his successor operated in this manner for the period between 1994 and 2005. In 2005, the Petitioner's successor corporation was the subject of a field audit by the State Tax Commissioner. In December 2005, as a result of the field audit, the Petitioner was advised by the auditing supervisor that it was entitled to a refund of purchasers' use tax. At the same time, the auditing supervisor advised the Petitioner that his successor corporation was required to pay consumers' sales and service tax on the amount of sales it had made to its customers, but for which it failed to collect consumers' sales and service tax, for the three-year period preceding the audit.
The auditing supervisor advised the Petitioner that the successor corporation would be required to collect and pay over consumers' sales and service tax on all future sales of hearing aids to its customers without a prescription.
The successor corporation was not assessed consumers' sales and service tax for sales of their product made to customers without a prescription during the audit period. There is no evidence in the record to show when the Petitioner, the sole proprietorship, filed any purchasers' use tax returns for periods from the time he commenced operations in 1994, and ceased operating as a sole proprietorship in June, 2002. Since the Petitioner ceased operating as a sole proprietorship in June, 2002, the latest due date of its purchasers' use tax return would have been July 15, 2002. The Petitioner recalls that he filed a claim for refund on or about January 31, 2006.
Conclusion
The issue in this matter is whether the Petitioner filed its claim for refund within the limitations period established by W. Va. Code § 11-10-14(l) (1) [2003], which provides the l imitation on claims for refund or credit. A claim for refund, or credit, must be filed within 3 years after the due date of the return with respect to the tax (or fee) that was imposed, determined by including any authorized extension of time for filing the return, or within two years from the date the tax, (or fee), was paid, whichever of the periods expires the later, or if no return was filed by the taxpayer, within two years from the time the tax (or fee) was paid, and not thereafter.
For the second quarter of 2002, the final quarter during which the Petitioner, conducted business as a sole proprietorship, the due date of the purchasers' use tax was July 15, 2002. There is no evidence to show that the Petitioner paid its purchasers' use tax for that quarter, or for any other quarter, subsequent to July 15, 2002. Using this date as the benchmark, the claim for refund for the second quarter of 2002 was required to be filed by July 15, 2005. Since, at the earliest, it was filed on or about January 31, 2006, it was not timely filed. Also the Petitioner failed to show that it is entitled to the refund. See W. Va. Code § 11-10A-10(e) [2002].
The full text may be accessed on the West Virginia Office of Tax Appeals website.
(West Virginia Administrative Decision 06-225 RU, December 12, 2006)
Subscribe to CyberTax News and receive the latest indirect tax news, including rate changes, rule updates, compliance issues, and more, delivered directly to your email.
Call 800.355.3500 to Speak to a Sales Representative.
