Opinion ID: 2605783
Heading Depth: 1
Heading Rank: 6

Heading: Determination of the Correct Amount of Tax Due

Text: Wards claims that the Director's only statutory authority to make sales tax assessments is found in section 39-21-103(1), C.R.S.1973, which requires the Director to examine returns, determine the correct amount of tax, and assess the difference between the correct amount and the amount paid: As soon as practicable after [a] ... sales... tax return is filed, the executive Director of the department of revenue shall examine it and shall determine the correct amount of tax. If the tax found due is greater than the amount theretofore assessed, a notice of deficiency shall be mailed to the taxpayer by certified mail. Wards asserts that the district court erred in sustaining the $2,163,541.39 assessment because the Department's assessment amounts to retroactive imposition of the accrual method which requires Wards to pay a sales tax which is not owed. Error is also claimed because the district court entered judgment for the full amount of sales tax assessment based on the transfer of accounts receivable. We agree with Wards that section 39-21-103(1), C.R.S.1973, requires that the Director examine returns, determine the correct amount of tax, and assess the difference between the correct amount and the amount paid. Wards' accounting method, however, prohibited the Director from making an accurate determination of tax liability on the basis of cash actually received. Wards' accounting method is based on assumptions and estimates unrelated to actual payments made by a customer on a particular account. The Director was required to use the accrual basis to make an accurate determination of Wards' sales tax liability. [8] Accordingly, the judgment of the district court is affirmed. ROVIRA and LOHR, JJ., dissent.