If a taxpayer is penalized for failing either to file for a license or to pay the tax on the appropriate due date, the assessing official must waive or abate the penalty if the taxpayer was not at fault and the failure was due to events beyond the taxpayer's control. Interest, as opposed to a penalty, cannot be waived. To demonstrate lack of fault for waiver of penalty, a taxpayer must have exercised the same amount of care as a reasonably prudent person and must have actively tried to avoid the failure. For example:
1. Taxpayer opened small dry-cleaning business in County A. County A has a population of 25,000. Taxpayer failed to apply for a license because taxpayer thought, in good faith, that his gross receipts would not exceed $50,000. Taxpayer's gross receipts were $100,000. Taxpayer would be liable for the license tax plus a penalty because taxpayer failed to file an application for a license.
2. A retailer fails to file an application on time when its computer system suffers significant damage due to floods. The retailer never informs tax assessor of its problem. Although the failure to file was initially not the fault of the retailer, retailer will be liable for the penalty since it failed to act reasonably in notifying the locality within a short period of time and did not attempt to correct the failure and to obtain an extension.
3. Same facts as Example C, except that the retailer did not contact the tax assessor for 10 months after its computer system is repaired and its store reopened. Although its failure to file was through no fault of its own, the retailer will be responsible for the penalty since it failed to rectify the failure within an amount of time that was reasonable under the circumstances indicated once the impediment was removed.
4. Local official erroneously sends old tax forms with outdated information to taxpayer. Taxpayer, who in good faith uses the old tax forms, underpays his tax. Since the underpayment was due to an event beyond the taxpayer's control and it was not reckless, fraudulent or the result of an intentional disregard of the law, there will be no penalty on the understatement.
Va. Admin. Code § 10-500-570