Rulings of the Tax Commissioner

December 6, 2000

Re: Taxpayer: Locality Assessing Tax: Final State Determination, Appeal of Business, Professional and Occupational License (BPOL) Tax

Dear ****

This final state determination is issued upon your application for correction of BPOL taxes assessed to you ("the Taxpayer") by the Commissioner of the Revenue of the City of **** ("the City").

The local license tax and fee are imposed and administered by local officials. Code of Virginia § 58.1-3703.1(A)(5) authorizes the department to issue determinations of taxpayer appeals of certain local license tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the local assessment will stand unless the taxpayer proves that it is incorrect.

This determination addresses the calculation of the taxable measure of a beginning business. Copies of cited sources are enclosed.

FACTS

In general, the City's license tax ordinance requires a business to calculate its license tax liability based on its prior year's gross receipts. However, the ordinance requires a beginning business to calculate its tax liability based on its estimated gross receipts for the current license year. If the business underestimates its gross receipts, the City may make an additional assessment to reflect actual gross receipts for the license year. A beginning business is one that did not engage in business in the City for the full preceding year.

The Taxpayer commenced business in the City in 1995. In 1995 and 1996, the Taxpayer paid license taxes based on its estimated gross receipts for each year. The City assessed additional license taxes after an audit revealed that the Taxpayer had underestimated its gross receipts each year. The Taxpayer does not contest this assessment.

In license years 1997, 1998 and 1999, the Taxpayer paid license taxes based on its estimated gross receipts for each of the years. An audit revealed this situation, and the City assessed additional license taxes for each of these years based on the prior year's gross receipts. The Taxpayer sought correction of this assessment at the local level and filed this appeal after the City rejected its argument.

The Taxpayer contends that it is inequitable for the City to correct the estimates of beginning businesses while not allowing a similar correction in later years.

ANALYSIS

The lawfulness of this method of determining the basis of license taxes is supported by Virginia case law and prior decisions of the department. See Commonwealth v Jones, 194 Va. 727, 728 (1953) and Public Document 99-229 (August 10, 1999), for a complete discussion of this issue.

CONCLUSION

As the Taxpayer has not shown sufficient proof that the assessments made by the City for license years 1997, 1998 and 1999 are incorrect, the assessments stand, as is. Code of Virginia § 58.1-3703.1(A)(5) provides that this final state determination may be appealed to the appropriate circuit court. If you have any other questions, you may contact Tax Policy Analyst, in my Office of Tax Policy, at * * *



Danny M. Payne
Tax Commissioner