April 17, 2015
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Business, Tangible Personal Property Tax
Dear *****:
This final state determination is issued upon the application for correction filed by you on behalf of ***** (the "Taxpayer") with the Department of Taxation. You appeal the ***** (the "City") assessment of Business Tangible Personal Property (BTPP) tax made on certain property owned by the Taxpayer.
The BTPP tax is imposed and administered by local officials. Virginia Code § 58.1-3983.1 D authorizes the Department to issue determinations on taxpayer appeals of BTPP tax assessments. On appeal, a BTPP tax assessment is deemed prima facie correct, i.e., the local assessment will stand unless the taxpayer proves that it is incorrect.
The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website.
FACTS
The Taxpayer, a large transportation and logistics company, was under contract with a retailer that had a regional distribution center in the City. The contract required the Taxpayer to base equipment and personnel within the region including the City for the exclusive use of the retailer at the City facility and another distribution center located in a neighboring state.
The Taxpayer filed local property tax returns with the City for the 2013 tax year. In early 2014, the City audited the Taxpayer and increased the number of tractors (trucks) sitused within its jurisdiction and issued an assessment. The Taxpayer appealed the assessment to the City. In its final local determination, the City upheld the assessment based on information provided by a manager employed by the Taxpayer.
The Taxpayer filed an appeal with the Department seeking correction of the assessments for the 2013 tax year, citing numerous errors made by the City. With its appeal, the Taxpayer provided additional information that had not been previously reviewed by the City. The City requested the new information be returned for its consideration. The Department complied with this request and the appeal was closed.
In conjunction with its continuing review, the City requested additional information to reconcile apparent conflicting information provided by the Taxpayer. When the Taxpayer failed to comply with the request, the City issued a new final determination and upheld the assessment. The Taxpayer then filed a new appeal with the Department making a number of arguments, which will be addressed separately below.
ANALYSIS
Local Tax Assessments
The Taxpayer contends that the presumption of correctness should not apply to appeals of local tax assessments to the Department, because such presumption language appears only in subsection B of Va. Code § 58.1-3983.1 addressing appeals to localities, and not in the provisions concerning appeals to the Department under Va. Code § 58-1-3983.1 D. Further, the Taxpayer asserts that the City has provided no independent corroboration to support the 2013 assessment. Based on this reasoning, the Taxpayer argues a local tax assessment must be based on objectively reasonable findings before a presumption can apply.
Coca-Cola Bottling Co. of Roanoke, Inc. v. County of Botetourt, 259 Va. 559, 526 S.E.2d 746 (2000) cited Va. Code § 58.1-3984 in affirming that the burden of proof is upon a taxpayer to show that an assessment was invalid or incorrect. Because this is the standard by which Virginia's courts decide the validity of a tax assessment, the Department has taken the position that the presumption is on the taxpayer to prove an assessment is incorrect. In § 1.8.7. of the Guidelines for Appealing Local Business Taxes (the "Guidelines"), issued as Public Document (P.D.) 04-28 (6/25/2004), the Department has confirmed that it will presume that a local assessing officer's final local determination is correct.
New Issues
The Taxpayer asserts the documents, including an affidavit, did not raise new issues and the City's request needlessly delayed the resolution of the Taxpayer's appeal. As such, the Taxpayer has filed this appeal in response to the City's new final determination issued in November 2014 and requests the Department consider all documents submitted with it current appeal, as well as the appeal filed in March 2014.
The Taxpayer initially filed an appeal of the City's final local determination in March 2014. The appeal included documents, which had not previously been provided to the City. In accordance with § 1.8.6. of the Guidelines, the City made a request to address new issues raised in the documentation provided by the Taxpayer. Pursuant to the Guidelines, the Department returned the matter to the City and closed the appeal.
As a matter of clarity, the Taxpayer cited Title 23 of the Virginia Administrative Code (VAC) 10-500-760 in its arguments concerning the City's request to review the affidavit. This regulation is only applicable to administrative appeals of the business, professional and occupational license (BPOL) tax. In the absence of regulations, the Guidelines enumerated in P.D. 04-28 set forth the procedures for the handling of local business tax appeals.
In cases in which appeals have been returned at the locality's request, the Department has found that the locality and the taxpayer have been able to resolve at least some, if not all of the issues involved. This is because the locality and the taxpayer have more in depth knowledge of the factual circumstances that may have resulted in the locality's initial determination and reconsiderations by the locality generally result in a better outcome for both the parties involved. As such, the Department has granted wide latitude to a locality when it requests that an appeal be returned.
Situs of Property
The primary issue concerns the situs of tractors (trucks) engaged in the Taxpayer's business of moving freight for the retailer's regional distribution center. The Taxpayer believes that its exposure to property tax is limited to trailers physically present in the City on January 1 of the tax year. As a general rule for property tax, it is true that tangible personal property is taxable in the jurisdiction in which the property is located on tax day.
Under Va. Code § 58.1-3511 A, the situs of motor vehicles; travel trailers, boats and airplanes is, with certain exceptions, the locality where the vehicle is normally garaged, docked or parked. The tractors and trailers owned by the Taxpayer do not appear to fit into any of the exceptions for the situsing of vehicles enumerated in Va. Code § 58.1-3511.
Further, the Attorney General has opined that the situs of a tractor trailer for BTPP taxation is the place where it is ordinarily garaged or parked as of January 1 of a tax year. See 1984 Att'y. Gen. Ann. Rep. 399. Situs would not, however, include the casual presence of property in a locality while in the course of transit. Hogan v. County of Norfolk, 198 Va. 733, 96 S.E.2d 744 (1957). With regard to trucks, the Attorney General has opined that the term "normally garaged or parked" means that the truck must have been located within a local jurisdiction for six months or more. See 1987-88 Att'y. Gen. Ann. Rep. 592.
The Taxpayer furnished global positioning data for its trailers detailing their respective locations throughout the 2013 calendar year. The Taxpayer asserts that the global positioning data demonstrates there were only three tractors that spent more than 180 days at the facility in the City during 2013. To support its claim, the Taxpayer provided an affidavit by the Taxpayer's Vice President of Management Information Systems, who testified to the accuracy of the global position reports.
The Taxpayer's appeal asserts the City is attempting to impose tax on all 35 tractors enumerated in the agreement with the retailer, The City's investigation, however, only found that an additional 17 tractors should be sitused at the retailer's distribution center. Its findings are based primarily on evidence provided by one of the Taxpayer's managers that 20 tractors were present at the distribution center on a regular basis.
Valuation
In its letter, the Taxpayer disagrees with the method used by the City to value the tractors and trailers. The City states that it used a pricing guide to value the property.
Virginia Code § 58.1-3103 charges local commissioners of the revenue with the responsibility of assessing property at fair market value (FMV). The FMV of a particular item of tangible personal property is generally defined as the price such property will bring when offered by one who desires, but is under no obligation, to sell it, and the buyer has no immediate necessity to purchase it. See Tuckahoe Women's Club v. County of Richmond, 119 Va. 734, 101 S.E.2d 571 (1958).
Virginia Code § 58.1-3506 A 25 sets forth a separate classification for tractors and trailers with a gross vehicle weight of 10,000 pounds or more used by a motor carrier hired to transport property in interstate commerce. The statute does not specify how such property should be valued. The City's local assessing officer determined the use of a pricing guide for valuation purposes was appropriate. The method is the one of the options for most motor vehicles classified under Va. Code § 58.1-3503.
Apportionment
In its request for information, the City requested information concerning the mileage traveled by the tractors. Under Va. Code 58.1-3511(B), certain property "operating over interstate routes, in the rendition of a common, contract or other private carrier service" that is subject to property tax in any other state based on an apportioned assessment may only be assessed by a locality based on the percentage equal to the total miles traveled in Virginia divided by the total number of miles traveled everywhere.
In its appeal, the Taxpayer indicates that the three tractors, as well as its trailers would have been eligible for apportioned assessments. The Taxpayer provides percentages for the tractors, but has provided no documentation to support its computation. Further, no information has been provided indicating the trailers were subject to property tax in another state or the amount of miles traveled by the trailers.
Accuracy of Assessments
Because the information provided with the appeal conflicted with the audit findings, the City was within its authority to request and examine additional documentation in order to clear up the discrepancies. To that end, the City requested information to reconcile the conflicting findings including listings of equipment available exclusively to the retailer, other locations where trucks were garaged in Virginia, other Virginia localities in which property tax was paid, documentation regarding the affidavit and the testimony of the Taxpayer's manager, and other information to help it make an accurate assessment of the property sitused within its jurisdiction.
Virginia Code § 58.1-3109 6 grants local assessing officers the authority to require records and other information necessary to make an accurate assessment of a taxpayer's tangible personal property. In addition, pursuant to Va. Code § 58.1-3983.1 B 3, a local assessing officer may require the submission of additional information or documentation in order to make a proper and equitable determination of an application for correction.
The Taxpayer's response to the City was to object to each request as vague, burdensome and overly broad. In its appeal, it asserts the City has improperly and impermissibly shifted the burden of proving only three tractors were subject to tax in 2013. As indicated above, an assessment issued by a locality is deemed to be prima facie correct. See Va. Code § 58.1-3983.1 B 4. As such, it is incumbent upon the Taxpayer to prove to the satisfaction of the local assessing officer that it properly reported the items and value of property on BTPP returns.
DETERMINATION
When the evidence shows a taxpayer failed to cooperate with the locality with regard to producing records, the Department will consider the locality's assessment to be prima facie correct. Because the Taxpayer has failed to comply with requests for information from the City, or provide any suitable alternative documents, the City's assessments for the 2013 tax year is upheld.
If you have any questions concerning this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5927958425.o