February 28, 2017
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Business, Professional and Occupational License (BPOL) Tax
Dear *****:
This notice of jurisdiction is issued upon the application for correction filed by you on behalf of ***** (the “Taxpayer”), with the Department of Taxation. The Taxpayer appeals the assessment of BPOL tax issued to the Taxpayer for the 2014 through 2016 tax years by the ***** (the “County”). The Taxpayer also requests a refund of BPOL tax paid for the 2015 tax year.
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 web site.
FACTS
The Taxpayer filed a BPOL tax return with the County for the 2015 tax year. Subsequently, the Taxpayer contacted the County to request a correction to the amount of gross receipts it reported for the 2015 tax year. The County requested further information from the Taxpayer to verify its 2015 gross receipts. At the same time, the County also audited the Taxpayer for the 2013, 2014 and 2016 tax years. As a result of the audit, the County accepted the Taxpayer's requested correction to its 2015 gross receipts. The County, however, also determined that the Taxpayer had underreported its gross receipts for each of the other tax years, and an assessment for the additional BPOL tax was issued on June 9, 2016.
The Taxpayer attempted to appeal the audit determination to the County on June 30, 2016, but the County concluded that the Taxpayer did not file a complete appeal. Although the County and the Taxpayer had some further contact regarding the case, a complete appeal was never filed. In January 2017, the County informed the Taxpayer that the time for filing a local appeal had expired. The Taxpayer then filed an appeal with the Department. The Taxpayer contends it should be classified as a contractor for BPOL tax purposes, and a portion of its gross receipts qualified for a deduction because they were attributable to business conducted in other states where it filed income tax returns. The Taxpayer's appeal effectively seeks a correction of the assessment with respect to the 2014 and 2016 tax years and a further refund of BPOL tax paid for the 2015 tax year, for the same reasons it disputes the 2014 and 2016 assessments. For each tax year, the Taxpayer asserts that it should have been classified as a contractor and been allowed to deduct a portion of its gross receipts.
ANALYSIS
Virginia Code § 58.1-3703.1 A 5 b provides that any person assessed with a local license tax as a result of an appealable event may file an administrative appeal of the assessment within one year from the last day of the tax year for which such assessment is made, or within one year from the date of the appealable event, whichever is later, with the commissioner of the revenue or other local assessing official. An appealable event is an increase in the assessment of a local license tax payable by a taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed.
This statute also provides the procedure that a taxpayer must use to appeal a final local license tax assessment. A taxpayer must first file an appeal with the locality in which the appealable event occurred. Once an appeal is filed, the locality's assessing officer will fully review the taxpayer's claims and issue a final determination letter setting forth the facts and arguments in support of its decision. See Va. Code § 58.1-3703.1 A 5 b.
Under Va. Code § 58.1-3703.1 A 6 a, a taxpayer may file an appeal with the Department only after a final determination has been issued by a locality. See Public Document (P.D.) 11-124 (7/1/2011). Virginia Code § 58.1-3703.1 A 5 e, however, does allow a taxpayer to appeal directly to the Department if an appeal to a locality has been pending for more than one year. Under such circumstances, the taxpayer can elect to consider the local appeal to have been denied. The taxpayer is required to give a locality 30 days written notice of such an election.
In this case, the County's determination letter was written by a member of the County's audit staff in response to the Taxpayer's refund request for the 2015 tax year. In conjunction with that refund request, the County also requested information to verify the Taxpayer's gross receipts for the 2013, 2014 and 2016 tax years. As a result of that review, the County issued an assessment for additional BPOL tax due for the 2014 and 2016 tax years. The County communicated the results of its review to the Taxpayer in a letter that was styled as a final determination letter. Such letter, however, was not a response to any local appeal the Taxpayer had filed with respect to the assessment. As such, that letter cannot be considered a final determination letter for purposes of the BPOL appeals process.
Pursuant to the BPOL statutes, the assessment created an appealable event because it increased the amount of BPOL tax liability paid by the Taxpayer for the 2014 and 2016 tax years. Once the audit decision was reached and the assessment for additional tax was issued to the Taxpayer on June 9, 2016, at a minimum, the Taxpayer had one year from that date to file an appeal with the County. With respect to the 2016 tax year specifically, the Taxpayer actually has until December 31, 2017, to file an appeal. See Va. Code § 58.1-3703.1 A 5 b. This includes the further refund request the Taxpayer has made with respect to the 2015 tax year, on the same basis that it disputes the 2014 and 2016 tax year assessments. For each year, the Taxpayer is claiming the contractor rate applied and that a portion of its gross receipts qualified for a deduction because they were attributable to business conducted in other states where the Taxpayer filed income tax returns. See Va. Code § 58.1-3732 B 2. The information provided indicates that a complete appeal has not yet been filed with the County.
DETERMINATION
The determination letter issued by the County accepted the Taxpayer's correction to its gross receipts for the 2015 tax year and communicated the results of an audit the County initiated for the 2013, 2014 and 2016 tax years. That audit increased the Taxpayer's BPOL tax liability for the 2014 and 2016 tax years. As such, an appealable event occurred when the assessment for additional BPOL tax was issued to the Taxpayer on June 9, 2016.
Although it would have until December 31, 2017, to file an appeal for the 2016 tax year, the Taxpayer must file an appeal with the County by June 9, 2017, if it wishes to have the other tax years considered. To date, the Taxpayer has not filed a complete local appeal. Therefore, the Department does not have jurisdiction to issue a determination on the Taxpayer's appeal filed with the Department. The Taxpayer should file a complete local appeal with the County. Once the County has issued its final local determination, if the Taxpayer disputes the County's conclusions, it may file an appeal with the Department within 90 days of the date of such final local determination.
The Code of Virginia sections and public document cited are available on-line in the Laws, Rules and Decisions section of the Department's website, located at www.tax.virginia.gov. If you have any questions regarding this response, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1142.M