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 ***** (the “Taxpayer”) with the Department of Taxation. The Taxpayer appeals an assessment of business tangible personal property (BTPP) tax issued to the Taxpayer by the ***** (the “City”) for the 2015 tax year.
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 documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website.
FACTS
The Taxpayer is affiliated with a cable television provider. In order to receive the cable service, customers must have a converter, also known as a set top box. The converters are owned by the Taxpayer and are issued to cable customers by the cable television provider.
The Taxpayer classified the converters as intangible personal property on its 2015 BTPP return filed with the City. The City audited the Taxpayer for the 2015 tax year and issued an assessment of BTPP tax. The Taxpayer appealed contending the boxes were intangible property exempt from the BTPP tax. In its final determination, the City determined that the converters were machinery subject to tax. The Taxpayer has filed an appeal with the Department, contending the converters are intangible property not subject to the local taxation.
ANALYSIS
The Department has held in numerous determinations that converters should be classified as intangible property exempt from the BTPP tax. See Public Document (P.D.) 12-163 (10/16/2012), P.D. 12-199 (12/16/2012), P.D. 14-68 (5/21/2014), P.D. 14-70 (5/21/2014), P.D. 14-185 (12/1/2014) and P.D. 15-103 (5/12/2015). In addition, both the Chesterfield County Circuit Court in Joseph A. Horbal v. Verizon Online LLC, CL13-78 (2015) and the Henrico Circuit Court in Eugene H. Walter v. Verizon Online LLC, CL13-3050 (2016) have issued final orders holding that converter boxes should be classified as intangible property exempt from the BTPP tax. Finally, in an opinion issued on March 2, 2017 in the case Joseph A. Horbal, Commissioner of the Revenue for Chesterfield County v. Verizon Online LLC, the Virginia Supreme Court affirmed the Chesterfield County Circuit Court's decision that the converter boxes are not subject to local taxation under Va. Code § 58.1-1101 A 2a.
DETERMINATION
Based on information provided and the analysis set forth in the public documents and court decisions cited above, the converters were intangible property exempt from BTPP tax under Va. Code § 58.1-1101 A 2a. As such, I am remanding the case back to the City to abate any assessment issued for the 2015 tax year based on the converters being subject to the BTPP tax.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/786.B