June 1, 2017
Re: Notice of Jurisdiction
Taxpayer: *****
Locality: *****
Business, Professional and Occupational License (BPOL) Tax
Dear *****:
This notice of jurisdiction is issued upon the application for correction filed on behalf of your client, **** (the “Taxpayer”), with the Department.
The Taxpayer appeals the denial of a refund of BPOL tax from the (the “City”) for the 2010 through 2013 tax years.
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 BPOL tax returns with the City for the 2010 through 2013 tax years. Subsequently, it filed a refund request in accordance with Va. Code § 58.1-3980, claiming the out-of-state deduction for gross receipts attributable to business conducted in other states where a taxpayer is subject to an income or income like tax. While the City agreed that a deduction was warranted, it did not agree with the Taxpayer's computation. In June 2016, the City indicated that it would be issuing refunds for the tax years at issue.
By letter dated December 2016, the Taxpayer notified the City that it was filing an appeal with the Department under § 1.7.4 of the Guidelines for Appealing Local Business Taxes, issued as Public Document (P.D.) 04-28 (6/25/2004). Subsequently, the Taxpayer filed an appeal with the Department contesting the deduction computation by the City.
ANALYSIS
Appealable Event
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. See P.D. 04-67 (8/20/2004), P.D. 11-91 (6/2/2011), P.D. 13-217 (12/12/2013), and P.D. 16-3 (2/2/2016). In this case, the denial of a portion of the Taxpayer's refund request falls within the definition of an appealable event for BPOL tax purposes. Therefore, the Taxpayer has the right to appeal the City's computation of the out-of-state deduction.
Local Appeals Process
Virginia statute provides the procedure that a taxpayer must use to appeal a BPOL 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.
The City issued the refunds in June 2016 resulting in an appealable event. At that time, the Taxpayer's right to file an appeal to the City. Under Va. Code § 58.13703.1 A 5 b, a taxpayer “assessed with a local license tax as a result of an appealable event as defined in this section may apply 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, to the assessor for a correction of the assessment.” Thus, the Taxpayer has until one year from the date the City's refund checks were issued to file an appeal with the City.
Final Local Determinations
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 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.
Here, the City created an appealable event when it issued refunds for less than the amount the Taxpayer requested. At that time, the Taxpayer should have filed an appeal with the City as required by the statute. The Department cannot accept an application for correction of a local tax assessment after a taxpayer has given a locality 30 days notice when no local appeal has been filed with the locality.
Further, in drafting its notice, the Taxpayer erred in citing P.D. 04-28, which address the procedures for appealing local business tax assessments established under Va. Code § 58.1-3983.1. The appeals process for BPOL taxes is governed by Va. Code § 58.1-3703.1 A 5 and A 6 and Title 23 of the Virginia Administrative Code § 10-500-640 et seq.
Appeals under Va. Code §. 58.1-3980
The Taxpayer appropriately filed its refund request with the City under Va. Code § 58.1-3980. Pursuant to Va. Code § 58.1-3980, any person aggrieved by an assessment of local taxes “may, within three years from the last day of the tax year for which such assessment is made, or within one year from the date of the assessment, whichever is later, apply to the commissioner of the revenue or such other official who made the assessment for a correction thereof.” Under this procedure, if the taxpayer disagrees in whole or in part with the local assessing officer's determination, the taxpayer may then seek correction with the circuit court under the provisions of Va. Code § 58.1-3984. Accordingly, the Department has no jurisdiction to address an appeal filed under Va. Code § 58.1-3980.
DETERMINATION
Pursuant to the BPOL statutes, the denial of the refund created an appealable event. Once that decision was communicated to the Taxpayer, the Taxpayer had one year from that date to file an appeal with the City. The Taxpayer, therefore, should file a local appeal with the City. Once the City issues its final determination, the Taxpayer may appeal to the Department pursuant to Va. Code § 58-3703.1 A 6 and Title 23 VAC 10-500-720 if it disagrees with any of the City's conclusions.
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/1210.B