December 10, 2018
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality Assessing Tax: *****
Business, Professional and Occupational License 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 denial of refunds of Business, Professional and Occupational License (BPOL) tax paid by the Taxpayer to the ***** (the “City”) for the 2013 through 2015 tax years.
The BPOL tax is imposed and administered by local officials. Virginia Code § 58.1-3703.1 authorizes the Department to issue determinations on taxpayer appeals of BPOL tax assessments. On appeal, a BPOL 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 Laws, Rules and Decisions section of the Department’s web site.
FACTS
The Taxpayer claimed refunds of BPOL tax paid to the City for the 2013, 2014 and 2015 tax years on the basis that gross receipts attributable to internet access services were not subject to BPOL tax under the federal Internet Tax Freedom Act (the “Act”) codified at Title 47 U.S.C. § 151 note. The City issued a final local determination denying the refund claim. The City concluded that the Taxpayer’s appeal violated the terms of a prior settlement agreement between the City and the Taxpayer and that the City’s BPOL tax was grandfathered from the Act’s application. The Taxpayer filed an appeal with the Department, repeating its contention that the Act preempts imposition of the City’s BPOL tax on gross receipts attributable to internet access services.
ANALYSIS
After extensive analysis in Public Document (P.D.) 17-94 (6/9/2017), the Department concluded that the Act applied to the BPOL tax. The City contends that even if the Act applies to the BPOL tax generally, its BPOL tax was grandfathered from the Act’s application. The Department has declined to issue any orders for correction on the basis that a Virginia locality failed to prove it qualified for grandfather protection under the Act. See P.D. 18-24 (3/14/2018).
DETERMINATION
Because the remaining issue involves a dispute between the Taxpayer and the City regarding whether the City was grandfathered under the Act, the Department declines to issue an order for correction. Therefore, the City’s denial of the refunds is upheld. The Department declines to express an opinion concerning what effect, if any, any prior settlement agreement had on the City’s ability to tax the Taxpayer’s gross receipts from internet access services.
If you have any questions regarding this determination, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1865.M