December 18, 2018
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality Assessing Tax: *****
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 a denial of an exemption from Business, Professional and Occupational License (BPOL) tax from the ***** (the “City”).
The following determination is based on the facts presented to the Department and summarized below. The Code of Virginia sections, regulations and public document cited are available on-line at www.tax.virignia.gov in the Laws, Rules and Decisions section of the Department’s website.
FACTS
The Taxpayer was a nonprofit corporation exempt from federal income tax under Internal Revenue Code (IRC) § 501(c)(6). The Taxpayer was authorized by a federal government agency to process, close and service a certain kind of federal loan. In April 2017, the City denied the Taxpayer’s application for exemption from the City’s BPOL tax. The City contacted the Taxpayer again in May 2018 regarding the Taxpayer’s failure to obtain a business license. In response, the Taxpayer asked whether it was, in fact, being required to obtain a license and pay BPOL tax. The City issued a final determination to the Taxpayer, concluding that because it was conducting activities typical of for-profit businesses, it did not qualify for the exemption to the City’s BPOL tax under Virginia Code § 3703 C 18 b. The Taxpayer appealed to the Department, contending it was not similar to other types of businesses that were subject to BPOL tax in the City, and it would be unreasonable to tax a nonprofit business that performed a public service.
ANALYSIS
Virginia Code § 58.1-3703.1 A 5 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 the taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed. An appealable event also includes the appeal of a business classification, regardless of whether the taxpayer’s appeal is in conjunction with an assessment, examination, audit or any other action taken by the locality.
This statute also provides the procedure that a taxpayer must use to appeal a final local license tax assessment. A taxpayer must 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 Virginia Code § 58.1-3703.1 A 5 b.
Under Virginia 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 (7/1/2001). 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.
The Taxpayer appealed a decision by the City that the Taxpayer’s gross receipts were subject to the City’s BPOL tax. No assessment was issued or increased, no refund has been denied, and the case did not involve a classification issue because the only issue presented was whether the Taxpayer’s gross receipts were subject to BPOL tax or not. As such, no appealable event has occurred.
DETERMINATION
Because no appealable event has occurred, the Department lacks jurisdiction over the Taxpayer’s appeal. If an appealable event occurs and the Taxpayer wishes to dispute the City’s action, the Taxpayer is directed to follow the procedures for filing a proper administrative appeal under Virginia Code § 58.1-3703.1 A 5 and 6, which includes first filing a local appeal with the City. The local appeals process is described in more detail in Title 23 of the Virginia Administrative Code (VAC) 10-500-640 et seq. Alternatively, whether an appealable event has occurred or not, the Taxpayer may submit a request for an advisory opinion to the Department pursuant to Virginia Code § 58.1-3701. See also Title 23 VAC 10-500-632 and 633. The Taxpayer should be aware that advisory opinion requests generally require the submission of a fee. The fee submission form is enclosed.
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/1704.A