November 14, 2024
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality Assessing Tax: County of *****
Business, Professional, and Occupational License 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 an assessment of business, professional, and occupational license (BPOL) tax issued to it by the County of ***** (the “County”) for the 2019 tax year.
The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website.
FACTS
The County audited the Taxpayer’s BPOL returns for the 2019 through 2021 tax years and issued an assessment of additional BPOL tax for the 2019 tax year. By electronic mail in October 2023, the County requested that the Taxpayer confirm whether a telephone conversation in February 2023 was intended to be an appeal with respect to the 2019 assessment. The Taxpayer responded via electronic mail, confirming that it would like to proceed with the “informal internal appeal” concurrently with the open audit of the remaining tax years.
Subsequently, the County issued a letter described as an “Audit Determination & Final Local Determination of Administrative Appeal.” The Taxpayer appealed the final determination with respect to the 2019 tax year to the Department, contending the County improperly denied its deductions for business activities outside Virginia and for payments to an affiliated entity.
ANALYSIS
The Code of Virginia creates a review process designed to encourage resolution of local license tax issues through an appeal process that includes review by the local assessing officer and appeal to the Department. Through this process, a taxpayer who disagrees with an audit assessment may apply to the local assessing officer for review. If the taxpayer is dissatisfied with the results of the local review, the taxpayer may appeal the local decision to the Department, which will make a determination of the issues raised by the taxpayer. See Title 23 of the Virginia Administrative Code (VAC) 10-500-640.
Specifically, 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. In addition, an appealable event includes a taxpayer’s appeal of a business classification, regardless of whether it 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 follow to appeal a local license tax assessment. A taxpayer must file an appeal with the locality in which the appealable event occurred. The appeal must be filed in good faith and sufficiently identify the taxpayer, the tax periods covered by the challenged assessments, the amount in dispute, the remedy sought, each alleged error in the assessment, the grounds upon which the taxpayer relies, and any other facts relevant to the taxpayer’s contention. See Virginia Code § 58.1-3703.1 A 5 b. See also Title 23 VAC 10-500-700 D and Public Document (P.D.) 20-115 (6/30/2020). 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.
By merely making a phone call to dispute the result of the audit, the Taxpayer failed to follow the statutory procedures for filing a local appeal. In addition, the County erred by asking the Taxpayer for clarification as to whether the Taxpayer intended for the phone call to be an appeal. Asking this question implied that a phone call could constitute a valid appeal, which it cannot.
DETERMINATION
Because a valid local appeal was not filed, the Department cannot accept this matter for review.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at ***** or *****@tax.virginia.gov.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia