January 10, 2025
Re: Notice of Jurisdiction
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 requests a waiver of penalty and interest assessed by the County of ***** (the “County”) for late payment of Business, Professional, and Occupational License (BPOL) tax for the 2024 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 Taxpayer operated a retail business in the County. When the Taxpayer filed its 2024 BPOL tax return and paid the tax due after the due date, the County issued an assessment for late payment penalty and interest.
The Taxpayer sent an electronic mail communication to the County’s taxpayer services team’s electronic mail inbox, requesting that the assessment be waived. A member of that team replied that the assessment would not be waived based on the County’s policy that mailed payments must be postmarked on or before the due date of the return to be considered timely. The Taxpayer replied, asking if that was the County’s final determination. The same taxpayer services team member replied that the charge could not be waived. The Taxpayer then appealed to the Department, contending that the late payment penalty and interest should be waived pursuant to Virginia Code § 58.1-3703.1 A 2 d because the Taxpayer acted responsibly, and the failure was due to events beyond its control.
ANALYSIS
Local Appeals Process
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 a taxpayer’s appeal of a classification, regardless of whether it is in conjunction with an assessment, examination, audit, or any other action taken by the locality.
In addition, “assessment” is defined in relevant part as “a determination as to the proper rate of tax, the measure to which the tax rate is applied, and ultimately the amount of tax, including additional or omitted tax, that is due.” See Virginia Code § 58.1-3700.1. See also Title 23 of the Virginia Administrative Code (VAC) 10-500-10.
In this case, the County assessed penalty and interest only for a late payment of tax. The statute and regulations provide for administrative appeals of local tax assessments resulting from appealable events. Taking the definitions of appealable event and assessment together, an administrative appeal must involve a dispute as the actual amount of tax owed. As such, the local appeals process provided by Virginia Code § 58.1-3703.1 A 5 does not apply to assessments of penalty and interest only.
Even if the local appeals process applied to assessments of penalty and interest only, if the Taxpayer disagreed with the denial of its waiver request, its next step would have been to file an appeal with the County’s local assessing official pursuant to Virginia Code § 58.1-3703.1 A 5. The Taxpayer’s electronic mail communication to the County’s general taxpayer services team’s inbox asking whether the denial represented the County’s final determination was not a substitute for a complete local appeal.
Further, under Virginia Code § 58.1-3703.1 A 6 a, a taxpayer may file an appeal with the Department only after a final determination that met all the requirements of Title 23 VAC 10-500-710 has been issued by a locality. See P.D. 11-124 (7/1/2011). An electronic mail from a member of the County’s taxpayer services team does not meet the requirements for a final local determination which must, among other requirements, be signed by the local assessing official or their designee. Further, Title 23 VAC 10-500-710 contains specific language that must be included in any final written determination for a BPOL tax appeal. This language was not included in the County’s electronic mail. The Department cautions localities and taxpayers that the anonymity and informality of electronic mail is generally ill-suited to administrative appeals and determinations with respect to local tax issues. See, for example, P.D. 20-178 (10/7/2020).
Penalty Waiver
Virginia Code § 58.1-3703.1 A 2 d provides that a penalty of 10% may be assessed for the failure to pay the BPOL tax by the appropriate due date. However, no late payment penalty may be assessed if the failure to pay was not the fault of the taxpayer. In order to demonstrate lack of fault, the taxpayer must show that they acted responsibly, and that the failure was due to events beyond their control.
The determination as to whether the Taxpayer acted responsibly, and whether the late payment of the BPOL tax was due to events beyond its control, are matters of fact to be determined by the County. Even if a locality determined that the late payment of BPOL tax was not due to events beyond a taxpayer’s control, it still may waive the penalty at its discretion. See P.D. 20-3 (1/7/2020). Waivers of BPOL tax penalties are subject to the review and discretion of the locality and are not subject to administrative review by the Department. See P.D. 20-3 and P.D. 20-18 (2/6/2020).
DETERMINATION
As discussed above, the local administrative appeals process provided by Virginia Code § 58.1-3703.1 A requires a dispute as to the amount of BPOL tax for which a taxpayer is ultimately liable. The Department does not have jurisdiction when the disputed assessment is only for penalties and interest. Even if the Department had jurisdiction, it does not appear that a proper local appeal was filed with the County or that the County issued a proper final local determination. Accordingly, the Department does not have jurisdiction to decide the Taxpayer’s appeal on the merits.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****@tax.virginia.gov.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia