January 10, 2025
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality Assessing Tax: *****
Machinery and Tools Tax
Dear Mr. *****:
This final state determination is issued upon the administrative appeal filed by you on behalf of ***** (the “Taxpayer”) with the Department of Taxation. You appeal the assessment of Machinery and Tools (M&T) tax issued to the Taxpayer by ***** (the “County”) for the 2022 tax year.
The M&T tax is imposed and administered by local officials. Virginia Code § 58.1-3983.1 D 1 authorizes the Department to issue determinations on taxpayer appeals of M&T tax assessments. On appeal, a local 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 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 business that extracted limestone from open pit quarries in the County. The Taxpayer also manufactured chemical quicklime at its location in the County. It had similar operations in other Virginia localities and in ***** (State A).
The County issued an assessment for the 2022 tax year for some additional assets that the County claimed the Taxpayer had omitted on its original M&T return. The County also made adjustments to that return consistent with the determination it had made as to prior years’ returns that the equipment the Taxpayer was treating as exempt was used in quarrying, not mining, and thus was subject to M&T tax under the processing designation.
The Taxpayer filed an appeal with the County, contending that the assessment included assets that had already been reported as taxable on its original return. The Taxpayer also asserted that the activities the County considered to be processing were actually mining and, as such, any equipment that was not directly used in the mining operation was not subject to local taxation. Further, the Taxpayer indicated that the assessment not only included some assets the Taxpayer had previously disposed of, but also mistakenly excluded certain assets that the Taxpayer had reported on its original 2022 M&T return.
The County issued a final local determination in March 2024, reiterating its previous conclusion that the equipment the Taxpayer was treating as exempt was used in quarrying, not mining, and thus remained subject to tax under the processing designation. The County also determined that the assessment of tax for additional assets was correct because the Taxpayer had not submitted requested filings for all its furniture, fixtures, and equipment or produced evidence that other assets were double assessed. In addition, the County concluded that there was no evidence of any disposals.
The Taxpayer appealed to the Department, contending that 1) the activities the County designated as processing were mining; 2) the County taxed some assets twice; and 3) the assessment included assets the Taxpayer had previously disposed of; and 4) the assessment mistakenly excluded assets the Taxpayer had previously reported as taxable on its 2022 M&T return.
ANALYSIS
In its March 2024 final determination, the County concluded that the Taxpayer was not a mining business because it was operating a quarry, not a mine. That determination was issued shortly before the Department issued its determination in a case involving the same Taxpayer and locality for the 2018 through 2021 tax years, published as Public Document (P.D.) 24-27 (3/20/2024). In that case, the Department determined that the term “mining” in Virginia Code § 58.1-1101 includes the extraction of limestone from a quarry. Accordingly, the case was remanded to the County to determine what property was used in the Taxpayer’s mining operations and what property was exempt. The Department also instructed the County to evaluate the Taxpayer’s claims of duplicative assessments based on additional information provided by the Taxpayer. See also P.D. 23-43 (4/12/2023) and P.D. 23-93 (08/03/2023).
DETERMINATION
In this case, the County’s final determination as to the 2022 tax year was issued before the date of the Department’s determination in response to the Taxpayer’s appeal for the 2018 through 2021 tax years. With that determination, the Department remanded the case to the County to determine what property was utilized in the Taxpayer’s mining operations and what property was exempt. The Department also instructed the Taxpayer to provide the County with information it had requested to ensure that no duplication of assets had occurred. Once the County completed its review, it was directed to revise the assessment and issue a new final determination. If the Taxpayer disagreed with the County’s new final determination, it could appeal to the Department pursuant to Virginia Code § 58.1-3983.1.
Consistent with that determination, the Department is remanding this case to the County with the same instructions as provided in P.D. 24-27, with additional instructions as to new issues not present in the previous case. Namely, the Taxpayer must provide the County with evidence of disposals. The County must also consider the Taxpayer’s information regarding assets it claims were mistakenly excluded from the assessment.
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 *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4960.X