Tax Type
BTPP Tax
Description
Department will not intervene in a decision by a locality concerning an OIC
Topic
Local Taxes Discussion
Records/Returns/Payments
Date Issued
01-13-2014
January 13, 2014
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Business Tangible Personal Property Tax (BTPP)
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 a final local determination upholding a BTPP tax assessment for the 2010 tax year, issued by the ***** (the "City").
The BTPP 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 certain BTPP tax assessments, respectively. On appeal, a tax assessment by a local assessing officer 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, regulation, and public document cited are available on-line in the Laws, Rules and Decisions section of the Department of Taxation's web site, located at www.tax.virginia.gov.
FACTS
The Taxpayer failed to file BTPP tax returns for the 2010 and 2011 tax years and the City issued assessments. The Taxpayer appealed the assessments and provided documentation. Based on documentation provided and an inspection of the Taxpayer's facility, the City adjusted the 2011 assessment, but denied any adjustments to the 2010 assessment. In its final determination, the City concluded it could not adjust the 2010 assessment because the Taxpayer failed to provide requested information.
The Taxpayer appeals the final local determination to the Department, asserting the City's assessment overstates the BTPP tax liability for 2010. The Taxpayer provided a number of documents including information previously requested by the City. The City reviewed the additional documentation, but denied any further adjustments to the 2010 assessment, stating the federal depreciation schedule did not match the information reviewed in the City's audit.
ANALYSIS
Taxpayer Records
The Taxpayer, a limited liability company, states that a member withdrew taking all of the financial documents resulting in the Taxpayer having to recreate its financial records. The Taxpayer asserts it has accurately recreated the documentation requested by the City and that its assets are correctly reported. The City counters that, in the absence of the Taxpayer's records, it conducted a manual audit for the 2010 tax year, and the assessment is based on the assets identified during the audit.
Under Va. Code § 58.1-3983.1 B 3, a local assessing officer may require the submission of additional information or documentation in order to make a proper and equitable determination of an application for correction. In addition, Va. Code § 58.1-3109 6 grants local assessing officers the authority to require records and other information necessary to verify the accuracy of a taxpayer's BPOL tax returns. When the financial records provided by a taxpayer are inconclusive, it is reasonable for the local assessing officer to request information sufficient to verify property reported on financial statements or tax return. Further, when such information is not provided, a local assessing authority must use the information available to determine the amount of property sitused within its jurisdiction.
Requests for Documentation
The Taxpayer asserts the City may have confused its business with another entity. In one of its letters, the City appears to indicate the Taxpayer changed locations. The Taxpayer denies any such move. However, one of the Taxpayer's former members had an office in close proximity to the Taxpayer. The Taxpayer acknowledges some furniture and equipment were moved from the partner's office to the Taxpayer's location, but not the amount suggested by the City's auditor.
In the City's correspondence, there are inconsistent statements concerning the facts and its procedures for computing the assessments. The City originally stated that the Taxpayer timely filed a 2009 business schedule and the assessment was based partially on the 2009 return. In a subsequent letter, the City stated that the information provided in the 2009 BTPP return was not derived from the Taxpayer's operations, but a previous entity. Other statements indicate the Taxpayer was not operating in the City until 2010.
The City asserts it increased the amount of BTPP held by the Taxpayer because it offered more seating and an expanded menu when compared to the business that had previously operated in the Taxpayer's location. The City initially issued identical assessments for the 2010 and 2011 tax years. After noticing the Taxpayer had less property in its establishment, however, the City abated 80% of the 2011 assessment.
In order to clarify the inconsistent factual statements made by the City, the Department requested the documentation used to generate the 2010 assessment, including a copy of the City's audit report. The City declined the Department's request citing the privacy requirements under Va. Code § 58.1-3.
Under Va. Code § 58.1-3983.1 D 4, an appeal to the Department is treated in the same manner as an application made pursuant to Va. Code § 58.1-1821. Under Title 23 of the Virginia Administrative Code (VAC) 10-20-165 D 3 d, which interprets Va. Code § 58.1-1821, the Department has the authority to request additional information to facilitate rendering a determination of the administrative appeal. With regard to the local appeals process, the Department has the authority to request additional information from both taxpayers and localities in order to make an informed decision on a particular appeal. When requested information is not provided, the Department must issue a determination based on the information available.
DETERMINATION
Neither the City nor the Taxpayer has provided a clear record of the facts, accurate documentation of the BTPP at issue, or the process as to how the assessments are derived. Without such information, the Department cannot determine if the policy was properly applied in this instance. At the same time, the Department is concerned with the amount of the 2010 assessment, which is more than 600% greater than the 2011 assessment. Based on the limited information provided, it is difficult for the Department to understand how the Taxpayer discarded that much BTPP from 2010 to 2011.
In cases such as this, when there is doubt as to the liability of a taxpayer, localities are authorized to accept offers in compromise from taxpayers under Va. Code § 58.1-3994. All such offers must be submitted in writing by the taxpayer and are accepted solely the discretion of the local assessing official. The Department will not intervene in a decision by a locality concerning an offer in compromise. As such, I am remanding this case back to the City in order to reconsider its assessment for the 2010 tax year.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5341100773.D
Rulings of the Tax Commissioner