August 3, 2022
Re: Notice of Jurisdiction
Taxpayer: *****
Locality Assessing Tax: *****
Business Tangible Personal Property (BTPP) Tax
Machinery and Tools (M&T) 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. You appeal the assessment of Machinery and Tools (M&T) tax and Business Tangible Personal Property (BTPP) tax issued to the Taxpayer by ***** (the “County”) for the 2020 tax year.
The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site.
FACTS
The Taxpayer operated open pit quarry mines in the County. It also had mining operations in other Virginia localities and in ***** (State A). The Taxpayer filed an M&T tax return for the 2020 tax year, reporting taxable machinery and tools used in its mining operations. The return, however, did not include certain categories of assets the Taxpayer had previously included in prior years’ returns but now believed had been included in error. The Taxpayer believed these categories of assets were not subject to the M&T tax because they were not directly used in the Taxpayer’s mining operations. The County adjusted the return to include the categories in the taxable measure of machinery and tools and business tangible personal property and issued an assessment.
The Taxpayer appealed to the County, contending that the excluded categories of assets were not directly used in its mining operation. The County issued a letter to the Taxpayer, informing it that a prior letter concluding that the Taxpayer was a processor, not a manufacturer, was still valid. The Taxpayer appealed to the Department, contending that it was a mining company and as such only its machinery and tools were subject to local taxation.
ANALYSIS
Virginia Code § 58.1-3983.1 B 5 and § 1.7 of the Department’s Guidelines for Appealing Local Business Taxes, issued as Public Document (P.D.) 04-28 (6/25/2004), provide that once a proper local appeal has been filed, it is incumbent on a locality to undertake a full review of a taxpayer’s claims and issue a written determination setting forth the facts and analysis in support of the locality’s decision. The final local determination must also include a written explanation of the taxpayer’s right to file an administrative appeal of the determination to the Department. Only when a proper final local determination has been issued can a taxpayer file an administrative appeal with the Department, if it wishes to contest any of the locality’s conclusions. See Virginia Code § 58.1-3983.1 D and P.D. 04-28.
The County’s determination letter did not address the Taxpayer’s claim that it was a mining company engaged in mining operations. Rather, it concluded that the Taxpayer was a processor, not a manufacturer. Thus, it appears the County failed to consider the Taxpayer’s claims and provided no analysis to address the Taxpayer’s assertions. Further, the County’s letter did not contain a written explanation of the taxpayer’s right to file an administrative appeal of the determination to the Department.
DETERMINATION
For the reasons stated above, the Department lacks jurisdiction to address this appeal. Therefore, I am remanding this case back to the County with instruction to fully address the specific arguments set forth in the Taxpayer’s appeal and to issue a proper final local determination. Once a proper final local determination has been issued, the Taxpayer, if it is not satisfied with such determination, may file an appeal under either Virginia Code § 58.1-3980 or § 58.1-3983.1 within the time prescribed by law. If the Taxpayer wishes to appeal to the Department, the Taxpayer must proceed under Virginia Code § 58.1-3983.1.
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/4094.B