Tax Type
BPOL Tax
Local Taxes
Description
Beginning business
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
06-28-2000
June 28, 2000Re: Taxpayer: ****
Locality Assessing Tax:
Final State Determination
Appeal of Business, Professional and Occupational License (BPOL) Tax
Dear ****
This is in response to your appeal of a 1999 audit assessment of the 1996 tax year for **** (the "Business") issued by the City of **** (the "City"). You appeal a final local determination by the Commissioner of the Revenue of the City upholding an audit assessment of the Business's BPOL taxes due. I apologize for the delay in responding to your application for correction.
The BPOL tax and fee are imposed and administered by local officials. Code of Virginia § 58.1-3703.1(A)(5) authorizes the department to issue determinations on taxpayer appeals of certain BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct. In other words, 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 by the Business and the City as summarized below. Copies of cited sources are enclosed.
The Taxpayer's Position
The Business began its operations in the City in October of 1995. It did not apply for the BPOL license prior to beginning business as required by Code of Virginia, § 58.1-3703.1(A)(2)(a). Rather, the Business paid BPOL taxes for the license year of May 1, 1995 through April 30, 1996 on January 5, 1996. In so doing, the Business prorated the estimated gross receipts as follows:
The City's Position
In an audit conducted by the City in 1999, the Business was found to be have underestimated its gross receipts for 1996; its actual receipts for that year were $****. The City stated that the Business had only remitted $**** in BPOL taxes due in 1996. The Business contested the results of the audit as it pertained to taxes remitted in the calendar year of 1996. While it does not dispute the adjusted gross receipts earned in that year, the Business maintains that it had remitted $***** in taxes and owes $***** in additional taxes for 1996, as opposed to the City's estimate of $****.
In its final determination, the City asserted that it is "precluded by State statute to adjust license tax payments, either debits or credits, beyond the current license year (1999) and the three prior license years (1996, 1997 and 1998)." The City also stated in its final determination that "[y]our letter thoroughly presents your case and, if not barred by the statute of limitations, would have caused us to adjust our calculations." The City was referring to the adjusting of the 1995 partial year estimates to the actual gross receipts earned, which were not the subject of the appeal.
The Business filed its appeal of the final local determination of taxes due in 1996 with the Tax Commissioner on May 17, 1999.
Code of Virginia § 58.1-3980(A) provides that:
The City has practiced the following procedure for those businesses that report a partial year income for the first year in which the business is engaged in activity.
I concur that the statute of limitations bars an audit or adjustment of license year 1995. The City, on the other hand, clearly has the authority to review the 1996 license year. The Taxpayer's 1996 taxes must be regarded as estimated since the Taxpayer had not been in business for a full year in 1995.
The Business has provided sufficient proof that the assessment made by the locality for license tax year 1996 is improper and subject to reconsideration. Therefore, I am returning this matter to the locality for a reconsideration of its final local determination. The reconsideration should include a review of the 1996 assessment on a license tax year basis. I would strongly suggest that the auditor and the commissioner of the revenue meet with the Business so they can discuss how the BPOL tax applies to the Business in terms of filing deadlines, etc. The 1996 estimates should be adjusted to fit the actual gross receipts of the business. For tax years 1997 going forward, the actual revenues from the prior year, or base year, serve as the basis of the tax. Code of Virginia § 58.1-3700.1.
If you have other questions, please do not hesitate to contact ****, Tax Policy Analyst, in my Office of Tax Policy, at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23473
Locality Assessing Tax:
Final State Determination
Appeal of Business, Professional and Occupational License (BPOL) Tax
Dear ****
This is in response to your appeal of a 1999 audit assessment of the 1996 tax year for **** (the "Business") issued by the City of **** (the "City"). You appeal a final local determination by the Commissioner of the Revenue of the City upholding an audit assessment of the Business's BPOL taxes due. I apologize for the delay in responding to your application for correction.
The BPOL tax and fee are imposed and administered by local officials. Code of Virginia § 58.1-3703.1(A)(5) authorizes the department to issue determinations on taxpayer appeals of certain BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct. In other words, 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 by the Business and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The Taxpayer's Position
The Business began its operations in the City in October of 1995. It did not apply for the BPOL license prior to beginning business as required by Code of Virginia, § 58.1-3703.1(A)(2)(a). Rather, the Business paid BPOL taxes for the license year of May 1, 1995 through April 30, 1996 on January 5, 1996. In so doing, the Business prorated the estimated gross receipts as follows:
-
- $**** For period of October 1, 1995 - December 31, 1995
$**** For period of January 1, 1996 - April 30, 1996
- $**** For period of October 1, 1995 - December 31, 1995
The City's Position
In an audit conducted by the City in 1999, the Business was found to be have underestimated its gross receipts for 1996; its actual receipts for that year were $****. The City stated that the Business had only remitted $**** in BPOL taxes due in 1996. The Business contested the results of the audit as it pertained to taxes remitted in the calendar year of 1996. While it does not dispute the adjusted gross receipts earned in that year, the Business maintains that it had remitted $***** in taxes and owes $***** in additional taxes for 1996, as opposed to the City's estimate of $****.
In its final determination, the City asserted that it is "precluded by State statute to adjust license tax payments, either debits or credits, beyond the current license year (1999) and the three prior license years (1996, 1997 and 1998)." The City also stated in its final determination that "[y]our letter thoroughly presents your case and, if not barred by the statute of limitations, would have caused us to adjust our calculations." The City was referring to the adjusting of the 1995 partial year estimates to the actual gross receipts earned, which were not the subject of the appeal.
The Business filed its appeal of the final local determination of taxes due in 1996 with the Tax Commissioner on May 17, 1999.
OPINION
Code of Virginia § 58.1-3980(A) provides that:
-
- Any person, firm or corporation assessed by the commissioner of the revenue... with local taxes on tangible personal property, machinery and tools, or merchants capital, or a local license tax, aggrieved by any such assessment, may, within three years from the last day of the tax year for which such assessment is made, or within one year from the date of the assessment, whichever is later, apply to the commissioner of the revenue... who made the assessment for a correction thereof.
- Any person, firm or corporation assessed by the commissioner of the revenue... with local taxes on tangible personal property, machinery and tools, or merchants capital, or a local license tax, aggrieved by any such assessment, may, within three years from the last day of the tax year for which such assessment is made, or within one year from the date of the assessment, whichever is later, apply to the commissioner of the revenue... who made the assessment for a correction thereof.
The City has practiced the following procedure for those businesses that report a partial year income for the first year in which the business is engaged in activity.
-
- Whenever any person begins a business . . . after the first day of the license year, so much of the license tax imposed . . . as is based on gross shall be measured by the estimated gross that will be made and received from the commencement of the business . . . to the end of the license year. License Code, Art. I, § 18-10. [Emphasis added.]
- Whenever any person begins a business . . . after the first day of the license year, so much of the license tax imposed . . . as is based on gross shall be measured by the estimated gross that will be made and received from the commencement of the business . . . to the end of the license year. License Code, Art. I, § 18-10. [Emphasis added.]
I concur that the statute of limitations bars an audit or adjustment of license year 1995. The City, on the other hand, clearly has the authority to review the 1996 license year. The Taxpayer's 1996 taxes must be regarded as estimated since the Taxpayer had not been in business for a full year in 1995.
The Business has provided sufficient proof that the assessment made by the locality for license tax year 1996 is improper and subject to reconsideration. Therefore, I am returning this matter to the locality for a reconsideration of its final local determination. The reconsideration should include a review of the 1996 assessment on a license tax year basis. I would strongly suggest that the auditor and the commissioner of the revenue meet with the Business so they can discuss how the BPOL tax applies to the Business in terms of filing deadlines, etc. The 1996 estimates should be adjusted to fit the actual gross receipts of the business. For tax years 1997 going forward, the actual revenues from the prior year, or base year, serve as the basis of the tax. Code of Virginia § 58.1-3700.1.
If you have other questions, please do not hesitate to contact ****, Tax Policy Analyst, in my Office of Tax Policy, at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23473
Rulings of the Tax Commissioner