Document Number
05-162
Tax Type
BTPP Tax
Description
Taxpayer contends that it is a contract carrier, Aircraft
Topic
Local Taxes Discussion
Date Issued
10-07-2005


October 7, 2005




Re: Appeal of Final Local Determination
Taxpayer: *****
Locality Assessing Tax: *****
Business Tangible Personal Property Tax

Dear *******************:

This final state determination is issued upon your appeal filed on behalf of ***** (the "Taxpayer") with the Department of Taxation. You appeal the ***** (the "City") assessment of Business Tangible Personal Property ("BTPP") taxes made on certain property owned by the Taxpayer. For the reasons that follow, this is a final state determination only with respect to issues raised for tax year 2004. Tax years 2000 and 2002 are barred from a final state determination by the statute of limitations.

The BTPP tax is imposed and administered by local officials. Virginia Code § 58.1-3983.1 D authorizes the Department to issue determinations on taxpayer appeals of BTPP tax assessments. On appeal, a BTPP tax assessment is deemed prima facie correct. That is, 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 on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website.

FACTS

The Taxpayer owns aircraft that are used to provide travel services to its affiliated entities. The Taxpayer bills the person or entity using the aircraft for the expenses of travel.

The Taxpayer contests the assessment of one aircraft ("Plane A") in tax year 2000, a second aircraft ("Plane B") in tax years 2002 and 2004, and a third aircraft ("Plane C") in tax year 2004. The Taxpayer contends that it is a contract carrier, and as such, its BTPP tax assessment should be based on the ratio of the number of miles traveled in the Commonwealth to the number of miles traveled outside of the Commonwealth, in accordance with Va. Code § 58.1-3511 B.

Additionally, the Taxpayer requests that its BTPP tax assessment for Plane C be prorated to reflect the sale of the aircraft in July 2004.

The City determined that the Taxpayer is a professional corporation liable for BTPP taxes at the established rate of $2.40 per $100.00 of assessment.

ANALYSIS

Jurisdiction

Virginia Code § 58.1-3983.1 offers taxpayers who believe they are erroneously assessed for local business taxes the option of using the administrative appeals process when seeking correction of an assessment. This option does not affect taxpayers' rights to use the traditional appeals process through the circuit court. The circumstances under which a taxpayer may use the administrative appeals process, however, are strictly prescribed in Va. Code § 58.1-3983.1 B.1
    • Any person assessed with any local business tax may apply 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 such assessment, whichever is later, to the commissioner of the revenue or other official responsible for the assessment for a correction of the assessment. [Emphasis added.]

If a taxpayer has appealed an assessment to the local assessing officer within one year of the year in which the assessment was made, and the local assessing official determines that his initial assessment is correct, the taxpayer may appeal the final local determination within 90 days to the Tax Commissioner. See Va. Code § 58.1-3983.1 D.

In this case, the Taxpayer made an application for correction of an assessment on April 26, 2004, in response to a distress warrant issued for the collection of personal property taxes due on Plane A for the years 2000 and 2002. The Taxpayer also included the assessment made on Plane B in tax year 2002 and 2004, and Plane C in 2004, in its application for correction filed with the local commissioner of the revenue. Based on the provisions of Va. Code § 58.1-3983.1 B, I do not have jurisdiction to consider the appeals of assessments made in 2000 and 2002, because the Taxpayer did not file an application for correction or initiate such action with the City within one year of the date of the assessments. The Taxpayer should have been informed of its right to appeal these years under the provisions of Va. Code § 58.1-3984, which provides:

    • Any person assessed with local taxes, aggrieved by any such assessment, may . . . (a) within three years from the last day of the tax year for which any such assessment is made, (b) within one year from the date of the assessment, (c) within one year from the date of the Tax Commissioner's final determination under § 58.1-3703.1 A 5 or § 58.1-3983.1 D, or (d) within one year from the date of the final determination under § 58.1-3981, whichever is later, apply for relief to the circuit court of the county or city wherein such assessment was made. [Emphasis added.]

While I do not have jurisdiction to consider your appeal for the assessments issued in 2000 and 2002, I have jurisdiction to address the 2004 assessments because the appeal for that year was timely filed with the City.

Assessment of Tangible Personal Property

The Taxpayer challenges the 2004 assessment made on Planes B and C on the basis that the aircraft operations are conducted as a contract carrier, and as such, the assessment should be made on the basis of miles traveled in Virginia.

Aircraft that are used in a business as a common, contract or private carrier are treated differently from other aircraft for purposes of the BTPP tax. Under Va. Code § 58.1­3511 B
    • The assessment of motor vehicles, travel trailers, boats or airplanes operating over interstate routes, in the rendition of a common, contract or other private carrier service which are subject to property taxation in any other state on the basis of an apportioned assessment, shall be apportioned in the same percentage as the total number of miles traveled in the Commonwealth by such vehicle bears to the total number of miles traveled by such vehicle.

That is, when a taxpayer is subject to property tax in another state on an apportioned basis, the local assessing officer must apportion the assessment of the aircraft according to the percentage of miles traveled in Virginia. For this to occur, the Taxpayer must provide the local assessing officer with evidence that the aircraft was subject to property taxation in another state on the basis of apportioned assessment. The Taxpayer has not provided such evidence; therefore, there is no basis to apportion the assessment based on miles traveled as provided in Va. Code § 58.1-3511 B.

Proration

The Taxpayer asserts that because it sold Plane C in July 2004, its assessment must be prorated in accordance with Va. Code § 58.1-3516. This Code section provides for proration of BTPP taxes only for motor vehicles, trailers, semitrailers and boats. It does not provide for the proration of property taxes on airplanes. I know of no provision in the statute that would permit localities to provide for the proration of the BTPP tax on airplanes.

Furthermore, Va. Code § 58.1-3516 is permissive, i.e., it allows a locality to adopt proration by ordinance. It is my understanding that the City's ordinance does not provide for the proration of any local business taxes. Accordingly, the City cannot prorate the 2004 assessment for Plane C.

                      • DETERMINATION

I do not have jurisdiction to address the Taxpayer's 2000 and 2002 assessments. Pursuant to the provisions of Va. Code § 58.1-3983.1, a proper appeal is made to the Department only after the assessment is first appealed to the local assessing officer within one year of the date of assessment. The Taxpayer did not file a timely appeal with the City for the 2000 and 2002 assessments.

Regarding the assessment for tax year 2004, it is my determination that the City's assessment is correct. The Taxpayer is not entitled to apportion the BTPP tax assessment on the basis of miles traveled in Virginia as compared to miles traveled everywhere because the requirements of Va. Code § 58.1-3511 B have not been satisfied. There is no proof that the aircraft at issue were subject to property tax in another state on an apportioned basis. Finally, the provisions of Va. Code § 58.1-3516 are not applicable to Plane C because the statute does not provide for the proration of the property tax on aircraft.

If you have any questions about this determination, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
                • Sincerely,

                • Kenneth W. Thorson
                  Tax Commissioner



AR/54813H
1The quoted language is from the statute as in effect in 2004, when the Taxpayer's appeal was filed. Chapter 927 of the 2005 Acts of Assembly changed the wording and organization of the statute, effective July 1, 2005, to clarify the process.

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46