Tax Type
Corporation Income Tax
Description
Telecommunications Tax; SCC
Topic
Records/Returns/Payments
Statute of Limitations
Taxable Income
Date Issued
09-12-2007
September 12, 2007
Re: § 58.1-1821 Application: Corporate Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the assessment for the minimum tax on telecommunications companies (the "Telecommunications Tax") issued to your client, ***** (the "Taxpayer"), for the taxable years ended December 31, 2002 through 2004.
FACTS
The Taxpayer is a telecommunications company. It filed Virginia corporate income tax returns for the taxable years at issue that reported losses. The Taxpayer did not file Virginia Telecommunications Companies Minimum Tax forms, nor did it pay the Telecommunications Tax.
The Taxpayer was audited by the Department and the auditor made an assessment of Telecommunications Tax based on the gross receipts reported to the Virginia State Corporation Commission (SCC). Upon reviewing the audit adjustments, the Taxpayer discovered that they gross receipts reported to the SCC were overstated. The Taxpayer sought a recertification of the gross receipts from the SCC, but its request was denied because it was not made within the statutory period allowed.
The Taxpayer appeals the Department's assessment and contends that gross receipts as defined in the statute do not tie into the amount certified by the SCC. In addition, the Taxpayer contends that the limitations period for correcting the gross receipts certified by the SCC applies only to taxpayers seeking to file amended returns and that a taxpayer is entitled to receive relief from an assessment that results from an audit that occurs outside of the certification period.
DETERMINATION
Virginia Code § 58.1-400.1 A provides that a telecommunications company is subject to a minimum tax, in lieu of the corporate income tax, based on its gross receipts for the calendar year that ends during the taxable year if the corporate income tax is less than the Telecommunications Tax. The Taxpayer contends this definition does not stipulate that the gross receipts must be certified by the SCC. As such, the Department is not bound to the certified gross receipts of a telecommunications company for determining its Telecommunications Tax.
Virginia Code § 58.1-400.1 C specifies that "The State Corporation Commission shall certify to the Department the . . . gross receipts for each telecommunications company." It has been the Department's longstanding policy that the SCC, not the Department, determines the components of gross receipts. See Public Document (P.D.) 91-273 (10/23/1991). Further, the Department has determined on several occasions that certified gross receipts cannot be changed without approval from the SCC. See P.D.s 93-35 (2/24/1993) and 96-395 (12/31/1996).
Under Va. Code § 58.1-2674.1, any telecommunications company that disagrees with the SCC in its certification of the gross receipts to the Department must apply to the SCC for a review within 18 months of the certification on a form prescribed by the SCC. The Taxpayer did not discover its error until after the 18-month statute of limitations had expired. The Taxpayer contends that the 18-month limitations period applies to taxpayers seeking to file an amended return, but does not apply to taxpayers that are audited after the 18-month limitations period.
The statute, however, does not stipulate any conditions under which the 18month time period would not apply. If a telecommunications company fails to request a review of the gross receipts certified by the SCC within the limitations period, the gross receipts certified by the SCC cannot be changed for income tax purposes.
In this case, the auditor conducted an audit of the Taxpayer and discovered that it failed to pay the Telecommunications Tax. The auditor assessed additional tax and interest based on gross receipts certified by the SCC as statutorily mandated. Neither the Department nor the SCC is authorized to adjust the amount of certified gross receipts after the expiration of the 18-month limitations period. Accordingly, the Taxpayer's request for an abatement of the assessments must be denied.
The enclosed schedule shows the remaining balance of the assessments after applying the Taxpayer's payment. Please remit the balance to the Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attention: *****. Payment must be made within 30 days from the date of this letter to avoid the accrual of additional interest. If you have any questions concerning payment of the assessment, you may contact ***** at *****.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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Janie E. Bowen-
- Tax Commissioner
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AR/1-939649319B
Rulings of the Tax Commissioner