Tax Type
BPOL Tax
Description
Adequate documentation not furnished to support the gross receipts reported to IRS
Topic
Local Taxes Discussion
Records/Returns/Payments
Date Issued
04-20-2007
April 20, 2007
Re: Appeal of Final Local Determination
Locality: *****
Taxpayer: *****
Business, Professional and Occupational License Tax
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 an assessment of business, professional and occupational license (BPOL) taxes issued to the Taxpayer by the ***** (the "County") for tax years 2002 through 2005.
The BPOL tax is imposed and administered by local officials. Virginia Code § 58.1-3703.1 A 6 authorizes the Department to issue determinations on taxpayer appeals of BPOL tax assessments. On appeal, a BPOL 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 represents that it is engaged in both wholesale and retail sales. Historically, it has applied for and received two separate licenses for BPOL tax purposes: one as a retail merchant and one as a wholesale merchant.
Under audit, the County was unable to verify the gross receipts identified with the Taxpayer's wholesale business and assessed the Taxpayer as a retail merchant. During the appeal to the County, the Taxpayer provided records to show the activity of the wholesale business. The County found that the evidence provided did not reconcile to amounts reported on the Taxpayer's federal income tax return. Accordingly, the County determined that the evidence was not sufficient to accurately account for the Taxpayer's wholesale business, and the assessment was upheld.
The Taxpayer appeals the assessment, claiming that a significant amount of its business during the tax years in question was, in fact, attributed to wholesale sales.
ANALYSIS
Virginia Code § 58.1-3703.1 A 1 provides that multiple businesses conducted by a person at a single location are required to obtain a separate license for each business. This same Code section also allows a taxpayer to elect to obtain one license, provided that the taxpayer meets all the following criteria:
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- a) each business or profession is subject to licensure at the location and has satisfied any requirements imposed by state law or other provisions of the ordinances of this jurisdiction; (b) all of the businesses or professions are subject to the same tax rate, or, if subject to different tax rates, the licensee agrees to be taxed on all businesses and professions at the highest rate; and (c) the taxpayer agrees to supply such information as the assessor may require concerning the nature of the several businesses and their gross receipts.
Therefore, it is incumbent upon the taxpayer to supply the local assessing official with the information supporting its claim of being engaged in two businesses. By inference, if a taxpayer claims to operate two distinct businesses, the taxpayer bears the burden of proof in substantiating its claim.
Virginia Code § 58.1-3703.1 A 5 a clarifies a taxpayer's appeal rights. It states that an appeal must be (i) filed in good faith, (ii) sufficiently identify the tax periods covered by the challenged assessments, (iii) the amount in dispute, (iv) the remedy sought, (v) each alleged error in the assessment, (vi) the legal grounds upon which the taxpayer relies, and (vii) any other facts relevant to the taxpayer's position. Most importantly, the assessment at issue in the appeal "shall be deemed prima facie correct." The burden of proof in a local license tax dispute is with the taxpayer.
DETERMINATION
In its final local determination, the County states that the Taxpayer did not furnish adequate documentation to "support the gross receipts reported on the federal income tax return or those reported on [the County's] business license tax returns." Therefore, the County declined to accept the Taxpayer's position that it engages in two separate businesses - retail sales and wholesale sales. In its current appeal filed with the Department, the Taxpayer has not provided any evidence to refute the County's position. Therefore, I decline to reverse the County's determination.
Because this is purely a factual issue, I am remanding this matter to the County with the understanding that the current assessment stands unless the Taxpayer supplies the County with sufficient documentation to prove that it indeed is engaged in two separate businesses. The Taxpayer must furnish the County with such information within 45 days of the date of this determination.
You propose that in the absence of additional information, an alternative method and compromise be accepted. Under Va. Code § 58.1-3994, only the local commissioner of the revenue can make a determination to accept such an offer. The Department will not intervene in this decision. Accordingly, I must reject your request.
If you have any questions regarding this determination, you may call ***** Office of Policy and Administration, Appeals and Rulings at *****.
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- Sincerely,
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Janie E. Bowen
Tax Commissioner
AR/1-720779901H
Rulings of the Tax Commissioner