Tax Type
E-911 Tax
Description
Local Tax for Enhanced 911 Service
Topic
Basis of Tax
Local Power to Tax
Local Taxes Discussion
Payment and Refund
Date Issued
07-30-2008
July 30, 2008
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Local Tax for Enhanced 911 Service
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 enhanced 911 (E-911) tax issued to the Taxpayer by the ***** (the "City") for the period of February 2001 through December 2005.
During the tax years in question, the E-911 tax was imposed by the locality and collected by the local exchange provided on behalf of the locality. Virginia Code § 58.1-3783.1 authorizes the Department to issue determinations on taxpayer appeals of certain local business tax assessments, including E-911 tax assessments. On appeal, an E-911 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, regulations 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.
FACT
The Taxpayer is a local exchange telephone company that collected and remitted the E-911 tax for numerous Virginia localities. During the period of October 2003 and December 2005, the Taxpayer stopped collecting E-911 tax on internal communication lines provided to one of its customers (the "Customer") when it discovered that only a small portion of its total lines could access a "public safety answering point" (PSAP) where E-911 service is provided. The Customer's telephone system was used for external and internal communication. This system consisted of more than 700 lines, but less than 20 lines provided access to the local exchange system and the PSAP.
In addition, the Taxpayer filed a claim for refund with the City in August 2006 for the period of February 2001 through September 2003. Under audit, the City denied the refund request and assessed the Taxpayer E-911 taxes due but not collected from the Customer during the period of October 2003 through December 2005. The Taxpayer appealed the assessment to the City, which issued a final local determination on October 2007, upholding the original assessment. The Taxpayer filed an appeal and also requests that the Department order the City to refund E-911 taxes collected during the February 2001 through September 2003 tax periods to the Customer.
ANALYSIS
E-911 Tax
Virginia Code § 58.1-3813.1 (repealed effective January 1, 2007 by Chapter 780, 2006 Acts of Assembly) permitted localities to impose the E-911 tax on landline and certain Internet telephone services for the sole purpose of supporting a locality's E-911 system. For landline or local exchange telephone services, the tax was imposed on consumers of the telephone service or services provided by any corporation subject to the provisions of Va. Code § 58.1-2600 et seq. Virginia Code § 58.1-2600 defines a telephone company as "a person holding a certificate of convenience and necessity granted by the State Corporation Commission authorizing telephone service."
The City's ordinance in effect during the periods at issue imposed the E-911 tax on consumers on each phone in service within its jurisdiction. According to the City, it could impose the E-911 tax on all lines purchased from a telephone company. In its final determination, the City concluded that the ordinance imposed the tax within the parameters of authority granted by the Code of Virginia.
The Taxpayer argues that the E-911 tax only applied to switched local telephone services and did not apply to internal communications lines, and the City's ordinance could not expand the service on which the tax is imposed. Virginia Code § 58.1-3813.1 imposed the E-911 tax on consumers of the telephone services, subject to the notification and jurisdictional provisions provided under Va. Code § 58.1-3812 (repealed effective January 1, 2007, by Chapter 780, 2006 Acts of Assembly). This section defined a "consumer" to be a person who, individually or through agents, employees, officers, or representatives, makes a taxable purchase of local telecommunication services. "Local telecommunication service" included switched local telephone services, telegraph services, teletypewriter, or local mobile telecommunications service. The statute pointed to Internal Revenue Code (IRC) § 4252 for the definition of local telephone service.
Under IRC § 4252(a), "local telephone service" is defined as "the access to a local telephone system, and the privilege of telephonic quality communication with substantially all persons having telephone or radio telephone stations constituting a part of such local telephone system . . . ." This subsection specifically excludes "private communication service" or intercom systems from the definition of local telephone service. Based on these statutes, the E-911 tax as imposed under Va. Code § 58.1-3813.1 was limited to purchases of lines that access the local exchange system and the PSAP.
Refund Request
The Taxpayer filed a claim for refund for on behalf of the Customer in August 2006 for the period of February 2001 through September 2003. In order to determine what if any of the claim can be honored, the questions as to who can claim the refund and the statutory period for filing such claims must be addressed.
The E-911 was imposed on the consumers of telephone services. Businesses providing taxable services were required to collect and remit the tax to the locality. Virginia Code § 58.1-3980 provides that "any person, firm, or corporation" assessed with local taxes may apply to the locality for correction of such assessment. In the case of the E-911 tax, the consumer is the person, firm, or corporation assessed by a locality.
With regard to the refund claim, the Customer is the consumer that could file a claim for correction of E-911 taxes assessed by the City. Although assessed with the E-911 tax for the period of October 2003 and December 2005, the Taxpayer, a business providing taxable telephone services, was the entity charged with collecting the tax on behalf of the City, and therefore is not considered to have been assessed for the period of February 2001 through September 2003.
The question, therefore, becomes whether or not the Customer made an application for a correction of its E-911 tax assessment. The documents show that the Taxpayer made an application on behalf of the Customer. No evidence has been provided that would indicate the Customer authorized the Taxpayer to act on its behalf. A statement granting the Taxpayer power of attorney for purposes of the application for correction has not been provided. Without such authorization, the City would be prohibited from acting on the application.
Further, where such authorization is provided, Va. Code § 58.1-3980 requires that applications for correction be made "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 . . . ." This statute does not address a tax that was assessed on a monthly basis. Because the term "tax year" generally applies to the calendar year for which local taxes are assessed under Virginia law, E-911 taxes imposed for each month of a calendar year, regardless of when the tax is required to be remitted, would be included in a tax year.
Under this analysis, the application for correction made in August 2006 was filed within three years of the last day of the 2003 tax year and the refund claims for the periods January 2003 through September 2003 would be considered to be filed timely. The refund claim for earlier periods would be considered to be filed outside the statute of limitations.
DETERMINATION
In accordance with this determination, the E-911 tax assessment for the periods October 2003 through December 2005 must be abated by the City. Additionally, the Customer must authorize the Taxpayer to act on its behalf before the City can review the request for refund. The City may order a refund of any tax over collected, as permitted under the statute of limitations.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-2052509457.o
Rulings of the Tax Commissioner