Tax Type
BTPP Tax
Description
Assessments; Filing requirements: Tangible personal property
Topic
Local Taxes Discussion
Records/Returns/Payments
Statute of Limitations
Tangible Personal Property
Date Issued
12-12-2011
December 12, 2011
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Business Tangible Personal Property 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 the ***** (the "City") assessment of Business Tangible Personal Property (BTPP) tax made on certain property owned by the Taxpayer. I apologize for the delay in responding to your letter.
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, i.e., 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 provides interstate motor carrier transport primarily for large retailers. The Taxpayer operates 20 terminals nationwide. One such retailer has a regional distribution center in the City. The contract requires the Taxpayer allocate a certain number of tractors and trailers to the distribution center. The specific trailers assigned may change periodically.
The Taxpayer filed local property tax returns with the City for the 2004 through 2010 tax years. In early 2008, the City contacted the Taxpayer concerning an unpaid balance on a 2006 BTPP assessment and requested an accurate listing of property for the 2008 tax year. An assessment for the 2008 tax year was issued based on information provided by the Taxpayer. The Taxpayer did not agree with the assessment and also claimed it overpaid tax in prior tax years. The City discovered that the Taxpayer had reported a number of vehicles in the ***** (the "County”) for the 2007 tax year. The City asserted that these vehicles were sitused in the City in 2007.
The Taxpayer filed an appeal with the City seeking correction of the assessments for the 2004 through 2009 tax years, citing numerous errors made by the City. On December 29, 2010, the Taxpayer filed a complaint in the Circuit Court of the City of Staunton (the Circuit Court), Case No. CL10000231-00, in order to address the Taxpayer's appeal of the BTPP taxes. The suit included the 2009 and 2010 tax years. Subsequently, the Taxpayer filed appeals for these tax years with the Department.
The Department responded to the Taxpayer's appeals indicating that it would defer to the Circuit Court's decision with regard to the issues between the City and the Taxpayer. On September 6, 2011, the Circuit Court issued a decision concluding that the 2004 through 2006 tax years were beyond the statute of limitations and instructing the Department to issue a response to the Taxpayer's appeal.
ANALYSIS
Application Filed with Circuit Court
Under Va. Code § 58.1-3984, a taxpayer seeking correction of a local tax assessment may file an application with the appropriate court provided such application is made within three years from the last day of the tax year for which such assessment was made, one year from the date of the assessment, one year from the date of a final local determination issued by a locality, or one year from the date of a final local determination issued by the Tax Commissioner, whichever is later. The statute contains no requirement that a taxpayer must exhaust all administrative remedies before filing an application with a court.
As such, when a taxpayer has the same or similar issues before both the court and the Department, the Department has traditionally deferred to the court's authority in interpreting Virginia statutes. Therefore, the Department's policy is to not address an appeal while the same matter is pending in court. The primary reason behind the policy is that tine court's interpretation of the statute and its application to a taxpayer's situation is the final decision on the matter. Any determination by the Department must be consistent with the court's findings.
The Taxpayer filed an application with the Circuit Court while its appeal was under consideration by the Department. The Department followed established policy in refraining from addressing the Taxpayer's appeal when the Circuit Court had clear jurisdiction in the matter. While the Department maintains that its policy is valid and appropriate, it will comply with the Circuit Court's request. However, because the Circuit Court has ruled that the statute of limitations for the 2004 through 2006 tax years has expired, the Department will not include these tax years in its analysis or determination.
Statute of Limitations
Virginia Code § 58.1-3903 provides that an assessing official may assess omitted local taxes for the current tax year and the three preceding tax years. As long as the limitations period remains open, the local assessing officer has the authority to issue an assessment for the applicable period. See Public Document (P.D.) 04-47 (8/13/2004).
In this case, the Taxpayer filed a return of the 2007 tax year and paid the tax. In July 2009, the City rendered its determination, but did not issue an assessment. Because the current tax year is 2011, the City would only be permitted to make assessments for the 2008 through 2011 tax years. Based on the statute cited above, the statute of limitations for making an assessment for the 2007 tax year has expired.
Situs of Property
For the 2008 through 2010 tax years, the primary issue concerns the situs of tractors (trucks) and freight trailers engaged in the Taxpayer's business of moving freight for the retailer's regional distribution center. The Taxpayer believes that its exposure to property tax is limited to trailers physically present in the City on January 1 of the tax year. As a general rule for property tax, it is true that tangible personal property is taxable in the jurisdiction in which the property is located on tax day.
Under Va. Code § 58.1-3511 A, the situs of motor vehicles, travel trailers, boats and airplanes is, with certain exceptions, the locality where the vehicle is normally garaged, docked or parked. The tractors and trailers owned by the Taxpayer do not appear to fit into any of the exceptions for the situ sing of vehicles enumerated in Va. Code § 58.1-3511.
Further, the Attorney General has ruled that, situs of a tractor trailer for BTPP taxation is the place where it is ordinarily garaged or parked as of January 1 of a tax year. See 1984 Report of the Attorney General 399. Situs would not, however, include the casual presence of property in a locality while in the course of transit. Hogan v. County of Norfolk, 198 Va. 733, 96 S.E.2d 744 (1957). When it cannot be determined where the vehicle is normally located, the situs is the domicile of the owner of such personal property. See 1983-1984 Report of the Attorney General 400.
The Taxpayer furnished global positioning data for its trailers detailing their respective locations on and around January 1, 2008. The Taxpayer asserts that the global positioning data demonstrates where the trailers were physically located on January 1. In addition, the Taxpayer has provided records and an affidavit for the 2008 tax year supporting this position. As indicated above, the situs of the tractors and trailers does not necessarily correspond with where they were physically located on January 1.
For 2008, the Taxpayer provided the City with a report titled "Virginia Equipment." The City made its assessment based on this schedule. The City's assessments for the 2009 and 2010 tax years were based on information provided by the Taxpayer in May 2008.
The Taxpayer asserts that the report provided was a confidential internal document and should not have been disclosed. Under Va. Code § 58.1-3983.1 B 3, a local assessing officer may require the submission of additional information or documentation in order to make a proper and equitable determination of an application for correction. Because the listing includes property in a class subject to taxation, the City was within its authority to request and examine the document.
The Taxpayer also asserts that the title of the document is misleading. It contends the title of the report was changed when it was sent to the City, and it was actually maintained for mileage reconciliation purposes only. The report was, in fact, titled "Miles for Virginia Based Equipment." This title would seem to indicate that the Taxpayer was maintaining mileage information for its tractors and trailers located in Virginia.
It has been the Department's experience that reports for specific purposes can, on occasion, be incorrectly labeled or contain other inaccuracies. As such, the Department has found it advisable to reconcile such reports to other documents directly tied to an entity's financial statements. It does not appear that the City has done that in this case.
Further, although the Taxpayer is required to keep a certain number of tractors and trailers available to the retailer's distribution center, the Taxpayer has not assigned specific equipment to the facility. While a helpful indicator of where movable property might be normally garaged, the Department would not consider such information to be conclusive.
In this case, the Taxpayer has tractors, trailers, and other movable tangible personal property engaged in providing delivery services for multiple customers in a number of jurisdictions. Under such circumstances, one way to determine the situs of such property would be based on the preponderance of the usage of such property. If a tractor or trailer were used to provide delivery services for the customer in the City, based on time or mileage, more than in any other customer, such movable tangible personal property could be considered to be normally garaged in the City. In such cases, all facts and circumstances must be considered in determining situs and no one fact may be determinative.
Accurate Assessments
The Taxpayer asserts that the City's ordinance limits the information that may be used for the basis of a BTPP assessment. The Taxpayer asserts that under the ordinance the City may only use the most recent tax return or information available from the Department of Motor Vehicles as the basis for assessments on motor vehicles. Thus, the Taxpayer asserts that the City did not have the authority to issue assessments for the 2009 and 2010 tax years based on schedules provided by the Taxpayer for the 2008 tax year.
Virginia Code § 58.1-3109 6 grants local assessing officers the authority to require records and other information necessary to make an accurate assessment of a taxpayer’s tangible personal property. In addition, pursuant to Va. Code § 58.1-3983.1 B 3, a local assessing officer may require the submission of additional information or documentation in order to make a proper and equitable determination of an application for correction.
Because the listing includes property in a class subject to taxation, the City was within its authority to request and examine the document. Further, both the City and the Department have requested a number of documents from the Taxpayer that may provide sufficient information to show the situs of the Taxpayer's property for the 2009 and 2010 tax years. The Taxpayer has objected to providing such information to the City and the Department.
As indicated above, an assessment issued by a locality is deemed to be prima facie correct. See Va. Code § 58.1-3983.1 B 4. As such, it is incumbent upon the Taxpayer to prove to the satisfaction of the local assessing officer that it properly reported the items and value of property on BTPP returns.
Valuation
In its letters appealing the 2009 and 2010 tax years, the Taxpayer disagrees with the method used by the City to value the tractors and trailers. The City states that it used a pricing guide to value the property.
Virginia Code § 58.1-3103 charges local commissioners of the revenue with the responsibility of assessing property at fair market value (FMV). The FMV of a particular item of tangible personal property is generally defined as the price such property will bring when offered by one who desires, but is under no obligation, to sell it, and the buyer has no immediate necessity to purchase it. See Tuckahoe Women's Club v. County of Richmond, 119 Va. 734, 101 S.E.2d 571 (1958).
Virginia Code § 58.1-3506 A 25 sets forth a separate classification for tractors and trailers with a gross vehicle weight of 10,000 pounds or more used by a motor carrier hired to transport property in interstate commerce. The statute does not specify how such property should be valued. The City's local assessing officer determined use a pricing guide for valuation purposes was appropriate. The method is the one of the opinions for most motor vehicles classified under Va. Code § 58.1-3503.
The Taxpayer argues that the City did not use the lowest value specified in the pricing guide. While several categories of property require such valuation under Va. Code § 58.1-3503, no such limitation is placed on a locality under Va. Code § 58.1-3506.
The Taxpayer also asserts the City failed to provide a reasonable description of its valuation method. According to the City, the valuation was done using a national recognized pricing guide. For purposes of the assessments made against the Taxpayer, the City used base value models without equipment options. Without information from a taxpayer as to which items of property were properly sitused in a locality, it is difficult for the local assessing office to provide a precise description of its valuation methods.
DETERMINATION
The statute of limitations for the 2007 tax year expired on December 31, 2010. The Taxpayer raised no substantive issues concerning its original 2007 return. Because the City failed to issue a assessment within the statute of limitations, it is prohibited from issuing an assessment against the Taxpayer for underpaid BTPP for the 2007 tax year.
With regard to the number of tractors, trailers and other movable tangible personal property subject to tax in the City for 2008 through 2010, the evidence suggests that such equipment was not in the City casually or temporarily, but was kept and maintained there in the ordinary course of the Taxpayer's business. While agreeing that the City's assessment may not be based on the most accurate information, the Department finds the global positioning data provided does not reflect the situs of the Taxpayer's movable tangible personal property.
The burden is on the Taxpayer to show which trailers and other movable tangible personal property were normally garaged in the City. Because the Taxpayer has failed to comply with requests for information, from both the City and the Department, or provide any suitable alternative documents, the City's assessments for the tax years at issue are upheld.
If you have any questions concerning this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
Craig M. Burns
Tax Commissioner
- Sincerely,
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AR/1-4890168035.o
Rulings of the Tax Commissioner