Tax Type
BTPP Tax
Description
Underreporting the value of its taxicabs for business tangible personal property tax
Topic
Local Taxes Discussion
Records/Returns/Payments
Tangible Personal Property
Date Issued
04-27-2012
April 27, 2012
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 Business Tangible Personal Property (BTPP) tax assessment issued by the ***** (the "City") for the 2008 through 2010 tax years.
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 web site.
FACTS
The Taxpayer operated a taxicab business in the City. The City determined that the Taxpayer underreported the value of its taxicabs for business tangible personal property tax purposes and issued assessments for the tax years at issue. The Taxpayer appealed the assessments, contending the City erroneously relied on a pricing guide in valuing the taxicabs. In its final determination, the City concluded that the Taxpayer failed to provide sufficient evidence to demonstrate the fair market value f its taxicabs, and upheld its assessment. The Taxpayer appeals the local final determination to the Department.
ANALYSIS
All tangible personal property, unless declared intangible under the provisions of Va. Code § 58.1-1100 et seq., is reserved for local taxation by Article X, § 4 of the Constitution of Virginia. Article X, §§ 1 and 2 of the Constitution of Virginia provide that all property, unless specifically exempted within the provisions of the Constitution, shall be taxed at a uniform rate among classes, and that "all assessments of real estate and tangible personal property shall be at their fair market value to be ascertained as prescribed by general law."
Virginia Code § 58.1-3103 charges local commissioners of the revenue with the responsibility of assessing property at fair market value. The fair market value 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).
The Taxpayer argues that the City improperly relied on a pricing guide to determine fair market value of the taxicabs. It asserts that Va. Code § 58.1-3503 A excludes taxicabs from the requirement that motor vehicles be valued using a recognized pricing guide.
In attempting to achieve property valuations that reasonably approximate fair market value, the General Assembly has statutorily prescribed different methodologies for use in the valuation of different classifications of property. Virginia Code § 58.1- 3503 specifies that for most items of tangible personal property, fair market value is to be ascertained either by a percentage or percentages of original cost, or in the case of trucks and cars and certain other vehicles, by means of recognized pricing guides. However, Va. Code § 58.1-3503 A 8 sets forth a separate classification for taxicabs.
Unlike other types of motor vehicles, the statute does not specify how taxicabs should be valued.
Virginia Code § 58.1-3503 B provides:
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- Methods of valuing property may differ among the separate categories, so long as each method used is uniform within each category, is consistent with requirements of this section and may reasonably be expected to determine actual fair market value as, determined by the commissioner of revenue or other assessing official . . .
The Constitutional provisions concerning the taxation of property presumes that the General Assembly's prescribed valuation method will both standardize valuation practices across all the local governments in Virginia and result in something approximating fair market value. In cases where the General Assembly has failed to prescribe a method for valuation of taxicabs, a commissioner of the revenue or other local assessing official must develop a method that meets the standard set in the Constitution of Virginia.
The City relies on a recognized pricing guide to ascertain the value of the taxicabs within its jurisdiction and then allows adjustments based on evidence of their physical condition as provided by taxicab owners. The City applies this method uniformly among taxicab companies within its jurisdiction.
In contesting valuations of tangible personal property, the taxpayer bears the burden of proof to demonstrate that property has been assessed at greater than fair market value. See Va. Code § 58.1-3984. The mere fact that the City uses a valuation method different from other localities is not sufficient to show that the City's method is invalid.
The Taxpayer further contends that the City failed to take into consideration the alterations that transform a stock automobile into a taxicab and the condition of the Taxpayer's cabs. The City asserts that the Taxpayer failed to provide sufficient evidence to adjust the value of the taxicabs from the value stated in the pricing guide.
Under the provisions of Va. Code § 58.1-3109 6, the local commissioner of the revenue is empowered with the authority to require records and other information necessary to make an accurate assessment of a person's tangible personal property. It is incumbent upon the Taxpayer to prove to the satisfaction of the local taxing authority that it properly reported the value of its property on its BTPP returns. See Va. Code § 58.1-3983.1 B 4.
DETERMINATION
Based on facts and documentation presented, the City's methodology appears to meet the standard set forth in the Constitution of Virginia. Accordingly, the City's assessment is correct pending an examination of documentation in order to allow adjustments based on the physical condition of the taxicabs.
I am, therefore, remanding this case back to the City in order to consider any other evidence the Taxpayer may be able to provide with regard to the physical condition of its taxicabs. Such documentation or evidence should be provided to the City within 30 days of the date of this determination. If the required documentation is not provided within the time allowed, the assessments will be considered to be correct as issued and the City may proceed with collection action.
If you have any questions regarding this determination, you may call ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Craig M. Burns
Tax Commissioner
- Craig M. Burns
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AR/1-5008730148.B
Rulings of the Tax Commissioner