May 21, 2018
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
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 the denial of refunds of Business, Professional and Occupational License (BPOL) tax paid to the ***** (the “City”) for the 2013 through 2015 tax years. You also appeal an assessment of BPOL tax issued by the City for the 2016 tax year.
The BPOL tax is imposed and administered by local officials. Virginia Code § 58.13703.1 authorizes the Department to issue determinations on taxpayer appeals of BPOL tax assessments. On appeal, a BPOL 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 and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site.
FACTS
The Taxpayer requested a refund of BPOL taxes paid for the 2013, 2014 and 2015 tax years and correction of an assessment for the 2016 tax year, contending that the federal Internet Tax Freedom Act (the “Act”), codified at Title 47 U.S.C. § 151 note, preempted imposition of the City's BPOL tax on gross receipts attributable to internet access services. The City issued a final determination denying the Taxpayer's refund request and upholding the assessment. The Taxpayer filed an appeal with the Department, repeating its contention that the Act preempts imposition of the City's BPOL tax on gross receipts attributable to internet access services.
ANALYSIS
The City contends that the Act does not apply to the BPOL tax. In addition, even if the Act applies to the BPOL tax generally, the City argues that its BPOL tax was grandfathered. The Taxpayer presents arguments to refute these contentions and asserts that the Act precludes imposition of the BPOL tax on gross receipts attributable to Internet access services.
In Public Document (P.D.) 17-94 (6/9/2017), the Department concluded that the Act applied to the BPOL tax. The City argues that neither the Commonwealth nor any locality recognizes the Act as a tax exemption, citing P.D. 15-218 (12/8/2015). In that case, the Department determined that the Act did not prevent the imposition of Virginia's communication sales tax to certain specific fees the taxpayer imposed, such as activation and early termination fees and broadband recovery fees. The Department, however, did not state in P.D. 15-218 that the Act could never prevent the imposition of a state or local tax otherwise authorized by Virginia statute.
In addition, the Department has declined to issue any orders for correction on the basis that a Virginia locality failed to prove it qualified for grandfather protection under the Act. See P.D. 18-24 (3/14/2018).
DETERMINATION
Because the remaining issue involves a dispute between the Taxpayer and the City regarding whether the City was grandfathered under the Act, the Department declines to issue an order for correction in this case pursuant to P.D. 18-24. Therefore, the City's assessment stands. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1418.M