June 17, 2019
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Business Tangible Personal Property Tax
Dear *****:
This notice of jurisdiction is issued upon the application for correction filed by ***** (the “Taxpayer”), with the Department. The Taxpayer appeals a determination issued by ***** (the “County”) concerning whether it was exempt from the Business Tangible Personal Property (BTPP) tax for the 2012 through 2016 tax years because it should have been classified as a manufacturer.
The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections cited are available online in the Laws, Rules and Decisions section of the Department’s web site, located at www.tax.virginia.gov.
FACTS
The Taxpayer is a producer of ready to serve meals for airliners. It filed its BTPP tax returns classifying itself as business service. The Taxpayer subsequently filed refund claims pursuant to Virginia Code § 58.1-3980 with the County for the 2012 through 2016 tax years, contending it should have been classified as a manufacturer for purposes of the BTPP tax.
The County denied the refund request for the 2012 tax year on the basis that it was outside the statute of limitations. It further denied the refund requests for the 2013 through 2016 tax years, concluding that the Taxpayer was a business service. The County instructed the Taxpayer that any additional appeals were to be filed with a circuit court pursuant to Virginia Code § 58.1-3984. The Taxpayer appealed the County’s determination to the Department.
ANALYSIS
Appealable Event
Under § 1.4 of the Guidelines for Appealing Local Business Taxes, issued as Public Document (P.D.) 04-28 (6/25/2004), an “assessment” is defined as “a determination as to the proper rate of tax, the measure to which the tax rate is applied, and ultimately the amount of tax, including additional or omitted tax, that is due.” When a taxpayer files an amended local business tax return, the local taxing authority must make a determination as to the proper amount of the tax. If the locality denies the refund, it has made a determination as to the proper amount of tax, even if the assessment on that locality's books is not changed. Consequently, the denial of a refund by a local taxing authority would constitute an assessment for purposes of filing an appeal under Virginia Code § 58.1-3983.1. See P.D. 10-103 (6/18/2010).
Virginia Code § 58.1-3980 provides that any person aggrieved by an assessment of local taxes “may, 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, apply to the commissioner of the revenue or such other official who made the assessment for a correction thereof.” Under this procedure, if the taxpayer disagrees in whole or in part with the local assessing officer’s determination, the taxpayer may then seek correction with the circuit court under the provisions of Virginia Code § 58.1-3984.
Virginia Code § 58.1-3983.1 B 1 provides that any person assessed with a “local business tax . . . may appeal such assessment within one year from the last day of the tax year for which such assessment is made, or within one year from the date of such assessment, whichever is later, to the commissioner of the revenue or other assessing official.” Under this provision, if the taxpayer’s appeal is denied in part or completely by the local assessing official, the taxpayer may, within 90 days, appeal the assessment to the Department.
When responding to requests for refunds of local taxes, local taxing officials have the discretion to simply deny the request or issue a final determination. When a final determination is not issued by a locality, a taxpayer may file an appeal within the statutory time prescribed with the locality as provided under Virginia Code § 58.1-3983.1 B 1. Alternatively, if the locality issues a final determination, the taxpayer may proceed to file an appeal with the Department. See P.D. 11-124 (7/1/2011) and P.D. 15-105 (5/12/2015).
In this case, the Taxpayer requested a refund from the County for the tax years at issue as permitted under Virginia Code § 58.1-3980. The County issued a determination to the refund request in lieu of denying the refund and instructed the Taxpayer to direct any further appeal pursuant to Virginia Code § 58.1-3984. Because the Taxpayer’s refund request was made properly under Virginia Code § 58.1-3980, the County cannot abrogate the Taxpayer’s right to appeal in accordance with the process established in Virginia Code § 58.1-3983.1.
Local Determination
The County cited Virginia Code § 58.1-3703 C 4 as the subject in its determination letter. This code section addresses the manufacturing exemption for the Business, Professional, Occupational License (BPOL) tax, not BTPP tax jurisdiction.
In addition, under Title 23 of the Virginia Administrative Code (VAC) 10-500-710 and P.D. 04-28, “local assessing officer” means the Commissioner of Revenue or chief assessing officer or his designee. Therefore, to qualify as a final local determination, the letter should normally be signed by the Commissioner of the Revenue or chief assessing officer and not an employee working at their direction, unless the individual has been expressly designated by the Commissioner of the Revenue or chief assessing officer and evidence of such designation is included with the final local determination. See P.D. 18-140 (3/30/2018). Additionally, Title 23 VAC 10-500-710 contains specific language that must be included in any written final determination.
In this case, the local determination was signed by the County’s director of personal property. Nothing in the determination shows that this person was expressly designated by the Commissioner of the Revenue or chief assessing officer to issue final local determinations.
DETERMINATION
For the reasons stated above, the Department lacks jurisdiction to address this appeal. I am remanding this case back to the County with instruction to fulfill its obligation under Virginia law to issue a final local determination in accordance with P.D. 04-28. Once a proper final local determination has been issued, the Taxpayer, if it is not satisfied with such determination, may file an appeal with the County under either Virginia Code § 58.1-3980 or § 58.1-3983.1 within the time prescribed by law. If the Taxpayer files a local appeal under Virginia Code § 58.1-3983.1 and is not satisfied with the County’s final determination, it may file an appeal with the Department.
If you have any questions regarding this response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/2009.B