January 7, 2020
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality Assessing Tax: *****
Business, Professional and Occupational License (BPOL) tax
Dear *****:
This notice of jurisdiction is issued upon the application for correction filed by you on behalf of your client, ***** (the “Taxpayer”), with the Department of Taxation. The Taxpayer appeals an assessment of BPOL tax issued by ***** (the “City”) for the 2014 through 2018 tax years.
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 Laws, Rules and Decisions section of the Department’s web site.
FACTS
The Taxpayer, a Virginia LLC, is engaged in the business of providing college level instruction and degrees through correspondence and in-person courses. The Taxpayer maintains a campus in the City, but also has locations in neighboring localities and states. The Taxpayer’s online activity is run through servers in ***** (“City A”) and controlled by personnel primarily located in ***** (“State A”). The Taxpayer sitused gross receipts from online students to the campus location nearest to their location. The City is seeking to situs gross receipts generated from all locations of the Taxpayer to the City. The Taxpayer asserts that situsing all gross receipts to the City is disproportionate to the services provided at that definite place of business.
ANALYSIS
The Code of Virginia creates a review process designed to encourage resolution of local license tax issues through an appeals process that includes review by the local assessing officer and appeal to the Department. Through this process, a taxpayer who disagrees with an audit assessment may apply to the local assessing officer for review. If the taxpayer is dissatisfied with the results of the local review, the taxpayer may appeal the local decision to the Department, who will make a determination of the issues raised by the taxpayer. See Title 23 of the Virginia Administrative Code (VAC) 10-500-640.
Specifically, Virginia Code § 58.1-3703.1 A 5 provides that any person assessed with a local license tax as a result of an appealable event may file an administrative appeal of the 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 the appealable event, whichever is later, with the commissioner of the revenue or other local assessing official. An appealable event is an increase in the assessment of a local license tax payable by the taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed. In addition, an appealable event includes a taxpayer’s appeal of a classification, regardless of whether it is in conjunction with an assessment, examination, audit or any other action taken by the locality.
This statute also provides the procedure that a taxpayer must follow to appeal a final local license tax assessment. A taxpayer must file an appeal with the locality in which the appealable event occurred. Once an appeal is filed, the locality’s assessing officer will fully review the taxpayer’s claim and issue a final determination letter setting forth the facts and arguments in support of its decision. See Virginia Code § 58.1-3703.1 A 5 b.
Under Virginia Code § 58.1-3703.1 A 6 a, a taxpayer may file an appeal with the Department only after a final determination has been issued by a locality. See Public Document (P.D.) 11-124 (7/1/2001). Virginia Code § 58.1-3703.1 A 5 e, however, does allow a taxpayer to appeal directly to the Department if an appeal filed with a locality has been pending for more than one year. Under such circumstances, the taxpayer can elect to consider the local appeal to have been denied. The taxpayer is required to give a locality 30 days written notice of such an election.
Under Title 23 VAC 10-500-710, “local assessing officer” means the Commissioner of Revenue or chief assessing officer of his designee. Therefore, to qualify as a final local determination, a letter should normally be signed by the Commissioner of the Revenue or chief assessing officers and not employees 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 final written determination.
DETERMINATION
The City issued a letter dated July 19, 2019 claiming to be a final determination. That letter, however, was not signed by the City’s Commissioner of the Revenue and it did not include a designation granting the employee who signed the letter authority to issue a final local determination on the Commissioner’s behalf. Therefore, the Department cannot consider the letter to be a final local determination.
Accordingly, the case will be returned to the City so that the Commissioner of the Revenue can issue a valid final local determination. Once that is done, the Taxpayer will have 90 days to file an appeal with the Department if it disagrees with the outcome of that determination. If the case has been pending with the City for more than one year, the Taxpayer may also appeal to the Department after giving the City the requisite notice.
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/2131.A