August 24, 2021
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
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 ***** (the “Taxpayer”), with the Department of Taxation. The Taxpayer seeks a refund of Business, Professional and Occupational License (BPOL) tax paid to ***** (the “County”) for the 2017 through 2020 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 was a producer of ready to serve meals for airliners. It filed its BPOL tax returns classifying itself as a retail merchant. The Taxpayer subsequently filed refund claims with the County for the 2017 through 2020 tax years, contending it should have been classified as a manufacturer. The County denied the Taxpayer’s classification request. The Taxpayer appeals to the Department, contending that it was exempt from BPOL taxation as a manufacturer selling its goods at wholesale from the place of manufacture.
ANALYSIS
Virginia Code § 58.1-3703.1 A 5 b 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 a taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed. An appealable event also includes the appeal of a business classification regardless of whether the taxpayer’s appeal is in conjunction with an assessment, examination, audit or any action taken by the locality.
It appears that the Taxpayer first made the refund claim for the 2017 through 2020 tax years by letter dated December 31, 2020. The County’s letter of January 28, 2021, acknowledged receipt of the Taxpayer’s “appeal” and concluded that the issue had been addressed in a prior determination issued by the County on May 3, 2017.
It appears that the January 2021 letter was the first response to the Taxpayer’s refund request. As such, it constituted the initial denial of the refund, not a determination of a local appeal filed by the Taxpayer. The January 2021 response, therefore, was the appealable event for purposes of filing a local administrative appeal. Because the Taxpayer subsequently appealed directly to the Department, a valid local appeal has not yet been filed nor has a valid final local determination been issued.
In addition, under Title 23 VAC 10-500-710, “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 Public Document (P.D.) 18-140 (3/30/2018). Additionally, Title 23 of the Virginia Administrative Code (VAC) 10-500-710 contains specific language that must be included in any written final determination.
Even if the County’s January 2021 letter had been issued pursuant to a local appeal, it was signed by the County’s deputy commissioner of tax compliance. While the deputy commissioner’s oath of office was attached to the letter, there was no express designation by the County’s Commissioner of the Revenue given to issue final local determinations.
DETERMINATION
I find that the January 2021 letter denying the Taxpayer’s refund request constituted the appealable event for purposes of filing a local administrative appeal. Because the Taxpayer subsequently appealed directly to the Department, a valid local appeal has not yet been filed nor has a valid final local determination been issued as to the 2017 through 2020 tax years.
Moreover, the determination letter issued by the County was not signed by the County’s Commissioner of the Revenue and 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, even if a valid local appeal had been filed, the Department could not consider the letter to be a final local determination.
Further, the Department observes that it is the practice of most, if not all localities, for the Commissioner of Revenue or chief assessing officer to sign final local determination letters. This practice generally reflects the Department’s own appeals process by which the Tax Commissioner signs appeal determinations and official rulings of the Department.
In the Department’s opinion, such a practice is preferred because it helps ensure the highest level of supervisory oversight of the process. Regardless, under no circumstance should an employee who issued an audit determination which becomes the subject of an appeal be permitted to sign the final local determination in the case.
In addition, the Department has observed that localities are uncertain about what constitutes a proper designation by a Commissioner of the Revenue or chief assessing officer. Designations should be signed and notarized and clearly identify the designee and what authority the Commissioner of the Revenue or chief assessing officer is granting such individual. As such, the following is a sample of such a designation:
TO WHOM IT MAY CONCERN:
Under the authority of Title 23 of the Virginia Administrative Code (VAC) 10-500-10 and the Guidelines for Appealing Local Business Tax in Public Document (P.D.) 04-28 (6/25/2004), I hereby delegate to [Insert Name], [Insert Title], the authority to sign final local determination letters on my behalf.
Honorable [Insert Name]
Commissioner of the Revenue
[Insert Locality]
Accordingly, because a valid local appeal has not yet been filed and the purported final local determination letter was not signed by the proper individual, the Department lacks jurisdiction over the Taxpayer’s appeal. If the Taxpayer wishes to pursue its case, it must file a local administrative appeal with the County within one year from the date of the denial of the refund and wait the issuance of a valid final local determination. If the Taxpayer disagrees with the outcome of its local appeal, it may then appeal to the Department for relief. Each party is referred to the Department’s regulations governing the administration of BPOL tax appeals found in Title 23 VAC 10-500-640 et seq. for additional information regarding the process.
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/3770.B