June 4, 2025
Re: Reconsideration Request
Taxpayer: *****
Locality Assessing Tax: County of *****
Business Professional and Occupational License Tax
Dear *****:
This will reply to your letter in which you seek reconsideration of the Department’s notice of jurisdiction issued as Public Document (P.D.) 24-151 (11/14/2024).
The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website.
FACTS
The County audited the Taxpayer’s BPOL returns for the 2019 through 2021 tax years and issued an assessment of additional BPOL tax for the 2019 tax year. By electronic mail in October 2023, the County requested that the Taxpayer confirm whether a telephone conversation in February 2023 was intended to be an appeal with respect to the 2019 assessment. The Taxpayer responded via electronic mail, confirming that it would like to proceed with the “informal internal appeal” concurrently with the open audit of the remaining tax years.
Subsequently, the County issued a letter described as an “Audit Determination & Final Local Determination of Administrative Appeal.” The Taxpayer appealed the final determination with respect to the 2019 tax year to the Department, contending the County improperly denied its deductions for gross receipts attributable to business activities outside Virginia and for payments to an affiliated entity. In P.D. 24-151, the Department found that both parties failed to follow the local appeals process and determined that it did not have jurisdiction to consider the Taxpayer’s appeal. The County requests reconsideration, asserting that the result would be unfair to the Taxpayer because the statutory period to file an administrative appeal with the County expired in December 2023.
ANALYSIS
Virginia Code § 58.1-3703.1 6 a states that an appeal to the Department is to be treated as an application made pursuant to Virginia Code § 58.1-1821. Under Virginia’s regulation interpreting Virginia Code § 58.1-1821, the Department will accept a taxpayer’s request for reconsideration if one of four criteria is met. See Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F.
Because local business tax appeals are handled in the same manner as appeals filed under Virginia Code § 58.11821, the Department may review reconsideration requests of local business tax determinations. See, e.g., P.D. 12-171 (11/2/2012) and P.D. 18-22 (3/12/2018). In addition, the Department has previously addressed reconsideration requests related to notices of jurisdiction issued in local business tax determinations. See, e.g., P.D. 17-217 (12/22/2017) (reconsidering P.D. 17-81 (6/1/2017)) and P.D. 25-20 (2/13/2025) (reconsidering P.D. 24-25 (3/20/2024)).
Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F 1 provides that a taxpayer who disagrees with the Department’s final determination issued pursuant to Virginia Code § 58.1-1822 may request a reconsideration of the determination. In order to grant a request for reconsideration, the Department must receive the request no later than 45 days after the date of the determination letter, and a taxpayer must meet one of four specific requirements set forth in that section:
1. The facts upon which the original determination is based are misstated by the Tax Commissioner or are inaccurate, and the determination would have a different result based on a correction of the Tax Commissioner’s misstatement of the facts presented or a clarification of the original facts presented in the taxpayer’s administrative appeal;
2. The law upon which the original determination is based has been changed by legislation, court decision, or other authority effective for the tax period(s) at issue;
3. The policy upon which the original determination is based is misapplied, and the determination would have a different result based on the application of the proper policy; or
4. The taxpayer has discovered additional evidence or documentation that was not available to the taxpayer at the time the original administrative appeal was filed with the Department, and the additional evidence or documentation could produce a result different from the original determination.
In the Department’s opinion, the County’s request meets the requirements for reconsideration because the Department has issued a determination in the intervening time that could now afford the Taxpayer an opportunity to file a local appeal. See P.D. 24-25 and P.D. 25-20.
In P.D. 24-25, the taxpayer had filed amended Machinery and Tools (M&T) tax returns with a locality, requesting refunds. In response, the locality issued a purported final local determination, denying the refunds and advising the taxpayer that it had the right to appeal to the Department. The taxpayer timely sought relief from the Department pursuant to such instruction. A clerical error, however, caused a long delay before the Department issued its determination.
The Department determined, consistent with intervening policy first published in P.D. 22-113 (6/21/2022), that it did not have jurisdiction to consider the taxpayer’s appeal because an amended return could not be treated as a local appeal and thus a valid local appeal had never been filed. The Department instructed the taxpayer to file a local appeal, and if the locality issued a final determination with which the taxpayer disagreed, the taxpayer would then be eligible to appeal to the Department.
Consistent with the Department’s instructions, the taxpayer filed an appeal with the locality. The locality, however, advised the taxpayer that it would not consider the appeal because the taxpayer had not filed it within the time allowed under either Virginia Code § 58.1-3980 or Virginia Code § 58.1-3983.1. The taxpayer again sought relief from the Department. In P.D. 25-20, the Department observed that had it been clear to the parties from the beginning that the locality’s first purported final determination was actually the denial of a refund claim and thus an assessment that triggered the Taxpayer’s right to file a local appeal, the taxpayer would have had one year from that date in order to file its local appeal under Virginia Code § 58.1-3983.1 B 1.
The parties, however, were not aware that the Department would consider that determination to in fact be an appealable assessment until P.D. 24-25 was issued. The Department, therefore, concluded that the date P.D. 24-25 was issued was the date from which the taxpayer had one year to file a local appeal. The Department explained that such treatment was appropriate to protect the integrity of the administrative appeals process, especially when the statutory filing periods had lapsed because of an error not caused by the Taxpayer.
The facts in this case are similar to those discussed above. Until the Department issued P.D. 24-151, the parties did not know that a valid local appeal had not been filed. The County now requests that the Department treat the February 2023 phone call as a valid local appeal because the statute of limitations for filing a local appeal expired in December 2023, before P.D. 24-151 was issued.
The Department agrees that denying the Taxpayer an administrative remedy would create an inequitable result similar to the issue the Department sought to rectify in P.D. 25-20. The appropriate remedy, however, must be tailored to the facts of this case. A careful review of the October 2023 electronic mail exchanges between the parties reveals that the Taxpayer did not believe it had filed an appeal during the February 2023 phone call. The Taxpayer specifically requested confirmation in October 2023 that it had only two months remaining to file an appeal with the County. It was this exchange that led the County to ask whether the Taxpayer had intended for the prior phone call to be a local appeal and then accept it as such. As the Department concluded in P.D. 24-151, however, a phone call cannot be considered a valid local appeal.
Because a valid local appeal has yet to be filed, the Department does not have jurisdiction to decide the matter on the merits at this time. However, because two months of the 12-month statutory period to appeal remained at the time the Taxpayer and the County agreed to proceed with the purported appeal, the Department believes it is appropriate to grant the Taxpayer two months from the date of this determination within which to file a valid local appeal in order to protect the integrity of the administrative appeals process.
DETERMINATION
Because a valid local appeal has yet to be filed, the Department cannot accept this case for review. As discussed above, the date of the Department’s determination issued as P.D. 24-151 was the date the parties were first made aware that the Taxpayer had not filed a valid appeal. At the time the Taxpayer and the County agreed to treat a prior phone call as a local appeal, the Taxpayer still had two months remaining within which it could file a valid local appeal. Thus, consistent with the Department’s remedial approach in P.D. 25-20, if the Taxpayer files a local appeal with the County within two months of the date of this determination, the Department will consider it to be timely filed within the one-year period provided by Virginia Code § 58.1-3703.1 A 5 b.
If the Taxpayer files a local appeal, it is incumbent on the County to undertake a full review of the Taxpayer’s claims and issue a final local determination setting forth the facts and arguments in support of the decision. See Virginia Code § 58.1-3703.1 A 5 b. The final local determination must also include a written explanation of the rights to file an administrative appeal. See Virginia Code § 58.1-3703.1 A 5 c. If the County issues a final determination and the Taxpayer disagrees with the outcome, then the Taxpayer may appeal to the Department. See Virginia Code § 58.1-3703.1 A 6 a.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****@tax.virginia.gov.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR 5130.Q