Tax Type
BPOL Tax
Description
BPOL; Applying for refund
Topic
Local Power to Tax
Date Issued
06-16-1997
June 16, 1997
Re: Request for Advisory Opinion - BPOL Tax
Dear******************
In your letter, dated April 28, 1997, you asked tor an advisory opinion concerning several issues surrounding a refund request of BPOL taxes from a public service company.
The license tax is a local tax that is imposed and administered by local officials. The Code of Virginia limits the involvement of the Department of Taxation to promulgating guidelines and issuing advisory opinions. The department, however, is not required to interpret local ordinances.
While addressing the questions raised in your letter, this response is intended to provide advisory guidance only and does not constitute a formal or binding ruling. Please note, copies of cited sources are enclosed for your review.
FACTS
The*********** imposes a local license tax only on public service companies. A public service company overstated their gross receipts in past years and now requests a refund of those overpayments.
You asked the following questions concerning the requested refund:
1. What is the procedure for amending (and refunding) the return?
2. How many years must a refund encompass?
3. How can a local official verify the gross receipts of a public service company?
OPINION
The local official is directed by the authority of a local ordinance or by Virginia Code to refund an erroneous assessment. Interest at the current rate of ten percent must be paid on this refund because the refund request or BPOL tax adjustment is considered an assessment that is or will be made after January 1, 1997. The refund application may include erroneous assessments from years 1994-1997. Additionally, the local official can verify gross receipts under the audit procedure and require the public service company to produce support information and calculations of the taxable amount. This opinion is based on the following analysis.
Issues #1 and #2.
If a taxpayer wants to amend a BPOL return because of an erroneous assessment and request a refund, the taxpayer should apply to the local assessing official. To determine the proper procedure, the local official should refer to the local ordinance for refunding erroneous assessments. Code of Virginia § 58.1-3990. (Please review the attached copies of attorney general opinions concerning issues 1 and 2.) If the local ordinance does not provide for a refund, the taxpayer and local official are then directed by Virginia statutory procedures for refunding certified erroneous assessments. Code of Virginia §§ 58.1-3980(A), 3981.
To begin the process, the taxpayer must apply for correction of an erroneous assessment before the local official is required to certify and refund the erroneous amount. Code of Virginia §§ 58.1-3980(A), -3981. After certifying the amount as erroneously assessed, the local official must correct the assessment according to statutory procedure. Vol. l 1982-83 Op. Va. Att'y Gen. 105, 106. In the case of a mere clerical error, a taxpayer's application for refund is not required; the local official may automatically correct this type of error. 1982 Op. Va. Att'y Gen. 525, 526.
In the present case, the public service company should apply for a refund, if it has not done so, as required by the local ordinance that was created pursuant to Code of Virginia § 58.1-3990 or by the Virginia refund statute, Code of Virginia § 58.1-3980. The local assessing official must review the request according to procedures stated in the local ordinance or in Code of Virginia § 58.1-3981.
Whether or not interest must be paid on refunds depends on when the assessment was made. An "assessment" is a determination of the proper rate of tax that is used to calculate the BPOL tax liability and includes a local official's written assessment or a taxpayer's self-assessment, made when filing a return or paying the BPOL tax. Code of Virginia § 58.1-3700.1. Further, an assessment includes a locality's adjustment of BPOL tax liability or a taxpayer's filing of an amended return, either of which results in a refund to the taxpayer. P.D. 97-129.
For assessments determined on or after January 1, 1997, a local official is required to pay interest on all BPOL tax refunds that are based on amended returns or for other reasons even if the assessment involves tax years prior to 1997. Code of Virginia § 58.1-3703.1(A)(2)(e). Penalties and interest paid by the taxpayer and associated with this erroneous assessment must also be refunded. Code of Virginia § 58.1-3703.1(A)(2)(e). No interest, however, must be paid on refunds by localities paid within thirty days of the due date or on estimated tax overpayments determined at the conclusion of the base year. Code of Virginia § 58.1-3703.1 (A)(2)(e).
The interest rate that local officials are required to pay on refunds is variable, based on a statutory definition. Code of Virginia §§ 58.1-3703.1(A)(2)(e), -3916. Currently, the interest rate is ten percent.
The Virginia statutes regarding refunds impose a three-year limit for filing an application of correction for an erroneous assessment. Specifically, the application must be filed within three years from the last day of the tax year for which any erroneous assessment is made or within one year from the date of the assessment, whichever is later. Code of Virginia §§ 58.1-3980(A), -3981, -3990.
In this case, the local official is responsible for paying interest on the overpayments because a refund application filed by the public service company or a tax adjustment made by the local official is considered an assessment, which is or will be made after January 1, 1997. The refund application must be filed within three years from the last day of the tax year in which the erroneous assessment is made. For example, if using a calendar year as the tax year for a refund filed January 3, 1997, the refund application can include erroneous assessments three years from December 31, 1997 or from 1994, 1995, 1996, and 1997. The statutory interest rate is ten percent.
ISSUE 3
The local official can verify gross receipts of a public service company by auditing the account. A taxpayer that is liable for BPOL tax payments is required to keep sufficient records to enable a local official to verify the correct tax liability for each tax year. The local official may inspect all records, books of accounts, and other relevant information that the taxpayer relied on for support of BPOL tax determination. Code of Virginia § 58.1-3703.1(A)(6).
I hope that the above information will be beneficial to you. Although, l believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please do not hesitate to contact me.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12496G
Rulings of the Tax Commissioner