Could a town receive communications-tax trust-fund distributions after failing to report its 2006 cable franchise fees by the original deadline?

Subject

Communications Sales and Use Tax Trust Fund

Plain-English summary

A town could begin receiving a share of Virginia's Communications Sales and Use Tax Trust Fund even though it had missed the original October 1, 2006 reporting deadline. The town had collected cable franchise fees during fiscal year 2006 but never reported them to the Auditor of Public Accounts, so it received no monthly fund distributions.

Virginia created the fund when it replaced numerous state and local communications taxes and fees with centrally administered taxes and fees beginning in 2007. Each locality's share was based on its verified fiscal-year 2006 collections.

Legislation effective in 2009 allowed localities to report omitted or incorrect 2006 receipts using audited financial statements or independent-CPA verification. A further amendment effective July 1, 2010 allowed a locality to request a Tax Department ruling adjusting its share, subject to the statutory aggregate-redistribution limit.

Correspondence from an independent CPA and the communications provider verified the town's cable franchise revenue. Virginia authorized a share based on that amount beginning with the first distribution after July 1, 2010 and promised a correcting distribution if implementation was delayed.

What this means for you

• The original missed deadline was not fatal after the statute created an adjustment process.
• A locality had to document actual fiscal-year 2006 collections.
• The ruling adjusted future monthly distributions rather than inventing a share without verified revenue.
• The result depended on the statutory procedures in effect beginning July 1, 2010.

Common questions

Why had the town received nothing from the fund?

It did not report its fiscal-year 2006 cable franchise fees by the original deadline.

What evidence supported the adjustment?

Correspondence with an independent certified public accountant and the relevant communications service provider.

When did the town's distributions begin?

With the first fund distribution made after July 1, 2010, subject to a correcting payment if delayed.

Citations and references

• Va. Code § 58.1-662.
• 2006 Va. Acts ch. 780 (House Bill 568).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-193

Original ruling text

August 27, 20110

Re: Ruling Request: Communications Sales and Use Tax

Dear *:

This is in response to your request for a ruling authorizing the * (the "Town") to receive a share of the monthly distribution from the Communications Sales and Use Tax Trust Fund (the "Fund").

FACTS

The Town received * in cable franchise fee revenues during Fiscal Year 2006. This has been verified by TAX through correspondence with an independent certified public accountant and the relevant communications services provider. The Town, however, has never received a distribution from the Fund because it did not report these revenues to the Auditor of Public Accounts ("APA") prior to October 1, 2006 as required by Va. Code § 58.1-662. The Town requests a ruling authorizing it to receive a distribution from the Fund based on these revenues.

DETERMINATION

Effective January 1, 2007, House Bill 568 ( Acts of Assembly 2006, Chapter 780) replaced many of the state and local communications taxes and fees with a centrally administered Communications Sales and Use Tax, a Landline E-911 Tax, and a Cable Rights-of-Way Use Fee. Revenues from these new taxes and fees are deposited into the Fund and, after the deduction of administrative costs and the costs of the Virginia Relay Center, are distributed to local governments to replace the revenues from the repealed taxes and fees.

House Bill 568 provided that each locality's percentage share of the monthly distribution from the Fund shall be determined by the APA based on the percentage of total statewide telecommunications and cable television taxes and fees received by the locality in Fiscal Year 2006 based on local tax rates adopted on or before January 1, 2006 from any consumer utility tax on landline and wireless telephone service; E-911 tax on landline telephone service; portion of the local BPOL tax on public service companies exceeding .5% currently billed to customers in some grandfathered localities; cable television franchise fees; local consumer utility tax on cable television; and video programming excise tax on cable television services. Localities were required to report these revenues to the APA by October 1, 2006.

Beginning July 1, 2009, legislation enacted in the 2009 Session of the General Assembly amended Va. Code § 58.1-662 to allow localities to report to TAX any telecommunications or cable television taxes and fees collected in Fiscal Year 2006 that were not submitted, or were incorrectly submitted, to the APA in order to receive, or correct, monthly distributions from the Fund. The locality could report such receipts to TAX by either an audited financial statement or a statement verified in writing by an independent certified public accountant.

Effective July 1, 2010, Va. Code § 58.1-662 has been amended to change the procedures for a locality to request an adjustment of its percentage share of distribution from the Fund. Beginning July 1, 2010, a locality may request a ruling from TAX adjusting its distribution from the Fund so long as the aggregate redistribution from all other localities does not exceed $100,000. A locality is required to present evidence to TAX that it collected local telecommunications or cable television taxes and fees in Fiscal Year 2006 before obtaining a ruling from TAX.

Based on the correspondence with the independent certified public accountant and the relevant communications service provider, the Town has shown to my satisfaction that it collected * from repealed local communications taxes and fees in Fiscal Year 2006. Accordingly, it is my determination that the Town is entitled to receive a share of each distribution from the Fund based on this amount beginning with the first distribution from the Fund made after July 1, 2010. In the event that the first payment to the locality is delayed, TAX will make a correcting distribution from the Fund to the locality to make it whole.

CONCLUSION

The Va. Code sections and regulations cited, along with other reference documents, are available on-line in the Tax Policy Library section of TAX's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions about this determination, you may contact * in the Office of Tax Policy, Policy Development Division, at ***.

Sincerely,

Craig M. Burns

Acting Tax Commissioner

PD/1-4476746295