Could the Virginia Tax Commissioner waive a city's penalty when a business's accountant filed its machinery and tools tax return one day late?

Subject

Tax Commissioner does not have jurisdiction to make any determination with respect to the assessment of a penalty by a local assessing authority.

Plain-English summary

The Virginia Tax Commissioner could not decide whether a city should waive a one-day late-filing penalty on a machinery and tools tax return. The business had timely given its information to an accounting firm, but the firm filed the 2009 return one day late. The city refused to waive the penalty, and the business appealed to the Department.

Virginia's state appeal process covered assessments of certain local business taxes. Under the Department's cited definition, an assessment concerned the tax rate, the measure to which it applied, and the amount of tax due. A penalty imposed for filing late was not itself an assessment of tax for that appeal statute.

The ruling also pointed to Va. Code § 58.1-3916, which assigned fault determinations for a failure to file to the local commissioner of the revenue. The Tax Commissioner therefore did not reach whether the taxpayer or its accounting firm was at fault and dismissed the issue for lack of jurisdiction.

What this means for you

• A state-level appeal of a local business tax assessment does not necessarily include a separately imposed filing penalty.
• Hiring an accountant did not give the Tax Commissioner authority to review the city's fault decision.
• A taxpayer challenging a local late-filing penalty must use whatever waiver or review process local law provides.

Common questions

Was the return late by more than one day?

No. The ruling says the 2009 machinery and tools tax return was filed one day after its due date.

Did the Tax Commissioner decide whether the accountant's error excused the taxpayer?

No. The Commissioner held that the state lacked jurisdiction to make that determination.

Was the underlying machinery and tools tax amount challenged?

The stated appeal concerned the late-filing penalty, not the rate, tax base, or amount of tax due.

Citations and references

• Va. Code § 58.1-3983.1(B)(1).
• Va. Code § 58.1-3916.
• Virginia Public Document 04-28 (June 25, 2004), defining an assessment for the local-tax appeal process.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-213

Original ruling text

September 15, 2010

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business Tangible Personal Property (BTPP) Tax

Dear *:

This final state determination is issued upon the application for correction filed by you on behalf of * (the "Taxpayer") with the Department of Taxation. The Taxpayer appeals a final local determination by the *** (the "City") denying an appeal to waive a late filing penalty for failure to timely file the 2009 personal property tax return.

The machinery and tools tax is imposed and administered by local officials. Virginia Code § 58.1-3983.1 authorizes the Department to issue determinations on taxpayer appeals of machinery and tools tax assessments. On appeal, a machinery and tools tax assessment is deemed prima facie correct, i.e., the local assessment will stand unless the taxpayer proves it is incorrect.

The following determination is based on the facts presented to the Department and summarized below. The Code of Virginia sections and public documents cited are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.virginia.gov.

FACTS

The Taxpayer's 2009 machinery and tools tax return was filed one day after the due date and the City assessed a late filing penalty. The Taxpayer requested a waiver of the penalty from the City. The Taxpayer had hired an accounting firm to prepare and file its return and believed it was not at fault for the late filing. The City denied the Taxpayer's request.

The Taxpayer has submitted an appeal to the Tax Commissioner, contending that the City may only assess a late filing penalty when the failure to file the tax return timely is the fault of the taxpayer. The Taxpayer has provided a written statement from the accounting firm stating that the Taxpayer provided the information timely to the accounting firm and the accounting firm failed to file the return timely. The City argues only circumstances beyond the control of the Taxpayer or its designated agent would merit waiver of penalty.

ANALYSIS

Virginia Code § 58.1-3983.1 B 1 provides that any person assessed with a local business tax, including machinery and tools tax, may appeal such assessment within certain time limitations to the local assessing official. Pursuant to Public Document (P.D.) 04-28 (6/25/2004), an "assessment" is defined as "a determination as to the proper rate of tax, the measure to which the tax rate is applied, and ultimately the amount of tax, including additional or omitted tax, that is due." Under this definition, the assessment of a penalty by a local taxing authority would not constitute an assessment for purposes of filing an appeal under Va. Code § 58.1-3983.1. Furthermore, Va. Code § 58.1-3916 states "the commissioner of the revenue shall make determinations of fault relating exclusively to failure to file a return."

DETERMINATION

Virginia Code § 58.1-3983.1 authorizes the Tax Commissioner to address appeals of certain local business taxes. Such appeals are limited to assessments of tax as defined in P.D. 04-28. Accordingly, the Tax Commissioner does not have jurisdiction to make any determination with respect to the assessment of a penalty by a local assessing authority.

If you have any questions regarding this response, you may call * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Linda D. Foster

Deputy Tax Commissioner

AR/1-4097136151.o