Could Virginia hear a BPOL classification appeal when the city claimed its own procedural rules made the local appeal invalid?

Subject

Procedural issues

Plain-English summary

A business filed amended BPOL returns and refund claims seeking a different classification for 2007 through 2010. The city adjusted some liability but denied reclassification, then argued that neither it nor the Department had jurisdiction because of alleged defects in the local appeals.

Virginia focused on what the city's October 2015 letter actually did. The letter resolved the substantive classification issue and included the appeal notice required for a final local determination under 23 VAC 10-500-710 D.

The business timely appealed that adverse determination. Under Va. Code § 58.1-3703.1 A 6 a, the Department therefore had jurisdiction to review the BPOL classification.

This notice decided only jurisdiction. It made the city's remaining procedural objections moot and allowed a later state determination on the proper classification; it did not resolve that classification itself.

Citations and references

• Va. Code § 58.1-3703.1 A 6 a.
• 23 VAC 10-500-710 D.
• P.D. 14-72.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-37

Original ruling text

March 24, 2016

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 your client, * (the "Taxpayer") with the Department of Taxation. The Taxpayer appeals the denial of a refund of BPOL tax from the (the "City") for the 2007 through 2010 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 in the Laws, Rules and Decisions section of the Department of Taxation's web site, located at www.tax.virginia.gov .

FACTS

The Taxpayer had a definite place of business in the City during the taxable years at issue. The Taxpayer filed amended returns and a refund request for the 2007 through 2010 years seeking the reclassification of its business. The City adjusted the Taxpayer's liability but denied its reclassification request. The Taxpayer filed appeals.

In October 2015, the City responded that it lacked jurisdiction to address the Taxpayer's appeals and concluded that the Taxpayer was properly classified for BPOL tax purposes. In January 2016, the Taxpayer filed an appeal of the City's denial of refund claims for the 2007 through 2010 tax years with the Department. The City asserts that the Taxpayer failed to file a proper local appeal and argues that the Department lacks jurisdiction to hear the appeal.

ANALYSIS

The City asserts that it lacked jurisdiction to hear the Taxpayer's local administrative appeals because: (1) the Taxpayer's appeal was filed with the wrong City administrator; (2) there was no appealable event under the City's ordinance; (3) the City's ordinance supersedes the Code of Virginia ; and (4) neither of the Taxpayer's local appeals were timely filed.

Virginia Code § 58.1-3703.1 A 6 a provides:

Any person assessed with a local license tax as a result of a determination or that has received a determination with regard to the person's appeal of the license classification or subclassification applicable to the person's business, upon an administrative appeal to the commissioner of the revenue or other assessing official . . . that is adverse to the position asserted by the taxpayer in such appeal may appeal such assessment or determination to the Tax Commissioner . . .

While the City's response raised procedural issues, it clearly made a determination as to the Taxpayer's classification. Further, the letter issued by the City included the notice required for a final local determination under Title 23 of the Virginia Administrative Code (VAC) 10-500-710 D. See Public Document (P.D.) 14-72 (5/28/2014).

DETERMINATION

The Taxpayer timely filed an appeal with the Department contesting the City's final local determination of the proper classification of its business. Because the City's letter addressed the substantive issue of the Taxpayer's classification and included the elements required under Title 23 VAC 10-500-710 D, the Department concludes that the City issued a final determination appealable under Va. Code § 58.1-3703.1.

Because the City's final local determination met the statutory and regulatory requirements, the Department has jurisdiction to review the Taxpayer's appeal and issue a final determination with regard to the proper classification of the Taxpayer's business for the tax years at issue. The City issued a final local determination; therefore, its arguments that the Taxpayer failed to follow proper local procedures are moot.

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/1-6244694819.B