Could a cable company obtain Department review of converter-box BTPP assessments more than four years after the city's final determination?

Plain-English summary

The taxpayer argued that cable converter boxes were intangible property rather than taxable machinery. The city issued a final determination rejecting that position in April 2013, but the taxpayer did not file its Department appeal until September 2017 and claimed it had only recently received the city's letter.

Virginia did not decide whether the boxes were taxable. Based on the city's affidavit and the record, the Department treated the 2013 determination as issued and found the 2017 appeal outside the 90-day deadline. The taxpayer also had not invoked the separate procedure available when a local appeal remains pending for more than one year. The Department therefore lacked jurisdiction.

Citations and references

• Va. Code § 58.1-3983.1 B 5 and B 6
• Va. Code § 58.1-3983.1 D 1

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-6

Original ruling text

January 18, 2018

Re: Taxpayer: *

Locality Assessing Tax: *

Business Tangible Personal Property Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed by * (the “Taxpayer”) with the Department of Taxation. The Taxpayer seeks correction of assessments of business tangible personal property (BTPP) tax issued to it by the *** (the “City”) for the 2011 and 2012 tax years.

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

FACTS

The Taxpayer was affiliated with a cable television provider. In order to receive the cable service, customers must have a converter, also known as a set top box. The converters were owned and issued by the Taxpayer to cable customers.

The Taxpayer classified the converters as intangible personal property on its 2011 and 2012 BTPP tax return filed with the City. The City audited the Taxpayer for the 2011 and 2012 tax years and issued assessments of BTPP tax. The Taxpayer appealed, contending the boxes were intangible property exempt from the BTPP tax.

In its final determination dated April 14, 2013, the City determined that the converters were machinery subject to tax. The Taxpayer has filed an appeal with the Department dated September 12, 2017, contending the converters are intangible property not subject to the local taxation. The City asserts that the Taxpayer's appeal to the Department was submitted outside the statutory limitations period. The Taxpayer argues that the appeal was timely filed because it did not receive the City's final determination until June 14, 2017.

ANALYSIS

Pursuant to Virginia Code § 58.1-3983.1 B 5, a local assessing official must issue a written determination within 90 days after a local appeal is filed. The Taxpayer appealed local assessments for the 2011 and 2012 tax years by letter dated December 28, 2012. A final local determination letter dated April 4, 2013 indicates that the appeal was received on January 3, 2013. As such, the City indicates that its final local determination letter was timely issued within the 90-day limitations period.

Virginia Code § 58.1-3983.1 D 1 requires that a taxpayer file its BTPP appeal with the Department within 90 days of the final local determination. The Taxpayer contends that it did not receive a copy of the final local determination until June 14, 2017 when the City's attorney forwarded it by e-mail. As such, the Taxpayer asserts that its September 12, 2017 administrative appeal to the Department was timely filed within the 90-day limitations period.

The City argues that it issued its final determination on April 4, 2013 and, therefore, the Taxpayer's appeal letter to the Department dated September 12, 2017 is time barred. The City has provided an affidavit from an employee stating that the final local determination letter was issued on April 4, 2013.

In addition, under Virginia Code § 58.1-3983.1 B 6, a taxpayer may file an appeal with the Department if an appeal is pending with a locality for more than one year provided 30 days' notice is given to the local assessing official. In this case, the Taxpayer never filed an appeal with the Department while its local appeal was pending even though the Taxpayer alleges that more than four years had passed before the City's determination letter was issued. Moreover, the Taxpayer has provided no evidence showing that it urged the City to issue a final determination during the four-year period.

DETERMINATION

Based on the information provided, I find that the Taxpayer did not timely file its BTPP tax administrative appeal with the Department in accordance with Virginia Code § 58.1-3983.1 D 1. As such, I find that the Department lacks jurisdiction to address the Taxpayer's appeal of BTPP assessments issued by the City for the 2011 and 2012 tax years.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1458.B