Can taxpayers appeal a county's BPOL refund-denial letter directly to Virginia when they never first filed a formal local administrative appeal?

Plain-English summary

Two taxpayers asked a county to refund 2015 BPOL tax, claiming the federal Anti-Head-Tax Act exempted them. The county denied the refund in a letter, and they appealed directly to the Virginia Department of Taxation.

The Department said the appeal was premature. The refund denial started the local administrative appeal process; it was not itself a final local determination that the Department could review.

The required appeal sequence

Va. Code § 58.1-3703.1 and 23 VAC 10-500-640 create a two-stage BPOL process:

1. File a formal administrative appeal with the local assessing officer after an appealable event, such as a refund denial, assessment increase, new assessment, or classification dispute.
2. After the locality fully reviews the claim and issues a final determination, appeal that decision to the Tax Commissioner.

The local appeal generally must be filed within one year from the later of the tax year's last day or the appealable event.

Why the county letter was not final

The taxpayers' original refund request was not a valid local appeal. The county employee's January 14, 2019 denial created the right to appeal locally.

The denial letter also failed the signature rule. A final determination should be signed by the Commissioner of the Revenue or chief assessing officer, or by a designee whose express written authority accompanies the decision. Final letters must also contain specified language under 23 VAC 10-500-710.

The taxpayers therefore had to file a proper county appeal. Only after a compliant final determination could they appeal to the Department within 90 days. If the local appeal remained pending more than one year, they could elect to treat it as denied after giving 30 days' written notice.

What this means for you

• A refund request and an administrative appeal are different filings. Denial of the request may be what starts the appeal right.
• Do not skip the locality. Virginia Department review ordinarily comes only after the local final determination.
• Check the signer and required language. A county letter may not be legally final even if it denies relief.
• The merits remained open. This ruling did not decide the federal Anti-Head-Tax Act exemption.

Common questions

Q: Did the Department reject the claimed federal exemption?

A: No. It did not reach the merits because the taxpayers had not completed the local appeal process.

Q: How long after the local final determination could they appeal?

A: The ruling states 90 days.

Q: What if the county takes more than a year?

A: The taxpayers may elect to treat the appeal as denied after giving the locality 30 days' written notice.

Citations and references

• Va. Code § 58.1-3703.1(A)(5)-(6) — local BPOL appeal and Department review
• 23 VAC 10-500-640 — two-stage review process
• 23 VAC 10-500-710 — final local determination requirements
• 49 U.S.C. § 40116 — Anti-Head-Tax Act claim not decided
• Related Virginia rulings cited: P.D. 11-124, P.D. 18-140

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-63

Original ruling text

June 17, 2019

Re: Notice of Jurisdiction

Taxpayers: *

Locality Assessing Tax: *

Business, Professional and Occupational License (BPOL) tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed on behalf of your clients, * and (the “Taxpayers”), with the Department. The Taxpayers appeal the denial of a refund of BPOL tax from ** (the “County”) for the 2015 tax year.

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 at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site.

FACTS

The Taxpayers requested a refund of BPOL tax paid to the County for the 2015 tax year, contending that they were exempt from the County’s BPOL tax under the federal Anti-Head-Tax Act (the “AHTA”), codified at 49 U.S.C. § 40116. In a letter purporting to be a final determination, the County concluded that the Taxpayers were not exempt under the AHTA and denied the refund. The Taxpayers appealed to the Department.

ANALYSIS

The Code of Virginia includes a review process designed to encourage resolution of local license tax issues through an appeal process that includes review by the local assessing officer and appeal to the Tax Commissioner. Through this process, a taxpayer who disagrees with an audit assessment may apply to the local assessing officer for review. If the taxpayer is dissatisfied with the results of the local review, the taxpayer may appeal the local decision to the Tax Commissioner who will make a determination of the issues raised by the taxpayer. See Title 23 of the Virginia Administrative Code (VAC) 10-500-640.

Specifically, Virginia Code § 58.1-3703.1 A 5 provides that any person assessed with a local license tax as a result of an appealable event may file an administrative appeal of the assessment within one year from the last day of the tax year for which such assessment is made, or within one year from the date of the appealable event, whichever is later, with the commissioner of the revenue or other local assessing official. An appealable event is an increase in the assessment of a local license tax payable by the taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed. In addition, an appealable event includes a taxpayer’s appeal of a classification, regardless of whether it is in conjunction with an assessment, examination, audit or any other action taken by the locality.

This statute also provides the procedure that a taxpayer must use to appeal a final local license tax assessment. A taxpayer must file an appeal with the locality in which the appealable event occurred. Once an appeal is filed, the locality’s assessing officer will fully review the taxpayer’s claims and issue a final determination letter setting forth the facts and arguments in support of its decision. See Virginia Code § 58.1-3703.1 A 5 b.

Under Virginia Code § 58.1-3703.1 A 6 a, a taxpayer may file an appeal with the Department only after a final determination has been issued by a locality. See Public Document (P.D.) 11-124 (7/1/2001). Virginia Code § 58.1-3703.1 A 5 e, however, does allow a taxpayer to appeal directly to the Department if an appeal to a locality has been pending for more than one year. Under such circumstances, the taxpayer can elect to consider the local appeal to have been denied. The taxpayer is required to give a locality 30 days written notice of such an election.

Under Title 23 VAC 10-500-710, “local assessing officer” means the Commissioner of Revenue or chief assessing officer or his designee. Therefore, to qualify as final local determinations, such letters should normally be signed by the Commissioner of Revenue or chief assessing officers and not employees working at their direction, unless the individual has been expressly designated by the Commissioner of Revenue or chief assessing officer and evidence of such designation is included with the final local determination. See P.D. 18-140 (3/30/2018). Additionally, Title 23 VAC 10-500-710 contains specific language that must be included in any final written determination.

DETERMINATION

In this case, the appealable event occurred when the County issued the January 14, 2019, letter denying the Taxpayers’ refund request. The initial request for refund was not a valid local appeal. The denial of the refund by an employee of the local Commissioner of the Revenue’s office triggered the Taxpayers’ appeal right to the County. Thus, the letter denying the Taxpayers’ refund request was not a valid final local determination because it was not issued in response to a valid local appeal. It was also not a valid final local determination because it was not signed by the local Commissioner of the Revenue or an individual given the expressed written authorization to issue such final determination.

Accordingly, the Taxpayers should now file a local appeal with the County and await the final determination of the Commissioner of the Revenue or her designee. Once that is done, the Taxpayers will have 90 days to file an appeal with the Department if they disagree with the outcome of that determination. If the case has been pending with the County for more than one year, the Taxpayers may also appeal to the Department after giving the County the requisite notice.

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/2005.M

Related Documents

11-124

18-140