Can the Virginia Department of Taxation decide whether a city properly converted a company's unpaid local meals tax to an allegedly responsible individual?

Plain-English summary

A city assessed local food and beverage tax against a company. When the assessments went unpaid, the city converted them to an individual. The individual appealed to the Virginia Department of Taxation, arguing he was not a responsible person.

The Department could not hear the dispute. Although Virginia law authorizes responsible-person liability for certain local taxes, the Department's appeal jurisdiction does not include local food and beverage tax, commonly called meals tax.

The responsible-person issue the Department could not decide

Va. Code § 58.1-3906 can impose a penalty equal to unpaid local admissions, transient-occupancy, food-and-beverage, or daily-rental-property tax on certain people who willfully fail to collect or pay it, or willfully evade it.

The person must have held a covered role — such as corporate officer or employee, partnership member or employee, or limited-liability-company member, manager, or employee — and must have:

• had a duty concerning the unpaid tax;
• actually known of the failure or attempt; and
• had authority to prevent it.

The taxpayer disputed those elements. But P.D. 19-70 did not decide whether he met them.

Why the appeal ended for lack of jurisdiction

Va. Code §§ 58.1-3703.1 and 58.1-3983.1 let the Department review final local determinations only for specified taxes:

• BPOL tax;
• business tangible personal property tax;
• machinery and tools tax;
• merchant's capital tax;
• local mobile property tax; and
• consumer utility tax.

Meals tax is absent. The Tax Commissioner therefore lacked authority to rule on whether the city properly converted the assessments.

What this means for you

• Not every local-tax dispute can be appealed to the Department. Jurisdiction depends on the particular tax.
• A jurisdictional dismissal is not a merits loss. This ruling did not find that the individual was responsible; it found only that the Department could not decide.
• Responsible-person liability has specific elements. Role, duty, actual knowledge, willfulness, and authority can matter in the proper forum.
• Identify the appeal route before filing. Local meals-tax procedures differ from the Department-review path available for BPOL and the other listed local taxes.

Common questions

Q: Did Virginia decide the individual was responsible for the company's meals tax?

A: No. The Department expressly declined to decide that issue because it lacked appellate jurisdiction.

Q: Which local taxes can the Department review?

A: The ruling lists BPOL, business tangible personal property, machinery and tools, merchant's capital, local mobile property, and consumer utility tax.

Q: Is local food and beverage tax the same as meals tax here?

A: Yes. The ruling describes local food and beverage tax as commonly known as meals tax.

Citations and references

• Va. Code § 58.1-3906(A)-(B) — responsible-person liability for specified local taxes
• Va. Code §§ 58.1-3703.1, 58.1-3983.1 — Department jurisdiction over specified local-tax appeals
• Related Virginia ruling cited: P.D. 13-82

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-70

Original ruling text

July 2, 2019

Re: Notice of Jurisdiction

Taxpayer: *

Locality Assessing Tax: *

Local Food and Beverage Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed on behalf of your client, * (the “Taxpayer”), with the Department. The Taxpayer seeks abatement of assessments of local food and beverage tax issued to (the “Company”) by ** (the “City”) and converted to the Taxpayer.

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

FACTS

Assessments of local food and beverage tax issued by the City to the Company went unpaid and were converted to the Taxpayer. The Taxpayer appealed to the Department, contending he was not a responsible party to which the assessments should have been converted.

ANALYSIS

Virginia Code § 58.1-3906 A provides that certain classes of individuals who willfully fail to pay, collect, or truthfully account for and pay over any local admission, transient occupancy, food and beverage, or daily rental property tax administered by a locality, or who willfully attempt to evade or defeat any such tax or payment thereof, shall be liable for a penalty equal to the amount of tax. Such individuals must have been officers or employees of corporations, or a member or employee of a partnership, or a member, manager or employee of a limited liability who was under a duty to perform the act in respect of which the violation occurred and who had actual knowledge of the failure or attempt and had authority to prevent such failure or attempt. See Virginia Code § 58.1-3906 B.

Virginia Code §§ 58.1-3703.1 and 58.1-3983.1 authorize the Department to consider appeals of final local determinations of certain taxes. The ability to file an administrative appeal to the Department for a local tax is limited to the following: BPOL tax, BTPP tax, machinery and tools tax, merchant's capital tax, local mobile property tax and consumer utility tax.

DETERMINATION

The Department is not authorized to consider appeals of the local food and beverage tax, commonly known as the meals tax. See Public Document (P.D.) 13-82 (5/29/2013). Therefore, I cannot issue a determination regarding whether the meals tax assessments were properly converted to the Taxpayer.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/2080.M

Related Documents

13-82