The county's determination letters on our BPOL and BTPP tax appeal were signed by a deputy, not the Commissioner of the Revenue -- does that mean the county's decision isn't actually final and appealable yet?

Plain-English summary

A business that fabricates countertops out of raw granite and marble slabs was classified by its county as a contractor for BPOL tax purposes, and separately hadn't been remitting business tangible personal property (BTPP) tax on its fabrication equipment. After an audit, the county assessed BTPP tax for 2016-2019. The company appealed locally, arguing its equipment was manufacturing machinery and tools that should be taxed at the lower Machinery & Tools (M&T) rate rather than the general BTPP rate. The county investigated (including a site visit), decided the company wasn't actually manufacturing, reclassified it as part retailer/part wholesaler for BPOL purposes, assessed BPOL tax for 2017-2019, and upheld the BTPP assessments. The company then appealed both the BTPP and BPOL determinations to the Department, insisting it should be classified as a manufacturer for both taxes.

Before reaching the substance, a threshold problem: were the county's letters even valid "final local determinations"? Virginia's local-tax appeals process requires a taxpayer to first get a decision from the "local assessing officer" -- meaning the Commissioner of the Revenue, chief assessing officer, or someone THEY have expressly designated -- before the Department has jurisdiction to rule. A determination letter must normally be signed by the Commissioner or chief assessing officer personally; if someone else signs it, there needs to be evidence that individual was expressly designated by the Commissioner to sign final determinations on their behalf.

Here, the county issued TWO determination letters about the BTPP appeal, both signed by its deputy commissioner of tax compliance. While the deputy's oath of office was attached to each letter, there was no evidence the Commissioner of the Revenue had expressly delegated final-determination-signing authority to that deputy. Because of that missing designation, the Tax Commissioner held that NEITHER letter counted as a valid final local determination -- meaning the BTPP dispute wasn't actually ready for the Department to rule on yet.

A separate, simpler problem on the BPOL side: no local appeal was ever filed. The taxpayer had gone straight to the Department on its BPOL classification without ever filing a local appeal of that issue with the county first -- so that part of the case needed to start over at the local level too.

The Department sent the whole matter back and provided a model fix. The county was directed to review a properly filed local appeal (once the taxpayer amends it to include the BPOL classification issue) and issue a PROPER final local determination -- either signed by the actual Commissioner/chief assessing officer, or by someone with a documented, signed, and notarized express delegation. The ruling includes a sample designation-letter template for localities to use, and notes as a matter of general policy that whoever conducted the original audit determination should never be the same person who signs off on the final determination reviewing that same audit -- regardless of designation status.

What this means for you

Taxpayers appealing a local BPOL or BTPP tax determination

Check WHO actually signed your county's determination letter -- if it isn't the Commissioner of the Revenue (or chief assessing officer) personally, and there's no documented express delegation of signing authority attached, that letter may not legally count as a "final local determination," meaning your 90-day appeal clock to the Department may not have properly started (or the case may need to go back to the locality first).

Localities administering BPOL and BTPP tax appeals

Make sure any employee signing final determination letters on the Commissioner's behalf has a SIGNED, NOTARIZED, and specific written delegation -- a job title or an attached oath of office alone isn't sufficient designation. And never let the same person who issued the original audit assessment also sign off on the final determination reviewing that assessment.

Taxpayers with multiple related tax disputes (like BTPP and BPOL classification) arising from the same underlying facts

Don't assume winning (or even properly appealing) one tax type's dispute covers a related one -- here, the taxpayer needed a SEPARATE local appeal specifically addressing its BPOL classification, distinct from its BTPP appeal, even though both turned on the same manufacturer-or-not factual question.

Common questions

Q: Does a determination letter count as final just because it's signed by SOMEONE at the county's tax office?
A: No -- it must be signed by the Commissioner of the Revenue or chief assessing officer personally, or by someone that official has expressly designated in writing (signed and notarized) to sign final determinations on their behalf, with evidence of that designation included.

Q: Is an attached oath of office enough to show someone was properly designated to sign final determinations?
A: No -- this ruling found an attached oath of office insufficient; there needs to be a specific, documented delegation of authority to sign FINAL DETERMINATIONS, not just evidence the person holds a county position.

Q: Can the same auditor who issued the original assessment also sign the final determination reviewing an appeal of that assessment?
A: No -- the Department states this should never happen under any circumstances, regardless of any designation, to preserve independent review of the original audit decision.

Citations and references

• Public Document 04-28 (6/25/2004) -- the Guidelines for Appealing Local Business Tax, defining "local assessing officer" and the general local-tax appeals process
• Public Document 18-140 (3/30/2018) -- cited alongside P.D. 19-62 for the requirement that a final local determination be signed by the Commissioner/chief assessing officer or an expressly designated individual
• Public Document 19-62 (6/17/2019) -- cited for the same signature/designation requirement

Subject

Administration : Appeal - Jurisdiction; Designation by Local Assessing Officer

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-62

Original ruling text

May 18, 2021

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business, Professional and Occupational License (BPOL) Tax

Business Tangible Personal Property (BTPP) Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed by you on behalf of * (the “Taxpayer”), with the Department of Taxation. The Taxpayer appeals the assessments of Business, Professional and Occupational License (BPOL) tax for the 2017 through 2019 tax years and the assessments of Business Tangible Personal Property (BTPP) tax for the 2016 through 2019 tax years issued to the Taxpayer by *** (the “County”).

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 Taxpayer was a fabricator of countertops. It transformed slabs of raw granite and marble into finished countertops. It was classified as a contractor for purposes of the BPOL tax. In addition, it did not remit BTPP on its fabricating equipment for purposes of the BTPP tax.

As the result of an audit, the County issued assessments of BTPP tax for the 2016 though 2019 tax years to the Taxpayer. The Taxpayer appealed the assessments to the County, contending that its equipment constituted machinery and tools used in manufacturing and should be taxed at the applicable Machinery and Tools (M&T) tax rate. The County requested additional information in order for it to determine whether the Taxpayer was a manufacturer for purposes of both the BTPP and BPOL taxes. Based on the documentation it received and a site visit, the County determined that the Taxpayer should be classified as a retailer in part and a wholesaler in part for purposes of the BPOL tax, and that it was not performing manufacturing. Accordingly, BPOL tax was assessed for the 2017 through 2019 tax years and the BTPP tax assessments were upheld. The Taxpayer appealed the assessments of BTPP and BPOL taxes to the Department asserting that it should be classified as a manufacturer for purposes of the BPOL and BTPP taxes.

ANALYSIS

The Code of Virginia creates a review process designed to encourage resolution of local license tax issues through an appeals process that includes review by the local assessing officer and appeal to the Department. 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 Department, who will make a determination of the issues raised by the taxpayer. See Title 23 of the Virginia Administrative Code (VAC) 10-500-640 and the Guidelines for Appealing Local Business Tax in Public Document (P.D.) 04-28 (6/25/2004).

Under Title 23 VAC 10-500-710 and P.D. 04-28, “local assessing officer” means the Commissioner of Revenue or chief assessing officer or his designee. Therefore, to qualify as a final local determination, the letter should normally be signed by the Commissioner of the Revenue or chief assessing officer and not an employee working at their direction, unless the individual has been expressly designated by the Commissioner of the 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) and 19-62 (6/17/2019). Additionally, Title 23 VAC 10-500-710 contains specific language that must be included in any written final determination.

In this case, the Taxpayer appealed the assessments of BTPP tax to the County on October 15, 2019. The County issued two determination letters, one dated April 9, 2020, and a second dated September 24, 2020, each purporting to be in response to the Taxpayer’s appeal of October 15, 2019. Each determination letter was signed by the County’s deputy commissioner of tax compliance. While the deputy commissioner’s oath of office was attached to these determination letters, there was no express designation by the County’s Commissioner of the Revenue given to issue final local determinations.

DETERMINATION

The determination letters issued by the County were not signed by the County’s Commissioner of the Revenue and did not include a designation granting the employee who signed the letter authority to issue a final local determination on the Commissioner’s behalf. Therefore, the Department cannot consider the letters to be final local determinations.

The Taxpayer should be aware, however, that the information provided indicates that it did not file a local appeal with respect to its BPOL classification. The Taxpayer, therefore, should amend its local appeal to include an appeal of its classification for BPOL tax purposes.

After the County receives the Taxpayer’s amended appeal, the County is directed to review the appeal in accordance with the applicable regulations and guidelines and issue a proper final local determination. Once that is done, the Taxpayer will have 90 days to file an appeal with the Department if it disagrees with the outcome of that determination. If the case has been pending with the County for more than one year, the Taxpayer may also appeal to the Department after giving the County the requisite notice.

Further, the Department observes that it is the practice of most, if not all localities, for the Commissioner of Revenue or chief assessing officer to sign final local determination letters. This practice generally reflects the Department’s own appeals process by which the Tax Commissioner signs appeal determinations and official rulings of the Department.

In the Department’s opinion, such a practice is preferred because it helps ensure the highest level of supervisory oversight of the process. Regardless, under no circumstance should an employee who issued an audit determination which becomes the subject of an appeal be permitted to sign the final local determination in the case.

In addition, the Department has observed that localities are uncertain about what constitutes a proper designation by a Commissioner of the Revenue or chief assessing officer. Designations should be signed and notarized and clearly identify the designee and what authority the Commissioner of the Revenue or chief assessing officer is granting such individual. As such, the following is a sample of such a designation:

TO WHOM IT MAY CONCERN:

Under the authority of Title 23 of the Virginia Administrative Code (VAC) 10-500-10 and the Guidelines for Appealing Local Business Tax in Public Document (P.D.) 04-28 (6/25/2004), I hereby delegate to [Insert Name], [Insert Title], the authority to sign final local determination letters on my behalf.

Honorable [Insert Name]

Commissioner of the Revenue

[Insert Locality]

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/3677.B

Related Documents

04-28

18-140

19-62