Can I skip straight to the Virginia Department of Taxation to appeal a local business tangible personal property tax dispute, or do I have to go through the locality's own appeal process first?

Plain-English summary

An amusement park operator submitted a REFUND request to its county for business tangible personal property (BTPP) tax paid over 2017-2020, arguing that certain assessed items were actually fixtures to real estate (and so not subject to BTPP tax at all) and that other assets should have been removed from its tax rolls because it no longer owned them. The county denied the refund, concluding the disputed items weren't fixtures and that the taxpayer hadn't given it complete information to support the asset-removal claim. The taxpayer then brought the dispute to the Department, arguing the items were fixtures and that the county was even taxing property located outside its own jurisdiction.

The Tax Commissioner didn't reach any of those merits questions. Pointing to a near-identical prior case, the ruling explains that a REFUND request (or an amended return correcting the taxpayer's own filing mistake) is legally different from a formal local APPEAL -- and when a locality responds to a mere refund request with something styled as a "Final Local Determination Letter," that doesn't substitute for the actual local appeals process the taxpayer is entitled to under Va. Code §§ 58.1-3980 and 58.1-3983.1. Here, just like in the earlier case, the county short-circuited the process: instead of simply granting or denying the refund and telling the taxpayer about its local appeal rights (or conducting its own verification and then affording an appeal), it jumped straight to a purported final determination. The Department's conclusion: the taxpayer may now file a genuine local appeal with the county under either statute; only once the county issues a REAL final determination -- and the taxpayer still disagrees -- does the Department (or, alternatively, the local circuit court) actually have jurisdiction to decide the dispute on the merits.

What this means for you

Businesses disputing a local BTPP, machinery & tools, or similar local business tax assessment

Know the difference between a refund request/amended return and a formal APPEAL -- they trigger different procedures, and only a proper appeal under Va. Code § 58.1-3983.1 (or § 58.1-3980 to circuit court) gets you to a real final determination that the Department (or a court) can review. If your locality responds to a simple refund request with something calling itself a "final determination," that may not actually satisfy the appeal requirement.

Localities administering local business taxes

This ruling (echoing a 2022 predecessor) is a reminder that a refund request isn't an appeal -- respond to it by granting it, denying it with appeal-rights notice, or conducting a verification process followed by an appeal opportunity, rather than issuing a "final determination" that skips the taxpayer's actual local appeal rights.

Accountants and tax professionals

Before escalating a local tax dispute to the Department, confirm your client actually went through a genuine local appeal (not just a refund claim) under § 58.1-3983.1 or § 58.1-3980. If the locality's process didn't follow that path, raise the jurisdictional defect early -- as this ruling shows, the Department will decline jurisdiction rather than rule on the substance until the proper local process plays out.

Common questions

Q: Can I appeal directly to the Virginia Department of Taxation if my locality denies my refund request for a local business tax?
A: Not necessarily -- a refund request is legally distinct from a formal appeal. You generally need to go through a proper local appeal under Va. Code § 58.1-3983.1 (or file in circuit court under § 58.1-3980) before the Department has jurisdiction to decide the dispute on the merits.

Q: What should a locality do when it receives a refund request instead of a formal appeal?
A: Either grant the request, or deny it and inform the taxpayer of local appeal rights -- or conduct its own verification process and then give the taxpayer an appeal opportunity. Issuing a "final determination" in response to a mere refund request skips a step the taxpayer is entitled to.

Q: What happens after a locality's flawed response gets a case sent back for a real local appeal?
A: The taxpayer may then file a proper local appeal; if the locality issues a genuine final determination and the taxpayer still disagrees, only then can the Department or a circuit court decide the merits.

Q: Does this ruling decide whether the disputed property was actually exempt as fixtures?
A: No -- the Department expressly did not reach that question, resolving the case entirely on the jurisdictional/procedural defect instead.

Citations and references

• Va. Code § 58.1-3980 (application to circuit court for correction of local tax assessment)
• Va. Code § 58.1-3983.1 (local business tax appeal procedure and Department review)
• P.D. 22-113 (6/21/2022) (controlling precedent on the refund-request-vs-appeal distinction)

Subject

Tangible: Appeals - Jurisdiction

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 23-42

Original ruling text

April 12, 2023

Re: Appeal of Final Local Determination

Taxpayer: *

Locality Assessing Tax: *

Business Tangible Personal Property Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed by you on behalf of * (collectively, the “Taxpayer”) with the Department of Taxation. The Taxpayer appeals the denial of refunds of business tangible personal property (BTPP) tax paid to *** (the “County”) for the 2017 through 2020 tax years.

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

The Taxpayer operated an amusement park in the County. The Taxpayer submitted a refund request to the County for BTPP tax paid for the 2017 through 2020 tax years, contending that certain items of property that had been the subject of previous BTPP tax assessments were in fact fixtures to realty and not subject to the BTPP tax and that certain assets were removed from the Taxpayer’s asset list because they were no longer owned by the Taxpayer.

The County denied the refund request, concluding that the items at issue were not fixtures and thus were subject to the BTPP tax and that the Taxpayer was not eligible for a refund based on the removal of assets because the Taxpayer failed to supply the County with complete and accurate information concerning past asset disposals. The Taxpayer appealed the County’s determination to the Department, contending that all of the contested items of property were fixtures to realty and that the County is taxing property that is not located within its jurisdiction.

ANALYSIS

The procedural background of this case is similar to the facts of Public Document (P.D.) 22-113 (6/21/2022). In that case, the taxpayer requested a refund on the basis that it had erroneously paid BTPP taxes to the locality. The locality later issued a purported “Final Local Determination Letter” in response to the taxpayer’s “appeal application.” The taxpayer, however, had not filed an appeal. Amended returns or refund claims seeking to correct mistakes in a taxpayer’s own filings are not appeals. In such cases, the locality should either grant the request, or perform a verification process. If the locality chooses to perform a verification process, the taxpayer should be informed of the results of that review and then should be given the opportunity to appeal the locality’s decision. Like that case, here the County proceeded to issue a final local determination in response to the Taxpayer’s initial refund claim, instead of denying the refund and informing the Taxpayer of its local appeal rights.

DETERMINATION

In this case, the Taxpayer filed a refund claim, the County issued a response, and the Taxpayer should now be afforded an opportunity to participate in the local appeals process. Because the County has issued a response, the Taxpayer may now file a local appeal under Virginia Code § 58.1-3980 or § 58.1-3983.1. If the County issues a final determination and the Taxpayer disagrees with the outcome, then the Taxpayer may appeal to the Department under Virginia Code § 58.1-3983.1 or the local circuit court under Virginia Code § 58.1-3980. Until the local appeals process is completed, the Department does not have jurisdiction to decide the Taxpayer’s appeal on the merits.

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/4296.X

Related Documents

22-113