Could an air-charter operator bypass local BPOL appeals by requesting a Virginia advisory opinion?

Plain-English summary

Virginia Tax declined to decide whether the air-charter operator's receipts were exempt from BPOL tax. The taxpayer was already disputing assessments but had not filed the required appeals with either the town or county. An advisory opinion was not a substitute for the statutory local correction and appeal process.

The taxpayer first had to seek correction or a refund from the local assessing authority. For a local-license-tax appealable event, it had to file with the locality, receive a final local determination, and only then appeal to the Department. If a local appeal remained pending more than one year, the statute allowed a direct Department appeal after treating the appeal as denied and giving the locality 30 days' written notice.

Because no local appeal had been filed, the Department did not reach the claimed federal air-carrier exemption. It also lacked jurisdiction over the town's separate fixed-base-operator license fee.

What this means for you

• Challenge each locality's BPOL assessment through that locality before asking Virginia Tax to review the merits.
• Preserve the applicable refund and appeal deadlines; discussions with local officials are not described here as a substitute for a filed claim.
• Obtain the locality's written final determination for a normal Department appeal.
• If a local appeal sits for more than one year, review the statutory deemed-denial and 30-day-notice procedure.
• Separate BPOL issues from other local fees because Virginia Tax may lack jurisdiction over those charges.

Common questions

Q: Did the Department decide whether 49 U.S.C. § 40116 exempted the air-charter receipts?
A: No. It declined to reach that question because the taxpayer had not followed the local appeal process.

Q: Could the taxpayer appeal directly to Virginia Tax?
A: Ordinarily only after a final local determination. A statutory exception applied when a local appeal had been pending more than one year and the taxpayer gave the required notice.

Q: What about the fixed-base-operator fee?
A: The Department said it lacked jurisdiction to issue an opinion or determination on that fee.

Q: What was the practical result?
A: The taxpayer had to pursue the remedies permitted by Va. Code §§ 58.1-3980 and 58.1-3703.1 A 5 before the BPOL merits could be reviewed.

Citations and references

• Va. Code §§ 58.1-3701, 58.1-3703.1 A 5 and A 6, 58.1-3980, 58.1-3990, and 58.1-3983.1.
• 23 VAC 10-500-640.
• 49 U.S.C. § 40116(b)(4), asserted by the taxpayer but not decided.
• Virginia Public Documents 09-48 and 11-124, discussed in the response.

Subject

Taxpayer did not appeal the assessments to either the Town or the County as required by law.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-217

Original ruling text

December 12, 2013

Re: Request for Advisory Opinion

Business, Professional and Occupational License (BPOL) Tax

Dear *:

This is in response to your letter in which you request an advisory opinion as to whether certain activities performed by * (the "Taxpayer") should be subject to the Business, Professional and Occupational License (BPOL) tax in the (the "Town") for the 2011 and 2012 tax years and in the ** (the "County") for the 2007 through 2011 tax years. I apologize for the delay in responding to your letter.

The local license fee and tax are imposed and administered by local officials. Virginia Code § 58.1-3701 authorizes the Department to issue advisory opinions on local license tax issues. The following opinion has been made subject to the facts presented to the Department summarized below. Any change in facts or the introduction of new facts may lead to a different result.

The Code of Virginia sections 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 an air charter operator at airports located in the County for the 2007 through 2011 tax years and in the Town for the 2011 and 2012 tax years. The Taxpayer also provided maintenance services and sold fuel at its facility in the Town.

The Taxpayer believes its gross receipts derived from air carrier services were exempt from the BPOL tax under 49 U.S.C. § 40116(b)(4) and has sought relief from the Town. It requests a refund of BPOL tax paid to the Town and the County on gross receipts obtained from air carrier services for the 2007 through 2012 tax years. It also requests that all fixed base operator fees paid to the Town be refunded.

OPINION

BPOL Tax

Although the Taxpayer has requested an advisory opinion, the facts suggest an ongoing dispute with regard to BPOL tax assessments with the Town. Generally, the Department will not issue an advisory opinion when a taxpayer is actively engaged in disputing an assessment with a locality. The Department has made exceptions when both the locality and the taxpayer have agreed to request an advisory opinion to clarify a disputed matter. See Public Document (P.D.) 09-48 (4/27/2009). No evidence has been provided indicating that the Town or the County has agreed to seek this advisory opinion with the Taxpayer. As such, the Department will not address the substance of the Taxpayer's questions.

However, Va. Code § 58.1-3980 provides that a taxpayer aggrieved by an assessment of local taxes apply for the correction of such assessment to local assessing authority "within three years from the last day of the tax year for which such assessment is made, or within one year from the date of the assessment, whichever is later." In its request for an advisory opinion, the Taxpayer has indicated that it has been in discussions with the Town concerning its BPOL tax assessments, but gives no indication that it has filed a claim for refund with the County. In order to receive any refund of an overpayment of BPOL tax, a taxpayer must file a claim for a refund in accordance with Va. Code §§ 58.1-3980 and 58.1-3990 and local ordinance.

Further, Va. Code § 58.1-3703.1 A 5 b 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 a taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed.

This statute also provides the procedure that a taxpayer must use to appeal a final local license tax assessment. A taxpayer must first 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 Va. Code § 58.1-3703.1 A 5 b.

Under Va. 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 P.D. 11­124 (7/1/2011). 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. In this case, the Taxpayer did not appeal the assessments to either the Town or the County.

The purpose of the appeals process is to encourage resolution of local license tax issues through a review by the local assessing officer and appeal to the Tax Commissioner. See Title 23 of the Virginia Administrative Code (VAC) 10-500-640. As stated above, the objective of an advisory opinion is to interpret the BPOL statutes and regulations. Thus, a taxpayer must first avail itself of the appeals process when an appealable event has occurred. Accordingly, the Taxpayer must seek a remedy as permitted under Va. Code § 58.1-3980 and Va. Code § 58.1-3703.1 A 5.

Fixed Base Operator License Fee

The Taxpayer contends that it is subject to double taxation because the Town assesses a fixed base operator license fee based on gross receipts in addition to the BPOL tax. Virginia Code § 58.1-3983.1 authorizes the Tax Commissioner to issue determinations and advisory opinions for certain local business taxes. These taxes are: the business tangible personal property tax, the machinery and tools tax, the merchants' capital tax and the local mobile property tax. As such, the Department does not have jurisdiction to issue an advisory opinion or make any determination with respect to a fixed base operator license fee.

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/1-5513993734.B