Could a convenience store overturn local BPOL and business-property assessments without producing complete records?

Plain-English summary

Virginia upheld the city's BPOL and business tangible personal property assessments because the store did not provide the records needed to prove them wrong. The convenience store and gas station supplied federal returns, income statements, and some register tapes, but repeatedly withheld the complete tapes and other requested documents.

For BPOL tax, the city could require records sufficient to reconcile the store's claimed gross receipts with its financial statements and returns. When the evidence remained incomplete and inconsistent, the city was allowed to use the information available.

For business tangible personal property tax, the store said vendors owned certain display cases and coolers. It provided no contracts or other ownership records, while the equipment sat at its business and was used in store operations. The store therefore did not overcome the presumption that the assessment was correct.

The Department had no authority to decide the separate local food-and-beverage, or meals-tax, assessment. The determination pointed instead to the statutory circuit-court appeal route and deadlines.

What this means for you

• Local BPOL audits can require ledgers, financial statements, returns, and complete point-of-sale records.
• Federal tax returns do not necessarily prove the local gross-receipts base when underlying records are missing or inconsistent.
• If a vendor owns equipment at your premises, retain contracts or other ownership evidence.
• Different local taxes can have different administrative appeal routes.

Common questions

Q: Why were the BPOL assessments upheld?
A: The store did not provide complete records allowing the city to verify and reconcile gross receipts.

Q: Why were the coolers and display cases assessed to the store?
A: They were used at its business, and the store supplied no proof that vendors owned them.

Q: Did the Tax Commissioner decide the meals-tax assessment?
A: No. The Department lacked statutory authority over that local tax appeal.

Citations and references

• Va. Code §§ 58.1-3109 6, 58.1-3700.1, 58.1-3703.1, 58.1-3983.1, and 58.1-3984 A.

Subject

In conjunction with an audit taxpayer failed to provide all of the documentation requested.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-82

Original ruling text

May 29, 2013

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business, Professional and Occupational License (BPOL) Tax

Business Tangible Personal Property (BTPP) Tax

Dear *:

This final state determination is issued upon the application for correction filed by you on behalf of your client, * (the "Taxpayer") with the Department of Taxation. You appeal a final local determination upholding a BPOL tax assessment and a BTPP tax assessment for 2008 through 2010 tax years, issued by the *** (the "City").

The local license tax and fee and business tangible personal property tax are imposed and administered by local officials. Virginia Code §§ 58.1-3703.1 A 5 and 58.1-3983.1 D 1 authorize the Department to issue determinations on taxpayer appeals of certain BPOL and BTPP tax assessments, respectively. On appeal, a tax assessment by a local assessing officer is deemed prima facie correct, i.e. , the local assessment will stand unless the taxpayer proves that it is incorrect.

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

FACTS

The Taxpayer operated a convenience store and gas station in the City. In conjunction with an audit of the Taxpayer, the City requested financial records to ascertain the correct tax liabilities for all of the tax years at issue. When the records were not provided, the City issued assessments based on the available information for 2008 through 2010 tax years for BPOL tax, BTPP tax and local food and beverage taxes.

The Taxpayer appealed the assessments and provided the City copies of its federal income tax returns and income statements. In its final determination, the City upheld the assessments on the basis that the Taxpayer failed to provide sufficient records to substantiate items reported on the income tax returns.

The Taxpayer has filed an appeal with the Tax Commissioner, contending the City's assessments are overstated. The Taxpayer believes gross receipts for BPOL tax purposes should be based on sales reported on its income tax returns. The Taxpayer also asserts it did not own certain property included in the BTPP tax assessments. The Taxpayer further argues that it had limited sales of items that could have been classified as meals.

ANALYSIS

BPOL Tax

The BPOL tax is a gross receipts based tax imposed upon business, trades, professions, occupations, callings and the persons engaged therein for the privilege of conducting business in a local jurisdiction. Virginia Code § 58.1-3700.1 defines "gross receipts" as the "whole, entire, total receipts, without deduction."

As part of its auditing procedures, the City requested financial documentation from the Taxpayer including financial statements, ledgers, schedules, tax returns and a sample of tapes from the Taxpayer's cash registers. The Taxpayer failed to provide all of the documentation requested. Further, the City found discrepancies in the documentation that was provided. In response, the City requested that the Taxpayer provide the remaining documentation requested, as well as all of the cash register tapes for the tax years at issue. When the Taxpayer failed to produce the requested documents, the City issued assessments.

With its appeal to the City, the Taxpayer provided additional information, but again failed to provide all of the documentation requested. As a result, the City issued a final determination upholding the BPOL tax assessments.

In its appeal to the Department, the Taxpayer asserts that the City disregarded valid tax returns and that the register tapes provided are sufficient documentation. The Department requested the Taxpayer provide all of the documentation requested by the City. Again, the Taxpayer provided some additional records, but did not include all of the cash register tapes.

Virginia Code § 58.1-3109 6 grants local assessing officers the authority to require records and other information necessary to verify the accuracy of a taxpayer's BPOL tax returns. In addition, Va. Code § 58.1-3703.1 A 9 requires taxpayers to keep sufficient records to enable the local taxing authority to verify the correctness of the tax paid for the license years assessable and determine the correct amount of tax assessable. When the documentation provided by a taxpayer is inconclusive, it is reasonable for the local assessing officer to request information sufficient to reconcile gross receipts to total gross receipts reported on financial statements or tax returns. Further, when such information is not provided, a local assessing authority must use the information available to determine gross receipts sitused within its jurisdiction.

BTPP Tax

The Taxpayer contends that several display cases and coolers included in the BTPP tax assessments belonged to vendors, which used the displays for their products. The City and the Department have requested copies of contracts or any other documentation showing ownership of the property at issue. The Taxpayer has been unable to provide any documentation as to the ownership of the cases and coolers. The property was located at the Taxpayer's definite place of business and was used in its operations as a convenience store. With respect to the BTPP tax, a local assessing officer can audit taxpayer records and require a taxpayer to furnish information to make an accurate assessment of a taxpayer's tangible personal property. See Va. Code § 58.1-3109 6. In addition, pursuant to Va. Code § 58.1-3983.1 B 3, a local assessing officer may require the submission of additional information or documentation in order to make a proper and equitable determination of an application for correction. As such, it is incumbent upon the Taxpayer to prove to the satisfaction of the local assessing officer that it did not own the property in question.

Local Food and Beverage Tax

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.

The Department is not authorized to consider appeals of the local food and beverage tax, commonly known as the meals tax. Therefore, I cannot issue a determination regarding the validity of the meals tax assessments issued to the Taxpayer by the City.

The Taxpayer may appeal assessments of the meals tax to the circuit court under the provisions of Va. Code § 58.1-3984 A. In the Taxpayer's case, such an appeal must be filed with the circuit court: (1) within three years from the last day of the tax year for which the assessment is made, (2) within one year from the date of the assessment, or (3) within one year from the date of the local official's final determination under Va. Code § 58.1-3981, whichever is later.

DETERMINATION

As indicated above, an assessment issued by a local assessing officer is deemed to be prima facie correct. See Va. Code §§ 58.1-3703.1 A 5 b and 58.1-­3983.1 B 4. In this case, the Taxpayer has failed to comply with requests for documentation from both the City and the Department, or provide any suitable alternative documents. Accordingly, the City's BPOL and BTPP assessments for the 2008 through 2010 tax years are upheld.

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/1-5215749712.D