Did Virginia reconsider a denied satellite-equipment refund because the regulation's broadcasting definition supposedly changed the law?

Plain-English summary

An equipment retailer sought reconsideration after Virginia denied a refund for tax collected on equipment sold to a satellite television content provider. It argued the regulatory definition of broadcasting changed the law or had been misapplied.

Virginia rejected both grounds. The definition was longstanding, and the original satellite-provider analysis remained correct.

Reconsideration standard

23 VAC 10-20-165(F)(1) required a request within 45 days plus proof that governing law changed for the periods at issue or that policy was misapplied and proper application would change the result.

Why the definition argument failed

The regulation describes broadcasting equipment used directly to disseminate a signal into the air. Virginia traced materially identical language to its 1979 regulation and noted the statutory exemption dated to 1966. Later amendments had not changed the definition relied on by the taxpayer.

The Department also found its original determination and cited public documents accurately stated its longstanding satellite television policy. Disagreement with that conclusion was not a reconsideration ground.

What this means for you

• Reconsideration requires more than rearguing the original position.
• Identify an actual legal change effective for the disputed period.
• A regulatory phrase must be read within the agency's established exemption policy.
• Prove that correcting a policy error would change the outcome.

Common questions

Q: Had the broadcasting definition recently changed?

A: No. Virginia found the relevant language had remained the same since 1979.

Q: Did sending a satellite signal into the air automatically qualify?

A: No. The Department maintained that its longstanding policy did not exempt this customer's activity.

Citations and references

• Va. Code § 58.1-609.6(2) — broadcasting exemption
• 23 VAC 10-210-3030 — broadcasting regulation
• 23 VAC 10-20-165(F)(1) — reconsideration
• Prior determination discussed: P.D. 18-151

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-32-0

Original ruling text

April 17, 2019

Re: § 58.1-1821 Refund Application: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the “Taxpayer”), in which you request reconsideration of the determination issued by the Department on August 8, 2018 regarding the Taxpayer’s refund request for the period August 2010 through July 2014.

FACTS

The Taxpayer is a retailer of broadcasting equipment. During the period at issue, the Taxpayer sold broadcasting equipment to * (the “Customer”) and charged the retail sales tax on these sales. The Customer provides content and programming via a satellite system to subscribers. The Taxpayer submitted a request to the Department for refund of the sales tax charged, collected and remitted on sales of equipment to the Customer. The Department’s auditor denied the refund request, finding that the Customer does not meet the requirements set forth in Virginia Code § 58.1-609.6 2 and Title 23 of the Virginia Administrative Code (VAC) 10-210-3030. The Taxpayer subsequently appealed the denial of its refund request. In accordance with the aforementioned authorities, it was determined that the broadcasting exemption did not apply to the Taxpayer’s Customer and to the sale of the equipment to that Customer.

Relying on Title 23 VAC 10-20-165 F, the Taxpayer requests reconsideration of the determination issued by the Department. The Taxpayer maintains that the law upon which the original determination is based has changed and the policy upon which the original determination is based is misapplied, and the determination would have a different result based on the application of the proper policy. The Taxpayer further states that in Title 23 VAC 10-210-3030 B, the Department defined broadcasting as disseminating a signal into the air and that the regulation changed Virginia law. Based upon this definition, the Taxpayer maintains that the equipment sold to its Customer is satellite broadcasting equipment used to disseminate a signal into the air and, therefore, is exempt from the sales tax.

DETERMINATION

Title 23 VAC 10-20-165 F 1 states, in pertinent part, that:

In order for the Tax Commissioner to grant a request for reconsideration, the request must be received by the Department not later than 45 days after the final determination and the taxpayer must demonstrate that…the law upon which the original determination is based has been changed by legislation, court decision or other authority effective for the tax period(s) at issue or that the policy upon which the original determination is based is misapplied, and the determination would have a different result based on the application of the proper policy….

Based upon a review of the Taxpayer’s reconsideration request and the law and policy used to make the determination issued by the Department, I find that the Taxpayer has not demonstrated that the applicable law has been changed, or that the policy has been misapplied. Specifically, I find that the definition of broadcasting in Title 23 VAC 10-210-3030 B did not change Virginia law. The broadcasting exemption is one of the original exemptions enacted in 1966 at the inception of the Virginia retail sales and use tax. The regulation addressing the broadcasting exemption was first issued in 1979 by the Department and is the precursor to Title 23 VAC 10-210-3030. The language used in the 1979 definition of broadcasting is the same language that is used in the current regulation. [1] Title 23 VAC 10-210-3030 has been amended over the years. However, the definition referenced by the Taxpayer has not changed since issued in 1979. Accordingly, the law has not changed as stated by the Taxpayer.

Further, the determination letter issued to the Taxpayer accurately applies the law and policy to the facts at issue. The public documents referenced in the determination letter clearly and accurately state and explain the Department’s longstanding policy with respect to the broadcasting exemption and the Department’s longstanding policy with respect to satellite television providers. The Department’s policy and application of the law are clear. The fact that the Taxpayer disagrees with the Department’s decision does not warrant reconsideration of the findings in the determination letter issued to the Taxpayer. Accordingly, the Taxpayer’s request for reconsideration is denied and the findings in the determination letter stand as issued.

The Code of Virginia section and regulations cited is available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact * in the Department’s Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

[1] Virginia Retail Sales and Use Tax Regulation 1-88(a) provides that “Broadcasting as used in this section means transmitting and programming (program preparation). The exemption only applies to broadcasting equipment and accessories to such equipment used directly in disseminating a signal into the air.” The exemption applied to commercial radio and television companies.

Related Documents

88-294

96-7

96-323

97-392

00-23

01-3

05-70

18-151