Can I appeal a Virginia locality's BPOL (business license) tax straight to the Department of Taxation, or do I have to go through the locality first?

Plain-English summary

A taxpayer that a Virginia county had assessed BPOL (business license) tax for the 2014–2018 tax years tried to appeal to the Department of Taxation. The Commissioner issued a "notice of jurisdiction" explaining the Department had no authority to hear the appeal yet, because the taxpayer had not completed a proper local appeal.

Virginia's BPOL appeal process (Va. Code § 58.1-3703.1) is two-step. First, a taxpayer who disagrees with a local license tax assessment must file an administrative appeal with the local assessing official (usually the commissioner of the revenue) — within one year of the last day of the tax year for which the assessment was made, or one year of the "appealable event," whichever is later. An appealable event includes an increase in the assessment, a refund denial, a new assessment, or a business-classification dispute. The local appeal must actually explain why the assessment is wrong, with supporting facts and law (23 VAC 10-500-700 D). The locality then reviews and issues a final determination. Only after that final determination may the taxpayer appeal to the Department — within 90 days (23 VAC 10-500-720).

Here, the taxpayer had only sent the county a January 2020 letter asking it to explain why the BPOL tax applied — essentially a list of questions. That did not meet the requirements of a local appeal, and in any event the county hadn't responded before the taxpayer wrote to the Department. Because no valid local appeal had produced a final determination, the Department couldn't step in. The Commissioner noted one alternative: if a proper local appeal stays pending for more than a year, the taxpayer may elect to treat it as denied and appeal directly to the Department, after giving the locality 30 days' written notice.

What this means for you

Businesses disputing a local BPOL assessment

You can't skip the locality. Sending questions or asking for an explanation is not a formal appeal. To preserve your rights, file a written local appeal that states the assessment is erroneous and lays out your facts and legal basis, and do it within one year of the tax year or the appealable event. Get the locality's final determination, then appeal to the Department within 90 days if you still disagree. If the locality sits on your appeal for over a year, you can force the issue by electing to treat it as denied (with 30 days' notice) and going to the Department.

Practitioners handling local tax appeals

The Department cannot compel a locality to answer a taxpayer's questions, and it will decline jurisdiction until there's a final local determination (or the one-year-pending election). Frame the client's first move as a compliant local appeal under § 58.1-3703.1, not an informal inquiry, so the clock and the record start correctly.

Common questions

Q: Can I appeal my BPOL tax directly to the Virginia Department of Taxation?
A: Not at first. You must appeal to the local assessing official and get a final determination; only then can you appeal to the Department, within 90 days.

Q: I asked the county to explain the assessment. Isn't that an appeal?
A: No. A request for an explanation or a list of questions doesn't meet the requirements of a local appeal. A proper appeal must state why the assessment is wrong and provide the supporting facts and law.

Q: What if the locality never responds to my appeal?
A: If a proper local appeal has been pending more than one year, you may elect to treat it as denied and appeal directly to the Department, after giving the locality 30 days' written notice.

Q: What's the deadline to file the local appeal?
A: Within one year of the last day of the tax year for which the assessment was made, or one year of the appealable event, whichever is later.

Citations and references

Statute, regulations, and public document:

• § 58.1-3703.1 (BPOL local license tax appeal process; appealable events; local final determination; one-year-pending direct-to-Department election)
• 23 VAC 10-500-640, 23 VAC 10-500-700 D, and 23 VAC 10-500-720 (local review process, contents of a local appeal, and the 90-day appeal to the Department)
• P.D. 11-124 (7/1/2001) (a Department appeal is available only after a locality issues a final determination)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-115

Original ruling text

June 30, 2020

Re: Notice of Jurisdiction

Taxpayer: *

Locality Assessing Tax: *

Business, Professional and Occupational License (BPOL) Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed by you on behalf of your client, * (the “Taxpayer”), with the Department. The Taxpayer appeals assessments of Business, Professional and Occupational License (BPOL) tax issued by *** (the “County”) for the 2014 through 2018 tax years.

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 County issued assessments for BPOL tax to the Taxpayer for the 2014 through 2018 tax years. The Taxpayer sent a letter to the County’s chief assessing officer dated January 9, 2020, asking him to explain the basis for why the BPOL tax was assessed. When a response was not received, the Taxpayer wrote to the Department for the explanation.

ANALYSIS

The Code of Virginia includes a review process designed to encourage resolution of local license tax issues through an appeal process that includes review by the local assessing officer and appeal to the Tax Commissioner. 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 Tax Commissioner who will make a determination of the issues raised by the taxpayer. See Title 23 of the Virginia Administrative Code (VAC) 10-500-640.

Specifically, Virginia Code § 58.1-3703.1 A 5 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 the taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed. An appealable event also includes the appeal of a business classification, regardless of whether the taxpayer’s appeal is in conjunction with an assessment, examination, audit or any other action taken by the locality.

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

Pursuant to Title 23 VAC 10-500-700 D, the taxpayer’s appeal should contain, among other things, a statement explaining why the taxpayer believes the assessment is erroneous. The statement should also include facts, issues and authority which the taxpayer believes support his position.

Under Virginia 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 Public Document (P.D.) 11-124 (7/1/2001). 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 appealable event occurred when the assessments were issued. Although the Taxpayer attempted to obtain explanations from the County regarding why he was subject to BPOL tax, it is unclear whether the letter dated January 9, 2020, that the Taxpayer sent to the County’s chief assessing officer was a local appeal. The letter fails to meet the requirements of a local appeal or application for review, and it contained a series of questions that the Taxpayer wanted the County to answer. Even if that letter could be a considered a valid local appeal, the Taxpayer did not receive a response prior to writing to the Department for an explanation regarding why he was subject to BPOL tax by the County.

DETERMINATION

While the Department hopes that localities will be responsive to questions taxpayers have regarding the application of local taxes, the Department cannot compel local officials to respond. If the Taxpayer wishes to dispute the assessments, the Taxpayer must file an appeal with the County and explain why he believes he is not subject to BPOL tax under the particular facts of his case. The local appeal should clearly set forth the issues in addition to the facts and law the Taxpayer relies on to reach that conclusion.

Once the County has issued its final determination, the Taxpayer may file an appeal with the Department within 90 days pursuant to Title 23 VAC 10-500-720 if he disagrees with any of the County’s conclusions. The Taxpayer may also appeal to the Department if the local appeal is pending with the County for more than one year, provided the Taxpayer gives the County 30 days written notice that it is electing to treat the appeal as denied.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1871.M

Related Documents

11-124