A county's BPOL refund-denial letters were signed by a deputy, not the Commissioner of the Revenue -- do those letters count as a 'final local determination' I can appeal to the Department?

Plain-English summary

This is a procedural "notice of jurisdiction" -- the Department didn't reach the merits of the underlying BPOL tax dispute because the county never issued a properly authorized final local determination for the Department to review.

A business with a definite place of business in a Virginia county filed amended BPOL tax returns for four tax years, seeking refunds by using payroll apportionment (to situate gross receipts across the states where it did business) and claiming an out-of-state deduction for receipts attributable to states where it filed income tax returns. The county audited the amended returns and, over the course of about eight months, issued three separate letters purporting to be final determinations, each time after getting more information from the taxpayer. The last letter concluded the business had only one definite place of business (so no apportionment applied) and denied the out-of-state deduction for several states and a foreign country where the county found no nexus or attributed income.

Virginia's local-tax appeal process is a two-step system: a taxpayer first appeals to the local assessing officer (defined as the Commissioner of the Revenue or chief assessing officer), and only after receiving a "final local determination" from that official can the taxpayer appeal further to the Department. Under Title 23 VAC 10-500-710, to actually count as a final local determination, the determination letter normally must be SIGNED by the Commissioner of the Revenue or chief assessing officer personally -- or, if signed by someone else, that person must have received an EXPRESS designation of that signing authority from the Commissioner, with evidence of the designation included alongside the determination.

Here, all three of the county's letters were signed by the county's deputy commissioner of tax compliance, not the Commissioner of the Revenue. While the deputy's oath of office was attached to the letters, that's not the same as an express designation of authority to sign final determinations -- so the Department couldn't treat any of the three letters as valid final local determinations and lacked jurisdiction to rule on the substance of the apportionment and out-of-state deduction dispute. The Department also flagged (as a separate loose end) that it wasn't clear whether the taxpayer's local appeal had actually addressed the county's separate 2020-tax-year adjustments, and asked the taxpayer to supplement its local appeal on that point if needed.

To help localities avoid this problem going forward, the Department published a sample designation form in this ruling: a dated, signed, notarized letter naming the specific delegate and the specific authority (to sign final local determination letters) being delegated by the Commissioner of the Revenue.

What this means for you

Businesses appealing a local BPOL determination to the Department

Before relying on a locality's determination letter as your ticket to appeal to the Department, check WHO signed it. If it wasn't the Commissioner of the Revenue (or chief assessing officer) personally, ask the locality to show you the documented delegation of authority -- an employee's job title or oath of office, by itself, isn't enough. If no valid designation exists, the Department may treat the letter as procedurally invalid and decline to rule on the merits, sending the case back rather than resolving your dispute.

Localities issuing final local determinations on BPOL and other local business taxes

Have the Commissioner of the Revenue or chief assessing officer sign final determination letters directly whenever possible. If you delegate that authority, document it with a signed, notarized designation that specifically identifies the delegate and the specific authority being granted (a sample format is included in this ruling) -- and never let the same employee who issued the original audit assessment also sign the final determination on that same case.

Businesses whose refund claim spans multiple tax years or issues

If a locality's determination letter doesn't clearly address every year or issue in dispute (here, the taxpayer's 2020 tax year adjustments), don't assume silence means it's covered -- affirmatively supplement your local appeal with facts and arguments for every disputed year and issue to make sure it's preserved before the local process concludes.

Common questions

Q: Who is legally allowed to sign a final local determination on a BPOL (or other local business tax) appeal?
A: The Commissioner of the Revenue or chief assessing officer, personally -- or another employee who has received an EXPRESS, documented designation of that specific signing authority from that official. A general job title or an oath of office alone doesn't establish the designation.

Q: What happens if a locality's determination letter wasn't signed by someone with proper authority?
A: The Department can't treat it as a valid final local determination and won't rule on the underlying tax dispute. Instead, it issues a jurisdictional notice like this one, effectively sending the matter back to the local level for a properly authorized determination.

Q: My refund covers several tax years, but the locality's last letter only clearly discusses some of them -- what should I do?
A: Don't assume the unaddressed years are automatically part of your appeal. Affirmatively supplement your local appeal with the specific facts and arguments for every disputed year so the locality's final determination has to address them.

Citations and references

• Title 23 VAC 10-500-640 and Public Document (P.D.) 04-28 (6/25/2004) (Guidelines for Appealing Local Business Tax; establish the two-step local-then-Department appeal process)
• Title 23 VAC 10-500-710 and P.D. 18-140 (3/30/2018), P.D. 19-62 (6/17/2019), and P.D. 21-62 (5/18/2021) (requirement that a final local determination be signed by the Commissioner of the Revenue/chief assessing officer, or an expressly-designated delegate)

Subject

Administration : Appeal - Jurisdiction; Locality Failed to Issue Final Local Determination

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-130

Original ruling text

September 28, 2021

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

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 * (the “Taxpayer”), with the Department of Taxation. The Taxpayer appeals the denial of refunds of Business, Professional and Occupational License (BPOL) tax by *** (the “County”) for the 2016 through 2019 tax years and the issuance of an assessment of BPOL tax for the 2020 tax year.

The following determination is based on the facts presented to the Department summarized below. The 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 Taxpayer, a business that collected and distributed data for a specific industry, had a definite place of business in the County. The Taxpayer filed amended BPOL tax returns for the 2016 through 2019 tax years with the County requesting refunds. The amended returns sitused gross receipts using payroll apportionment and claimed the out-of-state deduction for gross receipts attributable to business conducted in other states in which it filed tax returns.

The County audited the amended returns and issued three different letters purporting to be final local determinations. Each letter was issued after receiving additional information from the Taxpayer. In the last letter, the County determined that the Taxpayer only had one definite place of business and therefore no apportionment was required. The County further denied the out-of-state deduction claimed for a number of states and a foreign country because the Taxpayer either lacked nexus or did not attribute income to those particular states. The Taxpayer filed an appeal with the Department, contending that it should be allowed to use payroll apportionment and that the out-of-state deduction disallowed by the County was for gross receipts attributable to states in which income tax returns were filed.

ANALYSIS

The Code of Virginia creates a review process designed to encourage resolution of local license tax issues through an appeals process that includes review by the local assessing officer and appeal to the Department. 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 Department, who will make a determination of the issues raised by the taxpayer. See Title 23 of the Virginia Administrative Code (VAC) 10-500-640 and the Guidelines for Appealing Local Business Tax in Public Document (P.D.) 04-28 (6/25/2004).

Under Title 23 VAC 10-500-710 and P.D. 04-28, “local assessing officer” means the Commissioner of Revenue or chief assessing officer or his designee. Therefore, to qualify as a final local determination, the letter should normally be signed by the Commissioner of the Revenue or chief assessing officer and not an employee working at their direction, unless the individual has been expressly designated by the Commissioner of the Revenue or chief assessing officer and evidence of such designation is included with the final local determination. See P.D. 18-140 (3/30/2018), 19-62 (6/17/2019) and P.D. 21-62 (5/18/2021). Additionally, Title 23 VAC 10-500-710 contains specific language that must be included in any written final determination.

In this case, the Taxpayer appealed the denial of refunds of BPOL tax for the 2016 through 2019 tax years. The County issued three determination letters, dated July 30, 2020, December 23, 2020 (updated on December 29, 2020) and March 11, 2021, purporting to be in response to the Taxpayer’s refund request. Each determination letter was signed by the County’s deputy commissioner of tax compliance. While the deputy commissioner’s oath of office was attached to these determination letters, there was no express designation by the County’s Commissioner of the Revenue given to issue final local determinations.

DETERMINATION

The determination letters issued by the County were not signed by the County’s Commissioner of the Revenue and did not include a designation granting the employee who signed the letter authority to issue a final local determination on the Commissioner’s behalf. Therefore, the Department cannot consider the letters to be final local determinations.

The Department observes that it is the practice of most, if not all localities, for the Commissioner of Revenue or chief assessing officer to sign final local determination letters. This practice generally reflects the Department’s own appeals process by which the Tax Commissioner signs appeal determinations and official rulings of the Department.

In the Department’s opinion, such a practice is preferred because it helps ensure the highest level of supervisory oversight of the process. Regardless, under no circumstance should an employee who issued an audit determination which becomes the subject of an appeal be permitted to sign the final local determination in the case.

In addition, the Department has observed that localities are uncertain about what constitutes a proper designation by a Commissioner of the Revenue or chief assessing officer. Designations should be signed and notarized and clearly identify the designee and what authority the Commissioner of the Revenue or chief assessing officer is granting such individual. As such, the following is a sample of such a designation:

TO WHOM IT MAY CONCERN:

Under the authority of Title 23 of the Virginia Administrative Code (VAC) 10-500-10 and the Guidelines for Appealing Local Business Tax in Public Document (P.D.) 04-28 (6/25/2004), I hereby delegate to [Insert Name], [Insert Title], the authority to sign final local determination letters on my behalf.

Honorable [Insert Name]

Commissioner of the Revenue

[Insert Locality]

Further, in reviewing the information provided with the appeal, it is unclear whether the Taxpayer filed a local appeal with respect to the adjustments the County made to the Taxpayer’s 2020 BPOL filing. The County’s last letter does not appear to address the payroll apportionment or out-of-state deduction issues for the 2020 tax year, if they still existed. The County did, however, include the 2020 tax year in reference to the creation of a BPOL account for a separate entity and also in reference to receipts that may have been attributable to a branch located in a foreign country. If the Taxpayer has not already done so, it should supplement its local appeal with facts and arguments related to any disputed issues that have arisen for the 2020 tax year, and the County’s final determination should address any such issues.

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/3830.B

Related Documents

04-28

18-140

19-62

21-62