The county responded to my local BTPP/machinery-and-tools tax appeal, but its letter didn't actually address my argument -- can the Department still rule on my case?

Plain-English summary

A company that operated open-pit quarry mines in a Virginia county (with additional operations elsewhere in Virginia and in another state) filed its 2020 machinery and tools (M&T) tax return, but left out certain categories of equipment it had reported in prior years -- the company had come to believe those assets weren't directly used in its mining operations and so weren't taxable. The county disagreed and adjusted the return to add those categories back into the taxable measure for both M&T and business tangible personal property (BTPP) tax.

The company appealed to the county, arguing the excluded assets weren't used directly in mining. The county's response, though, didn't actually engage with that argument -- it simply told the company that a prior letter concluding the company was a "processor" rather than a "manufacturer" was still valid. The company then appealed to the Department, framing itself as a mining company whose equipment should mostly be exempt from local taxation.

The Department didn't reach that mining-classification question at all. Virginia's local business tax appeal statute requires that once a taxpayer files a proper local appeal, the locality must fully review the taxpayer's specific claims and issue a written final determination addressing them, including a written explanation of the taxpayer's right to a further appeal to the Department. A taxpayer can only bring its dispute to the Department after that kind of proper final local determination exists. Here, the county's letter never addressed the taxpayer's actual claim (that its assets weren't used in mining) -- it just repeated an old, differently-framed conclusion about "processor" versus "manufacturer" status, and it left out the required appeal-rights notice. Because the county hadn't done what the statute requires, the Department found it lacked jurisdiction to decide anything on the merits, and remanded the entire case back to the county with instructions to actually address the taxpayer's mining argument and issue a proper final local determination. Only after that happens can either party bring the substantive dispute to the Department under Va. Code § 58.1-3983.1.

What this means for you

Businesses appealing a local BTPP or machinery-and-tools tax assessment to the county or city

A locality's response to your appeal has to actually grapple with the specific argument you raised, in writing, and it has to tell you (in writing) about your right to appeal further to the Department. If the locality's letter just recycles an old conclusion, restates its original position, or otherwise dodges your actual claim, it likely isn't a valid final local determination -- and you (or the locality) may need to go back and get one before the Department can rule on the substance.

Quarry, mining, and similar extraction businesses classified by a locality as "processors"

Being labeled a "processor" rather than a "manufacturer" doesn't resolve whether your equipment counts as mining machinery for local property tax purposes -- that's a separate legal question the locality has to actually address if you raise it in an appeal, not one it can sidestep by falling back on an older classification letter about a different label.

Anyone whose local tax appeal gets what looks like a final answer from the locality

Check whether that answer actually addresses your specific arguments and includes the required notice of your right to appeal to the Department. If it doesn't, the Department may treat the whole matter as not yet ripe for its review, sending it back to the locality rather than deciding your case.

Common questions

Q: The county sent me a letter after my local tax appeal, but it doesn't address what I actually argued -- is that a final determination?
A: Not necessarily. If the locality's letter fails to engage with your specific claims and omits the required written notice of your right to appeal further to the Department, it may not qualify as a valid final local determination, meaning the Department can't yet rule on the merits.

Q: What happens if the Department finds the county's determination letter was deficient?
A: The Department remands the case back to the county, instructing it to actually address the taxpayer's specific arguments and issue a complete, proper final local determination -- only after that can the case return to the Department (or go to court) on the merits.

Q: Does being classified as a "processor" instead of a "manufacturer" settle whether my mining equipment is taxable?
A: No -- those are different classification questions. Whether equipment counts as exempt mining machinery under Virginia's local property tax rules has to be separately and specifically addressed if you raise it, not resolved by reference to an unrelated manufacturer/processor distinction.

Citations and references

• Va. Code § 58.1-3983.1 B 5 (once a proper local appeal is filed, the locality must fully review the taxpayer's claims and issue a written determination with supporting facts and analysis)
• Va. Code § 58.1-3983.1 D (a taxpayer may only appeal to the Department after a proper final local determination has been issued)
• P.D. 04-28 (6/25/2004) (Department's Guidelines for Appealing Local Business Taxes, § 1.7, describing the required contents of a final local determination)

Subject

Tangible Personal Property: Appeals - Jurisdiction

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-123

Original ruling text

August 3, 2022

Re: Notice of Jurisdiction

Taxpayer: *

Locality Assessing Tax: *

Business Tangible Personal Property (BTPP) Tax

Machinery and Tools (M&T) 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. You appeal the assessment of Machinery and Tools (M&T) tax and Business Tangible Personal Property (BTPP) tax issued to the Taxpayer by *** (the “County”) for the 2020 tax year.

The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections and public document 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 operated open pit quarry mines in the County. It also had mining operations in other Virginia localities and in * (State A). The Taxpayer filed an M&T tax return for the 2020 tax year, reporting taxable machinery and tools used in its mining operations. The return, however, did not include certain categories of assets the Taxpayer had previously included in prior years’ returns but now believed had been included in error. The Taxpayer believed these categories of assets were not subject to the M&T tax because they were not directly used in the Taxpayer’s mining operations. The County adjusted the return to include the categories in the taxable measure of machinery and tools and business tangible personal property and issued an assessment.

The Taxpayer appealed to the County, contending that the excluded categories of assets were not directly used in its mining operation. The County issued a letter to the Taxpayer, informing it that a prior letter concluding that the Taxpayer was a processor, not a manufacturer, was still valid. The Taxpayer appealed to the Department, contending that it was a mining company and as such only its machinery and tools were subject to local taxation.

ANALYSIS

Virginia Code § 58.1-3983.1 B 5 and § 1.7 of the Department’s Guidelines for Appealing Local Business Taxes, issued as Public Document (P.D.) 04-28 (6/25/2004), provide that once a proper local appeal has been filed, it is incumbent on a locality to undertake a full review of a taxpayer’s claims and issue a written determination setting forth the facts and analysis in support of the locality’s decision. The final local determination must also include a written explanation of the taxpayer’s right to file an administrative appeal of the determination to the Department. Only when a proper final local determination has been issued can a taxpayer file an administrative appeal with the Department, if it wishes to contest any of the locality’s conclusions. See Virginia Code § 58.1-3983.1 D and P.D. 04-28.

The County’s determination letter did not address the Taxpayer’s claim that it was a mining company engaged in mining operations. Rather, it concluded that the Taxpayer was a processor, not a manufacturer. Thus, it appears the County failed to consider the Taxpayer’s claims and provided no analysis to address the Taxpayer’s assertions. Further, the County’s letter did not contain a written explanation of the taxpayer’s right to file an administrative appeal of the determination to the Department.

DETERMINATION

For the reasons stated above, the Department lacks jurisdiction to address this appeal. Therefore, I am remanding this case back to the County with instruction to fully address the specific arguments set forth in the Taxpayer’s appeal and to issue a proper final local determination. Once a proper final local determination has been issued, the Taxpayer, if it is not satisfied with such determination, may file an appeal under either Virginia Code § 58.1-3980 or § 58.1-3983.1 within the time prescribed by law. If the Taxpayer wishes to appeal to the Department, the Taxpayer must proceed under Virginia Code § 58.1-3983.1.

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/4094.B

Related Documents

04-28