If a locality's tax office replies to my business tangible personal property tax dispute, but the letter isn't signed by the Commissioner of the Revenue (or their designee), can I appeal that response directly to the Virginia Department of Taxation?

Plain-English summary

A business that ran a recycling facility believed its machinery and tools were being taxed at the wrong, higher rate: the general business tangible personal property (BTPP) rate instead of the lower rate Virginia localities may apply to manufacturing equipment. It asked the city's Commissioner of the Revenue's office to certify its manufacturing status. An employee in that office wrote back concluding the business wasn't manufacturing at its city location. The business then appealed straight to the Virginia Department of Taxation, seeking correction of the BTPP tax it had paid for 2019 through 2021.

Before the Department can even reach the manufacturing-rate question, it first has to have jurisdiction to hear the appeal at all -- and that requires a genuine "final local determination" from the locality. Virginia law and the Department's own published Guidelines for Appealing Local Business Taxes (P.D. 04-28) spell out the procedure: a taxpayer disputing a local business tax assessment goes through the locality first, and only once the locality issues a final determination signed by the Commissioner of the Revenue (or someone the Commissioner has expressly designated) can the taxpayer appeal further to the Department.

Two problems doomed this appeal. First, it wasn't even clear from the business's own letter what it was actually asking the city for: a refund of BTPP tax it had self-reported and paid, a formal appeal of a City-issued assessment, or just a forward-looking clarification of its manufacturing status. Second, and more fundamentally, the City's response letter wasn't signed by the Commissioner of the Revenue or an authorized designee -- so it didn't legally count as a "final determination" that could be appealed to the Department in the first place, regardless of which of those three things the business meant to pursue. Because there was no valid final local determination to appeal from, the Department concluded it lacked jurisdiction to decide the case at all.

The Department did lay out the correct path forward: if the business is seeking a refund of tax it believes it overpaid, it should make that request following the City's own local ordinances and filing procedures. If that request is denied in whole or in part, the business can then file a formal local appeal under Va. Code § 58.1-3980 or § 58.1-3983.1 -- and if it wants to preserve the right to eventually appeal to the Department, it needs to use the § 58.1-3983.1 route specifically. Once the City issues a properly signed final local determination addressing the facts and arguments raised, the business would then have 90 days from that determination to appeal to the Department if it still disagreed. The ruling separately noted that the City's letter also touched on the business's manufacturing status for BPOL (business license) tax purposes, which is a related but separately governed appeal track under different statutes and regulations.

What this means for you

Businesses disputing a local BTPP or manufacturing-classification determination

Make sure whatever you're asking the locality for is clearly and specifically stated -- a refund of tax already paid, a formal appeal of an assessment, or a prospective classification ruling are three different things procedurally, and mixing them up can leave your request in limbo. And don't assume any written response from the locality's tax office counts as an appealable "final determination" -- it must be signed by the Commissioner of the Revenue or that official's express designee.

Businesses who received an unsigned or informal staff letter instead of a real final determination

You generally can't skip straight to the Department of Taxation on the strength of that letter. Go back to the locality, follow its procedures (using Va. Code § 58.1-3983.1 if you want to preserve the right to later appeal to the Department), and get a properly signed final local determination before appealing further -- you'll then have 90 days from that determination to bring the matter to the Department.

Businesses juggling both BTPP/machinery-and-tools issues and a related BPOL classification dispute with the same locality

Treat them as separate appeal tracks. BPOL license tax appeals are governed by their own statute (Va. Code § 58.1-3703.1) and regulations (23 VAC 10-500-640 et seq.), distinct from the BTPP appeal procedure used here.

Common questions

Q: Can I appeal a locality's tax letter directly to the Virginia Department of Taxation?
A: Only if that letter is a genuine "final local determination" -- meaning it's signed by the Commissioner of the Revenue or an official the Commissioner has expressly designated, and it actually addresses the facts, assertions, and legal authorities you raised. An informal staff letter that doesn't meet those requirements isn't enough to give the Department jurisdiction.

Q: What should I do if I only got an unsigned or informal response from the locality?
A: Go back through the locality's own process. If you're seeking a refund of tax you already paid, follow the locality's ordinances and filing requirements for that; if the locality then denies it, file a formal local appeal, using Va. Code § 58.1-3983.1 if you want to preserve your right to later appeal to the Department. Once you have a properly signed final determination, you have 90 days to appeal to the Department if you still disagree.

Q: Are BPOL (business license) tax classification disputes handled the same way as BTPP disputes?
A: No -- BPOL appeals follow their own separate statute (Va. Code § 58.1-3703.1) and regulations (23 VAC 10-500-640 et seq.), even though the same underlying manufacturing-status question can affect both taxes.

Citations and references

• Va. Code § 58.1-3983.1(B) (procedure for appealing local business tax assessments, including BTPP)
• Va. Code § 58.1-3980 (local tax refund/correction request procedure)
• Va. Code § 58.1-3703.1 (BPOL tax appeal procedure)
• Title 23 VAC 10-500-640 et seq. (BPOL appeal regulations)
• P.D. 04-28 (6/25/2004) (Guidelines for Appealing Local Business Taxes)
• P.D. 18-140 (3/30/2018) and P.D. 21-5 (2/2/2021) (a locality's response must be signed by the Commissioner of the Revenue or an express designee to count as a final determination)

Subject

Administration: Jurisdiction

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-146

Original ruling text

October 7, 2022

Re: Notice of Jurisdiction

Taxpayer: *

Locality Assessing Tax: *

Business Tangible Personal Property (BTPP) Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed by you on behalf of * (the “Taxpayer”) with the Department. The Taxpayer appeals assessments of BTPP tax it paid to *** (the “City”) for the 2019 through 2021 tax years.

The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections, regulation 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 operated a recycling facility in the City. The Taxpayer explains that the City had been taxing its machinery and tools at the higher tangible personal property rate rather than the lower rate applicable to machinery and tools used in a manufacturing facility. The Taxpayer requested certification of its manufacturing status from the City. In a letter from an employee of the City’s Commissioner of the Revenue’s office, the City concluded that the Taxpayer was not manufacturing at its location within the City. The Taxpayer appealed to the Department, contending that the activities at its location within the City qualified it as a manufacturer and that its machinery and tools should thus be taxed at the lower rate applicable to manufacturers.

ANALYSIS

Virginia Code § 58.1-3983.1 B and the Guidelines for Appealing Local Business Taxes (the “Guidelines”), issued as Public Document (P.D.) 04-28 (6/25/2004), provide taxpayers with the procedure for appealing local business tax assessments, including assessments of BTPP tax. The Taxpayer’s letter to the Department stated that it was appealing “personal property tax” paid to the City for the 2019 through 2021 tax years. It is unclear, however, from the Taxpayer’s letter to the locality whether it was 1) requesting a refund of BTPP tax the Taxpayer self-reported and paid; 2) appealing assessments of BTPP tax the City had issued; or 3) just attempting to clarify its status as a manufacturer on a prospective basis. In any event, the City’s letter in response could not constitute a final determination letter from which the Taxpayer could appeal to the Department because it was not signed by the Commissioner of the Revenue or an express designee. See P.D. 18-140 (3/30/2018) and P.D. 21-5 (2/2/2021).

DETERMINATION

Because it is unclear from the information provided what procedure the Taxpayer was following to seek redress from the City and because the City’s response did not constitute a final determination that was appealable to the Department, the Department lacks jurisdiction to decide the Taxpayer’s appeal. If the Taxpayer is attempting to seek a refund of BTPP taxes erroneously paid, as the Taxpayer’s letter to the Department suggests, the Taxpayer should first make such request in accordance with the City’s local ordinances and the Commissioner of the Revenue office’s filing requirements.

It is the Department’s position that if the Taxpayer receives a response to any such request denying the refund in whole or part, the Taxpayer may then file a local appeal under Virginia Code § 58.1-3980 or Virginia Code § 58.1-3983.1. If the Taxpayer wishes to retain the right to appeal later to the Department, the local appeal must be filed pursuant to Virginia Code § 58.1-3983.1. If the Taxpayer files a local appeal, it is incumbent on the City to issue a final local determination addressing the facts, assertions and authorities submitted by the Taxpayer. See § 1.7.3. of the Guidelines. The final local determination must also be signed by the Commissioner of the Revenue or an express designee. See id . If the Taxpayer continues to disagree with the locality’s final determination, it may appeal to the Department within 90 days of the date of the final determination.

The Taxpayer should be aware that the City’s response also appears to reference the Taxpayer’s manufacturing status for Business, Professional and Occupational License (BPOL) tax purposes. Appeals of BPOL tax matters are separately governed by Virginia Code § 58.1-3703.1 and Title 23 of the Virginia Administrative Code (VAC) 10-500-640 et seq. The Taxpayer should consult these provisions to the extent it may wish to dispute any matters pertaining to the BPOL tax with the City.

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/4237.X

Related Documents

04-28

18-140

21-5