Can I get a Virginia refund-denial determination reconsidered if I still think the Department misapplied its own policy, without new facts or a change in law?

Plain-English summary

A taxpayer had already lost a refund dispute in a 2020 determination, P.D. 20-80, which upheld the Department's denial of a sales and use tax refund covering September 2008 through June 2011. The taxpayer asked the Department to reconsider two specific issues: first, that denying the refund was a "misapplication of policy" because the legal burden to collect and remit sales tax falls on the vendor, not the purchaser, and since the Department already agreed an internet service provider (ISP) exemption applied to certain purchases, nothing should stop it from refunding the state portion of tax on those transactions; second, the taxpayer's original argument about how the Department allocated revenue on equipment used for both taxable and exempt purposes ("mixed-use equipment").

Reconsideration in Virginia isn't a second round of arguing the same case -- it requires meeting one of four specific grounds under 23 VAC 10-20-165 F: the original determination misstated the facts, the law changed, the Department misapplied the correct policy, or the taxpayer has genuinely new evidence unavailable at the time of the original appeal. Reviewing the taxpayer's request, the Department found it didn't show any factual misstatement, and didn't show that its policy on refunds or on prorating tax on mixed-use equipment had actually been misapplied -- the determination letter had applied the Department's longstanding, clearly explained policy correctly to the facts. The taxpayer was, in substance, simply disagreeing with how that policy came out for its transactions, which the Department reiterated is not itself a basis for reconsideration.

Accordingly, the reconsideration request was denied, and the findings in the original determination letter (denying the refund) stood as issued.

What this means for you

Anyone considering asking Virginia to reconsider a refund denial or assessment

Reconsideration isn't a chance to re-litigate the same points that were already rejected. You need to identify a specific misstated fact, a change in the governing law, an actual misapplication of the Department's stated policy (not just an outcome you disagree with), or genuinely new evidence that wasn't available when you first appealed.

Anyone arguing that a vendor's collection obligation should excuse a purchaser's tax liability

Simply pointing out that vendors are legally responsible for collecting and remitting sales tax doesn't, by itself, change a purchaser's own refund or liability position -- the Department will look at whether its actual policy and legal analysis on the specific issue was correctly applied, not just at general burden-of-collection principles.

Accountants and tax professionals filing reconsideration requests

Frame the request explicitly around one of the four regulatory grounds, and be specific about exactly what fact was misstated or what policy was misapplied and how a correct application would change the result -- a general re-argument of your original position, even a well-reasoned one, will be denied without reaching the merits again.

Common questions

Q: What has to be shown to get a Virginia tax determination reconsidered?
A: One of four specific grounds under 23 VAC 10-20-165 F: a misstatement of the original facts, an intervening change in law, a misapplication of the correct policy, or newly discovered evidence unavailable at the time of the original appeal.

Q: Is it enough to argue that the Department's policy produced an unfair or incorrect result?
A: No -- disagreeing with how a correctly applied policy came out does not satisfy the "misapplied policy" ground; you must show the Department actually applied the wrong policy or applied the right policy incorrectly.

Q: Can I raise the same arguments from my original appeal in a reconsideration request?
A: Reasserting arguments the Department already considered and rejected does not meet any of the four reconsideration grounds on its own -- you need something new: a factual correction, a legal change, a genuine misapplication of policy, or new evidence.

Citations and references

• 23 VAC 10-20-165 F (four grounds for requesting reconsideration of a determination)
• Va. Code § 58.1-1821 (administrative appeal of an assessment or refund denial)
• P.D. 20-80 (5/12/2020) (the original determination sought to be reconsidered)

Subject

Administration: Appeal Reconsideration - Buried of Showing Policy was Misapplied Not Met

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 23-13

Original ruling text

January 18, 2023

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

Dear *:

This will respond to your letter submitted on behalf of * (the “Taxpayer”) in which you seek a reconsideration of the Tax Commissioner’s determination, issued as Public Document (P.D.) 20-80 (5/12/2020), for the period September 2008 through June 2011.

FACTS

In P.D. 20-80, the Tax Commissioner upheld the denial of the Taxpayers refund request as the Taxpayer had not proven that the refund was erroneously denied. The Taxpayer requests reconsideration of two issues raised in the original appeal.

DETERMINATION

With its reconsideration, the Taxpayer contends that the denial of the refund is a misapplication of policy because the burden of collection, reporting, and remitting retail sales tax is on the vendor. The Taxpayer further argues that, because the Department agrees that the internet service provider (ISP) exemption applies to certain purchases, the Department is not hindered from processing a refund of the state portion of the tax paid on said transactions. The Taxpayer also reasserts its original argument regarding the Department’s revenue allocation on mixed-use equipment.

In regard to reconsideration requests, Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F 1 permits taxpayers to request a consideration of a determination issued under Virginia Code § 58.1-1821. Such requests, however, must meet one of the four following requirements:

1. The facts upon which the original determination is based are misstated by the Tax Commissioner or are inaccurate, and the determination would have a different result based on a correction of the Tax Commissioner’s misstatement of the facts presented or a clarification of the original facts presented in the taxpayers administrative appeal;

2. 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;

3. 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; or

4. The taxpayer has discovered additional evidence or documentation that was not available to the taxpayer at the time the original administrative appeal was filed with the department, and the additional evidence or documentation could produce a result different from the original determination.

Based upon a review of the Taxpayer’s reconsideration request and the law and policy used to make the determination issued by the Department, the Taxpayer has not demonstrated that the facts upon which the original determination is based are misstated or inaccurate, nor that the policy has been misapplied.

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 issuance of refunds and the Department’s longstanding policy with respect to calculation of the proration of the sales tax on mixed-use equipment. The Department’s policy and application of the law are clear. The fact that the Taxpayer disagrees with the Department’s decision does not by itself 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 are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this response, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/4310.A

Related Documents

20-80