FROM THE CIRCUIT COURT OF ARLINGTON COUNTY. Louise DiMatteo Megaree, Judge.
Michael R. Shebelskie (William L.S. Rowe; Joseph M. Sullivan; Hunton & Williams; Sullivan Law Office, on briefs), for appellant.
Raymond A. Warren for appellee Ingrid H. Morroy, Commissioner of Revenue for the County of Arlington.
Ara L. Tramblian, Deputy County Attorney, for appellee County Board of Arlington County.
Amicus Curiae: Virginia Chamber of Commerce (Neil V. Birkhoff; Frank K. Friedman; Woods Rogers, on briefs), in support of appellant.
Amici Curiae: County of Fairfax and Board of Supervisors of Fairfax County (David P. Bobzien, County Attorney; Gail P. Langham, Assistant County Attorney; James V. McGettrick, Assistant County Attorney, on brief), in support of appellee County Board of Arlington County.
Amici Curiae: Local Government Attorneys of Virginia, Virginia Association of Counties, and Virginia Municipal League (Andrew R. McRoberts; Ian Lambeets; Sands Anderson, on brief), in support of appellees.
Present: Lemons, C.J, Millette, Mims, McClanahan, and Powell, JJ., and Russell and Lacy, S.JJ. OPINION BY JUSTICE LEROY F. MILLETTE, JR.
[289 Va. 85] LEROY F. MILLETTE, JR.,
In this appeal we consider whether the Tax Commissioner employed a permissible methodology -- a payroll percentage calculation -- to determine the amount of certain receipts that, pursuant to Code § 58.1-3732(B)(2), may be deducted from the pool of taxable gross receipts upon which a locality may levy a business license tax.
I. Facts And Proceedings
The Nielsen Company (U.S.), LLC promotes itself as " a global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior." In the 2007 tax year, Claritas, Inc. was doing business in Arlington County, Virginia. Claritas was a wholly owned subsidiary of Nielsen throughout the 2007 tax year, and continued as an independent entity until Claritas merged into Nielsen in October 2008. For purposes of this appeal, the activities of Claritas are attributed to Nielsen.
During the 2007 tax year, Nielsen had offices in 18 states, including Virginia. Nielsen's only Virginia office was located in Arlington County. Nielsen's Arlington County office engaged in client relationship and customer support, statistical and data collection, data development, product fulfillment, and the solicitation of sales. To engage in these business activities for the 2007 tax year, Nielsen acquired a business license from Arlington County as required under the Code and Arlington County's ordinances.
In 2010, Ingrid Morroy, the Commissioner of Revenue of Arlington County, audited Nielsen for several of the previous tax years. After that audit, Commissioner Morroy issued an additional tax assessment on Nielsen for the 2007 tax year on the basis that Nielsen failed to pay sufficient tax on its business license. Nielsen took exception to Commissioner Morroy's additional assessment, and the dispute over that assessment has worked its way through multiple levels of review.
Nielsen first appealed to Commissioner Morroy herself pursuant to Code § 58.1-3703.1(A)(5)(b). In response, Commissioner Morroy issued a final determination confirming her additional assessment, subject to some modifications. Pursuant to Code § 58.1-3703.1(A)(6)(a), [289 Va. 86] Nielsen then filed an appeal with the Virginia Tax Commissioner. The Tax Commissioner subsequently issued an opinion in this matter, with the parties' names redacted, published as a Public Document titled PD 12-146. The Tax Commissioner held that Commissioner Morroy used an incorrect methodology in the 2007 tax year assessment, and instead permitted a payroll percentage methodology to be used to calculate the Code § 58.1-3732(B)(2) deduction to Arlington County's tax on Nielsen's business license. The Tax Commissioner subsequently remanded the case back to the County so that Commissioner Morroy could adjust the additional assessment for the 2007 tax year in accordance with the Tax Commissioner's opinion.
It was then Arlington County's and Commissioner Morroy's turn to appeal, as they disagreed with the Tax Commissioner's payroll percentage methodology. Pursuant to Code § § 58.1-3703.1(A)(7)(a) and 58.1-3984, Arlington County and Commissioner Morroy appealed to the Circuit Court of the County of Arlington to correct the Tax Commissioner's allegedly erroneous ruling. After a day-long bench trial, a subsequent hearing for oral arguments, and consideration of the parties' briefs and several of the Tax Commissioner's prior opinions issued as Public Documents, the circuit court issued its opinion in this matter. The court rejected the Tax Commissioner's methodology for calculating the relevant tax deduction as erroneous, contrary to law and precedent, and arbitrary and capricious in its application. The court entered a final order which memorialized that opinion, confirmed Commissioner Morroy's assessment against Nielsen for the 2007 tax year, and directed Nielsen to pay such assessment.
Nielsen timely filed a petition for appeal with this Court. We granted three of Nielsen's assignments of error:
1. The trial court erred in reversing the State Tax Commissioner's decision, and reinstating the County's assessment, because the trial court misinterpreted and misapplied Code § 58.1-3732(B)(2).
2. The trial court erred in reversing the State Tax Commissioner's decision, and reinstating
the County's erroneous assessment, because the trial court should have deferred to the State Tax Commissioner's interpretation of Code § 58.1-3732(B)(2).
[289 Va. 87] 3. The trial court erred in reversing the State Tax Commissioner's decision, and reinstating the County's erroneous assessment, because the trial court erroneously placed the burden of proof on Nielsen rather than on the County.
A. Standard Of Review
Whether tax deductions properly comply with the relevant statutory provisions is a mixed question of law and fact.
See Ford Motor Credit Co. v. Chesterfield Cnty.,281 Va. 321, 333-34, 707 S.E.2d 311, 317 (2011). " Therefore, while we give deference to the trial court's factual findings and view the facts in the light most favorable to the prevailing party, we review the trial court's application of the law to those facts de novo." Bailey v. Loudoun County ...