THE CIRCUIT COURT OF CHESTERFIELD COUNTY Timothy J. Hauler,
All the Justices.
ELIZABETH A. McCLANAHAN JUSTICE.
appeals arise out of a determination by the Tax Commissioner
of Virginia that television set top boxes owned by Verizon
Online LLC ("Verizon") and used in its cable
television business are "intangible personal
property" not subject to local taxation under Code
§ 58.1-1101(A)(2a). The Tax Commissioner directed
Chesterfield County to issue refunds to Verizon for local
taxes it paid for tax years 2008, 2009, and 2010 on set top
boxes it owned. Upon judicial review, the circuit court
upheld the Tax Commissioner's determination that
Verizon's set top boxes are not subject to local
taxation. However, as to the taxes Verizon paid for tax years
2008 and 2009, the circuit court ruled that Verizon was not
entitled to refunds for those years due to its failure to
file a timely appeal with the local commissioner of revenue.
affirm that part of the circuit court's judgment ruling
that Verizon's set top boxes are not subject to local
taxation under Code § 58.1-1101(A)(2a). We will reverse
that part of the circuit court's judgment ruling that
Verizon is not entitled to refunds for tax years 2008 and
2009. As we hold herein, the issue of the timeliness of
Verizon's local appeal was not preserved for review by
the circuit court.
LOCAL TAXATION OF VERIZON'S SET TOP BOXES
leases television set top boxes, also referred to as
"converters, " to customers in Chesterfield County
for use in the cable television business. A set top box "converts a digital
television signal to analog for viewing on a conventional
set" or "enables cable or satellite television to
be viewed." Verizon's set top boxes are used to
deliver a cable service called "FiOS."
years 2008, 2009, and 2010, Joseph A. Horbal, Commissioner of
Revenue for Chesterfield County ("Horbal"),
assessed local property taxes upon Verizon's set top
boxes based on Verizon's annual reports of business
personal property for those years. Subsequently, Verizon
filed a local appeal with Horbal asserting that it had
erroneously classified its set top boxes as ordinary tangible
property on its returns for tax years 2008, 2009, and 2010.
Verizon argued that the set top boxes should instead be
classified as "intangible personal property" under
Code § 58.1-1101(A)(2a) and requested a refund of $1,
003, 657. Horbal denied Verizon's
appeal, stating that the set top boxes were
"machinery" subject to local taxation.
appealed the determination of Horbal to the Tax Commissioner
pursuant to Code § 58.1-3983.1(D). Following a response filed by Chesterfield
County, the Tax Commissioner determined that the converters
were classified as "intangible personal property"
under Code § 58.1-1101(A)(2a) and, thus, not taxable by
the County. The Tax Commissioner remanded the case to the
County "to issue refunds for the 2008 through 2010 tax
years in accordance with [the Tax Commissioner's]
filed an application for judicial review of the determination
of the Tax Commissioner in the circuit court pursuant to Code
§§ 58.1-3983.1(G), -3984. Horbal asserted that the Tax
Commissioner's determination was erroneous because the
set top boxes were subject to local taxation as
"machines" under Code § 58.1-1101(A)(2a). The
circuit court granted Verizon's motion for summary
judgment, ruling that the set top boxes are "intangible
personal property" not subject to local taxation under
Code § 58.1-1101(A)(2a). In reaching its decision, the circuit
court found the statutory language contained in Code §
58.1-1101(A)(2a) ambiguous and considered "various
amendments to the relevant statutes" to conclude that
"it was the legislature's intent to exclude cable
set top box converters and tuners from the definition of
'machines and tools.'"
asserts that the circuit court erred in ruling that the
language in Code § 58.1-1101(A)(2a) is ambiguous and
considering "extrinsic evidence." Horbal contends
that set top boxes fall within the plain meaning of
"machines, " which are to be taxed locally as
tangible personal property.
judicial review of a determination by the Tax Commissioner,
the burden is on Horbal "to show that the ruling of the
Tax Commissioner is erroneous." Code §
58.1-3983.1(G). "The State Tax Commissioner's
determination is presumed valid." City of Richmond
v. Virginia Elec. & Power Co., 292 Va. 70, 74, 787
S.E.2d 161, 163 (2016) (quoting Palace Laundry, Inc. v.
Chesterfield County, 276 Va. 494, 497, 666 S.E.2d 371,
373 (2008)). "The Department of Taxation and the Tax
Commissioner administer and enforce the Commonwealth's
tax laws." Nielsen Co. (US), LLC v. County Board of
Arlington County, 289 Va. 79, 88, 767 S.E.2d 1, 5
(2015); Code § 58.1-202. Therefore, although a court
does not defer to their interpretation of an unambiguous tax
statute, a court will afford great weight to their
interpretation when the statute's meaning is doubtful.
Nielson Co., 289 Va. at 88-89, 767 S.E.2d at 4-5.
Code § 58.1-1100, "[i]ntangible personal property,
including capital of a trade or business of any person, firm
or corporation . . . is hereby segregated for state taxation
only." Code § 58.1-1101 classifies certain personal
property, tangible in fact, as "intangible personal
property." With specific regard to cable television
businesses, "[p]ersonal property, tangible in fact, used
in cable television businesses" is classified as
"intangible personal property." Code §
58.1-1101(A)(2a). However, "[m]achines and tools, motor
vehicles, delivery equipment, trunk and feeder cables, studio
equipment, antennae and office furniture and equipment of
such businesses shall not be defined as intangible personal
property for purposes of this chapter and shall be taxed
locally as tangible personal property." Id.
undisputed that the set top boxes are personal property used
in Verizon's cable television business. Therefore, the
set top boxes are classified as "intangible personal
property" not subject to local taxation unless they fall
within one of the enumerated exceptions. Code §§
58.1-1100, -1101(A)(2a); see Daily Press, Inc. v. City of
Newport News, 265 Va. 304, 309, 576 S.E.2d 430, 433
(2003); City of Winchester v. American Woodmark
Corp., 250 Va. 451, 456, 464 S.E.2d 148, 151 (1995).
Horbal contends that the plain meaning of ...