Virginia Law

A. Every person who is assessable with a local license tax must keep sufficient records to enable the assessor to verify the correctness of taxes paid for the license years assessable and to enable the assessor to ascertain what is the correct amount of tax that was assessable for each of those years. All such records, books of accounts and other information must be open to inspection and examination by the assessor in order to allow the assessor to establish whether a particular receipt is directly attributable to the taxable privilege exercised within a jurisdiction. The assessor must provide the taxpayer with the option to conduct the audit at the taxpayer's place of business if the records are maintained there. If maintained outside the assessor's jurisdiction, copies of the appropriate books and records must be sent to the assessor's office upon demand.

B. A taxpayer must keep its records for the current license year and the preceding three license years where it regularly files BPOL tax returns; however, a locality may review a taxpayer's records for the current license year and the six preceding license years when there has been a failure on the part of the taxpayer to file BPOL tax returns or obtain a BPOL license, or where there has been fraud on the taxpayer's part relating to BPOL taxes. For each license year under audit or for which the taxpayer must keep records, base year records provide the measure for license tax on gross receipts. (§§ 58.1-3703.1 A 4 b and B 2 of the Code of Virginia.) For example:

1. Company A regularly pays BPOL taxes and is audited in 1997 for license years 1994, 1995 and 1996 by the locality in which it operates. In order for a full review covering all relevant tax years to take place, Company A must have its records for the current year and for license years 1994 through 1996.

2. Same facts as in the first example, except Company A has not applied for a BPOL license nor filed BPOL tax returns since 1989. Section 58.1-3703.1 A 4 b of the Code of Virginia allows a locality to assess the BPOL tax for the current license year and the previous six license years where there is fraud or the taxpayer fails to apply for a BPOL license. However, in cases of fraud or a failure to apply for a BPOL license, 58.1-3703.1 B 2 of the Code of Virginia limits the application of § 58.1-3703.1 A 4 b of the Code of Virginia to BPOL assessments for license years beginning on and after January 1, 1997. The ability to assess a BPOL tax for the current license year and the previous six license years under § 58.1-3703.1 A 4 b of the Code of Virginia is in addition to the statutory authority to assess a BPOL tax for three preceding years under § 58.1-3903 of the Code of Virginia. Therefore, under § 58.1-3903 of the Code of Virginia, Company A can be assessed a license tax for 1997, 1996, 1995, and 1994.