02-114 | Virginia Tax

Tax Type

BPOL Tax

Description

Statutory and regulatory definitions of 'definite place of business' for purposes of administering BPOL tax

Topic

Basis of Tax

Date Issued

12-12-2002

- The Honorable Ross A. Mugler
  Commissioner of the Revenue for the City of Hampton
  
  Issues Presented
  
  You pose several questions regarding the business, professional and occupational license ("BPOL") tax contained in Chapter 37 of Title 58.1, §§ 58.1-3700 through 58.1-3735. First, you ask whether a commissioner of the revenue should rely on the meaning of "definite place of business" as that phrase is defined in § 58.1-3700.1 or as defined in the Guidelines for Business, Professional and Occupational License Tax¹("2000 BPOL Guidelines"). Second, you inquire concerning the meaning of "visit" as it relates to "definite place of business." You also inquire whether the criteria for determining "definite place of business" are different if the location is outside the Commonwealth. Finally, you inquire concerning the applicability of § 58.1-3732(B)(2), which requires a locality to deduct from gross receipts income or other taxes, based on income, imposed by jurisdictions outside the Commonwealth.
  
  Response
  
  It is my opinion that there is no conflict between the definitions of "definite place of business" in § 58.1-3700.1 and the 2000 BPOL Guidelines. Accordingly, you, as a commissioner of the revenue, should rely on both definitions when administering the BPOL tax statutes. It is also my opinion that, whether the activity of a business at a particular location is sufficient for it to become a definite place of business, rather than a visit, is a question of fact to be determined by the local taxing official. It is further my opinion that local tax assessments should be administered consistently and that the criteria for establishing a definite place of business should be the same, whether other taxing jurisdictions are located in or outside the Commonwealth. Lastly, it is my opinion that § 58.1-3732(B)(2) should be applied to businesses outside the Commonwealth so that the assessments are fairly apportioned between the activity within the taxing jurisdiction and the activity outside the Commonwealth.
  
  Applicable Law and Discussion
  
  You first ask whether you should rely on the meaning of "definite place of business" as defined in § 58.1-3700.1 or in the 2000 BPOL Guidelines. The definition of "definite place of business" is identical in § 58.1-3700.1 and in the 2000 BPOL Guidelines, with the exception of the language emphasized below, which appears only in the guidelines:
  - - - [A]n office or a location at which occurs a regular and continuous course of dealing where one holds one’s self out or avails one’s self to the public for thirty consecutive days or more, exclusive of holidays and weekends. A definite place of business for a person engaged in business may include a location leased or otherwise obtained from another person on a temporary or seasonal basis and real property leased to another. A person’s residence shall be deemed to be a definite place of business if there is no definite place of business maintained elsewhere and the person is not subject to licensure as a peddler or itinerant merchant.^[2] [Emphasis added.]
  Section 58.1-3701 mandates that the Department of Taxation promulgate guidelines, which by their nature, must amplify and clarify statutory provisions.³ The guidelines are subject to the "Administrative Process Act^[4] and [are] accorded the weight of a regulation under § 58.1-205."⁵ The additional language in the 2000 BPOL Guidelines does not alter the meaning of the statutory definition of "definite place of business." The additional language, "where one holds one’s self out or avails one’s self to the public" and "exclusive of holidays and weekends,"⁶ simply amplifies and clarifies the meaning of "regular and continuing course of dealing" in the statutory definition by specifying the conduct that will be deemed a definite place of business. Accordingly, you, as a commissioner of the revenue, should rely on both definitions when administering the local BPOL tax statutes.
  Section 58.1-3701 also provides that "[t]he Tax Commissioner shall have the authority to issue advisory written opinions in specific cases to interpret the provisions of [Chapter 37] and the guidelines issued pursuant to this section."⁷ To the extent you have remaining questions concerning the interplay between the statutory definition and the guideline definition of "definite place of business," I refer you to the Tax Commissioner who is authorized to issue such opinions.⁸
  You next ask for a definition of the word "visit" as it relates to "definite place of business." Section 58.1-3703.1(A)(3)(a) provides:
  - - - Whenever the tax imposed by [an] ordinance [levying a local BPOL tax] is measured by gross receipts, the gross receipts included in the taxable measure shall be only those gross receipts attributed to the exercise of a privilege subject to licensure at a definite place of business within this jurisdiction. In the case of activities conducted outside of a definite place of business, such as during a visit to a customer location, the gross receipts shall be attributed to the definite place of business from which such activities are initiated, directed, or controlled.
  Section 58.1-3703(A)(3)(a) pertains to the situs of gross receipts for purposes of local BPOL taxation. The statute clearly provides that gross receipts derived from activities conducted outside of a definite place of business, such as during a customer visit, are attributed back to that place of business. The Supreme Court of Virginia has stated that "‘[t]he manifest intention of the legislature, clearly disclosed by its language, must be applied.’"⁹ "‘[T]ake the words as written’ and give them their plain meaning."¹⁰ The word "visit" is not defined in Title 58.1. Absent a statutory definition, words are given their ordinary meaning.¹¹ The word "visit" means "a journey to and stay or short sojourn at a place for a particular purpose."¹² It would appear, therefore, that a journey to, and stay at, a customer’s location is a "visit."
  Whether a visit becomes a definite place of business or an additional place of business is a question of fact. This Office historically has declined to render opinions that involve determinations of fact rather than questions of law.¹³ Accordingly, I am unable to render an opinion regarding at what point a "visit" becomes a "definite place of business." The local commissioner of the revenue is responsible for making factual determinations in matters of local BPOL taxation.¹⁴ In making a determination, however, the factors to consider would include the number and frequency, as well as the length and purpose, of the visits. As noted previously, the Tax Commissioner is authorized to issue advisory opinions on the situs of gross receipts, and you may elect to seek additional guidance from him.¹⁵
  You also inquire whether the criteria are different for determining a "definite place of business" located outside the Commonwealth. § 58.1-3703.1(A)(3)(b) provides:
  - - - If the licensee has more than one definite place of business and it is impractical or impossible to determine to which definite place of business gross receipts should be attributed under the general rule,^[16]the gross receipts of the business shall be apportioned between the definite places of businesses on the basis of payroll. Gross receipts shall not be apportioned to a definite place of business unless some activities under the applicable general rule occurred at, or were controlled from, such definite place of business. Gross receipts attributable to a definite place of business in another jurisdiction shall not be attributed to this jurisdiction solely because the other jurisdiction does not impose a tax on the gross receipts attributable to the definite place of business in such other jurisdiction.
  The criteria for determining whether a business located in or outside the Commonwealth constitutes a definite place of business are the same. The importance of this determination is that gross receipts are assigned to a definite place of business either by direct attribution or by apportionment.¹⁷ Gross receipts assigned to a definite place of business located in another state may not be taxed by any Virginia locality. The Supreme Court of Virginia has acknowledged that an internal consistency test must be applied to decisions on apportionment.¹⁸ "An assessment is internally consistent if applying the text of the taxing statute, and assuming that every other jurisdiction applied the same statute, the taxpayer would not be subjected to a risk of double taxation."¹⁹ As such, tax assessments should be internally consistent and, therefore, the criteria for establishing a definite place of business are the same whether the other taxing jurisdictions are located in or outside the Commonwealth.
  Finally, you inquire concerning the application of § 58.1-3732(B)(2). § 58.1-3732(B)(2) requires the deduction of "[a]ny receipts attributable to business conducted in another state or foreign country in which the taxpayer … is liable for an income or other tax based upon income" for purposes of local BPOL taxation. In considering the application of the BPOL tax to businesses outside the Commonwealth, assessments should be fairly apportioned, which initially requires that the assessment be both internally and externally consistent.²⁰ The internal consistency test requires that other jurisdictions apply the same tax statutes and precludes double taxation.²¹ External consistency requires that an assessment apply only to the "‘portion of the revenues from the interstate activity which reasonably reflects the in-state component of the activity being taxed.’"²² § 58.1-3732(B)(2) should be applied to businesses outside the Commonwealth so that the assessments are fairly apportioned between the activity in your jurisdiction and the activity outside the Commonwealth. For specific guidance in particular factual situations, I refer you to the Tax Commissioner for questions regarding apportionment.²³
  
  Conclusion
  
  Accordingly, it is my opinion that there is no conflict between the definitions of "definite place of business" in § 58.1-3700.1 and the 2000 BPOL Guidelines. Thus, you, as a commissioner of the revenue, should rely on both definitions when administering the BPOL tax statutes. It is also my opinion that, whether the activity of a business at a particular location is sufficient for it to become a definite place of business, rather than a visit, is a question of fact to be determined by the local taxing official. It is further my opinion that local tax assessments should be administered consistently and that the criteria for establishing a definite place of business should be the same, whether other taxing jurisdictions are located in or outside the Commonwealth. Lastly, it is my opinion that § 58.1-3732(B)(2) should be applied to businesses outside the Commonwealth so that the assessments are fairly apportioned between the activity within the taxing jurisdiction and the activity outside the Commonwealth.
  ¹Dep’t Tax’n, Guidelines for Business, Professional and Occupational License Tax (Jan. 1, 2000) [hereinafter 2000 BPOL Guidelines], available at http://www.tax.state.va.us/Web_PDFs/2000bpol-Sect1.pdf. Effective July 1, 2001, the guidelines have the force of regulations. Va. Code Ann. § 58.1-3701 (Michie Repl. Vol. 2000).
  ²2000 BPOL Guidelines ch. 1, supra note 1.
  ³Op. no. 02-044 to Hon. Christopher B. Saxman, H. Del. Mbr. (May 1, 2002) available at http://www.vaag.com/media%20center/Opinions/02-044.htm.
  ⁴Va. Code Ann. §§ 2.2-4000 to 2.2-4033 (LexisNexis Repl. Vol. 2001 & Supp. 2002).
  ⁵Va. Code Ann. § 58.1-3701 (Michie Repl. Vol. 2000).
  ⁶2000 BPOL Guidelines ch. 1, supra note 1.
  ⁷The remainder of § 58.1-3701, however, provides that "the Tax Commissioner shall not be required to interpret any local ordinance. The guidelines and opinions issued pursuant to this section shall not be applicable as an interpretation of any other tax law."
  ⁸See op. no. 02-033 to Hon. Ross A. Mugler, Hampton Comm’r Rev. (July 8, 2002), available at http://www.vaag.com/media%20center/Opinions/02-033.htm.
  ⁹Barr v. Town & Country Properties, 240 Va. 292, 295, 396 S.E.2d 672, 674 (1990) (quoting Anderson v. Commonwealth, 182 Va. 560, 566, 29 S.E.2d 838, 841 (1944)); see also 2001 Op. Va. Att’y Gen. 179, 180.
  ¹⁰Birdsong Peanut Co. v. Cowling, 8 Va. App. 274, 277, 381 S.E.2d 24, 26 (1989) (quoting Brown v. Lukhard, 229 Va. 316, 321, 330 S.E.2d 84, 87 (1985)), quoted in Adkins v. Com., 27 Va. App. 166, 169, 497 S.E.2d 896, 897 (1998); see 2001 Op. Va. Att’y Gen. supra note 9, at 180.
  ¹¹1987-1988 Op. Va. Att’y Gen. 513, 514.
  ¹²Webster’s Third New International Dictionary of the English Language Unabridged 2557 (1993).
  ¹³1991 Op. Va. Att’y Gen. 122, 124.
  ¹⁴See op. no. 02-044, supra note 3 (concluding that classification of business for purposes of BPOL taxation is determination of fact for commissioner of revenue).
  ¹⁵See op. no. 02-033, supra note 8.
  ¹⁶Section 58.1-3703.1(A)(3)(a) sets forth the general rule for measuring gross receipts.
  ¹⁷Compare § 58.1-3703(A)(3)(a) and (b) (LexisNexis Supp. 2002).
  ¹⁸See City of Winchester v. American Woodmark Corp., 252 Va. 98, 102, 471 S.E.2d 495, 497 (1996). The Court also acknowledged the requirement to apply an external consistency test in apportionment decisions. See id. The application of the external consistency test, however, is not pertinent to your inquiry.
  ¹⁹Id. (citing Goldberg v. Sweet, 488 U.S. 252, 261 (1989)).
  ²⁰Id.
  ²¹Id.
  ²²Id. (quoting Goldberg, 488 U.S. at 262).
  ²³Op. no. 02-033, supra note 8.

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