Tax Type
BPOL Tax
Local Taxes
Description
Contractor selling and installing kitchen cabinets
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
05-17-2001
May 17, 2001
Re: Taxpayer: ****
Locality Assessing Tax:
Final State Determination
Business, Professional and Occupational License (BPOL) Tax
Dear ****
This final state determination is issued upon an application for correction of BPOL tax assessments filed by you on behalf of ***** (the "Taxpayer"). The assessment contested was made by the Commissioner of the City of **** (the "City"). I apologize for the delay in responding to your application for correction.
The BPOL tax and fee are imposed and administered by local officials. Code of Virginia
§ 58.1-3707.1(A)(5) authorizes the department to issue determinations of taxpayer appeals of certain BPOL assessments. On appeal, a BPOL tax assessment is deemed prima facie correct, i.e., it stands unless the taxpayer proves it is incorrect.
The following determination is based on the facts presented by the Taxpayer and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The Taxpayer's Position
The Taxpayer sells and installs kitchen cabinets and has been in business for eighteen years. The Taxpayer has a contractor's license with the Commonwealth of Virginia, and states that its primary sales are related to new construction. The Taxpayer's customers sign contracts "with the understanding that all of the cabinets must be special ordered and installed by the Taxpayer, and that its showroom in the City has no inventory." Rather, the showroom merely serves as a display room to "facilitate customer's selections."
A contract submitted by the Taxpayer details the following work:
Ordering of the cabinets to be delivered and which are billed to the client; tearing out of existing cabinets, counter tops, appliances, soffits and exhaust fan; plastering and repairs; running new ductwork; removing old and installing new electrical receptacles and plumbing lines, installing the new cabinets and counter tops, lights, trim etc., and general finishing work.
The Taxpayer-subcontracts the plumbing and electrical wiring to a licensed plumber and an electrician when remodeling kitchens. In these instances, the Taxpayer acts as the general contractor.
The Taxpayer opened an auxiliary office in the City in 1998. The locality in which the Taxpayer's principal office is located and other localities in which the Taxpayer conducts business have always assessed the Taxpayer as a contractor. The Taxpayer has obtained a license and paid license taxes or fees due in each locality in which it conducts over $25,000 worth of business.
The City's Position
The City classifies the Taxpayer as a retail seller. The City points to the Taxpayer's advertisement in the Yellow Pages, which states:
Buy where the Builders Buy. Professional in home installation (Do it yourself or we'll do it for you)... and Free in-home estimates.
The City compares the Taxpayer to a merchant who sells floor covering, citing Public Document (P.D.) 99-12:
Example D in § 5.3 of the (1997) BPOL Guidelines states that "a merchant who sells floor coverings (whether the covering be carpet, linoleum, tile or other covering) and installs the floor covering as part of or incidental to the sale is not contracting but [rather making] a retail or wholesale sale."
ANALYSIS
Code of Virginia § 58.1-3714(D) pertains directly to the imposition of the BPOL tax on contractors and provides that "contractor" means any person, firm or corporation:
accepting or offering to accept orders or contracts for doing any work on or in any building or premises involving the erecting, installing, altering, repairing, servicing, or maintaining electric wiring, devices or appliances permanently connected to such wiring, or the erecting, repairing or maintaining of lines for the transmission or distribution of electric light and power.
The 2000 BPOL Guidelines elaborate on this Code section, noting that when:
the installation work requires making openings in a wall, running ductwork, wire or plumbing or any other work described in paragraph D of § 58.1-3714, the installation work may be deemed contracting. 2000 BPOL Guidelines § 5.1.3.
Based on the facts presented, it is clear that the Taxpayer is a contractor. The contract between the Taxpayer and its customers requires new ductwork, removal of old and installing new electrical receptacles and plumbing lines, and installation of the new cabinets and counter tops, lights, and general finishing work. However, it is not clear from the facts presented as to whether or not the Taxpayer also engages in retail sales of merchandise from its showroom. If a substantial portion of its business is in retail sales, then the Taxpayer may be required to obtain a separate business license for this activity. Section 58.1-5 of Code of Virginia states that "when any person, firm or corporation is engaged in more than one business which is made by law subject to taxation, such person, firm or corporation shall pay the tax provided by law on each branch of his, their or its business." Both the Attorney General and the Department of Taxation have relied upon this language in previous BPOL rulings. (See 1994 Op. Va. Att'y. Gen. 99, Public Document (P.D.) 99-88 and § 2.9 of the 2000 BPOL Guidelines.)
CONCLUSION
I find that the Taxpayer is engaged in business as a contractor. However, I am referring this matter back to the local commissioner of the revenue to determine if the sale of cabinets with no installation is a substantial portion of the Taxpayer's business and merits a separate retail license.
I trust that this information has been useful to you. If you have any questions regarding this determination, you may contact ****, Tax Policy Analyst, in the department's Office of Tax Policy, at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/31140H
Re: Taxpayer: ****
Locality Assessing Tax:
Final State Determination
Business, Professional and Occupational License (BPOL) Tax
Dear ****
This final state determination is issued upon an application for correction of BPOL tax assessments filed by you on behalf of ***** (the "Taxpayer"). The assessment contested was made by the Commissioner of the City of **** (the "City"). I apologize for the delay in responding to your application for correction.
The BPOL tax and fee are imposed and administered by local officials. Code of Virginia
§ 58.1-3707.1(A)(5) authorizes the department to issue determinations of taxpayer appeals of certain BPOL assessments. On appeal, a BPOL tax assessment is deemed prima facie correct, i.e., it stands unless the taxpayer proves it is incorrect.
The following determination is based on the facts presented by the Taxpayer and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The Taxpayer's Position
The Taxpayer sells and installs kitchen cabinets and has been in business for eighteen years. The Taxpayer has a contractor's license with the Commonwealth of Virginia, and states that its primary sales are related to new construction. The Taxpayer's customers sign contracts "with the understanding that all of the cabinets must be special ordered and installed by the Taxpayer, and that its showroom in the City has no inventory." Rather, the showroom merely serves as a display room to "facilitate customer's selections."
A contract submitted by the Taxpayer details the following work:
Ordering of the cabinets to be delivered and which are billed to the client; tearing out of existing cabinets, counter tops, appliances, soffits and exhaust fan; plastering and repairs; running new ductwork; removing old and installing new electrical receptacles and plumbing lines, installing the new cabinets and counter tops, lights, trim etc., and general finishing work.
The Taxpayer-subcontracts the plumbing and electrical wiring to a licensed plumber and an electrician when remodeling kitchens. In these instances, the Taxpayer acts as the general contractor.
The Taxpayer opened an auxiliary office in the City in 1998. The locality in which the Taxpayer's principal office is located and other localities in which the Taxpayer conducts business have always assessed the Taxpayer as a contractor. The Taxpayer has obtained a license and paid license taxes or fees due in each locality in which it conducts over $25,000 worth of business.
The City's Position
The City classifies the Taxpayer as a retail seller. The City points to the Taxpayer's advertisement in the Yellow Pages, which states:
Buy where the Builders Buy. Professional in home installation (Do it yourself or we'll do it for you)... and Free in-home estimates.
The City compares the Taxpayer to a merchant who sells floor covering, citing Public Document (P.D.) 99-12:
Example D in § 5.3 of the (1997) BPOL Guidelines states that "a merchant who sells floor coverings (whether the covering be carpet, linoleum, tile or other covering) and installs the floor covering as part of or incidental to the sale is not contracting but [rather making] a retail or wholesale sale."
ANALYSIS
Code of Virginia § 58.1-3714(D) pertains directly to the imposition of the BPOL tax on contractors and provides that "contractor" means any person, firm or corporation:
accepting or offering to accept orders or contracts for doing any work on or in any building or premises involving the erecting, installing, altering, repairing, servicing, or maintaining electric wiring, devices or appliances permanently connected to such wiring, or the erecting, repairing or maintaining of lines for the transmission or distribution of electric light and power.
The 2000 BPOL Guidelines elaborate on this Code section, noting that when:
the installation work requires making openings in a wall, running ductwork, wire or plumbing or any other work described in paragraph D of § 58.1-3714, the installation work may be deemed contracting. 2000 BPOL Guidelines § 5.1.3.
Based on the facts presented, it is clear that the Taxpayer is a contractor. The contract between the Taxpayer and its customers requires new ductwork, removal of old and installing new electrical receptacles and plumbing lines, and installation of the new cabinets and counter tops, lights, and general finishing work. However, it is not clear from the facts presented as to whether or not the Taxpayer also engages in retail sales of merchandise from its showroom. If a substantial portion of its business is in retail sales, then the Taxpayer may be required to obtain a separate business license for this activity. Section 58.1-5 of Code of Virginia states that "when any person, firm or corporation is engaged in more than one business which is made by law subject to taxation, such person, firm or corporation shall pay the tax provided by law on each branch of his, their or its business." Both the Attorney General and the Department of Taxation have relied upon this language in previous BPOL rulings. (See 1994 Op. Va. Att'y. Gen. 99, Public Document (P.D.) 99-88 and § 2.9 of the 2000 BPOL Guidelines.)
CONCLUSION
I find that the Taxpayer is engaged in business as a contractor. However, I am referring this matter back to the local commissioner of the revenue to determine if the sale of cabinets with no installation is a substantial portion of the Taxpayer's business and merits a separate retail license.
I trust that this information has been useful to you. If you have any questions regarding this determination, you may contact ****, Tax Policy Analyst, in the department's Office of Tax Policy, at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/31140H
Rulings of the Tax Commissioner