Document Number
02-131
Tax Type
BPOL Tax
Description
Merchants' capital tax.
Topic
Basis of Tax
Local Power to Tax
Date Issued
10-08-2002

October 8, 2002


Re: Request for Advisory Opinion
Business, Professional and Occupational License (BPOL) tax

Dear *****:

This is in response to your letter of May 17, 2002, in which you request an advisory opinion on a jurisdiction's ability to impose the BPOL fee in conjunction with the imposition of the merchants' capital tax. You also ask if a county has the authority to impose a BPOL fee in a town within the county with or without the town's consent, whether or not the town already imposes a BPOL tax or fee.

The local license fee and tax are imposed and administered by local officials. § 58.1-3701 of the Code of Virginia authorizes the department to promulgate guidelines and issue advisory opinions on local license tax issues. The following opinion has been made subject to the facts presented to the department as summarized below. Any change in these facts or the introduction of facts by another party may lead to a different result.

While addressing the questions raised in your letter, this response is intended to provide advisory guidance only, and does not constitute a formal or binding ruling. Copies of the Code of Virginia, regulations and public documents cited are included for reference purposes. These and other reference documents are also available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us.

FACTS


The ***** (the "County") currently imposes the merchants' capital tax on businesses. It is considering imposing a BPOL fee on the same businesses in addition to the merchants' capital tax. The County is also considering imposing a BPOL fee in all towns within the County, whether or not they already impose a BPOL fee.


OPINION


Merchants' Capital and BPOL Taxes

Code of Virginia § 58.1-3704 provides that "[w]henever any county, city or town imposes a license tax on merchants, the same shall be in lieu of a tax on the capital of merchants, as defined by § 58.1-3509 . . . ." [Emphasis added.] The word "tax " in this context is to be construed as encompassing both the BPOL tax and fee. This becomes apparent upon an examination of Code of Virginia § 58.1-3700, which authorizes localities to impose a license fee or levy a license tax when a local ordinance is passed requiring a business license. This Code section goes on to state, "[a]ny person who engages in a business without obtaining a required local license . . . shall not be relieved of the tax imposed by the ordinance."

In Charlottesville v. Mark's Shows, 179 Va. 321 (1942), the Virginia Supreme Court drew the distinction between fees imposed for purposes of funding governmental expenses related to regulation and fees imposed for the purposes of raising revenues.
    • Where the fee is imposed for the purpose of regulation and the statute requires compliance with certain conditions in addition to the payment of the prescribed sum, such sum is a license proper, imposed by virtue of the police power. But where it is extracted solely for revenue purposes and its payment gives the right to carry on the business without any further conditions it is a tax. 1

A review of the BPOL fee statute, § 58.1- 3703(A), makes it clear that the BPOL fee is allowed to be imposed for "issuing a license." Thus, the fee is imposed for revenue, rather than regulatory, purposes. Localities have no role in the regulation of businesses, professions and occupations. Any regulation of such entities remains solely a function of the state.

Chapter 37 of Title 58.1 of Code of Virginia is entitled "License Taxes." The word "taxes" as used in this chapter encompasses both levies on true gross receipts as described in § 58.1-3706, and fees for carnivals, circuses, speedways, coliseums, arenas, auditoriums and itinerant merchants. Localities may impose either a gross receipts tax or a fee, both of which are tied to gross receipts thresholds for the express purpose of raising revenues. There is no regulatory purpose assigned to the BPOL tax or fee.

Moreover, Code of Virginia § 58.1-3702 states that "[t]he provisions of this chapter (Chapter 37) shall be the sole authority for counties, cities and towns for the levying of the license taxes described herein." This section authorizing the imposition of license taxes does not differentiate between license taxes and fees, both of which are encompassed in Chapter 37 without reference to any regulatory authority. Therefore, it is my opinion that, consistent with Code of Virginia § 58.1-3704, a jurisdiction cannot impose both a-merchants' capital tax and a BPOL fee.

Applicability of the Merchants' Capital Tax

In those instances where a locality opts to impose a BPOL tax or fee on all occupations with the exception of merchants, the locality may impose a merchants' capital tax on merchants. The Attorney General has found that:
    • a locality may impose a business license tax on every category of business except merchants and, at the same time, impose a merchants' capital tax on merchants. 1989 Op. Att'y. Gen. 315, citing 1983-1984 Att'y Gen. Ann. Rep. 374.

Counties Imposing a BPOL Tax/Fee upon Towns

Code of Virginia § 58.1-3711 expressly limits a county's ability to levy a license tax on a town.
    • Any county license tax imposed pursuant to this chapter shall not apply within the limits of any town located in such county, where such town now, or hereafter, imposes a town license tax on the same privilege. If the governing body of any town within a county, however, provides that a county license tax shall apply within the limits of such town, then such license tax may be imposed within such towns. [Emphasis added.]

It is my opinion that "Any county license tax pursuant to this chapter" includes the fees authorized in Chapter 37 of Title 58.1. Furthermore, it is clear that a county may impose such license taxes and fees only with the town's permission.

I hope this information has been helpful to you. If you have any questions regarding this opinion, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.

Sincerely,


Kenneth W. Thorson
Tax Commissioner



AR/40898H


1Citing 33 Am. Jur., a Licenses, § 19, p. 341; Chambers v. Higgins, 169 Va.345, 349, 193 S.E. 531, 532; Phoebus v. Manhattan Social Club, 105 Va. 144, 147, 52 S.E. 839, 8 Ann. Cas. 667; Schmidt v. Indianapolis, 168 Ind. 631, 80 N.E. 632, 634, 120 Am. St. Rep. 385, 14 L.R.A. (N.S.) 787; Chicago v. R.&X. Restaurant, 369 III. 65, 15 N.E. (2d) 725, 117 A.L.R. 1313.

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46