February 3, 2015
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Business, Professional and Occupational License (BPOL) Tax Business Tangible Personal Property (BTPP) Tax
Dear *****:
This final state determination is issued upon the application for correction filed by ***** (the "Taxpayer"), with the Department of Taxation. The Taxpayer appeals the assessments of BPOL tax issued to the Taxpayer for the 2006 through 2011 tax years and the assessments of BTPP tax for the 2008 through 2012 tax years by the ***** (the "County").
The local license tax and fee and business tangible personal property tax are imposed and administered by local officials. Virginia Code §§ 58.1-3703.1 A 5 and 58.1-3983.1 D 1 authorize the Department to issue determinations on taxpayer appeals of certain BPOL and BTPP tax assessments, respectively. On appeal, a tax assessment by a local assessing officer is deemed prima facie correct, i.e., the local assessment will stand unless the taxpayer proves that it is incorrect.
The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections, regulations and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site.
FACTS
The Taxpayer, who resided in the County, performed work for a company (the "Company") located in ***** (Country A) for the tax years at issue. The County audited the Taxpayer, determined that the Taxpayer was engaged in a licensable business activity and had business tangible property within its jurisdiction, and issued assessments for the BPOL license fee and the BTPP tax.
The County issued a final determination upholding its BPOL and BTPP tax assessments on the basis that the Taxpayer was engaged in a licensable business activity and had business tangible personal property. The Taxpayer appeals the County's assessments, contending the County failed to issue a proper BPOL determination. The Taxpayer also asserts that she was not engaged in a licensable business and was not subject to BPOL or BTPP tax.
ANALYSIS
Final Local Determination - BPOL
in Public Document (P.D.) 14-72 (5/28/2014), the case was sent back to the County in order for it to issue a proper final local BPOL tax determination. The County reviewed the Taxpayer's documentation and issued a final determination letter dated June 10, 2014 upholding the BPOL assessments that were issued for the 2006 through 2011 tax years. This final determination letter included the language required for a final local BPOL determination.
Employee v. Independent Contractor
The Taxpayer contends that she was an employee of the Company, not an independent contractor. The County asserts that the Taxpayer was a sole proprietorship engaged in business within the County, subject to business licensure and liable for the BTPP tax on any property used in the business.
Revenue Ruling 87-41, citing Treas. Reg. § 31.3121(d)-1, provides a twenty factor test in order to determine whether an individual is an employee or independent contractor for federal income tax purposes. Virginia has adopted this test for income tax withholding purposes. See Title 23 of the Virginia Administrative Code (VAC) 10-140-10 and P.D. 99-294 (9/9/1999).
However, the factors enumerated under Treas. Reg. § 31.3121(d)-1 are not used to determine whether an individual is an employee or independent contractor for BPOL tax purposes. Under Title 23 VAC 10-500-130 C, "[t]he determination as to whether a person is an employee or an independent contractor is based on common law principles and is affected by factors such as control, who furnishes materials, and other factors."
Moreover, Title 23 VAC 10-500-130 D provides that "[I]ocalities are entitled to rely upon the classification of a person as an employee or independent contractor for federal payroll tax purposes unless the taxpayer demonstrates that the classification for federal payroll tax purposes is erroneous or inapplicable." In this case, the Taxpayer has not provided either Form W-2s or Form 1099s issued by the Company. However, the Taxpayer's accountant indicated in correspondence that the Taxpayer received Federal Form 1099s. A Form 1099 is used to report various types of income other than wages, salaries, and tips. As such, the Taxpayer's receipt of Form 1099s from the Company indicates that she was not treated as an employee for federal payroll tax purposes.
In addition the Taxpayer reported her income and business expense deductions on a Federal Schedule C, and she claimed a deduction for the business use of her home. A Federal Form Schedule C is used to report income and expenses from a business. The Taxpayer's reporting of her income on a Schedule C, along with expense deductions, are indicative of operating a business.
Engaged in Business
Virginia Code § 58.1-3703.1 A 1 states, "A separate license shall be required for each definite place of business and for each place of business. A "definite place of business" is defined as "an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more." See Va. Code § 58.1-3700.1 3. A person's residence is considered 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." See P.D. 01-215 (12/12/2001).
The Taxpayer indicates that she works 40 hours a week for the Company either in the field or in her home office that is located in the County. As such, she clearly was engaged in business in the County for the tax years at issue and subject to business licensure.
Personal Property Tax
The Taxpayer contends that she was not subject to the BTPP tax because she was not engaged in a licensable business. As stated above, the Taxpayer was engaged in a licensable business. As such, any property utilized in her business that is defined as business tangible personal property in Va. Code § 58.1-3500 et seq. would be subject to tax. The classification of property for purposes of the BTPP tax is a matter of fact to be determined by the locality. See P.D. 11-54 (4/7/2011).
DETERMINATION
In accordance with the foregoing, I find that the Taxpayer was engaged in a licensable business subject to the BPOL tax for the 2006 through 2011 tax years. Further, the Taxpayer was also subject to the BTPP tax for the 2008 through 2012 tax years. The assessments issued by the County are hereby upheld.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5601611706.B