Tax Type
BPOL Tax
Description
Separately licensable businesses; Retirement facilities
Topic
Local Power to Tax
Date Issued
06-11-1997
June 11, 1997
Re: Request for Advisory Opinion: BPOL
Dear**************
This will response to your letter transmitted by fax on May 7, 1997, requesting an advisory opinion.
The license tax is a local tax which is imposed and administered by local officials. The Code of Virginia limits the involvement of the Department of Taxation to promulgating guidelines and issuing advisory opinions. However, the department shall not be required to interpret any local ordinance.
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.
FACTS
A business located in your jurisdiction rents apartments to elderly retired individuals. Payment of rent for these apartments entitles the resident to a number of services provided by the apartment management. These services include, meals, recreation activities, housekeeping, linen service, apartment utilities, transportation, wellness programs, and 24 hour security. Residents who require enhanced care and services i.e. "assisted living care", are also accommodated at a higher monthly fee. Approximately 100 residents live at the facility. The business is licensed by the Department of Social Services to house up to 34 residents requiring assisted living care.
OPINION
I understand that your inquiry is whether the facility should be subject to the BPOL tax as a service provider with respect to the services listed above that it provides to the residents. Because the business provides two types of housing arrangements, I will address each of these below.
Standard Housing
With regard to the standard housing arrangement the business offers to senior citizens, I conclude that the services the retirement facility offers are ancillary to the rental of real estate. The licensing of multiple business is discussed in § 3.5 of the BPOL Guidelines. When a single person or entity conducts multiple businesses at the same location a separate license must be obtained for each business. Whether or not the retirement facility is separately licensable relative to the service it provides depends on whether or not the service activities rise to the level of a separate business or remain ancillary to the underlying business of real estate rental.
The term "ancillary", as defined on page 2 of the Guidelines, refers to business activities which are subordinate, subservient, auxiliary or in aid of the businesses principal business activity. Distinguishing between an ancillary activity and an activity which rises to the level of a separate business can often be accomplished by determining if the activity under scrutiny exists independently of the principal business. To the extent that additional services are offered to make the sale of a good or service more attractive to the consumer, the offering of such supplemental services are usually ancillary to the principal business.
Except with regard to the assisted living residents, the central business activity of the retirement facility is providing housing to senior citizens. In order to make the housing arrangement attractive, the facility offers a wide range of services to make living at the facility convenient, accessible and enjoyable. Although all of these added services contribute to the entire package of quality living that the facility offers, they do not exist independently of the underlying real estate rental business. If the facility did not offer housing as its basic and principal function, there would be no reason to provide the other services offered. The supplemental services that the facility provides to its unimpaired residents are, therefore, ancillary to the real estate rental business and do not rise to the level of a separately licensable business.
Assuming that your locality is grandfathered to impose a license tax on the facility's real estate rental business, any receipts for services rendered for an additional charge over the rental payment would be included and subject to the BPOL tax as part of the rental gross receipts.
Assisted Living Services
In addition to providing housing and related services to retirees, the business in question also offers assisted living services to its residents. These services are provided for an additional monthly fee and include administering medications, bath and personal hygiene assistance and regular status checks. Providers of assisted living services are required to obtain a license from the Department of Social Services which regulates and provides oversight for this type of service provider. The business in question has been licensed to provide assisted living services to a limited number of its residents.
Although it appears that the services rendered ordinary residents are ancillary to the operation of the business as a real estate rental enterprise, it appears that the assisted living services provided are in the nature of a separately licensable business. As stated in the 1991 Report of the Attorney General 261, the assisted living services provided at a nursing home are paramount and primary over the provision of housing or real estate rental. In these settings, the care, rather than the real estate rental, is the core service provided. Thus, under the reasoning of the Attorney General, an assisted living provider is properly classified as a personal service business rather than a real estate rental business. As stated in the Attorney General opinion, the intensive level of care provided with assisted living arrangements requires that providers of such services be classified as service providers rather than real estate rental businesses.
Provided your locality is grandfathered to impose a license tax on general real estate rental activity, the business in question may be properly classified as two separate lines of business for BPOL purposes, i.e. real estate rental business and service provider. A business license should be issued for the real estate rental as well as the service line of business unless the business elects, pursuant to § 58.1-3703.1 A 1 Code of Virginia to obtain one license for both of its businesses. If your locality is not grandfathered to tax real estate rental activity, it may separately license and impose the BPOL tax on the assisted living line of business carried on by the facility.
I hope that the above information will be beneficial to you. Although I believe this letter conforms with the law, it is written only for your guidance. If you have any further questions or comments, please do not hesitate to let me know.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12532D
Rulings of the Tax Commissioner