Tax Type
BPOL Tax
Local Taxes
Description
Automotive parts
Topic
Local Power to Tax
Date Issued
04-23-1999
April 23, 1999
Re: BPOL
Dear**************
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. Additionally, § 58.1-3703.1(A)(5) authorizes the department to receive taxpayer appeals of certain local license tax assessments and to issue determinations on such appeals. However, in no case is the department required to interpret any local ordinance. Code of Virginia § 58.1-3701. 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. I have enclosed copies of cited material for your review.
FACTS
You have stated that you operate a service station at which you both sell gasoline and perform automotive repair services. The gasoline sales constitute approximately 80 percent of your gross receipts, while automotive repairs constitute the remaining 20 percent. Parts used in the course of automobile repairs are being taxed by the * * * * * (the "locality') at its business service tax rate ($0.36 per $100 of gross receipts). You inquire as to why the Commonwealth collects retail sales and use tax on these parts while the locality assesses the same parts at its business services tax rate for local license tax purposes.
OPINION
The BPOL tax is a local tax that is separate and distinct from the Commonwealth's retail sales and use tax. Tangible goods used as part of the provision of a business service may be subject to different taxation by the Commonwealth and by its localities. The sale of tangible goods generally are subject to the Commonwealth's retail sales and use tax as this is a transaction based tax on the sale of tangible personal property. The BPOL tax, however, is not transaction based but is a tax on a business for engaging in a taxable privilege. A business engaged in the servicing of automobiles is subject to a BPOL tax on gross receipts attributable to this service at a maximum tax rate of $0.36 per $100 of gross receipts. Gross receipts taxed at this rate must include gross receipts from the sale of parts used in the repair. This is because the business of servicing automobiles normally cannot be undertaken unless new parts are available to replace worn parts. The BPOL Guidelines illustrate this point of law. "Any person engaged in repair service who sells parts as part of the service is engaged in a licensable service business.' BPOL Guidelines, pages 41-42.
It is important to add that in those instances where "over the counter' sales of parts and other goods are made by a taxpayer and are not used in the services supplied by the taxpayer, such taxpayer can be found to have two separate licensable activities subject to different tax rates (one for goods sold which are not used in providing services and a second for the provision of services including the parts used in performing the service). This is the case where the sale of parts and other goods not used in the provision of a service are substantial so as to rise to a separate business. 1994 Op. Va. Att'y Gen. 99. This principle is also illustrated in the BPOL Guidelines which state that "[i]f the person sells parts in addition to the repair service [i.e., parts not used in the performance of the service], he is engaged in retail or wholesale sales as to the sales of the repair parts.' BPOL Guidelines, page 42.
Based upon the facts you present, it is my opinion that you are engaged in a separate retail business, as evidenced by your sales of gasoline at retail which comprise 80% of your gross receipts. Because you are engaged in a retail business as well as a service business, those parts which you sell directly to customers which are not used in the servicing of automobiles are subject to your locality's retail license tax rate. On the other hand, those parts sold and used in the repair of the automobiles are subject to the locality's business services license tax rate.
I hope that this information is useful to you. Although I believe that this letter conforms with the requirements of the law, it is only written for your guidance. If you have any other questions, please do not hesitate to contact * * * * * at * * * * *.
Sincerely,
Danny Payne
Tax Commissioner
Rulings of the Tax Commissioner