Tax Type
BPOL Tax
Local Taxes
Description
Coal mining; Town
Topic
Local Power to Tax
Date Issued
04-30-1999
April 30, 1999
Re: Request for Advisory Opinion Business, Professional and Occupational License (BPOL) Tax
Dear********
This is in response to your letter requesting an advisory opinion regarding the ability of the ***** to impose a BPOL tax on the "bookkeeping' activities of a local coal mining company. I apologize for the delay in responding to your request.
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
A company (the "Business') engaged in mining coal outside of the town limits (the "Town') maintains its "bookkeeping' operation within the Town. You ask if the Town may assess a local license tax or fee upon the Business.
OPINION
Code of Virginia § 58.1-3703(C)(5) prohibits counties, cities and towns from imposing a license fee or tax "[on] a person engaged in the business of severing minerals from the earth for the privilege of selling the severed mineral at wholesale at the place of severance, except as provided in Secs.58.1-3712 and 58.1-3713.' Only cities and counties are authorized to impose a license tax on the severance of coal or gases at prescribed rates under Code of Virginia §§58.1-3712 and 58.1-3713.
A Virginia locality may impose a BPOL license fee or tax on a licensable business or privilege. An activity which is ancillary or subordinate or auxiliary to a licensable business must be treated for BPOL tax purposes as part of the primary licensable business. "An activity for which no separate charge is made is presumed to be ancillary to the activity for which a charge is made .... Gross receipts attributable to any ancillary activities are taxable as part of the primary licensable business.' 1997 BPOL Guidelines, page 39.
If the Business's bookkeeping activities are not being performed for persons other than the Business, these activities are ancillary or auxiliary to the Business's coal severance business. In such a case, the Business's coal severance business is taking place in two different localities, the Town in which the bookkeeping occurs and the locality in which the coal is severed. Because Code of Virginia § 58.1-3703(C)(5) only prohibits the imposition of a BPOL fee or tax for wholesale sales of severed minerals at the place of severance, this prohibition in no way touches upon the Town's ability to levy a license fee or license tax on that part of the coal severance business being conducted within the Town, i.e., the internal bookkeeping activities.
However, generally speaking, there are no gross receipts attributable to or generated by internal bookkeeping activities. This principle is embodied in the 1997 BPOL Guidelines. The Guidelines indicate that lawyers, certified public accountants, and like individuals, offering their services only to their employer and not engaging in business or transactions involving customers, do not generate gross receipts. 1997 BPOL Guidelines, pages 5 and 40. Based on this principle and the facts presented, it is my opinion that there are no gross receipts generated or attributable to the Business's internal bookkeeping activities within the Town. However, as discussed above, the Town is not prohibited by Code of Virginia § 58.1-3703(C)(5) from imposing a license fee upon the Business.
If you find, however, that the Business's "bookkeeping' operation also includes soliciting orders for coal, offering bookkeeping services to others, or engaging in transactions involving customers, there may be different BPOL tax consequences.
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 M. Payne
Tax Commissioner
OTP/13128
Rulings of the Tax Commissioner