Tax Type
BPOL Tax
Local Taxes
Description
Nonprofit Organization; Seminar fees, Donations
Topic
Basis of Tax
Exemptions
Local Power to Tax
Local Taxes Discussion
Date Issued
09-11-1989
[Opinion - Virginia Attorney General: 1989 at 311]
REQUEST BY: The Honorable Claude M. Wells Commissioner of the Revenue for the City of Falls Church 300 Park Avenue Falls Church, Virginia 22046
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask whether fees collected by a nonprofit organization from attendees at seminars conducted by the organization outside the Commonwealth are subject to local license taxes. You state that the organization is qualified as tax exempt under I.R.C. § 501(c)(4) (West Supp. 1989).1 You further state that the organization maintains its principal place of business in Falls Church, Virginia, but occasionally will conduct seminars in other states. You also ask whether donations made to this organization constitute "gross receipts" for purposes of the business license tax.
I. Applicable Statutes
Section 58.1-3703 of the Code of Virginia generally authorizes localities to levy a license tax:
The governing body of any county, city or town may levy and provide for the assessment and collection of county, city or town license taxes on businesses, trades, professions, occupations and callings and upon the persons, firms and corporations engaged therein within the county, city or town subject to the limitations provided in subsection B of this section.
When a business maintains only one office location, the situs for local license taxation is the locality in which the office is located. See § 58.1-3708(A).
II. Nonprofit Organization Distributing Literature and Conducting Seminars for Compensation is Subject to License Tax
As noted above, § 58.1-3703 authorizes the governing body of any county, city or town to collect license taxes on businesses, trades, professions and callings. The initial question presented by your inquiry is when, and to what extent, a nonprofit organization is engaged in business.
In Portsmouth v. Citizens Trust Co., 219 Va. 903, 252 S.E.2d 339 (1979), the Supreme Court of Virginia defined the phrase "engaged in business" as "'a course of dealing which requires the time, attention and labor of the person so engaged for the purpose of earning a livelihood or profit. . . . It implies a continuous and regular course of dealing, rather than an irregular or isolated transaction. . . .'" Id. at 905-06, 252 S.E.2d at 341 (citation omitted). Noting that the volume of business activity, not the profit motive of the owners of the business, determines whether an organization is engaged in business, the Supreme Court of Virginia also has held that a nonprofit association was engaged in business, although the profits from food sales to its members were used solely for association purposes. Commonwealth v. Employees Assoc., 195 Va 663, 670, 79 S.E.2d 621, 625 (1954). See also Dep't Tax'n, Guidelines for Loc. Bus., Prof. & Occupational License Taxes at 13 (Jan. 1, 1984) (charitable institution or other not-for-profit organization that engages in business may be subject to local license tax, even though proceeds from sales are subsequently used for charitable purposes).
Based on the above, it is my opinion that a nonprofit organization which regularly offers seminars would be subject to the local license tax upon fees received by the organization from the seminars. Whether a particular nonprofit organization is engaged in business activities and, as a result, also is required to secure a local business license, is a question of fact to be determined by the commissioner of the revenue. See 1983-1984 Att'y Gen. Ann. Rep. 371, 372.
III. Donations Are Not "Gross Receipts" for Purposes of License Tax
Business license taxes are calculated on the gross receipts of the business to be taxed. See § 58.1-3706. The term "gross receipts," for tax purposes, typically refers to the total amount of money or the value of other consideration received from selling property or from performing services. See, e.g., New Mexico Enterprises, Inc. v. Bureau of Revenue, 86 N.M. 799, 800, 528 P.2d 212, 213 (1974); Black's Law Dictionary 633 (5th ed. 1979). A donation or gift, on the other hand, is "[a] voluntary transfer of property to another made gratuitously and without consideration." Black's Law Dictionary, supra, at 619 (emphasis added).
It is my opinion, therefore, that donations received by a nonprofit organization are not gross receipts subject to the business license tax, since these donations are derived from the charitable, rather than from the business, activities of the organization.
IV. Gross Receipts Contingent on Events Occurring Outside Taxing Jurisdiction Includable as Measure of License Tax When Only Tax Situs Is Located in Taxing Jurisdiction
You also ask the extent to which the gross receipts of an organization whose only business location is in the Commonwealth, but which conducts seminars for compensation outside Virginia, are subject to the license tax in the Virginia locality where the business is located. As discussed above, § 58.1-3708 provides, in part, that "the situs for the local taxation for any licensable business . . . shall be the county, city or town . . . in which the person so engaged has a definite place of business or maintains his office."
The organization in the facts you present maintains no regular business location other than its principal place of business in Falls Church, Virginia. Fees charged for seminars presented outside of Virginia are billed from and received at the Falls Church business location. The organization, therefore, has not established a tax situs elsewhere, and an apportionment of its gross receipts is not required. See Braniff Airways v. Nebraska Board, 347 U.S. 590 (1954) (state of domicile may tax full value of personal property as long as no tax situs has been established elsewhere). The fact that the measure of the tax -- in the facts you present, gross receipts -- is contingent upon events occurring outside of the Commonwealth does not invalidate the tax. See Norton Co. v. Dept. of Revenue, 340 U.S. 534 (1951); see also 1981-1982 Att'y Gen. Ann. Rep. 390 (fees for accounting services performed outside of taxing jurisdiction includable in gross receipts for local license tax when only business office located in that jurisdiction).
Both §§ 58.1-3707 (situs for local license taxation of practitioners of professions) and 58.1-3708 (situs for local license taxation of businesses and occupations) provide that the situs for local taxation shall be the county, city or town in which the taxpayer's office is maintained. It is my opinion, therefore, that the tax situs of the organization you describe is the locality in which the organization's sole business office is located. It is further my opinion that the total amount of the organization's gross receipts, excluding donations, is includable in its tax base for purposes of that locality's business license tax.
With kindest regards, I am
1 Section 501(c)(4) exempts from federal income tax "civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare."
Attorney General's Opinion