Tax Type
BPOL Tax
Local Taxes
Description
Independent Contractor with Home Office
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
12-31-1991
[Opinion - Virginia Attorney General: 1991 at 252]
REQUEST BY: The Honorable J. Ronnie Minter Commissioner of the Revenue for the City of Martinsville Municipal Building Martinsville, Virginia 24112
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask whether a person who does consulting work out of his home as an independent contractor is subject to the local business license tax.
I. Facts
The independent contractor (the "consultant") is a safety consultant who gives seminars worldwide. He conducts no seminars in your locality. The consultant resides in Martinsville and receives business mail, places and receives business calls, and plans and organizes his business activities in his home. He has no place of business in any other locality. The consultant does not claim any tax deduction for home office use on his federal or state income tax return.
II. Applicable Statutes
Section 58.1-3703(A) of the Code of Virginia provides:
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.
Section 58.1-3708(A) provides that "the situs for the local license taxation for any licensable business, trade, occupation or calling, shall be the county, city or town . . . in which the person so engaged has a definite place of business or maintains his office."
Section 58.1-3708(B) provides that,
where a local license tax imposed by any such other locality is measured by volume, the volume on which the tax may be computed shall be the volume attributable to the business, trade, occupation or calling in such other locality. All volume attributable to the business, trade, occupation or calling in any such other locality which levies a local license tax thereon shall be deductible from the base in computing any local license tax measured by volume imposed on him by the locality in which the first-mentioned definite place or office is located.
Under § 58.1-3708(C), if a person has no definite place of business or office within the Commonwealth, "the situs for the local license taxation of such a person shall be each locality in which he engages in such business, trade, occupation or calling, with respect to what is done in each such locality."
III. Regular and Continuous Course of Dealing in Locality Constitutes Engaging in Business for Business License Tax Purposes
Section 58.1-3703 authorizes a locality to impose a license tax on persons engaged in business with that locality. Whether a person is engaged in business is a question of fact to be determined by the commissioner of the revenue. See Op. to Hon. N. Everette Carmichael, Chesterfield Co. Comm'r Rev., at 3 (Oct. 8, 1991) ("Carmichael Op.") (copy enclosed); 1987-1988 Att'y Gen. Ann. Rep. 513, 515. The Supreme Court of Virginia has defined "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 [and involves] a continuous and regular course of dealing, rather than an irregular or isolated transaction . . . .'" Krauss v. City of Norfolk, 214 Va. 93, 95, 197 S.E.2d 205, 206 (emphasis added), reh'g granted, 198 S.E.2d 780, reaff'd, 199 S.E.2d 529 (1973) (quoting Young v. Vienna, 203 Va. 265, 267, 123 S.E.2d 388, 390 (1962)) [hereinafter Krauss].
Because a license tax is an excise tax imposed on the privilege of doing business within the taxing jurisdiction, a commissioner of the revenue must determine not just whether the person is engaged in a business in general but whether the person is engaged in the business within the commissioner's locality. See Att'y Gen. Ann. Rep.: 1990 at 220; 1974-1975 at 459.
A person may meet the requirement of being engaged in a business within a locality in two ways. First, the person may have a definite place of business or maintain an office in a locality within the Commonwealth. § 58.1-3708(A). Second, if the person has no definite place of business within the Commonwealth, he may meet the requirement of being engaged in business by conducting a continuous and regular course of dealing within a locality. See § 58.1-3708(C); Krauss, supra.
IV. Person Engaged in Business in Locality Where Office Maintained or Definite Place of Business Exists
Section 58.1-3708(A) establishes that a person is engaged in a business in the jurisdiction where he has a definite place of business or maintains an office. While a person's home may constitute a place of business under certain facts, residency in a jurisdiction by a person who, in general, is engaged in business does not, by itself, establish situs for purposes of the business license tax, even if the person has no taxable situs elsewhere. See Commonwealth v. Manzer, 207 Va. 996, 154 S.E.2d 185 (1967) (definite place of business may include that part of home set aside, equipped and regularly used to transact business); see also Att'y Gen. Ann. Rep.: 1985-1986 at 288; 1982-1983 at 553, 554-55; 1981-1982 at 387.
Whether a person's home constitutes a definite place of business or an office ultimately is a question of fact to be determined by the commissioner of the revenue. The elements of this inquiry will vary depending on the nature of the business conducted. For example, a prior Opinion of this Office concludes that a commission salesman's home constitutes a definite place of business when the salesman used his home to store sample and paper needs, uses his home telephone number as a business number for customers and deducts home office expenses for federal income tax purposes.1 See 1985-1986 Att'y Gen. Ann. Rep, supra; see also Carmichael Op., supra Pt. II.
V. If No Definite Place of Business or Office Exists in Commonwealth, Consultant Is Engaged in Business in Each Locality Where Continuous and Regular Course of Dealing for Purpose of Earning Livelihood or Profit Is Conducted
If you determine that the consultant in question does not have a definite place of business and does not maintain an office in Martinsville or within any other locality in the Commonwealth under § 58.1-3708(C), you nevertheless may impose your locality's license tax on the consultant to the extent he otherwise is engaged in business in Martinsville. To impose the license tax under such circumstances, you would need to determine that the consultant is engaged in business in Martinsville within the standard set out in Krauss, i.e., a "' continuous and regular course of dealing, rather than an irregular or isolated transaction.'" 214 Va. at 95, 197 S.E.2d at 206 (quoting Young v. Town of Vienna , 203 Va. at 267, 123 S.E.2d at 390).
You indicate that the consultant is engaged in the business of conducting safety seminars but conducts no seminars in your locality. Without other business activities in the locality that constitute a continuous and regular course of dealing, the consultant, therefore, is not engaged in business there within the meaning of § 58.1-3708(C). Accordingly, unless you determine that the consultant maintains an office in his home that constitutes a definite place of business, it is my opinion that he is not subject to a business license tax in Martinsville.
1 The salesman discussed in the prior Opinion sold from samples, stored the samples and paper goods in a portion of his home, arranged paper needs for travel to visit customers and updated samples in his home, treated a portion of his home expenses as business expenses for income tax purposes, and used his home telephone number on his calling cards and printed thank-you notes to his customers. See 1985-1986 Att'y Gen. Ann. Rep. 288. In the facts you present, the business activities conducted at home by the consultant appear to be less substantial than those in the prior Opinion to support a conclusion that the consultant's home is a place of business under the standards established in § 58.1-3708(A) and interpreted in Commonwealth v. Manzer, 207 Va. 996, 154 S.E.2d 185 (1967).
Attorney General's Opinion