Attorney General Opinions

August 17, 2023

Re: Request for Advisory Opinion
      Business, Professional and Occupational License Tax  

Dear *****:

This is in response to your letter in which you request an advisory opinion on behalf of your client, ***** (the “Taxpayer”), regarding the application of the Business, Professional and Occupational License (BPOL) tax administered by the City of ***** (the “City”).

The BPOL local license fee and tax is imposed and administered by local officials. Virginia Code § 58.1-3703.1 authorizes the Department to issue advisory opinions on local business tax matters. The following opinion has been issued subject to the facts presented by the Taxpayer to the Department as summarized below. Any changes in facts or the introduction of new facts may lead to a different result.
 
The Code of Virginia sections, regulations, and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site.

FACTS

The Taxpayer is a corporation that provides linguistic services and performs software development. The Taxpayer leases a virtual office from another company (the “Company”) that provides office, administrative, and other services to the Taxpayer and similar businesses. The Company receives the Taxpayer’s mail and service of process at this location in the City. This location is also listed as the Taxpayer’s principal office with the Virginia State Corporation Commission (SCC). In addition, the Company provides one of its employees to act as the Taxpayer’s part-time vice-president for purposes of processing correspondence and managing the Taxpayer’s bank account. The Taxpayer states that, aside from its relationship with the Company, it maintains no employees, officers, or directors in the City. The Taxpayer has requested an advisory opinion regarding whether the Taxpayer is subject to BPOL tax in the City. 

OPINION

Classification

Virginia Code § 58.1-3703 authorizes localities to enact an ordinance levying a local license tax or a fee, or both, for issuing a license. This tax or fee is imposed on businesses and professionals for the privilege of doing business in a locality. Every ordinance adopted or maintained by a locality that levies a license tax is required to be substantially similar to the provisions in Virginia Code § 58.1-3703.1. See Title 23 of the Virginia Administrative Code (VAC) 10-500-20 A.

The BPOL tax is imposed at different rates according to the classification of an enterprise. See Virginia Code § 58.1-3706. These classifications are regulated under Title 23 VAC 10-500-10 et seq. Classification of a specific business must be determined based on consideration of all the facts and circumstances.

The Taxpayer seems to believe that it would not be subject to BPOL tax in the County because it did not provide professional services as defined by the County’s ordinances. The Taxpayer provides linguistic services, including translating text, audio, video, and other multi-media content, and develops computer software. Neither of these services are included in the list of professional services in Title 23 VAC 10-500-450 or Article A § 9-1-2(16) of the City’s Business License Code (the “City Code”). 

For purposes of the BPOL tax, however, there are two separate classifications of services: “financial, real estate and professional services,” and “repair, personal, business and other services.”  Those businesses classified as providers of professional services are specifically enumerated in Title 23 VAC 10-500-450. All other services not clearly identified as financial, real estate or professional services fall under the classification of “ repair, personal, business and other services.” See Title 23 VAC 10-500-480 and Article A § 9-1-2(18) of the City Code. 

Under Article C § 9-1-72 of the City Code, the Taxpayer’s services would be classified as “repair, personal, business and other services.”  Accordingly, if the Taxpayer maintains a definite place of business in the City, it must obtain a business license and pay an annual license tax, based on gross receipts. See Article A § 9-1-5 of the City Code.
 
Definite Place of Business

Virginia Code § 58.1-3700.1 defines a definite place of business as an office or a location at which occurs a regular and continuous course of dealing for 30 consecutive days or more. See also § 9-1-2 (7) of the City Code. A definite place of business can include a location leased or otherwise obtained from another entity on a temporary or seasonal basis. Some characteristics that may help determine whether the location is a definite place of business include, but are not limited to, the following onsite activities: (1) a continuous presence; (2) having an office or phone; (3) the reception of mail; (4) having employees; (5) record keeping; (6) and advertising or otherwise holding oneself out as engaging in business at the particular location. See Public Document (P.D.) 97-201 (4/25/1997), P.D. 01-215 (12/12/2001), and P.D. 10-277 (12/21/2010).

Although these activities are indicative of a definite place of business, all facts and circumstances concerning the nature of a taxpayer’s operations must be considered. In this case, the Taxpayer conducts administrative activities at its location in the County. That location is listed as the Taxpayer’s business address both on its website and in statements filed with the SCC. Correspondence and service of process are received and processed at that location. In addition, banking activities are conducted from the location. Nothing in the facts presented would indicate these activities do not occur as a regular and continuous course of dealing. The Taxpayer, therefore, appears to have a definite place of business in the City.

Situs

The BPOL tax is based on gross receipts that are sitused to a taxpayer’s definite place of business within the locality. In determining the situs of gross receipts, Virginia Code § 58.1-3703.1 A 3 a 4 and § 58.1-3703.1 A 3 b state that receipts from services are to be taxed based on (in order): (i) the definite place of business at which the service is performed, or if not performed at any definite place of business, (ii) the place from which the service is directed or controlled; or as a last resort (iii) when it is impossible or impractical to determine where the service is performed or from where the service is directed or controlled, by payroll apportionment between definite places of business. Virginia Code § 58.1-3703.1 A 3 b also states that gross receipts may not be apportioned to a definite place of business unless some business activities occurred at, or were controlled from, such definite place of business.

The Taxpayer states that its location in the City is used only for certain administrative activities and that no services are actually performed there. It is not apparent from the facts presented whether the Taxpayer has other definite places of business at which services are performed such that the gross receipts from those services would be attributed to those locations. To the extent any services were not performed at a definite place of business, they would they be sitused to the definite place of business from which they were directed or controlled. Absent the establishment of a definite place of business in another jurisdiction, all of the Taxpayer’s gross receipts would be attributed to its definite place of business in the City.

CONCLUSION

Where a Virginia locality has adopted a BPOL ordinance that requires a license, every person engaged in a licensable activity at a definite place of business in such locality must apply for a license. See Title 23 VAC 10-500-30. 

For the reasons discussed above, although the Taxpayer does not provide professional services, it provides services that would come under the general “repair, personal, business and other services” classification. In addition, it appears that the Taxpayer has a definite place of business in the City. As such, the Taxpayer would likely be required to obtain a business license from the City. The Taxpayer, however, may not be required to pay BPOL tax to the City if no gross receipts would be sitused to that definite place of business under the situs rules for service businesses described above. Ultimately, issues pertaining to the situs of gross receipts are questions of fact to be determined by the locality.

If you have any questions regarding this opinion, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at (804) *****.  

Sincerely,

Craig M. Burns
Tax Commissioner

AR/4479.X