Tax Type
BPOL Tax
Local Taxes
Description
Real property lessors; Residential vs. commercial
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
06-23-2000
June 23, 2000Re: Request for Advisory Opinion
Business, Professional, and Occupational License (BPOL) Tax
Dear ****
This will respond to your letter requesting an advisory opinion regarding the local license taxation of real estate lessors in the **** (the Town).
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. Additionally, although Code of Virginia § 58.1-3701 authorizes the department to issue advisory opinions on local license tax issues, the department is not required to interpret any local ordinance. I have enclosed copies of cited material for your review.
You state that the Town imposes a license tax on some, but not all, real property owners that rent their property to others. You believe that the authority for this tax is a local ordinance provision that imposes a license tax on persons providing real estate services. Prior to the adoption of the current ordinance (and prior to January 1, 1974), the Town required real property lessors to pay a license tax under the authority of an ordinance that imposed a license tax on "rental agents for real estate."
You ask whether or not the Town may impose a license tax on real property lessors. You also ask whether or not the license tax treatment of lessors differs between lessors of residential properties and lessors of commercial properties. Finally, you ask whether or not the Town may impose a license tax on lessors of real estate that is located in an area of the Town annexed from a locality that imposes a license tax on real property lessors.
License Taxation of Real Property Lessors
In limited circumstances, a locality may tax gross receipts derived from the rental of real property to others. The general rule is that no locality may impose a license fee or levy any license tax:
In order for the Town to impose a license tax on real property owners engaged in the business of renting their real property, the Town must have imposed such a license tax on January 1, 1974.
The Town ordinance in effect on January 1, 1974 imposed a license tax on "rental agents for real estate." Absent specific language to the contrary, a license classification of "rental agents for real estate" would not include real estate lessors. Real estate lessors are real property owners who rent their property to others. Rental agents provide rental services to real estate lessors. In my opinion, this ordinance provision would not have been applicable to real property owners engaged in the business of leasing their property to others. As the Town did not impose a license tax on real property lessors on January 1, 1974, it is not authorized to do so now.
However, as explained in P.D. 99-13, if the leasing activity is ancillary to another licensable business of the owner, the receipts from leasing would be included in the business' gross receipts and subject to license taxation.
Impact of Use of Property
You also ask whether or not the license tax treatment of a lessor is affected by the use of the property. I am not aware of any state law that requires different license tax treatments for real estate lessors based on the use of the property, whether residential, commercial, or retail.
Annexed Areas
You also ask whether or not the Town may impose a license tax on real property owners engaged in the business of leasing property that is located in an area of the Town annexed from a locality that is authorized to impose a license tax on real property lessors. As this question concerns the law of annexation, rather than of local license taxation, you should consult the Attorney General or your town attorney.
I hope that the above information will be beneficial to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please do not hesitate to contact ****, Tax Policy Analyst, in my Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/28717D
Business, Professional, and Occupational License (BPOL) Tax
Dear ****
This will respond to your letter requesting an advisory opinion regarding the local license taxation of real estate lessors in the **** (the Town).
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. Additionally, although Code of Virginia § 58.1-3701 authorizes the department to issue advisory opinions on local license tax issues, the department is not required to interpret any local ordinance. I have enclosed copies of cited material for your review.
FACTS
You state that the Town imposes a license tax on some, but not all, real property owners that rent their property to others. You believe that the authority for this tax is a local ordinance provision that imposes a license tax on persons providing real estate services. Prior to the adoption of the current ordinance (and prior to January 1, 1974), the Town required real property lessors to pay a license tax under the authority of an ordinance that imposed a license tax on "rental agents for real estate."
You ask whether or not the Town may impose a license tax on real property lessors. You also ask whether or not the license tax treatment of lessors differs between lessors of residential properties and lessors of commercial properties. Finally, you ask whether or not the Town may impose a license tax on lessors of real estate that is located in an area of the Town annexed from a locality that imposes a license tax on real property lessors.
OPINION
License Taxation of Real Property Lessors
In limited circumstances, a locality may tax gross receipts derived from the rental of real property to others. The general rule is that no locality may impose a license fee or levy any license tax:
-
- upon any person, firm or corporation for engaging in the business of renting, as the owner of such property, real property other than hotels, motels, motor lodges, auto courts, tourist courts, travel trailer parks, lodging houses, rooming houses and boardinghouses; however, any county, city or town imposing such a license tax on January 1, 1974, shall not be precluded from the levy of such tax by the provisions of this subdivision.
- upon any person, firm or corporation for engaging in the business of renting, as the owner of such property, real property other than hotels, motels, motor lodges, auto courts, tourist courts, travel trailer parks, lodging houses, rooming houses and boardinghouses; however, any county, city or town imposing such a license tax on January 1, 1974, shall not be precluded from the levy of such tax by the provisions of this subdivision.
In order for the Town to impose a license tax on real property owners engaged in the business of renting their real property, the Town must have imposed such a license tax on January 1, 1974.
The Town ordinance in effect on January 1, 1974 imposed a license tax on "rental agents for real estate." Absent specific language to the contrary, a license classification of "rental agents for real estate" would not include real estate lessors. Real estate lessors are real property owners who rent their property to others. Rental agents provide rental services to real estate lessors. In my opinion, this ordinance provision would not have been applicable to real property owners engaged in the business of leasing their property to others. As the Town did not impose a license tax on real property lessors on January 1, 1974, it is not authorized to do so now.
However, as explained in P.D. 99-13, if the leasing activity is ancillary to another licensable business of the owner, the receipts from leasing would be included in the business' gross receipts and subject to license taxation.
Impact of Use of Property
You also ask whether or not the license tax treatment of a lessor is affected by the use of the property. I am not aware of any state law that requires different license tax treatments for real estate lessors based on the use of the property, whether residential, commercial, or retail.
Annexed Areas
You also ask whether or not the Town may impose a license tax on real property owners engaged in the business of leasing property that is located in an area of the Town annexed from a locality that is authorized to impose a license tax on real property lessors. As this question concerns the law of annexation, rather than of local license taxation, you should consult the Attorney General or your town attorney.
I hope that the above information will be beneficial to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please do not hesitate to contact ****, Tax Policy Analyst, in my Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/28717D
Related Documents
Rulings of the Tax Commissioner