Tax Type
BPOL Tax
Local Taxes
Description
Vendor with concession contract with NAFA
Topic
Local Power to Tax
Date Issued
06-28-2000
June 28, 2000
Re: Request for Advisory Opinion
Business, Professional and Occupational License (BPOL) Tax
Dear ****
This is in response to the request for an advisory opinion that you submitted concerning the BPOL tax liability of an independent vendor (the "Contractor"), who has a concession contract with the **************** (NAFA). NAFA is an instrumentality of the United States Government situated at the ******, Virginia.
While addressing the issues raised in your request, 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
The Contractor contends that because he has an exclusive relationship with NAFA, he is not subject to state and local taxes. The Contractor and NAFA have entered into a five-year contract referred to as the ****** "Contract." The contract contains the following stipulations:
1.) The Contractor will pay to NAFA a sales commission based on gross sales excluding the state sales tax.
2.) The Contractor shall, at its own expense, obtain all necessary permits, give all necessary notices, pay all license fees and;
3.) The Contractor assumes complete liability for all taxes applicable to its property, income, and all of its transactions arising out of or in connection with the performance of this contract. NAFA shall not be liable to the contractor and will make no reimbursements for any tax imposed either directly or indirectly upon the Contractor by any authority on account of or by reason of this contract or otherwise.
OPINION
Localities in Virginia may impose the BPOL license fee and tax ordinances on businesses that engage in a licensable business within the locality applying the tax. Code of Virginia § 58.1-3703(A). The BPOL tax is not a tax on income, but a tax on the privilege of engaging in business. The taxable amount is based total gross receipts that the business earns within that locality. Code of Virginia § 58.1-3703.1(A)(3)(a).
"Gross receipts" are the total receipt of money or other consideration received by the taxpayer for engaging in a licensed business activity less any statutory exclusions or deductions. Exclusions and deductions from gross receipts are allowed only for those items enumerated in the statute. Code of Virginia §§ 58.1-3703(C); 58.1-3732; 58.1-3732.1; 58.1-3732.2.
In the present case, there is nothing in the statutes, contract or in any other information provided which would allow the Contractor to claim the same tax-exempt status as NAFA. The Contractor is independent from NAFA; he is not considered an instrumentality of the United States government. In fact, the terms of the contract negotiated with NAFA clearly state that the Contractor is responsible for obtaining all necessary permits and paying all license fees and taxes resulting from its performance under the contract. Accordingly, it is my opinion that the Contractor is required to obtain a business license and is subject to the BPOL tax.
I hope this information has been helpful 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 ***** in my Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/28959H
Re: Request for Advisory Opinion
Business, Professional and Occupational License (BPOL) Tax
Dear ****
This is in response to the request for an advisory opinion that you submitted concerning the BPOL tax liability of an independent vendor (the "Contractor"), who has a concession contract with the **************** (NAFA). NAFA is an instrumentality of the United States Government situated at the ******, Virginia.
While addressing the issues raised in your request, 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
The Contractor contends that because he has an exclusive relationship with NAFA, he is not subject to state and local taxes. The Contractor and NAFA have entered into a five-year contract referred to as the ****** "Contract." The contract contains the following stipulations:
1.) The Contractor will pay to NAFA a sales commission based on gross sales excluding the state sales tax.
2.) The Contractor shall, at its own expense, obtain all necessary permits, give all necessary notices, pay all license fees and;
3.) The Contractor assumes complete liability for all taxes applicable to its property, income, and all of its transactions arising out of or in connection with the performance of this contract. NAFA shall not be liable to the contractor and will make no reimbursements for any tax imposed either directly or indirectly upon the Contractor by any authority on account of or by reason of this contract or otherwise.
OPINION
Localities in Virginia may impose the BPOL license fee and tax ordinances on businesses that engage in a licensable business within the locality applying the tax. Code of Virginia § 58.1-3703(A). The BPOL tax is not a tax on income, but a tax on the privilege of engaging in business. The taxable amount is based total gross receipts that the business earns within that locality. Code of Virginia § 58.1-3703.1(A)(3)(a).
"Gross receipts" are the total receipt of money or other consideration received by the taxpayer for engaging in a licensed business activity less any statutory exclusions or deductions. Exclusions and deductions from gross receipts are allowed only for those items enumerated in the statute. Code of Virginia §§ 58.1-3703(C); 58.1-3732; 58.1-3732.1; 58.1-3732.2.
In the present case, there is nothing in the statutes, contract or in any other information provided which would allow the Contractor to claim the same tax-exempt status as NAFA. The Contractor is independent from NAFA; he is not considered an instrumentality of the United States government. In fact, the terms of the contract negotiated with NAFA clearly state that the Contractor is responsible for obtaining all necessary permits and paying all license fees and taxes resulting from its performance under the contract. Accordingly, it is my opinion that the Contractor is required to obtain a business license and is subject to the BPOL tax.
I hope this information has been helpful 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 ***** in my Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/28959H
Rulings of the Tax Commissioner