Tax Type
BPOL Tax
Local Taxes
Description
Foreign corporation that is a wholly-owned subsidiary of a VA corporation
Topic
Local Power to Tax
Date Issued
07-06-2000
July 6, 2000
RE: Taxpayer: ******
Locality Assessing Tax:
Final State Determination
Business, Professional and Occupational License (BPOL)Tax
Dear ****
This final state determination is issued upon an application for correction of BPOL taxes filed by you on behalf of ****** (the "Taxpayer"). The assessment contested was made by the Commissioner of Revenue, City of ****** (the "City"). I apologize for the delay in responding to your application for correction.
The BPOL tax and fee are imposed and administered by local officials. Code of Virginia § 58.1--3707.1(A)(5) authorizes the department to issue determinations of taxpayer appeals of certain BPOL assessments. On appeal, a BPOL tax assessment is deemed prima facie correct, i.e., it stands unless the taxpayer proves it is incorrect.
The following determination is based on the facts presented by the Taxpayer and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The tax years in question are 1995, 1996 and 1997. You assert that the Taxpayer is a foreign corporation that is a wholly-owned subsidiary of a Virginia corporation (the "parent"). The Taxpayer's headquarters is in ******, Virginia, as are the headquarters of the parent and three other wholly-owned domestic subsidiaries of the parent. The Taxpayer's primary asset is a resort in a foreign country which engages in "timeshare" leases that are of five to 40 years in duration. During the tax years in question, the Taxpayer maintained sales and marketing offices in the City, in another city in Virginia, in another state and at the resort. The Taxpayer leased office space in the City for both its sales and marketing functions.
One of the parent's other subsidiaries did have property in the City which maintained rental units. However, these were not affiliated with the resort, although it appears that the City listed them as such.
OPINION
I first turn to the those sections of the Code of Virginia that pertain directly to the imposition of the BPOL tax based on the definitions of "business, gross receipts and situs," as well as the general concept of "apportionment" as applied under the BPOL statutes in rendering in my determination.
Business implies a regular and continuous course of dealing, rather than an irregular or isolated transaction. A rebuttable presumption that a person is engaged in a business may be found in (i) advertising or otherwise holding oneself out for business or (ii) the filing of tax returns, schedules and documents only required of those engaged in a trade or business. Definite place of business means an office or a location at which occurs a regular and continuing course of dealing for thirty days or more. Code of Virginia § 58.1-3700.1.
The Taxpayer clearly meets both of these criteria, which is a prerequisite to the City's authority to levy the BPOL tax or fee. It operates a sales and marketing operation out of leased sites within the City. However, the Taxpayer has demonstrated that it has several sites, both instate, out-of-state and offshore, at which these same functions or "business activities" occur. Apportionment, therefore becomes the determinative factor in ascertaining taxable receipts.
The gross receipts from the performance of services shall be attributed to the definite place of business at which the services are performed or, if not performed at a definite place of business, then from the definite place of business from which the services are directed or controlled. Code of Virginia § 58.1-3703.1(A)(3)(a)(4).
In this instance the activities of the taxpayer's office in the City were controlled and directed from another locality in the Commonwealth as well as by the offshore resort facility.
If the licensee has more than one definite place of business and it is impracticable or impossible to determine to which definite place of business the gross receipts should be attributed under the general rule, the gross receipts shall be apportioned between the definite places of business on the basis of payroll. Code of Virginia § 58.1--3703.1(A)(3)(a)(4)(2).
Furthermore, "gross receipts attributable to a definite place of business in another jurisdiction shall not be attributed to a given jurisdiction solely because the other jurisdiction does not impose a tax on gross receipts attributable to the definite place of business in such other jurisdiction." Id.
In reviewing the City's assessment, it is not clear how it arrived at taxable receipts. The Taxpayer is a controlled foreign corporation that is a wholly-owned subsidiary of a domestic corporation headquartered in another Virginia locality. I do not question the City's authority to apply the BPOL tax or fee to the payroll receipts generated by the Taxpayer in its sales and marketing offices located in the City. However, payroll and income attributed to the parent corporation cannot be included in any methodology the City uses. Rather, if applicable, the parent corporation should be treated as a separate entity. Likewise, payroll attributed to other localities or countries may not be included in the Taxpayer gross receipts due in the City. Code of Virginia §58.1-3703.1(A)(3)(a)(4)(2). I therefore recommend that the City re-evaluate its methodology in determining the BPOL tax due to the City paying careful attention to issued of "definite place of business" and "apportionment," and that the City issue a revised "final local determination."
I trust that this information has been useful to you. 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/22075
RE: Taxpayer: ******
Locality Assessing Tax:
Final State Determination
Business, Professional and Occupational License (BPOL)Tax
Dear ****
This final state determination is issued upon an application for correction of BPOL taxes filed by you on behalf of ****** (the "Taxpayer"). The assessment contested was made by the Commissioner of Revenue, City of ****** (the "City"). I apologize for the delay in responding to your application for correction.
The BPOL tax and fee are imposed and administered by local officials. Code of Virginia § 58.1--3707.1(A)(5) authorizes the department to issue determinations of taxpayer appeals of certain BPOL assessments. On appeal, a BPOL tax assessment is deemed prima facie correct, i.e., it stands unless the taxpayer proves it is incorrect.
The following determination is based on the facts presented by the Taxpayer and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The tax years in question are 1995, 1996 and 1997. You assert that the Taxpayer is a foreign corporation that is a wholly-owned subsidiary of a Virginia corporation (the "parent"). The Taxpayer's headquarters is in ******, Virginia, as are the headquarters of the parent and three other wholly-owned domestic subsidiaries of the parent. The Taxpayer's primary asset is a resort in a foreign country which engages in "timeshare" leases that are of five to 40 years in duration. During the tax years in question, the Taxpayer maintained sales and marketing offices in the City, in another city in Virginia, in another state and at the resort. The Taxpayer leased office space in the City for both its sales and marketing functions.
One of the parent's other subsidiaries did have property in the City which maintained rental units. However, these were not affiliated with the resort, although it appears that the City listed them as such.
OPINION
I first turn to the those sections of the Code of Virginia that pertain directly to the imposition of the BPOL tax based on the definitions of "business, gross receipts and situs," as well as the general concept of "apportionment" as applied under the BPOL statutes in rendering in my determination.
Business implies a regular and continuous course of dealing, rather than an irregular or isolated transaction. A rebuttable presumption that a person is engaged in a business may be found in (i) advertising or otherwise holding oneself out for business or (ii) the filing of tax returns, schedules and documents only required of those engaged in a trade or business. Definite place of business means an office or a location at which occurs a regular and continuing course of dealing for thirty days or more. Code of Virginia § 58.1-3700.1.
The Taxpayer clearly meets both of these criteria, which is a prerequisite to the City's authority to levy the BPOL tax or fee. It operates a sales and marketing operation out of leased sites within the City. However, the Taxpayer has demonstrated that it has several sites, both instate, out-of-state and offshore, at which these same functions or "business activities" occur. Apportionment, therefore becomes the determinative factor in ascertaining taxable receipts.
The gross receipts from the performance of services shall be attributed to the definite place of business at which the services are performed or, if not performed at a definite place of business, then from the definite place of business from which the services are directed or controlled. Code of Virginia § 58.1-3703.1(A)(3)(a)(4).
In this instance the activities of the taxpayer's office in the City were controlled and directed from another locality in the Commonwealth as well as by the offshore resort facility.
If the licensee has more than one definite place of business and it is impracticable or impossible to determine to which definite place of business the gross receipts should be attributed under the general rule, the gross receipts shall be apportioned between the definite places of business on the basis of payroll. Code of Virginia § 58.1--3703.1(A)(3)(a)(4)(2).
Furthermore, "gross receipts attributable to a definite place of business in another jurisdiction shall not be attributed to a given jurisdiction solely because the other jurisdiction does not impose a tax on gross receipts attributable to the definite place of business in such other jurisdiction." Id.
In reviewing the City's assessment, it is not clear how it arrived at taxable receipts. The Taxpayer is a controlled foreign corporation that is a wholly-owned subsidiary of a domestic corporation headquartered in another Virginia locality. I do not question the City's authority to apply the BPOL tax or fee to the payroll receipts generated by the Taxpayer in its sales and marketing offices located in the City. However, payroll and income attributed to the parent corporation cannot be included in any methodology the City uses. Rather, if applicable, the parent corporation should be treated as a separate entity. Likewise, payroll attributed to other localities or countries may not be included in the Taxpayer gross receipts due in the City. Code of Virginia §58.1-3703.1(A)(3)(a)(4)(2). I therefore recommend that the City re-evaluate its methodology in determining the BPOL tax due to the City paying careful attention to issued of "definite place of business" and "apportionment," and that the City issue a revised "final local determination."
I trust that this information has been useful to you. 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/22075
Rulings of the Tax Commissioner