Tax Type
BPOL Tax
Local Taxes
Description
Merchant's license
Topic
Local Power to Tax
Date Issued
08-07-2000
August 7, 2000
Re: Taxpayer: *****
Locality Assessing Tax:
Final State Determination
Appeal of Business, Professional and Occupational License (BPOL) Tax
Dear ****
This is in response to your appeal of a 1998 audit-based assessment of the 1995-1998 tax years for ****** (the "Taxpayer") by the City of ******* (the "City"). You appeal a final local determination by the Commissioner of the Revenue of the City upholding an audit assessment of the Taxpayer's BPOL taxes due. 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 § 58.1-3703.1(A)(5) authorizes the department to issue determinations on taxpayer appeals of certain BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the local assessment will stand unless the taxpayer proves that it is incorrect.
The following determination is based on the facts presented to the department by the Taxpayer and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The Taxpayer's Position
The Taxpayer disputes the findings of the City's audit assessment for the amount of the retail merchants portion of the BPOL tax and the gross receipts tax on equipment rentals. The Taxpayer paid the retail merchants license portion of the tax in the amount of $***** in order to gain release of its blanket hauling permits: a condition imposed by the Commissioner of the Revenue for the City. The Taxpayer did so under protest, and excepting the retail merchants license tax on sales of $***** and $***** for 1996 and 1997, respectively, contests the balance of the assessments imposed for the BPOL tax in the tax years covered under the audit.
In filling its appeal with the State, the Taxpayer presented a series of documents that may or may not have been made available to the City at the time of the audit.
The City's Position
The City states in its final determination, "the audit was based on verifiable documents" and that "since information was not furnished to enable a complete review of his appeal, no adjustments have been made." These adjustments would have included the consideration of BPOL licenses held by the Taxpayer in other Virginia localities.
The City also questions the rental of crane work as falling under the definition of "contractor" as delineated in Code of Virginia § 58.1-3714(B).
The Taxpayer filed its appeal of the final local determination of taxes due in tax years 1995-1998 with the Tax Commissioner on August 11, 1999. The City responded with a detailed summary of the evidence it used in conducting the audit. While the audit dealt with both BPOL and tangible personal property tax issues, only the facts pertinent to the BPOL tax are subject to this final state determination.
OPINION
Applicable Statutes
The 2000 BPOL Guidelines clearly discuss the wider scope of the definition of contracting in § 5.1.2. "Contracting generally includes but is not limited to, persons engaged in the following occupations, businesses, or trades: "dredging ...wrecking, moving or excavating ...sewer drilling and well digging ...road, street, bridge, tunnel sidewalk or curb and gutter construction, and several other activities. In my opinion, when the Taxpayer is hired to do a job related to any of these or the other forms of contracting, and provides his own personnel or supervisors to oversee and perform the work, that does not constitute "rental." Rather it is contracting and should be assessed as such. [The 2000 BPOL Guidelines are cited because they are currently in circulation. However, these sections remain essentially the same as those in effect in 1995.]
It is readily apparent that the Taxpayer's primary source of income is derived through its activities as a contractor as defined by the Code of Virginia.
The gross receipts of a contractor shall be attributed to the definite place of business at which his services are performed, or if not performed at any definite place of business, the definite place of business from which his services are directed or controlled, unless the contractor is subject to the provisions of § 58.1-3715. Code of Virginia § 58.1-3703.1(A)(3)(a)(1).
Section 58.1-3715 states that if a contractor does business in another jurisdiction in excess of $25,000 and in which it has a BPOL license, it may deduct the amount of business done in that other jurisdiction from the gross revenue in the localities in which its principal office is located. This also applies to any branch office of the contractor which is located in a different locality. Therefore, if the Taxpayer has paid a license tax in another jurisdiction and his business in that jurisdiction has exceeded $25,000, that gross amount of business should be deducted from the gross receipts the City taxes.
Real Property Rentals
It is not clear from either the City's submission nor from the Taxpayer's position as to what "real estate rentals" were being assessed, and what relationship the Taxpayer had with the real property rentals in question. I believe that portions of Public Document 99-13 might be helpful in clarifying the issue for both the City and the Taxpayer, and am enclosing a copy of that document for your reference. Absent more specific facts, I cannot reach a determination on this particular issue. The determinative question would be, is the Taxpayer a lessor of real property which it owns, and therefore would be exempt from the BPOL tax, or is it functioning as a business service, in which case it might be liable for a license tax on the separate, but ancillary business.
Conclusion
The Taxpayer has shown sufficient proof that the assessment made by the locality for license tax years 1995-1998 is subject to reconsideration. Therefore, it is my recommendation that the appeal be returned to the City for a reconsideration of its final local determination, and that the City review the new evidence presented by the Taxpayer in its appeal of August 11, 1999. The issues pertaining to the use of crane operators as part of the contractor's license, the Taxpayer's contention of the retail merchants license, and the rental income, both real property and tangible personal property, should be reviewed. After the City reconsiders its determination and issues a new final determination regarding the BPOL tax appeal, the Taxpayer may consider this in the same light as the earlier final local determination.
The issues regarding the appeal of tangible personal property tax assessments, if not agreed to by the City's Commissioner of the Revenue and the Taxpayer, may be appealed to the circuit court within three years from the last day of the tax year for which any such assessment is made, or within one year from the from the date of the assessment, whichever is later. Code of Virginia § 58.1-3984.
I hope this letter has been helpful. 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/24466H
Re: Taxpayer: *****
Locality Assessing Tax:
Final State Determination
Appeal of Business, Professional and Occupational License (BPOL) Tax
Dear ****
This is in response to your appeal of a 1998 audit-based assessment of the 1995-1998 tax years for ****** (the "Taxpayer") by the City of ******* (the "City"). You appeal a final local determination by the Commissioner of the Revenue of the City upholding an audit assessment of the Taxpayer's BPOL taxes due. 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 § 58.1-3703.1(A)(5) authorizes the department to issue determinations on taxpayer appeals of certain BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the local assessment will stand unless the taxpayer proves that it is incorrect.
The following determination is based on the facts presented to the department by the Taxpayer and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The Taxpayer's Position
The Taxpayer disputes the findings of the City's audit assessment for the amount of the retail merchants portion of the BPOL tax and the gross receipts tax on equipment rentals. The Taxpayer paid the retail merchants license portion of the tax in the amount of $***** in order to gain release of its blanket hauling permits: a condition imposed by the Commissioner of the Revenue for the City. The Taxpayer did so under protest, and excepting the retail merchants license tax on sales of $***** and $***** for 1996 and 1997, respectively, contests the balance of the assessments imposed for the BPOL tax in the tax years covered under the audit.
In filling its appeal with the State, the Taxpayer presented a series of documents that may or may not have been made available to the City at the time of the audit.
The City's Position
The City states in its final determination, "the audit was based on verifiable documents" and that "since information was not furnished to enable a complete review of his appeal, no adjustments have been made." These adjustments would have included the consideration of BPOL licenses held by the Taxpayer in other Virginia localities.
The City also questions the rental of crane work as falling under the definition of "contractor" as delineated in Code of Virginia § 58.1-3714(B).
The Taxpayer filed its appeal of the final local determination of taxes due in tax years 1995-1998 with the Tax Commissioner on August 11, 1999. The City responded with a detailed summary of the evidence it used in conducting the audit. While the audit dealt with both BPOL and tangible personal property tax issues, only the facts pertinent to the BPOL tax are subject to this final state determination.
OPINION
Applicable Statutes
The 2000 BPOL Guidelines clearly discuss the wider scope of the definition of contracting in § 5.1.2. "Contracting generally includes but is not limited to, persons engaged in the following occupations, businesses, or trades: "dredging ...wrecking, moving or excavating ...sewer drilling and well digging ...road, street, bridge, tunnel sidewalk or curb and gutter construction, and several other activities. In my opinion, when the Taxpayer is hired to do a job related to any of these or the other forms of contracting, and provides his own personnel or supervisors to oversee and perform the work, that does not constitute "rental." Rather it is contracting and should be assessed as such. [The 2000 BPOL Guidelines are cited because they are currently in circulation. However, these sections remain essentially the same as those in effect in 1995.]
It is readily apparent that the Taxpayer's primary source of income is derived through its activities as a contractor as defined by the Code of Virginia.
The gross receipts of a contractor shall be attributed to the definite place of business at which his services are performed, or if not performed at any definite place of business, the definite place of business from which his services are directed or controlled, unless the contractor is subject to the provisions of § 58.1-3715. Code of Virginia § 58.1-3703.1(A)(3)(a)(1).
Section 58.1-3715 states that if a contractor does business in another jurisdiction in excess of $25,000 and in which it has a BPOL license, it may deduct the amount of business done in that other jurisdiction from the gross revenue in the localities in which its principal office is located. This also applies to any branch office of the contractor which is located in a different locality. Therefore, if the Taxpayer has paid a license tax in another jurisdiction and his business in that jurisdiction has exceeded $25,000, that gross amount of business should be deducted from the gross receipts the City taxes.
Real Property Rentals
It is not clear from either the City's submission nor from the Taxpayer's position as to what "real estate rentals" were being assessed, and what relationship the Taxpayer had with the real property rentals in question. I believe that portions of Public Document 99-13 might be helpful in clarifying the issue for both the City and the Taxpayer, and am enclosing a copy of that document for your reference. Absent more specific facts, I cannot reach a determination on this particular issue. The determinative question would be, is the Taxpayer a lessor of real property which it owns, and therefore would be exempt from the BPOL tax, or is it functioning as a business service, in which case it might be liable for a license tax on the separate, but ancillary business.
Conclusion
The Taxpayer has shown sufficient proof that the assessment made by the locality for license tax years 1995-1998 is subject to reconsideration. Therefore, it is my recommendation that the appeal be returned to the City for a reconsideration of its final local determination, and that the City review the new evidence presented by the Taxpayer in its appeal of August 11, 1999. The issues pertaining to the use of crane operators as part of the contractor's license, the Taxpayer's contention of the retail merchants license, and the rental income, both real property and tangible personal property, should be reviewed. After the City reconsiders its determination and issues a new final determination regarding the BPOL tax appeal, the Taxpayer may consider this in the same light as the earlier final local determination.
The issues regarding the appeal of tangible personal property tax assessments, if not agreed to by the City's Commissioner of the Revenue and the Taxpayer, may be appealed to the circuit court within three years from the last day of the tax year for which any such assessment is made, or within one year from the from the date of the assessment, whichever is later. Code of Virginia § 58.1-3984.
I hope this letter has been helpful. 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/24466H
Rulings of the Tax Commissioner