Tax Type
BPOL Tax
Description
Timeshare Condominiums
Topic
Collection of Tax
Local Power to Tax
Local Taxes Discussion
Property Subject to Tax
Date Issued
03-13-2000
March 13, 2000
Re: Taxpayer:
Locality Assessing Tax:
Final State Determination
Appeal of 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 your client, ******** (the "Taxpayer"). The assessment contested was made by the Commissioner of the Revenue of the ******** (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 § 58.1-3703.1(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 states that it is a non-stock corporation organized to administer the operation of a timeshare condominium. Although most of the timeshare unit weeks are owner-occupied, some of the unit weeks are leased to third parties by their owners. In addition, some of the unit weeks have been acquired by the Taxpayer through foreclosure and are leased to third parties.
The Taxpayer collects fees from the unit-week owners for managing and maintaining the individual units and the common areas. The Taxpayer also receives income from renting the unit weeks that it owns to third parties and from acting as a rental agent for other unit-week owners who rent their unit weeks to third parties. The Taxpayer also receives miscellaneous income from other activities.
The Taxpayer uses these funds to pay the costs of managing and maintaining the facility, including employee salaries and wages, repairs and maintenance, taxes, insurance premiums and utilities.
The Taxpayer, which is not recognized as a nonprofit organization for income tax purposes, files a Form 1120 U.S. Corporate Income Tax Return and has historically obtained a business license from the City. On its business license applications, the Taxpayer excludes most of its income, other than income from rental activities, from its taxable gross receipts. As a result of an audit, the City has disallowed this exclusion and assessed additional license taxes for license years 1995, 1996 and 1997.
The Taxpayer contends that the exclusion is appropriate as it is not acting as a business with respect to its receipt of the excluded income. The Taxpayer filed this appeal when its arguments were rejected by the City.
ANALYSIS
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- Section 1 of the 2000 BPOL Guidelines defines "gross receipts" to be:
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- the whole, entire, total receipts, of money or other consideration received by the taxpayer as a result of transactions with others besides himself and which are derived from the exercise of a licensed privilege to engage in a business . . . without deduction or exclusion except as provided by law.
Although certain monies received by an agent are not included in the agent's gross receipts, a business may not exclude monies received from its customer that are attributable to costs incurred by the business with others who have no contractual relationship with the customer. Alexandria v. Morrison-Williams Associates, Inc., 223 Va. 349 (1982).
CONCLUSION
The facts presented are not sufficient to determine whether the expenses to which the receipts were applied were incurred by the Taxpayer or by the unit owners.
Accordingly, I am returning this matter to the City for a redetermination regarding this issue consistent with this opinion. As I am not aware of any other provision of law that would authorize the Taxpayer to exclude its gross receipts, it is my determination that the license years 1995, 1996 and 1997 assessments are otherwise correct. The Taxpayer may appeal the City's redetermination regarding the agency issue to the department within 90 days of the redetermination. 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/22553D
Rulings of the Tax Commissioner