Document Number
00-3
Tax Type
BPOL Tax
Local Taxes
Description
2000 BPOL Guidelines
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
01-01-2000
January 1, 2000


Enclosed are the 2000 BPOL Guidelines for the Business, Professional, and Occupational License (BPOL) Tax. Legislation enacted by the General Assembly in 1996 directed that the BPOL Guidelines be updated triennially to provide a current interpretation of Code of Virginia § 58.1-3700 et seq. This edition incorporates the statutory and administrative changes that have occurred since the 1997 Guidelines were issued.

These BPOL Guidelines are required by Code of Virginia § 58.1-3701 for use by local governments in administering the BPOL tax. After July 1, 2001, the Guidelines will be subject to the Administrative Process Act and accorded the weight of a regulation under Code of Virginia § 58.1-205.

I would like to thank members of the business community, local government representatives and other interested parties who participated in the updating of these Guidelines. Comments and suggestions from these individuals played a vital role in their publication.

l look forward to our working together as we continue our progress in achieving the goal of uniform application of the Business, Professional, and Occupational License Tax in Virginia.


Sincerely,



Danny M. Payne,
Tax Commissioner


TABLE OF CONTENTS

INTRODUCTION: A BRIEF HISTORY OF THE BPOL TAX iii

CHAPTER 1. DEFINITIONS. 1

CHAPTER 2: STRUCTURE OF THE TAX 4

    • § 2.1. AUTHORITY TO IMPOSE LICENSE TAX. 4
      § 2.2. ACTIVITIES SUBJECT TO LICENSE TAXATION 5
      § 2.3. EXEMPTIONS FROM THE BPOL TAX. 5
      § 2.4. GROSS RECEIPTS 6
      § 2.5. EXCLUSIONS FROM GROSS RECEIPTS. 7
      § 2.6. DEDUCTIONS FROM GROSS RECEIPTS. 8
      § 2.7. OTHER EXCLUSIONS AND DEDUCTIONS FROM GROSS RECEIPTS 9
      § 2.8. RATES AND FEES. 11
      § 2.9. MULTIPLE BUSINESSES 12
      § 2.10. MULTIPLE LOCATIONS 16
      §2.11. EMPLOYEES. 17
      §2.12. INDEPENDENT CONTRACTORS. 17
      §2.13. NAICS CODES 17

CHAPTER 3: SITUS RULES 18

    • §3.1. SITUS OF GROSS RECEIPTS. 18
      §3.2. SITUS OF GROSS RECEIPTS FOR A CONTRACTOR. 18
      §3.3. SITUS OF GROSS RECEIPTS FOR A RETAILER 19
      §3.4. SITUS OF PURCHASES FOR WHOLESALER 20
      §3.5. SITUS OF A BUSINESS RENTING TANGIBLE PERSONAL PROPERTY. 22
      §3.6. SITUS OF A BUSINESS PERFORMING SERVICES. 22

CHAPTER 4: APPORTIONMENT 25

CHAPTER 5: CLASSIFICATION ISSUES 27

    • §5.1. CONTRACTORS 27
      §5.2. RETAIL SALES. 29
      §5.3. WHOLESALE SALES. 31
      §5.4. FINANCIAL, REAL ESTATE AND PROFESSIONAL SERVICES. 34
      §5.5. REPAIR, PERSONAL, BUSINESS AND OTHER SERVICES; OTHER BUSINESSES. 39
      §5.6. COMMISSION MERCHANTS 41

CHAPTER 6: COMPLIANCE ISSUES. 42

    • §6.1. DUE DATES. 42
      §6.2. INTEREST AND PENALTIES 42
      §6.3. ASSESSMENTS: LIMITATIONS AND EXTENSIONS. 44
      §6.4. LIMITATIONS ON COLLECTION 45
      §6.5. RECORD-KEEPING AND AUDITS. 45
      §6.6. CONSISTENT REPORTING AND COORDINATED ENFORCEMENT 46
      §6.7. LOCALITY TAX YEAR 47
      §6.8. TAXPAYER'S REQUEST FOR A WRITTEN RULING. 48

CHAPTER 7: ADMINISTRATIVE APPEALS. 49

    • § 7.1. INTRODUCTION. 49
      § 7.2. ADMINISTRATIVE REVIEW PROCESS. 49
      § 7.3. APPLICABILITY OF GUIDELINES. 53
      § 7.4. DEFINITIONS. 53
      § 7.5. CALCULATION OF DAYS IN FILING REQUIREMENTS. 55
      § 7.6. SUSPENSION AND COMMENCEMENT/RESUMPTION OF COLLECTION
        • ACTIVITY. 55
      § 7.7. INTEREST DURING APPEAL. 56
      § 7.8. APPLICATION FOR REVIEW - LOCAL ASSESSING OFFICER. 56
      § 7.9. APPEAL TO THE TAX COMMISSIONER. 57
      §7.10. APPEAL TO THE CIRCUIT COURT. 62
      §7.11. COMMISSIONER'S ADVISORY AND INTERPRETATIVE POWERS. 62

APPENDIX A: AFFILIATED GROUPS 64

APPENDIX B: MANUFACTURING 69

APPENDIX C: HISTORY OF BPOL TAX 73

APPENDIX D: MISCELLANEOUS ITEMS 77
    • CERTAIN LOCALITIES NOT SUBJECT TO RATE LIMITATIONS 77
      NONPROFIT ORGANIZATIONS 77

APPENDIX E: PUBLIC DOCUMENTS 79

APPENDIX F: ATTORNEY GENERAL OPINIONS 82

APPENDIX G: ADVISORY OPINION REQUEST FORM 90







INTRODUCTION: A BRIEF HISTORY OF THE BPOL TAX

The Business, Professional and Occupational License Tax is a local option tax on the privilege of doing business within a locality. It has evolved over time from a state license tax to a local license fee or a gross receipts tax. For purposes of an introduction to the 2000 BPOL Guidelines, a brief history of recent changes in the structure of the BPOL tax is summarized here. A more detailed summary of the legislative and administrative history of the tax can be found in Appendix C.

The General Assembly amended the statute in 1964 to eliminate the language restricting local licenses to instances in which a state license was required, permitting counties and those cities and towns without general tax powers in their charters, to impose a license tax regardless of whether the state taxed the particular business. After seeking the counsel of local officials and interested groups and holding public hearings, the original Guidelines were published and dated January 1, 1979. The Department of Taxation updated the Guidelines effective January 1, 1980, July 1, 1984, and again on July 1, 1995.

In 1996, Code of Virginia §58.1-3700 et seq. was significantly amended. The intent of the 1996 amendments and the new Guidelines was to help ensure a more uniform local administration of BPOL taxes. Although an update of the Guidelines was not required until 1998, the scope of the changes in the 1996 statutory amendments necessitated that they be modified to reflect these changes. The revised Guidelines were issued on January 1, 1997.

Code of Virginia §58.1-3703.1 establishes uniform ordinance provisions. Localities levying a BPOL tax must include provisions in their local ordinances substantially similar to the uniform ordinance provisions. The uniform ordinance provisions include: due dates for BPOL license applications and license tax payments; penalty and interest provisions; waiver provisions for penalty and interest; taxpayer appeal procedures at the local and state level; rules for determining the situs and apportionment of gross receipts; and provisions allowing taxpayers and commissioners of the revenue to receive advisory opinions from the Tax Commissioner in addition to allowing taxpayers to obtain advance rulings from their local commissioners of the revenue.

The 2000 BPOL Guidelines are issued pursuant to Code of Virginia §58.1-3701 and are effective January 1, 2000. After July 1, 2001, the Guidelines will be subject to the Administrative Process Act and accorded the weight of a regulation under Code of Virginia §58.1-205. The Guidelines will be followed by the Department of Taxation in deciding all appeals under Code of Virginia §58.1-3703.1 (A)(5)(c) and in issuing advisory written opinions pursuant to Code of Virginia §58.1-3701. The department reserves the right to modify the Guidelines to reflect changes in interpretations, judicial opinions, and the law. Any changes to the Guidelines will be made consistent with Code of Virginia §58.1 -3700 et seq. which requires the Department to seek public comment. The Guidelines have been updated to reflect statutory and administrative changes and to be more user friendly. All references in the 2000 BPOL Guidelines are based on the 1997 BPOL Guidelines and Chapter 37 of the Code of Virginia unless otherwise noted.

Numerous examples and charts have been provided to aid local assessing officers and taxpayers in understanding and applying the BPOL law and its new provisions. The examples contained in these Guidelines are for illustrative purposes only. Requests for opinions often present unique factual circumstances, so the resulting analysis and conclusions will not necessarily be the same as that in the examples. Nevertheless, as a general rule, the examples are a useful tool in determining how Chapter 37 and the Guidelines should be interpreted.

The appendices have been expanded to assist in the interpretation of several provisions in the statute. They include an updated topical outline of Public Documents, an updated list of the Opinions of the Attorney General, and a standard form to use in preparing requests for advisory opinions. To further assist Guidelines users, the Department has prepared editorial comments containing cross references, annotations and other comments. The appendices and comments are subject to periodic updates.

CHAPTER 1: Definitions.

Unless otherwise required by the context, the following words and terms shall have the following meanings:

"Affiliated group" means a group of two or more corporations or chains of corporations. (See Appendix A for discussion and examples of Affiliated Groups.)

"Ancillary" means subordinate to, subservient to, auxiliary to, or in aid of, that which is principal and primary.

"Unlike a business that is engaged in two separate trades, one of which is exempt and one of which is not, . . . [the] non-manufacturing activities are ancillary to its primary business of manufacturing" and exempt from tax. County of Chesterfield v.BBC Brown Boveri, 238 Va. 64 (1989.) The court in BBC Brown Boveri implied that an ancillary activity would be one that is an integral part of another activity. 238 Va. 64, 70. Subordinate, subservient, auxiliary or in aid of indicate that an ancillary activity would be one that is at least in some way related to, but not independent of, the primary activity.
1994 Op. Va. Att'y Gen. 99 (If company's engineering services are ancillary and subordinate to other nonprofessional business services, and, further, if the latter are a substantial component of its business, the commissioner should disregard the professional services and tax the entire gross receipts at the lower rate.)

Apportionment means the division of the volume of business done between taxing jurisdictions within which the business income or purchases are generated.

"Assessment" means a determination as to the proper rate of tax, the measure to which the tax rate is applied, and ultimately the amount of tax, including additional or omitted tax, that is due. An assessment shall include a written assessment made pursuant to notice by the assessing official or a self-assessment made by a taxpayer upon the filing of a return. (For a more complete description, please see Chapter 6 where assessments are discussed.)

Audit means an examination of records, financial statements, books of accounts and other information to determine the correctness of a local license tax. (See Chapter 7 for a more detailed description of what does and does not constitute an audit.

"Base year" means the calendar year preceding the license year, except for contractors subject to the provisions of §58.1-3715. The local ordinance may provide for a different period for measuring the gross receipts of a business in the following situations: 1) for beginning businesses; or 2) to allow an option to use the same fiscal year as for federal income tax purposes.

"Business" means a course of dealing which requires the time, attention and labor of the person so engaged for the purpose of earning a livelihood or profit. It implies a continuous and regular course of dealing, rather than an irregular or isolated transaction. A person may be engaged in more than one business. If a person 1) advertises or otherwise holds himself out to the public as being engaged in a particular business; or 2) files tax returns, schedules and documents that are required only of persons engaged in a trade or business, he is presumed to be engaged in business. However, a person may present evidence to overcome this presumption.

"Definite place of business" means an office or a location at which occurs a regular and continuous course of dealing where one holds one's self out or avails one's self to the public for thirty consecutive days or more, exclusive of holidays and weekends. A definite place of business for a person engaged in business may include a location leased or otherwise obtained from another person on a temporary or seasonal basis and real property leased to another. A person's residence shall be deemed to be a definite place of business if there is no definite place of business maintained elsewhere and the person is not subject to licensure as a peddler or itinerant merchant.

"Financial services" means the buying, selling, handling, managing, and investing money, credit, securities, or other investments for others, as well as providing advice to others on such matters.

"Gross receipts" means 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 the licensed privilege to engage in a business or profession in the ordinary course of business, without deduction or exclusion except as provided by law. See §§2.5 and 2.7 for examples of items excluded from the definition of gross receipts.
Comment: Source: Derived from the new Uniform Ordinance provisions definition of "gross receipts," which is limited to those receipts received from the exercise of the licensed privilege in the ordinary course of business. There are restrictions on taxing specific types of gross receipts, e.g., sales between affiliated corporations pursuant to §58.1-3703(C)(10). See also exclusions from gross receipts listed in §§ 58.1-3732, 58.1-3732.1, 58.1-3732.2, and 58.1-3734.1.
    Alexandria v. Morrison-Williams, 223 Va. 349 (1982) (An advertising agency which charged its clients a commission on media charges was taxable on total receipts from clients without deduction for the media charges.)
      Savage v. Commonwealth, 186 Va. 1012 (1947) (Gross receipts mean the whole, entire total receipts.)
        1992 Op. Va. Att'y Gen. 162 ("gross receipts" typically include the total amount of money or the value of other consideration received from selling property or from performing services; proceeds from insurance policy on the life of a deceased executive are not taxable gross receipts because they are not attributable to the operation of a business.)

        1984-1985 Op. Va. Att'y Gen. 346 (fees for corporate directorship not taxable unless it is the person's business, trade, profession, occupation or calling.)
        "License year" means the calendar year for which a license is issued for the privilege of engaging in business.

        "Professional services" means services performed by those practicing the professions as listed in Chapter 5, § 5.4. The word "profession" implies attainments in professional knowledge as distinguished from mere skill, and the application of knowledge to uses for others rather than for personal profit.

        "Purchases" means all goods, wares and merchandise received for sale at each definite place of business of a wholesale merchant. (See Chapter 5 for the application of purchases to the classification of wholesale merchants.)

        "Real estate services" means providing a service for others with respect to the purchase, sale, lease, rental, or appraisal of real property.

        "Retail sale" means a sale of goods, wares and merchandise for use or consumption by the purchaser or for any purpose other than resale by the purchaser, but does not include sales at wholesale to institutional, commercial, industrial, and governmental users which are classified as wholesale sales.

        Sales solicitation is the act or acts directly related to selling particular items or goods to a particular person. See § 3.3 for a discussion of situs of gross receipts of retailers and wholesalers (for wholesalers taxable on purchases, see § 3.4). Sales solicitation does not include non-solicitation activities prior or subsequent to sales solicitation activities.

        "Services" mean things purchased by a customer which do not have physical characteristics, or which are not goods, wares, or merchandise. Specific types of services are defined further in the BPOL law. See, for example, the definitions of financial services and professional services in § 58.1-3700.1.

        Situs of gross receipts means the definite place of business that generated taxable gross receipts. If activities are conducted outside a definite place of business, gross receipts are taxable at the definite place of business where these activities are initiated, controlled or directed. (See Chapter 3 for detailed explanation.)

        Tax Year means the same as license year, or the calendar year in which a license is issued.

        "Wholesale sale" means a sale of goods, wares and merchandise for resale by the purchaser, including sales when the goods, wares and merchandise will be incorporated into goods for sale, and also includes sales to institutional, commercial, industrial, and governmental users which because of the facts and circumstances surrounding the sales, such as the quantity, price, or other terms, indicate that they are consistent with sales at wholesale.
        CHAPTER 2: STRUCTURE OF THE TAX

        § 2.1. AUTHORITY TO IMPOSE LICENSE TAX.

        Code of Virginia § 58.1-3703 authorizes localities to enact an ordinance levying a local license (BPOL) tax and/or a fee for issuing a license. Every ordinance adopted or maintained by a locality which levies a license tax is required to be substantially similar to the provisions in § 58.1-3703.1. Further, §§ 58.1-3703 and 58.1-3706 set statutory maximums for license rates and fees. Localities may choose not to require a license or impose fees, or localities may assess rates and fees which are less than the maximums stated in the statute. [Code of Virginia § 58.1-3704 provides that no locality shall be required to impose either a license tax on merchants or a tax on the capital of merchants]. Localities may levy license taxes at rates above the statutory maximum only if subject to the rollback provisions of § 58.1-3706 B. [See Appendix D for a discussion of these localities.] While localities must follow the exemptions, rates, classifications and thresholds as set forth in Chapter 37 (§ 58.1-3700 et seq.) of Title 58.1 of the Code of Virginia, their local ordinances may:

        A. Set tax rates at levels lower than those authorized by state law, or select the classifications to tax or not tax;

        B. Establish subclassifications within the classifications set out in state law and provide for different rates or exemptions for such subclassifications, as long as no rate exceeds the maximum permitted by state law;

        C. Establish graduated tax rates for any classification or subclassification so that the rate increases or decreases with volume, as long as no rate exceeds the statutory maximum for the classification under state law; and

        D. Establish a threshold amount of gross receipts below which no tax will be imposed, or a maximum tax for any classification.

        Localities may establish classifications and subclassifications based upon reasonable distinctions in municipal policy, and through the establishment of classifications and sub-classifications, localities may choose to exempt certain categories of taxpayers.
        Chesterfield Cablevision v. Chesterfield County, 241 Va. 252 (1991) (Unless suspect classification involved, a locality may constitutionally treat different subjects differently for tax purposes if 1) the difference is real, 2) the distinction has some relevance to the local governing purpose, and 3) the differing treatments are not so disparate, relative to the difference in classification, as to be wholly arbitrary.)
          See, also: 1987-1988 Op. Va. Att'y Gen. 515 (A locality may set lower rate for itinerant merchant participants in a sponsored community event, and establish a classification permitting a sponsor of a community event to obtain one "umbrella" license on behalf of all the itinerant merchant participants.)
          1989 Op. Va. Att'y Gen. 308 (A locality may exempt purchase of farm products for resale, but exemption of purchasers or sellers may not be based on residence.)
          1984-1985 Op. Va. Att'y Gen. 351 (A locality may establish subclassifications and tax them at different rates, exempt them, or exempt specified types of gross receipts provided that the discrimination is based on a reasonable municipal policy and not arbitrary.)
          1981-1982 Op. Va. Att'y Gen. 366 (A town may enact ordinance with single rate as long as it is below the lowest rate for any class, and sufficiently certain, clear and unambiguous as to the types of businesses taxed.)


          § 2.2. ACTIVITIES SUBJECT TO LICENSE TAXATION

          Where a Virginia locality has adopted a BPOL ordinance which requires a license, every person engaged in a licensable activity at a definite place of business in such locality must apply for a license. [Where a locality has adopted a BPOL ordinance requiring a license, a license is also required if a person has no definite place of business in a particular locality in Virginia but the person operates amusement machines in a locality or is classified as an itinerant merchant, peddler, carnival, circus, contractor subject to § 58.1-3715, or a public service corporation as defined in § 58.1-3731. ] Whether or not a particular activity is in fact subject to license taxation depends upon the local ordinance. What constitutes a definite place of business is discussed in Chapter 1: Definitions, above. See Uniform Ordinance provisions, Code of Virginia § 58.1-3703.1.


          § 2.3. EXEMPTIONS FROM THE BPOL TAX.

          Code of Virginia § 58.1-3703(C) prohibits local taxation of certain privileges which would otherwise be taxable. Those privileges are detailed in § 58.1-3703(C). Localities may not impose a license tax or fee on certain persons and privileges which include, but are not limited to, the following: [See also, e.g., Code of Virginia §§ 58.1-3703 B, 58.1-3712 through 58.1-3713.4, 58.1-3717 through 58.1-3721, and 58.1-3724 through 58.1-3730, which discuss specific types of businesses which are exempt from the local license tax. See also §§ 58.1-3714, 58.1-3715, and 58.1-3716. Also § 58.1-3731 discusses BPOL taxes on specific types of public service companies.]

          certain public service corporations and motor carriers, common carriers, and other carriers of passengers or property formerly certified by the Interstate Commerce Commission or presently registered for insurance purposes with the Surface Transportation Board of the United States Department of Transportation, Federal Highway Administration;

          the privilege of selling farm or domestic products or nursery products, or the planting of nursery products, as an incident to the sale thereof, outside of the regular market houses and sheds of such county, city or town, provided such products are grown or produced by the person offering them for sale;

          the privilege of printing or publishing any newspaper, magazine, newsletter or other publication issued daily or regularly at average intervals not exceeding three months, provided the publication's subscription sales are exempt from state sales tax, or the privilege or right of operating or conducting any radio or television broadcasting station or service;
          manufacturers for the privilege of manufacturing and selling goods, wares and merchandise at wholesale at the place of manufacture;

          persons severing minerals from the earth for the privilege of selling the severed mineral at wholesale at the place of severance, except as provided in §§ 58.1-3712 and 58.1-3713;

          a wholesaler for the privilege of selling goods, wares and merchandise to other persons for resale unless such wholesaler has a definite place of business or store in such county, city or town;

          the privilege of renting, as the owner of such property, real property (except in certain grand fathered localities) other than hotels, motels, motor lodges, auto courts, tourist courts, travel trailer parks, lodging houses, rooming houses and boardinghouses;

          certain transactions of a corporation which is a member of an affiliated group of corporations with other members of the same affiliated group (See Appendix A);

          any insurance company subject to taxation under § 58.1-2500 et seq. or on any agent of such company;

          any bank or trust company subject to taxation under §58.1-1200 et seq.;

          certain nonprofit organizations; (See Appendix D for a discussion of nonprofit organizations); and

          any venture capital fund or other investment fund, except commissions and fees of such funds.


          § 2.4. GROSS RECEIPTS

          The definition of gross receipts is discussed above in Chapter 1. Definitions. Income that is not derived from the exercise of the privilege for which the taxpayer is licensed by the locality do not constitute gross receipts for purposes of BPOL taxation. Activities of a taxpayer which serve only the taxpayer's interest, and no other, do not give rise to gross receipts. Other exclusions and deductions from gross receipts are discussed below.

          § 2.5. EXCLUSIONS FROM GROSS RECEIPTS.

          Generally, gross receipts for license tax purposes exclude any amount not derived from the exercise of the licensed privilege to engage in a business or profession in the ordinary course of business. [Code of Virginia § 58.1-3732.3 provides an exclusion for certain gross receipts of providers of funeral services. Code of Virginia § 58.1-3732.3 provides an exclusion for certain gross receipts of certain staffing firms.] The following is a partial list for illustrative purposes:

          amounts received and paid to the United States, the Commonwealth or any county, city or town for the Virginia retail sales or use tax, for any local sales tax or any local excise tax on cigarettes, for any federal or state excise taxes on motor fuels;

          amounts representing the liquidation of debt or the sale of a capital asset;

          amounts allowed by a business to its customers for returns and allowances;

          receipt of loan proceeds by a licensee where it is the obligor;

          return of principal either on a loan to a licensee-creditor or where a licensee sells a capital asset;

          rebates or discounts taken or received on account of purchases by the licensee;

          certain withdrawals from inventory; or,

          investment income not directly related to an entity's exercise of its licensed privilege, unless the
          entity's licensable activity is that of financial services.

          Examples:

          1. A lawyer is advanced funds by his client to pay court filing fees and the cost of a court reporter. He also receives payment from City A on account of a refund of excess taxes paid by his client. With his client's permission, lawyer deducts from the tax refund the cost of his services for handling the tax case, including telephone tolls, meals, copying and certain other charges the client has agreed to reimburse. The lawyer is taxable on the amount of his fee including any amount separately billed to the client. Amounts advanced to pay expenses on the client's behalf are not gross receipts, nor is the amount of the tax refund because it is received by the lawyer as the client's agent. Trust fund receipts, technically speaking, are not derived from the exercise of a licensable privilege; therefore, trust fund receipts do not constitute gross receipts.

          2. A lawyer handles a real estate closing for a real estate developer and receives the sale proceeds, net after costs withheld by the purchaser's attorney. He mails the proceeds, net of his fee, to the real estate developer. The lawyer is taxable only on his fee, and not on the full sales proceeds of the transaction. The developer is taxable on the whole of the proceeds of the transaction, including the fee withheld by the attorney.

          3. Corp. C, in County D, Virginia purchases a portfolio of loans for its own account. So long as the corporation's activities in the locality are limited to purchasing and holding portfolios for its own account, there is no tax.

          4. Same facts as above except that Corp. C sells interests in its investment pools through public offerings. There is no tax. Proceeds attributable to capital transactions in the nature of raising capital in the equity markets are not subject to BPOL tax.


          § 2.6. DEDUCTIONS FROM GROSS RECEIPTS.

          The following shall be deducted from gross receipts:

          any amount paid for computer hardware or software sold to the U.S. or a state government provided certain holding and contractual requirements are met; and,

          any receipts attributable to a business conducted in another state or foreign country in which the taxpayer is liable for an income or other tax based upon income. A Virginia taxpayer is liable for an income or other tax based upon income if the taxpayer files a return for an income or income-like tax in that state or foreign country. The Virginia taxpayer, however, need not actually pay any tax to take the deduction.

          Examples:

          1. Merchant sells goods to a North Carolina resident and ships the goods to him in that state. Gross receipts from the sale of the goods are attributable to a definite place of business in Virginia. North Carolina imposes an income tax and Merchant files a North Carolina income tax return. Merchant reports sales delivered to customers in North Carolina in the numerator of its sales factor for North Carolina income tax apportionment purposes. Gross receipts from sales delivered in North Carolina are deductible from Merchant's Virginia BPOL taxable gross receipts (or the cost of the purchases are deductible from the tax base if the merchant is taxable on purchases.)

          2. Same facts as above except that sales are delivered to a customer in Ohio. In Ohio, Merchant pays either a tax based on income or based on net worth, whichever is greater. Merchant files the appropriate Ohio tax return. Gross receipts (or the cost of purchases if Merchant is taxable on purchases) from sales delivered in Ohio are deductible from Merchant's Virginia BPOL taxable gross receipts. Receipts attributed to business conducted in another state or foreign country in which the taxpayer is liable for an income or an income based tax are deductible from Virginia BPOL taxable gross receipts, if such receipts are also attributable to a definite place of business in Virginia.

          3. Same facts as above except that sales are made to a customer in Nevada. Nevada imposes no income tax or other tax based upon income. Merchant does not file a return or perform any other actions to pay an income or income-based tax. For gross receipts relating to business conducted in another state or foreign country to be deductible from Merchant's Virginia BPOL taxable gross receipts, Merchant must be liable for an income or other tax based upon income. To be liable for an income or income-like tax, Merchant must file a tax return for an income or income like tax in the state or foreign country. Merchant is not entitled to a deduction as it did not file a return for an income or income based tax in Nevada.

          Derived from amendment to the Uniform Ordinance provisions at § 58.1-3732, limiting receipts to those derived from the exercise of the licensed privilege in the ordinary course of business and providing a deduction from gross receipts for certain amounts paid for computer hardware or software and also in certain instances where taxpayer required to pay income tax to another jurisdiction on gross receipts attributable there.
          Monument Associates v. Arlington County Board, 242 Va. 145 (1991). (A taxpayer who used accrual method for federal income tax must also use accrual method for BPOL receipts when ordinance required that same method be used for both).
          Alexandria v. Morrison-Williams, 223 Va. 349 (1982). (An advertising agency which charged its clients a commission on media charges, was taxable on total receipts from clients without deduction for the media charges.)
          1992 Op. Va. Att'y Gen. 162 ("Gross receipts" typically include the total amount of money or the value of other consideration received from selling property or from performing services; proceeds from insurance policy on the life of a deceased executive are not taxable gross receipts because they are not attributable to the operation of a business.)
          1984-1985 Op. Va. Att'y Gen. 346 (Fees for corporate directorship are not taxable unless it is the person's business, trade, profession, occupation or calling.)


          • § 2.7. OTHER EXCLUSIONS AND DEDUCTIONS FROM GROSS RECEIPTS.

            Examples of items deemed not to be receipts derived from the licensable business include, but are not limited to, the following:
                • A. Certain adjustments which may be required by reason of the accounting method or system or otherwise to reflect events subsequent to the sale, such as the return of merchandise for credit or refund. If the local ordinance requires gross receipts to be reported using the same method of accounting as used for federal income tax purposes, and the accrual method is used, sales will often be accrued, reported and taxed before actual payment is received. Adjustments may then be required to prevent the taxation of items accrued but never received.
              For example:
                    • 1. A business may record a customer's exchange of merchandise as a refund and new sale. If so, the refund of the previously taxed sale would be deductible because there would have been only one sale the first sale would have been rescinded when the refund/exchange was made.
                    • 2. A business that offers customers a discount for volume purchases, prompt payment, or other reason, may record the sale at full value and deduct the discount at the time of payment. If so, the discount from the previously taxed full sales price would be deductible from gross receipts since the amount was not and never will be received.
                    • 3. A business that makes sales on credit may accrue the full sales price and set up a receivable account for the installment payment or revolving charge account agreement. If the business subsequently determines that all or a portion of the receivable is worthless, entitling the business to a bad debt deduction for federal income tax purposes, the portion of the previously taxed sale which is determined to be worthless would be deductible because it was not received. The subsequent collection of a debt deducted from gross receipts as worthless would be includible in gross receipts when received, and considered ancillary to the business activity that created the debt.
                    • 4. A business that reports its receipts on the cash method of accounting would include all customer payments on installment contracts and revolving charge accounts when received since none of the receipts would be attributable to previously taxed sales.
                • B. The borrower's receipt of the proceeds of a loan transaction are not gross receipts arising from the exercise of a licensable privilege in the ordinary course of business even if the business regularly obtains money, goods or services on credit.

                • C. A business which lends money in the regular course of business may receive interest, points, origination fees, and other fees in connection with the loan transaction, all of which would be gross receipts derived from the licensable business. Customer payments to a lender which represent the return of principal on a loan are not gross receipts arising from the exercise of a licensable privilege in the ordinary course of a money lending business. As described in paragraph A above, the treatment of return of principal on the loans, installment contracts and the accounts receivable of other types of businesses may depend on the nature of the transaction in which the debt was created and the method of accounting used.

                • D. Patronage dividends, to the extent they represent a reduction in purchase price to a co-operative member.

              § 2.8. RATES AND FEES.

              The Uniform Ordinance provisions establish two thresholds; one for license fees and another for license taxes. The following chart gives an overview of the thresholds application to the exemption based on gross receipts and the limitation on the license fee based on a locality's population:

              PopulationMaximum License Fee amountGross receipts threshold amounts [License tax $0 if threshold is not met. Some localities may be grand fathered with respect to applicable license tax rates once thresholds have been met. See Appendix D.]
              0-24,999$30No dollar threshold amount
              25,000-50,000$50 $50,000
              50,001+$50 [Formerly $100, fee to be reduced not to exceed $50 by January 1, 2000.] [Additionally, Code of Virginia § 58.1-3703.1 (A)(1) provides that any locality with a population greater than 50,000 may waive the license requirements provided for in that section for businesses with gross receipts of less than $100,000.00.]$100,000

                • The thresholds indicate that, except as specifically provided in § 58.1-3706 and except for the fee authorized in § 58.1-3703, no local license tax imposed pursuant to the provisions of Chapter 37 of Title 58.1 of the Code of Virginia, except those specified in §§ 58.1-3712, 58.1-3712.1 and 58.1-3713, or any other provision of Title 58.1 or any charter, shall be imposed on any person whose gross receipts from a business, profession or occupation subject to licensure are less than:

                  (i) $100,000 in any locality with a population greater than 50,000; or,

                  (ii) $50,000 in any locality with a population of 25,000 but no more than 50,000.

                  Any business with gross receipts of more than $100,000, or $50,000, as applicable, may be subject to the tax at a rate not to exceed the rate set forth below for the classifications listed:
                    • 1. For contracting, and persons constructing for their own account for sale, sixteen cents per $100 of gross receipts;
                    • 2. For retail sales, twenty cents per $100 of gross receipts;
                    • 3. For financial, real estate and professional services, fifty-eight cents per $100 of gross receipts; and

                      4. For repair, personal and business services, and all other businesses and occupations not specifically listed or excepted in § 58.1-3706, thirty-six cents per $100 of gross receipts. [It is within the discretion of localities to impose flat license taxes, in addition to or in lieu of the license fee, however, a locality cannot fashion a flat tax which violates the threshold or the rate caps set in Code of Virginia §58.1-3706. ]
                  Additionally, Code of Virginia § 58.1-3703 (A) provides that no license tax may be assessed on any amount of gross receipts of a business upon which a license fee is charged.

                  The above tax rates and rate thresholds for license taxes as indicated in § 58.1-3706 do not apply to those items regarding taxation on the severance of coal, gas or oil as specified in §§ 58.1-3712, 58.1-3712.1 and 58.1-3713, or any other provision in Chapter 37 of Title 58.1 where a special taxing provision exists; for example, those taxes assessed upon the following taxpayers: (i) wholesalers, governed by § 58.1-3716; (ii) public service companies, which shall be governed by § 58.1-3731; (iii) carnivals, circuses and speedways, which shall be governed by § 58.1-3728; (iv) fortune-tellers, which shall be governed by § 58.1-3726; (v) massage parlors; (vi) itinerant merchants or peddlers, which shall be governed by § 58.1-3717; (vii) permanent coliseums, arenas, or auditoriums having a maximum capacity in excess of 10,000 persons and open to the public, which shall be governed by § 58.1-3729; (viii) savings institutions, and credit unions, which shall be governed by § 58.1-3730; (ix) photographers, which shall be governed by § 58.1-3727; and (x) direct sellers, which shall be governed by § 58.1-3719.1.

                  The above rate limitations and thresholds regarding license taxes do not apply to the license fee, authorized in § 58.1-3703. The license fee is subject to separate thresholds, as follows: localities with populations of less than 25,000 may assess businesses a license fee not to exceed $30.00. Localities with populations of 25,000, but less than 50,000 persons may assess businesses a license fee not to exceed $50.00. Localities with populations of more than 50,000 persons may assess businesses a license fee not to exceed $100.00. Localities with populations greater than 50,000 persons must reduce license fee to $50.00 by January 1, 2000. A locality may impose a fee for issuing a BPOL license upon all businesses for each licensable privilege in which they engage. Businesses paying a BPOL tax on other than a gross receipts basis or paying a flat BPOL tax are also subject to the license fee.


                  § 2.9. MULTIPLE BUSINESSES.

                  Multiple businesses conducted by a person at a single location are required to obtain a separate license for each business. If an entity has multiple businesses at one location with each separate business licensed, it would then count each separate licensed business for purposes of the threshold in order to trigger the BPOL tax under § 58.1-3706. For purposes of the license fee imposed under § 58.1-3703, it is within the locality's discretion whether or not to assess multiple fees for the issuance of multiple licenses where one entity exercises several licensable privileges at one location; however, every license issued carries with it a separate rate threshold.

                  Examples:
                  • 1. XYZ Co. operates a business at one location in City A at which automobiles are repaired and auto parts are sold. City A requires XYZ to obtain a retail business license and also a repair services license, charging a $100 fee for each license. XYZ Co. has two thresholds for purposes of establishing gross receipts for the applicability of the BPOL tax, one for the repair business and one for the retail business.

                    2. Same facts as above, except that XYZ Co. operates several business locations in City A at which automobiles are repaired and auto parts are sold. XYZ will be required to obtain two licenses for each location in City A and each licensable business will have a separate threshold for purposes of establishing gross receipts for the applicability of the BPOL tax.

                    3. Same facts as in Example 1 above, except that the locality chooses to charge the business only one fee for the issuance of two licenses. As above, XYZ Co. would have two thresholds for purposes of establishing gross receipts for the applicability of the BPOL tax, one for the repair business and one for the retail business.
                  A. Each such business must be clearly identifiable as a separate business and not merely activities ancillary to the primary business. An activity for which no separate charge is made is presumed to be ancillary to the activity for which a charge is made, but separately stating charges for different activities does not create a presumption that each such activity is a separate business. Gross receipts attributable to any ancillary activities are taxable as part of the primary licensable business. Gross receipts which are not ancillary to a licensable business must rise to the level of a separate business to be taxable. The following are examples of activities which may be ancillary or de minimis:

                  • 1. A merchant (retail or wholesale) offers an extended warranty with the merchandise it sells. The warranty covers parts and labor, and may include replacement of defective merchandise. Although a separate charge is made for the warranty, at the time of sale it is impossible to determine how much of the charge will be used (if any) for labor, parts, or replacement merchandise. The charge for an extended warranty is ancillary to the sale of the merchandise.

                    2. A retail merchant offers to deliver the merchandise it sells for a fee. The merchant has its own delivery trucks, but also contracts with third parties to make some of the deliveries. The fee charged to the customer varies with distance, but does not depend on whether the merchandise is delivered by the merchant or a third party. Because the delivery service is only offered with respect to merchandise sold by the merchant, the delivery charge is ancillary to the merchandising business.

                    3. A repair service must occasionally replace small, inexpensive parts. It does not separately charge for the parts. The provision of parts is ancillary to the repair service.

                    4. A firm offers repair service at numerous offices in several states. At its headquarters the firm employs lawyers and certified public accountants to assist in managing its operations. The firm also employs a real estate professional, engineer and architect to find and develop locations for new offices. None of these employees offer their services to anyone other than the firm, and the firm does not separately charge anyone for the activities of its professional employees. The activities of these employees are ancillary to the firm's repair business and do not generate gross receipts.

                    5. A retail merchant offers installment contracts in conjunction with the sale of its merchandise. Each contract provides for the payment of interest and collection costs, including attorneys fees of 20% of any delinquent amount collected by legal action.

                    (a) Interest received pursuant to the installment sales contract is ancillary to the retail sale of the merchandise.

                    (b) If the merchant employs a salaried staff attorney to collect delinquencies under the installment sales contract, any amounts collected would be ancillary to the retail sale of merchandise. (But, see § 2.7. for the impact of the cash or accrual method of accounting.)

                    B. Localities may permit, but may not require, a taxpayer to elect any of the following:
                    • 1. Multiple businesses conducted at a single location may be taxed under a single license if all are taxable at the same rate; or

                      2. Multiple businesses conducted at a single location may be taxed at the highest rate if the businesses are subject to tax at different rates; or

                      3. A single business may be issued separate licenses for its primary business and one or more ancillary activities which would be taxed at a different rate if the ancillary activities constitute a separate business.
                    C. The following are examples of multiple businesses that may be required to obtain multiple licenses:
                        • 1. When a merchant conducts both a wholesale and a retail business, the merchant is subject to the retail license tax on the retail portion of the business and subject to the wholesale license tax on the wholesale portion of the business. However, the locality may permit but not require the merchant to pay the license tax as a retailer on both the retail and wholesale portions of the business.
                        • 2. Any person engaged in repair service who sells parts as part of the repair service is engaged in a licensable service business. If the person sells parts in addition to the repair service, he is engaged in retail or wholesale sales as to the sales of the repair parts.
                        • 3. Any boardinghouse or lodging house which also furnishes or sells food or merchandise for compensation may be engaged in retail sales as to the sale of the food or merchandise.
                        • 4. An optometrist who also fills prescriptions for or fits corrective lenses and eyeglass frames in a regular course of dealing is engaged in two licensable businesses. The optometrist is rendering a professional service when examining eyes and is conducting business as a retail merchant when filling prescriptions and fitting corrective lenses and eyeglass frames.
                        • 5. Any practitioner of a profession who sells goods, wares or merchandise in connection with the practice of the profession may be engaged in making retail sales depending on the nature of the products sold and the service performed.
                        • 6. A medical doctor who engages in the sale of drugs or other merchandise as well as the practice of medicine is a merchant as to those sales. However, a medical doctor is not a merchant as to the drugs used in giving an immunization to a patient.
                        • 7. A chiropodist who sells shoes in connection with his practice is a retail merchant as to such sales.
                        • 8. An attorney practices law in Town A, Virginia, and has receipts from clients for trying cases, providing advice, lobbying, periodically teaching law at Town A Law School, the sale of stock received as a fee for incorporating a business, interest from the bank on his business accounts, and from gambling during a client- sponsored trip. Receipts from clients for trial work, legal advice, lobbying, the value of stock received as a fee in the year received are all taxable as gross receipts. Teaching law, the sale of stock as a fee, interest earned from the business accounts at the bank and gambling winnings are not taxable because the lawyer is not regularly engaged in these activities as a business and these activities are not ancillary to the practice of law. However, if some of the non-taxable activities were conducted on a regular basis as defined in the statute, they might constitute the conduct of business and be subject to separate licensure.

                  County of Chesterfield v. BBC Brown Boveri, 238 Va. 64 (1989).
                  Caffee v. City of Portsmouth, 203 Va. 928 (1962) (Bakery was held to be a manufacturer, but was subject to tax on gross receipts from retail sales showroom in front of building.)
                  1994 Op. Va. Att'y Gen. 99. (Separate business activities that could each be performed independently of the other suggest separate taxable businesses; activities so integrated as to comprise a single business are properly taxable at a single rate based on whichever constitutes the "substantial" activity, not the ancillary activities.)
                  1991 Op. Va. Att'y Gen. 258. (Contractor taxable on all receipts for a "design-build" contract even though some services, standing alone, would not be classified as contracting.)
                  1984-1985 Op. Va. Att'y Gen. 346. (Fees for corporate directorship not taxable unless it is the person's business, trade, profession, occupation or calling.)


                  § 2.10. MULTIPLE LOCATIONS.

                  The classification of a business generally depends on the nature of the goods or services offered to the customers of the business for consideration. In the case of a business which conducts different activities at multiple locations, proper classification of the business may require consideration of its activities at locations in addition to the licensed location, i.e., the overall nature of the business. For example:

                    • A. A complex product is manufactured in stages at different locations. It is undisputed that the overall process is manufacturing. However, final assembly and processing occur at a separate location and, viewed in isolation, the activities at this location may not cause sufficient transformation to be considered manufacturing. The location will be considered a "place of manufacture" for purposes of classifying the gross receipts or purchases as arising from sales at wholesale at the place of manufacture.
                    • B. A contractor maintains a staff of architects and engineers and bids on "design-build" contracts. The bids are for a lump sum and do not segregate design costs from building costs. The entire gross receipts are subject to license tax as a contractor in the locality in which the building is constructed. The design activities are ancillary to the contracting activities and the contractor will not be required to obtain a professional license for the architects and engineers.

                  Because the public policy of Virginia is to encourage manufacturing in Virginia, and the definition of manufacturing is applied liberally, County of Chesterfield v. BBC Brown Boveri, 238 Va. 64 (1989), the manufacturing exemption cannot be limited to situations in which the entire manufacturing process occurs at one location.
                  1990 Op. Va. Att'y Gen. 220. (Out-of-state manufacturer with a sales office in Virginia taxable as a wholesale merchant with respect to sales made at Virginia office since no manufacturing took place there.)
                  1991 Op. Va. Att'y Gen. 257. (A contractor is taxable on all receipts for a "design-build" contract even though some services, standing alone, would not be classified as contracting.)
                  Appeal of Titzel Engineering, Inc., 205 A. 2d. 700 (Pa. 1964). (The manufacturing process consisted of work subcontracted out but under the taxpayer's control at all times, work in the taxpayer's shop, and work by the taxpayer's employees at the customer's location.)


              § 2.11. EMPLOYEES.

              Employees are generally not engaged in a licensable business separate from that of their employer. Therefore, a license obtained by the employer generally covers the activities of any employees.


              § 2.12. INDEPENDENT CONTRACTORS.

              An independent contractor is engaged in a business separate from that of the person who contracts for the independent contractor's services.
                • A. Therefore, if one licensable business subcontracts some of its business to an independent contractor, the primary business may not deduct from its taxable gross receipts any payments to an independent contractor even though the independent contractor or subcontractor is also taxable on its gross receipts.
                • B. The determination as to whether a person is an employee or an independent contractor is based on common law principles and is affected by factors such as control, who furnishes materials, and other factors.
                • C. Localities are entitled to rely upon the classification of a person as an employee or independent contractor for federal payroll tax purposes unless the taxpayer demonstrates that the classification for federal payroll tax purposes is erroneous or inapplicable.


              § 2.13. NAICS CODES.

              The federal government publishes a manual of North American Industry Classification System (NAICS) codes. A locality may use the NAICS codes in the course of classifying a business for BPOL tax purposes; however, the NAICS code of a business does not control, or even create a presumption, as to the correct classification for BPOL purposes for the following reasons:

                • A. The NAICS codes group manufacturers and processors together, while processors are generally excluded when using the term manufacturer for BPOL tax purposes.
                • B. Only one NAICS code is assigned to an enterprise or establishment, while a separate BPOL license may be required for each identifiable business.
                • C. A classification, exemption, or deduction under state law or local ordinance may require consideration of factors not relevant to NAICS code selection.

              1983-1984 Op. Va. Att'y Gen. 372. (The use of SIC codes for retail sales tax purposes is not applicable to the
              determination of the meaning of manufacturer as used in BPOL tax law.
              CHAPTER 3: SITUS RULES

              § 3.1. SITUS OF GROSS RECEIPTS.

              Except as otherwise provided by law, situs refers to the locality in which a person subject to local license taxation for any business, profession, trade, occupation or calling has a definite place of business. If the person has a definite place of business in any other locality, then the other locality may impose a license tax on him, provided such other locality is otherwise authorized to impose a local license tax upon his business. [If a local license tax imposed by any locality is measured by volume, the volume on which the tax may be computed will be the volume attributable to all definite places of business of the business, profession, trade, occupation or calling in such locality. All volume attributable to any definite places of business of the business, profession, trade, occupation or calling in any other locality will be deductible from the base in computing any local license tax measured by volume imposed on the taxpayer by the locality in which the first-mentioned definite place is located. "Volume" means gross receipts, sales, purchases, or other base for measuring a license tax which is related to the amount of business done. The above may not be construed as prohibiting any locality from requiring a separate license for each definite place of business located in such locality. Code of Virginia § 58.1-3708.]

              When a BPOL tax is measured by gross receipts, the gross receipts included in the taxable measure are only those gross receipts attributed to the exercise of a privilege subject to licensure at a definite place of business within Virginia. Where activities are conducted outside of a definite place of business, such as during a visit to a customer location, gross receipts are attributed to the definite place of business from which such activities are initiated, directed, or controlled. The situs of gross receipts for different classifications of business are attributed to one or more definite places of business or offices as follows:


              § 3.2. SITUS OF GROSS RECEIPTS FOR A CONTRACTOR.

              Generally, under § 58.1-3703.1(A)(3)(1), the gross receipts of a contractor are attributed to the definite place of business where its services are performed. If a contractor performs services in a locality in which it does not maintain a definite place of business, then gross receipts from such services are attributed to the definite place of business where its services are initiated, controlled or directed, unless the contractor is subject to § 58.1-3715. [Prior to July 1, 1999, the provisions of Code of Virginia § 58.1-3715 did not apply to contractors with no definite place of business in Virginia.]

              A contractor is subject to § 58.1-3715 when it derives gross receipts in excess of $25,000 in one year from a Virginia locality in which it does not maintain a definite place of business. This locality may require the contractor to pay a license fee or tax. If the contractor maintains a definite place of business in a Virginia locality, the contractor may deduct the amount of business done in the locality in which it does not maintain a definite place of business from the gross revenue reported to the locality where its definite place of business is located. If gross receipts derived from the locality in which the contractor does not maintain a definite place of business do not exceed $25,000, then those receipts are attributable to the locality in which the contractor's definite place of business is located.


              For example:
                • 1. A painter is located and properly licensed in B County in Virginia. The painter is contracted to paint a large warehouse located in Town A in Virginia. The painter will receive gross receipts in excess of $25,000 for this job. The painter is subject to a license tax in Town A pursuant to § 58.1-3715. The gross receipts taxable in Town A are deductible from the gross receipts which the painter reports to County B.
                • 2. A plumber residing in City A performs plumbing work in City A, County B and Town C. The gross receipts attributable to County B and Town C are each less than $25,000 a year. The plumber keeps all tools and parts in his truck but maintains his records and business phone line in his house. The situs of gross receipts would be City A because the location of his phone line and records means that he controls his business from this locality.
                • 3. DEF, Inc., a company engaged in the business of contracting, has its principal office in City A (population 115,000), and provides contracting services in City A as well as County B (population 235,000) and Town C (population 15,000). DEF's gross receipts in City A in a year equal $125,000 and its gross receipts in County B equal $15,000 in that same year. DEF's gross receipts from Town C equal $35,000 in that same year, also. All localities herein require a license of, and also assess a BPOL tax on, contractors. DEF pays a license fee of $100 per year in City A and also pays a license fee of $30 per year in Town C.
                  • Here, DEF would report gross receipts of $175,000 to City A. However, since Town C could assess a BPOL tax on the $35,000 in gross receipts DEF generated in its locale, and if in fact it did levy such a tax upon DEF, then DEF would receive a deduction from the gross receipts it reports to City A for its BPOL tax in the amount of the business done in Town C. However, DEF would not receive a deduction in the calculation of its City A BPOL tax for any license fee paid to Town C. For the reasons stated above, since DEF's gross receipts from County B do not exceed $25,000, those receipts are attributable to City A, where DEF's principal office is located. Accordingly, DEF's gross receipts would be attributed as follows: $140,000 to City A and $35,000 to Town C.

                  § 3.3. SITUS OF GROSS RECEIPTS FOR A RETAILER (OR WHOLESALER SUBJECT TO LICENSE TAXATION BASED ON GROSS RECEIPTS.)

              The gross receipts of a retailer are attributed to the definite place of business where sales solicitation activities occur. If sales solicitation activities are not performed in any one locality, then they are attributed to the definite place of business from which the sales solicitation activities are initiated, directed or controlled. Unless a wholesaler is subject to a license tax measured by purchases (See § 3.4), its gross receipts are also attributed to the definite place of business where sales solicitation activities occur, or, if sales solicitation activities are not performed in any one locality, then they are attributed to the definite place of business from which the sales solicitation activities are initiated, directed or controlled. For example:
                • 1. A national retailer who sells clothing through a catalog has a sales office in A County where its sales staff receives telephone purchase orders and relays the orders to its warehouse which is located in Pennsylvania. Retailer's sales office is a definite place of business since sales solicitations are directed there. Gross receipts are sourced to A County.
                • 2. A national retailer's corporate headquarters are located in B City, Virginia. The retailer has stores throughout Virginia and the entire southeast. Each store maintains its own sales staff; however all accounting and operations management are performed at the corporate headquarters. Sales solicitation occurs at each store; therefore, the gross receipts from each store are sited to the localities in Virginia where each store is located.
                • 3. A wholesaler, whose BPOL tax is based upon gross receipts, has a warehouse in County A. Solicitations for the sale of goods stored at the warehouse are made from City B. The situs of these gross receipts is City B.
                • 4. A retailer sells goods over the Internet to customers who place their orders from home computers. The store, server, web page and customers are all in different localities in Virginia. The gross receipts of a retailer are attributed to the definite place of business where the sales solicitation activities occur. If sales solicitation activities are not performed in any one locality, then gross receipts are attributed to the definite place of business from which the sales solicitations are initiated, directed or controlled. The Internet page is not a definite place of business. Orders are filled at the retailer's store, and thus, under these facts, the sales solicitations are controlled at the store.
                • 5. Corp. A maintains a back-shop processing office in County B, Virginia where document specialists process requests for purchase proposals submitted to the office from sales representatives located throughout Virginia, including some in County B. An out-of-state office of Corp. A determines whether to submit a bid on the proposal, handles all aspects of the contract negotiation process, and has all authority to bind Corp. A by accepting proposals. The back-shop processing office in County B, Virginia has no authority to bind Corp. A and cannot accept any proposals. Gross receipts of a retailer, or a wholesaler which is taxed based upon gross receipts, are attributed to the definite place of business where sales solicitation occurs. If sales solicitation activities are not performed in any one locality, then they are attributed to the definite place of business from which the sales solicitation activities are initiated, directed or controlled. Sales solicitation relates to selling a particular product to a particular person. Generally, it does not include activities prior or subsequent to such activities. Whether sales solicitation takes place at one place or more is often a facts and circumstances test. In situations where multiple locations are involved, one such factor is which location had the authority to bind the seller in the transaction. In this example, the sales solicitation activity is under the full and sole control of Corp. A's out-of-state location; therefore, under these facts, gross receipts would not be attributed to County B, Virginia.

                • § 3.4. SITUS OF PURCHASES FOR WHOLESALER SUBJECT TO TAX BASED ON PURCHASES.

              The gross receipts of a wholesaler or distribution house subject to the tax based on purchases are attributed to the definite place of business from where the goods are physically delivered to customers or at the shipping point to customers. Any wholesaler who is subject to a BPOL tax in two or more localities with different bases or measures may apply to the Tax Commissioner for the proper measure of purchases and gross receipts subject to tax in each locality. [Some localities are grand fathered to assess a BPOL tax upon wholesalers based upon gross receipts.] "Purchases" means all goods, wares and merchandise received for sale at each definite place of business of a wholesale merchant. The term shall also include the cost of manufacture of all goods, wares and merchandise manufactured by any wholesale merchant and sold or offered for sale. A wholesale merchant may elect to report the gross receipts from the sale of manufactured goods, wares and merchandise if it cannot determine the cost of manufacture or chooses not to disclose the cost of manufacture.
                • 1. A wholesaler has its sales office in B Town and maintains a warehouse in C County from which it ships goods by truck to customers in Virginia. Wholesaler is subject to license tax measured by purchases. Wholesaler's warehouse is a definite place of business subject to taxation in C County.

                  2. A wholesaler has facilities in North Carolina and has a distribution center in A Town, Virginia, which assesses a BPOL tax on wholesalers based upon purchases. Merchandise shipped from the wholesaler in Town A is subject to the license tax measured by purchases and the situs of the wholesaler's purchases, of goods shipped from Town A is Town A because it is the shipping point from the distribution center.
                • 3. A wholesaler, whose BPOL tax is measured based upon purchases, has a warehouse in County A from where it delivers goods to customers. The situs of its purchases is County A.
                • 4. Company A manufactures equipment for industrial, governmental and commercial use at its plant outside Virginia. It has an office in City B, Virginia where sales solicitations take place. Company A's sales office is taxable as a wholesale merchant based on purchases. The purchases of a wholesaler subject to the tax on purchases are attributed to the definite place of business where the goods are physically delivered to customers or at the shipping point to customers. Company A has no taxable purchases in City B since the goods are not delivered or shipped from the sales office in that locality.
                • 5. Company A sells petroleum products at retail in its own retail stores. It also sells petroleum products at wholesale to retail dealers at City A in Virginia. Company A exchanges a shipload of petroleum products for a shipload of oil with Company A. The exchange occurs outside of Virginia. The exchange is not taxable. The sale is not a retail sale nor attributable to the exercise of the privilege of selling at retail at Company A's retail stores. There is no purchase at any place of business in Virginia that is subject to a wholesale merchant's tax in Virginia because delivery occurred outside Virginia.

              § 3.5. SITUS OF A BUSINESS RENTING TANGIBLE PERSONAL PROPERTY.

              The gross receipts of a business renting tangible personal property are attributed to the definite place of business where the property is rented, or if there is no definite rental place, then to the locality where the rental of the property is managed.

              For example:
                • 1. A car rental agency located in County B, stores its cars in a lot in Town C. The car rental contract is signed in the main office in County B and then an employee drives the customer out to the lot to pick up the car. The situs of gross receipts is County B since that is the locality where the rental took place.
                • 2. A business located in City A rents home electronics. Orders are placed by phone to the main warehouse in City A where the goods are then transported by truck to customers homes in various localities. The rental contract is filled out by a customer at her home and given to the driver at which time the goods are released. Situs of gross receipts is City A. Although the place of rental is in a number of localities, the rental is managed in City A.


              § 3.6. SITUS OF A BUSINESS PERFORMING SERVICES.

              The gross receipts from the performance of services are attributed to the definite place of business where the services are performed, or if not performed at any definite place, then they are attributed to the definite place of business where the services are directed or controlled.
                • 1. A law firm has an office in City A where all management decisions are made. Attorneys ravel to all surrounding city and county court houses to perform legal services. The proper situs would be City A since management decisions are made from this location.
                • 2. A real estate management company is headquartered in B County. Properties managed by the company are located in other Virginia localities as well as other states. Each rental property has an on-site office where rental, repair and management decisions may be made. Since each definite place of business is at the on-site rental office, gross receipts would be sourced to the localities where the rental offices are located. Further, if a locality in which any on-site office is located does not assess a BPOL tax, the gross receipts from such office would not be attributed back to County B where the company's headquarters are located.
                • 3. Same facts as above, except that there are no on-site management offices. All rental, repair and management decisions are directed and controlled at the company headquarters. Gross receipts will be sourced to B County since it is the definite place of business where the rental activity is directed and controlled.
                • 4. An individual works as a marketing consultant. This individual travels constantly throughout various cities and counties in the Commonwealth. She has no office, but keeps a cellular phone and her business records in her car. Her home is located in C County. Consulting income will be sourced to C County. Although she runs her business out of her car, a person's residence is deemed to be a definite place of business if there is no definite place of business maintained elsewhere. (See § 58.1-3700.1 (2)(b)).

                  5. Company XYZ has one truck which operates out of City A in southwest Virginia. Company XYZ picks up and delivers wares, loads and other goods for customers to and from locations in and outside of Virginia. Company XYZ has a telephone, desk, files and operating log books at its office in City A and controls, directs and conducts business out of this location. It has no other locations outside of this office in City A. Company XYZ has one truck which operates out of City A, with maintenance on the truck being performed at this location. Company XYZ is a service provider. Gross receipts from business services are attributed to the definite place of business where services are performed, or if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled. Code of Virginia § 58.1-3703.1(A)(3)(a)(4). Here, services are performed across a broad geographic range. Since services are not performed at any definite place of business, gross receipts are attributed to Company XYZ's office in City A where the services are directed or controlled.

                • 6. Acme Pest Co., a pest control and extermination business, has its principal offices in City C, Virginia. Most of Acme's customers are located in City C; however, Acme has some customers in localities which surround City C. Acme provides its service by making on-site visits and performing inspections and pest control spraying and eradication at its customers residences or places of business. Acme has on-going contracts with some of its customers under which it makes bi-annual visits to their residences or places of business. Other service visits are made on an intermittent, as- ordered basis. Acme leaves no equipment at its regular customers locations, with the exception of the placement of an occasional mouse trap. Gross receipts from business services are attributed to the definite place of business where services are performed, or if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled. Code of Virginia § 58.1-3703.1(A)(3)(a)(4). A definite place of business means an office or location at which occurs a regular and continuous course of dealing. Code of Virginia § 58.1-3700.1. Service is performed by Acme at each location on a regular but non-continuous basis. Acme does not maintain a permanent presence at its customers locations. Thus, Acme does not have a definite place of business at those locations, and its gross receipts from each place where service is rendered are attributed to City C where Acme has its principal office.
                • 7. ABC CPA's, LLP a CPA firm, has its principal offices in City C, Virginia. Although most of ABC's customers are located in City C, it has some customers in localities which surround City C. ABC provides some of its service by making on-site visits and performing inspections, audits, consulting, tax and business advice at its customers places of business. ABC also has engagements with some of its customers under which it makes bi-annual visits to their places of business. Other services are also performed at ABC's principal offices on an on-going as well as intermittent, as ordered, basis. ABC has no equipment at its regular customers locations. Gross receipts from business services are attributed to the definite place of business where services are performed, or if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled. Code of Virginia § 58.1-3703.1(A) (3)(a)(4). A definite place of business means an office or location at which occurs a regular and continuous course of dealing. Code of Virginia § 58.1-3700.1. Where a professional service provider performs services at other locations away from an established or principal office where its phone and mailing address is located and does not maintain a continuous presence for more than 30 consecutive days at these other locations, the location of its definite place of business remains its established or principal office. In this example, service is performed by ABC at each customer location on a regular but non-continuous basis. Thus, ABC does not have a definite place of business at those customer locations, and its gross receipts from each place where service is rendered are attributed to City C where ABC has its principal office.
                • 8. Corp. A is a financial services corporation headquartered in Town B, Virginia. Corp. A maintains a loan servicing office in State C and a portfolio maintenance office in State D. Receipts attributable to loan servicing activities and portfolio maintenance are not taxable in Town B.
              See Short Brothers, Inc. v. Arlington County, 244 Va. 520 (1992). If a business has only one definite place of business then all gross receipts are properly attributable there). Purchases, on the other hand, are sited to the definite place of business where the goods are physically delivered to customers or placed on trucks for delivery to customers.
                CHAPTER 4: APPORTIONMENT

                § 4.1. APPORTIONMENT.

                If the taxpayer has more than one definite place of business and it is not possible or practical to determine at which definite place of business gross receipts should be taxed, gross receipts must be divided between the definite places of businesses by payroll. Some activity must occur or be controlled from a definite place of business for gross receipts to be taxed by the locality of the definite place of business. If an entity's definite place of business is in a locality which does not tax gross receipts, a different locality may not tax these gross receipts simply because the first locality does not have a licence tax.
                  • 1. A large electronics retailer has its main sales office in City A and maintains a satellite office with its own management in the distant County B. Sales staff from City A make the initial sales contact in County B and process all sales related paperwork. Sales staff in County B make all personal and follow up sales contacts in County B. The definite place of business is in both City A and County B since each sales office is equally responsible for sales solicitations. If it were not possible or practical to determine which definite place of business gross receipts should be attributed to, gross receipts must be apportioned between the definite places of business on the basis of the payroll of the sales staff at each respective place of business.
                  • 2. A group medical practice has offices in County A and City B. County A does not tax gross receipts. Patient visits and record keeping functions occur in County A, but physicians see patients in the City B offices on a regular basis. City B may tax the gross receipts generated from services performed at offices located within its boundaries. However, City B may not tax the practice's gross receipts generated from County A simply because the county does not have a license tax.


                § 4.2 AGREEMENT TO APPORTION AMONG LOCALITIES.

                Local assessors may enter into agreements with each other regarding the manner in which gross receipts shall be apportioned among definite places of business. The sum of the gross receipts apportioned by the agreement shall not exceed the total gross receipts attributable to all definite places of business affected by the agreement. Upon notification from a taxpayer that a method attributing gross receipts is inconsistent with the method of one or more other localities in which the taxpayer is licensed, and that the difference has, or is likely to, result in taxes on more than 100 percent of its gross receipts from all locations in which the taxpayer is licensed, the assessor shall make a good faith effort to reach an apportionment agreement with the other localities involved. If an agreement cannot be reached, either the assessor or taxpayer may seek an advisory opinion from the Department of Taxation pursuant to § 58.1-3701. Notice of the request must be given to the other party.

                Notwithstanding the provisions of § 58.1-3993, when a taxpayer has demonstrated to a court that two or more political subdivisions of Virginia have assessed taxes on gross receipts that may create a double assessment within the meaning of § 58.1-3986, the court may enter such orders pending resolution of the litigation as may be necessary to ensure that the taxpayer is not required to pay multiple assessments even though it is not then known which assessment is correct and which is erroneous.

                CHAPTER 5: CLASSIFICATION ISSUES
                § 5.1. CONTRACTORS

                § 5.1.1. Maximum rate.

                The maximum rate for local license taxes imposed upon a person engaged in contracting and persons constructing for their own account for sale is sixteen cents per one hundred dollars of gross receipts. In lieu of the tax, a license fee may be charged by the locality. The amount of the fee depends upon the locality's population. See § 2.8.
                  • A. A person shall be classified as a contractor if he accepts contracts to perform, or regularly performs, or engages others to perform, any of the work described in paragraph B of
                    § 58.1-3714 on buildings, structures or real estate owned by him when the buildings, structures or real estate are sold upon completion of such work; or, if he regularly performs, or engages others to perform, any of the work described in paragraph B of § 58.1-3714 on buildings, structures or real estate owned by others.
                  • B. Contractors include persons who subdivide and improve real estate, and speculative builders who build houses or other buildings with the intention to offer the subdivided lots or completed buildings for sale. A person who would otherwise be classified as a contractor shall not lose such classification because real estate is temporarily leased until it can be sold, or leased with an option to purchase instead of sold, unless the leasing activity constitutes a separate licensable business. Any gross receipts from such leases shall be considered ancillary to the business of contracting.
                  • C. The mere subdivision of land into lots, without more, is not contracting. However, a person who installs water or sewer systems, roads, or engages in any other activity described in subsection B of § 58.1-3714 on his own land with the intent to offer the land for sale is a contractor regardless of whether the land is subdivided.
                  • D. A person shall not be deemed to be engaged in the business of contracting solely because he acts as his own prime contractor to build or improve a building which he intends to occupy as his residence, office or other place of business, or actually so occupied within a reasonable time prior to the sale of the premises.
                Subsection B includes a reference to leasing that must be coordinated with the provisions of § 58.1-3703 B 7; i.e.: (i) Leasing activities that are deemed ancillary to the contracting business would be taxable by every locality imposing a BPOL tax on contractors; or (ii) Leasing activities that constitute a separate business would be taxable only in a locality that imposed a BPOL tax on real estate rental businesses before January 1, 1974.
                Subsection D is intended to exempt owner occupied real estate which requires "fix up" work prior to sale.
                Notwithstanding § 58.1-3703 B 7, some localities are grand fathered to assess a BPOL tax upon the business of renting, as the owner, real property.
                1994 Op. Va. Att'y Gen. 114. (Contractor's licenses for regulatory purposes under § 54.1-1117 serve different purposes from license for tax purposes under § 58.1-3714, and different definitions apply).
                1987-1988 Op. Va. Att'y Gen. 578, at 584. (A person making repairs to his own home is not a contractor.)

                • § 5.1.2. List of occupations.

                  Contracting generally includes, but is not limited to, persons engaged in the following occupations, businesses or trades:

                  Air-conditioning
                  Brick contracting and other masonry
                  Building
                  Cementing
                  Dredging
                  Electrical contracting
                  Elevator installation
                  Erecting signs which are assessed as realty
                  Floor scraping or finishing
                  Foundations
                  House moving
                  Paint and paper decorating
                  Plastering
                  Plumbing, heating, steam fitting
                  Refrigeration
                  Road, street, bridge, tunnel, sidewalk or curb and gutter construction
                  Roofing and tinning
                  Sewer drilling and well digging
                  Sign painting
                  Structural metal work
                  Tile, glass, flooring and floor covering installation
                  Wrecking, moving or excavating

                  § 5.1.3. Installation by merchant.

                  An installation by a merchant is not considered contracting where he delivers and installs an appliance or other merchandise he sells when the installation uses existing openings and connections. If, however, the installation requires making openings in a wall, running ductwork, wires or plumbing, or any other work described in paragraph D of § 58.1-3714, then the installation work may be deemed contracting. This factor may turn upon the difficulty involved in making way for the goods to be installed. Other factors which may be considered in making the determination of whether or not a merchant's installation of goods constitutes contracting are as follows: (i) whether the installation is merely ancillary to the retail sales of a merchant, as opposed to constituting a substantial portion of what is sold in the transaction; (ii) does the merchant hold himself out as able to perform contractor's activities; and (iii) does the merchant install his own merchandise only, or does he also install the goods of others. Ultimately, however, the determination of whether or not a merchant's installation of goods constitutes contracting for purposes of the BPOL tax will depend upon the facts and circumstances in each case.
                    • A. A merchant engaged in the business of selling and erecting, or erecting, tombstones is not a contractor solely because he places or erects the tombstone on a gravesite, but is engaged in either retail or wholesale sales.
                    • B. While a person engaged in the business of wrecking or demolishing a building is a contractor, the subsequent sale of the materials after they have been separated, cleaned, graded, etc., may be classified as either retail or wholesale sales. However, bulk sales of such material from the demolition site may be classified as ancillary to the demolition contract.
                    • C. A person who merely sells a prefabricated building or structure is not a contractor, but if the person or a subcontractor for that person erects the building or structure, then the seller is a contractor.
                    • D. If a merchant sells floor coverings (whether the covering be carpet, linoleum, tile or other covering) and installs the floor covering as part of or incidental to the sale, the transaction is not contracting but a retail or wholesale sale. The fact that the purchaser is a general contractor or other institutional, commercial or industrial entity, coupled with the quantity sold and other terms, may affect the classification of the sale as a wholesale rather than retail sale. A person other than a merchant who enters into a contract to install floor coverings would be classified as a contractor, whether the contract is for installation only or sale and installation.
                    • E. The mere hauling of sand, gravel and dirt excavated by another is not contracting but is a business service.
                    • F. Soliciting business for a contractor is not contracting but is a business service.


                  § 5.2. RETAIL SALES.

                  § 5.2.1. Maximum rate.

                  The maximum rate for local license taxes imposed on a person engaged in retail sales is twenty cents per one hundred dollars of gross receipts. In lieu of a tax, a license fee may be charged by the locality. The amount of the fee depends upon the locality's population. See § 2.8.


                  1984-1985 Op. Va. Att'y Gen. 354. (A person who sells seafood from a truck one day a week is a peddler not a merchant because he does not keep a regular place of business open at all times during regular business hours.)


                  § 5.2.2. Retail and Wholesale Distinguished.

                  The sales price alone is not determinative of whether the sale is at retail or wholesale. The fact that a person sells goods, wares or merchandise at wholesale prices, at cost, or at less than cost does not prevent the person from being classified as a retail merchant if the sales fall within the definition of a retail sale. See § 5.3.
                • 1990 Op. Va. Att'y Gen. 220. (Sales to commercial or industrial users may be retail sales if made at a price or for a purpose that does not constitute a wholesale sale.)
                  • § 5.2.3. Banks.

                    Banks are generally exempt from local license tax, but § 58.1-1202 specifically authorizes localities to subject banks to local license tax on the sale of blank checks, repossessed automobiles, and any other tangible personal property sold by banks in connection with promotions or otherwise. [ Code of Virginia § 58.1-1202 does not authorize the imposition of a BPOL tax on banks. It merely indicates that banks are not exempt as to the sale of tangible personal property. A BPOL tax can be imposed on such sales by a bank when authorized by § 58.1-3703. In other words, such sales must be a separate business. If they are ancillary to the banking business, and classified as financial services, they would be exempt from the BPOL tax.] In connection with the sale of blank checks:
                      • A. A bank is not engaged in retail sales if the customer places an order for the checks directly with the printer and authorizes the bank to collect for the printer by charging his account, and the bank is not obligated to pay for the checks except insofar as it honors the customer's authorization.
                      • B. A bank is engaged in retail sales if the customer places his order with the bank, and the bank contracts with the printer and is liable to the printer, whether or not the bank actually collects from the customer.
                  [1990 Op. Va. Att'y Gen. 227. (A bank is liable for tax on sales of repossessed automobiles.)


                  • § 5.2.4. Solicitation.

                    A person is not subject to a local license tax if his business in this state is limited solely to the solicitation of orders by catalogs mailed from outside this state to mail-order buyers in this state and who fills orders from outside this state. However, if the catalogs are distributed by a Virginia resident by mail or in person or if the person engaged in the mail-order business has a definite place of business in this state at which mail orders are received or filled, the mail order business may be treated the same as any other retail or wholesale business for purposes of local license taxes.

                    § 5.2.5. Retail sales through a commission merchant.

                    Any person who sells goods at retail through a commission merchant, as defined in § 58.1-3733, may be held liable for a local license tax as to such sales even though the commission merchant may also be taxable with respect to a commission on such sales.

                    § 5.2.6. Non-mercantile businesses.

                  • A job printer is a manufacturer and is engaged in either retail or wholesale sales as to the sales of the items printed. The term job printer does not lend itself to rigid definition.

                    In general, a job printer is one who engages in commercial printing, on order, and the production of business forms, books, blank books, pamphlets, advertising, calendars, bill heads, periodicals, etc., which is generally considered manufacturing. Heidleberg Central, Inc. V Director of Department of the Revenue of the State of Missouri, 476 S.W. 2d 502 (1972), cited in Public Document (P.D.) 99-239 (August 23, 1999).

                    § 5.2.7. Motor vehicle dealers.

                    Any locality imposing a license tax on motor vehicle dealers may, by ordinance, require any dealer who separately states the amount of local license tax applicable to a sale and collects it from the customer to treat such taxes collected as held in trust for the locality and require that all such sums collected be paid over to the locality quarterly during the license year. Gross receipts on which the tax has been separately stated, collected and paid over shall be excluded from other taxable gross receipts when the annual license is obtained. During the three year period following over-assessments on the part of the motor vehicle dealers, the locality will refund the amounts due to the purchasers who produce verification that the over-payments were made.


                    Comment: Source: Code of Virginia § 58.1-3734.
                    1984-1985 Op. Va. Att'y Gen. 348. ( A farm equipment dealer licensed as a "motor vehicle dealer" by the Department of Motor Vehicles may separately state license tax.)


                    § 5.3. WHOLESALE SALES.

                    § 5.3.1. Maximum rate.

                    In general, the maximum rate for local license taxes imposed on a person engaged in wholesale selling is five cents per one hundred dollars of purchases of goods for sale. In lieu of a tax, a license fee also be charged by the locality. The amount of the fee depends upon the locality's population. See § 2.8. Some localities are grand fathered to assess a BPOL tax on wholesalers based upon gross receipts.

                    § 5.3.2. The licensable privilege of wholesale selling.

                    Whether or not a sale of tangible personal property is properly classified as wholesale selling depends on the facts and circumstances of the particular transaction under consideration. Wholesale trade is generally recognized as the selling at such prices and in such quantities to others who will then resell such goods either to ultimate consumers or further down the normal distribution chain. Wholesale trade may also include sales to industrial, commercial, or governmental users where goods sold will be used by the buyer in its productive processes. Although no single factor such as price, purpose, or place of sale may always distinguish between wholesale and other types of sales, the following inquiries may be helpful:

                    * Is the sale to an individual consumer for the consumer's own personal use? This type of transaction is never considered a wholesale sale for BPOL purposes regardless of whether the taxpayer sells the item at a purported wholesale price or sells the item from a business facility that appears to be a wholesale establishment.

                    * Is the sale to another merchant for resale? Transactions in which the taxpayer is selling new "in the box" items to a merchant for retail or distribution to other retailers or wholesalers are wholesale sales for BPOL purposes. Sales of used goods for resale may be wholesale depending upon the facts and circumstances of the transaction.

                    * Taxpayers engaged in the business of selling goods to a government, institutional, business, or industrial entity for consumption, use or incorporation in an assembly, manufacturing or processing operation are typically subject to the BPOL tax on wholesalers. Examples of these wholesale activities include: bulk quantity sales of goods for maintenance of facilities or equipment; sales of materials or components for incorporation into a product; or the supplying of machinery, fixtures or furnishings. Wholesale price can be an important factor in classifying this type of sales activity, especially when the transaction in question involves goods which are simultaneously offered to individual consumers at a higher price.

                    FACTORS THAT HELP DISTINGUISH BETWEEN
                    WHOLESALE AND RETAIL SELLING

                    RetailWholesale
                    * Personal use by individual consumers
                    * Retail price offered to consumers
                    * Sale for resale
                    * Volume
                    * Sale to government, institutional, or industrial entity for input into productive process
                    *Sales by the original manufacturer


                  • § 5.3.3. Wholesale activities ancillary to manufacturing.


                    In bringing their goods to market most manufacturers engage in a wholesale function. So long as this function is ancillary to the manufacturing function, i.e. it does not rise to the level of becoming a separate business activity, the manufacturer is not licensable as a wholesaler or subject to the wholesaler BPOL tax. The following wholesale functions are ancillary to a manufacturer's privilege of manufacturing and selling goods at wholesale at the place of manufacture and not subject to BPOL tax:


                    All facilities of manufacturer at same location.
                      • In this case, the wholesale function and the related sales personnel are located at the place of manufacture. The wholesale function is ancillary to the principal business of manufacturing and thus not licensable or taxable as a wholesale operation for BPOL purposes.
                      • Manufactured goods distributed from place of manufacture - sales function performed in several separate jurisdictions.
                      • Even though in this case sales activity is taking place in other jurisdictions, the activity does not rise to the level of a separate wholesale business because the goods to be sold remain at the place of manufacture. All sales activity is directed towards delivery of the goods from the place of manufacture to the customer and thus within the statutory exemption for manufacturing.
                      • All facilities of manufacturer at same location except completed goods warehoused in separate jurisdiction.
                      • The result in this example is the same as in the previous two. Assuming the warehouse is a storage facility which conducts no other business functions, its existence in another jurisdiction does not provide this other jurisdiction with grounds to levy a license tax on the facility. Mere storage of completed goods is ancillary to manufacturing regardless of where the storage takes place.

                    Examples of Wholesale Activities:
                      • 1. Company C manufactures parts for automobiles outside Virginia. Some of its production is sold directly to governmental, institutional, business, and industrial entities, and some of its production is sold through a store in City D, Virginia. Customers of that store include individuals purchasing at established retail prices, businesses purchasing at the same prices, and other businesses purchasing on a fleet basis at a discount. Sales by Company C directly to government, institutional, business, and industrial entities from the factory are wholesale sales provided that the purpose of the customer in buying such goods is to resell them in one form or another or to use them for business needs as supplies or equipment. Sales made at Company C's store in City D are wholesale to the extent made to businesses on a fleet basis at discount. Its sales made to other businesses not on a fleet and discounted basis are retail sales.
                      • 2. Corp. A, from its facility in City C, manufactures widgets which are installed in commercial, industrial, and governmental customer locations. Components are not for sale separately, nor can customers purchase unmade widgets. There is no tax. The company is a manufacturer selling at wholesale at the place of manufacture.

                    § 5.4. FINANCIAL, REAL ESTATE AND PROFESSIONAL SERVICES.

                    § 5.4.1. Maximum rate.

                    The maximum rate for local license taxes imposed on a person engaged in a financial, real estate or professional service is fifty-eight cents per one hundred dollars of gross receipts. In lieu of a tax, a locality may charge a license fee. The amount of the fee depends upon the locality's population. See § 2.8.

                    § 5.4.2. Financial services.

                    § 5.4.2.1. Definitions.

                    Any person rendering a service for compensation in the form of a credit agency, an investment company, a broker or dealer in securities and commodities, or a security or commodity exchange is providing a financial service, unless such service is specifically provided for under another section of these Guidelines. For purposes of this classification, the term:

                    • "Broker " means an agent of a buyer or a seller who buys or sells stocks, bonds, commodities, or services, usually on a commission basis.
                    • "Commodity" means staples such as wool, cotton, etc. which are traded on a commodity exchange and on which there is trading in futures.
                    • "Dealer" means any person engaged in the business of buying and selling securities for his own account, but does not include a bank, or any person insofar as he buys or sells securities for his own account, either individually or in some fiduciary capacity, but not as part of a regular business.
                    • "Security" shall have the same meaning as in the Securities Act (§ 13.1-501 et seq.) of the Code of Virginia, or in similar laws of the United States regulating the sale of securities.

                    § 5.4.2.2. List of occupations.

                    Those engaged in rendering financial services include, but are not limited to, the following:
                      • Buying installment receivables
                        Chattel mortgage financing
                        Consumer financing
                        Credit card services
                        Factors
                        Financing accounts receivable
                        Industrial loan companies
                        Installment financing
                        Inventory financing
                        Loan or mortgage brokers
                        Loan or mortgage companies
                        Safety deposit box companies
                        Security and commodity brokers and services
                        Stockbroker [Some localities may be grand fathered for purposes of the BPOL tax to apply a rate higher than that specified by state statute to stockbrokers.]
                        Working capital financing

                  § 5.4.2.3. Buying for another.

                  Any person other than a national bank or bank or trust company organized under the laws of this state, or a duly licensed or practicing attorney-at-law, that engages in the business of buying or selling for others on commission or for other compensation, shares in any corporation, bonds, notes or other evidences of debt is a stockbroker. The fact that orders are taken subject to approval by a main office does not relieve the broker from local license taxation.


                  § 5.4.2.4. Banks.

                  Although they render financial services:

                  A. banks and trust companies subject to the Virginia bank franchise tax are exempt from local license tax by § 58.1-1202, except as to sales of tangible personal property;
                    B. savings institutions (including those whose name includes "savings bank") and state chartered credit unions are limited to a local license tax of $50 by § 58.1-3730; and

                    C. federal credit unions are exempt under the Federal Credit Union Act, 12 U.S.C.A. § 1768.

                    1984-1985 Op. Va. Att'y Gen. 327. (A federal credit union exempt; however, a state-chartered credit union is not exempt, as the license tax is not a franchise tax.)
                    • § 5.4.3. Real estate services.

                      § 5.4.3.1. Defined.

                      Any person rendering a service for compensation as lessor, buyer, seller, agent or broker is providing a real estate service, unless the service is specifically provided for under another section of these Guidelines.

                      § 5.4.3.2. List of occupations.

                      Those rendering real estate services include, but are not limited to, the following:

                        • Appraisers of real estate
                          Escrow agents, real estate
                          Fiduciaries, real estate
                          Lessors of real property
                          Real estate agents, brokers and managers
                          Real estate selling agents
                          Rental agents for real estate

                      § 5.4.4. Professional services.

                      The BPOL tax applies to the rendering of professional services for a fee and does not apply to professional classifications, per se. For example, lawyers or accountants employed by a corporation and compensated in wages as employees are not subject to the BPOL tax as professionals.
                    [The Uniform Ordinance provisions state that the Department of Taxation may list as professionals other occupations in addition to those named below, but that those not listed will not be deemed to be professionals. See Code of Virginia § 58.1-3700.1. ]

                    • § 5.4.4.1. List of occupations.

                      The BPOL statute requires the Department of Taxation to list those occupations which may be classified as professionals by the localities. The BPOL statute limits the term professional to those occupations or vocations in which a professed knowledge of some department of science or learning, gained by a prolonged course of specialized instruction and study, is used in its practical application to the affairs of others, either advising, guiding, or teaching others, and serving their interests or welfare in the practice of an art or a science founded upon it. The statute also states that the word professional implies attainments in professional knowledge as distinguished from mere skill, and the application of knowledge to uses for others rather than for personal profit. The following is an all encompassing list.

                      A professional means a person rendering services as:

                        • Architects
                          Attorneys-at-law
                          Certified public accountants
                          Dentists
                          Engineers
                          Land surveyors
                          Surgeons
                          Veterinarians
                      • Practitioners of the healing arts (the arts and sciences dealing with the prevention, diagnosis, treatment and cure or alleviation of human physical or mental ailments, conditions, diseases, pain or infirmities), including pharmacists and occupational and physical therapists; chiropractors; dieticians; and such occupations as listed herein, and no others. [Unless otherwise specifically excluded, all professional titles listed include the specialties and sub-specialties included within that title in the U.S. Department of Labor's Dictionary of Occupational titles. For instance, dentist includes orthodontist, periodontist, oral pathologist, endodontist, oral surgeon, and prosthodontist. Further, the term A engineer includes, petroleum engineer, mechanical engineer, chemical engineer, civil engineer, industrial engineer, electrical engineer, nuclear engineer, and agricultural engineer.]
                      In addition to the above list, the following occupational titles would fall within the above definition of professional, as well:

                      Anatomists
                      Archeologist
                      Biologists
                      Botanists
                      Chemists
                      Economists
                      Geologists
                      Historians
                      Mathematicians
                      Metallurgists
                      Meteorologists
                      Morticians
                      Physicists
                      Zoologists

                      § 5.4.4.2. Consulting.

                      The terms "consultants" and "consulting" imply that the person possesses education, experience, and expertise in the subject matter of the service offered. However, whether a consultant renders a professional service also depends on the nature of the service offered. While consulting involves the rendering of an expert opinion, as opposed to the mere conveyance of data or the giving of general advice, the activity of consulting will not fall into the definition of professional services unless some professional service is rendered with the consulting advice and the rendering of such professional service is listed on the list contained in § 5.4.4.2. above. For example:

                        • A. An inexperienced lawyer offering legal services to the public is classified as a professional because qualifying as a lawyer requires a prolonged course of specialized instruction and study, and legal services are generally considered professional services.

                        • B. A "professional exterminator" is classified as personal and other services because he is offering an exterminating service even though he may be very experienced, expert and knowledgeable in the subject. On the other hand, a biologist or sanitarian who does not provide extermination services but advises as to procedures (among which may be extermination services), equipment, and other measures to avoid contamination by viruses, bacteria, chemicals, insects, rodents, and the like may be considered a professional.

                        • C. Services which are not considered professional services may be offered in connection with professional services and be considered ancillary. For example, tax preparation services generally are not professional services, while rendering advice concerning the tax consequences of completed or contemplated transactions would be a professional service. Professionals who specialize in tax matters may prepare returns as well as render advice, and the tax preparation service would be ancillary to the professional service.

                        • D. The term "management consulting" does not convey enough information about the service offered to determine the proper classification. Services which assist the business in the conduct of its day-to-day operations would generally not be considered professional. For example, payroll services, marketing surveys, and cash management, are all services that would not properly be classified as professional services.
                    1994 Op. Va. Att'y Gen. 99. (Hourly rates may be of some assistance in determining the proper classification -- if a substantial portion of the hourly rates billed is equivalent to those prevailing for comparable professionals in the locality, the commissioner may conclude that the business renders professional services.)


                    • § 5.4.4.3. Services for compensation.

                        • A. Certification as a professional by itself is not sufficient to establish liability for local license taxation because many individuals may maintain their professional certification even though they are not practicing their profession. The business may not be classified as professional unless it is offering professional services to the public for compensation.

                        • B. Gross receipts for purposes of local license taxation as a professional include only those gross receipts obtained from the practice of that profession as a business (including any ancillary receipts), whether the practice be on a full or part-time basis, and without regard to the legal form of the business entity.
                    1994 Op. Va. Att'y Gen. 99. (It is not necessary for an engineer to have been issued a regulatory license by the state in order to be classified as a professional for BPOL purposes.)


                        • § 5.5. REPAIR, PERSONAL, BUSINESS AND OTHER SERVICES; OTHER BUSINESSES.
                      Other services not clearly identified as financial, real estate or professional are classified as "repair, personal, business and other services" under § 5.5.

                      § 5.5.1. Maximum rate.

                      The maximum rate for local license taxes imposed upon a person engaged in providing for compensation any repair, personal, business or other services not specifically otherwise classified in these Guidelines or exempted from local license tax is thirty-six cents per one hundred dollars of gross receipts. In lieu of a tax, a locality may impose a license fee upon the service. The amount of the fee charged is limited by the locality's population. See § 2.8. Definitions of repair service, personal service, and business service have been omitted since this classification applies to all services not classified as financial, real estate or professional.

                      § 5.5.2. List of occupations.

                      Those rendering a repair, personal or business service or other service as provided for in
                      § 5.5. include, but are not limited to, the following:

                      Advertising agencies
                      Airports
                      Ambulance services
                      Amusements and recreation services
                      Animal hospitals, grooming services, kennels or stables (except for the services of a veterinarian)
                      Auctioneers and common criers
                      Automobile driving schools

                      Barber shops, beauty parlors, and hairdressing establishments, schools & services
                      Bid or building reporting services
                      Billiard or pool establishments or parlors
                      Boat landings
                      Bondsman
                      Booking agents or concert managers
                      Bowling alleys
                      Brokers and commission merchants other than real estate or financial brokers
                      Business and governmental research and consulting services

                      Chartered clubs
                      Child care attendants or schools
                      Collection agents or agencies
                      Commercial photography, art and graphics
                      Copying over the counter (including copies made by the customer on the business equipment)
                      Court reporting and public stenographers

                      Dance studios and schools
                      Data processing, computer and systems development services
                      Developing or enlarging photographs
                      Detective agency and protective services
                      Drafting services

                      Employment agencies
                      Engraving outside of the manufacturing process
                      Erecting, installing, removing or storing awnings
                      Extermination services [unless the services involve performing functions defined as contracting under Code of Virginia § 58.1-3714(D)]

                      Farrier or blacksmith
                      Forester
                      Freight traffic bureaus
                      Fumigating or disinfecting
                      Funeral services and crematories

                      Golf courses, driving ranges and miniature golf courses

                      Hauling of sand, gravel or dirt (excavated by others)
                      Home for adults (licensed by Department of Social Services)
                      Hospitals(other than the performance of medical services falling within the definition of professional services)
                      Hotels, motels, tourist courts, boarding and rooming houses and transient trailer parks and campsites
                      House cleaning services

                      Information bureaus
                      Instructors, tutors, schools and studios of music, ceramics, art, sewing, sports and the like
                      Interior decorating

                      Janitorial services

                      Laundry cleaning and garment services including laundries, dry cleaners, linen supply, diaper service, coin operated laundries and carpet and upholstery cleaning

                      Mailing, messenger and correspondent services
                      Movie theaters and drive-in theaters

                      Nickel plating, chromizing and electroplating
                      Nurses and physician registries
                      Nursing and personal care facilities including nursing homes, convalescent homes, homes for the retarded, old age homes and rest homes

                      Packing, crating, shipping, hauling or moving goods or chattels for others
                      Parcel delivery services
                      Parking lots, public garages and valet parking
                      Pawnbrokers
                      Personnel services, labor agents and employment bureaus
                      Piano tuning
                      Picture framing and gilding
                      Porter services
                      Press clipping services
                      Professional sports (i.e., commercial rather than amateur)
                      Promotional agents or agencies
                      Public relations services

                      Realty multiple listing services
                      Renting or leasing any items of tangible personal property
                      Research and development laboratories

                      Secretarial services
                      Septic tank cleaning
                      Shoe repair, shoe shine and hat repair shops
                      Sign painting (unless the painting services involve performing functions defined as contracting under subsection D of § 58.1-3714)
                      Storage--all types
                      Swimming pool maintenance and management

                      Tabulation services
                      Tax preparers (other than professionals described in § 5.4.4.2)
                      Taxicab companies
                      Taxidermist
                      Telephone answering services
                      Temporary employee services
                      Testing laboratories
                      Theaters
                      Theatrical performers, bands and orchestras
                      Towing services
                      Transportation services including buses and taxis
                      Travel agencies
                      Tree surgeons, trimmers and removal services
                      Trucking companies, intrastate

                      Wake-up services
                      Washing, cleaning or polishing automobiles

                    1991 Op. Va Att'y Gen.261 ( An Adult care home licensed by Dept. Social Services is not in business of renting real property as owners, as used in §58.1-3703 B 7, but is providing personal services.)


                    § 5.6. COMMISSION MERCHANTS.

                    A commission merchant as defined in § 58.1-3733 is deemed to be providing a service to the manufacturer or merchant for whom he sells. The commission merchant's commission income may be subject to a license tax of up to thirty-six cents per hundred dollars of gross receipts under this classification.


                    CHAPTER 6: COMPLIANCE ISSUES.

                    § 6.1. DUE DATES.

                    If not previously licensed, a person must apply for a license prior to beginning business. If licensed the previous year, a person must apply for a license prior to March 1st*. Applications are on forms prescribed by the local tax officials. [Every locality must adopt a March 1 due date for applications no later than the 2001 license year. ]

                    For reasonable cause, the local official may allow an extension for the filing of the application and such extension may be conditioned on the timely payment of an estimate of the tax due. Taxes paid based upon an estimate will be subject to correction, with interest and penalties, if the estimate is unreasonable.

                    For taxes based on gross receipts, the locality has the option of requiring payment of the tax on or before March 1st or a later date, or thirty or more days after the person begins business.

                    § 6.2. INTEREST AND PENALTIES.

                    The provisions of Code of Virginia § 58.1-3703.1 relating to interest and penalties apply to assessments made on and after January 1, 1997, even if for an earlier license year. Interest is charged on all late payments regardless of reason. A locality may impose a ten percent penalty on an entity which fails to file a license application or return on time or on an entity which makes late payments. The ten percent penalty and interest for late payment apply to license fees as well as the license tax.

                    Uniform Ordinance provisions. Code of Virginia § 58.1-3700. If a license is required by law and a license tax is levied on the business, it is unlawful to operate the business without a license. See Black's Law Dictionary. A fee is a charge fixed by law for the use of a privilege under control of government. Clearly the license tax and fee, if imposed by the locality, fulfill the same purpose; they are required to conduct business. Since they are identical, all penalty provisions which apply to the failure to file and application to pay the tax apply to the failure to pay the fee.


                    • § 6.2.1. Interest.

                      For assessments made on or after January 1, 1997, if a payment of tax is late, interest will be charged on the late payment from the due date until the date paid without regard to fault or other reason. For tax years prior to January 1, 1997, localities may charge interest upon delinquent taxes pursuant to § 58.1-3916.

                      If an assessment of additional or omitted tax is found to be erroneous, the interest and penalty charged and collected on the amount of such assessment must be refunded with interest on the refund from the date of payment or the due date, whichever is later. Interest on any refund must be paid at the same rate charged under § 58.1-3916.
                    Taxes paid by first-year taxpayers based upon estimates will be subject to correction with interest and penalties if estimates prove to be unreasonable. Unless otherwise provided by a locality, estimates of the tax due will be deemed unreasonable if they are less than 80% of the actual taxes ultimately due.

                    • If a refund is made within than thirty days from the date of the payment that created the refund, or the due date of the tax, whichever is later, interest will not be paid.

                      If a late payment is made within than thirty days from the due date of the tax, whichever is later, interest on the payment will not be due.

                      § 6.2.2. Penalties.

                      Upon a failure to file or a failure to pay a tax due, a penalty of ten (10%) percent may be imposed. If both the application and payment are late, only one penalty may be imposed, unless the local official determines the taxpayer has a history of non-compliance, then both penalties may be assessed. Where an assessment of additional tax is made, but the application and/or the return were made in good faith by the taxpayer and there is no fraud, recklessness or intentional disregard of the law on the part of the taxpayer, there will be no penalty on the additional tax.

                      A ten percent late penalty may be imposed on any assessed tax which is not paid within thirty (30) days. If the failure to file or pay is not the fault of the taxpayer, the penalty will not be imposed, or if imposed, shall be abated. Lack of fault must be demonstrated by the taxpayer showing that he acted responsibly and that the failure was due to events beyond his control. "Acted responsibly" means that the taxpayer exercised the reasonable care that a prudent person would exercise under the circumstances, and that the taxpayer took significant steps to avoid or mitigate the failure. Examples of such steps include requesting appropriate extensions (where applicable), attempting to prevent a foreseeable impediment, acting to remove an impediment once it occurred, and promptly rectifying a failure once the impediment was removed or the failure discovered. "Events beyond the taxpayer's control" include, but are not limited to, unavailability of records due to fire or other casualty; unavoidable absence (e.g., due to death or serious illness) of the person with sole responsibility for tax compliance; or the taxpayer's reasonable reliance in good faith upon erroneous written information from the assessing official who was aware of the relevant facts relating to the taxpayer's business when he provided the erroneous information.

                      § 6.2.3. Waiver or abatement of late filing or late payment penalties.

                      If a taxpayer is penalized for failing either to file for a license or to pay the tax on the appropriate due date, the assessing official must waive or abate the penalty if the taxpayer was not at fault and the failure was due to events beyond the taxpayer's control. Interest, as opposed to a penalty, cannot be waived. To demonstrate lack of fault for waiver of penalty, a taxpayer must have exercised the same amount of care as a reasonably prudent person and must have actively tried to avoid the failure. For example:
                        • 1. Taxpayer opened small dry-cleaning business in County A. County A has a population of 25,000. Taxpayer failed to apply for a license because taxpayer thought, in good faith, that his gross receipts would not exceed $50,000. Taxpayer's gross receipts were $100,000. Taxpayer would be liable for the license tax plus a penalty because taxpayer failed to file an application for a license.
                        • 2. A retailer fails to file an application on time when its computer system suffers significant damage due to floods. The retailer never informs tax assessor of its problem. Although the failure to file was initially not the fault of the retailer, retailer will be liable for the penalty since it failed to act reasonably in notifying the locality within a short period of time and did not attempt to correct the failure and to obtain an extension.
                        • 3. Same facts as #2 above, except that the retailer did not contact the tax assessor for ten months after its computer system is repaired and its store reopened. Although its failure to file was through no fault of its own, the retailer will be responsible for the penalty since it failed to rectify the failure within an amount of time which was reasonable under the circumstances indicated once the impediment was removed.
                        • 4. Local official erroneously sends old tax forms with outdated information to taxpayer. Taxpayer, who in good faith uses the old tax forms, underpays his tax. Since the underpayment was due to an event beyond the taxpayer's control and it was not reckless, fraudulent or the result of an intentional disregard of the law, there will be no penalty on the understatement.


                      § 6.3. ASSESSMENTS: LIMITATIONS AND EXTENSIONS.

                      Code of Virginia § 58.1-3903 provides that, in general, an assessing official may only assess omitted local taxes for the current tax year and the three preceding tax years. Notwithstanding § 58.1-3903, the assessing official may assess the local license tax omitted because of fraud or failure to apply for a license for the current license year and the six preceding license years. The provision permitting an assessment of license tax for up to six preceding years in certain circumstances may not be construed to permit the assessment of tax for a license year beginning before January 1, 1997. [Code of Virginia §§ 58.1-3703.1 A (4)(b) and 58.1-3703.1(B)(2).]

                      However, where, before the expiration of time established for the assessment of any license tax, both the assessing official and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon. [The assessing officer and the taxpayer can agree to extend the period assessing the original tax, assessing additional tax or omitted tax, or for revising an assessment as part of making a refund.] The period agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. The provisions of
                      § 58.1-3703.1(A)(4)(a) relating to agreements extending the period for assessing tax are effective for agreements entered into on and after July 1, 1996.

                      Assessments shall be deemed made by an assessing official when a written notice of assessment is delivered to the taxpayer by the assessing official or an employee of the assessing official, or mailed to the taxpayer at his last known address. Self-assessments shall be deemed made when a return is filed, or if no return is required, when the tax is paid. A return filed or tax paid before the last day prescribed by ordinance for the filing or payment thereof shall be deemed to be filed or paid on the last day specified for the filing of a return or the payment of tax, as the case may be. An assessment includes a return filed on behalf of the taxpayer by the local assessing officer. An assessment does not include the imposition of a late filing or a late payment penalty except to the extent that the imposition of penalties is associated with or imposed as the result of an audit.

                      § 6.4. LIMITATIONS ON COLLECTION.

                      Code of Virginia § 58.1-3940 provides that, in general, collection of local taxes may only be enforced for five years following December 31 of the year for which such taxes were assessed. In addition, Code of Virginia § 58.1-3703.1(a)(4)(c) provides that the period for collecting any local license tax will not expire prior to the period specified in § 58.1-3940, two years after the date of assessment if the period for assessment has been extended pursuant to § 58.1-3703.1(A)(4)(c), two years after the final determination of an appeal for which collection has been stayed pursuant to § 58.1-3703.1(A)(5)(b) or (d), or two years after the final decision in a court application pursuant to § 58.1-3984 or similar law for which collection has been stayed, whichever is later.

                      § 6.5. RECORD-KEEPING AND AUDITS.

                      Every person who is assessable with a local license tax must keep sufficient records to enable the assessor to verify the correctness of taxes paid for the license years assessable and to enable the assessor to ascertain what is the correct amount of tax that was assessable for each of those years. All such records, books of accounts and other information must be open to inspection and examination by the assessor in order to allow the assessor to establish whether a particular receipt is directly attributable to the taxable privilege exercised within a jurisdiction. The assessor must provide the taxpayer with the option to conduct the audit at the taxpayer's place of business if the records are maintained there. If maintained outside the assessor's jurisdiction, copies of the appropriate books and records must be sent to the assessor's office upon demand.

                      A taxpayer must keep its records for the current license year and the preceding three (3) license years where it regularly files BPOL tax returns; however, a locality may review a taxpayer's records for the current license year and the six (6) preceding license years when there has been a failure on the part of the taxpayer to file BPOL tax returns or obtain a BPOL license, or where there has been fraud on the taxpayer's part relating to BPOL taxes. For each license year under audit or for which the taxpayer must keep records, base year records provide the measure for license tax on gross receipts. See Code of Virginia §§ 58.1-3703.1(A)(4)(b) and 58.1-3703.1(B)(2). For example:

                        • A. Company A regularly pays BPOL taxes and is audited in 1997 for license years 1994, 1995 and 1996 by the locality in which it operates. In order for a full review covering all relevant tax years to take place, Company A must have its records for the current year and for license years 1994 through 1996.

                        • B. Same facts as above, except Company A has not applied for a BPOL license nor filed BPOL tax returns since 1989. Code of Virginia § 58.1-3703.1(A)(4)(b) allows a locality to assess the BPOL tax for the current license year and the previous six license years where there is fraud or the taxpayer fails to apply for a BPOL license. However, in cases of fraud or a failure to apply for a BPOL license, § 58.1-3703.1(B)(2), limits the application of § 58.1-3703.1(A)(4)(b) to BPOL assessments for license years beginning on and after January 1, 1997. The ability to assess a BPOL tax for the current license year and the previous six license years under § 58.1-3703.1(A)(4)(b) is in addition to the statutory authority to assess a BPOL tax for three preceding years under § 58.1-3903. Therefore, under § 58.1-3903, Company A can be assessed a license tax for 1997, 1996, 1995, and 1994.


                      § 6.6. CONSISTENT REPORTING AND COORDINATED ENFORCEMENT.

                      The local official administering the license tax may consult with federal, state and local government officials to verify that any relevant certifications, determinations or classifications made by such other government official or the taxpayer for other tax or regulatory purposes are consistent with the classification claimed by the taxpayer for local license tax purposes or to coordinate enforcement of various tax and regulatory provisions. No presumption will be established by the action or inaction of another government official unless the applicable law, regulation, or policy administered by the other government official is substantially similar to the definition, law, ordinance or other provision applicable for BPOL purposes. Certifications, determinations, or classifications made by a government official or the taxpayer for other tax or regulatory purposes are evidence of the correctness of a classification of a taxpayer, but are not conclusive evidence. For example:

                        • A. The local tax official may consult with federal and state tax officials concerning whether a person who claims not to be engaged in business for local license tax purposes properly filed a Schedule C with his federal and state income tax returns.
                        • B. The local tax official may verify whether federal forms W-2, 1099 or similar forms have been filed with respect to persons or income for which classification as an employee or independent contractor is an issue.
                        • C. The local tax official may verify whether a person has obtained or is required to obtain a state or local regulatory license such as a contractor's license, professional license, zoning approval, building permit, etc. The existence or absence of such other regulatory action generally will not establish a presumption with respect to BPOL tax issues because different definitions, purposes, and policies are involved.

                      1994 Op. Va. Att'y Gen. 114. (A contractor license for regulatory purpose is different than for BPOL.)
                      1993 Op. Va. Att'y Gen. 228. (A local commissioner refused to issue BPOL license because of zoning violation; nonetheless, BPOL tax owed when business conducted in violation of zoning.)



                      § 6.7. LOCALITY TAX YEAR.

                      A locality which changes its license year from a fiscal year to a calendar year and adopts March 1 as the due date for license applications is not required to prorate any license tax to reflect a license year of less than twelve months, whether the tax is a flat amount or measured by gross receipts, provided that no change is made in the taxable year for measuring gross receipts. For example, Locality A has a license year which is based on a fiscal year and its license tax is based on gross receipts from the previous calendar year, with license taxes being payable on May 1 of each year following the calendar year in which gross receipts are recognized. However, when Locality A changes its license year from a fiscal year to a calendar year, license taxes are payable on March 1 of each year following the calendar year in which gross receipts are recognized. In this instance, Locality A is not required to prorate any license taxes.

                      Locality's Change of License Year

                      Years1994199519961997199819992000
                      Old License Year (based on fiscal year)May 1-Apr.30May 1-Apr.30May 1-Apr.30N/AN/AN/AN/A
                      New License Year (based on calendar year)N/AN/AN/AJan.1-Dec. 31Jan.1-Dec. 31Jan.1-Dec. 31Jan.1-Dec. 31
                      Base yearJan. 1, 1993 to Dec. 31, 1993Jan. 1, 1994 to Dec. 31, 1994Jan. 1, 1995 to Dec. 31, 1995Jan. 1, 1996 to Dec. 31, 1996Jan. 1, 1997 to Dec. 31, 1997Jan. 1, 1998 to Dec. 31, 1998Jan. 1, 1999 to Dec. 31, 1999
                      License tax Due dateMay 1, 1994May 1, 1995May 1, 1996Mar. 1, 1997Mar. 1, 1998Mar. 1, 1999Mar. 1, 2000

                    • § 6.8. TAXPAYER's REQUEST FOR A WRITTEN RULING.

                      A taxpayer may request a written ruling from the local assessing officer regarding the application of a local license tax to a specific set of facts. Any person requesting such a ruling must provide all the relevant facts for the situation and may present a rationale for the basis of an interpretation of the law most favorable to the taxpayer. Any misrepresentation or change in the applicable law or the factual situation as presented in the ruling request will invalidate any such ruling issued. A written ruling issued by the local assessing officer may be revoked or amended prospectively if: (i) there is a change in the law, a court decision, or the Guidelines issued by the Department of Taxation upon which the ruling was based, or (ii) the assessor notifies the taxpayer of a change in the policy or interpretation upon which the ruling was based. However, any person who acts on a written ruling which later becomes invalid shall be deemed to have acted in good faith during the period in which such ruling was in effect.

                    CHAPTER 7: ADMINISTRATIVE APPEALS.


                    § 7.1. INTRODUCTION

                    The 1996 amendments to the BPOL statutes created a review process designed to encourage resolution of local license tax issues through an appeals process which includes review by the local assessing officer and appeal to the Tax Commissioner. Through this process, a taxpayer who disagrees with an audit assessment may apply to the local assessing officer for review. If the taxpayer is dissatisfied with the results of the local review, the taxpayer may appeal the local decision to the Tax Commissioner who will make a determination of the issues raised by the taxpayer.

                    Additionally, the 1996 amendments provided taxpayers an opportunity for greater certainty in the administration of the BPOL tax through the use of written rulings. In this process, taxpayers may request a written ruling from their local assessing officer regarding the application of a local license tax to their unique circumstances. In most cases, the taxpayer may rely on the positions set forth in those rulings.



                    § 7.2. ADMINISTRATIVE REVIEW PROCESS

                    Discussion and charts illustrating the appeals process as presented in the Guidelines appear below.


                    ADMINISTRATIVE REVIEW OF BPOL AUDIT ASSESSMENTS

                    Taxpayer


                    FunctionEffectInterestCollection Activity
                    Within 90 days of the date of an audit assessmentApplication for Review filed with the local assessing officerLocal assessing officer makes a final written determinationAccruesStops when a complete Application for Review or a Notice of Intent to Appeal is filed (1)
                    Within 90 days of the date of the local assessing officer's final written determination Appeal to the Tax Commissioner (2)Tax Commissioner will make a determination of the appealAccruesStops when an Appeal to the Tax Commissioner or a Notice of Intent to Appeal is filed (3)
                        • (1) Taxpayers intending to appeal an audit assessment should immediately provide a written Notice of Intent to Appeal to the local assessing officer to stop collection activity.
                          (2) If the appeal is incomplete, taxpayer is given 30 days to complete it.
                          (3) Taxpayers intending to appeal a local assessing officer's determination should immediately provide a written Notice of Intent to Appeal to the local assessing officer and to the Tax Commissioner to stop
                      collection activity.

                      As the chart above indicates, the taxpayer must first file an Application for Review with the local assessing officer before an appeal of an audit assessment can be made to the Tax Commissioner. The taxpayer has 90 days from the date of the audit assessment to file the Application for Review. Upon the timely filing of an Application for Review, the local assessing officer will make a final written determination on the taxpayer's application. The taxpayer then has 90 days from the date of the local assessing officer's final written determination to appeal that determination to the Tax Commissioner.
                      ADMINISTRATIVE REVIEW OF BPOL AUDIT ASSESSMENTS

                      Local assessing officer

                      Critical DateFunctionEffectInterestCollection Activity
                      Within a reasonable time of receipt of taxpayer's Application for ReviewMake a final written determinationTaxpayer has 90 days from date of final written determination to file an Appeal to the Tax Commissioner AccruesMay begin or resume after final written determination is made
                      Within 30 days of notice that appeal has been made to the Tax CommissionerMake a request to address new issues or make a written reply to taxpayer's appeal (1) Allows local assessing officer to respond to new issues or to the appeal, in generalAccruesStops until Tax Commissioner issues a final written determination
                        • (1) If a request to address new issues is made, the appeal will return to the local assessing officer and the local appeals process re-starts. The local assessing officer must make a new final determination which can be appealed to the Tax Commissioner.

                      As the chart above indicates, the local assessing officer must issue a final written determination within a reasonable time of the taxpayer's timely filing of an Application for Review. After issuing a final written determination, the local assessing officer may commence or resume collection activity on a license tax assessment. Such collection efforts must be suspended, however, upon the taxpayer's filing of a Notice of Intent to Appeal the final determination or upon the filing of an Appeal to the Tax Commissioner. The Tax Commissioner will provide written notice to the local assessing officer when the taxpayer has filed a timely Appeal to the Tax Commissioner. The local assessing officer will then have 30 days to file a reply with additional information or to file a written request to address issues first raised on Appeal to the Tax Commissioner. If the local assessing officer files a written request to address new issues, the appeal must return to the local assessing officer and the local appeals process starts anew. Once an appeal is returned to the local assessing officer, the local assessing officer must issue a new final written determination which can be appealed to the Tax Commissioner.



                      § 7.3. APPLICABILITY OF GUIDELINES.

                      The following sections cover the administrative review of audit assessments by the local assessing officer and the Tax Commissioner. These Guidelines apply to local license taxes only. The administrative review process is effective for assessments of local license tax made on and after January 1, 1997, even if for an earlier license year. The existence, utilization, or attempt to utilize the administrative review process provided in these Guidelines does not affect the taxpayer's right to pursue any other administrative and judicial remedies authorized by law. The filing of an action in circuit court does not prohibit an administrative review under § 58.1-3700 et seq.

                      § 7.4. DEFINITIONS.

                      Unless otherwise required by the context, the following words and terms have the following meanings:

                      Appeal to the Tax Commissioner means a taxpayer's application, filed with the Tax Commissioner pursuant to Code of Virginia § 58.1-3703.1 (A)(5)(c). The appeal should contain the following:
                        • A. Complete Application for Review (detailed below) as submitted to the local
                          assessing officer.
                        • B. Local assessing officer's Final Local Determination.
                        • C. A statement explaining why the taxpayer believes the local assessing officer is in error.

                      The statement should include analysis of how the local assessing officer misinterpreted or misapplied facts or authority and also include facts, issues and authority which the taxpayer believes the local assessing officer failed to take into consideration.

                      "Application for Review" means a taxpayer's written request filed with a local assessing officer for review of an audit assessment made pursuant to Code of Virginia § 58.1-3703.1(A)(5)(a). The application should contain the following:

                        • A. Name and address of taxpayer and taxpayer identification number.

                        • B. If applicant is different from the taxpayer, name and address of the applicant and a power of attorney or letter of representation.
                        • C. Copy of Notice of Assessment.

                        • D. A statement explaining why the taxpayer believes the assessment is erroneous. The statement should also include facts, issues and authority which the taxpayer believes supports his position.
                        • E. Statement of relief the taxpayer requests.


                      Assessment means the definition of that term as it appears in Chapter 1. Definitions, of these Guidelines.

                      Audit means an examination of records, financial statements, books of accounts, and other information to evaluate the correctness of a local license tax. An audit shall include, but is not limited to, an examination to determine the correctness of a classification of a licensable business, examinations resulting in adjustments made to gross receipts, tax, and other information contained in the taxpayer's return, and examinations resulting in the imposition of a local license tax when no return has been filed.

                      An audit assessment is not: a statutory assessment, a self-assessment, or an assessment resulting from the correction of mathematical errors. However, if an examination of records or other information takes place in conjunction with the above, the assessment may be appealable as an audit assessment.

                      Collection activity means the assessor's use of any means, direct or indirect, to obtain payment of an assessment.

                      Date of the assessment means the date when a written notice of assessment is delivered to the taxpayer by the assessing officer or an employee of the assessing officer, or mailed to the taxpayer at the taxpayer's last known address.

                      Filed. A document is filed as of the date it is postmarked for first class delivery via United States mail or when it is received if any other method of delivery, including facsimile transmissions, is utilized.

                      Final Local Determination means a writing setting out the local assessing officer's final determination on a taxpayer's Application for Review, including facts and legal authority in support of the local assessing officer's position on each issue raised by the taxpayer. See § 7.10. for a sample Final Local Determination.

                      Jeopardized by delay includes a finding that the application is frivolous or that a taxpayer desires to (i) depart quickly from the locality, (ii) remove his property therefrom, (iii) conceal himself or his property therein, or (iv) do any other act tending to prejudice, or to render wholly or partially ineffectual, proceedings to collect the tax for the period in question.

                      Local assessing officer means the Commissioner of Revenue, or chief assessing officer or the chief assessing officer's designee.

                      Notice of intent to appeal means the taxpayer's written statement filed with the local assessing officer that informs the local assessing officer of the taxpayer's intent to file an Application for Review. It also means the taxpayer's written statement filed with the local assessing officer and the Tax Commissioner informing of the taxpayer's intent to file an appeal to the Tax Commissioner.

                      Tax Commissioner means the chief executive officer of the Department of Taxation or his delegate, authorized pursuant to § 58.1-3703.1(A)(5)(c) to issue a final determination on an appeal.

                      Taxpayer means a person, corporation, partnership, unincorporated association, or other business or representative thereof subject to a local license tax.


                      § 7.5. CALCULATION OF DAYS IN FILING REQUIREMENTS.

                      For any limitation of time in making an Appeal to the Tax Commissioner, Application for Review, reply, or any other information or material mentioned in these Guidelines, should the last day of such limitation period fall on a Saturday, Sunday, or holiday observed by the Commonwealth of Virginia, the Appeal, Application, reply, or other information or material may be filed on the next business day. For any limitation of time appearing in these Guidelines, the limitation shall begin to run on the day next following the event which triggers the time limitation.


                      § 7.6. SUSPENSION AND COMMENCEMENT/RESUMPTION OF COLLECTION ACTIVITY.

                      Collection activity is suspended upon:
                        • A. The local assessing officer's receipt of a timely and complete Application for Review.
                        • B. The local assessing officer's receipt of a Notice of Intent to Appeal.
                        • C. The local assessing officer's receipt of notice of the filing of an Appeal to the Tax Commissioner.

                      The local assessing officer must notify the treasurer or other collection official when collection activity must be suspended.

                      Collection activity may commence or resume upon:

                      * The local assessing officer's determination that an assessment subject to an Application for Review or an Appeal to the Tax Commissioner is jeopardized by delay.

                      * The local assessing officer's issuance of a Final Local Determination.

                      * The local assessing officer's receipt of written notice from the Tax Commissioner that the taxpayer has failed to file a timely Appeal to the Tax Commissioner after the taxpayer has initially filed a Notice of Intent to Appeal.

                      * The local assessing officer's receipt of a final written determination issued by the Tax Commissioner in cases where the local license tax has not been totally abated.

                      * The local assessing officer's receipt of a copy of a taxpayer's request to withdraw an Appeal to the Tax Commissioner.


                      § 7.7. INTEREST DURING APPEAL.

                      Assessments subject to an Application for Review or Appeal to the Tax Commissioner will continue to accumulate interest until paid or abated. Taxpayers are encouraged to pay the undisputed portion of any assessment to avoid accrual of interest on that undisputed portion while an Application for Review or Appeal to the Tax Commissioner is pending. Any such payment will not be deemed a waiver of the taxpayer's remedies described in these Guidelines.


                      § 7.8. APPLICATION FOR REVIEW - LOCAL ASSESSING OFFICER.

                      § 7.8.1. Time limitations.

                      A taxpayer assessed with a local license tax as the result of an audit may file an Application for Review with the assessing officer of a locality within ninety days of the date of the assessment.

                      § 7.8.2. Good faith applications for review; frivolous applications for review; acknowledgment of filing of application for review.

                      The Application for Review must be filed in good faith. The Application for Review must not be frivolous or otherwise filed for purposes of avoiding or delaying collection of the local license tax. Upon receipt of the complete Application for Review, the local assessing officer shall acknowledge in a writing to the taxpayer, receipt of the Application for Review.

                      § 7.8.3. Final local determination.

                      Provided the application is filed in good faith and not merely for purposes of delay, the local assessing officer shall conduct a full review of the facts, assertions, and authorities submitted by the taxpayer. During this process the local assessing officer may hold conferences with the taxpayer, conduct further inquiries, or perform additional audits as required to reach a fair conclusion on the issues presented by the taxpayer. Within a reasonable time of receipt of the Application for Review, the local assessing officer shall issue a signed and dated Final Local Determination. Each final written determination shall contain the following notice:

                        • You may appeal this Final Local Determination to the Tax Commissioner as follows:

                      * If you wish to appeal, you must act within 90 days from the date of this Final Local Determination by filing an Appeal to the Tax Commissioner at P.O. Box 1880, Richmond, Virginia 23218-1880.

                      * Collection activity may commence or resume at any time after the date of this Final Local Determination and will not be suspended until a Notice of Intent to Appeal or Appeal to the Tax Commissioner is timely filed and the local assessing officer receives a copy. If you intend to appeal, you should immediately provide a written Notice of Intent to Appeal to the local assessing officer and to the Tax Commissioner so that collection activities are not reinstated or do not begin.

                      * BPOL Guidelines and the applicable Code of Virginia sections for preparing an Appeal to the Tax Commissioner are available at the office of the local assessing officer or at the Virginia Department of Taxation.

                      § 7.9. APPEAL TO THE TAX COMMISSIONER.

                      § 7.9.1. Time limitations.

                      The taxpayer has ninety days from the date of the local assessing officer's Final Local Determination to file an Appeal to the Tax Commissioner. The address is:

                      Tax Commissioner
                        • Post Office Box 1880
                          Richmond, Virginia 23218-1880

                      The Tax Commissioner may permit an extension of this period for good cause shown.

                      § 7.9.2. Notice of intent to appeal filed but appeal to the Tax Commissioner not timely filed.

                      If a Notice of Intent has been filed with the Tax Commissioner, the Tax Commissioner shall give written notice to the local assessing officer and to the taxpayer of the taxpayer's failure to file an Appeal to the Tax Commissioner within the time provided for in these Guidelines.


                      § 7.9.3. Incomplete appeals to the Tax Commissioner.

                      If the Tax Commissioner receives an appeal that is incomplete, the taxpayer will be given notice stating the information is incomplete. The local assessing officer will be provided a copy of this notice. The taxpayer will be allowed thirty days from the date of such notice to provide the information or ninety days from the date of the local assessing officer's Final Local Determination, whichever is longer.

                      Additional time to produce the missing items will be granted in compelling circumstances but only if the taxpayer makes such an extension request in writing within the time allowed under § 7.9.3.(A) herein. A copy of the request for additional time shall be mailed to the local assessing officer.

                      If the taxpayer fails to provide missing item(s) within the time allotted, the Tax Commissioner may proceed to decide the appeal based on available information making such inferences from the failure or refusal to provide requested information as may be appropriate under the circumstances. If sufficient information is unavailable to permit an adequate analysis, the appeal will be dismissed.


                      § 7.9.4. Tax Commissioner receipt of a complete appeal.

                      The Tax Commissioner shall send a notice of receipt of an appeal to the local assessing officer and to the taxpayer.


                      § 7.9.5. Local assessing officer's reply; New issues in taxpayer's appeal.

                      The local assessing officer has thirty days from the date of the notice of receipt of an appeal to:

                        • 1. File a written reply to the Tax Commissioner with additional information.

                      2. File a written request to address new issues raised by the taxpayer.

                      If a written request to address new issues is filed, the appeal shall return to the local assessing officer to address new issues. Whenever an appeal is returned to the local assessing officer because the local assessing officer has made a written request to address new issues, the local appeals process has started again. At this point, the local assessing officer must make a new determination which can then be appealed to the Tax Commissioner as described above.

                      The Tax Commissioner may request that the local assessing officer make a new Final Local Determination on any issues raised for the first time on appeal. The local assessing officer, however, is not required to make a new Final Local Determination but rather can provide relevant information to the Tax Commissioner who will then make a final written determination. If the local assessing officer issues a new Final Local Determination, that determination can then be appealed to the Tax Commissioner as described above.


                      § 7.9.6. Tax Commissioner's final determination of the taxpayer's appeal.

                      In determining an appeal, the Tax Commissioner shall presume the local assessing officer's Final Local Determination is correct. The Tax Commissioner shall issue a written final determination on the taxpayer's appeal within ninety days of the last day a reply or a written request to address new issues can be made. The taxpayer and local assessing officer will be notified if a longer period is required.

                      The Tax Commissioner may make requests for relevant information during the appeal process. This request can include meetings and inspections of facilities. Should the taxpayer fail to respond, within a reasonable time, to a request for reasonably available information, the Tax Commissioner may make a written final determination stating that the local assessing officer's Final Local Determination is correct.

                      All written and oral information relevant to the determination of the taxpayer's appeal shall be provided by the Tax Commissioner to the taxpayer and local assessing officer within a reasonable time of receipt. All such communications and information shall be made a permanent part of the taxpayer's case file.

                      Written communications sent by the taxpayer or local assessing officer to the Tax Commissioner must also be mailed or delivered to the other party by the submitting party. Such communications shall include a signed and dated certificate that copies were provided, as required by these Guidelines, showing the date of mailing or delivery and the name and address of the addressee.

                      The taxpayer or local assessing officer may request a meeting to discuss the issues presented by the appeal.

                      The Tax Commissioner's final determination shall provide citations to sources of information which provide significant guidance, input, or serve as a basis for the final determination. The final determination may include an order correcting an assessment pursuant to § 58.1-1822.


                      § 7.9.7. Withdrawal of appeal.

                      The taxpayer may withdraw his appeal to the Tax Commissioner by making such a request in writing any time prior to the issuance of the Tax Commissioner's final determination. A copy of the request to withdraw the appeal shall be mailed to the local assessing officer. Withdrawal of the appeal shall not preclude the Tax Commissioner from issuing for informational purposes an advisory opinion of issues presented by that appeal.

                      § 7.9.8. Confidentiality - determinations and advisory opinions.

                      Tax Commissioner determinations and advisory opinions made available to the public shall eliminate any reference to the identities of the taxpayer and the local assessing officer.

                      § 7.9.9. Appeal Exhibit.
                      FINAL LOCAL DETERMINATION

                      (DATE)

                      [Name]
                      [Organization]
                      [Address]
                      [City, State ZIP]
                        • Re: 58.1-3703.1(A)(5)(a) Determination:
                          Business, Professional and Occupational License (BPOL) Tax
                      [Taxpayer's name]

                      Dear [Salutation]:

                      Enclosed please find a final assessment for the base year(s) <list base years>. After considering your Application for Review made on <date>, a final determination on your application has been reached. We have based our determination upon the following grounds and relevant facts:

                      Facts
                      You (or your client) have challenged: [Specify the facts and issues presented in the Application for Review]

                      Determination
                      Based upon the facts we discovered during the audit and applicable local statutes, state statutes, and case law, we have determined:

                      [Final determination]

                      [Notification of taxpayer's rights]

                      You may appeal this Final Local Determination to the Tax Commissioner as follows:
                        * If you wish to appeal, you must act within 90 days from the date of this Final Local Determination by filing an Appeal to the Tax Commissioner at P.O. Box 1880, Richmond, Virginia 23218-1880.

                        * Collection activity may commence or resume at any time after the date of this Final Local Determination and will not be suspended until a Notice of Intent to Appeal or Appeal to the Tax Commissioner is timely filed and the local assessing officer receives a copy. If you intend to appeal, you should immediately provide a written Notice of Intent to Appeal to the local assessing officer and to the Tax Commissioner so that collection activities are not reinstated or do not begin.

                        * BPOL Guidelines and the applicable Code of Virginia sections for preparing an Appeal to the Tax Commissioner are available at the office of the local assessing officer and at the Virginia Department of Taxation.
                      Sincerely,

                      [name of local assessing officer]
                      [date]


                      • § 7.10. APPEAL TO THE CIRCUIT COURT.

                        Following an order made by the Tax Commissioner, the taxpayer or the local assessing officer may file an appeal to the circuit court pursuant to § 58.1-3984. The burden shall be on the appealing party to show that the ruling of the Tax Commissioner is erroneous. Neither the Tax Commissioner nor the Department of Taxation shall be made a party to the appeal merely because the Tax Commissioner has issued a final determination.

                        § 7.11. THE TAX COMMISSIONER's ADVISORY AND INTERPRETATIVE POWERS.

                        The Tax Commissioner has the authority to issue advisory written opinions which interpret the BPOL statutes and accompanying Guidelines. The Tax Commissioner is not required to interpret any local ordinances. Examples of the issues which the Commissioner may render advisory opinions upon include:

                        * Interpretation of changes made to the BPOL statutes.

                        * Questions, the answers of which depend upon both state law and the laws of a locality.

                        * Situations where two jurisdictions are attempting to tax the same gross receipts.

                        * Classifications of businesses under the BPOL enabling legislation.

                        * Whether a business qualifies as a manufacturer under existing court decisions.

                        * Whether a business qualifies for deductions, exclusions, or reduced rates of tax contained within the BPOL enabling legislation.

                        * Situs rules contained within the BPOL enabling legislation.

                        * Whether changes made to a local statute conform with required changes under recent Virginia law.

                        Suggested examples of advisory opinions which the Commissioner may decline to make include:

                        * Interpretations of wording contained within individual local BPOL ordinances.

                        * Interpretations of the validity of an individual locality's appeals process.

                        The form for use in the filing of a request for a written advisory opinion from the Tax Commissioner is set forth in Appendix G.

                        Source: Uniform Ordinance provisions The Tax Commissioner may refuse to issue an advisory opinion when the issue involves the interpretation of a local ordinance. However, the Commissioner must interpret the local ordinance if relevant to the appeal of an assessment.

                      • APPENDIX A: AFFILIATED GROUPS

                        "Affiliated group" means:
                          • A. One or more chains of corporations subject to inclusion connected through stock ownership with a common parent corporation which is a corporation subject to inclusion if:

                        * Stock possessing at least eighty percent of the voting power of all classes of stock and at least eighty percent of each class of the nonvoting stock of each of the corporations subject to inclusion, except the common parent corporation, is owned directly by one or more of the other corporations subject to inclusion; and

                        * The common parent corporation directly owns stock possessing at least eighty percent of the voting power of all classes of stock and at least eighty percent of each class of the nonvoting stock of at least one of the other corporations subject to inclusion. As used in this subdivision, the term "stock" does not include nonvoting stock which is limited and preferred as to dividends; the phrase "corporation subject to inclusion" means any corporation within the affiliated group irrespective of the state or country of its incorporation; and the term "receipts" includes gross receipts and gross income.

                        B. Two or more corporations if five or fewer persons who are individuals, estates, or trusts own stock possessing:

                        * At least eighty percent of the total combined voting power of all classes of stock entitled to vote or at least eighty percent of the total value of shares of all classes of the stock of each corporation; and

                        * More than fifty percent of the total combined voting power of all classes of stock entitled to vote or more than fifty percent of the total value of shares of all classes of stock of each corporation, taking into account the stock ownership of each such person only to the extent such stock ownership is
                        identical with respect to each such corporation.

                        When one or more of the corporations subject to inclusion, including the common parent corporation, is a non-stock corporation, the term "stock" as used in this subdivision shall refer to the non-stock corporation membership or membership voting rights, as is appropriate to the context.

                      An affiliated group is composed of two or more corporations or chains of corporations. Affiliated groups are one of two types, either parent-subsidiary or brother-sister. No locality shall impose a license fee or levy a license tax on gross receipts or purchases derived from transactions which occur between members of the affiliated group. Affiliated corporations are not exempt from the license tax or fee from gross receipts or purchases conducted with nonaffiliated entities. Localities may also levy a wholesale license tax on an affiliated corporation for sales to nonaffiliated entities, even if the tax would be based on purchases from an affiliated corporation. [Sales by the affiliated corporation to a nonaffiliated entity means sales by the affiliated corporation to the nonaffiliated entity where goods sold by the affiliated corporation or its agent are manufactured or stored in the Commonwealth prior to their delivery to the nonaffiliated entity.] The filing of a consolidated income tax return is presumptive of an affiliated group, but not conclusive.
                        • A. Parent-Subsidiary Control Group - A parent-subsidiary affiliated group consists of one or more chains of corporations in which a parent corporation directly owns at least 80% of the stock of at least one of the corporations subject to inclusion in the affiliated group, and at least 80% of the stock of any corporations subject to inclusion in the affiliated group, other than the parent corporation, are owned directly by one or more of the corporations subject to inclusion in the affiliated group. [The percentages of stock throughout this appendix refer to the voting power of all classes of stock and each class of nonvoting stock subject to inclusion. Stock does not include nonvoting stock which is limited and preferred as to dividends in § 58.1-3700.1(1)(b).] For example:

                      * Corp. A owns 80% of Corp. B. Corp. B owns 80% of Corp. C.

                      Corp A => 80% => Corp. B
                        • 80%
                        • Corp. C
                        • Corp. A is the common parent of a parent-subsidiary affiliated group of A, B and C corporations.

                      * Corp. B owns 80% of Corp. C and 80% of Corp. D. Corp. C owns 50% of Corp. F. Corp. D owns 30% of Corp. F.
                        • Corp. B => 80% => Corp. C


                        • 80% 50%

                        • Corp D => 30% => Corp. F
                        • Corp. B is the common parent of the B, C, D, and F affiliated group.

                        • B) Brother-Sister Affiliated Group - A brother-sister affiliated group exists if the following elements occur.

                      * Two or more corporations are owned by five or fewer persons (or estates or trusts); and

                      * A total membership test is met. Total ownership occurs when the shareholder group owns at least 80% of the total value of all stock or the total voting power of all classes of stock entitled to vote; and

                      * A common ownership test is met. Common ownership occurs when the shareholder group owns more than 50% of the total value of all stock or the total voting power of all classes of stock entitled to vote. The stock held by each person (estate or trust) is considered only to the extent that the stock ownership is identical for each corporation.

                      The best way to apply this test is to put the respective shareholders and corporations into charts:

                      Shareholders are listed down the first column and corporations are listed in the first row. Each shareholder's percentage of stock ownership is placed in the respective cell. The vertical columns are totaled to determine the 80% test. The horizontal columns are totaled into the identical ownership column and then the identical ownership column is totaled to determine the 50% test. Any owner who does not own at least some stock in each corporation is not considered in either the 50% test or the 80% test.

                      Example 1:

                      Individual shareholder A owns 30% of Corp. E, 40% of Corp. F, and 20% of Corp. G
                      Individual shareholder B owns 50% of Corp. E, 20% of Corp. F, and 30% of Corp. G
                      Individual shareholder C owns 10% of Corp. E, 20% of Corp. F, and 10% of Corp. G
                      Individual shareholder D owns 10% of Corp. E, 20% of Corp. F, and 30% of Corp. G


                      CorporationsExtent of Shareholder's Identical Ownership
                      Shareholders
                      E Corp.
                      F Corp.
                      G Corp.
                      A
                      30%
                      40%
                      20%
                      20%
                      B
                      50%
                      20%
                      30%
                      20%
                      C
                      10%
                      20%
                      10%
                      10%
                      D
                      10%
                      20%
                      30%
                      10%
                      Totals
                      100%
                      100%
                      90%
                      60%

                      • The vertical columns are totaled to determine the 80% test. The horizontal columns are totaled to determine the 50% test. Since all three test are met, E, F & G are an affiliated group.

                        Example 2:

                        Same facts as above except that Shareholder A owns 40% of Corp. E, Shareholder B owns 10% of Corp. F, Shareholder C owns 30% of Corp. G and Shareholder D owns 0% of Corp. E and 0% of Corp. G.

                        CorporationsExtent of shareholder's Identical Ownership
                        Shareholders
                        E Corp.
                        F Corp.
                        G Corp.
                        A
                        40%
                        40%
                        20%
                        20%
                        B
                        50%
                        10%
                        30%
                        10%
                        C
                        10%
                        20%
                        30%
                        10%
                        D
                        0%
                        20%
                        0%
                        0%
                        Totals
                        100%
                        90%
                        80%
                        40%

                        Corporations E, F, and G are not an affiliated group because the 50% test is not met. Owner D is not considered in the calculation since D does not own stock in each corporation.

                        However, as shown in the following chart, Corporations E & F are an affiliated group in the example above:

                        CorporationsExtent of shareholder's Identical Ownership
                        Shareholders
                        E Corp.
                        F Corp.
                        G Corp.
                        A
                        40%
                        40%
                        40%
                        B
                        50%
                        10%
                        10%
                        C
                        10%
                        20%
                        10%
                        D
                        0%
                        20%
                        0%
                        Totals
                        100%
                        90%
                        60%
                      APPENDIX B: MANUFACTURING

                      Manufacturers are not listed as a classification for which § 58.1-3706 specifies the maximum tax rate. The taxation of wholesalers, however, is affected by whether the business is also classified as a manufacturer, and whether activities at a definite place of business from which sales are made are considered to be part of the manufacturing process. Questions also arise as to whether a business is a manufacturer or properly classified as another type of business. [For purposes of consolidation, some comments included in the 1997 BPOL Guidelines have been omitted. However, the 1997 BPOL Guidelines are the primary source of this version.]

                      The Code of Virginia does not define the term "manufacturer" for purposes of the local business license tax. [Included in this Appendix are excerpts from the Virginia Supreme Court's discussion in the County of Chesterfield v. BBC Brown Boveri, 238 Va. 64 (1989) case of the term "manufacturer" as contained in the BPOL law.] The courts, however, have developed a liberally applied test involving three essential elements in determining when a person is a manufacturer:

                      1. The original material;
                      2. A process whereby the original material is changed; and
                      3. A resulting product which, by reason of being subjected to processing, is different from the original material.

                      "Manufacturer" means one engaged in activity which transforms materials into an article or product of substantially different character. A business engaged in manufacturing does not lose its status as a manufacturer merely because it conducts some non-manufacturing activities. When one is engaged in both manufacturing and non-manufacturing activities, it can still be classified as a manufacturer if its manufacturing activity constitutes a substantial portion of its overall activities. The test to determine whether a multi-purpose business qualifies as a manufacturer for tax purposes is one of substantiality. The test of substantiality has no rigid definition; however, the business as a whole must be considered. In order for the manufacturing component of a multi-purpose business to be deemed substantial, it must not be de minimis, merely trivial, or only incidental to its principal business.

                      Gross receipts that are ancillary to a manufacturer's sales at wholesale at the place of manufacture are also exempt even though the receipts may be attributable to activities at another location, e.g., interest on an installment sale or charge account may be received at a location other than the place of manufacture and sale at wholesale.

                      Thus, mere manipulation or rearrangement of the original materials is not sufficient; there must be a substantial, well-signified transformation in form, usability, quality and adaptability rendering the original material more valuable for use than it was before. Merely processing, blending, grading etc. material is not manufacturing.

                      Not every person engaged in some manufacturing is classified as a manufacturer. The manufacturing component of the business must be a substantial (i.e, not incidental or inconsequential) portion of the business. The factors that may be considered in determining whether the manufacturing component of a multi-purpose business makes a substantial contribution to the entire business include, but are not limited to, any one or more of the following:
                        • 1. the manufacturing component's financial receipts or proportion of total corporate income;
                        • 2. the percentage that manufacturing equipment, inventory, etc. comprises of the total capital investment;
                        • 3. the number of employees working in the manufacturing component as compared with the total number of employees; or
                        • 4. the ratio of manufacturing activities to the entire business. For example, if a developer of very complex custom software produces only a few copies of disks, the assembly of purchased components may or may not constitute manufacturing. However, if such production constitutes a majority of the business activities, the business may be considered a manufacturer.

                      Routine assembly generally is not manufacturing. For example, if components are sold separately and assembly is offered as an option to the purchaser, the assembly is a service (which may or may not be ancillary to the sale of the component, or de minimis.) When evaluating the facts and circumstances to determine if a business is engaged in manufacturing, factors which suggest that assembly is not a separate service but part of a manufacturing process include, but are not limited to, any one or more of the following:

                      * The assembly process is complex and uses numerous parts.

                      * After assembly, the components cannot be recognized without previous knowledge.

                      * The components are not readily usable for any purpose other than incorporation into the finished product.

                      Engineering, design, research and development, and computer software development typically are not manufacturing. However, the actual production of tangible products based on engineering, design, research and development can be manufacturing. For example:

                      While the development of computer software is not manufacturing, the production of boxes containing the software on disks and related instruction manuals may be manufacturing.

                      While the design of computer hardware components is not manufacturing, the production of such components may be manufacturing.

                      While the design and engineering of specialized tools, dies, and machinery is not manufacturing, the production of even a single tool, die or machine may be manufacturing.

                      Cases and opinions germane to manufacturing classification for BPOL tax

                      The term "original material" has been used instead of raw or new material because modern manufacturers may start with purchased components. In one case, a circuit court held that the assembly of purchased components into personal computers was manufacturing. County of Fairfax v. Datacomp Corp. (letter opinion dated February 22, 1995). See, also:
                      County of Chesterfield v. BBC Brown Boveri, 238 Va. 64 (1989). (Solite test for manufacturing is to be applied liberally; a multi-purpose business is classified as a manufacturer if manufacturing activity makes a substantial contribution to the entire business, i.e., not de minimis, trivial or incidental; factors suggested in evaluating substantiality.)
                      Solite Corp. v. King George County, 220 Va. 661 (1980). (The mere blending together of various ingredients, in the absence of a transformation into a product of substantially different character, is not manufacturing.)
                      Prentice v. City of Richmond, 197 Va. 724 (1956) (The original substance, though not destroyed, was so transformed through art and labor that without previous knowledge it could not have been recognized in the new shape it assumed, or in the new uses to which it was applied.)
                      1995 Op. Va. Att'y Gen. 257. (The pasteurization, homogenization, butterfat adjustment or vitamin fortification of milk, adding sugar and flavorings to milk is not manufacturing; but adding flavored powder or powdered tea and sugar to water is manufacturing; the addition of water to orange juice concentrate is not manufacturing.).
                      1995 Op. Va. Att'y Gen. 254. (Electroplating and electropainting processes are not manufacturing.)
                      1993 Op. Va. Att'y Gen. 231. (A seafood processor who transforms a product from one that is unusable by consumers into one that is usable and substantially different in character is a manufacturer.)
                      1991 Op. Va. Att'y Gen. 248. (A computer software development and hardware design, modification and installation is not manufacturing.)
                      1984-1985 Op. Va. Att'y Gen. 356. (A wholesale dealer in "cementitous" products not a manufacturer -the dry ingredients were merely mixed and sold in bags and boxes.)
                      1984-1985 Op. Va. Att'y Gen. 399. (A person who grades and packs herbs, and sells scrap metal or parts from junk cars is a merchant; but if plants are dried, crushed, graded and packaged, or if scrap metal is crushed and compacted, it would be manufacturing.) However, the Circuit Court of Chesapeake recently held that crushing and shredding junk cars and separating the pieces into metallic categories free from debris was industrial processing, but not manufacturing under § 58.1-3703(C)(4). Money Point Land Holding Corp. t/a Jacobson Metals Co. v. City of Chesapeake, (letter opinion dated 2/14/95.)
                      1983-1984 Op. Va. Att'y Gen. 372 (definition in sales tax law not applicable to definition of "manufacturer" for license tax purposes.)
                      Appeal of Titzel Engineering, Inc., 205 A. 2d. 700 (Pa. 1964) (making an automobile would be manufacturing whether or not it was merely the assembling of parts manufactured by many other companies; a company using employees to assemble many parts to create a new, different and useful article would be thought of as a manufacturer and not an assembler.)

                        • Manufacturing Examples:

                            • 1.) Example: An entity accepts delivery of used and burnt up turbine-powered generators which can no longer properly function. The entity removes parts from the generators and replaces them with new parts which it makes to precise specifications from raw copper. The entity also rewinds the generators with new copper wiring. After repair, the generators operate much like a new machine.
                          For the reasons stated above, the above activity constitutes manufacturing.

                            • 2.) Example: Entity purchases livestock outside of the state of Virginia, brings that stock into Virginia, and slaughters and trims the stock here, and also smokes and salts the meat for sale in Virginia.

                              Under these facts, this activity constitutes manufacturing.
                            • 3.) Example: An entity receives from various vendors electro-magnetic tape, some in raw form and some in programmed format, and integrates the data thereon with other magnetic tape received from other vendors which will result in a customized home video game cartridge or diskette.

                              Based upon these facts and for the reasons stated above, the above activity does not constitute manufacturing.
                            • 4.) Example: Same as above, except the entity designs small plastic, box-like cartridges and, after integrating the various original data types into combined data on a previously blank magnetic tape medium, it electronically engrafts the new, combined data onto magnetic plate-like tape diskettes inside of the cartridges and ships the resulting cartridges for wholesale from its production facility in Virginia.

                              For the reasons stated above, the activity as outlined in these set of facts constitutes manufacturing.
                            • 5.) Example: An entity engages in typesetting, duplicating, editing or graphic design processes. These activities by themselves are neither printing nor manufacturing. However, when an entity engages in more than one or a combination of these processes to produce a product that is substantially transformed from the original material, it may qualify as a manufacturer. If the entity sells the new product at wholesale from the place of manufacture, the business may benefit from the exemption contained within § 58.1-3703(C)(4). (See P.D. 99-200 for an example of this.)



                          APPENDIX C

                          LEGISLATIVE AND ADMINISTRATIVE HISTORY OF THE BPOL TAX

                          A brief history of the license tax is necessary to provide some context for recent changes in BPOL tax structure. In addition, an understanding of past legislative and administrative actions explains why so many policies and definitions refer back to laws that have been repealed.

                          For many years the state required a long list of specific businesses to obtain a license and pay a tax. The tax was usually a flat amount, but in some cases was graduated based on gross receipts. During this period, state law permitted cities and towns to impose their own license tax when anything for which a state license was required was done in the city or town. (However, many city charters contained broader general tax powers. Telephone Company v. Newport News, 196 Va. 627.) Beginning in 1948, license tax authority under state law was extended to counties and situs rules were added which brought in the concept of a "definite place of business." State law was amended in 1964 to eliminate the language restricting local licenses to instances in which a state license was required, permitting counties, and those cities and towns without general tax powers in their charters to impose a license tax regardless of whether the state taxed the particular business.

                          Although no locality was required to observe state license tax imposition and classifications after 1964, the local Commissioners of the Revenue issued both local and most state tax licenses. Where local ordinances and state law used the same terms or classifications, the local Commissioners would follow state classifications drafted for state license tax purposes.

                          State law provided for a number of exemptions for both state and local license tax purposes. For example, manufacturers were exempt from the tax on merchants if they were subject to the state tax on capital and sold to licensed dealers or retailers, but not to consumers. See § 188 of the Tax Code of 1928; see also Thompson's Dairy. Inc. v County Bd., 197 Va. 623 (1956) applying a similar provision to dairies. Thus, a state and local license tax exemption depended on the Department's definition of a "manufacturer" for purposes of the capital tax.

                          In 1966, Virginia enacted the retail sales and use tax. The act also reduced the rate of the capital tax and repealed the code sections imposing a state license tax on retail and wholesale merchants. However, the enactment repealing the merchants license tax expressly provided that the repeal would not operate to subject a wholesale merchant to a state peddlers tax. In other words, even though the section defining a wholesale merchant had been repealed, the definition was still relevant for state license tax purposes and, by implication, for local license tax purposes as well. 1966 Acts of Assembly Chpt. 151, enactment 2. Therefore, almost 30 years after its repeal, the inclusion of sales to institutional, commercial and industrial users in § 58-304's definition of wholesale sales continues to be relevant in today's BPOL Guidelines.

                          From 1964 until 1975 there was little statutory restraint on the authority of local governments to impose local license taxes at whatever rate they chose. The 1975 General Assembly froze local license tax rates as of December 31, 1974, and maintained the freeze until 1978. Following recommendations made by the Revenue Resources and Economic Commission, the General Assembly enacted the current four major categories and rate limitations now found in subsection A of § 58.1-3706. The relationship between the ceiling rates reflected the relative differences in operating ratios between broad categories of similar activities, i.e., the gross profit ratios for similar business activities as reported by the Internal Revenue Service in Statistics of Income: Business Income Tax Returns. 1970. The legislation also required the Department of Taxation to develop these Guidelines.

                          In 1978, the Department still administered a state license tax and the capital tax. As noted above, policies and definitions from the administration of both taxes affected local license tax administration. In 1982 the state license tax was repealed and in 1984 the rate on the capital tax was reduced to zero. The 1982 legislation repealed the code sections relating to state license taxes and amended sections relating to local license taxes to ensure that localities continued to enjoy the same authority with respect to local license tax as they had before the repeal of state license tax. Nevertheless, it is still necessary to look occasionally at pre-1982 state license tax law.

                          For example, employees who practice a profession may be required to obtain their own local license. Prior to the 1982 repeal, § 58-255 required a separate license for every member of a firm practicing a profession "regulated by the laws of this state" and other sections of the code required a state license of "every architect" or "every lawyer," etc.

                          In 1984, Title 58 was recodified as Title 58.1. The recodification rearranged and rewrote local license tax sections with little substantive change. Some of the changes eliminated references to repealed laws. The definition of "contractor" currently found in 58.1-3714 B was added, but derived from the definition for state license tax purposes in 58-297 prior to its repeal in 1982. It is interesting to note that § 58-297 included language classifying dealers in tombstones as merchants. This language was not incorporated into the recodification changes, but survives in § 5.5 of the current Guidelines, and appeared in § 4.6. of the 1995 version as well as in §1-5 of the 1984 version.

                          The 1978 session of the Virginia General Assembly enacted House Bill 696 amending §58-266.1 of the Code of Virginia (recodified in 1984 as § 58.1-3706), effective for the tax years beginning on and after January 1, 1979. The act imposed ceilings on the tax rates localities could impose on various classifications of businesses and also required that the Department of Taxation promulgate guidelines defining and explaining the categories of enterprises specified in the act. Previously, there were no BPOL Guidelines.

                          After seeking the counsel of local officials and interested groups and holding public hearings, the original Guidelines were published and dated January 1, 1979. The Department of Taxation updated the Guidelines effective January 1, 1980 and again on July 1, 1984.

                          In 1994, the General Assembly amended § 58.1-3701 requiring the Department to update the Guidelines by July 1, 1995, and triennially thereafter. The Department circulated a draft of the updated Guidelines on May 15, 1995, and on June 12, 1995 held a hearing to receive comments. The Guidelines were issued on July 1, 1995.

                          In 1996, Code of Virginia § 58.1 -3700 et seq. were significantly amended. The intent of the 1996 amendments and the new Guidelines was to help ensure a more uniform administration of BPOL taxes. Code of Virginia § 58.1-3703.1 establishes uniform ordinance provisions. Localities levying a BPOL tax must include provisions in their local ordinances substantially similar to the uniform ordinance provisions. The uniform ordinance provisions include: due dates for BPOL license applications and license tax payments; penalty and interest provisions; waiver provisions for penalty and interest; taxpayer appeal procedures at the local and state level; rules for determining the situs and apportionment of gross receipts; and provisions allowing taxpayers to obtain advance rulings.

                          Amendments to Code of Virginia § 58.1-3701 also promote uniform administration. Under that section, the Tax Commissioner has the authority to issue written advisory opinions to interpret the provisions of Chapter 37 and the Guidelines. Advisory opinions are intended to supplement and be used in conjunction with law set out in Chapter 37.

                          The effective date of these changes was January 1, 1997, but selected provisions had other effective dates or were transitioned into the law. Although an update of the Guidelines was not required until 1998, the scope of the changes necessitated that the Guidelines be modified to reflect the 1996 amendments. Working groups comprised of local officials, members of the business community, interested individuals, and the Department of Taxation were formed to assist in redrafting the Guidelines. The Department circulated a draft of the updated Guidelines on November 18, 1996, reflecting input from the working groups. After a series of public hearings held in November and December 1996 to hear comments on the proposed draft, the Guidelines were issued on January 1, 1997.

                          The Guidelines and advisory opinions are not to be interpreted as granting localities the authority to impose any tax not otherwise authorized or that is prohibited by some other provision of law.

                          The Guidelines also do not require the locality to levy any tax, only that in doing so it not exceed statutory maximum rates. The final decision of whether or not to tax a business, profession or occupation allowed under § 58.1-3700 et seq. lies with each locality unless the tax is prohibited by some provision of law.

                          The locality may also impose a lower tax rate or provide for subclassifications within the categories listed in § 58.1-3706, provided the tax imposed does not exceed the maximum tax rate specified in that section. In addition, the provisions required for administration of local license taxes must be adopted by the individual locality. Therefore, one must always look to the language of the local ordinance for the actual language imposing a tax, and creating subclassifications and exemptions.

                          The principal effect of the amendments was to provide a structure for uniform application of the tax. This structure starts from the premise that the tax is levied upon the privilege of conducting a licensable business. Localities may charge a fee for each license issued for the privilege of engaging in a licensable business. Additionally, to mitigate the tax burden on small and start-up companies, gross receipts thresholds were established for certain licensable privileges below which a locality cannot impose a BPOL tax. Further, a legislative amendment restricted localities from imposing a license fee and levying a license tax upon nonprofit organizations and venture capital funds.

                          After July 1, 2001, the Guidelines shall be subject to the Administrative Process Act and accorded the weight of a regulation under § 58.1-205. The Guidelines will be followed by the Department in deciding all appeals under Code of Virginia § 58.1-3703.1(A)(5)(c) and in issuing advisory written opinions pursuant to Code of Virginia § 58.1-3701. The Department reserves the right to modify the Guidelines to reflect changes in interpretations, judicial opinions, and the law. Any changes to the Guidelines will be made consistent with § 58.1-3700 et seq. which requires the Department to seek public comment.

                        APPENDIX D: MISCELLANEOUS ITEMS

                        CERTAIN LOCALITIES NOT SUBJECT TO RATE LIMITATIONS

                        Any locality which had, on January 1, 1978, a license tax rate for any of the categories listed in § 58.1-3706(A) which is higher than the maximum prescribed therein, may maintain a higher rate in such category, but no higher than the rate applicable on January 1, 1978, subject to the following conditions: (1) A locality may not increase a rate on any category which is at or above the maximum prescribed for such category in § 58.1-3706(A); (2) If a locality increases the rate on a category which is below the maximum, it shall apply all revenue generated by such increase to reduce the rate on a category or categories which are above such maximum; and, (3) A locality shall lower rates on categories which are above the maximums prescribed in § 58.1-3706(A) for any tax year after 1982 if it receives more revenue in tax year 1981, or any tax year thereafter, than the revenue base for such year. The revenue base for tax year 1981 shall be the amount of revenue received from all categories in tax year 1980, plus one-third of the amount, if any, by which such revenue received in tax year 1981 exceeds the revenue received for tax year 1980. The revenue base for each tax year after 1981 shall be the revenue base of the preceding tax year plus one-third of the increase in the revenues of the subsequent tax year over the revenue base of the preceding tax year. If in any tax year the amount of revenues received from all categories exceeds the revenue base for such year, the rates shall be adjusted as follows: The revenues of those categories with rates at or below the maximum shall be subtracted from the revenue base for such year. The resulting amount shall be allocated to the category or categories with rates above the maximum in a manner determined by the locality, and divided by the gross receipts of such category for the tax year. The resulting rate or rates shall be applicable to such category or categories for the second tax year following the year whose revenue was used to make the calculation.


                        NONPROFIT ORGANIZATIONS

                        Additionally, Code of Virginia § 58.1-3703(C)(18) provides certain exemptions to non-profit organizations. Nonprofit and charitable nonprofit organizations are defined separately as the kinds and sources of funds flowing to either nonprofit or charitable nonprofit organizations are different for purposes of the exemption from the BPOL tax.

                        Nonprofit organization means an organization, other than a charitable nonprofit organization, which is exempt from federal income tax under IRC § 501. Activities conducted for consideration which are similar to activities that are conducted for consideration by for-profit businesses may be presumed to be activities that are subject to licensure. For example, a lunch counter operated by an organization open to members only, the proceeds from which are used to maintain the organization, may be subject to local license tax. In any case, gifts, contributions, and membership dues of nonprofit organizations would not be taxable gross receipts from the conduct of a business, nor could a locality impose a license fee on activities giving rise to such funds.

                        Charitable nonprofit organization means an organization which is described in IRC § 501(c)(3) and to which contributions are deductible by the contributor under IRC Code § 170, except that educational institutions are limited to schools, colleges and other similar institutions of learning. To the extent that a charitable nonprofit organization is required to report income which is in fact unrelated business taxable income for federal income tax purposes under IRC Code § 511 et seq., such organization may be presumed to have gross receipts from an activity which, depending on the applicable classification, is licensable for BPOL purposes. The fact that a charitable nonprofit organization does not report any unrelated business taxable income for federal income tax purposes would not prevent the locality from requiring a license for the business activity; however, local officials may only determine whether a charitable nonprofit organization has unrelated taxable business income pursuant to IRC Code § 511 et seq.

                        1990 Op. Va. Att'y Gen. 217 (localities not precluded from taxing private nonprofit colleges on tuition or other consideration for services, but donations and other gratuitous transfers are not taxable gross receipts).
                        1989 Op. Va. Att'y Gen. 311 (nonprofit organization that regularly offers seminars taxable on receipts from seminar fees, but not donations).
                        Commonwealth v. Employees Assoc., 195 Va. 663 (1954) (locality may tax nonprofit employee association sales of food and beverage to members even though no profit intended or realized).


                        APPENDIX E: PUBLIC DOCUMENTS

                        Public Documents that have been issued by the department over the last several years are listed below by subject matter. They are available in your local commissioners office or you may contact the Office of Tax Policy at (804) 367-8010 to request copies of specific Public documents. Some documents may be listed more than once because they deal with multiple issues.

                        Attorney Fees

                        P.D. 94-227
                        P.D. 95-200
                        P.D. 97-063
                        P.D. 97-166
                        P.D. 97-310
                        P.D. 98-135
                        P.D. 99-111
                        P.D. 99-208

                        Affiliated Groups

                        P.D. 95-200
                        P.D. 97-101
                        P.D. 97-192
                        P.D. 97-421
                        P.D. 99-176

                        Business services

                        P.D. 97-2
                        P.D. 97-9
                        P.D. 97-16
                        P.D. 97-21
                        P.D. 97-26
                        P.D. 97-41
                        P.D. 97-44
                        P.D. 97-50
                        P.D. 97-52
                        P.D. 97-57
                        P.D. 97-63
                        P.D. 97-68
                        P.D. 97-69
                        P.D. 97-77
                        P.D. 97-87
                        P.D. 97-89
                        P.D. 97-115
                        P.D. 97-124
                        P.D. 97-133
                        P.D. 97-143
                        P.D. 97-145
                        P.D. 97-164
                        P.D. 97-165
                        P.D. 97-167
                        P.D. 97-174
                        P.D. 97-175
                        P.D. 97-183
                        P.D. 97-189
                        P.D. 97-192
                        P.D. 97-231
                        P.D. 97-251
                        P.D. 97-257
                        P.D. 97-277
                        P.D. 97-282
                        P.D. 97-284
                        P.D. 97-292
                        P.D. 97-294
                        P.D. 97-304
                        P.D. 97-309
                        P.D. 97-310
                        P.D. 97-318
                        P.D. 97-321
                        P.D. 97-323
                        P.D. 97-326
                        P.D. 97-330
                        P.D. 97-347
                        P.D. 97-396
                        P.D. 97-410
                        P.D. 97-421
                        P.D. 97-423
                        P.D. 97-427
                        P.D. 97-432
                        P.D. 97-490
                        P.D. 98-40
                        P.D. 98-50
                        P.D. 98-135
                        P.D. 98-140
                        P.D. 98-154
                        P.D. 98-156
                        P.D. 98-160
                        P.D. 98-203
                        P.D. 98-204
                        P.D. 99-10
                        P.D. 99-11
                        P.D. 99-12
                        P.D. 99-13
                        P.D. 99-14
                        P.D. 99-23
                        P.D. 99-100
                        P.D. 99-114
                        P.D. 99-121
                        P.D. 99-133
                        P.D. 99-134
                        P.D. 99-178
                        P.D. 99-199
                        P.D. 99-200
                        P.D. 99-207
                        P.D. 99-211
                        P.D. 99-228
                        P.D. 99-233
                        P.D. 99-234
                        P.D. 99-236
                        P.D. 99-238
                        P.D. 99-239

                        Contractors
                        P.D. 97-16
                        P.D. 97-21
                        P.D. 97-26
                        P.D. 97-57
                        P.D. 97-101
                        P.D. 97-133
                        P.D. 97-164
                        P.D. 97-166
                        P.D. 97-172
                        P.D. 97-182
                        P.D. 97-183
                        P.D. 97-318
                        P.D. 97-323
                        P.D. 97-344
                        P.D. 97-396
                        P.D. 97-404
                        P.D. 97-423
                        P.D. 97-472
                        P.D. 98-160
                        P.D. 98-204
                        P.D. 99-12
                        P.D. 99-13
                        P.D. 99-122
                        P.D. 99-141
                        P.D. 99-207

                        Fiduciaries

                        P.D. 96-397
                        P.D. 97-128
                        P.D. 97-278
                        P.D. 97-292
                        P.D. 97-415
                        P.D. 97-485
                        P.D. 98-59
                        Fiduciaries

                        P.D. 98-109
                        P.D. 98-135
                        P.D. 98-136
                        P.D. 99-2

                        Financial Services

                        P.D. 94-227
                        P.D. 95-200
                        P.D. 97-2
                        P.D. 97-68
                        P.D. 97-168
                        P.D. 97-277
                        P.D. 97-292
                        P.D. 97-310
                        P.D. 97-321
                        P.D. 97-323
                        P.D. 97-490
                        P.D. 98-154
                        P.D. 99-100
                        P.D. 99-121
                        P.D. 99-211
                        P.D. 99-228
                        P.D. 99-233
                        P.D. 99-234

                        Internet Sales

                        P.D. 98-154
                        P.D. 99-137

                        Interstate Commerce

                        P.D. 95-200
                        P.D. 97-50
                        P.D. 97-142
                        P.D. 97-324
                        P.D. 98-140
                        P.D. 99-134
                        P.D. 99-212
                        P.D. 99-238

                        Itinerant Merchants
                        & Peddlers

                        P.D. 97-68
                        P.D. 97-86
                        P.D. 97-133
                        P.D. 97-189

                        Limited Liability
                        P.D. 97-270
                        P.D. 98-37
                        P.D. 98-41
                        P.D. 98-42
                        P.D. 98-46
                        P.D. 98-50
                        P.D. 98-138
                        P.D. 98-156
                        P.D. 98-203
                        P.D. 99-9
                        P.D. 99-10
                        P.D. 99-134
                        P.D. 99-176
                        P.D. 99-209
                        P.D. 99-237

                        Manufacturers

                        P.D. 94-227
                        P.D. 95-200
                        P.D. 97-18
                        P.D. 97-146
                        P.D. 97-165
                        P.D. 97-183
                        P.D. 97-268
                        P.D. 97-312
                        P.D. 97-362
                        P.D. 97-427
                        P.D. 98-40
                        P.D. 98-154
                        P.D. 98-160
                        P.D. 99-14
                        P.D. 99-114
                        P.D. 99-200
                        P.D. 99-228
                        P.D. 99-237
                        P.D. 99-239

                        Multiple Businesses

                        P.D. 95-200
                        P.D. 97-69
                        P.D. 97-88
                        P.D. 97-257
                        P.D. 97-304
                        P.D. 98-42
                        P.D. 98-138
                        P.D. 98-140
                        P.D. 98-154
                        P.D. 99-211
                        P.D. 99-233
                        P.D. 99-238
                        P.D. 99-264

                        Non-Profits

                        P.D. 97-157
                        P.D. 98-203

                        Proration or Apportionment

                        P.D. 95-200
                        P.D. 97-166
                        P.D. 97-284
                        P.D. 97-308
                        P.D. 97-309
                        P.D. 98-140
                        P.D. 99-10
                        P.D. 99-236

                        Retailers

                        P.D. 97-2
                        P.D. 97-26
                        P.D. 97-55
                        P.D. 97-56
                        P.D. 97-57
                        P.D. 97-68
                        P.D. 97-69
                        P.D. 97-88
                        P.D. 97-89
                        P.D. 97-115
                        P.D. 97-138
                        P.D. 97-146
                        P.D. 97-164
                        P.D. 97-175
                        P.D. 97-179
                        P.D. 97-183
                        P.D. 97-217
                        P.D. 97-249
                        P.D. 97-304
                        P.D. 97-305
                        P.D. 97-309
                        P.D. 97-317
                        P.D. 97-326
                        P.D. 97-362
                        P.D. 98-41
                        P.D. 98-42
                        P.D. 98-140
                        P.D. 98-154
                        P.D. 98-160
                        P.D. 99-9
                        P.D. 99-10
                        P.D. 99-12
                        P.D. 99-14
                        P.D. 99-23
                        P.D. 99-114
                        P.D. 99-121
                        P.D. 99-125
                        P.D. 99-133
                        P.D. 99-137
                        P.D. 99-141
                        P.D. 99-199
                        P.D. 99-200
                        P.D. 99-239

                        Real Estate Brokers

                        P.D. 94-227
                        P.D. 97-8
                        P.D. 97-282
                        P.D. 97-323
                        P.D. 97-404
                        P.D. 98-46
                        P.D. 99-100
                        P.D. 99-133

                        Severance Taxes

                        P.D. 95-200
                        P.D. 97-86
                        P.D. 97-101

                        Taxes and Fees
                        P.D. 99-111
                        P.D. 99-114
                        P.D. 99-210
                        P.D. 99-229
                        P.D. 99-232
                        P.D. 99-233
                        P.D. 99-234
                        P.D. 99-252
                        P.D. 99-256
                        P.D. 99-257
                        P.D. 99-258
                        P.D. 99-259
                        P.D. 99-270
                        P.D. 99-275

                        Wholesalers

                        P.D. 97-2
                        P.D. 97-23
                        P.D. 97-56
                        P.D. 97-57
                        P.D. 97-88
                        P.D. 97-124
                        P.D. 97-146
                        P.D. 97-164
                        P.D. 97-165
                        P.D. 97-168
                        P.D. 97-179
                        P.D. 97-183
                        P.D. 97-200
                        P.D. 97-249
                        P.D. 97-268
                        P.D. 97-277
                        P.D. 97-309
                        P.D. 97-312
                        P.D. 97-362
                        P.D. 97-427
                        P.D. 97-450
                        P.D. 97-470
                        P.D. 98-40
                        P.D. 98-42
                        P.D. 98-154
                        P.D. 98-160
                        P.D. 99-12
                        P.D. 99-14
                        P.D. 99-125
                        P.D. 99-133
                        P.D. 99-137
                        P.D. 99-141
                        P.D. 99-199
                        P.D. 99-200
                        P.D. 99-228
                        P.D. 99-238
                        P.D. 99-239
                      This index is an updated version of the original list which was prepared by the staff of the City of Chesapeake for the 1997 BPOL Guidelines. The department utilized the Attorney General's Web site in updating the index.


                      • REQUEST FOR BPOL ADVISORY OPINION

                        A. Name of requesting party:
                        Local tax official or business:
                        Address:
                        Locality or localities involved:
                          • Date request made: Telephone: FAX:
                            E-mail:
                        B. On the lines below, please fully describe the facts on which you seek an opinion and sign Section C on Page 2. Please attach additional sheets and copies of pertinent documentation to this form as necessary.

                        REQUEST FOR BPOL ADVISORY OPINION



                      C. Before the Department of Taxation can respond to this request, this form must be signed. If the requesting party is a locality, this form must be signed by the Commissioner of the Revenue, Director of Finance, or other person authorized to sign on behalf of such persons. If the requesting party is a Business, this form must be signed by an authorized representative of the Business.
                        Signature:

                        I understand that the department may contact [my local tax official or, if an opinion is being requested by a locality, the Business] for purposes of answering my question(s).

                        Signature: Title:

                        Last Updated 08/25/2014 16:46