Tax Type
BPOL Tax
Description
Utilities and BPOL
Topic
Persons Subject to Tax
Date Issued
09-19-2001
September 19, 2001
Re: Request for Advisory Opinion
Business, Professional, & Occupational License (BPOL) Tax
Dear *****
This advisory opinion is issued in response to your request for guidance concerning the local license taxation of the electric and natural gas industries. I apologize for the delay in responding to your request.
While addressing the questions raised in your letter, this response is intended to provide advisory guidance only, and does not constitute a formal or binding ruling. I have enclosed copies of cited material for your review.
You ask whether or not electric suppliers, gas utilities and gas suppliers (as defined in Code of Virginia § 58.1-400.2) and pipeline distribution companies (as defined in Code of Virginia § 58.1-2600) (hereinafter referred to as "Electric and Gas Suppliers") are subject to the local license taxes authorized by Code of Virginia § 58.1-3731 based on their 2000 gross receipts.
The 1999 and 2000 sessions of the General Assembly provided for the deregulation of the electric and natural gas industries, respectively. See 1999 Senate Bill 1286 (Chapter 971 of the 1999 Acts of Assembly), 2000 Senate Bill 185 (Chapter 691 of the 2000 Acts of Assembly) and 2000 House Bill 279 (Chapter 706 of the 2000 Acts of Assembly). In addition to the deregulation, the manner in which each industry is taxed by the Commonwealth was changed.
Effective January 1, 2001, the state and local gross receipts license taxes imposed on the electric and natural gas industries were repealed. These taxes were replaced by imposing the corporate income tax on both industries and imposing consumption taxes on the consumers of electricity and gas. The consumption tax on electricity is based on kilowatt hour usage. The consumption tax on natural gas is based on the volume of natural gas in units of 100 cubic feet ("CCF") delivered and used per month.
Prior to January 1, 2001, localities were authorized by Code of Virginia
§ 58.1-3731 to impose a gross receipts license tax on Electric and Gas Suppliers at a rate not to exceed 0.5%. During each year that this tax was imposed, Electric and Gas Suppliers were allowed to embed the tax in the price of electricity and gas charged to consumers. The Electric and Gas Suppliers would then remit all of the tax collected in that year to the proper localities in the following year in accordance with that locality's remittance procedure.
In the present case, the Electric and Gas Suppliers included the local gross receipts license taxes in the price of all gas and electricity sold through December 31, 2000. Based upon the history of the collection and remittance of this tax, all of the local gross receipts taxes collected during 2000 should be remitted to the proper locality in 2001 in accordance with that locality's remittance procedure.
This was clearly the intent of the General Assembly when it enacted the changes in taxation for the electric and gas industries in 1999. Code of Virginia §§ 58.1-2901(D) and 58.1-2905(D) provide that taxes on electricity and gas sales in the year ending December 31, 2000, relating to the local license tax, shall be paid in accordance with Code of Virginia § 58.1-3731. Code of Virginia § 58.1-3731 states that the local gross receipts license tax shall not be imposed on Electric and Gas Suppliers after December 31, 2000, except upon gross receipts for the calendar year 2000. When all three sections are read in concert, the only correct determination is that the calendar year 2000 gross receipts of Electric and Gas Suppliers were subject to the local gross receipts license tax and is, therefore, payable in 2001.
It should be noted that the three Code sections referenced above were amended in the 2000 session of the General Assembly. The amendments, however, only served to correct two drafting errors and make one clarification of prior intent.
I hope that the above information will be of assistance to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please contact ***** Tax Policy Analyst, in my Policy Development Office at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP32354D
Re: Request for Advisory Opinion
Business, Professional, & Occupational License (BPOL) Tax
Dear *****
This advisory opinion is issued in response to your request for guidance concerning the local license taxation of the electric and natural gas industries. I apologize for the delay in responding to your request.
While addressing the questions raised in your letter, this response is intended to provide advisory guidance only, and does not constitute a formal or binding ruling. I have enclosed copies of cited material for your review.
You ask whether or not electric suppliers, gas utilities and gas suppliers (as defined in Code of Virginia § 58.1-400.2) and pipeline distribution companies (as defined in Code of Virginia § 58.1-2600) (hereinafter referred to as "Electric and Gas Suppliers") are subject to the local license taxes authorized by Code of Virginia § 58.1-3731 based on their 2000 gross receipts.
ANALYSIS
The 1999 and 2000 sessions of the General Assembly provided for the deregulation of the electric and natural gas industries, respectively. See 1999 Senate Bill 1286 (Chapter 971 of the 1999 Acts of Assembly), 2000 Senate Bill 185 (Chapter 691 of the 2000 Acts of Assembly) and 2000 House Bill 279 (Chapter 706 of the 2000 Acts of Assembly). In addition to the deregulation, the manner in which each industry is taxed by the Commonwealth was changed.
Effective January 1, 2001, the state and local gross receipts license taxes imposed on the electric and natural gas industries were repealed. These taxes were replaced by imposing the corporate income tax on both industries and imposing consumption taxes on the consumers of electricity and gas. The consumption tax on electricity is based on kilowatt hour usage. The consumption tax on natural gas is based on the volume of natural gas in units of 100 cubic feet ("CCF") delivered and used per month.
Prior to January 1, 2001, localities were authorized by Code of Virginia
§ 58.1-3731 to impose a gross receipts license tax on Electric and Gas Suppliers at a rate not to exceed 0.5%. During each year that this tax was imposed, Electric and Gas Suppliers were allowed to embed the tax in the price of electricity and gas charged to consumers. The Electric and Gas Suppliers would then remit all of the tax collected in that year to the proper localities in the following year in accordance with that locality's remittance procedure.
In the present case, the Electric and Gas Suppliers included the local gross receipts license taxes in the price of all gas and electricity sold through December 31, 2000. Based upon the history of the collection and remittance of this tax, all of the local gross receipts taxes collected during 2000 should be remitted to the proper locality in 2001 in accordance with that locality's remittance procedure.
This was clearly the intent of the General Assembly when it enacted the changes in taxation for the electric and gas industries in 1999. Code of Virginia §§ 58.1-2901(D) and 58.1-2905(D) provide that taxes on electricity and gas sales in the year ending December 31, 2000, relating to the local license tax, shall be paid in accordance with Code of Virginia § 58.1-3731. Code of Virginia § 58.1-3731 states that the local gross receipts license tax shall not be imposed on Electric and Gas Suppliers after December 31, 2000, except upon gross receipts for the calendar year 2000. When all three sections are read in concert, the only correct determination is that the calendar year 2000 gross receipts of Electric and Gas Suppliers were subject to the local gross receipts license tax and is, therefore, payable in 2001.
It should be noted that the three Code sections referenced above were amended in the 2000 session of the General Assembly. The amendments, however, only served to correct two drafting errors and make one clarification of prior intent.
I hope that the above information will be of assistance to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please contact ***** Tax Policy Analyst, in my Policy Development Office at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP32354D
Rulings of the Tax Commissioner