Tax Type
BPOL Tax
Description
Is Farmer Liable for BPOL Tax?
Topic
Basis of Tax
Taxability of Persons and Transactions
Date Issued
09-25-2001
September 25, 2001
Re: Request for Advisory Opinion
Business, Professional and Occupational License (BPOL) Tax
Dear *****
This will respond to your letter of September 6, 2001, regarding the application of the BPOL tax to a farmer (the "Taxpayer"), who has subdivided and improved property in ******** (the "County"). In your request, you ask if the Taxpayer qualifies as a contractor for BPOL tax purposes.
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.
FACTS
The Taxpayer is a farmer who has platted and added roads for several lots on his property with the intention of offering the lots for sale. The Taxpayer contends that he is "not in the business of contracting," rather, he is a farmer by trade and, therefore, not subject to the BPOL tax.
In a letter to you, the Commonwealth's Attorney for the County opined that the Taxpayer is not a contractor and, therefore, not subject to BPOL tax. The Commonwealth's Attorney also noted that the provision in the department's 2000 BPOL Guidelines addressing contractors "is merely a guideline and not binding State or local law." In response to your request to the Office of the Attorney General for clarification of the BPOL Guidelines, the Senior Assistant Attorney General declined to address the issue and affirmed the department's authority, stating that "I am of the view that the Department [of Taxation] is the appropriate agency to interpret its own regulations and guidelines to determine compliance . . . ."
OPINION
The Department's Authority
Code of Virginia § 58.1-3701 is clear as to the effect and force of the department's 2000 BPOL Guidelines as they affect implementation of the local license tax.
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. [Emphasis added.]
Code of Virginia § 58.1-205 addresses the question of the effect of regulations, rulings, etc., and administrative interpretations. This section provides that:
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- In any proceeding relating to the interpretation or enforcement of the tax laws of this Commonwealth, the following rules shall apply . . . . Any regulation promulgated as provided by subsection B of § 58.1-203 shall be sustained unless unreasonable or plainly inconsistent with applicable provisions of law.
Hence, the 2000 BPOL Guidelines have the same weight as regulations described in Code of Virginia § 58.1-205.
2000 BPOL Guidelines
The 2000 BPOL Guidelines specifically address the status of a person in the Taxpayer's position as one who subdivides property with the intention to sell such property.
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- 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. 2000 BPOL Guidelines § 5.1.1(C).
Code of Virginia § 58.1-3714 states that the term "contractor" means any person, firm or corporation:
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- Accepting or offering to accept contracts to do any paving, curbing or other work on sidewalks, streets, alleys, or highways, or public or private property, using asphalt, brick, stone, cement, concrete, wood or any composition; [or] Accepting or offering to accept an order for or contract to excavate earth, rock, or other material for foundation or any other purpose or for cutting, trimming or maintaining rights-of-way; Code of Virginia § 58.1-3714(D) (3). [Emphasis added]
In this case, the Taxpayer has provided access to properties otherwise inaccessible by state roads. The Taxpayer has divided his property and added roads with the intent of selling the lots. Therefore, for purposes of local licensure, it is my opinion that the Taxpayer is a contractor.
In its business as a contractor, the Taxpayer's taxable gross receipts would be calculated on the basis of its gross proceeds derived from the sale of the plots of land at the County's ordinances prescribed for contractors, with a limit imposed by state law of $0.16 per $100. Should the Taxpayer decide to further improve the properties before selling them, the Taxpayer's gross receipts would be based upon the gross proceeds from the sale, with no deductions for the cost of the improvements. Please note that only those gross receipts derived from the Taxpayer's business as a contractor are subject to the local license tax levied on its contracting business.
I trust that this information has been useful to you. If you have other questions, please do not hesitate to contact ***** in the department's Appeals and Rulings Office at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
ARO/36700H
Rulings of the Tax Commissioner