Tax Type
BPOL Tax
Description
Public Service Corporation: Interstate and Intrastate Carrier
Topic
Persons Subject to Tax
Date Issued
12-11-2001
December 11, 2001
Re: Appeal of Assessment: Final Local Determination
Taxpayers:*****
Locality Assessing Tax:*****
Business, Professional and Occupational License (BPOL) Tax
Dear *****
This final state determination is issued upon the application for correction filed by you on behalf of ***** (the "Taxpayers") with the Department of Taxation. You appeal a final local determination upholding an audit assessment of BPOL taxes made by the Commissioner of the Revenue for the ***** (the "City").
The local license tax and fee are imposed and administered by local officials. Code of Virginia § 58.1-3703.1(A)(5) authorizes the department to issue determinations on taxpayer appeals of certain BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the local assessment will stand unless the taxpayer proves that it is incorrect.
The following determination is based on the facts presented to the department as summarized below. This determination addresses the question of whether or not the Taxpayers were subject to the BPOL tax imposed by the City for license year 1997. Copies of cited sources are enclosed.
FACTS
The Taxpayers state they are public service corporations engaged in intrastate and interstate moving. They formerly held a certificate of public convenience and necessity from the Interstate Commerce Commission (ICC) to engage in transportation as a common carrier. They also held a State Corporation Commission (SCC) "Certificate of Convenience and Necessity." With the deregulation of the trucking industry, the ICC certification function transferred to the Surface Transportation Board of the United States Department of Transportation, Federal Highway Administration. The SCC's certification function transferred to the Department of Motor Vehicles (DMV) in 1995. The Taxpayers are currently registered under both of these programs.
The City has agreed that no license tax should be imposed for tax years 1998, 1999 and 2000. However, it issued an assessment for business license taxes for tax year 1997.
The Taxpayers contend that the imposition of the BPOL tax for the 1997 tax year is in violation of both Virginia law and the Commerce Clause of the United States Constitution.
DETERMINATION
Virginia law
Under Code of Virginia § 58.1-3703(C)(1), no county, city, or town shall impose a license fee or levy any license tax:
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- On any public service corporation or any motor carrier, common carrier, or other carrier 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, except as provided in § 58.1-3731 or as permitted by other provisions of law. [Emphasis added.]
The language referencing the Interstate Commerce Commission was enacted by the 1997 General Assembly and became effective July 1, 1997 (See 1997 Acts of Assembly, Chapter 283). Since the BPOL tax is assessed on a calendar year basis, the new provision did not apply to license tax year 1997.
The statute in force during tax year 1997, states that: "[n]o county, city, or town shall impose a license fee or levy any license tax on any public service corporation except as provided in § 58.1-3731 or as permitted by other provisions of law." Code of Virginia § 58.1-3703(C)(1), prior to 1997 amendments.
A "public service corporation" or "public service company" includes "companies, and all persons authorized to transport passengers or property as a common carrier." Code of Virginia § 56-1. The term "common carrier" is not expressly defined in this section of the law; however, it is defined in the motor vehicle law as:
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- any person who undertakes, whether directly or by a lease or any other arrangement, to transport passengers for the general public by motor vehicle for compensation over the highways of the Commonwealth, whether over regular or irregular routes .... Code of Virginia § 46.2-2000. [Emphasis added.]
A "restricted common carrier by motor vehicle" refers to motor carriers involved in the transportation of household goods. Therefore, the Taxpayers are not included in the general definition of a public service corporation.
Furthermore, after the 1995 change in statutory responsibility for certification of public convenience and necessity from the SCC to DMV and prior to the statutory change made to Code of Virginia § 58.1-3703(C)(1) in 1997, only public service corporations were exempt from the local license tax. Those companies merely holding certificates of public convenience and necessity issued by the DMV were not exempt. In any case, the Virginia corporation law is controlling when it comes to the issue of incorporation. It states:
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- Whether or not classified elsewhere in the Code as public service companies the following are not required to incorporate as public service companies ... household goods carriers . . . . Code of Virginia § 13.1-620(F). [Emphasis added.]
- Whether or not classified elsewhere in the Code as public service companies the following are not required to incorporate as public service companies ... household goods carriers . . . . Code of Virginia § 13.1-620(F). [Emphasis added.]
Commerce Clause
The Taxpayer also argues that the imposition of such a tax under the 1997 statute in force prior to the 1997 amendment violates the Commerce Clause of the United States Constitution. You maintain that localities are prohibited by the Commerce Clause from adopting a local tax ordinance that discriminates against interstate commerce.
In a 1989 opinion, the Attorney General found that the existing BPOL law, which exempted public service companies (which at that time included those intrastate carriers that held a certificate of public convenience and necessity) unconstitutional because the same exemption was not granted to those carriers of property that are solely engaged in interstate commerce. At that time, those common carriers that were certificated to transport both passengers and property were exempt from local license tax. Only after 1995, when the intrastate carriers were certificated by the DMV rather than the SCC, did they become subject to the BPOL tax. The Attorney General's rationale was that a local ordinance that exempts the intrastate activities of a common carrier that also competes against strictly interstate carriers is giving the former a tax benefit that the latter does not enjoy. 1
Since the enactment of the 1997 legislation, all carriers certified by the DMV or the Surface Transportation Board have been exempt from the BPOL tax; therefore, the Commerce Clause is not an issue. Nor was it an issue from the period of July 1995 through July 1997, when both intrastate and interstate household goods carriers were taxed. Therefore, I must conclude that there is no constitutional issue involved for local license tax year 1997.
Summary
For the reasons outlined above, the City's BPOL tax assessment issued to the Taxpayers for the 1997 license year is not erroneous. Therefore, the local final determination stands, and the Taxpayers owe the business license taxes assessed for license year 1997.
If you have any questions regarding this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/36004
1"It is my opinion that a local license tax that exempts a trucking company holding both an S.C.C. certificate of convenience and necessity and an I.C.C. interstate authority, while taxing a competing, "exclusively interstate trucking company," cannot satisfy that standard that the tax "not discriminate in favor of intrastate commerce at the expense of interstate commerce." 1989 Op. Atty. Gen. at 315. The opinion was quoting Goldberg v Sweet 488 U.S. 252.
Related Documents
Rulings of the Tax Commissioner