Tax Type
BPOL Tax
Local Taxes
Description
Payment to subcontractors, therapeutic services to its clientele, BPOL
Topic
Basis of Tax
Local Power to Tax
Local Taxes Discussion
Date Issued
04-23-2001
April 23, 2001
Taxpayer: Locality Assessing Tax: Final State Determination Business, Professional and Occupational License (BPOL) Tax
Dear ****
This final state determination is issued upon an application for correction of a BPOL tax assessment filed by you on behalf of ***** (the "Taxpayer"). The assessment contested was made by the Commissioner of the Revenue for the City of ***** (the "City"). I apologize for the delay in responding to your appeal.
The BPOL tax and fee are imposed and administered by local officials. Code of Virginia § 58.1-3707.1(A)(5) authorizes the department to issue determinations of taxpayer appeals of certain BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the assessment stands unless the taxpayer proves it is incorrect.
The following determination is based on the facts presented by the Taxpayer and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The Taxpayer provides therapeutic services to its clientele. In so doing, it subcontracts with social workers and psychologists to provide the requested services. The subcontractors obtain BPOL licenses and pay the required taxes or fees. The Taxpayer excluded the subcontractors' income in reporting its gross receipts, taking the position that to include the income would amount to "double taxation" because the subcontractors were separately taxed on the same receipts.
The City disagreed with the Taxpayer's position, included the Taxpayer's total gross receipts in its calculation of BPOL tax due and issued an assessment. In other words, the City disallowed the exclusion from the Taxpayer's gross receipts for income paid to the subcontractors.
ANALYSIS
Section 2.12 of the 2000 BPOL Guidelines states:
An independent contractor is engaged in a business separate from that of the person who contracts for the independent contractor's services.
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.
Further support for this position can be found in 1976-77 Op. Atty Gen. 272, and Public Document 99-252 (9/24/99)
. Accordingly, it is my determination that the City's assessment is correct.
If you have any questions regarding this final determination, you may contact *****, Tax Policy Analyst, in the department's Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
Taxpayer: Locality Assessing Tax: Final State Determination Business, Professional and Occupational License (BPOL) Tax
Dear ****
This final state determination is issued upon an application for correction of a BPOL tax assessment filed by you on behalf of ***** (the "Taxpayer"). The assessment contested was made by the Commissioner of the Revenue for the City of ***** (the "City"). I apologize for the delay in responding to your appeal.
The BPOL tax and fee are imposed and administered by local officials. Code of Virginia § 58.1-3707.1(A)(5) authorizes the department to issue determinations of taxpayer appeals of certain BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the assessment stands unless the taxpayer proves it is incorrect.
The following determination is based on the facts presented by the Taxpayer and the City as summarized below. Copies of cited sources are enclosed.
FACTS
The Taxpayer provides therapeutic services to its clientele. In so doing, it subcontracts with social workers and psychologists to provide the requested services. The subcontractors obtain BPOL licenses and pay the required taxes or fees. The Taxpayer excluded the subcontractors' income in reporting its gross receipts, taking the position that to include the income would amount to "double taxation" because the subcontractors were separately taxed on the same receipts.
The City disagreed with the Taxpayer's position, included the Taxpayer's total gross receipts in its calculation of BPOL tax due and issued an assessment. In other words, the City disallowed the exclusion from the Taxpayer's gross receipts for income paid to the subcontractors.
ANALYSIS
Section 2.12 of the 2000 BPOL Guidelines states:
An independent contractor is engaged in a business separate from that of the person who contracts for the independent contractor's services.
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.
Further support for this position can be found in 1976-77 Op. Atty Gen. 272, and Public Document 99-252 (9/24/99)
. Accordingly, it is my determination that the City's assessment is correct. If you have any questions regarding this final determination, you may contact *****, Tax Policy Analyst, in the department's Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner