Tax Type
BPOL Tax
Local Taxes
Description
Situs for contractors; Thresholds for taxes based on gross receipts and for fees
Topic
Local Power to Tax
Local Taxes Discussion
Rate of Tax
Date Issued
04-23-2001
April 23, 2001
Re: 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 contested assessment was made by the Commissioner of the Revenue of the City of **** (the "City"). I apologize for the delay in
responding to your application for correction.
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 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 is a contractor with a definite place of business in the "City." The Taxpayer conducts significant amounts of business in other cities in the region. In some years, the amount of business in some cities is in excess of $100,000, while in other cities the gross receipts are more than $25,000, but less than $100,000. Finally, in some instances, the Taxpayer does less than $25,000 in a given locality. The Taxpayer pays a license tax or fee in each of the jurisdictions that requires a license and deducts all of the receipts attributable to business done in these jurisdictions from its total receipts to be used in determining the tax due to the City. Receipts of less than $25,000 earned for business performed in other jurisdictions are sourced back to the City. The Taxpayer states that it has always used this methodology and was never challenged in previous audits.
The City disputes the Taxpayer's methodology, citing footnote 12 of the 1997 BPOL Guidelines, which states that in those instances where a locality imposes a fee, the "contractor may not deduct the amount of business done in the other locality from its BPOL tax return in its principal locality."
OPINION
Situs for Contractors
The 2000 BPOL Guidelines defines situs for contractors as follows:
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.
Section 58.1-3715 states that a contractor must obtain a license in a secondary jurisdiction when its business in that jurisdiction is in excess of $25,000.
Thresholds for Taxes Based on Gross Receipts and for Fees
A locality may impose a BPOL tax either in the form of a fee or based on gross receipts. However, in no instance may a locality impose both a fee and a gross receipts tax. Both the fee and the tax are subject to certain threshold requirements. 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:
License Taxes and Fees
The 1997 BPOL Guidelines noted that in those instances where a contractor has a principal place of business in one locality, conducts business in another locality that is in excess of $25,000, but does not exceed that other locality's threshold and is assessed a license fee by that locality, the contractor may not deduct the gross receipts from the business in the other locality from the gross receipts attributable to the contractor's principal locality. 1997 BPOL Guidelines, p.48, fn. 12. This point is clarified by Example # 3 in § 3.2 of the 2000 BPOL Guidelines.
Therefore, it is my determination that the City was correct in disallowing the deduction of gross receipts earned in a jurisdiction where the Taxpayer paid a license fee for the privilege of conducting business. Accordingly, the City's assessment is correct.
If you have any questions regarding this determination, please do not hesitate to contact ****, Tax Policy Analyst, in the department's Office of Tax Policy, at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
Re: 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 contested assessment was made by the Commissioner of the Revenue of the City of **** (the "City"). I apologize for the delay in
responding to your application for correction.
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 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 is a contractor with a definite place of business in the "City." The Taxpayer conducts significant amounts of business in other cities in the region. In some years, the amount of business in some cities is in excess of $100,000, while in other cities the gross receipts are more than $25,000, but less than $100,000. Finally, in some instances, the Taxpayer does less than $25,000 in a given locality. The Taxpayer pays a license tax or fee in each of the jurisdictions that requires a license and deducts all of the receipts attributable to business done in these jurisdictions from its total receipts to be used in determining the tax due to the City. Receipts of less than $25,000 earned for business performed in other jurisdictions are sourced back to the City. The Taxpayer states that it has always used this methodology and was never challenged in previous audits.
The City disputes the Taxpayer's methodology, citing footnote 12 of the 1997 BPOL Guidelines, which states that in those instances where a locality imposes a fee, the "contractor may not deduct the amount of business done in the other locality from its BPOL tax return in its principal locality."
OPINION
Situs for Contractors
The 2000 BPOL Guidelines defines situs for contractors as follows:
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.
Section 58.1-3715 states that a contractor must obtain a license in a secondary jurisdiction when its business in that jurisdiction is in excess of $25,000.
Thresholds for Taxes Based on Gross Receipts and for Fees
A locality may impose a BPOL tax either in the form of a fee or based on gross receipts. However, in no instance may a locality impose both a fee and a gross receipts tax. Both the fee and the tax are subject to certain threshold requirements. 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:
| Population | Maximum license fee amount | Gross receipts threshold amounts |
| 0-24,999 | $30 | No dollar threshold amount |
| 25,000- 50,000 | $50 | $50,000 |
| 50,001+ | $50 | $100,000 |
License Taxes and Fees
The 1997 BPOL Guidelines noted that in those instances where a contractor has a principal place of business in one locality, conducts business in another locality that is in excess of $25,000, but does not exceed that other locality's threshold and is assessed a license fee by that locality, the contractor may not deduct the gross receipts from the business in the other locality from the gross receipts attributable to the contractor's principal locality. 1997 BPOL Guidelines, p.48, fn. 12. This point is clarified by Example # 3 in § 3.2 of the 2000 BPOL Guidelines.
Therefore, it is my determination that the City was correct in disallowing the deduction of gross receipts earned in a jurisdiction where the Taxpayer paid a license fee for the privilege of conducting business. Accordingly, the City's assessment is correct.
If you have any questions regarding this determination, please do not hesitate to contact ****, Tax Policy Analyst, in the department's Office of Tax Policy, at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner