Tax Type
BPOL Tax
Local Taxes
Description
Consulting business, BPOL
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
01-04-2001
January 4, 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 a consulting business. 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.
The Taxpayer is engaged in the business of providing consulting services from a definite place of business in your locality (the "City"). Although business management, control and administrative functions are performed at this office, the Taxpayer performs consulting services at the premises of its clients. You seek guidance as to the proper license tax treatment of the Taxpayer in two scenarios.
Scenario One
Facts
One of the Taxpayer's clients is located in another Virginia locality. The Taxpayer performs services at the client's premises on a "continuous and long-term basis." You state that it is impractical to attribute receipts from this client using the situs rule set forth in Code of Virginia §58.1-3703.1(A)(3)(a)(4). Accordingly, as provided for in Code of Virginia §58.13703.1(A)(3)(b), you apportion these receipts between the two definite places of business on the basis of payroll. You ask whether or not you should include salaries representing the "management, control and administrative functions" performed at the office in the City when calculating this apportionment.
Opinion
Public Document (P.D.) 97-308 (7/22/97) opines that when apportioning gross receipts by payroll, "[a] governing body may include only those employees who directly participate in the businesses' [sic] licensed activity." As stated in the opinion, the local governing bodies must make a factual determination as to whether individual corporate office personnel directly participate in a taxpayer's licensed activity. Please also see P.D. 99-92 (4/30/99).
Scenario Two
Facts
Another of the Taxpayer's clients is located in Pennsylvania. The contract with this client requires employees of the Taxpayer to visit different locations of the client to perform one to three-day tasks. The Taxpayer is subject to income tax in Pennsylvania on an apportioned amount of its income. Both Pennsylvania and Virginia apportion multi-state income using a three-factor apportionment formula consisting of payroll, property, and sales. However, the formulas are not identical. You ask whether your locality should apportion receipts from this client using the Virginia or the Pennsylvania method.
Opinion
As the Taxpayer does not have a definite place of business in Pennsylvania, the receipts derived from the Pennsylvania contracts are attributable to your locality under Code of Virginia § 58.1-3703.1(a)(4). However, you must allow a deduction for any receipts included in this measure which are also "attributable to business conducted in another state or foreign country in which the business is liable for an income or other tax based upon income." Code of Virginia § 58.1-3732(B)(2). This issue was discussed in P.D. 97-490 (12/19/97) and clarified in P.D. 98-41 (3/6/98):
this deduction is applicable to those gross receipts that are subject to a Virginia locality's BPOL tax and are also subject to an income tax or income-like tax in another state or foreign country.
In my opinion, in order to determine the amount of gross receipts subject to an income or other tax based on income in another state, you should review the return filed by the Taxpayer in the other state.
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 do not hesitate to contact *** Tax Policy Analyst, in my Office of Tax Policy at ***.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/29160D
Rulings of the Tax Commissioner