03-18 | Virginia Tax

Tax Type

BPOL Tax

Description

Non-medical preventative and therapeutic health services

Topic

Appropriateness of Audit Methodology

Local Power to Tax

Date Issued

03-11-2003

March 11, 2003

Re: Final Local Determination
Taxpayer: *****
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 "Taxpayer") 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 of the ***** (the "City") for tax years 1998, 1999 and 2000. I apologize for the delay in the Department's response.

The local license tax and fee are imposed and administered by local officials. Va. Code § 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. I n 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. Copies of the Code of Virginia sections, regulations and public documents cited are available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us.

FACTS

The Taxpayer, a sub chapter S Corporation, represents itself as a center that provides "nutritional guidance, chelation therapy and other non-medical and preventative and therapeutic health services to the general public." The Taxpayer's medical director is a physician (the "Director") who is one of three shareholders in the corporation. The Director is also the sole shareholder in a professional medical practice (the "Practice") that is physically located in the same office suite as that occupied by the Taxpayer. The two corporations are unrelated entities for federal income tax purposes.

As a part of his professional practice, the Director performs medical screening examinations for candidates desiring the chelation therapy offered by the Taxpayer ¹.

These screenings are billed by the Practice not the Taxpayer. During the period in question, the Taxpayer only performed services in accord with prescriptions rendered by the Practice. The Practice is classified for BPOL purposes as a "professional service." The requests for the screenings come from the Taxpayer at the behest of its clients.

The Taxpayer advertises its services in the City's Yellow Pages under the category of "Physicians & Surgeons - Medical, M.D." The lead line in the advertisement is the Director's name. The City contends that the Taxpayer holds itself out for business under the Director's name and, therefore, the services it offers are ancillary to the Director's professional practice.

The Taxpayer contends that the services it provides are "non-medical preventative and therapeutic health services" and that it does not provide "professional medical services of any kind."

ANALYSIS

Definition of Business

Pursuant to Va. Code § 58.1-3700.1, business "means a course of dealing which requires the time, attention and labor of the person so engaged for the purpose of earning a livelihood or profit." Furthermore, the Code section provides that a person may be engaged in one or more businesses. In determining whether a person is in business, Va. Code § 58.1-3700.1 states that:

- The following acts shall create a rebuttable presumption that a person is engaged in a business: (i) advertising or otherwise holding oneself out to the public as being engaged in a particular business or (ii) filing tax returns, schedules and documents that are required only of persons engaged in a trade or business.

The Taxpayer meets both requirements for being engaged in a business. The Taxpayer advertises itself as being engaged in a particular business through the Director's name in its Yellow Pages advertisement. In addition, the Taxpayer files tax returns in which the Director is one of the two principal shareholders.

Personal and Other Services

"Repair, Personal, Business and Other Services" is a catchall classification for services not clearly identified as "financial, real estate or professional services." The 2000 BPOL Guidelines do not provide a comprehensive list for such services because "this classification applies to all services that are not classified as financial, real estate or professional services." 2000 BPOL Guidelines § 5.5.1. [Emphasis added.] While nursing and personal care facilities are specifically included in the list of services in the Guidelines under personal services, the occupation of nursing is not.

Professional Services

The 2000 BPOL Guidelines provide an "all encompassing list" of professions that are classified as "professional services" for purposes of local licensure. This list of professions includes:

- architects, attorneys-at-law, certified public accountants, dentists, engineers, land surveyors, surgeons, veterinarians, and practitioners of the healing arts (the arts and sciences dealing with the prevention, diagnosis, treatment and cure or alleviation of human physical or mental ailments, conditions, diseases, pain or infirmities), including pharmacists and physical and occupational therapists; chiropractors; dieticians; and such occupations as listed herein and no others." 2000 BPOL Guidelines § 5.4.4.1

The meaning of the phrase "as listed herein" is defined by way of example in a footnote: "For instance, 'dentist' includes orthodontist, periodontist, oral pathologist, endodontist, oral surgeon, and prosthodontist." 2000 BPOL Guidelines § 5.4.4.1. By inference, the term "healing arts" would include various kinds of physicians (pediatrician, oncologist, internist, etc.) as set forth in Va. Code § 54.1-2900 et. seq. While licensed nurse practitioners also fall within the category as "practitioners of the healing arts" as defined in this section of the Code of Virginia, registered nurses do not.

Medical Supervision

The Taxpayer holds itself out for business as "an alternative approach to vascular and heart diseases," providing "chelation therapy and vitamin and nutritional counseling."

Chelation therapy is a medical treatment performed in a doctor's office that improves metabolic function and blood flow through blocked arteries throughout the body. The protocol for the safe usage of chelation therapy, which is approved and promulgated by the American College of Advancement in Medicine, requires the following:

· A thorough pretreatment evaluation including a detailed medical history, complete physical examination, EKG, blood flow, and laboratory tests should be performed.
· An experienced staff of physicians, nurses, and technicians trained and experienced in EDTA chelation therapy should administer and monitor therapy.
· Continued follow up and personal attention by a physician. [Emphasis added.] See hftp:/drcranton.com/chelation.

The Taxpayer's business is under the direction of the Director, a licensed medical doctor who supervises a staff of professional registered nurses in their administration of various health services including chelation therapy. The Taxpayer states that the Director's involvement in the Taxpayer's activities is minimal, and that clients are referred to the Practice by the Taxpayer for professional medical evaluation. Assuming the Taxpayer is adhering to the accepted protocol for the administration of chelation therapy, that protocol would require his active participation in the administration and monitoring of the treatments.

The question of the classification of a medical clinic was addressed by the Tax Commissioner in Public Document (P.D.) 97-87 (2/20/97):

- In the case of a medical clinic or doctor's office, there is only the exercise of one licensable privilege, i.e., the professional services rendered by the doctor. Incidental services which are provided within the doctor's office or clinic such as the tasks performed by the nurse or receptionist are ancillary to the practice of medicine and do not constitute a separate licensable activity.

In this case, the Taxpayer's staff of professional registered nurses administers the treatment under the supervision of the Director, who is a medical physician. While it is true that the Director performs the medical evaluations separately under the auspices of the Practice, his role in the Taxpayer's business in the supervision of and the directing of the prescribed chelation therapy is essential to the standard protocol established for chelation therapy.

DETERMINATION

Based on the facts presented, the Taxpayer's business is one of providing alternative medical treatment to vascular and heart diseases through chelation therapy and vitamin and nutritional counseling. The Taxpayer holds itself out for business under the category of "Physicians & Surgeons - Medical, M.D.," advertises its business under the Director's medical title, and operates under the Director's supervision. Furthermore, some of the services the Taxpayer advertises require the supervision and direction of a medical doctor, which the Director is. For these reasons, it is my determination that the City's classification of the Taxpayer as a "professional service” is correct. The Taxpayer must pay any assessment owed with interest, as provided in Va. Code §58.1-3703.1(A)(5)(c) and (d).

If you have any questions regarding this determination, you may contact **** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Kenneth W. Thorson
        Tax Commissioner

AR/40406H

¹Chelation therapy is usually performed by physicians (medical doctors or osteopaths) with specialized training and certification from a chelation-oriented organization such as The American College for Advancement in Medicine or The American Board of Chelation Therapy.

Rulings of the Tax Commissioner