Tax Type
BPOL Tax
Description
Separately charged amount of BPOL tax
Topic
Local Taxes Discussion
Date Issued
04-25-2003
April 25, 2003
Re: Request for Advisory Opinion
Business, Professional and Occupational License (BPOL) Tax
Dear ***********:
This is in response to your letter requesting an advisory opinion on the proper method of charging your clients for BPOL taxes owed by ************ (the "Taxpayer") to Virginia localities. Specifically, you ask if it is legal to pass the costs of BPOL taxes on to your clients as a separate item.
The local license fee and tax are imposed and administered by local officials. Section 58.1-3701 of the Code of Virginia authorizes the Department to promulgate guidelines and issue advisory opinions on local license tax issues. 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. Any change in the facts or the introduction of facts by another party may lead to a different result.
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 is an engineering firm that does business in several states, including Virginia. In many of these states, localities impose some form of a local license tax. The Taxpayer states that it currently pays the local license tax directly to the localities in those states on whatever basis it is imposed. The Taxpayer has inquired if it would be legal to separately charge the amount of BPOL tax the Taxpayer estimates it would pay based on contracts it has with its clients. Secondly, the Taxpayer inquires if it is legal to separately charge its clients for the BPOL tax, is this common practice in Virginia.
OPINION
The BPOL tax is a privilege tax imposed upon businesses, trades, professions, occupations and callings and upon the persons, firms and corporations engaged therein for the licensable privilege for engaging in a business, profession or occupational calling. The basis of the tax is the gross receipts of such an entity. Gross receipts are defined as:
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- [T]he whole, entire, total receipts, of money or other consideration received by the taxpayer as a result of transactions with others besides himself and which are derived from the exercise of the licensed privilege to engage in a business or profession in the ordinary course of business, without deduction or exclusion except as provided by law. 2000 BPOL Guidelines § 1.
The BPOL tax is neither a consumption tax nor an excise tax that can be directly passed on to the consumer or the clients of a business. Clearly, businesses can build the estimated cost of the BPOL tax into its charges or fees, but such entities may not pass the tax directly on to the consumer or client through a separately stated charge. This is because, similar to the income tax, the BPOL tax is based upon the taxpayer's total income-producing activity rather than on individual transactions.
The only exception to this rule is found in Va. Code § 58.1-3734, which applies to motor vehicle dealers only. The General Assembly has not authorized any other type of business to engage in the practice of separately stating BPOL taxes on their charges to customers. Accordingly, the Taxpayer cannot pass on the BPOL tax to its clients through a separately stated charge.
Given this finding, it is unnecessary to address your second question. If you
have any questions regarding this opinion, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/44071H
Rulings of the Tax Commissioner