Document Number
04-154
Tax Type
BPOL Tax
Description
Jurisdictions that "host" the vending machines may not impose a BPOL tax
Topic
Property Subject to Tax
Date Issued
09-17-2004


September 17, 2004



Re: Advisory Opinion
Business, Professional and Occupational License (BPOL) Tax

Dear **********:

This is in response to your request for reconsideration of the advisory opinion issued as Public Document (P.D.) 02-150 (12/09/02). This opinion addresses the BPOL tax liability of a full-service vending machine operator in jurisdictions other than the jurisdiction in which the operator maintains its office. I apologize for the delay in the Department's response.

In P.D. 02-150, the Tax Commissioner opined that while coin-operated amusement devices are granted special treatment under Va. Code § 58.1-3720, the vending machines to which you refer in your request for reconsideration are specifically excluded from such treatment. Gross receipts from coin-operated machines other than amusement devices must be attributed to the jurisdiction from which the maintenance and operation of such machines are directed or controlled. The opinion stated:
    • If operators of vending machines are not "amusement operators," they are not subject to tax under § 58.1-3720, but the operator could be taxable under the regular BPOL tax rules of §§ 58.1-3703 and 58.1-3703.1, provided that the operator has a definite place of business in the locality that is imposing the tax. [Emphasis in original.]

P.D. 02-150 is based on a prior opinion issued by the Department, P.D. 98-156 (10/20/98). In this opinion, the Tax Commissioner found that a jurisdiction's ability to assess a BPOL tax on the gross receipts generated by coin operated machines is limited to coin-operated amusement devices. Because vending machines distributing goods, wares and merchandise are specifically excluded from the special treatment accorded to amusement devices, they are subject to the general provisions of Va. Code §§ 58.1-3703 and 58.1-3703.1. The operator is subject to BPOL tax only in the locality in which the operator has a definite place of business.

You disagree with the Department's conclusions and contend that a vending machine operator maintains a definite place of business in the jurisdiction in which it places a vending machine. Therefore, the operator is subject to a license tax in each jurisdiction in which it places vending machines.

I must respectfully disagree with your position. Under current law, the definite place of business for a person conducting a vending machine business must be attributed to the location from which a person operates the business. Virginia Code § 58.1-3703.1(A)(3)(a) states:
    • In the case of activities conducted outside a definite place of business, such as during a visit to a customer location [in this case, refilling vending machines], the gross receipts shall be attributed to the definite place of business from which such activities are initiated, directed or controlled.

Prior to 1984, an exception to this general rule was made for vending machines. The gross receipts of vending machines could be taxed by the locality in which they were situated at the retail sales rate; the operator's definite place of business was not relevant. This exception was specifically set forth in former Va. Code § 58-266.1(12).

Many localities adopted ordinances reflecting this provision. During the recodification of Title 58 in 1984, however, this provision was eliminated, thus subjecting the gross receipts from vending machines to the general provisions of Va. Code §§ 58.1-3703 and 58.1-3703.1. The intent of the legislation was clear. It retained the provisions enabling localities to impose a license tax on any amusement operator when its coin operated machines are located within the locality and to assess a gross receipts tax "only on the share of the receipts actually received by such operator from coin machines operated within that city, county or town." See Va. Code § 58.1-3720. At the same time, Va. Code § 58.1-3721 was adopted. This Code section states:
    • The coin machine operator's license tax authorized by § 58.1-3720 shall not be applicable to operators of weighing machines, automatic baggage or parcel checking machines or receptacles, nor to operators of vending machines which are so constructed to do nothing but vend goods, wares and merchandise. [Emphasis added.]

In summary, the BPOL statutes as amended in 1984 clearly specify that the gross receipts from vending machines other than amusement machines are to be attributed to the place of business from which such machines are operated or controlled. The fact that the Taxpayer is selling merchandise from its machine does indeed create a BPOL tax liability. The jurisdiction from which the Taxpayer directs and controls the operation of the vending machines is the proper taxing authority for purposes of the BPOL tax. Localities imposing the BPOL tax should have amended their ordinances to reflect the 1984 law change.

You ask how certain other businesses such as coin-operated laundromats, gas stations that dispense gasoline by use of a credit card or freestanding coin-operated car washes are to be treated for BPOL tax purposes. I would suggest that in each instance, there is an operator on premises: operators that supervise the gas station, that maintain the laundromat or supervise the car wash. I can think of no instance in which any of the three aforementioned businesses would operate without the owner or an employee on premises for a significant portion of the hours of operation.

For purposes of the BPOL tax, the situs of such businesses (the gas station, the laundromat and the car wash) is clear. Coin-operated vending machines that are placed at various places of business, on the other hand, are controlled by the operator of such machines. The operator may or may not have a definite place of business in the jurisdiction in which the machines are placed. The operator is subject to the BPOL tax on the gross receipts obtained from the machines in the jurisdiction from which he controls the business of operating the machines.

Based on the foregoing, I find no basis to overturn the opinion expressed in P.D. 02-150. It is my opinion that the jurisdictions in which persons direct and control the placing, servicing and supplying of vending machines may impose a BPOL tax upon such persons. Jurisdictions that "host" the vending machines may not impose a BPOL tax on the operator of the machines if the operator does not maintain a definite place of business in the jurisdiction.

The Code of Virginia sections and public documents cited are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions regarding this opinion, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
                    • Sincerely,


                • Kenneth W. Thorson
                  • Tax Commissioner


AR/44711H

Rulings of the Tax Commissioner

Last Updated 09/16/2014 15:39