Document Number
04-161
Tax Type
BPOL Tax
Description
Excavating and "sodding" of commercial and residential properties
Topic
Basis of Tax
Local Taxes Discussion
Date Issued
10-01-2004


October 1, 2004



Dear *****:

This is in response to your letter in which you request an advisory opinion regarding the application of the Business, Professional and Occupational License (BPOL) tax to a business that is engaged in the excavating and "sodding" of commercial and residential properties.

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 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.

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.
FACTS

The Taxpayer is classified as a class B contractor for purposes of state licensure. You state that the majority of the Taxpayer's business consists of work performed for home builders and commercial contractors. Copies of contracts provided by the Taxpayer indicate that its business consists of both excavation and general landscaping services.

For BPOL tax purposes, one locality treated the Taxpayer as a contractor until 2003, at which time the locality reclassified the Taxpayer as a business service. Other localities have treated the Taxpayer as a contractor. You request an advisory opinion as to which classification is correct.

OPINION

Contractors

For purposes of the BPOL tax, Va. Code § 58.1-3714(D)(3) defines the term "contractor" and includes any person, firm or corporation:
    • Accepting or offering to accept an order for or contract to excavate earth, rock, or other material for foundation or any other purpose or for cutting, trimming or maintaining rights-of-way;

In this case, a review of the Taxpayer's contracts reveals a substantial part of the Taxpayer's business involves "excavating." The preponderance of the Taxpayer's activities, however, (sodding, landscaping and spraying) are landscape services that do not fall under any of the definitions of "contractor" in Va. Code § 58.1-3714(D). Furthermore, landscape services are not included in the list of occupations, businesses or trades classified as "contracting" in Section 5.1.2 of the 2000 BPOL Guidelines. Because the landscape services are not contracting and are not clearly identified as financial, real estate or professional services (as those terms are defined under the BPOL tax law and 2000 BPOL Guidelines), they are classified as "business services." See Va. Code § 58.1-3706(A) and Section 5.5 of the 2000 BPOL Guidelines. Therefore, based on the information provided and the authorities cited, the Taxpayer's business may be properly classified as a "business service."

Multiple Businesses

Under the provisions of Va. Code § 58.1-3703.1(A)(1) a separate local business license is required for each business in which a person is engaged. person engaged in two or more businesses or professions carried on at the same place of business may, however, elect to obtain one license for all businesses and professions. If the business is subject to licensure at different tax rates, the licensee must agree to be taxed on all businesses and professions at the highest rate. In the present case, it appears that the Taxpayer's contracting business (that of excavating) may be significant enough to qualify as a separate business; however, the local commissioner of the revenue must make this determination. If the local commissioner of the revenue finds that the Taxpayer is engaged in two separate lines of business, the Taxpayer may choose to file its BPOL tax returns either on the basis of its separate activities as a contractor and a provider of landscaping services, or at the uniform rate of a business service.

If you have any questions regarding this opinion, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
                    • Sincerely,

                • Kenneth W. Thorson
                  Tax Commissioner
AR/51196H

Rulings of the Tax Commissioner

Last Updated 09/16/2014 15:39