04-179 | Virginia Tax

Tax Type

BPOL Tax

Description

Double taxation of gross receipts

Topic

Assessment

Local Taxes Discussion

Date Issued

10-06-2004

October 6, 2004

Re: Appeal of Denial of Refund: Final Local Determination
Taxpayer: *****
Locality: *****
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 by the ***** (the "Town") denying the Taxpayer's request for refund of a portion of BPOL taxes paid in license year 2003.

The following determination is based on the facts presented as summarized below. 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 moved the retail part of its business from the Town to a new facility in the County in April 2003, retaining a feed mill enterprise in the Town. At that time, the Taxpayer paid the County a BPOL tax assessment based on its projected receipts for April through December of 2003. The Taxpayer also paid the Town for a 2003 license. The Town's license tax was based on the Taxpayer's 2002 gross receipts. In license year 2004, the Taxpayer's County license tax was based on 2003 receipts actually earned in 2003. You believe the Taxpayer has been taxed twice on nine months (April through December) of its 2003 receipts and seek a refund from the Town.

DETERMINATION

The BPOL is a local tax imposed on businesses, trades, professions, occupations and callings and upon the persons, firms and corporations engaged therein for the privilege of engaging in business during a license year. "License year" is defined in Va. Code § 58.1-3700.1 as the calendar year in which a license is issued to the taxpayer for the privilege of engaging in business. The tax is assessed on the basis of gross receipts earned during the base year, which is defined in Va. Code § 58.1-3700.1 as:

- the calendar year preceding the license year, except for contractors subject to the provisions of § 58.1-3715 or unless the local ordinance provides for a different period for measuring the gross receipts of a business, such as for beginning businesses or to allow an option to use the same fiscal year as for federal income tax purposes.

In other words, unless the local ordinance specifies otherwise, the base year for purposes of assessment of the BPOL tax is the calendar year preceding the license year.

The County's general policy, while not clearly specified in its ordinance, follows the general rule practiced by other jurisdictions: a business that has not engaged in business in the locality for a whole year must determine its license tax liability using its estimated receipts for the current license year. At the end of the license year, the business's tax liability is adjusted to reflect actual receipts. Once the business has engaged in business in the locality for an entire year, each succeeding year's tax assessment is determined using the prior year's gross receipts and is not adjusted to reflect actual current year gross receipts. Based on the information presented, the County assessed the BPOL tax for the license year 2003 in a manner consistent with state law and the local ordinance.

The Town's BPOL tax assessment of the Taxpayer for the privilege of engaging in business in the Town during license year 2003 was appropriately based on actual receipts earned in tax year 2002. The Town's assessment of the Taxpayer's business in license year 2004 should have been based only on the business the Taxpayer was conducting at the feed mill, because the Taxpayer was not engaged in the retail business in the Town in license year 2004. The actual receipts earned in 2003 from the feed mill business would form the basis of the BPOL tax due for license year 2004. Utilizing this approach, there would be no double taxation of receipts for the months April through December 2003.

For further discussion of the license year issue, see Commonwealth v. Jones, 194 Va. 727, 728 (1953), copy enclosed. See also Public Documents 99-210 (7/28/99), 99-229 (8/10/99) and 00-147 (8/9/00).

Based on the foregoing analysis, I am referring this matter back to the Town to verify that its 2004 license tax assessment issued to the Taxpayer is based on actual receipts earned in 2003 from the feed mill business only. If this is the case, there is no double taxation of receipts and no basis for the Taxpayer to receive a refund from the Town for the license years 2003 and 2004.

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/49298H

Rulings of the Tax Commissioner