Tax Type
BPOL Tax
Description
Classification of a TP engaged in both exterminating and contracting business
Topic
Classification
Date Issued
08-30-2005
August 30, 2005
Re: Request for Advisory Opinion
Business, Professional, and Occupational License (BPOL) tax
Dear *****:
This is in response to your letter in which you request an advisory opinion on the appropriate classification of a taxpayer who is engaged in both exterminating and contracting business activities in ***** (the "County").
The following opinion has been made subject to the facts presented to the Department summarized below. Any change in these facts or the introduction of new facts may lead to a different result. 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. The Code of Virginia sections and regulations cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site.
FACTS
A taxpayer in the County owns an exterminating business. As a part of its business, the taxpayer also performs structural repair to damage caused by insects. The taxpayer is currently applying for a state contractor's license. You ask if the taxpayer should be classified as a contractor or a business service for purposes of the BPOL tax.
OPINION
Exterminators
Exterminators are classified as a business service for purposes of the BPOL tax. See 2000 BPOL Guidelines § 5.5.2. The example found in section 5.4.4.2 B provides the following guidance:
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- A 'professional exterminator' is classified as personal and other services because he is offering an exterminating service even though he may be very experienced, expert and knowledgeable in the subject.
Contractors
A contractor is defined in Va. Code § 58.1-3714 D 1 as any person, firm or corporation "[a]ccepting or offering to accept orders or contracts for doing any work on or in any building or structure, requiring the use of paint, stone, brick, mortar, wood, cement, structural iron or steel, sheet iron, galvanized iron, metallic piping, tin, lead, or other metal or any other building material."
Prior to classifying a person as a contractor for purposes of the BPOL tax, a locality must ensure that a taxpayer meets certain conditions set forth in Va. Code § 58.1-3714 B. Among the conditions are:
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- 1. The governing body of any county, city or town shall not issue or reissue a business license under this chapter to any contractor who (i) has not obtained or is not maintaining workers' compensation coverage for his employees and (ii) at the time of application for such issuance or reissuance, is required to obtain or maintain such coverage pursuant to Chapter 8 (§ 65.2-800 et seq.) of Title 65.2. [Emphasis added.]
2. Each such governing body shall require every contractor to provide written certification at the time of any application for issuance or reissuance of a business license that such contractor is in compliance with the provisions of Chapter 8 of Title 65.2 and will remain in compliance with such provisions at all times during the effective period of any such business license.
- 1. The governing body of any county, city or town shall not issue or reissue a business license under this chapter to any contractor who (i) has not obtained or is not maintaining workers' compensation coverage for his employees and (ii) at the time of application for such issuance or reissuance, is required to obtain or maintain such coverage pursuant to Chapter 8 (§ 65.2-800 et seq.) of Title 65.2. [Emphasis added.]
It is incumbent upon the local commissioner of the revenue to determine whether a person has met these requirements prior to classifying such person as a contractor for purposes of the BPOL tax.
Multiple Businesses
In the situation presented, you state that the taxpayer asserts it is engaged in business as both an exterminator and a contractor. As such, the County could require a separate license for each business activity. In the alternative, the County may issue a single license pursuant to the provisions of Va. Code § 58.1-3703.1 A 1. This Code section provides that, while a separate license is required for each definite place of business and for each business a taxpayer is operating, when a person is engaged in two or more businesses or professions carried on at the same place of business, he may elect to obtain one license for all such businesses and professions providing all of the following criteria are satisfied:
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- (a) each business or profession is subject to licensure at the location and has satisfied any requirements imposed by state law or other provisions of the ordinances of this jurisdiction; (b) all of the businesses or professions are subject to the same tax rate, or, if subject to different tax rates, the licensee agrees to be taxed on all businesses and professions at the highest rate; and (c) the taxpayer agrees to supply such information as the assessor may require concerning the nature of the several businesses and their gross receipts.
CONCLUSION
Local commissioners of the revenue are charged with the responsibility of classifying and assessing taxpayers at the appropriate rate for purposes of the BPOL tax. In the present case, you must determine whether the taxpayer is engaged in two businesses, each of which could operate independently of the other. If the taxpayer has met the conditions set forth in Va. Code § 58.1-3714 B, and is engaged in any of the activities defined in Va. Code § 58.1-3714 D 1, the taxpayer is clearly in business as a contractor. If you determine this is the case, then you must assess each business separately, unless the taxpayer elects to be classified under a single license and submits the information required by Va. Code § 58.1-3703.1 A 1.
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/55095H
Rulings of the Tax Commissioner