06-143 | Virginia Tax

Tax Type

BPOL Tax

Description

No tax on gross receipts of other jurisdictions who do not impose a BPOL tax

Topic

Local Power to Tax

Property Subject to Tax

Taxable Income

Date Issued

12-08-2006

December 8, 2006

Re: Request for Advisory Opinion
Business, Professional and Occupational License Tax

Dear *****:

This is in response to your letter requesting an advisory opinion on the classification of a petroleum jobber (the "Taxpayer") located in the ***** (the "Town"). You ask whether the Taxpayer is properly classified as being engaged in a wholesale or retail business for purposes of the Business, Professional and Occupational License (BPOL) tax.

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. 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 facts by another party 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

The Taxpayer is a petroleum marketer for ***** (the "Company"). The Taxpayer purchases gasoline, diesel fuel, kerosene, packaged lubricants and miscellaneous supplies from the Company and sells them through convenience stores.

The Taxpayer's main office is located in the Town. The Taxpayer's accounting office and its operations center are located in this office. The office also serves as the Taxpayer's truck parking and maintenance facility. The Taxpayer warehouses and sells at wholesale to retailers the Company's brand lubricants and other miscellaneous items from its office.

Historically, the Taxpayer operated as a wholesaler and was assessed accordingly by the Town. The Taxpayer recently changed its method of operation. The Taxpayer believes that its current operations no longer fit the classification of a wholesaler for purposes of the BPOL tax.

Currently, the Taxpayer sells its fuel at retail through commission merchants located at 25 convenience store/service stations (stations). The Taxpayer owns the real estate of 22 of these locations and leases the remaining three. The Taxpayer owns and maintains the fuel pumps, fuel storage tanks and related equipment at all of the stations. Five of these stations are located in the Town, four are in another state, and the other stations are located throughout Virginia.

The fuel is purchased by the Taxpayer at the Company's fuel depots located in two other jurisdictions. The fuel is then delivered by truck to underground tanks located at each of the Taxpayer's 25 stations. The fuel is sold at retail to end-users. The Taxpayer sets the retail price of the fuel and pays the convenience store operators a fixed per-gallon commission on the metered fuel sales.

The Taxpayer is now paying a BPOL tax to the Town on its entire operations as a wholesaler of fuel. In addition, the Taxpayer is paying a BPOL tax on its sales of the same fuel through retail operations in other Virginia localities.

The Taxpayer believes that it has a definite place of business at each of the 25 stores where it sells its fuel at retail and should be licensed as a retailer in each locality where it has a definite place of business. The Taxpayer also submits that the store operators should obtain a business license based on gross receipts attributed to the other convenience store activity plus the commissions the store operator receives from the Taxpayer for the sale of the fuel. With regard to the sales of products other than fuel made in the Town, the Taxpayer proposes that it obtain both a retail and a wholesale business license from the Town. The Town is requests an advisory opinion on the proper classification of the Taxpayer for purposes of the BPOL tax.

OPINION

Virginia Code § 58.1-3700.1 defines business as a "course of dealing which requires the time, attention and labor of the person so engaged for the purpose of earning a livelihood or profit." A rebuttable presumption that a person is engaged in a business is created when a person holds oneself out to the public as being engaged in a particular business through advertising or some other means of promoting his business.

A definite place of business is defined in Va. Code § 58.1-3700.1 as "an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more." The Taxpayer holds itself out for business as a retail seller at each of its locations through both its signage and its advertisements in the local yellow pages. Clearly, the Taxpayer operates a definite place of business in all of the locations where it sells fuel and other fuel-related products.

In this case, the Taxpayer purchases the fuel from the Company and sells the product directly to the end user through a third party. The third party does not purchase the fuel, nor does it have title to the fuel. Title passes to the Taxpayer upon purchase of the fuel from the Company's distribution center and remains with the Taxpayer until the sale of the fuel to the end user. Based on these facts and the definition of "retail sale" in Chapter 1 of the 2000 BPOL Guidelines, the Taxpayer is engaged in business as a retailer of fuel.

The situs of retail sales is defined as "the definite place of business at which the sales solicitation activities occur." Va. Code § 58.1-3703.1 A 3 a (2). In this case, the sales solicitation is initiated at the pump at each of the Taxpayer's 25 locations. Therefore, the Taxpayer has situs at each of these locations. The Taxpayer's gross receipts from each station are to be attributed to each jurisdiction where the Taxpayer has situs and a BPOL tax is imposed.

It is my opinion that the Taxpayer should obtain a license in each Virginia jurisdiction in which it has a definite place of business. See Va. Code 58.1-3703.1 A. The Taxpayer has indicated that its method of accounting would enable it to identify the gross receipts earned in each jurisdiction, and I agree with the Taxpayer that this is the appropriate method for reporting its gross receipts for purposes of BPOL taxation. Further, the Town may not impose tax on any of the Taxpayer's gross receipts attributed to the Taxpayer's definite places of business in other jurisdictions, even if those jurisdictions do not impose a BPOL tax. See Va. Code § 58.1-1-3703.1 A 3 a.

Some of the sales of products made from the Taxpayer's office location, however, are made to retailers and would be classified as wholesale sales for purposes of BPOL taxation. The Taxpayer must obtain a business license as a wholesaler for this business. The Taxpayer also would be required to obtain a separate retail license for sales solicitation that occurs from the office if such activity rises to the level of being a separate business. See 2000 BPOL Guidelines § 2.9. This is a determination the local assessing official must make.

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

- - - - Sincerely,

- - - - Janie E. Bowen
        Tax Commissioner

AR/1-307595922H

Rulings of the Tax Commissioner