Tax Type
BPOL Tax
Description
No definite place of business not subject to BPOL tax in the locality
Topic
Local Power to Tax
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
09-29-2006
September 29, 2006
Re: Request for Advisory Opinion
Business, Professional and Occupational License Tax
Dear ********:
This is in response to your letter in which you request an advisory opinion regarding the Business, Professional and Occupational License ("BPOL") tax liability of a fuel supplier (the "Taxpayer") that sells its products through a third-party terminal located in Virginia. I apologize for the delay in responding to your letter.
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 and public documents 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 producer of petroleum products. The Taxpayer sells these products through a network of more than 100 fuel terminals located throughout the United States, some of which it owns, and others of which it contracts for services.
The Taxpayer sold a terminal in a Virginia locality to an unrelated third party (the "Owner") in 2004. Currently, the Taxpayer uses the terminal as a depot through which it delivers its products to its customers.
The Taxpayer's customers are distributors, retailers, and industrial users of fuel who purchase fuel at the terminal. Customers have an agreement with the Taxpayer to buy certain types of fuel at the terminal at a "posted price," which is set daily and posted on the Taxpayer's website. The Taxpayer is notified electronically of purchases made by its customers, and invoices its customers on a daily basis.
The Taxpayer's petroleum products are delivered to the terminal by an interstate pipeline. At the fuel-loading racks, drivers of trucks that are owned either by the customer or by a common carrier enter an electronic code that permits them to access the terminal and load the fuel that has been purchased by the customer.
The Taxpayer neither owns nor leases any property at the terminal. The Owner is compensated through a "throughput agreement." This agreement stipulates the following:
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- 1. The Taxpayer shall pay the Owner a monthly fee based on the number of gallons that are distributed to the Taxpayer's customers;
2. The Taxpayer shall pay the Owner an additional fee for the addition of a generic gasoline additive;
3. The Taxpayer and the Owner agree to indemnify one another against claims arising out of negligence.
- 1. The Taxpayer shall pay the Owner a monthly fee based on the number of gallons that are distributed to the Taxpayer's customers;
OPINION
In 1996, the General Assembly added two important sections to Chapter 37 of Title 58.1: (1) Virginia Code § 58.1-3700.1, which contains definitions of terms used in the chapter; and (2) Virginia Code § 58.1-3703.1, or the uniform ordinance provision that, among other things, defines situs of gross receipts and wholesale purchases for purposes of BPOL taxation.
Definite Place of Business
Virginia Code § 58.1-3703.1 A 1 provides that to be subject to the BPOL tax, a taxpayer must have a definite place of business within the taxing jurisdiction. Virginia Code § 58.1-3700.1 3 defines a "definite place of business" as:
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- an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more. A definite place of business for a person engaged in business may include a location leased or otherwise obtained from another person on a temporary or seasonal basis and real property leased to another.
"Business" is defined 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. It implies a continuous and regular course of dealing, rather than an irregular or isolated transaction." Va. Code § 58.1-3700.1 3.
Some characteristics which may help determine whether the location is a definite place of business include, but are not limited to, the following on-site activities: (1) a continuous presence; (2) having an office with a phone; (3) the reception of mail; (4) having employees; (5) record keeping; (6) and advertising or otherwise holding oneself out as engaging in business at the particular location. See Public Documents 97-201 (04/25/1997), 98-204 (08/13/1999) and 99-234 (04/13/1999).
Based on the facts presented, since the sale of the terminal to the Owner in 2004, the Taxpayer has not maintained a definite place of business in the locality.
Situs of Wholesalers Subject to a Tax on Purchases.
The general rule establishing situs of gross receipts for purposes of BPOL taxation is that only those gross receipts attributed to the exercise of a licensable privilege at a definite place of business are subject to taxation. See Va. Code § 58.13703.1 A 3 a. The situs rules are different for wholesalers in those cases where the tax is measured by purchases. Virginia Code § 58.1-3703.1 A 3 a (2) provides:
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- a wholesaler or distribution house subject to a license tax measured by purchases shall determine the situs of its purchases by the definite place of business at which or from which deliveries of the purchased goods, wares and merchandise are made to customers. [Emphasis added.]
In this case, the Taxpayer does not have a definite place of business in the locality. While the deliveries of fuel are made at the terminal, it is the Owner, rather than the Taxpayer, who has a definite place of business in the locality.
In a case decided prior to the 1996 legislation, City of Richmond v. Petroleum Marketers, Inc., 221 Va. 372, 269 S.E.2d 389 (1980), the question before the Court was whether Petroleum Marketers' sales occurred where the contracts were executed or where the goods were delivered. The Court found that the site of the execution of the contract was irrelevant in terms of the second jurisdiction's ability to tax the petroleum merchant as a wholesale merchant. The 1996 legislation defined "definite place of business" and clearly made the connection between a definite place of business and wholesalers assessed according to purchasers for purposes of local BPOL taxation.
Under current law, the issue of "definite place of business" is paramount in determining whether a taxpayer has a local BPOL tax liability. In this case, the facts presented indicate that the Taxpayer does not have a definite place of business in the locality. The Taxpayer does not have an office at the terminal nor does it have any attached space to meet with customers; it does not have a mailing address at the terminal; it does not have a phone number at the terminal; it does not maintain or store business records at the terminal; and it does not have any employees at the terminal. In fact, the Taxpayer has no employees in either the locality or in the Commonwealth.
Under the specific facts as presented, it is my opinion the Taxpayer does not have a definite place of business at the terminal and, therefore, would not be subject to the BPOL tax in the locality where the Owner operates the terminal the Taxpayer uses. The Owner of the terminal is subject to the BPOL tax
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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Janie E. Bowen
Tax Commissioner
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AR/55781H
Rulings of the Tax Commissioner