Tax Type
BPOL Tax
Description
What constitutes an affiliated group for BPOL tax purposes
Topic
Corporate Distributions and Adjustments
Local Taxes Discussion
Date Issued
05-13-2009
May 13, 2009
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 interpretation of the affiliated group provisions of the Business, Professional and Occupational License (BPOL) tax.
The local license fee and tax are imposed and administered by local officials. Virginia Code § 58.1-3701 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 new facts may lead to a different result.
The Code of Virginia sections, regulations and public documents cited are available online at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site.
FACTS
A family of corporations (the "VA Group") is headquartered in Virginia. The relationship between the members of the VA Group has been as follows:
- ^***** (P) owns 100% of ***** (Corp1), and ***** (Corp2) and 50% of ***** (Corp3).
^Corp1 owns 98.787% of ***** (Corp4), which in turn owns the other 50% of Corp3.
^None of the entities of the Taxpayer have issued non-voting stock.
Corp2 is an employee leasing company that leases employees to Corp3. Both Corp2 and Corp 3 are headquartered in a Virginia and have a definite place of business where gross receipts are sitused.
The Taxpayer asks whether these corporations constitute an affiliated group for BPOL tax purposes and whether the receipts earned by Corp2 from Corp3 would be considered exempt intercompany receipts between members of an affiliated group.
OPINION
Pursuant to Title 23 of the Virginia Administrative Code (VAC) 10-500-10 and Va. Code § 58.1-3700.1, a chain of entities may be considered as members of an affiliated group if:
1. ownership interests possessing at least 80% of the voting power of all classes of ownership interests and at least 80% of each class of the nonvoting interests of each of the entities subject to inclusion, except the common parent entity, is owned directly by one or more of the other entities in the chain of entities; and
2. the common parent entity directly holds at least 80% of the voting power of all classes of ownership interests and at least 80% of each class of the nonvoting ownership interest of at least one of the other entities in the chain.
In this case, the first requirement is met because at least 80% of the voting interests of Corp1, Corp2, Corp3, and Corp4 are owned by one or more members of the VA Group. In addition, P directly holds at least 80% of the voting interests of Corp1 and Corp2, thus meeting the second requirement. Accordingly, the VA Group is an affiliated group under Va. Code § 58.1-3700.1.
Under the provisions of Va. Code § 58.1-3703 C 10, receipts or purchases made by members of an affiliated group of entities from other members of the same affiliated group are exempt from the BPOL tax. Because Corp2 and Corp3 are members of an affiliated group, the gross receipts Corp2 receives from Corp3 for leasing employees would be excluded from receipts subject to BPOL tax.
If you have any questions regarding this advisory opinion, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-3190699904.o
Rulings of the Tax Commissioner