Tax Type
BPOL Tax
Description
Taxpayer does not appear to have a definite place of business in the locality.
Topic
Local Taxes Discussion
Date Issued
07-28-2010
July 28, 2010
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 as to whether a business is subject to 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 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 and public document 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 company based in ***** (Country A) that produces and distributes on-line video games worldwide. The Taxpayer's management and operations are located principally in Country A. It has one executive who resides and works from his home office in a Virginia locality (the "City") and provides administrative tasks. The Taxpayer requests an advisory opinion as to whether it is subject to the BPOL tax in the City.
OPINION
The BPOL tax is a local license tax imposed on the privilege of doing business. It is based on an entity's gross receipts. For BPOL tax purposes, "gross receipts" are defined as "the whole, entire, total receipts, without deduction." See Virginia Code § 58.1-3700.1. The general rule for establishing sites for the BPOL tax is that whenever the tax is measured by gross receipts, "the gross receipts included in the taxable measure shall be only those gross receipts attributed to the exercise of a privilege subject to licensure at a definite place of business within [the] jurisdiction." See Va. Code § 58.1-3703.1 A 3 a.
Virginia Code § 58.1-3700.1 defines a "definite place of business" as an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more. Some characteristics that 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 (P.D.) 97-201 (4/25/1997).
In the instant case, the employee works out of a home office in which he performs management and administrative tasks. While the Taxpayer may have a continuous presence, office and employee in the locality, the Taxpayer is not holding itself out as a business; operating from the employee's home. Most of the Taxpayer's activities that would demonstrate a regular and continuous course of dealing occur in Country A. As such, it does not appear that the Taxpayer has a definite place of business in the locality.
Even if the home office constituted a definite place of business, the locality would not be able to impose a license tax on the Taxpayer unless gross receipts could be sitused to the locality. Based on the description provided, the Taxpayer's business would be classified as a retailer.
The gross receipts of a retailer are attributed to the definite place of business at which sales solicitation activities occur, or if sales solicitation activities do not occur at any definite place of business, then to the definite place of business from which sales solicitation activities are directed or controlled. See Va. Code § 58.1-3703.1 A 3 a 2.
Based on the facts presented, solicitation of sales neither occurs at the home office nor is directed or controlled from the home office. As such, gross receipts generated by the Taxpayer would not be sitused to the employees' home office located in the locality.
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,
Linda D. Foster
Deputy Tax Commissioner
- Sincerely,
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AR/1-42332118412.B
Rulings of the Tax Commissioner