Tax Type
BPOL Tax
Description
Change in the Taxpayer's legal status created a new and separate business
Topic
Local Power to Tax
Persons Subject to Tax
Property Subject to Tax
Date Issued
02-28-2011
February 28, 2011
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Business, Professional and Occupational License (BPOL) Tax
Dear *****:
This state determination is issued upon the application for correction filed by ***** (the "Taxpayer") with the Department of Taxation. You appeal an assessment of a Business, Professional and Occupational License (BPOL) fee issued to the Taxpayer by the ***** (the "City"), for the 2009 tax year. I apologize for the delay in the Department's response.
The local BPOL fee and tax are imposed and administered by local officials. Virginia Code § 58.1-3701 authorizes the Department to issue determinations on taxpayer appeals of BPOL fee and tax assessments. On appeal, a BPOL fee or tax assessment is deemed prima facie correct, i.e., the local assessment will stand unless the taxpayer proves that it is incorrect.
The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections, regulations 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, a single member limited liability corporation, began operating in the City in March 2009. Prior to establishing the Taxpayer, the single owner operated the same business as a sole proprietorship. The Taxpayer continued to operate under the original business license issued to the sole proprietorship during 2009.
As the result of an audit, the City issued a license fee to the Taxpayer for the 2009 tax year based on the City's finding that the Taxpayer was a new business. The Taxpayer appealed the assessment to the City, contending inaccurate information was received from the City concerning the change in legal status. The Taxpayer also claimed that the license fee should have been prorated based on the number of months it was in operation during 2009. In its final determination, the City upheld the assessment, concluding that the change in the Taxpayer's legal status created a new and separate business, and Virginia law does not provide for the proration of license fees.
In its appeal of the final local determination, the Taxpayer offers the same arguments presented in its appeal to the City. In addition, the Taxpayer requests the fee be waived due to personal and financial hardship.
ANALYSIS
Under Va. Code § 58.1-3706, localities may assess a BPOL tax on businesses that exceed certain minimum gross receipt thresholds. For businesses that do not meet the threshold, a locality may impose a fee in accordance with the limitations established under Va. Code § 58.1-3703.
Virginia Code § 58.1-37031.1 provides that "[e]very person shall apply for a license for each business or profession when engaging in a business..." Because the Taxpayer, a limited liability company, is an entity different from a sole proprietorship, it must be regarded as a beginning business in 2009 and subject to a license tax or fee for the 2009 tax year. See Public Document (P.D.) 99-237 (8/23/1999).
Under certain conditions, a business may be entitled to a refund for a prorated portion of the BPOL tax paid for tax year in which such business exercised its licensable privilege for only a fraction of the year. See Va. Code § 58.1-3710. The statute, however, further states, "In no event shall a county, city or town be required to refund any part of a flat fee or minimum flat tax."
DETERMINATION
Based on the evidence provided, I find that the Taxpayer was a new business entity in tax year 2009. The City properly imposed a license fee, in a manner consistent with state law and city ordinances. As such, the City's assessment issued to the Taxpayer for the 2009 taxable year is upheld.
As to the claim by the Taxpayer that it is unable to pay the additional fee, the provisions of Va. Code § 58.1-3994 permit local taxing authorities to accept offers in compromise from taxpayers who have failed to comply with the provisions of the tax law. This authority may be used to settle past liabilities whenever the collection of the entire amount is in substantial doubt and the best interests of the locality would be served by such a compromise. All such offers must be submitted in writing and are accepted solely at the discretion of the commissioner of the revenue or other local assessing official.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Craig M. Burns
Tax Commissioner
- Craig M. Burns
-
-
-
-
-
-
AR/1-4443577806.D
Rulings of the Tax Commissioner