May 7, 2015
Re: Appeal of Final Local Determination
Locality Assessing Tax:
Taxpayer:
Business, Professional and Occupational License Tax
Dear *****:
This final state determination is issued upon the application for correction filed on behalf of ***** (the "Taxpayer") with the Department of Taxation. You seek a reconsideration of Public Document (P.D.) 15-20 (2/17/2015) concerning the Business, Professional and Occupational License (BPOL) tax assessments issued to the Taxpayer by the ***** (the "City") for the 2010 tax year.
The BPOL tax is imposed and administered by local officials. Virginia Code § 58.1-3703.1 authorizes the Department to issue determinations on taxpayer appeals of BPOL tax assessments. On appeal, a BPOL 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 section and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site.
FACTS
The Department determined in P.D. 15-20 that the Taxpayer did not provide sufficient documentation to show that its gross receipts should have been sitused to definite places of business located in the ***** (the "County) and in the state of ***** ("State A"). The Taxpayer seeks a reconsideration, contending that the contract for the services generating the gross receipts required that the work be performed at the State A definite place of business.
ANALYSIS
In determining the situs of gross receipts, Va. Code §§ 58.1-3703.1 A 3 a 4 and 58.1-3703.1 A 3 b state that receipts from services are to be taxed based on (in order): (i) the definite place of business at which the service is performed, or if not performed at any definite place of business, (ii) the definite place of business from which the service is directed or controlled; or as a last resort (iii) when it is impossible or impractical to determine the definite place of business where the service is performed or from where the service is directed or controlled, by payroll apportionment between definite places of business. Virginia Code § 58.1-3703.1 A 3 b also states that gross receipts may not be apportioned to a definite place of business unless some business activities occurred at, or were controlled from, such definite place of business. The Department has addressed the situs of gross receipts for service providers in numerous public documents. See Public Document (P.D.) 05-168 (12/12/2005), P.D. 08-84 (6/6/2008) and P.D. 14-193 (12/29/2014).
Virginia Code § 58.1-3703.1 A 5 provides that the burden is on the taxpayer to provide sufficient documentation that a locality's assessment is incorrect. In this case, the Taxpayer has provided a contract which states that all work must be performed at the State A definite place of business and that no work is to be performed at the Taxpayer's definite place of business located in the City. Issues regarding the location of the performance of services are a matter of fact to be determined by the locality.
Under the provisions of Va. Code § 58.1-3109 6, the local commissioner of the revenue is empowered with the authority to require records and other information necessary to make an accurate assessment of a person's license taxes. As such, it is incumbent upon a taxpayer to prove to the satisfaction of the local taxing authority that it properly sitused gross receipts on its tax returns.
DETERMINATION
I have reviewed the contract provided by the Taxpayer. Based on the contract, I find there is a strong likelihood that the Taxpayer may have provided services at the State A facility and that gross receipts should be sitused to the definite place of business in State A. However, while a contract can indicate situs, the Taxpayer should be able to document where the services were actually performed. Accordingly, the Taxpayer should be able to provide documentation to show which employees worked on the contract and where the work actually took place. Further, if any of its employees assigned to the facility in the City worked on the contract, the Taxpayer should be able to show they were required to travel to State A to perform the services.
I am remanding this case to the City in order to review any evidence the Taxpayer can provide to demonstrate where the services mandated by the contract were actually performed. If the Taxpayer can provide clear and cogent evidence that services required by the contract were performed at the State A location, the City must adjust its BPOL tax assessment for the 2010 tax year reflecting the proper situs of the gross receipts and issue the appropriate refund with applicable interest.
If you have any questions regarding this response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5818199207.B