Document Number
17-113
Tax Type
BPOL Tax
Description
Taxpayer that grew and sold its own farm products is exempt from the County's license fee and tax under Va. Code § 58.1-3703 C 2.
Topic
Taxpayers' Remedies
Classification
Exemptions
Date Issued
06-26-2017

June 26, 2017

Re:      Final Local Determination
            Locality Assessing Tax:   *****
            Taxpayer:    *****
            Business, Professional and Occupational License Tax

Dear *****:

This will reply to your letter in which you seek correction of the classification status given to ***** (the “Taxpayer”), by the ***** (the “County”) for purposes of the Business, Professional and Occupational License (BPOL) tax.

The BPOL tax is imposed and administered by local officials.  Virginia Code § 58.1-3703.1 A 5 authorizes the Department to issue determinations on taxpayer appeals of a locality's final determination regarding a BPOL tax classification, regardless of whether the appeal is in conjunction with an assessment, examination, audit, or any other action taken by a locality.

The following determination is based on the facts presented to the Department summarized below.  The Code of Virginia sections, regulation and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site.

FACTS

In 2015, the Taxpayer established a definite place of business in the County.  The Taxpayer grew produce in various locations throughout the United States and Canada.  The produce was processed at packaging plants operated by the Taxpayer, one of which was located in the County.  Once processing was finished, the produce was sold to distributors.

When the County examined the facility, it determined the Taxpayer should be classified as a wholesaler.  The Taxpayer appealed and the County upheld its findings.  In its final determination, the County concluded that the Taxpayer should be classified as a wholesaler for BPOL tax purposes because packaging produce constituted a separate business.  The Taxpayer appealed to the Department, contending it was exempt from BPOL tax because it grew the produce.

ANALYSIS

The BPOL tax is imposed on businesses and professionals for the privilege of doing business in a locality.  The tax is imposed at different rates according to the classification of an enterprise.  See Va. Code § 58.1-3706.  The classifications are explained under Title 23 of the Virginia Administrative Code (VAC) 10-500-10 et seq. Classification of a specific business must be determined based on consideration of all the facts and circumstances.  Some of the factors to be considered include:

  1. What is the nature of the enterprise's business?
  2. How the enterprise generates gross receipts.
  3. Where the enterprise conducts its business.
  4. Who are the enterprise's customers?
  5. How the enterprise holds itself out to the public.
  6. The enterprise's NAICS code.

The Taxpayer contends that it was exempt from the BPOL tax because it grew the produce that was sold out of the County facility.  The County contends that the facility constituted a separate line of business that should have been classified as a wholesaler.

Virginia Code § 58.1-3703 C 2 provides that no Virginia locality shall impose a license fee or levy any license tax:

For selling farm or domestic products or nursery products, ornamental or otherwise, or for the planting of nursery products, as an incident to the sale thereof, outside of the regular market houses and sheds of such county, city or town, provided such products are grown or produced by the person offering them for sale[.]

The statute prevents a locality from imposing a license tax on a person selling farm products grown or produced by such person.  See 1984-1985 Report of the Attorney General 347 (4/9/1985).  “Persons” include corporations.  See Va. Code § 1­230.

Based on the information provided, the Taxpayer grew all of the products that it sold from its facility in the County.  Thus, even if the facility in the County essentially mirrored a wholesale business, the same person, the Taxpayer, grew the products being sold.

Had the Taxpayer been engaged in other business activities such as packaging products for other growers and selling them at wholesale, for example, such activities could have been evaluated to determine if they created a separately licensable business.  If so, any separate business may not have qualified for the Va. Code § 58.1­3703 C 2 exemption.  For more information concerning the standards used to evaluate whether a taxpayer is operating multiple businesses, including examples, see Title 23 VAC 10-500-110.  The Department also has issued a number of public documents addressing the separate business issue.  See, e.g., Public Document (P.D.) 13-112 (6/24/2013) and P.D. 16-118 (6/12/2016).

DETERMINATION

Because the Taxpayer grew the products it sold out of its facility in the County, the Department finds that the Taxpayer was exempt from the County's license fee and tax under Va. Code § 58.1-3703 C 2.  The County is instructed to abate any assessments and issue refunds to the extent the Taxpayer has paid any such fees or taxes.

If you have any questions regarding this determination, you may call ***** in the Office of Tax Policy, Appeals and Rulings, at *****.

Sincerely,

 

Craig M. Burns
Tax Commissioner

 

 

 

AR/1257.M

Rulings of the Tax Commissioner

Last Updated 10/02/2017 07:28