April 21, 2020
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality: *****
Business, Professional and Occupational License Tax
Dear *****:
This final state determination is issued upon the application for correction filed by you on behalf of ***** (the “Taxpayer”), with the Department of Taxation. You appeal assessments of the Business, Professional and Occupational License (BPOL) tax issued to the Taxpayer by ***** (the “County”) for the 2017 through 2019 tax years.
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 sections, regulations 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
The Taxpayer provided support services for the United States military at a location based in the County during the tax years at issue. The Taxpayer had 14 employees who were exclusively located and performed all activities at that location.
The County audited the Taxpayer and determined that the Taxpayer should have reported taxable gross receipts to the County. As a result, assessments were issued. The Taxpayer appealed to the County. The County concluded that the Taxpayer’s gross receipts were taxable because they were attributable to services performed at a definite place of business in the County. The Taxpayer filed an appeal with the Department, contending its activities within the County were insufficient to establish a definite place of business.
ANALYSIS
Definite Place of Business
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.” A definite place of business can include a location leased or otherwise obtained from another entity on a temporary or seasonal basis. 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 Document (P.D.) 97-201 (4/25/1997), P.D 01-215 (12/12/2001), P.D. 10-277 (12/21/2010).
Although these activities are indicative of a definite place of business, in an economic environment that is constantly evolving, all facts and circumstances concerning the nature of a taxpayer's operations must be considered. In P.D. 01-215, the Department found that a computer consultant whose work was performed at client’s locations on a regular and continuous basis could establish definite places of business at such locations. Similarly, in P.D. 11-161 (9/20/2011), the Department advised that a Taxpayer that maintained a regular and continuous presence at its client’s location for more than 30 consecutive days established a definite place of business even through it did not advertise, own business or personal property or have a telephone at its customer’s location.
The Taxpayer argues that its definite place of business was controlled by the terms of the contract, which defined its definite place of business as the Taxpayer’s home office. However, the Code of Virginia controls the determination of the Taxpayer’s definite place of business for purposes of the BPOL tax, not the contract.
In 1978-79 Op. Va. Att’y Gen 279, a maintenance contractor serviced hospitals and office buildings. The Attorney General opined that a continuous and regular course of dealing at a customer’s location would seem to constitute a definite place of business in such location when employees are “more or less” permanently assigned to work at the location for the duration of the contract. In this case, the Taxpayer and its employees were engaged in work on a continuous basis at the client’s location, which was mandated by the terms of the contract, and exceeded 30 consecutive days during all tax years at issue.
Situs
In determining the situs of gross receipts, Virginia 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 it not performed at any definite place of business, (ii) the place from which the service is directed or controlled; or as a last resort (iii) when it is impossible or impractical to determine where the service is performed or from where the service is directed or controlled, by payroll apportionment between definite places of business. In this case, gross receipts were attributable to services performed at the Taxpayer’s definite place of business in the County.
Federal Jurisdiction
The Taxpayer believes that because the work was being performed on a military base owned by the federal government, the City was barred from assessing a BPOL tax on activities carried out on the property. In Op. Va. Att’y Gen. 11-029 (2/24/2012), the Attorney General concluded that the City of Virginia Beach was authorized to impose its BPOL tax on gross receipts derived from activities conducted exclusively on federal property. The Attorney General reasoned that the BPOL tax came within the protection of the Buck Act, codified at 4 U.S.C. §§ 105-110, which prevents persons from being relieved of state and local tax obligations that arise from transactions occurring, or services being performed, in federal areas.
DETERMINATION
Based on the facts presented, the Taxpayer’s continuous course of dealing in the County created a definite place of business. As such, the gross receipts generated from the services provided at that definite place of business were subject to BPOL tax by the County. The fact that the Taxpayer was providing services on federal property has no bearing on the outcome of this appeal. Therefore, the assessments are upheld.
If you have any questions regarding this determination, you may *****, in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/2215.A