July 22, 2026
Re: Appeal of Final Local Determination
Taxpayer: *****
Locality Assessing Tax: *****
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 Business, Professional and Occupational License (BPOL) tax issued to the Taxpayer by ******** County (the “County”) for the 2023 and 2024 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 and regulations cited are available online at law.lis.virginia.gov. The public documents and tax bulletins cited are available at tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website.
FACTS
The Taxpayer was engaged in the business of building residential homes and developing neighborhoods. The Taxpayer operated as a contractor with its principal place of business and headquarters in the County. During the tax years at issue, the Taxpayer’s only definite place of business was in the County. The Taxpayer also operated as a speculative builder in another jurisdiction (“County 2”).
The Taxpayer did not renew its BPOL applications for the 2023 and 2024 tax years, and the County issued statutory BPOL tax assessments for the tax years at issue. After receiving the statutory assessments, the Taxpayer filed its BPOL applications and deducted the gross receipts earned in County 2 for each tax year at issue. The County disallowed the deductions for gross receipts and instead allowed deductions for the taxable base reported to County 2 for each tax year at issue. The County issued adjusted BPOL assessments for the tax years at issue. The Taxpayer filed an administrative appeal with the County, asserting that it should be allowed to deduct its gross receipts earned in County 2 from its BPOL applications for the tax years at issue.
The County issued its final determination, concluding that the Taxpayer was permitted to deduct its tax base in County 2 rather than its gross receipts earned in County 2. The Taxpayer timely appealed to the Department, contending that the County incorrectly included gross receipts from County 2 in its 2023 and 2024 BPOL assessments.
ANALYSIS
Situs
Generally, under Virginia Code § 58.1-3703.1 A 3 a, the gross receipts of a contractor are attributed to the definite place of business where its services are performed. If a contractor performs services in a locality in which it does not maintain a definite place of business, then gross receipts from such services are attributed to the definite place of business where its services are initiated, controlled, or directed, unless the contractor is subject to the provisions of Virginia Code § 58.1-3715.
Pursuant to Virginia Code § 58.1-3715, when a contractor has paid any local license tax required by the county, city or town in which his principal office and any branch office or offices may be located, no further license or license tax shall be required by any other county, city or town for conducting any such business within the confines of this Commonwealth. However, when the amount of business done by any such contractor in any other county, city or town exceeds the sum of $25,000 in any year, such other county, city or town may require of such contractor a local license, and the amount of business done in such other county, city or town in which a license tax is paid may be deducted by the contractor from the gross revenue reported to the county, city or town in which the principal office or any branch office of the contractor is located.
In this case, the Taxpayer conducted business in two jurisdictions that imposed BPOL taxation. The Taxpayer’s only definite place of business was in the County where it was classified as a contractor. The Taxpayer was classified as a speculative builder in County 2. Although the Taxpayer did not have a definite place of business County 2, the Taxpayer was subject to BPOL taxation in County 2 because it performed work in excess of $25,000. At issue is the amount attributable to County 2 that may be deducted from the Taxpayer’s gross receipts reported to the County.
The Taxpayer contends that, under the provisions of Virginia Code § 58.1-3715, it is permitted to deduct the gross receipts attributable to work performed in County 2 from its calculation of County BPOL taxes.
In its final determination, however, the County concluded that the Taxpayer was permitted to deduct its taxable base reported to County 2 rather than its gross receipts attributable to County 2. The County argues that the Taxpayer, as a speculative builder, paid BPOL tax in County 2 based on the cost of homes that were constructed and not based on the receipts earned from sales. Therefore, according to the County, the Taxpayer’s gross receipts from business in County 2 were not the proper measure of the amount of business that may be deducted under the provisions of Virginia Code § 58.1-3715.
The Department has ruled that contractors with a definite place of business in a locality that imposes the BPOL tax may deduct those gross receipts attributed to work performed in other jurisdictions only if the volume of business in those jurisdictions exceeds $25,000 and the contractor pays a license tax in that other jurisdiction. See Public Document (P.D.) 04-5 (2/17/2004). It is important to emphasize that: (1) a license tax must have been assessed and paid, and (2) license fees do not qualify for the deduction. See P.D. 01-47 (4/23/2001), P.D. 04-5 (2/17/2004), P.D. 10-104 (6/18/2010), and P.D. 25-9 (1/15/2025), see also Title 23 of the Virginia Administrative Code (“VAC”) VAC 10-500-160.
DETERMINATION
In the Department’s opinion, the Taxpayer is entitled to a deduction for gross receipts attributed to work performed in County 2 for tax years 2023 and 2024. The Department is remanding the case to the County to adjust the assessment in accordance with this determination. The Taxpayer must provide the County with the necessary documentation to allow the County to determine which gross receipts attributed to work performed in other localities, if any, were eligible for the deduction.
If you have any questions regarding this determination, you may contact ***** in the Office of Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****.
Sincerely,
Kristin L. Collins
Tax Commissioner
Commonwealth of Virginia
AR/5287.T