July 16, 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 administrative appeal filed by you on behalf of ***** (the “Taxpayer”) with the Department of Taxation. You appeal an assessment of Business, Professional, and Occupational License (BPOL) tax issued to the Taxpayer by the ***** (the “County”) for the 2025 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 sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website.
FACTS
The Taxpayer operated a brewery in the County. The County audited the Taxpayer and issued an assessment of BPOL tax for the 2025 tax year. The Taxpayer appealed to the County, contending that it was exempt from BPOL tax as a manufacturer. In its final determination letter, the County concluded that the Taxpayer was subject to BPOL on retail sales made in the Taxpayer’s tasting room located in the brewery. The Taxpayer filed an administrative appeal with the Department, contending that it is exempt from BPOL taxation on its tasting room sales because the tasting room is not a separate business apart from its manufacturing business.
ANALYSIS
Alcoholic Beverage Control Act
Businesses that produce or sell alcohol are heavily regulated by the Virginia Alcoholic Beverage Control Act (Title 4.1 of the Code of Virginia) (the “Act”). Virginia Code § 4.1-206.1 authorizes the board of directors of the Authority (the “Board”) to issue manufacturer licenses. Generally, a brewery license authorizes the licensee to manufacture beer and to sell and deliver or ship the beer so manufactured, in accordance with Board regulations, in closed containers to (i) persons licensed to sell the beer at wholesale and (ii) persons outside the Commonwealth for resale outside the Commonwealth. Such license shall also authorize the licensee to sell at retail at premises described in the brewery license (a) the brands of beer that the brewery owns for on-premises consumption, provided that not less than 20 percent of the volume of beer sold for on-premises consumption in any calendar year is manufactured on the licensed premises, and (b) beer in closed containers, which shall include growlers and other reusable containers, for off-premises consumption.
The Taxpayer contends that it was exempt from BPOL taxation on the gross receipts of its tasting room because it was authorized to make tasting room sales as part of its brewery license issued by the Board. It appears the Taxpayer believes that it cannot be required to obtain both a brewery license from the Board and a BPOL license from the County.
The fact that the Taxpayer’s brewery manufacturer license permitted the retail sale of its beer for on-site consumption does not exempt its gross receipts attributable to such sales from BPOL tax. In Public Document (P.D.) 20-88 (5/22/2020), the Department ruled that the Act did not prohibit localities from imposing the BPOL tax on any retail sales a taxpayer may have had, provided the taxpayer was operating a licensable retail business.
Manufacturing
Virginia localities are prohibited from imposing a license fee or tax on a manufacturer for the privilege of manufacturing and selling goods, wares, and merchandise at wholesale at the place of manufacture. See Virginia Code § 58.1-3703 C 4.
In this case, the Taxpayer, a manufacturer, was exempt from BPOL tax on its wholesale sales at the place of manufacture. The County, however, determined that the gross receipts attributable to tasting room sales were retail sales subject to licensure. The Taxpayer contends that its tasting room was not a separate licensable retail business and should be treated as part of its manufacturing business.
Because tastings were sold directly to consumers, the tasting room sales would be considered retail sales. See Title 23 of the Virginia Administrative Code (VAC) 10-500-10. In Public Document (P.D.) 98-154 (10/16/1998), the Department ruled that a manufacturer was exempt from BPOL tax on receipts attributable to products sold at wholesale from the place of manufacturer, but not on any retail receipts or other licensed activities. Under Title 23 VAC 10-500-520 C 1, however, any receipts that are ancillary to a manufacturer’s sales at wholesale at the place of manufacture are also exempt. Thus, the question becomes whether the Taxpayer’s tasting room sales were ancillary to its wholesale sales or whether they rose to the level of being a separate business subject to BPOL taxation.
Multiple Businesses
Virginia Code § 58.1-3703.1 A 1 provides that a separate license shall be required for each definite place of business and for each business a taxpayer is operating. Local tax officials are responsible for making the determination as to whether a taxpayer is engaged in a single business or in two businesses, each of which could operate independently of the other. In order to make this determination, the local tax official must be provided with documentation demonstrating the substantiality of each business. See 1994 Op. Va. Att’y Gen. 99.
In order to obtain multiple licenses, a business must be engaged in clearly identifiable separate business activities and not merely activities ancillary to the primary business. In P.D. 97-257 (6/11/1997), the Department concluded that the term “ancillary” refers to business activities that are subordinate, subservient, auxiliary, or in aid of the business’ principal business activity. Distinguishing between an ancillary activity and an activity that rises to the level of a separate business can often be accomplished by determining if the activity under scrutiny exists independently of the principal business. In general, an activity for which no separate charge is made will be presumed to be ancillary to the activity for which a charge is made, but separately stating charges for different activities will not create a presumption that each such activity is a separate business. See Title 23 VAC 10-500-110 B.
A case that is often cited in determining whether a taxpayer is operating separate businesses is Caffee v. Portsmouth, 203 Va. 928 (1962). Caffee involved a bakery that had a manufacturing business because it made the baked goods at the location and also a retail storefront where customers could purchase the baked goods. The court reasoned that the taxpayer was in fact conducting two separate trades or occupations for license tax purposes because the manufacturing component could be performed completely independent of, and without relation to the retail merchandising, even though the source of the retail sales was the taxpayer’s own manufacturing activities. See id. at 930. In P.D. 20-88, the Department ruled that a distillery’s tasting room was a separately licensable retail tasting business apart from its manufacturing business, stating that the distillery’s business was analogous to Caffee.
In this case, the Taxpayer contends that its tasting room activities were ancillary to its manufacturing business because the tasting room sales represented a small fraction of the sales needed to support the operational costs of the brewery. Therefore, according to the Taxpayer, its tasting room could not survive on its own and did not rise to the level of a separate business.
The County, however, argues that, similar to Caffee, the Taxpayer’s tasting room activities were a separate business because the manufacturing component could be performed completely independent of, and without relation to, the retail tasting room.
DETERMINATION
In the Department’s opinion, no provision of the Act exempts the Taxpayer from BPOL tax on its gross receipts from its retail tasting room. The Act does, however, preserve a locality’s authority to impose a license tax measured by a taxpayer’s gross receipts even when some part or all of the gross receipts are attributable to alcohol sales. See Virginia Code § 4.1-128.
Although any wholesale sales the Taxpayer made from its place of manufacture were exempt from the BPOL tax, the facts indicate the Taxpayer was operating a separately licensable retail tasting business. According to the County’s final determination, it was only such retail sales that the County used to compute the tax measurable for the BPOL tax. Accordingly, the County’s assessment of BPOL tax is upheld.
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/5234.T