Tax Type
BPOL Tax
Description
Water Treatment Facility
Topic
Local Power to Tax
Date Issued
06-24-1992
June 24, 1992
Re: Request for Ruling; Local License Tax
Dear******************
This will reply to your letter of January 30, 1992, in which you request a ruling concerning the applicability of the business, professional and occupation license (BPOL) tax to***************("the firm").
The license tax is, of course, a local tax which is imposed and administered by local officials. The Code of Virginia limits the involvement of the Department of Taxation to promulgating guidelines defining and explaining the categories within which businesses may be placed, and issuing written advisory opinions interpreting the classifications and guidelines.
For purposes of this ruling, it is assumed that the firm has a business location in your locality. However, business location is an issue is to be determined by local officials, based on the facts and circumstances of each case.
According to the information provided, the firm operates a water treatment facility at a cogeneration plant. The firm obtains water from local streams or lakes or, on occasion, purchases water from the local water company. The firm then treats the water and demineralizes it before the water flows to the customer (the cogeneration plant). The firm charges the cogeneration plant for its water treatment service
Va. Code §58.1-3703 prohibits localities from levying the license tax in certain circumstances. However, based on your description of the firm's activities, it appears that the firm does not fall under any of the limitations Provided under that section.
The firm has been classified as a "processor" for sales and use tax purposes. That classification appears to be applicable for BPOL purposes as well. Even though the firm is selling demineralized water (tangible personal property), it does not appear to be engaging in retail sales for BPOL purposes. Under Guidelines for Local Business, Professional and Occupational License Taxes (Jan. 1, 1984), a retail sale is defined as "the sale of goods, wares and merchandise for any purpose other than resale...." In this case, the principal business of the firm is not the retail sale of goods, wares and merchandise, but rather the processing (demineralizing) of water.
As a "processor," the firm does not fall under one of the categories enumerated in subsections 1,2, and 3 of Va. Code §58.1-3706, which provides for the limitation on the rate of license taxes. Therefore, the firm would be classified under subsection 4 under "all other businesses" and would be subject to a license tax at a rate not to exceed 36 cents per $100 of gross receipts.
I hope that this information will be helpful. Although I believe that the foregoing is in accordance with applicable law, it is given for guidance only, and the final determination rests with the locality.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5938F
Rulings of the Tax Commissioner