Tax Type
BPOL Tax
Local Taxes
Description
Mail Order Fulfillment Center
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
03-31-1994
March 31, 1994
Re: Request for Opinion; Local License Tax
Dear*************
This is in response to your letter of August 9, 1993, seeking an opinion as to the classification of mail-order fulfillment centers by ********** for purposes of its business license tax. I apologize for the delay in responding.
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 classifications and guidelines.
Nonetheless, I will try to address your request within the limitations set by the Code. As you are aware, the Code of Virginia authorizes localities to impose a license tax. Va. Code §58.1-3703 provides in pertinent part:
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- " The governing body of any county, city or town may levy and provide for the assessment and collection of county, city or town license taxes on businesses, trades, professions, occupations and callings and upon the persons, firms and corporations engaged therein within the county..."
In the instant case, the proposed mail-order fulfillment center would be located in ******** and would be responsible for picking the orders, packing the items, and shipping the items to customers. The orders will be taken and billed from their headquarters outside Virginia. The shipping charges will be added at the headquarters located outside Virginia.
You must first of all determine that this activity constitutes a business carried on within ********Based upon the information you have provided, it appears reasonable to conclude that this activity constitutes a business conducted in your locality, and is therefore required to obtain a business license.
The classification of this business depends upon your factual determination as to its nature. While the overall business is clearly one of retail sales, the business has been fragmented and decentralized. From your description of the activities expected to be conducted at the fulfillment center, it appears that there will be no direct contact between the retail customer and personnel at the fulfillment center. No orders will be taken at the center, no customers will be billed from the center, and no funds will be received from customers at the center. Under these circumstances, it is possible that there are no retail sales made at the fulfillment center that would be taxable as gross receipts from retail sales.
On the other hand, you may find that the fulfillment center has the characteristics of a business separate from the overall retail business and licensable as such under Va. Code §58.1-5. Since it provides a packing and shipping service to the overall business for which a separate charge is made, those charges may be taxable as receipts from other business services under Va. Code §58.1-3703 A 4 at a maximum rate of thirty-six cents per $100 of gross receipts. The fact that the charge may be billed and collected in another jurisdiction does not affect the taxability of those charges if the services are attributable to a definite place of business in your locality. However, this is a determination that must be made by*********.
I hope this information is helpful. It is intended for guidance only, and does not constitute a formal or binding ruling. The final determination in this matter rests with the locality.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7233M
Rulings of the Tax Commissioner