Tax Type
BPOL Tax
Description
In general; Advertising agencies
Topic
Local Power to Tax
Date Issued
01-13-1997
January 13, 1997
Re: Request for Advisory Opinion: BPOL
Advertising Agencies
Dear
This will respond to your letter transmitted by fax on January 8, 1997 requesting an advisory opinion as to whether an advertising agency should be subject to BPOL tax based on its gross receipts or its "gross commissions" which is its gross receipts less the media charges the agency incurs in servicing its clients.
FACTS
An advertising agency provides for advertising and promotions for its clients by contracting with radio, television and other media sources. The client has no contact with and no legal obligation to the media source for payment. The media source looks solely to the agency for payment. The agency bills its clients for the cost of the media advertising plus a commission.
OPINION
I agree that Alexandria v. Morrison-Williams Associates. Inc., 223 Va. 349 (1982), cited in your letter and on page 6 of the 1997 BPOL Guidelines should control on this issue. As stated on page 5 of the 1997 BPOL Guidelines, "gross receipts means the whole, entire, total receipts, of money or other consideration received by the taxpayer as a result of transactions with others...without deduction or exclusion except as provided by law." Because there is no relationship between the agency's client and the media, the media charges that the agency incurs in servicing the client is best viewed
as part of the agency's cost of doing business. There is no legal basis in the BPOL statute for excluding these costs in calculating the agency's gross receipts. Therefore, it would be improper for the agency to exclude media charges and report only "gross commissions" when it reports gross receipts for BPOL taxation.
I hope that the above information will be beneficial to you. Although I believe this letter conforms with the law, it is written only for your guidance. If you have any further questions or comments, please do not hesitate to let me know.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12034
Rulings of the Tax Commissioner