Tax Type
BPOL Tax
Description
BPOL Tax; Private Service Corporation
Topic
Local Power to Tax
Date Issued
03-05-1997
March 5, 1997
Re: Request for Advisory Opinion: BPOL
Dear**************************
This will respond to your letter transmitted by fax on February 14, 1997 requesting an advisory opinion.
The license tax is 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 and issuing advisory opinions. However, the department shall not be required to interpret any local ordinance.
While addressing the questions raised in your letter, this response is intended to provide advisory guidance only and does not constitute a formal or binding ruling.
FACTS
A long distance telephone service provider has an office located in the town. The company does business in Virginia, the District of Columbia and Maryland. Secondly, a company located in the town rents and sells video tapes and sells and installs video and satellite equipment. Your inquiry is whether the telephone company is subject to the BPOL tax and how the video business should be treated for BPOL purposes.
OPINION
Telephone Company
A company providing long distance telephone services is a public service corporation for BPOL purposes. The authority for a locality to impose the BPOL tax on a public service corporation is provided in § 58.1-3731 Code of Virginia. This section provides that a locality may levy a gross receipts tax on a public service corporation not to exceed one-half of one percent of the gross receipts of the company accruing from the sales of services in the taxing jurisdiction. The code section states further that the gross receipts of a telephone company shall not include long distance charges. Thus, a locality may only charge the BPOL tax on telephone companies to the extent that they provide and bill for local service. In your situation, where the telephone company's only receipts are from long distance charges, the locality has no authority to levy the BPOL tax.
Satellite and Video Business
For purposes of this discussion, I assume that the video company has a definite place of business in your jurisdiction. This means that the company has been regularly and continuously conducting business in a location in your jurisdiction for the past 30 days. The video company may be taxable and subject to licensure under a number of lines of business. To the extent the video company has been renting videotapes during this period it would fall under the general classification of a personal service business. Sales of video tapes and equipment would fall under the general classification of retail sales and should be subject to licensure as such.
Regarding the sales and installation of satellite equipment, see section 5.3 of the 1997 BPOL Guidelines. This section helps draw the distinction between retailing and contracting for the application of the BPOL tax. Installation of satellite equipment, to the extent it involves bolting on the receiver dish and running wires to the receiving unit, is ancillary to the sale of the equipment. Ancillary activities conducted by a business are taxable to the same extent as the primary business activity they support. This assumes, of course, that the primary business has a definite place of business in the locality imposing the tax. Thus, in this case any additional charge the retailer makes for installation of the satellite equipment would be included in the retailer's gross receipts. In this case, the company would not be separately licensable as a contractor.
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/12178
Rulings of the Tax Commissioner