Tax Type
BPOL Tax
Description
Gross receipts from retail sales; Lottery ticket sales
Topic
Local Power to Tax
Date Issued
03-07-1997
March 7, 1997
Re: Request for Advisory Opinion: BPOL
Dear*********************
This will respond to your letter transmitted by facsimile on February 5, 1997, in which you asked several questions relating to the administration of the local license (BPOL) tax.
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 written opinions. However, the department shall not be required to interpret any local ordinance.
FACTS
You asked (1) whether a BPOL license fee or tax may be imposed upon an owner of a mobile home park; (2) whether a service station may deduct the cost of gasoline from gross receipts derived from gasoline sales; (3) what is the situs of gross receipts for propane gas sales when gas is sold from an office within the locality but delivered to a person's residence from storage tanks located outside the locality; and (4) whether a BPOL license tax can be levied on receipts from the sale of lottery tickets for lotteries established by the State Lottery Board.
OPINION
LOCAL LICENSE FEE OR TAX ON MOBILE HOMES
Generally, localities are prohibited from imposing a local license fee or a local license tax on persons "engaging in the business of renting, as the owner of such property, real property other than hotels, motels, motor lodges, auto courts, tourist courts, travel trailer parks, lodging houses, rooming houses and boardinghouses .... Code of Virginia § 58.1-3703 C (copy enclosed). However, localities imposing a local license fee or tax on January 1, 1974 on owners of real property engaging in the business of renting such property may continue to tax all such owners. Code of Virginia § 58.1-3703 C.
If the rental of a mobile home is the rental of real property, only those localities imposing a BPOL fee or tax on January 1, 1974 upon owners renting mobile homes may continue to tax such owners. Conversely, if the rental of a mobile home is not the rental of real property, a locality may impose a license fee or tax upon owners of mobile homes engaging in the business of renting such homes, provided the local ordinance licenses such businesses.
Mobile homes may be classified as real or personal property depending upon the facts. The key determinant is the intention of the mobile home owner in annexing the mobile home to land. See Report of the Attorney General 1981-1982 at page 369 (copy enclosed.)
The rental of a mobile home, however, always entails a transfer in usage rights to the underlying land. During the course of the rental agreement, the owner leasing the mobile home generally is limited in his ability to remove the tenants from the mobile home park. Code of Virginia § 55-248.50:1 (copy enclosed). Because the rental of a mobile home will always include the rental of the underlying real estate, the rental of a mobile home by an owner is the rental of real property by an owner of such property. Therefore, only those localities imposing a BPOL fee or tax on January 1, 1974 upon owners renting mobile homes may continue to tax such owners.
DEDUCTION OF A SERVICE STATION'S COSTS FROM GROSS RECEIPTS
Subject to limits in Code of Virginia § 58.1-3703 C, if a local ordinance provides that a particular business may be licensed, a locality may be able to levy a license tax upon that business. The license tax is generally levied upon gross receipts. Code of Virginia § 58.1-3706 A (copy enclosed). However, before a locality can levy a license tax, the licensable business's gross receipts must equal or exceed applicable tax thresholds for the locality. Code of Virginia § 58.1-3706 A.
Gross receipts means the "whole, entire, total receipts, without deduction." Code of Virginia § 58.1-3700.1 (copy enclosed). Assuming that a local ordinance provides for the levying of a license tax upon a service station and the service station's gross receipts equal or exceed applicable tax thresholds, the service station must report its whole, entire, total receipts derived from the privilege of engaging in that activity for purposes of BPOL tax assessments. As a result, the service station may not deduct the cost of gasoline from its gross receipts when filing a BPOL tax return. Expenses and other costs of doing business are not deductible for purposes of the BPOL tax.
SITUS OF GROSS RECEIPTS FOR RETAILERS
You next ask whether a certain business engaging in the business of selling propane gas is subject to a local license tax when such sales are made from an office within the locality but delivered to the customer's home from storage tanks located outside the locality.
For a locality to levy a license tax on retailers, the local ordinance must provide for the licensing of such businesses. Additionally, a locality may not levy a license tax on licensable businesses whose gross receipts fall below applicable tax thresholds for the locality. Code of Virginia § 58.1-3706 A.
The 1996 BPOL legislation for the first time definitively provided situs rules for the gross receipts of wholesalers and retailers. Assuming the locality may levy a license tax on retailers, these situs rules would require gross receipts for this propane gas retailer to be attributed to "the definite place of business at which sales solicitation activities occur, or if sales solicitation activities do not occur at any definite place of business, then the definite place of business from which sales solicitation activities are directed or controlled." Code of Virginia § 58.1-3703.1 A 3a(2) (copy enclosed). A definite place of business "means an office or a location at which occurs a regular and continuous course of dealing where one holds one's self out or avails one's self to the public for thirty consecutive days or more, exclusive of holidays and weekends". 1997 BPOL Guidelines, page 4 (copy enclosed).
This particular retailer appears to have a definite place of business in the locality where sales solicitation activities occur. Propane gas sales are made from an office located within the locality. Therefore, under the BPOL situs rules for retailers, gross receipts of this propane gas retailer would be attributed to the office in town from which sales are made. As a result, the locality may levy a license tax on the gross receipts of
this retailer.
LOCAL LICENSE TAX ON VIRGINIA LOTTERY TICKET SALES
No state or local taxes may be imposed on the sale of tickets for lotteries established by the State Lottery Board, except as provided in Code of Virginia § 58.1--4011. Code of Virginia § 58.1-4025 (copy enclosed). Code of Virginia § 58.1-4011 provides that gross receipts for purposes of the local license tax mean only the compensation actually paid by the State Lottery Board to a retailer of lottery tickets. Code of Virginia § 58.1-4011 (copy enclosed).
Thus, a locality levying a license tax on licensable businesses selling Virginia lottery tickets may include the compensation paid by the State Lottery Board in the basis for the tax. However, localities are prohibited from including gross receipts from the sale of Virginia lottery tickets in such basis. See Report of the Attorney General 1987-1988 at page 561 (copy enclosed).
I hope that the above information will be beneficial to you. Although letter conforms with the law, it is written only for your guidance, and the final determination is with the locality.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12146C
Rulings of the Tax Commissioner