Tax Type
BPOL Tax
Description
In general; Out-of-state contractors
Topic
Local Power to Tax
Date Issued
01-22-1997
January 23, 1997
Re: Request for Advisory Opinion: BPOL
Contractors
Dear**********
This will respond to your letter of December 31, 1996 in which you ask for a reconsideration of the department's interpretation of the taxation of out-of-state contractors under the BPOL statutes and 1997 Guidelines.
FACTS
You ask for a reconsideration of an advisory opinion made by the department on December 16, 1996. The facts of that opinion concerned contractors with a principal place of business in Tennessee who also performed contracting services in ****** Virginia. The contractors in question did not maintain any permanent presence in ******Virginia. The length of time these contractors worked at a particular job site varied from a few days to several months. We concluded that these contractors were subject to a BPOL license fee and tax only for those construction projects in which they maintained a presence at the construction site for at least thirty consecutive days.
You ask for a reconsideration of an advisory opinion made by the department on December 16, 1996. The facts of that opinion concerned contractors with a principal place of business in Tennessee who also performed contracting services in ***** Virginia. The contractors in question did not maintain any permanent presence in ****** Virginia. The length of time these contractors worked at a particular job site varied from a few days to several months. We concluded that these contractors were subject to a BPOL license fee and tax only for those construction projects in which they maintained a presence at the construction site for at least thirty consecutive days.
DETERMINATION
The gross receipts of a contractor are attributed to the definite place of business at which the contractor's services are performed. If contracting services are not performed at any definite place of business, then the contractor's gross receipts are attributed to the definite place of business from which the services are directed or controlled. Code of Virginia §58.1-3703.1 A 3a(1). A definite place of business means an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more. Code of Virginia §58.1-3700.
Thus, a Tennessee or other out-of-state contractor who does not maintain a presence at a Virginia job site for at least thirty days and who does not have a definite place of business in Virginia from which contracting services are directed or controlled cannot be charged a license fee or levied with a license tax on gross receipts by any Virginia locality. However, a Virginia contractor who does not maintain a presence at a Virginia job site for at least thirty days but who has a definite place of business in Virginia from which contracting services are directed or controlled is subject to a license fee and license tax. Depending on the circumstances, such Virginia contractor will be subject to a license fee and license tax in the locality where his principal place of business is located or in the locality where the contracting services are performed.
Virginia contractors and out-of-state contractors are subject to the same general situs rules. The gross receipts of both contractors are attributed to the definite place of business where the contracting services are performed or the definite place of business where the contracting services are directed or controlled.
Your point is well taken that out-of-state contractors historically have been subject to the BPOL tax in Virginia where their construction activities took place, regardless of the length of time of the project. However, the General Assembly specifically enacted the definite place of business limitation (30 day rule) in the situs rules for the gross receipts of contractors. Furthermore, the legislative history of Code of Virginia §58.1-3703.1 A 3a(1) indicates that the General Assembly intentionally provided the definite place of business protection to out-of-state businesses to avert federal constitutional questions of discriminatory tax treatment. See relevant pages of House Document No. 59 (copy enclosed.)
*********************************If you have any questions, please call.**********************
Sincerely,
Danny Payne
Tax Commissioner
Tax Commissioner
Rulings of the Tax Commissioner