Tax Type
BPOL Tax
Description
Loggers
Topic
Local Power to Tax
Date Issued
04-10-1997
April 10, 1997
Re: Request for Advisory Opinion: BPOL
Dear***************
This will respond to your facsimile dated March 6, 1997, regarding the taxation of mobile home installation and loggers.
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 question raised in your letter, this response is intended to provide advisory guidance only and does not constitute a formal or binding ruling.
FACTS
A mobile home dealer sells single and double wide mobile homes to residents in your locality. The dealer's offices, display lot, and inventory are all in an adjacent locality. The dealer has no office or sales personnel in your locality and all sales are made at the dealership outside of your locality. The dealer does, however, enter your locality for delivery and setup. Setup of the mobile homes consists of grading the site, laying mortar and block piers for support, and installing skirting around the base of the home. An advisory opinion [P.D. 97-40] was issued to you. It concluded that the sales of double wide mobile homes and their installation were not taxable by your locality. You state that contractors who have a definite place of business in another locality must get a BPOL license from your locality when gross proceeds exceed $25,000. You question why mobile home sales and their setup are not taxable by your locality when contractors with gross receipts in excess of $25,000 are subject to licensure.
You also ask what are all the circumstances that a logger in your locality would need a business license. In addition, you give the following three logging scenarios:
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- Loggers that buy tracts of land with timber and cut and sell the timber to a mill. Loggers that buy standing timber which they cut and sell to a mill.
A logging company which cuts the timber off tracts of land for another company and is paid by the volume cut.
- Loggers that buy tracts of land with timber and cut and sell the timber to a mill. Loggers that buy standing timber which they cut and sell to a mill.
Your locality charges both a license fee and a tax on gross receipts. Your tax on wholesalers is based on purchases.
OPINION
Mobile Homes
P.D. 97-40, copy enclosed, concluded that mobile home dealers are classified as retailers for business license purposes. A retailer would need a definite place of business in your locality to be subject to licensure. Code of Virginia § 58.1-3700.1, copy enclosed, defines a definite place of business as "an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more." The mobile home retailer is located outside of your locality. It does not have a definite place of business in your locality and therefore you cannot tax them as a retailer. However, in certain cases the activities of a business may be such that they constitute two or more businesses which may be separately subject to licensure. The determinative question is whether the setup of the double wide mobile homes constitutes a business separate from retailing which may be subject to licensure in your locality.
Normally, the site grading, laying of mortar and block piers and the installation of skirting would constitute contracting pursuant to Code of Virginia § 58.1-3714, copy enclosed. A contractor may be subject to licensure in your locality if it had either a definite place of business in your locality or if it had $25,000 or more of gross receipts. See Code of Virginia §§ 58.1-3700.1 and 3715, copies enclosed. The mobile home dealer may have a definite place of business in your locality only if it worked on a particular installation for thirty consecutive days or more. It is unlikely that any particular installation would exceed thirty days. However, the value of all the mobile home installations in your locality may exceed the $25,000 contractor threshold.
Even if the mobile home installations exceed $25,000, the installations may not be a separate business subject to licensure as a contractor. The installation activities may be considered part of the retail sale of mobile homes which are not subject to licensure in your jurisdiction. The determination of whether a merchant's installation of goods constitutes contracting for purposes of the BPOL tax will depend upon the facts and circumstances in each case. Section 5.3 of the 1997 BPOL Guidelines, copy enclosed, provides that the factors which determine whether or not a merchant's installation of goods constitute contracting include: 1 ) whether the installation requires any work described in § 58.1-3714 B; 2) whether the installation is merely ancillary to the retail sales of the merchant, as opposed to constituting a substantial portion of what is sold in the transaction; 3) whether the merchant holds himself out as able to perform contractor's activities; and 4) whether the merchant installs his own merchandise only or does he also installs the goods of others. In order to determine whether the installation of the mobile home constitutes contracting, I will examine each individual factor.
Factor 1
Code of Virginia § 58.1-3714 B 1 states that any work using brick, mortar, cement is contracting. Code of Virginia § 58.1-3714 B 4 states that earth excavation constitutes contracting. Clearly grading the site, laying mortar and installing skirting around the base of mobile home satisfies the first factor's definition of contracting.
Factor 2
Section 1 of the 1997 BPOL Guidelines, copy enclosed, defines ancillary as "subordinate to, subservient to, auxiliary to, or in aid of, that which is principal and primary." The principal purpose of the mobile home retailer is to sell mobile homes, not set them up. The installation of the mobile homes is clearly auxiliary to the sale of the mobile home. The setup of the mobile homes is ancillary to the sale.
Factors 3 & 4
There is no evidence that the mobile home dealer holds itself out as able to perform contractor's activities, nor is there evidence that the dealer installs the mobile homes of others.
In the instant case the mobile home dealer only satisfied one of the four factors. Thus, it is my opinion that the gross receipts derived from the installation activities of the mobile home dealer are part of the retail sale and are not separately taxable as contractor activities by your locality.
Loggers
As you stated in your letter, there are many circumstances in which a logger may be subject to licensure. I will provide you a brief overview of the BPOL statute which you can use to help determine whether a logger is subject to licensure. I will also address the three specific examples for which you requested an opinion.
A person must be engaged in the exercise of a licensable privilege in order to be subject to licensure. A person must be in business to be engaged in a licensable privilege. Code of Virginia § 58.1-3700.1 defines business as:
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- ...a course of dealing which requires the time, attention, and labor of the person so engaged for the purpose of earning a livelihood or profit. It implies a regular and continuous course of dealing rather than an irregular or isolated transaction...
Secondly, the business must have a definite place of business in your locality to be subject to taxation in your locality. Code of Virginia § 58.1-3700.1 defines a definite place of business as:
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- ...an office or location at which occurs a regular and continuous course of dealing for thirty consecutive days or more ... [a] person's residence shall be deemed to be a definite place of business if there is no definite place of business maintained elsewhere...
To be subject to licensure, loggers would have to be engaged in a regular course of dealing for thirty or more continuous days. They would also need an office or location in your locality where they operate for thirty consecutive days or more. Their residence may be a definite place of business if they do not have a definite place of business elsewhere.
A locality may assess a license fee and/or a gross receipts tax on a licensable business. However, to assess a gross receipts tax, gross receipts must be sited to the definite place of business of the logger. The general situs rule is that the gross receipts subject to tax are those which are "attributed to a licensable privilege at a definite place of business, or if the activities occur outside of a definite place of business, then to the definite place of business from which such activities are initiated, directed or controlled." Code of Virginia § 58.1-3703.1 A 3a, copy enclosed. In addition, there are special situs rules that may apply to the different types of activities which loggers may be engaged in. The gross receipts of wholesalers is "the definite place of business at which or from which deliveries of the purchased goods, wares and merchandise is made to customers." Code of Virginia § 58.1-3703.1 A 3a 2. The gross receipts from the performance of services "shall be attributed to the definite place of business at the services are performed or, if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled". Code of Virginia § 58.1-3703.1 A 3a 2.
In addition to your general question on the licensure of loggers, you presented three scenarios. For each scenario, I will presume that the loggers are engaged in business and have a definite place of business in your locality.
In the first scenario loggers buy tracts of land with timber and cut and sell the timber to the mill. It is my opinion that these loggers are wholesalers. Section 1 of the 1997 BPOL Guidelines defines a wholesale sale as "a sale of goods, wares and merchandise for resale by the purchaser in, including sales when the goods, wares and merchandise will be incorporated into goods for sale ...." In this scenario, the timber is purchased along with the land and sold to the mill. The mill will process the timber and resell it to either other wholesalers or to end users. Thus, the loggers may be subject to taxation as a wholesaler.
In the second scenario, the loggers buy standing timber which they cut and sell to the mills. In this scenario, the loggers may be subject to licensure as wholesalers for the same reasons as in the first scenario. The fact that the loggers purchase standing timber instead of tracts of land, does not effect the analysis.
In the third scenario, a logging company cuts the timber off of tracts of land for another company. The logging company is paid by the volume that is cut. In this scenario, it is my opinion that the logging company is operating as a service provider. They are providing the service of removing timber for another company. They may be subject to licensure as a service provider.
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, and the final determination is with the locality.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12260B
Rulings of the Tax Commissioner