Tax Type
BPOL Tax
Description
BPOL tax; Employees
Topic
Local Power to Tax
Date Issued
04-16-1997
April 16, 1997
Re: Request for Advisory Opinion: BPOL
Dear**************************
This will respond to your letter dated March 10, 1997, regarding the application of BPOL license requirements to employees.
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
Your locality is now requiring businesses to report their gross receipts under their corporation or partnership license. Individual employees are not required to obtain business licenses. Your position is that since employees are paid by the corporation, the corporation (or partnership) should pay the tax on the entire gross receipts derived under its license.
You indicate that businesses operating in your locality are attempting to lower their BPOL tax liability by paying license filing fees for its employees and then subtracting the applicable threshold amounts attributable to each license from its total receipts. You ask the Department's opinion on these issues.
OPINION
Localities may charge a fee for issuing BPOL licenses and may levy BPOL license taxes on businesses, trades, professions, occupations and callings, and upon the persons, firms and corporations engaged therein within the locality. Code of Virginia § 58.1-3703 A. The levy of a BPOL tax is, however, subject to certain rate threshold requirements ($50,000 or $100,000 in gross receipts in localities with populations more than 25,000, but less than 50,000, and 50,000, respectively). Code of Virginia § 58.1-3706. The 1997 BPOL Guidelines indicate that every license issued carries with it a separate rate threshold. See 1997 BPOL Guidelines, § 3.5.
In order to trigger an obligation to obtain a BPOL license from a locality, one must be engaged in business at a definite place of business within that particular locality. The BPOL statute imposes a license requirement on the business itself, not the employees of the business. § 3.7.1. of the 1997 BPOL Guidelines state that employees are not engaged in a licensable business separate from that of their employer. Therefore, a license obtained by the employer covers the activities of any employees.1
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/12323H
1 The comment to § 3.7.1. indicates that former state license tax law required every practitioner of certain professions to have a separate state tax license in addition to any regulatory license. This requirement was repealed in 1982 when the state license tax was abolished, although the authority of localities to continue imposing local license tax on professionals was not intended to be affected by the repeal. While localities may be authorized to require an employee who is also a practitioner of a profession to have a license separate from the employer’s license when professional services are rendered to the public within the scope of employment, the department recommends taxing professional gross receipts under the employer’s license and not requiring employees to obtain licenses. For the same reason, the license of a partnership , limited liability company, or other business entity should cover the receipts generated by the activities of partners, members, and similar individuals.
Rulings of the Tax Commissioner