Tax Type
BPOL Tax
Description
Rate limitations; BPOL tax; Retail sales
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 February 11, 1997, regarding the proper BPOL tax rate upon retailers imposed by a certain locality.
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
You indicate that your company has recently paid a BPOL tax rate of twenty-four (24¢) cents per $100 of gross receipts for retail activity conducted within a certain locality. The justification given by the locality for this rate is that the tax base of the locality has been eroded due to the closing of several retail businesses, most notably a large shopping mall. You state that the locality indicated that if it were to reduce its BPOL tax rate on retailers to a rate of twenty (20¢) cents per $100 of gross receipts, it would experience a negative tax revenue stream. The locality also indicated that the rate may be reduced in the future contingent upon the opening of a large retailer in its jurisdiction.
Your company paid the BPOL tax for its retail activity in this jurisdiction at a rate of twenty-four (24¢) cents per $100 of gross receipts because, among other things, the filing date for the locality's BPOL tax was January 31. You request that the Department of Taxation investigate this situation, indicate the correct maximum rate for the BPOL tax on retail activity and, if a refund is due your company, you request the process of recapturing any overpayments made.
OPINION
Based upon our review, It appears that the locality in question has the authority to assess a BPOL tax of twenty-four (24¢) per $100 of gross receipts upon retailers due to the rollback provisions of the BPOL law.
In addition to imposing a fee ($50 or $100, as applicable) for issuing a license, localities may also levy a BPOL tax subject to certain threshold requirements ($50,000 or $100,000 in gross receipts in those localities with populations in excess of 25,000, but less than 50,000, and 50,000, respectively). Code of Virginia §§ 58.1-3703 and 58.1-3706. (Copies enclosed). Any retail business with gross receipts in excess of the thresholds may be subject to a BPOL tax at a rate not to exceed twenty (20¢) cents per $100 of gross receipts. Code of Virginia § 58.1-3706.
However, a locality which had, on January 1, 1978, a license tax rate for any of the following categories 1) contracting; 2)retail sales; 3) financial, real estate and professional services; and, 4) repair, personal and business services, higher than the maximum prescribed by state BPOL law, may maintain the higher rate in such categories. These localities may not increase the rate above the rate in effect on January 1, 1978, subject to the following conditions.
First, a locality cannot increase a rate in any category which is at or above the maximum rate prescribed by state BPOL law. Also, in a locality with BPOL tax rates above the maximums set in law, revenues from rate increases on categories below the maximum rates must be applied to reduce the rates on categories which are above the maximum rates prescribed by state BPOL law.
Finally, a locality shall lower rates on any categories which are above the maximums allowed by the BPOL law for any tax year after 1982 if it receives more revenue in tax year 1981, or any year thereafter, than the revenue base for such years.
The calculation and application of the rollback formula are a matter for local administration. You are encouraged to contact the locality in order to verify that it is properly calculating the rollback formula based on the enclosed materials.
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. If you have any questions, please contact *** at ****** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12221H
Rulings of the Tax Commissioner