Tax Type
BPOL Tax
Description
In general; Business, professional, and occupational license (BPOL) tax; Real property rentals
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 facsimile dated January 31, 1997, regarding the application of the BPOL tax to gross receipts arising from the rental of real estate by the owner in a multi-jurisdictional setting.
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 raise two scenarios. In both scenarios, it is assumed that the realty in question is not a hotel, motel, motor lodge, auto court, tourist court, travel trailer park, lodging house, rooming house or boardinghouse. It is further assumed that such realty is being rented by the owner.
SCENARIO ONE
The first scenario involves commercial property which is located in County A where the owner of such property resides in County B. County A imposed the BPOL tax on the gross receipts arising from the rental of real estate by owners prior to January 1, 1974, and continues to impose such tax today. You ask which county may levy the BPOL tax upon the rental receipts from this property.
SCENARIO TWO
Town A lies within County C. The property is located in Town A. The owner of this realty lives in State B. Town A does not have the ability to assess the BPOL tax on the gross receipts arising from the rental of real estate by the owner. County C has the ability to apply such a tax, and you inquire whether County C may apply the BPOL tax to receipts from the rental by the owner of the realty located in Town A.
OPINION
Subject to limits in Code of Virginia § 58.1-3703 C, localities may charge a fee for issuing BPOL licenses and may levy, assess and collect 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. However, no locality may impose a license fee or levy any license tax upon any person, firm or corporation for 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; however, any county, city or town imposing such a license tax on January 1, 1974, shall not be precluded from the levy of such tax. Code of Virginia § 58.1-3703 C 7.
Gross receipts from the sale and rental of real estate and buildings remain taxable by the locality in which the real estate is located provided the locality is otherwise authorized to tax such businesses and rental of real estate. (Emphasis added). Code of Virginia § 58.1-3703 C 19.
Whenever the BPOL tax is measured by gross receipts, the gross receipts included in the taxable measure shall be only those gross receipts attributed to the exercise of a privilege subject to licensure at a definite place of business within the locality. Code of Virginia § 58.1-3703.1 A 3a. A definite place of business is defined to include, among other things, a real property location leased to another. 1997 BPOL Guidelines, § 1.
In summary, a locality may impose a BPOL tax on the activity of an owner which gives rise to rental income from real property located in the taxing jurisdiction. However, maintenance fees (real estate management fees) are sited to the definite place of business of the maintenance office.
SCENARIO ONE
County A has the ability to impose the BPOL tax on the gross receipts from the rental real estate by owners and presently imposes that tax. Since those activities are conducted at a definite place of business in County A, the rental receipts arising from such activities would be taxable by county A.
SCENARIO TWO
Where Town A is located within the boundaries of County C and the rental activities are conducted at a definite place of business within Town A, but Town A does not impose a BPOL tax upon the activities but gives County C permission to do so, then the receipts arising from the rental activities in Town A would be taxable by County C. Code of Virginia § 58.1-3711 A.
Finally, the restriction upon, and the authorization for, Virginia localities to apply the BPOL tax to gross receipts derived from the rental of real estate by the owner is found in Code of Virginia § 58.1-3703 C 7. However, Code of Virginia § 58.1-3703 C 19 is a reaffirmation of that authority.
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/12114H
Rulings of the Tax Commissioner