Tax Type
BPOL Tax
Description
In general; Telephone Service Seller
Topic
Local Power to Tax
Date Issued
04-18-1997
April 18, 1997
Re: Request for an Advisory Opinion: BPOL
Dear******************
This will respond to your facsimile dated March 19, 1997, regarding the taxation of long distance phone service.
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 resident taxpayer sells long distance phone service on behalf of a particular long distance carrier in your locality. This taxpayer earns a commission based on the amount of service a customer purchases. The taxpayer solicits potential clients by both telephone and by going door to door. The taxpayer believes that he should be classified as a direct seller for BPOL purposes. You believe that the taxpayer should be classified as a business service. You ask how the taxpayer should be classified.
OPINION
Code of Virginia § 58.1-3719.1 B, copy enclosed, defines a direct seller as a person who:
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- 1. Engages in the trade or business of selling or soliciting the sale of consumer products primarily in private residences and maintains no public location for the conduct of such business; and
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- 2. Receives renumeration for such activities, with substantially all of such renumeration being directly related to sales or other sales-oriented services, rather than to the number of hours worked; and
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- 3. Performs such activities pursuant to a written contract between such person and the person for whom the activities are performed and such contract provides that such person will not be treated as an employee wit respect to such activities for federal tax purposes.
The taxpayer's compensation is based on sales. He presumably performs his activities pursuant to a written agreement between with the long distance carrier which states that he is not to be treated as an employee for federal income tax purposes. The taxpayer does solicit long distance services primarily in private residences. However, the statute states that the sale must be of consumer products. The determinative question is whether long distance phone services constitute "consumer products" for BPOL purposes.
Black's Law Dictionary, copy enclosed, defines a consumer product as "[a]ny tangible personal property which is distributed in commerce and which is normally used for personal, family or household purposes...." (Emphasis Added.) The taxpayer is selling long distance services, not tangible personal property. Thus, the taxpayer is not a direct seller.
Since the taxpayer is not a direct seller, he may possibly be classified as either an itinerant merchant or as a business service provider. Code of Virginia § 58.1-3717, copy enclosed, defines an itinerant merchant as "any person who engages in, does, or transacts any temporary or transient business in any [locality] and who for the purpose of carrying on such business, occupies any location for a period of less than one year." The element that differentiates itinerant merchants from other classifications is that itinerant merchants operate in any particular locality on a temporary or transient basis. From the facts that you presented, the taxpayer operates in your locality on an ongoing rather than temporary basis. Thus, the taxpayer may be classified as providing a business service and not as an itinerant merchant.
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/12319B
Rulings of the Tax Commissioner