Tax Type
BPOL Tax
Description
Locality with population under 25,000
Topic
Local Power to Tax
Rate of Tax
Date Issued
01-13-1997
January 13, 1997
Re: Request for Advisory Opinion: Local License Tax
Dear*********:
This will reply to your facsimile of December 27, 1996, requesting an advisory opinion, pursuant to Code of Virginia § 58.1-3701, as to whether the tax and fee schedule in your ordinance fits within the BPOL statute.
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.
I will address the question raised in your letter. The response is intended to provide guidance only and does not constitute a formal or binding ruling.
Facts
Your locality has a population of less than 25,000. Your ordinance imposes a $30.00 fee on each business license issued. It also assesses a gross receipts tax at the following rates: Forty cents per $100 of gross receipts over $7,500 for financial, real estate and professional services; sixteen cents per $100 of gross receipts over $18,750 for contracting services; twenty cents per $100 of gross receipts between $15,000 and $2,000,000, fifteen cents per $100 of gross receipts between $2,000,000 and $4,000,000, and thirteen cents per $100 of gross receipts over $4,000,000 for retail sales, twenty cents per $100 of gross receipts over $15,000 for repair, personal, and business services, up to a maximum tax of $600.00; and thirteen cents per $100 of gross receipts over $23,076 for wholesale sales.
Determination
Code of Virginia § 58.1-3703 A allows a locality with a population of less than 25,000 to charge a maximum fee of $30.00 for issuing a business license. Your ordinance's fee schedule fits within the BPOL statute since your locality has a population of less than 25,000 and it charges a $30.00 fee on all classifications.
Code of Virginia § 58.1-3706 A provides that a locality may impose a tax on the gross receipts of a business, in addition to or instead of a license fee, provided that the gross receipts exceed the thresholds set for particular locality populations. There is no threshold gross receipt amount for localities with populations under 25,000. Thus, any gross receipts from a licensable business would be subject to taxation.
Code of Virginia § 58.1-3706 A lists the maximum tax rates allowable for particular classifications. All of the rates set by your ordinance are less than or equal to the maximum rates allowed by statute. § 3.1.1. of the 1997 BPOL Guidelines states that a locality may establish a threshold amount of gross receipts below which no tax will be imposed, a maximum tax for any classification and/or graduated tax rates for any classification so long as no rate exceeds the statutory maximum. Your ordinance sets gross receipt thresholds which do not allow the imposition of a tax unless they exceed $30.00. Your ordinance also sets a graduated rate on retail sales and a maximum tax on repair, personal, and business services. These rate limitations are permissible under the BPOL statute since the maximum statutory tax rates are never exceeded.
Code of Virginia § 58.1-3716 states that:
-
- No [locality] shall impose a license tax on wholesale merchants at an aggregate rate in excess of 5¢ per $100 of purchases except in those [localities] where the local rate in effect on January 1, 1964 was in excess of such rate, in which case such localities are hereby prohibited from increasing such rate as in effect on January 1, 1964.
Your ordinance taxes wholesalers on their gross receipts. Your locality may tax a wholesaler's gross receipts provided that it did so as of January 1, 1964. The rate may not exceed the rate in effect on January 1, 1964. If your locality did not tax the gross receipts of wholesalers at that date, it must tax purchases at a maximum rate of five cents per hundred, if it chooses to impose a license tax.
I hope that the above information will be beneficial to you. If you have any questions, please do not hesitate to let me know.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP11980B
Rulings of the Tax Commissioner