Tax Type
BPOL Tax
Description
Retailers and wholesalers
Topic
Local Power to Tax
Date Issued
04-25-1997
April 25, 1997
Re: Request for Advisory Opinion: BPOL
Dear**********
This will respond to your letter of March 12, 1997, requesting an advisory opinion.
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 have requested an advisory opinion on the proper BPOL treatment of a convenience store retailer who receives a per unit sold "commission" for gasoline sales made at his place of business. The gasoline sold at the store remains the property of a local oil company until it is dispensed to customers. The oil company is licensed and pays a BPOL tax on the gross receipts from gasoline sales. However, the actual transaction at the pump is handled by the retailer who collects the money. Under the commission arrangement, the retailer regularly pays his gasoline sales receipts to the oil company less his per unit sold commission. The retailer claims he is entitled to exclude his gasoline sales commissions from his gross receipts because the oil company has already paid a BPOL tax on the gasoline gross receipts.
OPINION
In order to properly determine the BPOL treatment of the retailer in this case we must first determine the proper treatment of the oil company that is supplying the gasoline. Although the oil company ostensibly maintains ownership of the gasoline until it is sold by the retailer, the transaction is, in substance, indistinguishable from a transaction where the convenience store retailer purchases the gasoline on credit from the oil company then pays the oil company for the gasoline supplied less his profit. It is, therefore, more appropriate to treat the oil company as a wholesaler and the convenience store as a gasoline retailer for purposes of imposing the BPOL tax.
Oil Company as Wholesaler
As a wholesaler the oil company is subject to the BPOL tax imposed where it has a definite place of business. Unless a locality is grandfathered to impose the tax on gross receipts, a locality must impose any BPOL tax on the wholesalers's purchases attributed to the definite place of business from where the wholesaler physically delivers its goods to the customer or ships to the customer. The maximum rate allowed by statute for wholesalers is .05 per $100. In the case of fuel or oil distribution, the definite place of business where deliveries to customers are made from or shipped is usually the wholesalers bulk oil storage facility. Provided the oil company has a definite place of business in your locality and provided your local ordinance includes a tax on wholesalers, you may subject the wholesaler to a BPOL tax based on its purchases attributable to the definite place of business in your locality from where the oil company delivers or ships oil products to its customers.
Convenience Store Retailer
The term "gross receipts" is defined in the 1997BPOL Guidelines as follows:
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- "Gross receipts" means the whole, entire, total receipts of money or other consideration received by the taxpayer as s result of transactions with others besides himself and which are derived from the exercise of the licensed privilege to engage in a business or profession in the ordinary course of business, without deduction or exclusion except as provide by law.
As stated above, the retailer's gasoline sales arrangement with the oil company is indistinguishable from a transaction where the wholesaler actually sells the gasoline the retailer on credit terms. Under this scenario, the retailer would be required to include the entire amount of its gasoline sales, not merely its profit, for purposes of the BPOL tax. The same logic applies to the facts in this case. Since the retailer collects the entire amount due on gasoline sales, the same amount must be included with its other gross receipts for purposes of calculating the BPOL tax.
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. If you have any further questions or comments, please do not hesitate to let me know.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12339D
Rulings of the Tax Commissioner