Tax Type
BPOL Tax
Description
Situs; Retail and wholesale activity
Topic
Local Power to Tax
Date Issued
06-02-1997
June 2, 1997
Re: Request for Advisory Opinion: BPOL
Dear***********
This will respond to your facsimile dated May 12, 1997, regarding the proper treatment for BPOL purposes of certain activities of a warehouse distribution facility situated in your 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 the taxpayer in question is interested in purchasing a building in your locality which it will use solely as a furniture distribution center. You further state that the taxpayer has a business office in a neighboring locality and pays a BPOL tax there. The taxpayer will receive all orders in the neighboring locality, but the distribution of goods will be made from your locality.
You ask if, under the above circumstances, the taxpayer will be liable for a BPOL tax to your locality. You do not indicate, however, if the taxpayer sells only at retail, as opposed to selling at wholesale, or if it sells both at retail and wholesale. Therefore, I will analyze your request under all three scenarios.
OPINION
In my opinion, for the reasons stated below, if the taxpayer in question conducts wholesale operations in your locality, you may require the taxpayer to obtain a BPOL license and charge it a license fee and a BPOL tax. If, on the other hand, the taxpayer is a retail merchant, your locality may require it to obtain a BPOL license and assess a fee for its issuance, but the gross receipts from its activities will be attributed to the taxpayer's definite place of business in the neighboring locality.
In addition to assessing a fee for the issuance of a BPOL license when required, localities may levy a BPOL tax on persons or firms engaged in business within the locality's jurisdictions. Code of Virginia §§ 58.1-3703 and 37061. In order to trigger a license requirement, a person or entity must be engaged in business at a definite place of business within the locality. Code of Virginia §§ 58.1-3703 A and 3703.1 A 3a.
Business is defined as a course of dealing which requires the time, attention and labor of the person so engaged for the purpose of earning a livelihood or profit. It implies a continuous and regular course of dealing, rather than an irregular or isolated transaction. A definite place of business is defined as an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more. Code of Virginia § 58.1-3700.1.
RETAIL MERCHANT
For retail merchants, the BPOL tax is measured by those gross receipts attributable to a merchant's activities at a definite place of business within a locality. Code of Virginia § 58.1-3706. The gross receipts of a retail merchant are attributed to the definite place of business where the sales solicitation activity occurs. If the sales solicitation activity does not occur at a definite place of business, then the gross receipts of the retailer are attributed to the definite place of business where the sales solicitation activity is directed or controlled. Code of Virginia § 58.1-3703.1 A 3a(2).
Sales solicitation is defined in the BPOL Guidelines as acts directly related to selling a particular item or good to a particular person. Sales solicitation does not include non-solicitation activities prior or subsequent to sales solicitation activity. 1997 BPOL Guidelines § 1.
If the taxpayer in question is a retail merchant and its sales solicitation activities occur at a definite place of business in a neighboring locality, then the gross receipts derived from such activity will be attributable to the neighboring locality.
WHOLESALE MERCHANT
Localities may not impose a license fee or levy any license tax upon a wholesaler for the privilege of selling goods, wares and merchandise to other persons for resale unless such wholesaler has a definite place of business or store in the localities. Code of Virginia § 58.1-3703 C 6. The measure of the BPOL tax on wholesalers is based upon their purchases 2. Code of Virginia § 58.1-3716. Purchases include all goods received for sale at each definite place of business of a wholesale merchant. Code of Virginia § 58.1-3700.1. Purchases of a wholesale merchant are attributed to the definite place of business at which or from which deliveries of the purchased goods are made to customers. Code of Virginia § 58.1-3703.1 A 3a (2).
If the taxpayer in question is a wholesale merchant, then its purchases will be attributable to the place from where it makes delivery of its goods to customers. This place is its warehouse, which you indicate is situated in your locality, thus your locality could, under these circumstances, impose the BPOL tax upon a such taxpayer. If the taxpayer is engaged in both retail and wholesale activities, then each respective portion of its business will be treated as retail or wholesale as described above.
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/12523H
1Legislation passed in 1997 provides that, effective July 1, 1998, localities may impose either a BPOL license fee or a tax, but not both. Acts of Assembly 1997, c. 903.
2Several Virginia localities are “grandfathered" to assess a gross receipts tax upon wholesalers for BPOL purposes. See Code of Virginia § 58.1-3716. Gross receipts of wholesalers taxed upon gross receipts are attributed to the definite place of business where sales solicitation city occurs. See Code of Virginia § 58.1-3703.1 A 3a (2). However, you have indicated that your locality assesses its BPOL tax on wholesalers based upon their purchases.
Rulings of the Tax Commissioner