Tax Type
BPOL Tax
Description
BPOL; Wholesale merchants; Fishermen
Topic
Local Power to Tax
Date Issued
06-13-1997
June 13, 1997
Re: Request for Advisory Opinion: BPOL
Dear**************
This will respond to your letter transmitted by facsimile on May 1, 1997, in which you asked what is the measure of the local license tax for a fisherman catching and selling seafood caught by him.
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 written 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 indicated that a fisherman ("Taxpayer") operates a seafood broker/wholesaler business in the ********* ("Locality"). You stated that all seafood is sold at wholesale with deliveries being made from a taxpayer location within the locality. You indicated that about one-half of the seafood sold is harvested by the taxpayer himself while the rest is purchased from local watermen. Finally, you stated that the locality uses purchases as the measure of the local license tax for wholesalers. You asked what are the purchases for seafood caught and sold at wholesale by the taxpayer.
OPINION
Subject to limits in Code of Virginia § 58.1-3703 C, localities may charge a fee for issuing BPOL licenses and may levy a license tax on a business for the privilege of engaging in business at a definite place within the locality. Code of Virginia §§ 58.1-3700 and 58.1-3703 A (copies enclosed). Generally, the local license tax rate is applied to a business's gross receipts. Code of Virginia § 58.1-3706 A (copy enclosed).
For wholesalers, however, the local license tax rate is applied to a wholesaler's purchases. Code of Virginia § 58.1-3716 (copy enclosed). Wholesalers are subject to a maximum license tax of $.05 per $100 of purchases unless the taxing locality had a higher rate in effect on January 1,1964. Code of Virginia § 58.1-3716. Those localities with a higher rate in effect on January 1, 1964 can continue to tax wholesalers on such higher rate.
Purchases for a wholesaler means "all goods, wares and merchandise received for sale at each definite place of business of a wholesale merchant." Code of Virginia § 58.1-3700.1 (copy enclosed). Purchases can also mean the cost of manufacture of goods, wares, and merchandise manufactured by any wholesale merchant and sold or offered for sale. Code of Virginia § 58.1-3700.1.
Wholesalers subject to a license tax measured by purchases will have their purchases attributed for taxation purposes 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 3 a(2) (copy enclosed).
Seafood Caught and Sold by the Taxpayer
With respect to seafood caught and later sold at wholesale, the taxpayer has no purchases upon which a local license tax can be levied. This is because the taxpayer does not purchase or pay a market price for this seafood. While the taxpayer may buy or lease equipment used in catching fish, the cost of this equipment cannot be the taxpayer's "purchases" because under Section 58.1-3700.1 "purchases" are goods, wares and merchandise received and held for sale.
Additionally, "purchases" include the cost of manufacture of goods manufactured by any wholesale merchant. Code of Virginia § 58.1-3700.1. In this case, the taxpayer does not engage in any manufacturing activity for seafood caught by him and later sold at wholesale. The taxpayer simply catches fish, packages the fish in lined boxes, and makes deliveries to wholesale customers. Thus, for this particular taxpayer, the cost of manufacture cannot be the proper measure upon which the license tax may be levied.
Because the taxpayer has no taxable purchases for seafood caught and later sold at wholesale, the locality may not levy a license tax on the taxpayer for the privilege of making wholesale sales of seafood caught and sold at wholesale by him.
Seafood Bought and Sold Wholesale by the Taxpayer
You stated that the taxpayer also purchases seafood from local watermen and makes wholesale sales of this seafood. Here, the cost of purchasing this seafood is the proper measure upon which the license tax may be levied.
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/12494C
Rulings of the Tax Commissioner