Document Number
97-279
Tax Type
BPOL Tax
Description
BPOL application
Topic
Local Power to Tax
Date Issued
06-23-1997

June23, 1997


Re: Request for Advisory Opinion: BPOL

Dear***************

This will respond to your facsimile memorandum dated June 4, 1997, regarding the imposition of penalties by your locality in its administration of the BPOL tax.

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 request an opinion on your locality's proposal to assess a ten ($10.00) dollar penalty on the license fee if an application is not made by March 1 or within sixty (60) days of the date an entity starts business operations. Besides this penalty, your locality wishes to assess an additional ten (10%) percent for the late filing of an application for each year that the license application remains unfiled or unpaid.

OPINION


Localities may impose a penalty of ten (10%) percent of the BPOL tax upon a taxpayer's failure to file a BPOL application or to pay the BPOL tax by the appropriate due date1 If both the license application and payment of the tax are late, then only the late filing penalty shall be imposed. However, both the failure to file and the late payment penalties may be imposed if the assessing official determines that the taxpayer has a history of noncompliance. Code of Virginia § 58.1-3703.1 A 2(d). The penalty for failure to file a license application or a return may be assessed on the day after such return or application is due, whereas the penalty for the failure to pay any tax may be assessed on the day after the first installment is due. Code of Virginia § 58.1-3916.

Further, no penalty for failure to pay a tax or installment shall exceed ten (10%) percent of the tax past due or the sum of ten ($10.00) dollars, whichever is the greater. In no case shall the penalty exceed the amount of tax due. No penalty for failure to file a return shall be greater than ten (10%) percent of the tax assessable on such return or ten dollars, whichever is greater. However, in no case shall the penalty exceed the amount of the tax assessable. Code of Virginia § 58.1-3916.

Interest shall be charged on the late payment of the tax from the due date until the date paid without regard to fault or other reason for the late payment. Interest, at a rate not to exceed ten (10%) percent per year for the first year, may be assessed after thirty (30) days from the due date of the tax, but may begin accruing not earlier than the first day following the day the tax is due. For second and subsequent years, localities may impose interest at the rate specified by statute on those BPOL taxes remaining unpaid, until such taxes are paid2 Moreover, this interest accrues on both the unpaid tax and the penalty, as the penalty becomes part of the tax. Code of Virginia §§ 58.1--3703 A 2(e) and 3916.

Based on the above law, your locality may assess a penalty of ten (10%) percent of the amount of the BPOL tax due if a taxpayer either fails to file a BPOL license application, or is late in paying its BPOL tax or fee. Your locality may impose both the failure to file penalty and the late payment penalty only where your assessing official determines that the taxpayer has a history of noncompliance.

In addition to the penalty discussed above, your locality may impose interest upon delinquent BPOL taxes at a rate of ten (10%) percent per year where the taxes remain unpaid for more than thirty (30) days from the due date of the tax, until such taxes are paid. Although interest may begin to accrue on such taxes not earlier than the day after such taxes become due, if the taxes are paid within thirty (30) days of the due date, no interest may be imposed thereon.

While the Code of Virginia states that the Department of Taxation shall not be required to interpret any local ordinance, l will review the penalties portion of your locality's ordinance which you sent to me.

Your local license ordinance indicates that taxpayers are required to pay a penalty of ten ($10) dollars if their license taxes remain unpaid sixty (60) days after the due date. In addition, your ordinance imposes a ten (10%) percent per annum assessment on license taxes not paid within sixty (60) days of the due date.

As indicated above, a penalty for failure to pay the BPOL tax shall not exceed ten (10%) percent of the tax past due or the sum of ten ($10.00) dollars, whichever is the greater. However, in no case shall the penalty exceed the amount the tax due. Since your locality assesses a thirty ($30.00) dollar license tax upon all classifications of activity which business entities may conduct in your jurisdiction, the penalty of ten ($10.00) dollars would not violate the above provisions of law.

Further, your locality's imposition of interest upon delinquent BPOL taxes at a rate of ten (10%) percent per year where the taxes remain unpaid for more than sixty (60) days from the due date of the tax, until such taxes are paid, is within the provisions of the Uniform Ordinance.

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/12604H

1If the tax is measured by the gross receipts of the business, the tax shall be paid on or before March 1 or later date, including installment payment dates, or thirty or more days after beginning business, at the locality's option. Code of Virginia § 58.1-3703.1 A 2(b).
2The rate for second and subsequent years is either the rate as established pursuant to the Internal Revenue Code (I.R.C. § 6621), or ten (10%) percent annually, whichever is greater. Code of Virginia § 58.1-3916. the rate recently set under l.R.C. § 6621 for under payments is eight (8%) percent..

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