Tax Type
BPOL Tax
Description
Different tax rates for different classifications
Topic
Local Power to 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 17, 1996, requesting an advisory opinion, pursuant to Code of Virginia § 58.1-3701, as to whether a locality may impose different license fees for different business classifications.
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 questions raised in your letter. The response is intended to provide guidance only and does not constitute a formal or binding ruling.
Facts
You ask whether a locality may impose different license fees for different business classifications.
Determination
Code of Virginia § 58.1-3703 A provides that "[t]he governing body of any [locality] may charge a fee for issuing a license in an amount not to exceed ... thirty dollars for any locality with a population smaller than 25,000 ...." (Emphasis added.) This statutory language permits a locality to charge a fee less than the statutory maximum, or to not charge a fee at all.
§ 3.3.1. A of the 1997 BPOL Guidelines allows a locality to set tax rates at levels lower than those authorized by state law, or select the classifications to tax and not tax provided their ordinances follow the exemptions, rates, classifications and thresholds as set forth in Chapter 37 (§ 58.1-3700 et seq.) of Title 58.1 of the Code of Virginia.
Therefore, a locality may choose to impose a different fee on different classifications subject to constitutional limitations. The courts have held that:
-
- Unless a "suspect classification" is involved, the (locality) may constitutionally treat different subjects differently for tax purposes if 1) the difference is real, 2) the distinction has some relevance to the local governing purpose, and 3) the differing treatments are not so disparate, relative to the difference in classification, as to be wholly arbitrary. Chesterfield Cablevision v. Chesterfield County, 241 Va. 252, 255-6 (1991).
The governing body must determine whether imposing different fees on different classifications satisfies the four part Chesterfield Cablevision test. If the test is satisfied, the governing body may choose to impose different fees on different classifications as long as the fee does not exceed the maximum fee authorized by Code of Virginia § 58.1-3703 A, which is $30.00 in your case.
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
OTP11968B
Rulings of the Tax Commissioner