Tax Type
BPOL Tax
Description
Wholesale and retail sales
Topic
Local Power to Tax
Date Issued
07-25-1997
July 25, 1997
Re: Request for Advisory Opinion: BPOL
Dear***************
This will respond to a facsimile dated July 2, 1997, from your office regarding the application of the BPOL tax to certain company employees with a presence in your jurisdiction.
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 the application of the BPOL tax to the activities of a company whose headquarters are in *********which also has an employee at an established sales office in your locality. The employee receives a payroll check from company headquarters and most functions are controlled from the headquarters. You ask whether the company needs a business license from your locality to maintain such a sales office therein, and if so, you inquire as to the appropriate apportionment formula for such a configuration. The company is involved in the sale of goods, as opposed to services. You indicated that the taxpayer's sales activities may be both wholesale and retail, thus I will address your inquiry under both scenarios.
OPINION
An individual or entity must be “engaged in business" at a "definite place of business" within a locality in order to be liable for obtaining a BPOL license and subject to a locality's BPOL tax 1 "Business" means 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. Advertising or otherwise holding oneself out to the public as being engaged in a particular business creates a rebuttable presumption that a person or entity is engaged in a business. "Definite place of business" means an office or a location at which occurs a regular and continuous course of dealing for thirty (30) consecutive days or more. A definite place of business for a person engaged in business may include a location leased or obtained from another person on a temporary or seasonal basis. Code of Virginia § 58.1-3700.1.
The measure of the BPOL tax on retailers, and wholesalers taxed on gross receipts2
is based upon gross receipts and such receipts 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 are attributed to the place where such activity is directed or controlled. Code of Virginia§ 58.1-3703.1 A 3a (2).
Only those gross receipts attributable to the exercise of a licensable privilege (ie., "engaged in business") at a definite place of business within a locality may be included in the base measure used to calculate the BPOL tax. Code of Virginia § 58.1-3703.1 A 3a. Further, gross receipts of the business shall be apportioned only where the taxpayer has more than one definite place of business and it is impractical or impossible to determine to which definite place of business gross receipts should be attributed under the general rule. Code of Virginia § 58.1-3703.1 A 3b.
The taxpayer has an office within your locality from which it conducts sales solicitation activities on a regular and ongoing basis. In this scenario, the taxpayer would be engaged in business at a definite place of business within your locality. For that part of the taxpayer's business which is retail in nature, the gross receipts derived from its sales solicitation activities in your locality would be attributable to its definite place of business in your jurisdiction, and thus subject to your BPOL tax and licensing requirements. Apportionment would only be necessary if the taxpayer has more than one definite place of business and it is impractical or impossible to determine to which definite place of business the gross receipts generated from sales solicitation activities in your locality should be attributed. If this were the case, such gross receipts would be apportioned on the basis of the payroll of those employees directly engaged in the licensable privilege at each definite place of business of the taxpayer. Code of Virginia § 58.1-3703.1 A 3b and 1997 BPOL Guidelines § 3.9, Example 1.
For that part of the taxpayer's activity which constitutes wholesale sales activities, the taxpayer would be taxed based upon purchases which would be attributed to the definite place of business at or from which deliveries of the goods are made to customers (ie. "the warehouse"). If that definite place of business ("the warehouse") were within your locality, then you could require a business license along with a fee and impose a BPOL tax on the taxpayer based on the purchases delivered therefrom 3 If that definite place of business ("the warehouse") were not in your locality, you could not impose a BPOL tax on the taxpayer, but you could require a business license and assess a license fee if the taxpayer otherwise maintained a definite place of business (ie., an "office") in your locality.
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/12721H
1§ 3.7.1. of the 1997 BPOL Guidelines state that employees are generally not engaged in a licensable business separate from that of their employer. Therefore, a license obtained by the employer generally covers the activities of any employees.
2The measure of the BPOL tax on wholesalers is generally based upon their purchases. Purchases are attributed to the definite place of business at or from which deliveries of the goods are made to customers. Code of Virginia § 58.1-3703.1 A 3a (2). However, Virginia localities with a BPOL tax rate on wholesalers in excess of the rate limit in effect on January 1, 1964 (ie., 5¢ per $100 of purchases) are "grandfathered" to assess such a rate upon wholesalers, but the locality cannot increase the BPOL tax rate on wholesalers above the rate in effect on January 1, 1964. Code of Virginia § 58.1-3716. You indicated your locality was not grandfathered to apply the BPOL tax on wholesalers based upon their gross receipts.
3If apportionment were necessary in this scenario, the taxpayer could apply to the Department of Taxation for a determination as to the proper measure of purchases and gross receipts subject to a license tax in each locality. Code of Virginia § 58.1-3703.1 A 3a (2).
Rulings of the Tax Commissioner