Tax Type
BPOL Tax
Description
Contractors subject to BPOL tax
Topic
Local Power to Tax
Date Issued
07-30-1997
July 30, 1997
Re: Request for Advisory Opinion - Business, Professional, and Occupational License(BPOL) Tax
Dear****************
In your memorandum dated June 18, 1997, you asked for an advisory opinion regarding several questions on the applicability of the town's BPOL tax on certain contractors' gross receipts.
The license tax is a local tax that is imposed and administered by local officials. The Virginia Code limits the involvement of the of the Department of Taxation to promulgating guidelines and issuing advisory opinions. The department, however, is not required to interpret local ordinances.
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. Copies of cited sources are enclosed for your review.
FACTS
The Town of****enacted BPOL tax ordinances and is located in ********County, which has not enacted BPOL tax ordinances. In the first two situations, the contractor has a principal place of business in the county and engages in business in the town. The projects may last for any period of time and produce any amount of gross receipts for a year. In the third situation, a contractor with a principal place of business in North Carolina is constructing an apartment complex in the town with a listed construction cost of $758,998. Construction will take longer than thirty days to complete.
Issues:
1. Is the county-based contractor subject to the town's BPOL tax ordinances based on Virginia Code § 58.1-3715 if the contractor renders services on a job performed in the town for an amount over $25,000 but is completed in less than thirty days?
2. If the county-based contractor renders services on a job in the town that takes over thirty days to complete, has the contractor established a definite place of business in the town, subjecting the gross receipts earned from this job to the town's BPOL tax ordinances? Further, is the dollar amount of the job relevant in this determination?
3. Because the apartment complex will take over thirty days to construct, will the North Carolina-based contractor establish a definite place of business in the town, subjecting the gross receipts from the project to the town's BPOL tax ordinances?
OPINION
Under the general situs rule, the contractor would be subject to the town's BPOL tax ordinances when the contractor establishes a definite place of business in the town by engaging in licensable activities for thirty days or more. The specific situs rule overrides the general situs rule when, among other criteria, the total gross receipts for engaging in business locally equal or exceed $25,000 during a year. If the jobs take less time than thirty days and the cost is under $25,000, then the contractor's gross receipts earned within the town's boundaries may not be subject to the local BPOL tax ordinances.
The North Carolina contractor will have a "definite place of business" in the town because the apartment construction will take thirty days or more to complete, which establishes the "situs" for attributing gross receipts for BPOL tax purposes under the general situs rule. Consequently, the North Carolina contractor will be subject to the town's BPOL tax ordinances on gross receipts derived from this project. This opinion is based on the following analysis.
Issues 1 and 2:
Under the BPOL uniform ordinance provisions of the Virginia Code, a contractor's gross receipts are attributed to the definite place of business at which the contractor's service are performed or, if the services are not performed at a definite place of business, then at the definite place of business from where the services are controlled. Code of Virginia § 58.1-3703.1(A)(1). A "definite place of business" includes an office or location at which a regular and continuous course of dealings for thirty days or more occur. Code of Virginia § 58.1-3700.1. This general situs rule applies unless the contractor is subject to the specific situs rule. Code of Virginia § 58.1-3715.
The specific situs rule overrides the general situs rule when a contractor (1) has a principal office in a Virginia locality, (2) engages in the licensable business in another locality, and (3) earns gross receipts of $25,000 or more from this local business activities regardless of the activity's length of time for completion. Code of Virginia § 58.1-3715; 1995 Va. Op. Att'y Gen. 245, 246.
The specific situs rule also allows a taxpayer to deduct from the total gross receipts the gross receipts earned in the other locality on which a license tax is paid. This deduction is allowed only if a license tax is paid in the other locality. 1995 Va. Op. Att'y Gen. 245, 246.
In the first situation, the specific situs rule applies because the contractor meets all three criteria of the rule. The county-based contractor (1) has a principal office in a Virginia county, (2) is engaged in business in the town, and (3) earned over $25,000 in gross receipts from the job, subjecting those gross receipts to the town's BPOL tax ordinances. The gross receipts on which the town's BPOL tax is paid can be deducted from the total gross receipts on which the county tax is determined. In this case, however, the county does not have a BPOL tax so the deduction is not applicable.
In the second situation, either rule may apply depending on the amount of gross receipts received during the year from business activities performed in the town. If the contractor receives less than $25,000 in a year from jobs performed in the town, then the general situs rule applies. The specific rule does not apply because the contractor only meets two of the three criteria for meeting the requirements. Consequently, gross receipts from the contractor's business activities performed in the town that last thirty days or more are subject to the town's BPOL tax ordinances.
As stated above, the gross receipts on which the contractor paid the town's BPOL tax could be deducted from total gross receipts on which a county tax is calculated. In this case, however, the county has no BPOL tax on which to deduct this amount.
On the other hand, if the contractor receives $25,000 or more from annual business activities performed in the town, then all three criteria are met and the specific situs rule applies. Consequently, these gross receipts are subject to the town's BPOL tax ordinances regardless of the period of time in which the contractor engages in business in the town.
Issue 3:
A contractor has a principal place of business in North Carolina and engages in a licensable business (e.g., apartment construction) in the town. This project will take over thirty days to complete. The general situs rule applies in this case because the specific situs rule only applies to contractors with their principal place of business in a Virginia locality. 1995 Va. Op. Att'y Gen. 245, 247. As a result, because the construction activities will take longer than thirty days, the gross receipts derived from this project are subject to the town's BPOL tax ordinances.
Conclusion:
The specific situs rule overrides the general situs rule if all three criteria of the specific situs rule are met, regardless of the period of time that the licensable activities are performed within another locality. If all the criteria are not met, then the general rule applies.
I hope that the above information will be beneficial to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please do not hesitate to contact me.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP12655G
Rulings of the Tax Commissioner