Tax Type
BPOL Tax
Description
Rate of license taxes; Rate applicable to solicitation firm
Topic
Local Power to Tax
Date Issued
08-18-1997
August 18, 1997
Re: Request for Advisory Opinion: BPOL
Dear********************
This will respond to your facsimile dated July 24, 1997, regarding the proper classification of your firm for purposes of the Business, Professional, and Occupational License (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 the proper classification of your firm which acts as a sales agent for out-of-state trucking companies. Your firm solicits the hauling of loads for out-of-state transportation providers so that such providers will not have to return empty upon leaving Virginia after having transported goods into the Commonwealth. For this service your firm is paid a commission which is based on a percentage of each total freight bill for each load which you procure. The various trucking companies, for which you find hauling loads, collect the freight charges. Your firm does not bill or collect any freight charges.
The locality in which you are located wishes to classify your firm as a commissioned merchant for purposes of the BPOL tax. You contend your firm offers a service and should be classified and taxed as a freight broker under the BPOL tax.
OPINION
Based on an analysis of the facts as presented, it is my opinion that if your firm neither bills for, nor collects, any freight charges, the commission amounts received by your firm for arranging services by out-of-state transportation companies would constitute your gross receipts for purposes of the local license tax. While the local license tax is a local tax which is imposed and administered at the local level, it is my opinion that your firm is engaged in that type of activity most commonly classified as business services under the BPOL tax. Therefore, as an entity rendering business services, your firm may be required to pay a local license tax based upon its gross receipts not to exceed the lesser of the local BPOL rate on such business, if any, or thirty-six (36¢) cents per of $100 such gross receipts.
Localities may charge a fee for issuing BPOL licenses and may levy a BPOL tax on businesses, trades, professions, occupations and callings, and upon the persons, firms and corporations engaged therein within the locality.(Legislation passed in 1997 provides that, effective July 1, 1998, localities may impose either a BPOL license fee or a tax, but not both. Acts of Assembly 1997, c. 903). Code of Virginia § 58.1-3703. . The BPOL tax rate is based upon four general classifications each with different maximum rate limitations. Code of Virginia § 58.1-3706.
A taxpayer's classification for BPOL tax purposes is a question of fact to be determined by the local taxing authority. The business must be considered as a whole in determining its classification for BPOL purposes. Op. Att'y Gen. 99, 104 (1994).
Code of Virginia § 58.1-3733 (copy enclosed) states that any person engaged in the business of selling merchandise on commission by sample, circular, or catalogue for a regularly established retailer, who has no stock or inventory under his control, other than floor samples held for demonstration or sale and owned by the principal retailer, shall be classified as a "commission merchant" and taxed only on commission income as provided for in category A 4 of § 58.1-3706. To be taxed as a commissioned merchant, a business must meet the above definition. In my opinion, your firm does not meet the definition of a commissioned merchant since it offers a service, as opposed to selling merchandise.
Although classification for BPOL purposes is a determination best made by the appropriate local official, my opinion is that your firm is engaged in activity which is most commonly classified for BPOL purposes as that of rendering business services. Those entities rendering business services may be required to pay a BPOL tax based upon their gross receipts not to exceed a rate of thirty-six (36¢) cents per $100 of gross receipts. Code of Virginia § 58.1-3706 A 4. (Copy enclosed).
"Gross receipts" mean the whole, entire, total receipts, without deduction. Code of Virginia § 58.1-3700.1. The 1997 BPOL Guidelines, at § 1 (copy enclosed), state that "gross receipts" mean money or other consideration received by the taxpayer from transactions with others besides himself which are derived from the exercise of the licensed privilege to engage in a business, without deduction or exclusion except as provided by law. For an item to be omitted from the calculation of gross receipts under the BPOL tax, it must be excluded by law. One such exclusion states that gross receipts include only amounts derived from the exercise of the licensed privilege to engage in a business. Other examples of exclusions, and specific deductions, are provided by statute (See generally, Code of Virginia § 58.1-3732 A (1-8).
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/12764H
Rulings of the Tax Commissioner