Tax Type
BPOL Tax
Description
Persons renting residential or commercial property.
Topic
Local Power to Tax
Date Issued
10-20-1997
October 20, 1997
Re: Request for Advisory Opinion: BPOL
Dear*************
This will respond to your letter of October 7, 1997 requesting an advisory opinion.
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 have inquired as to whether a general partnership which leases two parcels of commercial real estate situated in *****County (the "County") should apply for a BPOL license in the County. The partnership has no fixed business location and provides no services in conjunction with the leased property. The stock in the S corporation is owned by the partners of the leasing partnership.
OPINION
Under Code of Virginia § 58.1-3703 C.7, a locality may not impose the BPOL tax on a business engaged in the renting, as a property owner, real property other than hotels, motels and other types of transient rentals. This exemption extends to commercial and residential leasing unless the locality is "grandfathered" to impose the tax on this type of business. Localities which imposed a BPOL tax on non-transient type leasing as of January 1, 1974, may continue to impose the tax on this activity notwithstanding the exemption provided in the code section cited above.
According to your letter, the partnership has no fixed business location and provides no services in connection with the leases. Nonetheless, the partnership is leasing real property within the locality which will impose the tax. Code of Virginia § 58.1-3703 C. 19. provides in the pertinent part as follows: "Gross receipts from the sale or rental of real estate and buildings remain taxable by the locality in which the real estate is located provided the locality is otherwise authorized to tax such business." [Emphasis added]. Assuming the locality is grandfathered to tax real estate leasing activity, it is authorized to impose the gross receipts tax on real estate leasing in my opinion.
Although the partners in the leasing partnership are also the shareholders of the S corporation tenant, there is no exemption for transactions between the two entities. The affiliated group exemption provided for in Code of Virginia § 58.1-3703 C.10., only applies to transactions between related corporations not corporations and partnerships.
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. If you have any further questions or comments, please do not hesitate to let me know.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13046D
Rulings of the Tax Commissioner