Tax Type
BPOL Tax
Description
Limitations on rate of license taxes; Calculation of gross receipts; Relocated business
Topic
Local Power to Tax
Date Issued
02-06-1997
February 6, 1997
Re: Request for Advisory Opinion: BPOL
Dear*****************
This will respond to your facsimile dated January 27, 1997, regarding the calculation of gross receipts of a transportation business. You also ask about establishing the gross receipts basis of a new business in the taxing jurisdiction.
The license tax is, of course, 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 on the BPOL law and issuing advisory written opinions in specific cases to interpret those provisions and the guidelines issued thereunder. 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 advisory written opinion regarding a transportation business which receives and hauls loads in its trucks where such loads are referred to it from other companies. You indicate that the transportation company receives the total price for the hauling job and remits most of that amount to the referring company while retaining its fee of 10 percent for its transportation services. You ask how to calculate the gross receipts of this company for purposes of the BPOL tax.
You also ask whether an ongoing business, which has recently moved into and started operations in your locality, must pay a BPOL tax to your locality according to last year's gross receipts, or merely pay a flat tax fee of $30.00 and estimate its gross receipts for your locality's BPOL tax.
DETERMINATION
TRANSPORTATION COMPANY
Currently, localities may charge a license fee and assess a BPOL tax upon most transportation companies which have a definite place of business therein. Legislation has been proposed and is now pending in the General Assembly which would restrict the ability of localities to tax certain types of transportation companies. Should the law change in this area, we will notify you. Otherwise, current law is as follows.
The transportation company which you describe is an entity which provides business services. The BPOL tax is levied upon the gross receipts of service providers. Code of Virginia § 58.1-3706. Gross receipts mean the whole, entire, total receipts, without deduction. Code of Virginia § 58.1-3706. Gross receipts include money or other consideration received by the taxpayer from transactions with others besides himself which are derived from the exercise of a licensed privilege in the ordinary course of business. Code of Virginia § 58.1-3732 A; 1997 Guidelines, § 1.
The transportation company receives the total sum for the hauling job and retains part of that amount as its fee for the transportation services, while remitting the remainder of the sum to the referring company. Under these facts and the rules stated above, the total sum for each job would be included in the transportation company's gross receipts.
RELOCATED BUSINESS
Under prior law, localities could charge a BPOL tax which was the greater of $30.00 or the maximum gross receipts tax allowed by state law, depending upon the classification of the business involved. 1995 Guidelines §§ 3.1, 4.1, 5.1 and 6.1.
Present law permits localities to charge a fee for issuing BPOL licenses and levy, assess and collect BPOL license taxes on businesses, trades, professions, occupations and callings, and upon the persons, firms and corporations engaged therein within the locality. Code of Virginia §§ 58.1-3700 and 58.1-3703 A.
Regarding the gross receipts tax under the BPOL law, most localities use a company's gross receipts from the previous year as a base upon which to measure the gross receipts tax for the current year. Here, where an ongoing business has moved into your locality from another locality, we believe that it would be permissible to use the gross receipts of the business from the previous year derived from activity in another locality as a base from which to measure the BPOL tax to be assessed by your locality for the current year.
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/12104H
Rulings of the Tax Commissioner