Tax Type
BPOL Tax
Description
In general; Branch office and commissioned salesmen.
Topic
Local Power to Tax
Date Issued
12-09-1997
December 9, 1997
Re: Request for Advisory Opinion: BPOL
Dear*****************
This will respond to your letter transmitted by fax on November 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
A Company which has its principal office in ***** has a branch sales office in ***(the "City"). The Company is a retailer of equipment and machinery. Some of the sales in Virginia are conducted by commission salesmen who are not employed by the Company. Other sales are handled by personnel in the branch office. All purchase orders are sent to the **** office for acceptance. In the past the commission salesmen have been subject to BPOL tax in the City. For convenience purposes, sales tax returns for Virginia sales are processed and filed from the**** location.
OPINION
I understand that your inquiry is whether the branch sales office should be subject to licensure and if so, how should the gross receipts be calculated.
Subject to the limits in Code of Virginia § 58.1-3703 C, localities may charge a fee for issuing BPOL licenses and may 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.
Branch Office Sales
The Company must have a definite place of business in the town in order to be subject to licensure. At page 4 of the 1997 BPOL Guidelines, "definite place of business" is defined as:
-
- an office or location at which occurs a regular and continuous course of dealing where one holds one's self out or avails one's self to the public for thirty consecutive days or more, exclusive of holidays and weekends.
Based on the facts presented, it appears that the Company has a definite place of business in your jurisdiction by virtue of the branch sales office. Assuming that the Company is selling to individual consumers rather than to a government, institutional, business or industrial entity for consumption use or incorporation in an assembly, manufacturing or processing operation, it appears that the Company should be classified as a retailer for BPOL purposes. The situs rules for a retailer are discussed at § 3.8.2. of the Guidelines. The gross receipts of a retailer are attributed to the definite place of business where sales solicitation activities occur. If the sales solicitations are not performed in any one locality, then they are attributed to the definite place of business from which the sales activities are initiated, directed or controlled. In this case, it appears that the branch sales office is the hub of sales activity in Virginia. Thus, gross receipts for Virginia sales would be attributable to that location.
Although the purchase orders are sent to ***** for "approval", this step appears to be a mere formality which would not change the situs of the transactions. The sales solicitation takes place at or is directed and controlled from the branch office in the City.
Sales Through Commission Salesmen
The facts indicate that some of the Company's sales are made through commission salesmen who operate as independent contractors. Commission sales are addressed at page 101 of the Guidelines and at Code of Virginia § 58.1-3733. Individuals selling by sample, circular or catalogue for a regularly established retailer may be separately subject to licensure as a commission merchant. The BPOL statute provides that only the commission income and not the gross amount of sales can be attributed to a commission merchant for local license purposes. The sales price minus the commission is included in the gross receipts of the retailer for whom the commission merchant is selling. Thus in this case the commission salesmen operating for the Company can be separately licensed and taxed on their commission income. The total amount of sales made by the commission salesman, less the commissions paid, should be reported and included as part of the Company's gross receipts for purposes of its retailer license.
I hope that the above information will be beneficial to you. Although I believe this letter conforms with he 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/13182D
Rulings of the Tax Commissioner