Company president working out of residence on occasional basis
Local Power to Tax
February 18, 1997
Re: Request for an Advisory Opinion: Local License Tax
This will reply to your letter of January 15, 1997, requesting an advisory opinion, pursuant to Code of Virginia § 58.1-3701, as to whether ******************(the "Taxpayer") is subject to the BPOL tax. The Department of Taxation does not have specific authority to issue an opinion on the application of business tangible personal property and machinery and tools taxes. I would recommend that you contact the Office of the Attorney General for a ruling on these particular taxes.
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.
I will address the questions raised in your letter. The response is intended to provide guidance only and does not constitute a formal or binding ruling.
The Taxpayer is a Virginia corporation that stages shows for clients in different states throughout the country. No shows are ever staged in Virginia. The Taxpayer leases an office and warehouse in another state ("State A") which serves as the principal headquarters. Clients contract with the taxpayer in State A. The Taxpayer's president maintains an apartment in State A and a residence in a Virginia locality where he performs work from a home office from time to time. All of the Taxpayer's production equipment is stored in the warehouse in State A. Corporate accounts are maintained in both State A and in Virginia. All client's payment for services go into State A's checking account. The Taxpayer's president draws a salary from State A's account. The Taxpayer does not file corporate income tax returns in Virginia, but the Taxpayer's president files his personal income tax return in Virginia. The company's president will drive a corporate truck carrying equipment to his home in the Virginia locality between shows if he is in the area.
Based on the description provided, the Taxpayer's business could be classified as a service provider or contractor depending on the particular job. Code of Virginia § 58.1-3703.1 A 3a 1 and 3a 4 provides that a service provider or a contractor is subject to a license tax measured by the gross receipts attributed to the definite place of business where the services are performed. If the services are not performed at any definite place of business, then the service provider's gross receipts are attributed to the definite place of business from which the services are directed or controlled.
Code of Virginia § 58.1-3700.1 defines a definite place of business as an office or location at which occurs a regular and continuous course of dealing for 30 consecutive days or more. If these activities take less than 30 days to complete, the gross receipts would be sited back to the definite place of business where they are directed or controlled. Pursuant to the facts presented, the staging activities may be directed or controlled at either the office in State A, the president's residence in the Virginia locality, or possibly from both locations.
The determining question which must be answered concerns the direction and control of the services from the Virginia locality. If activities constitute a regular and continuous course of dealing for 30 consecutive days or more, there is a definite place of business. § 1 of the 1997 BPOL Guidelines provides that a continuous course of dealing occurs when an entity holds itself out to the public as engaged in business for 30 consecutive days in the Virginia locality. Activities which demonstrate that an entity conducts a regular and continuous course of dealing include, but are not limited to advertising, filing corporate income tax returns, receiving mail, having a business telephone, contracting with clients, and maintaining office equipment and supplies.
It appears from the facts provided that the Taxpayer would not be subject to the BPOL tax in the Virginia locality. The Taxpayer's activities in Virginia are limited to the company president working out of his residence on an occasional basis. Most of the Taxpayer's activities, which would demonstrate a regular and continuous course of dealing, occur in State A. The Taxpayer contracts with clients, maintains its business telephone, receives mail and maintains its office equipment and supplies in State A.
The Taxpayer would file its corporate income tax returns in State A if this state required that its taxpayers file an income tax.
I have enclosed Code of Virginia §§ 3700.1, 3703.1 and § 1 of the 1997 Guidelines for your further reference. If you have any questions, you may contact ******** at ***************.
Danny M. Payne