In general; License issuance and revocation
Local Power to Tax
February 20, 1997
Re: Request for Advisory Opinion: BPOL
This will respond to your facsimile dated February 6, 1997, regarding the issuance and revocation of business licenses.
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.
An individual has applied for a business license to operate an amusement center in a location zoned for amusement centers. Your local zoning ordinance requires a public hearing prior to issuing a permit to create amusement centers. You wish to adopt an ordinance in which you charge those itinerant merchants and peddlers who continuously renew their licenses, fourteen cents per hundred dollars of gross receipts and other itinerant merchants and peddlers a flat $500 dollar tax. You ask for an opinion on the following issues: (I) is a locality required to issue a business license to an individual if they do not receive a zoning permit; (ii) should zoning ordinances which would prevent an individual from receiving a business license be eliminated; (iii) does a locality have the right to revoke a business license; and (iv) may a locality charge peddlers and itinerant merchants who continuously renew their licenses at a rate of fourteen cents per hundred dollars of gross receipts while charging other itinerant merchants and peddlers a flat $500.
Issuance of a business license
Code of Virginia § 58.1-3700 states that:
- [T]he governing body of any [locality] may require that no business license ... shall be issued until the applicant has produced satisfactory evidence that all delinquent business license, personal property, meals transient occupancy, severance and admissions taxes owed by the business to the [locality] have been paid...
The BPOL statute specifically allows localities to deny business licenses to entities which are delinquent in paying local taxes. It does not address whether a locality may deny a business license to an otherwise licensable entity which has not received a zoning permit. This appears to be an issue which must be addressed by local ordinance.
Code of Virginia § 58.1-3703.1 A 2d provides that "a penalty equal to ten percent of the tax may be imposed upon the failure to file an application or the failure to pay the tax by the appropriate due date". (Emphasis Added) The statute allows the governing authority to enforce the statute through a penalty. However, the statute does not address whether a business license may be revoked. The revocation of a business license is a reasonable way to exercise the implied power to enforce collection of the tax. See the 1982-1983 Attorney General's opinion at page 607. (Commissioner of Revenue has the power to revoke severance license to enforce collection of the tax.) Thus, it is my opinion that a locality may revoke a business license for enforcement purposes.
Itinerant Merchants and Peddlers
§ 3.1.1. B of the 1997 Guidelines states that a local ordinance may:
- [e]stablish subclassifications within the classifications set out in state law and provide for different rates or exemptions for such subclassifications, as long as no rate exceeds the maximum permitted by state law.
A locality may choose to charge different rates on any classification or subclassification subject to constitutional limitations. The courts have held that:
- Unless a "suspect classification" is involved, the (locality) may constitutionally treat different subjects differently for tax purposes if 1) the difference is real, 2) the distinction has some relevance to the local governing purpose, and 3) the differing treatments are not so disparate, relative to the difference in classification, as to be wholly arbitrary. Chesterfield Cablevision v. Chesterfield County, 241 Va. 252, 255-6 (1991).
The governing body must determine whether charging itinerant merchants and peddlers who continuously renew their licenses a different tax rate than other itinerant merchants and peddlers satisfies each part of the test specified in Chesterfield Cablevision. Code of Virginia § 58.1-3717 C provides that the maximum tax which can be levied on itinerant merchants and peddlers is $500. If the dual rate structure you have proposed for itinerant merchants and peddlers fulfills the Chesterfield Cablevision test and the tax never exceeds the $500 maximum, the governing body may choose to impose the different rates.
I have enclosed §§ 58.1-3700, 3701, 3703.1, 3717, § 3.1. of the 1997 Guidelines, the 1992 Attorney General's opinion at page 607, and the Chesterfield Cablevision for your further reference. 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.
Danny M. Payne