Document Number
Tax Type
Medical professional and personal services
Local Power to Tax
Date Issued
February 20, 1997

Re: Request for Advisory Opinion: BPOL


This will respond to your letter transmitted by fax on February 5, 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. This response is intended to provide guidance only and does not constitute a formal or binding ruling. However, the Department shall not be required to interpret any local ordinance.


A for profit hospital is located within the town. For the past several years, the hospital has not been subjected to any license requirements although personal service businesses have been subject to licensure for the past two years. There are a number of other medical service providers in the town. The town has requested advice on how the hospital and the other medical providers should be treated for BPOL purposes and has requested further advice on the time limits for assessing local license taxes.



Hospitals and other types of medical and/or care facilities are listed under § 9.2 of the 1997 BPOL Guidelines as personal service businesses. Hospitals and the physicians that work there can be organized in any number of ways such as employer-employee, independent contractor, etc. In the traditional method of organization, physicians are independent professionals who work for the patient and have practice privileges at one or more hospitals. Under this arrangement, the hospital and the physician each generate separate bills for the services that they provide to the patient. Professional services rendered by the physician constitutes the exercise of one licensable privilege and the personal services rendered by the hospital constitute the other.

Medical Clinic or Doctor's Office

In the case of a medical clinic or doctor's office, there is only the exercise of one licensable privilege, i.e. the professional services rendered by the doctor. Incidental services which are provided within the doctor's office or clinic such as the tasks performed by the nurse or receptionist are ancillary to the practice of medicine and do not constitute a separate licensable activity.

Nursing, Convalescent and Rest Homes

Nursing, convalescent and rest homes are all properly classified and subject to the local license tax as personal service businesses. The situation here is similar to that of a hospital. Although physicians may visit these facilities on occasion, their visits do not transform the business into a professional service provider. Only a physician can render such services and only the physician, and not the nursing home, is subject to licensure with respect to these services.

Dental Offices

As with medical clinics and doctors' offices, there is only the exercise of one licensable privilege at a dental clinic or dentist's office. The services provided by the office staff and dental hygienists are ancillary to the professional dentistry practice and do not constitute a separate licensable activity.

Although the uniform ordinance provisions enacted in 1996 provide a framework for the administration of the local license tax, localities have a great deal of flexibility in implementing the tax. The classification scheme set forth in the statute is broad in scope. Localities may create sub-classifications provided all businesses within these classifications are treated consistently. For example, a locality could create a sub-classification of all hospitals that is exempt from local licensure. So long as all hospitals in the locality could claim this exemption, the sub-classification would be a valid exercise of the locality's BPOL licensing authority.

Under § 58.1-3903 you may assess local license taxes for the preceding three tax years if such assessment was omitted previously and your local ordinance provided for the imposition of the tax during these periods. The fact that the taxes have not been assessed previously does bar the assessment within the time permitted by the statute, however, I reiterate your local ordinance must have provided for the application of tax to the licensable privilege in question.

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
Tax Commissioner


Last Updated 08/25/2014 16:46