Tax Type
BPOL Tax
Description
Specific Types of Local License Taxes
Topic
Local Power to Tax
Date Issued
10-19-1998
October 19, 1998
Re: Request for Advisory Opinion: BPOL
Dear *****
This will respond to your letter transmitted by facsimile on November 12, 1997, in which you ask certain questions on the assessment of personal property tax and local license (BPOL) taxes on a company leasing construction equipment. I apologize for the delay in responding to your letter.
The license tax is a local tax that 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
***** (``Taxpayer') is located in ***** (``Locality'). The taxpayer is in the business of leasing heavy construction equipment both on a short-term and long-term basis. The taxpayer pays a BPOL tax on the gross receipts of its leasing business to the Locality.
You have indicated that a piece of construction equipment was leased to a customer in ***** (``Neighboring Locality') beginning in December 1996 through the first one or two months of 1997. The equipment was purchased by the customer and presumably remained in the Neighboring Locality throughout 1997.
Gross receipts from the lease of this equipment were included in the taxpayer's local license tax return filed with the Locality. Additionally, a personal property tax was assessed on the equipment by the Neighboring Locality because the equipment was located there on the locality's tax day, January 1, 1997.
You ask whether the same piece of equipment may be factored into the assessment of both local license and personal property taxes.
OPINION
Subject to limits in Code of Virginia §58.1-3703 C, localities may charge a fee for issuing BPOL licenses and may levy a license tax on a business for the privilege of engaging in business at a definite place of business within the locality. Code of Virginia §58.1-3700 and 58.1-3703 A (copies enclosed.) (Effective July 1, 1998, localities can impose either a license tax or a license fee on a business at a definite place of business, but not both). A definite place of business means an office or a 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. 1997 BPOL Guidelines, page 4 (copy enclosed.)
Prohibitions on Assessing BPOL and Merchant's Capital Taxes
A locality is forbidden from assessing both the license tax and merchants' capital tax on merchants. Code of Virginia §58.1-3704 (copy enclosed). The situation you describe, however, involves the assessment of license tax by the Locality on the taxpayer's leasing business and the assessment of tangible personal property tax by the Neighboring Locality on heavy construction equipment used in the business. Thus, the prohibition of §58.1-3704 is inapplicable to the facts presented. The assessment of tax by the Locality and the Neighboring Locality in the manner described above is permitted under Virginia law. Moreover, the BPOL tax and the tangible personal property tax are two discrete taxes. The former is a tax on the privilege of engaging in business while the latter is a property tax. It is my opinion that two discrete taxes may be imposed on the same business, unless otherwise provided by law.
Situs of Taxation for the Construction Equipment
You also ask whether the Neighboring Locality lawfully assessed a tangible personal property tax on the construction equipment in 1997. Although the department does not render advisory opinions concerning the tangible personal property tax, I am including a statement of the applicable law for your guidance. The following constitutes no part of the department's formal advisory opinion.
The tax situs for tangible personal property, merchants' capital, and machinery and tools is the locality where such property is physically located on the tax day. Code of Virginia §58.1-3515 (copy enclosed). However, tax situs means more than where the property is simply located on the tax day. ``It does not mean property which is casually there or incidentally there in the course of transit, but it does [not] necessarily involve the idea of permanent location like real property. It is sufficient if it is there and being used in such a way as to be fairly regarded as part of the property of the ... [locality].' Hogan v. County of Norfolk, 198 Va. 733, 735 (1957) (copy enclosed).
Thus, in determining the question of situs, the test the local tax official should apply is whether the property is being used in such a way as to be fairly regarded as part of the property of the locality. This is a determination to be made by the local tax official.
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/13189C
Re: Request for Advisory Opinion: BPOL
Dear *****
This will respond to your letter transmitted by facsimile on November 12, 1997, in which you ask certain questions on the assessment of personal property tax and local license (BPOL) taxes on a company leasing construction equipment. I apologize for the delay in responding to your letter.
The license tax is a local tax that 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
***** (``Taxpayer') is located in ***** (``Locality'). The taxpayer is in the business of leasing heavy construction equipment both on a short-term and long-term basis. The taxpayer pays a BPOL tax on the gross receipts of its leasing business to the Locality.
You have indicated that a piece of construction equipment was leased to a customer in ***** (``Neighboring Locality') beginning in December 1996 through the first one or two months of 1997. The equipment was purchased by the customer and presumably remained in the Neighboring Locality throughout 1997.
Gross receipts from the lease of this equipment were included in the taxpayer's local license tax return filed with the Locality. Additionally, a personal property tax was assessed on the equipment by the Neighboring Locality because the equipment was located there on the locality's tax day, January 1, 1997.
You ask whether the same piece of equipment may be factored into the assessment of both local license and personal property taxes.
OPINION
Subject to limits in Code of Virginia §58.1-3703 C, localities may charge a fee for issuing BPOL licenses and may levy a license tax on a business for the privilege of engaging in business at a definite place of business within the locality. Code of Virginia §58.1-3700 and 58.1-3703 A (copies enclosed.) (Effective July 1, 1998, localities can impose either a license tax or a license fee on a business at a definite place of business, but not both). A definite place of business means an office or a 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. 1997 BPOL Guidelines, page 4 (copy enclosed.)
Prohibitions on Assessing BPOL and Merchant's Capital Taxes
A locality is forbidden from assessing both the license tax and merchants' capital tax on merchants. Code of Virginia §58.1-3704 (copy enclosed). The situation you describe, however, involves the assessment of license tax by the Locality on the taxpayer's leasing business and the assessment of tangible personal property tax by the Neighboring Locality on heavy construction equipment used in the business. Thus, the prohibition of §58.1-3704 is inapplicable to the facts presented. The assessment of tax by the Locality and the Neighboring Locality in the manner described above is permitted under Virginia law. Moreover, the BPOL tax and the tangible personal property tax are two discrete taxes. The former is a tax on the privilege of engaging in business while the latter is a property tax. It is my opinion that two discrete taxes may be imposed on the same business, unless otherwise provided by law.
Situs of Taxation for the Construction Equipment
You also ask whether the Neighboring Locality lawfully assessed a tangible personal property tax on the construction equipment in 1997. Although the department does not render advisory opinions concerning the tangible personal property tax, I am including a statement of the applicable law for your guidance. The following constitutes no part of the department's formal advisory opinion.
The tax situs for tangible personal property, merchants' capital, and machinery and tools is the locality where such property is physically located on the tax day. Code of Virginia §58.1-3515 (copy enclosed). However, tax situs means more than where the property is simply located on the tax day. ``It does not mean property which is casually there or incidentally there in the course of transit, but it does [not] necessarily involve the idea of permanent location like real property. It is sufficient if it is there and being used in such a way as to be fairly regarded as part of the property of the ... [locality].' Hogan v. County of Norfolk, 198 Va. 733, 735 (1957) (copy enclosed).
Thus, in determining the question of situs, the test the local tax official should apply is whether the property is being used in such a way as to be fairly regarded as part of the property of the locality. This is a determination to be made by the local tax official.
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/13189C
Rulings of the Tax Commissioner