Tax Type
BPOL Tax
Description
Gross receipts from retail sales; Economic hardship deduction
Topic
Local Power to Tax
Date Issued
02-24-1998
February 24, 1998
Re: Request for Advisory Opinion - Business, Professional, & Occupational License
(BPOL) Tax
Dear
In a letter dated October 28, 1997, your office asked for an advisory opinion on whether or not an exclusion or deduction from gross receipts for car sales made to rental car companies by a car dealer was proper under BPOL tax law.
Although the BPOL tax is a local license tax that is imposed and administered by local officials, the Virginia Department of Taxation may promulgate guidelines and issue advisory opinions on a limited basis according to Virginia statute. The department, however, is not required to interpret local ordinances.
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. Copies of cited sources are enclosed for your review.
FACTS
A car dealer in the ***** area maintains that he sells a high volume of cars to two local car rental companies at a narrow margin. The applicable BPOL tax liability substantially reduces the profits from these sales. If he raises his prices, the rental company will buy from an out-of-state car dealer that does not have to pay BPOL tax. To be competitive and still receive a profit, the car dealer would like to deduct the receipts from these car sales from gross receipts that are subject to the BPOL tax.
OPINION
Localities in Virginia may impose the BPOL license fee and tax ordinances on businesses that engage in a licensable business within the locality applying the tax. Code of Virginia § 58.1-3703(A). The BPOL tax is not a tax on income, but a tax on the privilege of engaging in business. The taxable amount is based total gross receipts that the business earns within that locality. Code of Virginia § 58.1-3703.1(A)(3)(a).
"Business" is defined as a course of dealing for the purpose of earning a livelihood or profit and implies a continuous and regular course of dealing rather than an irregular or isolated transaction. Code of Virginia § 58.1-3700.1. "Gross receipts" are the total receipt of money or other consideration received by the taxpayer for engaging in a licensed business activity less any statutory exclusions or deductions. Code of Virginia §§ 58.1-3700.1; 58.1-3732. Exclusions and deductions from gross receipts are allowed only for those items listed under the statute. Code of Virginia §§ 58.1-3703(C); 58.1-3732; 58.1-3732.1; 58.1-3732.2.
In the present case, the car dealer operates a business and the associated gross receipts are subject to the locality's BPOL license and tax ordinances. There is no appropriate statutory exclusion or deduction that may reduce the total, taxable gross receipts. To alleviate the taxpayer's situation, the locality could create a subclassification for car dealers and apply a different tax or exempt the gross receipts from BPOL tax. However, this subclassification must be applied to every car dealer that engages in this classification of business in that jurisdiction.
I hope that the above information will be beneficial to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please do not hesitate to contact me.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13166G
Rulings of the Tax Commissioner