Tax Type
BPOL Tax
Local Taxes
Description
Brokers and commission merchants
Topic
Local Power to Tax
Date Issued
05-06-1999
May 6, 1999
Re: Request for Advisory Opinion
Business, Professional and Occupational License (BPOL) Tax
Dear************
This is in response to your letter requesting an advisory opinion on the local license tax classification of a taxpayer (the "Business') which acts as a "middleman' in the brokering of fire equipment.
The local license fee and tax are imposed and administered by local officials. §58.1-3701 of the Code of Virginia authorizes the department to promulgate guidelines and issue advisory opinions on local license tax issues. Additionally, § 58.1-3703.1(A)(5) authorizes the department to receive taxpayer appeals of certain local license tax assessments and to issue determinations on such appeals. However, in no case is the department required to interpret any local ordinance. Code of Virginia § 58.1-3701. The following opinion has been made subject to the facts presented to the department as summarized below. Any change in these facts or the introduction of facts by another party may lead to a different result.
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. I have enclosed copies of cited material for your review.
FACTS
The Business participates in the sale of large and expensive firefighting equipment to Virginia municipalities and to local volunteer fire departments. The Business does not assume title to the equipment sold, but merely acts as a broker between the various fire companies and several out-of-state manufacturers of such equipment. You state that the Business maintains its only place of business in the City.
After several discussions with the department, you have asked what is the proper license tax classification for this Business?
OPINION
Subject to limits set forth in Code of Virginia § 58.1-3703(C), localities may charge a fee for issuing BPOL licenses or may levy a license tax on a business for the privilege of engaging in business at a definite place within the locality. Code of Virginia §§58.1-3700 and 58.1-3703(A).
§58.1-3706 of the Code of Virginia provides for a maximum tax rate of thirty-six cents per one hundred dollars of gross receipts for repair, personal and business services. Under the BPOL Guidelines, providers of repair, personal, and business services include brokers and commission merchants, with the exception of real estate and financial brokers. BPOL Guidelines, page 121. Additionally, the gross receipts from the performance of services are attributable to the definite place of business at which the services are performed. Code of Virginia § 58.1-3703.1(A)(3)(a)(4).
The Business locates firefighting equipment for local volunteer fire companies and Virginia municipalities and arranges for the sale of this equipment for a commission. You state that the Business performs these activities at a definite place of business in the City. It is my opinion that, because the Business does not assume title to the firefighting equipment eventually sold, the Business is providing a service to its customers. Gross receipts from these services may be taxed by the City since the Business performs such services from a definite place of business within the City. Finally, the Business is subject to a maximum tax rate of thirty-six cents per one hundred dollars of its gross receipts, in this case its gross commissions earned.
I hope that this information is useful to you. Although I believe that this letter conforms with the requirements of the law, it is written only for your guidance. If you have any other questions, please contact ***** at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22205
Rulings of the Tax Commissioner