Tax Type
BPOL Tax
Local Taxes
Description
Local ordinance
Topic
Local Power to Tax
Rate of Tax
Date Issued
05-14-1999
May 14, 1999
Re: Request for Advisory Opinion Business, Professional and Occupational License (BPOL) Tax
Dear************************
This advisory opinion is issued in response to your letter of October 30, 1998 requesting guidance concerning a proposed change to the license tax rate and fee structure imposed by your locality. I apologize for the delay in responding to your request.
The local license tax and fee 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 is based on the facts, summarized below, as they have been presented to the department. 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 advisory opinion is intended to provide guidance only, and does not constitute a formal or binding ruling. Copies of cited sources are enclosed for your review.
FACTS
You ask whether or not your locality may lawfully impose a license fee on businesses with gross receipts under $100,000 and a license tax on businesses with gross receipts over $100,000. No business, however, would be charged both a license fee and a license tax under this proposed license tax rate and fee structure. The population of your locality is greater than 50,000. You are concerned that this proposal may conflict with the provisions of Code of Virginia §§. 58.1-3703 (A) and 58.1-3705.
OPINION
A locality with a population greater than 50,000 may impose a license fee, not to exceed $100.00 ($50.00, effective January 1, 2000), on each business operating at a definite place of business in the locality. Code of Virginia § 58.1-3703 (A). Localities with a population greater than 50,000 may also impose a license tax on each business with gross receipts greater than $100,000. Code of Virginia § 58.1-3706 (A). However, the license tax "shall not be assessed and collected on any amount of gross receipts of each business upon which a license fee is charged.' Code of Virginia § 58.1-3703 (A).
Implications of Code of Virginia § 58.1-3703 (A)
Code of Virginia § 58.1-3703 (A) restricts localities from subjecting any amount of a business' gross receipts from a definite place of business to both a license fee and a license tax. In general, a local ordinance which does not subject any amount of a business' gross receipts to both a license fee and a license tax does not violate Code of Virginia § 58.1-3703 (A). You should consult your local attorney to determine if your locality's proposed ordinance conforms with Code of Virginia § 58.1-3703 (A), as interpreted in this letter.
Implications of Code of Virginia § 58.1-3705
You are also concerned that the proposed license tax rate and fee structure may violate Code of Virginia § 58.1-3705, which provides that "w]henever any county, city or town levies a license tax, the basis of such tax, whether it be gross receipts or otherwise, shall be the same for all persons engaged in the same business, trade, occupation or calling.'.
Virginia law has traditionally allowed localities to subject otherwise similar businesses to license taxation, in the form of license taxes and fees, at effective rates which differ according to the total volume of gross receipts. For example, prior to the 1996 revision of the BPOL statutes, Code of Virginia § 58.1-3706 (A) provided that "no local license tax . . . shall be greater than thirty dollars or the rate set forth below for the class of enterprise listed, whichever is higher (emphasis added).' This statute authorized localities to subject otherwise similar businesses to license taxation at rates which differed according to the total volume of gross receipts (i.e., the minimum license tax was thirty dollars, but, depending on the amount of gross receipts, some businesses paid license taxes at a higher or lower effective tax rate).
I am not aware of any legal authority holding that this practice violated Code of Virginia § 58.1-3705, which was in effect at that time. The Attorney General has opined that the purpose of Code of Virginia § 58.1-3705, formerly designated § 58-266.5, was "to prevent excess taxation of businesses which operate in more than one locality.' 1974 Op. Att'y Gen. 379. In general, the BPOL statutes have historically allowed for some differences in the license fees and taxes assessed upon businesses, based on gross receipts. Again, you should consult your local attorney to determine if your locality's proposed ordinance conforms with Code of Virginia § 58.1-3705, as interpreted in this letter.
CONCLUSION
I hope that this information will be of assistance to you. Although I believe this advisory opinion 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 * * * * * Tax Policy Analyst, in my Office of Tax Policy at * * * * *.
Sincerely,
Danny Payne
Tax Commissioner
Rulings of the Tax Commissioner