Tax Type
BPOL Tax
Local Taxes
Description
Situs
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
06-09-1999
June 9, 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 whether or not your client, headquartered in Florida, is subject to a BPOL license tax in the ***** (the "City'), where it also maintains an office. I apologize for the delay in responding to your request.
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') maintains its corporate offices and approximately 82 percent of its 1,100 employees in Florida. The Business collects, processes, and analyzes workers compensation insurance data. This enables the Business to provide its customers with rating bureau and statistical agent services involving workers compensation insurance. The Business' typical contract provides for the parties to the contract to exchange information so that the Business can provide services including, but not limited to: (1) producing and filing loss costs/rates, rating plans, rating rulings and schedules, required statistical plan filings and reports, and related manuals and circulars; (2) producing background materials the Business will submit to regulators in support of loss/cost filings; (3) undertaking legislative reform efforts; and (4) responding to any regulatory requests on behalf of its customers. The Business' customers include individual members of the insurance industry and state departments of insurance.
You state that the Business also employs regional staff throughout the United States. This includes Government, Consumer and Industry Affairs ("GC&I') directors who handle between four and six states. GC&I directors:
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- represent [the Business'] affiliates in their states and provide on-site information, testimony and support to the workers compensation industry. They are responsible for all state filing support activity... They coordinate all state-based activities with insurance, trade and employer organizations. This includes the dissemination of technical research and analysis of legislative proposals. Taxpayer's February 8, 1999 Statement of Facts, Page 1.
- represent [the Business'] affiliates in their states and provide on-site information, testimony and support to the workers compensation industry. They are responsible for all state filing support activity... They coordinate all state-based activities with insurance, trade and employer organizations. This includes the dissemination of technical research and analysis of legislative proposals. Taxpayer's February 8, 1999 Statement of Facts, Page 1.
You ask if the Business is subject to the City's local license tax.
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 of business within the locality. Code of Virginia §§58.1-3700 and 58.1-3703(A).
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"Business' means a course of dealing which requires the time, attention and labor of the person so engaged for the purpose of earning a livelihood or profit. It implies a continuous and regular course of dealing, rather than an irregular or isolated transaction... The following acts shall create a rebuttable presumption that a person is engaged in a business: (I) advertising or otherwise holding oneself out to the public as being engaged in a particular business or (ii) filing tax returns, schedules and documents that are required only of persons engaged in a trade or business.
"Definite place of business' means an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more. Code of Virginia § 58.1-3700.1.
The Business currently operates an office in the City. Additionally, the Business holds itself out to the public as being engaged in the Insurance Rating Bureau business. It has done this by placing a listing in the City's 1999 Yellow Pages (listing its address and telephone number in the City) under the heading, "Insurance Rating Bureaus.' Based upon these facts, a presumption arises that the Business is engaged in business from a definite office or location in the City. Moreover, the only evidence offered by the Business to rebut this presumption is that the vast majority of its employees work out of a Florida office(s). However, this in no way casts doubt on the fact that the Business maintains an office in the City. As a result, it is my opinion that the Business is clearly engaged in business from a definite place of business in the City.
Is the Business Subject to the City's Local License Tax?
Although an entity may be engaging in business at a definite place or location in Virginia, it is the situs rules under Code of Virginia § 58.1-3703.1 which determine where a business must pay local license taxes. Gross receipts from the performance of services are attributed to the definite place of business at which the services are performed, or if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled. Code of Virginia § 58.1-3703.1(A)(3)(a)(4).
The Business specifies in its typical business services contract that, among other obligations, it will assist in the filing of loss/cost rates, rating plans and similar documents; undertake legislative reform efforts; and respond to regulatory requests on behalf of its customers. GC&I directors generally assist in fulfilling some of these contractual promises. Moreover, the facts presented to the department suggest that the GC&I director assigned to the City office undertook the same responsibilities and functions as the typical GC&I director. Based upon these facts, it is clear that GC&I directors play a substantial role in performing some of the services offered by the Business, and this held true for the GC&I director formerly assigned to the City office. Because the Business' GC&I director performed some of the contractual services out of the Business' office in the City, it is my opinion that a portion of the Business' gross receipts were attributable to, and taxable under the City's local license tax during the period in which the GC&I director was located in the City.
I understand that a GC&I director no longer works out of the Business' office in the City, and this office is currently staffed by an "administrative assistant.' Whether or not the Business was subject to the City's local license tax after the GC&I director left the City and on a going forward basis depends on whether or not the "administrative assistant' performed or now performs some of the same functions as a GC&I director or, as a general matter, what functions are actually performed by the "administrative assistant.' This is a question to be resolved at the local level as the facts presented to the department do not shed light on the responsibilities and duties of this "administrative assistant.' In any event, because the Business is engaged in business from an office in the City, the Business is subject to the City's local license fee.
Measure of the License Tax: Deduction Under Code of Virginia § 58.1-3732
The Business has not asked for an opinion as to the proper amount of gross receipts subject to the City's license tax. However, I will outline the applicable law that must be used in determining the local license tax liability of an entity conducting business in interstate commerce.
In general, the amount of gross receipts that a locality can subject to its BPOL tax must satisfy the test set forth in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977). Under that test, the locality's tax must be: (1) applied to an activity with a substantial nexus with the taxing authority; (2) fairly apportioned; (3) nondiscriminatory to interstate commerce; and (4) fairly related to the services provided by the state or locality. The taxpayer has the burden of producing evidence that a locality's BPOL assessment fails this test.
Finally, as provided by Code of Virginia § 58.1-3732, a locality must deduct from BPOL taxable gross receipts those receipts of the taxpayer attributable to business conducted in another state or foreign country in which the taxpayer is "liable for an income or other tax based upon income.' In order to qualify for the deduction, the taxpayer must be required by the laws of another state or foreign country to file an income tax return or other return for a tax based upon income. 1997 BPOL Guidelines, page 30. See P.D. 97-490 for further explanation on how the deduction is calculated.
I hope that this information is useful to you. Although I believe that this letter conforms with the requirements of the law, it is only written for your guidance. If you have any other questions, please do not hesitate to contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13552
Rulings of the Tax Commissioner