Tax Type
BPOL Tax
Local Taxes
Description
Specific Types of Local License Taxes
Topic
Local Power to Tax
Date Issued
06-11-1999
June 11, 1999
Re: Request for Advisory Opinion Business, Professional and Occupational License (BPOL) Tax
Dear****************
This will respond to your letter requesting an advisory opinion as to the local license taxation of ***** (the "Taxpayer'). 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, § 58.13703.1(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
You state that the Taxpayer produces crushed stone in your county which "is sold to state and federal transportation departments, asphalt and ready mix plants, construction contractors and subcontractors.' You ask whether these sales should be classified as wholesale or retail sales.
OPINION
I am enclosing a copy of Public Document 98-160 (P.D. 98-160), which discusses the license tax classification of retail and wholesale merchants at length.
Sales When the Goods Will Be Incorporated into Goods for Sale
You state that the Taxpayer's customers include asphalt and ready mix plants. If these customers use crushed stones as a primary ingredient in making asphalt and ready mix, the sale of crushed stone is a wholesale sale. See Guidelines §1, definition of "wholesale sale.'
Sales to Institutional, Commercial, Industrial and Governmental Users
Additionally, the Guidelines definition of a wholesale sale includes sales to institutional, commercial, industrial and governmental users which are consistent with sales at wholesale. This determination requires a consideration of all of the facts and circumstances surrounding the sale. "Factors used to discern the difference between a retail and wholesale sale are the characteristics of the purchaser and the purchaser's use of the merchandise, and to a lesser degree, the price and quantity of the product sold.' P.D. 98-160.
You state that the Taxpayer's customers also include state and federal transportation departments, construction contractors and subcontractor. In general, the characteristics of these customers are not inconsistent with those of purchasers buying at wholesale. However, you must determine how these customers use the crushed stone. As discussed above, and in P.D. 98-160, the customers use of the goods is an important element in determining whether a particular sale is a retail or wholesale sale. P.D. 98-160 also is helpful in that it describes those uses by a purchaser which typically are associated with or identify a wholesale sale. Sales in quantity or at a discount to these purchasers would be additional factors indicating that these sales are at wholesale.
I will note that a business which sells to both individual and institutional, commercial, industrial or governmental users and charges the latter lower prices must be able to substantiate the lower prices to the institutional, commercial, industrial or governmental users in order to qualify such sales as wholesale sales.
CONCLUSION
Your request for guidance does not present sufficient detail regarding the characteristics of the purchasers, the purchasers' uses of the merchandise, and the price and quantities of the product sold to make a conclusive determination as to the nature of the Taxpayer's sales. I hope that the law as outlined above will assist you in determining whether this taxpayer is a retailer or wholesaler.
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 *****, Tax Policy Analyst, in my Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13685D
Rulings of the Tax Commissioner