Tax Type
BPOL Tax
Local Taxes
Description
Exceptions; Affiliated group
Topic
Local Power to Tax
Date Issued
06-30-1999
June 30, 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 a limited liability company (the "LLC') which is owned by an individual can be a member of an affiliated group of corporations under Code of Virginia § 58.1-3703(C)(10). I apologize for the delay in responding to your request.
The local license fee and tax are imposed and administered by local officials. Section 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 materials for your review.
FACTS
You have stated that your law firm (the "Business') is a corporation of which you are the sole shareholder. You also established a LLC of which you individually own 99 percent. This was done to facilitate a Small Business Administration loan for use in acquiring and rehabilitating a building which will house the Business's offices.
You ask if the LLC which is 99 percent owned by you as an individual can be a member of an affiliated group of corporations. Under Code of Virginia § 58.1-3703(C)(10), transactions between certain affiliated entities are exempt from BPOL license taxes and fees.
OPINION
In the present case, you individually, and not the Business, own the LLC. An affiliated group, however, as defined under § 58.1-3700.1(1), is characterized by a common parent corporation having ownership of a certain percentage of the shares of the members of the affiliated group. Because an individual owning a LLC, such as yourself, is not an incorporated entity and, therefore, cannot be a common parent corporation, it is my opinion that an LLC owned by an individual cannot be a member of an affiliated group. As a result, receipts derived from business conducted between the LLC and the Business are subject to a license tax or a license fee.
This opinion only addresses the question of whether or not a LLC owned by an individual can benefit from the tax exclusion provided under Code of Virginia § 58.1-3703(C)(10).
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 * * * * *.
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 a limited liability company (the "LLC') which is owned by an individual can be a member of an affiliated group of corporations under Code of Virginia § 58.1-3703(C)(10). I apologize for the delay in responding to your request.
The local license fee and tax are imposed and administered by local officials. Section 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 materials for your review.
FACTS
You have stated that your law firm (the "Business') is a corporation of which you are the sole shareholder. You also established a LLC of which you individually own 99 percent. This was done to facilitate a Small Business Administration loan for use in acquiring and rehabilitating a building which will house the Business's offices.
You ask if the LLC which is 99 percent owned by you as an individual can be a member of an affiliated group of corporations. Under Code of Virginia § 58.1-3703(C)(10), transactions between certain affiliated entities are exempt from BPOL license taxes and fees.
OPINION
-
- Under Code of Virginia § 58.1-3700.1(1) "affiliated group' means:
1. One or more chains of corporations subject to inclusion connected through stock ownership with a common parent corporation which is a corporation subject to inclusion if:
a. Stock possessing at least eighty percent of the voting power of all classes of stock and at least eighty percent of each class of the nonvoting stock of each of the corporations subject to inclusion, except the common parent corporation, is owned directly by one or more of the other corporations subject to inclusion; and
b. The common parent corporation directly owns stock possessing at least eighty percent of the voting power of all classes of stock and at least eighty percent of each class of the nonvoting stock of at least one of the other subject to inclusion corporations . . . (emphasis added.)
- Under Code of Virginia § 58.1-3700.1(1) "affiliated group' means:
In the present case, you individually, and not the Business, own the LLC. An affiliated group, however, as defined under § 58.1-3700.1(1), is characterized by a common parent corporation having ownership of a certain percentage of the shares of the members of the affiliated group. Because an individual owning a LLC, such as yourself, is not an incorporated entity and, therefore, cannot be a common parent corporation, it is my opinion that an LLC owned by an individual cannot be a member of an affiliated group. As a result, receipts derived from business conducted between the LLC and the Business are subject to a license tax or a license fee.
This opinion only addresses the question of whether or not a LLC owned by an individual can benefit from the tax exclusion provided under Code of Virginia § 58.1-3703(C)(10).
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 * * * * *.
Rulings of the Tax Commissioner