Tax Type
BPOL Tax
Local Taxes
Description
Printer as manufacturer with other sales
Topic
Local Power to Tax
Date Issued
08-10-1999
August 10, 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 proper application of the BPOL gross receipts tax to copying services and other services provided by a printing business.
The local license tax and fee are imposed and administered by local officials. Code of Virginia § 58.1-3701 authorizes the department to promulgate guidelines and issue advisory opinions on local license tax issues. Additionally, Code of Virginia § 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, with the exception of those appeals in which a local ordinance is relevant to the appeal of an assessment. 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 a printing business (the "Business') located in ***** (the "locality') performs copying services and sells business cards and wedding invitations which they contract out for production. You also state that the Business considers these activities to be ancillary to its primary business of printing, and ask how this would affect the Business' BPOL tax status.
OPINION
Printers as Manufacturers
"No county, city or town shall impose a license fee or levy any license tax ... (o)n a manufacturer for the privilege of manufacturing and selling goods, wares and merchandise at wholesale at the place of manufacture.' Code of Virginia § 58.1-3703(C)(4). In a 1985 opinion, the department held that "printers are properly classified as manufacturers for local license tax purposes.' However, to be classified as a manufacturer exempt from BPOL tax, a business must show that its manufacturing activity is substantial and not an ancillary activity when compared to its total business activities.
Substantiality Test:
-
- The test of substantiality is clearly defined in P.D. 98-154, which states:
To be considered substantial, the manufacturing component of a business "must not be de minimis, merely trivial, or only incidental to its principal business.' (BPOL Guidelines, Appendix B at page 2.) Factors that may be used to determine whether or not an activity is the primary or substantial activity of a multi-activity business include the manufacturing component's financial receipts, its proportion of the total corporate income, the percentage that the activity comprises of the total capital investment, the number of employees working in the manufacturing component as compared with the total number of employees, or the ratio of manufacturing activities to the entire business. Id. These factors are not a conclusive test of substantiality, but are rather an endeavor to encompass the entire scope of a multi-purpose business venture. Id.
- The test of substantiality is clearly defined in P.D. 98-154, which states:
It is important to note that only the local commissioner of the revenue can make this judgement based on the specific facts of each case. (See 1996 Op. Va. Atty. Gen. 214.) In the present case, if you find that the Business' printing or manufacturing activity is substantial and that it sells its printed materials at wholesale at the place of manufacture, then, pursuant to Code of Virginia § 58.1-3703(C)(4), the Business is exempt from BPOL license tax and fees on revenues generated from its printing activities.
For the remainder of this opinion I will assume that the Business' printing activities are substantial, and that the Business sells its printed materials at wholesale at the place of manufacture.
Other Services Besides Printing-Copying: Selling of Wedding Invitations and Business Cards
You indicate that the Business performs other services besides printing. You ask whether the Business is taxable on its gross receipts from non-printing services. In evaluating whether the Business is taxable on non-printing services, you must first determine whether these services are so substantial such that they rise to the level of a separate line of business. In making this determination, you must apply the substantiality test discussed above.
If you conclude that these non-printing services are substantial when measured against the total activities of the Business, the Business may be subject to a license fee or tax on its revenues from non-printing services. Alternatively, if you conclude that these non-printing services are not substantial but rather are ancillary to the Business' printing operations, you are precluded by Code of Virginia § 58.1-3703(C)(4) from imposing a license fee or license tax upon the Business.
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/23103
Rulings of the Tax Commissioner