Tax Type
BPOL Tax
Local Taxes
Retail Sales and Use Tax
Description
Antenna tower lease
Topic
Exemptions
Local Taxes Discussion
Taxability of Persons and Transactions
Date Issued
03-10-1999
March 10, 1999
Re: Request for Ruling: Retail Sales and Use Tax
Advisory Opinion: Business, Professional and Occupational License (BPOL) Tax
Dear ***
In your letter of December 21, 1998, you request a determination of whether tower leasing activities in Virginia by your Client are subject to both the retail sales and use tax and the local license (BPOL) tax.
The BPOL license fee and tax are imposed and administered by local officials. Section 58.1-3701 of the Code of Virginia limits the involvement of the Department of Taxation to promulgating guidelines and issuing advisory opinions. However, the department shall not be required to interpret any local ordinance.
While addressing the BPOL issues raised in your letter, this response is intended to provide advisory guidance only, and does not constitute a formal or binding ruling. Copies of cited sources are enclosed for your review.
FACTS
You ask whether the sales and use tax and BPOL tax may be imposed on leases for space on an antenna tower or its pad or within an adjacent shelter. Your Client currently owns or leases various towers throughout Virginia. Your Client leases this space to telecommunications carriers who use the space for placement of base station equipment and connection of cable to telecommunications equipment and antennas.
You indicate that the leasing arrangements are not for the rental of tangible personal property and that your Client provides no telecommunications services. Rather, it is only engaged in leasing towers and other realty space to telecommunications providers to enable them to set up and run a telecommunications service system facility.
RULING: SALES TAX
An antenna tower is deemed real property when it has been permanently attached to the realty. The key determinant is the intention of the antenna tower owner in annexing the tower to the realty. See Public Documents (P.D.) 91-166 (8/7/91), 95150 (6/12/95), 93-99 (4/12/93), and 96-121 (6/7/96).
As the retail sales and use tax applies only to the sale, lease or rental of tangible personal property and certain taxable services (e.q., meals and lodgings), it has no application to the lease of real property without accommodations. Accordingly, the lease of an antenna tower, pad and shelter which are permanently affixed to the realty or the lease of space within or on realty structures is not subject to the retail sales and use tax.
If an antenna tower, pad or shelter has not been permanently affixed to the realty, it constitutes tangible personal property. When leased or rented to the final consumer, the gross proceeds applicable to the rental or lease of the personal property are subject to the retail sales and use tax. See Title 23 of the Virginia Administrative Code (VAC) 10-210-840.
If a lease provides both real and tangible property, the portion of the lease involving tangible personal property is taxable. See P.D. 92-141 (8/10/92) and 94-142 (4/29/94).
OPINION: BPOL TAX
You ask whether a BPOL license tax may be imposed on your Client's leasing activities in Virginia. Subject to the exceptions set out in Code of Virginia § 58.13703(C), the general tax rule is that localities may impose a license fee or levy a license tax on businesses, trades, professions, occupations, and callings, and upon the persons, firms and corporations engaged therein within the locality. However, please note that some localities do not impose a BPOL tax or fee.
1. When tower, pad and shelter are real property owned by Client who leases all or a portion of the property space to others. Code of Virginia § 58.1-3703(C)(7) provides an exception to the general tax rule. This exception prohibits localities from imposing a local license fee or a local license tax on any person, firm or corporation which engages "in the business of renting, as the owner of such property, real property" with certain exceptions not applicable to your inquiry. However, this prohibition does not apply to those localities which imposed a local license tax on January 1, 1974, on owners of real property engaged in the business of renting such property.
In addition, Code of Virginia § 58.1-3703 (C)(19) provides that gross receipts from the sale and rental of real estate and buildings remain taxable by the locality in which the real estate is located provided the locality is otherwise authorized to tax such businesses and rental of real estate. Accordingly, localities which assessed a license tax on the privilege of renting real estate and buildings on January 1, 1974, may continue to tax all such owners renting their real property to others provided such property is physically located within the taxing jurisdiction.
I would also note that whenever the BPOL tax is measured by gross receipts, the gross receipts included in the taxable measure shall be only those gross receipts attributed to the exercise of a privilege subject to licensure at a definite place of business within the locality. Code of Virginia § 58.1-3703.1 (A)(3)(a). A definite place of business is defined to include, among other things, real property leased to another. Code of Virginia § 58.1-3700.1; 1997 BPOL Guidelines, § 1. Accordingly, each real property location or structure which the Client owns and leases constitutes a definite place of business.
In summary, a locality may impose a BPOL tax on gross receipts from the rental of real property which is owned by your Client and located in the taxing jurisdiction. The classification of towers, pads and shelters as real or personal property depends upon the facts and is decided by each locality. The key determinant is the intention of the land owner in annexing property to the land. See Report of the Attorney General: 1981-1982 at pages 368 and 369.
2. When antenna tower, pad and shelter are real property and Client leases such property to sublease all or a portion of the space to others. The Code of Virginia contains no exclusion or prohibition from imposing a local license fee or a local license tax on persons, firms or corporations which engage in the business of subleasing real property. Rather, pursuant to Code of Virginia § 58.1-3703(C)(19), nonowners of real estate who lease realty for the purpose of re-leasing or subleasing all or a portion of the realty are taxable on the gross receipts received from the re-lease or sublease of the real estate by the locality in which the real estate is located, provided the locality is otherwise authorized to tax such businesses and the rental or lease of real estate. Under these circumstances, your Client is liable for a local license fee or a local license tax for the licensable privilege of subleasing or re-leasing real property, provided the locality is authorized to tax such businesses and the real property is located within the taxing jurisdiction.
I hope that the above information will be beneficial to you. Although I believe the BPOL responses set out in this letter conform with the law, they are written only for your guidance, and the final determination is with the locality.
If you have any questions concerning the BPOL issue, please contact please contact *** at ***. If you have any questions concerning the sales tax issue, please contact *** at ***.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner