Tax Type
BPOL Tax
Local Taxes
Description
Printer; Sales to out-of-state customers
Topic
Local Power to Tax
Date Issued
08-23-1999
August 23, 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 inclusion of receipts from out-of-state sales in reporting your gross receipts to the*****for purposes of local license taxation. 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, 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 ***** (the ``Business') is a general commercial printer with one location which is in the ***** (the ``locality'). You describe the Business as one which prints, sells and delivers. Some of your customers are out-of-state businesses which purchase your product for internal use.
You ask if the gross receipts from these out-of-state sales have to be included in the gross receipts you must report to your locality for BPOL tax purposes.
OPINION
The department recently issued Public Document (P.D.) 99-200, which specifies the criteria that must be met in order for a printer / copier to qualify for an exemption from local license taxes and fees under Code of Virginia § 58.1-3703(C)(4). This section prohibits a Virginia locality from imposing license fees or taxes on the privilege of manufacturing (in P.D. 99-200 the department implicitly concluded that printers can be manufacturers) and selling goods, wares and merchandise at wholesale at the place of manufacture. If the Business is a printer as described in P.D. 99-200 and if the Business meets all the conditions of § 58.1-3703(C)(4), the Business is exempt from local license taxes and fees and the question of taxable gross receipts becomes moot. Please check with your local assessing officer to determine if the Business benefits from the restrictions on levying taxes placed upon localities under § 58.1-3703(C)(4).
Must the Business Include Out-of-State Sales in Taxable Gross Receipts?
In order to answer your question on whether or not out-of-state sales must be included in the taxable gross receipts of the Business, the remainder of this opinion assumes that either the Business is not a printer or, while the Business is engaged in printing, it does not meet all of the conditions set forth in § 58.1-3703(C)(4).
In reporting taxable gross receipts, the Business must include gross receipts from all its sales, including out-of-state sales, so long as the inclusion of such receipts does not run afoul of the Interstate Commerce Clause of the United States Constitution. A tax on interstate commerce complies with the requirements of the federal constitution if: ``(1) the tax is applied to an activity that has a substantial nexus with the taxing jurisdiction; (2) the tax is fairly apportioned; (3) the tax does not discriminate against interstate commerce; and (4) the tax is fairly related to the services provided by the taxing jurisdiction.' Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977). In Short Brothers, Inc. v. Arlington County, 244 Va. 520 (1992), the Virginia Supreme Court ruled that the federal constitution was not offended when Arlington County imposed a local license tax on all the gross receipts of a business having one definite place of business, located in Arlington County. This is because a business with just one place of business in one state is not subject to a risk of double or multiple taxation amongst the several states, in violation of the Due Process and Commerce Clauses of the federal constitution.
Based on the Short Brothers decision and because the Business has only one definite place of business, it is my opinion that you must include out-of-state sales when reporting gross receipts to your locality. A business, however, is entitled to deduct from its gross receipts any gross receipts attributable to business conducted in another state or foreign country in which the business is liable for an income or other tax based on income. Code of Virginia § 58.1-3732(B)(2). A taxpayer is liable for an income or other tax based on income if the taxpayer files a return for such tax in another state or country. 1997 BPOL Guidelines § 3.3.4. Thus, in order to take the deduction, a 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 on income.
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/20811
Rulings of the Tax Commissioner