Tax Type
BPOL Tax
Local Taxes
Description
Food stamp sales; Manufacturer's transfer station
Topic
Local Power to Tax
Date Issued
11-30-1999
November 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 the proper application of the BPOL gross receipts tax to a manufacturer's activity at a local transfer station. You also request an advisory opinion regarding the correct application of the BPOL license tax to retail merchants who accept food stamps as consideration when selling food items and other goods. I apologize for the delay in responding to your letter.
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, Sec. 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 Sec. 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 have asked for an advisory opinion on two separate and unrelated issues. The first issue concerns a manufacturer (the ``Business') which owns and operates a transfer station at which raw materials from its own quarry as well as those from others are held before being shipped the Business' manufacturing plant by an independent contractor. You state that the actual manufacturing plant is located in another jurisdiction. You also state that without the transfer station, alternative methods of transporting the raw materials to the point of manufacture would have to be arranged. In other words, you state that it is the Business's opinion that the transfer station is integral to the manufacturing enterprise. Additionally, you state that the independent contractor pays its own BPOL license tax as a business service. You ask if the Business is conducting a taxable activity separate from its tax exempt status as a manufacturer selling at wholesale under Code of Virginia Sec. 58.1-3703(C)(4).
The second issue addresses a concern expressed by a local food retailer (the ``Taxpayer') whose clientele includes a large number of customers who purchase their groceries using food stamps. You ask if purchases made with Virginia food stamps are exempt from the BPOL tax on gross receipts.
OPINION
Manufacturer's Transfer Station
If the Business's operation of the transfer station is not being performed for persons other than the Business, these activities are ancillary or auxiliary to the Business's manufacturing activities.
Generally speaking, there are no gross receipts attributable to or generated by internal storage activities. This principle is embodied in the 1997 BPOL Guidelines. In this case, individuals, offering their services only to their employer and not engaging in business or transactions involving customers, do not generate gross receipts. 1997 BPOL Guidelines, pages 5 and 40. Based on this principle and the facts presented, it is my opinion that there are no gross receipts generated or attributable to the Business's operation of a transfer station for its own purposes.
The Town is not prohibited by Code of Virginia 58.1-3703(C)(4) from imposing a license fee upon the Business that is distinctly separate from the primary business of manufacturing. Therefore, if you find that the Business' ``operation of the transfer station' also includes providing the service to other taxpayers or engaging in transactions involving customers, there may be different BPOL tax consequences.
Purchases Made with Food Stamps
The Food Stamp program is designed to funnel federal aid through the states and ultimately to the consumer for use in purchasing food and certain specified nonfood items according to regulations promulgated by the Secretary of Agriculture. United States Code Annotated, Title 7, Chapter 51. In all cases, the retailer is fully compensated, be it from the ultimate consumer or from the state agencies administering the program. For that reason, there is no exclusion provided for the gross receipts generated by customers using food stamps as a method of payment under Code of Virginia Sec. 58.1-3732 or elsewhere in the Code of Virginia. Whether the income is received from the federal government, the state or local agency or directly from the customer is irrelevant to the amount of actual gross receipts a merchant receives and which are subject to the BPOL tax.
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/23404
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 a manufacturer's activity at a local transfer station. You also request an advisory opinion regarding the correct application of the BPOL license tax to retail merchants who accept food stamps as consideration when selling food items and other goods. I apologize for the delay in responding to your letter.
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, Sec. 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 Sec. 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 have asked for an advisory opinion on two separate and unrelated issues. The first issue concerns a manufacturer (the ``Business') which owns and operates a transfer station at which raw materials from its own quarry as well as those from others are held before being shipped the Business' manufacturing plant by an independent contractor. You state that the actual manufacturing plant is located in another jurisdiction. You also state that without the transfer station, alternative methods of transporting the raw materials to the point of manufacture would have to be arranged. In other words, you state that it is the Business's opinion that the transfer station is integral to the manufacturing enterprise. Additionally, you state that the independent contractor pays its own BPOL license tax as a business service. You ask if the Business is conducting a taxable activity separate from its tax exempt status as a manufacturer selling at wholesale under Code of Virginia Sec. 58.1-3703(C)(4).
The second issue addresses a concern expressed by a local food retailer (the ``Taxpayer') whose clientele includes a large number of customers who purchase their groceries using food stamps. You ask if purchases made with Virginia food stamps are exempt from the BPOL tax on gross receipts.
OPINION
Manufacturer's Transfer Station
If the Business's operation of the transfer station is not being performed for persons other than the Business, these activities are ancillary or auxiliary to the Business's manufacturing activities.
Generally speaking, there are no gross receipts attributable to or generated by internal storage activities. This principle is embodied in the 1997 BPOL Guidelines. In this case, individuals, offering their services only to their employer and not engaging in business or transactions involving customers, do not generate gross receipts. 1997 BPOL Guidelines, pages 5 and 40. Based on this principle and the facts presented, it is my opinion that there are no gross receipts generated or attributable to the Business's operation of a transfer station for its own purposes.
The Town is not prohibited by Code of Virginia 58.1-3703(C)(4) from imposing a license fee upon the Business that is distinctly separate from the primary business of manufacturing. Therefore, if you find that the Business' ``operation of the transfer station' also includes providing the service to other taxpayers or engaging in transactions involving customers, there may be different BPOL tax consequences.
Purchases Made with Food Stamps
The Food Stamp program is designed to funnel federal aid through the states and ultimately to the consumer for use in purchasing food and certain specified nonfood items according to regulations promulgated by the Secretary of Agriculture. United States Code Annotated, Title 7, Chapter 51. In all cases, the retailer is fully compensated, be it from the ultimate consumer or from the state agencies administering the program. For that reason, there is no exclusion provided for the gross receipts generated by customers using food stamps as a method of payment under Code of Virginia Sec. 58.1-3732 or elsewhere in the Code of Virginia. Whether the income is received from the federal government, the state or local agency or directly from the customer is irrelevant to the amount of actual gross receipts a merchant receives and which are subject to the BPOL tax.
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/23404
Rulings of the Tax Commissioner