Tax Type
BPOL Tax
Local Taxes
Description
Additional License Fee
Topic
Local Power to Tax
Date Issued
08-09-2000
August 9, 2000
Re: Taxpayer: *****
Locality Assessing Tax:
Final State Determination
Appeal of Business, Professional and Occupational License (BPOL) Tax
Dear ****
This final state determination is issued upon the application for correction filed by you with the Department of Taxation. You appeal a final local determination upholding an audit assessment of BPOL taxes issued to ***** ("the Taxpayer") by the Commissioner of the Revenue of the City of ****** ("the City").
Code of Virginia § 58.1-3703.1(A)(5)(a) provides that on appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the local assessment will stand unless the taxpayer proves that it is incorrect.
FACTS
The Taxpayer commenced business in the City on November 1, 1996. The Taxpayer obtained a 1997 business license by paying the $50.00 license fee imposed by the City on businesses reporting gross receipts of less than $100,000.00.
The City subsequently audited the Taxpayer and assessed additional license taxes for 1997 because the Taxpayer's actual 1997 gross receipts exceeded $100,000.00. The City used the Taxpayer's actual 1997 gross receipts to determine the Taxpayer's liability because the Taxpayer had not been engaged in business in the City for the full preceding calendar year.
The Taxpayer contends that it is unfair for the City to assess 1997 license taxes using that year's actual gross receipts while assessing each subsequent year's license tax liability based on the prior year's gross receipts. The Taxpayer sought correction of this assessment at the local level and filed this appeal after the City rejected her argument.
ANALYSIS
A business which is subject to license taxation based on its gross receipts determines its tax liability for the license year using its base year gross receipts. A License year means the calendar year for which a license is issued for the privilege of engaging in business." Code of Virginia § 58.1-3700.1. A Base year means the calendar year preceding the license year . . . unless the local ordinance provides for a different period for measuring the gross receipts of a business, such as for beginning businesses . . . ." Id.
Many local ordinances, like that of the City, provide that a business which has not engaged in business in the locality for a whole year must determine its license tax liability using its estimated receipts for the current license year. At the end of the license year, the business's tax liability is adjusted to reflect actual receipts. Once the business has engaged in business in the locality for a whole year, each succeeding year's tax is determined using the prior year's gross receipts and is not corrected to reflect actual current year gross receipts. City Code § 18-10.
This issue was previously addressed by the department in Public Document 99-210, copy enclosed. The lawfulness of this method of determining license taxes is supported by Virginia case law. See Commonwealth v Jones, 194 Va. 727, 728 (1953), copy enclosed, for a discussion of this issue.
CONCLUSION
As the Taxpayer has not shown sufficient proof that the assessment made by the City for license year 1997 is incorrect, the assessment stands, as is. If you have any other questions, you may contact *****, Tax Policy Analyst, in my Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/29373D
Re: Taxpayer: *****
Locality Assessing Tax:
Final State Determination
Appeal of Business, Professional and Occupational License (BPOL) Tax
Dear ****
This final state determination is issued upon the application for correction filed by you with the Department of Taxation. You appeal a final local determination upholding an audit assessment of BPOL taxes issued to ***** ("the Taxpayer") by the Commissioner of the Revenue of the City of ****** ("the City").
Code of Virginia § 58.1-3703.1(A)(5)(a) provides that on appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the local assessment will stand unless the taxpayer proves that it is incorrect.
FACTS
The Taxpayer commenced business in the City on November 1, 1996. The Taxpayer obtained a 1997 business license by paying the $50.00 license fee imposed by the City on businesses reporting gross receipts of less than $100,000.00.
The City subsequently audited the Taxpayer and assessed additional license taxes for 1997 because the Taxpayer's actual 1997 gross receipts exceeded $100,000.00. The City used the Taxpayer's actual 1997 gross receipts to determine the Taxpayer's liability because the Taxpayer had not been engaged in business in the City for the full preceding calendar year.
The Taxpayer contends that it is unfair for the City to assess 1997 license taxes using that year's actual gross receipts while assessing each subsequent year's license tax liability based on the prior year's gross receipts. The Taxpayer sought correction of this assessment at the local level and filed this appeal after the City rejected her argument.
ANALYSIS
A business which is subject to license taxation based on its gross receipts determines its tax liability for the license year using its base year gross receipts. A License year means the calendar year for which a license is issued for the privilege of engaging in business." Code of Virginia § 58.1-3700.1. A Base year means the calendar year preceding the license year . . . unless the local ordinance provides for a different period for measuring the gross receipts of a business, such as for beginning businesses . . . ." Id.
Many local ordinances, like that of the City, provide that a business which has not engaged in business in the locality for a whole year must determine its license tax liability using its estimated receipts for the current license year. At the end of the license year, the business's tax liability is adjusted to reflect actual receipts. Once the business has engaged in business in the locality for a whole year, each succeeding year's tax is determined using the prior year's gross receipts and is not corrected to reflect actual current year gross receipts. City Code § 18-10.
This issue was previously addressed by the department in Public Document 99-210, copy enclosed. The lawfulness of this method of determining license taxes is supported by Virginia case law. See Commonwealth v Jones, 194 Va. 727, 728 (1953), copy enclosed, for a discussion of this issue.
CONCLUSION
As the Taxpayer has not shown sufficient proof that the assessment made by the City for license year 1997 is incorrect, the assessment stands, as is. If you have any other questions, you may contact *****, Tax Policy Analyst, in my Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/29373D
Related Documents
Rulings of the Tax Commissioner