Tax Type
BPOL Tax
Local Taxes
Description
Determination of business; Jurisdiction to impose tax
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
12-05-2000
December 5, 2000
Re: Request for Advisory Opinion
Business, Professional, and Occupational License (BPOL) Tax
Dear ***************
This advisory opinion is issued in response to your request for guidance concerning the local license taxation of certain employees of the * * * (the "Town"). I apologize for the delay in responding to your request.
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. The department, however, is not required to interpret any local ordinance.
The following opinion is based on 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 Town rents its excavating equipment to certain of its employees (the "Taxpayers"). The Taxpayers perform excavation, plumbing, and water line repair jobs for third parties for personal profit. You have been informed that the Taxpayers have been engaged in these activities for at least eight years and have performed over 65 jobs. You have also been informed that the Town receives $ 5,000 to $ 10,000 annually in rental income from the Taxpayers. You ask whether or not the Taxpayers are subject to license taxation by the Town.
OPINION
In order to determine whether or not the Taxpayers are subject to license taxation concerning these activities, you must determine whether or not they are engaged in a business that is subject to license taxation in the Town.
Engaged in Business
The 2000 BPOL Guidelines (January 1, 2000) defines "business" to mean:
- a course of dealing which requires the time, attention and labor of the person so engaged for the purpose of earning a livelihood or profit. It implies a continuous and regular course of dealing, rather than an irregular or isolated transaction. A person may be engaged in more than one business. If a person 1) advertises or otherwise holds himself out to the public as being engaged in a particular business; or 2) files tax returns, schedules and documents that are required only of persons engaged in a trade or business, he is presumed to be engaged in business. However, a person may present evidence to overcome this presumption.
The facts presented are not sufficient for me to determine whether or not the Taxpayers are engaged in business. Although the activities described in your letter are of the type commonly engaged in by businesses, it is possible that the Taxpayers may engage in these activities for purposes other than to earn a livelihood or profit. Also, these may be irregular or isolated transactions. Additionally, these activities may not be licensable for reasons set forth in your local ordinance.
Jurisdiction to Impose License Tax
In the event that you determine that the Taxpayers are engaged in business, you will need to determine whether or not they are subject to licensure in the Town. Based on the limited information available, it appears that the Taxpayers are acting as contractors. See Public Document 00-145 (August 7, 2000).
In general, the gross receipts of a contractor are attributed to the definite place of business at which his services are performed, or if his services are not performed at any definite place of business, then to the definite place of business from which his services are directed or controlled. Gross receipts attributable to localities other than the Town would not be subject to tax in the Town.
This general rule does not apply to contractors who earn gross receipts exceeding $ 25,000 in a year in a locality. These contractors may be subject to a license fee or tax on those gross receipts in the locality regardless of the duration of the business activity. See Code of Virginia § 58.1-3715. Gross receipts subject to tax under this rule are not subject to tax in any other Virginia locality.
I am enclosing a copy of Public Document 00-117 (June 27, 2000), which explains the license taxation of contractors in greater detail.
I hope that the above information will be of assistance to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please do not hesitate to contact * * * Tax Policy Analyst, in my office of Tax Policy at * * *
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner