Tax Type
BPOL Tax
Description
Telephone call center
Topic
Local Power to Tax
Date Issued
03-06-1998
March 6, 1998
Dear**********:
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. Copies of cited sources are enclosed for your review.
FACTS
The Taxpayer is a nationwide distributor of various office products and supplies and has its headquarters located in another state. The Taxpayer has approximately forty distribution centers, several sales offices, and four call centers (also known as customer service centers). One call center is located in ***** Virginia and several sales offices are located in other Virginia localities.
In general, the call center receives telephone calls from customers located on the east coast who place orders for office products. These customers are generally end-users of the product but may be purchasing for resale, government use, institutional use, commercial use, or industrial use. The call center personnel enter the orders into the system, process the billing information, and set up the items for delivery from the nearest distribution center to the customer location.
OPINION
I. Business Subject to BPOL License and Tax Requirements
A locality in Virginia may impose BPOL license fee and tax requirements on businesses for the "privilege' of engaging in a licensable business at a definite place of business within a locality's jurisdiction. 1. Code of Virginia § 58.1-3703.1(A)(1), (3)(a). The BPOL tax liability is measured by applying the applicable tax rate for such business activity against the business's total gross receipts. Code of Virginia § 58.13703.1(A)(3)(a).
"Business' is defined to include a course of dealing for the purpose of earning a livelihood or profit and implies a continuous and regular course of dealing rather than an irregular or isolated transaction. Code of Virginia § 58.1-3700.1. A "definite place of business' means an office or location at which business is conducted for thirty days or more. Code of Virginia § 58.1-3700.1. A company with multiple business activities may be subject to multiple licenses, tax rates, threshold limits, and situs requirements. In such situations, a company may elect to obtain one license for all businesses, but certain criteria must be met. Code of Virginia § 58.1-3703.1(A)(1).
"Gross receipts' are the total receipt of money or other consideration attributed to the licensed business activities minus applicable statutory deductions. Code of Virginia §§ 58.1-3700.1; 58.1-3732. When BPOL tax is measured by gross receipts, the taxable gross receipts include only those attributed to the exercise of a licensed business within Virginia. Guidelines for Business, Professional, and Occupational License Tax, (Va. Dep't of Tax'n) Jan. 1, 1997, at 13.
In the present case, the personnel at the call center are continuously and regularly performing the business activity of selling office products for profit and receiving gross receipts from these sales. Consequently, the company is conducting a sales business that is subject to the locality's BPOL tax. The next issue is determining the type of sales activity in which the business is engaging.
II. Types of Sales Activities Subject to BPOL Tax
The classification of business activity determines the applicable tax rate and the amount of the gross receipts to generate the BPOL tax liability.
"Retail sales' are the sales of goods for use by purchasers for any purpose other than resale. Guidelines at 8. To calculate the tax, gross receipts from retail sales are attributable to the definite place of business where sales solicitation activities occur. Code of Virginia § 58.1-3703.1(A)(3)(a)(2). If sales activities do not occur at a definite place, then the situs defaults to the location from where sales activities are controlled or directed. Id.
"Wholesale sales' are the sales of goods for resale by purchasers. This term also includes sales to institutions, commercial and industrial businesses for their processing purposes, and the government. Guidelines at 9. This sales classification is based on the facts and circumstances surrounding the sale activity. Gross receipts of a wholesaler or distribution house are measured by purchases at the definite place of business at which or from which deliveries of the purchases are made to customers. Code of Virginia § 58.1-3703.1(A)(3)(a)(2).
According to the facts, the Taxpayer's business is a combination of retail and wholesale sales. The personnel at the call center are selling goods to the end-user (retail sales) and also to purchasers for resale, institutions, commercial and industrial processors, and governments (wholesale sales). Each sales classification is subject to a separate license and tax rate on the applicable gross receipts. However, as stated previously, the company could choose to be taxed under one license and tax rate if certain criteria are met. The next issue is to determine which sales are subject to the BPOL tax.
III. Deduction From Gross Receipts
Under BPOL laws, certain deductions from gross receipts are allowed by statute. The pertinent deduction in this case allows a deduction for receipts that are attributed to business conducted in another state in which the taxpayer is liable for an income tax or an income-like tax. Code of Virginia § 58.1-3732(B)(2). In this case, the gross receipts attributed to telephone sales from the call center that are delivered in Virginia are subject to the local BPOL tax ordinance. From these gross receipts, the Locality is required to deduct the receipts from business conducted in other states that are taxable for income tax or income-like tax purposes. The Taxpayer should provide the Locality with tax returns that were filed in a foreign state to support this deduction.
I hope that the above information will be beneficial 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 me.
1Effective July 1, 1998, localities may only impose a BPOL license fee or tax, but not both. 1997 Va. Acts of Assembly, ch. 903 (codified at Code of Virginia § 58.13703(A) (effective July 1,1998).
Dear**********:
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. Copies of cited sources are enclosed for your review.
FACTS
The Taxpayer is a nationwide distributor of various office products and supplies and has its headquarters located in another state. The Taxpayer has approximately forty distribution centers, several sales offices, and four call centers (also known as customer service centers). One call center is located in ***** Virginia and several sales offices are located in other Virginia localities.
In general, the call center receives telephone calls from customers located on the east coast who place orders for office products. These customers are generally end-users of the product but may be purchasing for resale, government use, institutional use, commercial use, or industrial use. The call center personnel enter the orders into the system, process the billing information, and set up the items for delivery from the nearest distribution center to the customer location.
OPINION
I. Business Subject to BPOL License and Tax Requirements
A locality in Virginia may impose BPOL license fee and tax requirements on businesses for the "privilege' of engaging in a licensable business at a definite place of business within a locality's jurisdiction. 1. Code of Virginia § 58.1-3703.1(A)(1), (3)(a). The BPOL tax liability is measured by applying the applicable tax rate for such business activity against the business's total gross receipts. Code of Virginia § 58.13703.1(A)(3)(a).
"Business' is defined to include a course of dealing for the purpose of earning a livelihood or profit and implies a continuous and regular course of dealing rather than an irregular or isolated transaction. Code of Virginia § 58.1-3700.1. A "definite place of business' means an office or location at which business is conducted for thirty days or more. Code of Virginia § 58.1-3700.1. A company with multiple business activities may be subject to multiple licenses, tax rates, threshold limits, and situs requirements. In such situations, a company may elect to obtain one license for all businesses, but certain criteria must be met. Code of Virginia § 58.1-3703.1(A)(1).
"Gross receipts' are the total receipt of money or other consideration attributed to the licensed business activities minus applicable statutory deductions. Code of Virginia §§ 58.1-3700.1; 58.1-3732. When BPOL tax is measured by gross receipts, the taxable gross receipts include only those attributed to the exercise of a licensed business within Virginia. Guidelines for Business, Professional, and Occupational License Tax, (Va. Dep't of Tax'n) Jan. 1, 1997, at 13.
In the present case, the personnel at the call center are continuously and regularly performing the business activity of selling office products for profit and receiving gross receipts from these sales. Consequently, the company is conducting a sales business that is subject to the locality's BPOL tax. The next issue is determining the type of sales activity in which the business is engaging.
II. Types of Sales Activities Subject to BPOL Tax
The classification of business activity determines the applicable tax rate and the amount of the gross receipts to generate the BPOL tax liability.
"Retail sales' are the sales of goods for use by purchasers for any purpose other than resale. Guidelines at 8. To calculate the tax, gross receipts from retail sales are attributable to the definite place of business where sales solicitation activities occur. Code of Virginia § 58.1-3703.1(A)(3)(a)(2). If sales activities do not occur at a definite place, then the situs defaults to the location from where sales activities are controlled or directed. Id.
"Wholesale sales' are the sales of goods for resale by purchasers. This term also includes sales to institutions, commercial and industrial businesses for their processing purposes, and the government. Guidelines at 9. This sales classification is based on the facts and circumstances surrounding the sale activity. Gross receipts of a wholesaler or distribution house are measured by purchases at the definite place of business at which or from which deliveries of the purchases are made to customers. Code of Virginia § 58.1-3703.1(A)(3)(a)(2).
According to the facts, the Taxpayer's business is a combination of retail and wholesale sales. The personnel at the call center are selling goods to the end-user (retail sales) and also to purchasers for resale, institutions, commercial and industrial processors, and governments (wholesale sales). Each sales classification is subject to a separate license and tax rate on the applicable gross receipts. However, as stated previously, the company could choose to be taxed under one license and tax rate if certain criteria are met. The next issue is to determine which sales are subject to the BPOL tax.
III. Deduction From Gross Receipts
Under BPOL laws, certain deductions from gross receipts are allowed by statute. The pertinent deduction in this case allows a deduction for receipts that are attributed to business conducted in another state in which the taxpayer is liable for an income tax or an income-like tax. Code of Virginia § 58.1-3732(B)(2). In this case, the gross receipts attributed to telephone sales from the call center that are delivered in Virginia are subject to the local BPOL tax ordinance. From these gross receipts, the Locality is required to deduct the receipts from business conducted in other states that are taxable for income tax or income-like tax purposes. The Taxpayer should provide the Locality with tax returns that were filed in a foreign state to support this deduction.
I hope that the above information will be beneficial 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 me.
1Effective July 1, 1998, localities may only impose a BPOL license fee or tax, but not both. 1997 Va. Acts of Assembly, ch. 903 (codified at Code of Virginia § 58.13703(A) (effective July 1,1998).
Rulings of the Tax Commissioner