Tax Type
BPOL Tax
Description
Public service corporations
Topic
Local Power to Tax
Date Issued
05-19-1995
You ask whether public service corporations in your locality that conduct several different types of business activities, including the sale of merchandise and repair services, in addition to providing public utilities, should be assessed the public utility rate for local license tax purposes1 on all of the business activities, or whether each business activity may be assessed at the rate applicable for such activities based on the locality's ordinance.2
Section 58.1-3703(B)(1) of the Code of Virginia provides that no local license tax shall be assessed "[o]n a public service corporation except as provided in § 58.1-3731 or as permitted by other provisions of law.'3 I am aware of no other provision that authorizes a local tax on public service corporations. When a statute is expressed in plain and unambiguous terms, whether general or limited, the legislature is assumed to mean what it plainly has expressed, and no room is left for construction.4§ 58.1-3731, therefore, permits localities to impose a single tax at a single rate not to exceed one-half of one percent on all of the gross receipts of public service corporations.5
As to the proper measurement of the gross receipts of a public service corporation which, in addition to selling utilities, engages in sales of merchandise and services, the Supreme Court of Virginia has said that "[t]he words `gross receipts' mean `whole, entire, total receipts" of a business.6 This definition is consistent with the definition of "gross receipts' contained in § 58.1-2600, a part of Chapter 26 of Title 58.1, which is the basis for state taxation of public service corporations. The General Assembly defines "gross receipts' in that section as "the total of all revenue derived in the Commonwealth, including ... income from the provision or performance of a service or the performance of incidental operations not necessarily associated with the particular service performed, without deductions....'
The same result is appropriate with respect to the local tax imposed pursuant to § 58.1-3731. The Supreme Court of Virginia has held that a city may not divide a business into two parts and tax each part of that business separately.7 In addition, the Court has ruled that a company will be classified as engaging in a single business activity if a substantial portion of the business it con When a substantial portion of the business activity of a public service corporation is providing the applicable utility service, other separate business activities are merely ancillary to that purpose.
Accordingly, I am of the opinion that public service corporations that conduct several separate business activities should be assessed the public utility rate of one-half of one percent of the total gross receipts of the corporation, consistent with the definition of "gross receipts' contained in § 58.1-2600.
1 The public utility rate is one-half of one percent of the gross annual receipts from sales to the ultimate consumer in the city. See Va. Code Ann. § 58.1-3731.
2 For example, sales of merchandise are to be taxed at the retail merchant rate of "twenty cents per $100 of gross receipts' and repair services at the repair service rate of "thirty-six cents per $100 of gross receipts.'§ 58.1-3706(A)(2), (4).
3 A prior opinion of the Attorney General clarifies that the exemption provided in § 58.1-3703(B)(1) is limited to motor vehicle carriers that have obtained a certificate of public convenience and necessity from the State Corporation Commission. 1987-1988 Op. Va. Att'y Gen. 578, 585.
4 Town of South Hill v. Allen, 177 Va. 154, 165, 12 S.E.2d 770, 774 (1941).
5 Section 58.1-3731 authorizes localities "to impose a license tax ... on (1) telephone and telegraph companies, (ii) water companies and (iii) heat, light and power companies at a rate not to exceed one-half of one percent of the gross receipts of such company accruing from sales to the ultimate consumer in such county, city or town.'
6 Savage v. Commonwealth, 186 Va. 1012, 1018, 45 S.E.2d 313, 317 (1947).
7 Hill v. City of Richmond, 181 Va. 744, 26 S.E.2d 48 (1943) (state classification of business as wholesale merchandise brokers is binding on city, which may not tax part of brokerage business that includes buying and selling on broker's own account and part devoted to selling merchandise on commission).
Attorney General's Opinion