Document Number
01-215
Tax Type
BPOL Tax
Description
Consultant who performs business in several localities
Topic
Local Power to Tax
Taxability of Persons and Transactions
Date Issued
12-12-2001
December 12, 2001

Re: Appeal of Assessment: Final Local Determination
Taxpayer: *****
Locality Assessing Tax: *****
Business, Professional and Occupational License (BPOL) Tax

Dear *****

This final state determination is issued upon the application for correction filed by you on behalf of ***** (the "Taxpayer") with the Department of Taxation. You appeal a final local determination upholding an audit assessment of BPOL taxes made by the Commissioner of the Revenue of the ***** (the "City").

The local license tax and fee are imposed and administered by local officials. Code of Virginia § 58.1-3703.1(A)(5) authorizes the department to issue determinations on taxpayer appeals of certain BPOL tax assessments. 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.

The following determination is based on the facts presented to the department as summarized below. This determination addresses the question of whether or not the Taxpayer was subject to the BPOL tax imposed by the City for license year 2001. Copies of cited sources are enclosed.
FACTS

The Taxpayer is a computer consultant who performs its business in several localities. It has obtained business licenses in three of the five jurisdictions in which it does business. The fourth jurisdiction does impose a business license tax or fee, but only on real property contractors, and the fifth jurisdiction does not impose a business license tax or fee. The Taxpayer has received affidavits from two of its employers attesting to its presence in the two of the three jurisdictions in which it does business. These affidavits explain that the Taxpayer's presence is required two or three days a week in each location, thus establishing a regular and continuous course of business. The third jurisdiction is the City, which is the Taxpayer's residence, but in which the Taxpayer states that it does no business. However, the Taxpayer does maintain a business telephone number in the City's telephone directory.

The City's final determination included the Taxpayer's entire gross receipts as the basis for its BPOL liability within the City. The City relies on Code of Virginia § 58.1-3703.1(3)(a)(4), which provides:
    • The gross receipts from the performance of services shall be attributed to the definite place of business at which the services are performed or, if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled.

In its discussion, the City also referred to the fact that the Taxpayer's business telephone was the same as the Taxpayer's home telephone. The City cites the following example found in § 3.6 of the 2000 BPOL Guidelines:
    • An individual works as a marketing consultant. This individual travels constantly throughout various cities and counties in the Commonwealth. She has no office, but keeps a cellular phone and her business records in her car. Her home is located in C County. Consulting income will be sourced to C County. Although she runs her business out of her car, a person's residence is deemed to be a definite place of business if there is no definite place of business maintained elsewhere.
DETERMINATION

Definite Place of Business

The Taxpayer does indeed run a consulting service, but as the affidavits from two of its clients explain, the Taxpayer's work necessitates its presence in two of the four jurisdictions to which the Taxpayer attributes its income on a regular weekly basis. Code of Virginia § 58.1-3700.1 defines "business" for BPOL purposes as:
    • 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.

Furthermore, Code of Virginia § 58.1-3700.1 generally defines a "definite place of business" as:

an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more... A person's residence shall be deemed to be a definite place of business if there is no definite place of business maintained elsewhere... [Emphasis added.]
    • In an earlier ruling, the department found that:
    • "Continuous" for purposes of this definition is analyzed in terms of whether the business has established a location for the exercise of the licensable privilege. The time spent actually conducting business at this location is not important so long as the business is availing itself to the public and conducting its activities at that particular location. Regularly conducting business refers to a periodic pattern of instances in which a business is "open for business." A regularly conducted business may operate daily, weekly, monthly or for some other set time period. Public Document (P.D.) 97-75 (2/18/97). Also cited in P.D. 01-171 (10/29/01).

Code of Virginia § 58.1-3703.1(A)(3)(a)(4) states that the following rules of order be observed in establishing situs for purposes of business license taxation:
    • The gross receipts from the performance of services shall be attributed to the definite place of business at which the services are performed or, if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled. [Emphasis added.]

It can be concluded from the affidavits of the Taxpayer's employers and other information provided that the Taxpayer is engaged in a continuous and regular course of dealing in two jurisdictions other than the City. Moreover, the Taxpayer has paid the requisite business license fees in those jurisdictions. Therefore, the City must deduct those receipts taxed by the other localities from the base used in computing its local license tax. See Code of Virginia § 58.1-3708(B).

Two of the jurisdictions in which the Taxpayer does business do not impose a business license tax or fee (the one jurisdiction only imposes a tax on real property contractors). The statute does not permit a jurisdiction to impose a license tax on receipts earned in another jurisdiction merely because the other jurisdiction does not impose a license tax. See Code of Virginia § 58.1-3703.1(A)(3)(b). Section 4.1 of the 2000 BPOL Guidelines provides further clarification of the rules of apportionment:
    • If an entity's definite place of business is in a locality which does not tax gross receipts, a different locality may not tax these gross receipts simply because the first locality does not have a license tax.

In this case, the Taxpayer has not supplied proof of a "definite place of business" in two of the four jurisdictions to which it attributes its gross receipts. Absent such proof, it can be assumed that the definite place of business is that jurisdiction from which the Taxpayer's "services are directed or controlled." In this instance, it appears that the City is the place from which the Taxpayer's activities are directed or controlled, as the Taxpayer maintains its residence, business address and telephone in the City. Again, the 2000 BPOL Guidelines § 4.2 provide:
    • Some activity must occur or be controlled from a definite place of business for gross receipts to be taxed by the locality of the definite place of business.

Conclusion

Based on the foregoing, it is my determination that the City must exclude the gross receipts earned in the two jurisdictions for which the Taxpayer has supplied proof of a "definite place of business." However, absent such proof regarding the Taxpayer's other places of business, the City may include these receipts in its assessment, concluding that the Taxpayer is either "directing or controlling" its activity from its residence located in the City.

If you have any questions regarding this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.

Sincerely,

Danny M. Payne
Tax Commissioner

AR/35604

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46