Tax Type
BPOL Tax
Description
Improvements to real estate may classify taxpayer as a contractor.
Topic
Basis of Tax
Property Subject to Tax
Date Issued
08-25-2004
August 25, 2004
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 ***** (the "Taxpayer") with the Department of Taxation. You appeal the BPOL tax assessments issued to your business by the ***** (the "City") for tax years 2000, 2001, 2002 and 2003. I apologize for the delay in this response.
The following determination is based on the facts presented to the Department as summarized below. The Code of Virginia sections and public documents cited are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us.
FACTS
The Taxpayer is in the business of buying, repairing and selling homes. The Taxpayer states that, upon beginning business, he was told by the City that he would not need a business license because he was engaged in the business of repairing his own homes. In June 2003, the City audited the Taxpayer and determined that the Taxpayer owed ***** in past due BPOL taxes related to the gross receipts earned on the sale of homes the Taxpayer owned, repaired and offered for sale.
The Taxpayer insists that he was following earlier advice given to him by the City, and suggests that "to be penalized for [the City's] mistake is ... unjust." The Taxpayer requests the Department to find that he only be assessed BPOL taxes on gross receipts earned after the City informed him of his obligation to maintain a business license based on the Taxpayer's business as a contractor.
DETERMINATION
In Public Document (P.D.) 97-423, (10/17/1997), the Tax Commissioner determined that "a business making improvements to its own real estate with the intention of offering the real estate for sale, may be properly classified and subject to the tax as a contractor." Based on the description of the Taxpayer's business and the determination in P.D. 97-423, the Taxpayer is subject to the BPOL tax as a contractor.
In regard to your contention that the Taxpayer received erroneous advice and should not be liable for prior years' taxes, Virginia Code § 58.1-3703.1(A)(5)(e) provides that any taxpayer may request a written ruling regarding the application of a specific local license tax from the local assessor. If the written ruling becomes invalid at a later date, the person "shall be deemed to have acted in good faith during the period in which such ruling was in effect." In this case, if the Taxpayer has a written ruling from the local assessing officer to support his contention that he was misinformed by the local official, then the past due BPOL taxes must be forgiven. Absent such evidence, the City's assessment is correct.
If you have any questions regarding this determination, you may contact ************ in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
-
-
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Kenneth W. Thorson
-
- Tax Commissioner
-
- Kenneth W. Thorson
-
-
-
-
-
-
AR/49620H
Rulings of the Tax Commissioner