10-104 | Virginia Tax

Tax Type

BPOL Tax

Description

Definite place of business in other localities/Gross receipts

Topic

Local Taxes Discussion

Records/Returns/Payments

Taxable Transactions

Date Issued

07-18-2010

June 18, 2010

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

Dear *****:

This final state determination is issued upon the application for correction filed by ***** (the "Taxpayer") with the Department of Taxation. You appeal an assessment of Business, Professional and Occupational License (BPOL) taxes made by the ***** (the "County") for license tax years 2006 through 2008.

The BPOL tax is imposed and administered by local officials. Virginia Code § 58.1-3703.1 authorizes the Department to issue determinations on taxpayer appeals of BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct, i.e., 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 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.virginia.gov.

FACTS

The Taxpayer is a contractor that maintains its primary location in the County. It performed contracting services in other localities throughout Virginia during the years at issue. The Taxpayer only reported those gross receipts derived from contracting work performed in the County on its 2006 through 2008 County BPOL tax returns.

The County audited the Taxpayer and issued assessments for the 2006 through 2008 tax years. In its final determination addressing the Taxpayer's local appeal, the County concluded that the Taxpayer had not demonstrated that it had a definite place of business in other jurisdictions or that a license tax had been paid to localities in which it performed business in excess of $25,000. As a result, all gross receipts earned from work performed in those other localities were subject to the County's BPOL tax. The Taxpayer appeals the County's final determination, contending it had definite place of business in each of the other localities and the County could not assess a tax on those receipts.

ANALYSIS

Situs for Contractors with a Definite Place of Business

The gross receipts of contractors are sitused pursuant to Va. Code § 58.1-3703.1 A 3 a 1. This section provides:

- The gross receipts of a contractor shall be 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 the definite place of business from which his services are directed or controlled, unless the contractor is subject to the provisions of § 58.1-3715. . . .

In City of Lynchburg v. English Construction, 277 Va. 574, 584, 675 S.E.2d 197, 202 (2009), the Virginia Supreme Court ruled that "a locality may tax a contractor's gross receipts from services performed in that locality if the contractor has a definite place of business there, and no other locality has authority to tax those receipts." Accordingly, a locality may not assess a BPOL tax on a contractor's gross receipts from business done in a jurisdiction outside the locality, when the contractor has a definite place of business in such jurisdiction regardless of whether that jurisdiction imposes a BPOL tax. Thus, when a contractor has a definite place of business outside the locality at which its principal office is located, it may take a deduction from total gross receipts for those gross receipts generated from business conducted in the locality in which the definite place of business is located.

Definite Place of Business

- Virginia Code § 58.1-3700.1 3 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 definite place of business for a person engaged in business may include a location leased or otherwise obtained from another person on a temporary or seasonal basis and real property leased to another.

The Department set forth some characteristics that may help determine whether a contractor has a definite place of business at a work location in Public Document (P.D.) 02-153 (12/11/02). Generally, a contractor must establish some physical presence, be it an office, a trailer with a telephone, a desk with a telephone, etc., on a continuous basis in order to have a definite place of business at a particular worksite.

The Taxpayer has provided records showing the location of projects, tax information, and general contractors as evidence that it established a definite place of business at each jobsite. Such information, however, is not sufficient to show that the Taxpayer had a continuous physical presence in a locality for 30 consecutive days or more.

Situs for Contractors Without a Definite Place of Business

Virginia Code § 58.1-3715 states that a while a contractor generally is obligated to procure a license in the jurisdiction where its principal offices are located, a contractor must obtain a license in a secondary jurisdiction when its business in that jurisdiction is in excess of $25,000. In such instances, the statute provides:

- when the amount of business done by any contractor generally in any other county, city or town exceeds the sum of $25,000 in any year, such other county, city or town may require of such contractor a local license, and the amount of business done in such other county, city or town in which a license tax is paid may be deducted by the contractor from the gross revenue reported to the county, city or town in which the principal office or any branch office of the contractor is located.

The intention of Va. Code § 58.1-3715 as cited above is clear. The deduction for gross receipts earned in another jurisdiction in excess of $25,000 may only be taken in those cases where a license tax has been paid. If a locality does not impose the BPOL tax, the deduction cannot be taken by the contractor.

In this case, even if the Taxpayer is unable to provide sufficient evidence of a definite place of business in a locality in which it provided contract work, it may have been able to subtract those gross receipts from the gross receipts reported to the County if it had paid the BPOL tax in the locality in which the business was conducted.

DETERMINATION

The Taxpayer has failed to provide sufficient documentation that it had definite places of business at its worksites outside the County. In accordance with this determination, the Taxpayer must provide the County evidence to show it had a definite place of business in each the jurisdictions in which it conducted business for the 2006 through 2008 tax years. In lieu of such evidence, the Taxpayer may be entitled to a deduction for gross receipts generated in localities in which it had more than $25,000 in gross receipts and paid a BPOL tax to such localities. The Taxpayer should provide such evidence to the County within 30 days of the date of this determination.

I am remanding this case to the County with instructions to hold collection action on the BPOL tax assessments for the 2006 through 2008 tax years pending the receipt of evidence to be provided by the Taxpayer. If the required documentation is not provided within the time allowed, the assessments will be upheld as issued and the County may proceed with collection action.

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

- - - - Sincerely,

- - - - Linda Foster
        Deputy Tax Commissioner

AR/1-4069131725.B

Rulings of the Tax Commissioner