Tax Type
BPOL Tax
Description
Logistic support services are being performed at a definite place of business in the City.
Topic
Government Contractor
Local Power to Tax
Date Issued
11-28-2011
November 28, 2011
Re: Request for Advisory Opinion
Business, Professional and Occupational License Tax
Dear *****:
This is in response to your letter in which you request an advisory opinion regarding the application of the Business, Professional and Occupational License (BPOL) tax to a corporation (the "Taxpayer") that has employees performing services at a military supply center. I apologize for the delay in the Department's response.
The local license fee and tax are imposed and administered by local officials. Virginia Code § 58.1-3701 authorizes the Department to issue advisory opinions on local license tax issues. The following opinion has been made subject to the facts presented to the Department summarized below. Any change in these facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site.
FACTS
The Taxpayer is a contractor that performs logistics, operations, construction, training, security and information technology services for United States military installations worldwide. The Taxpayer has an office in the ***** (City A). In 2002, the Taxpayer contracted with the military to perform logistic support services at a supply center located in the ***** (City B).
The Taxpayer's assignment may only be performed at, the military's designated buildings, floors, office and other locations temporarily assigned to the Taxpayer. The Taxpayer maintains a designated, secured web mail server located in City A that is designated as the City B office. This server is used for e-mail and other information transfer between the Taxpayer's employees at the service center and other Taxpayer offices. The Taxpayer publishes a telephone number in City B. City B work locations are advertised on its website.
The employment is task order driven. Specific task orders are typically completed in 30 days or more. Extensions of time to perform tasks commonly last more than a year. The contract requires that the Taxpayer maintain an on-site supervisor to be physically present during all operations. The on-site supervisor plans, controls and manages contracted task orders from this work site location.
The City A office provides contact with the on-site supervisor through the use of site-management team members. The site-management team is responsible for the employee relations and the monitoring of project time management reports. Sitemanagement team members visit the on-site project supervisors at the various work locations. The site management team also visits the military to inquire about additional projects to maximize revenue.
Approximately 200 to 500 of the Taxpayer's employees are assigned to work at the supply center. The Taxpayer's employees' workspace is segregated from the government workers' space. The segregated workspace contains desks with the employees' names on them. The employees also have a separate lunch room separated from the work site. The project supervisor works from a private office work space, separated from the common work site. This office contains a desk, government issued landlines and Internet accessible computers.
City B contends that the Taxpayer has a definite place of business in City B, and all the services provided by the Taxpayer's employees at the base are directed and controlled from the base in City B. City B states that City A's position is that the Taxpayer is a staffing firm that provides temporary staff to customers, and all aspects of the contract between the Taxpayer and the military are managed from the City A office. City B requests an advisory opinion as to whether the Taxpayer is subject to the BPOL tax in City B.
OPINION
Definite Place of Business
Virginia Code § 58.1-3700.1 defines a "definite place of business" as an office or a location at which occurs a regular and continuous course of dealing for 30 consecutive days or more. Some characteristics that may help determine whether the location is a definite place of business include, but are not limited to, the following onsite activities: (1) a continuous presence; (2) having an office with a phone; (3) the reception of mail; (4) having employees; (5) record keeping; (6) and advertising or otherwise holding oneself out as engaging in business at the particular location. See Public Document (P.D.) 97-201 (4/25/1997).
Although these activities are indicative of a definite place of business, all facts and circumstances concerning the nature of a taxpayer's operations must be considered. In this case, the Taxpayer's presence at the supply center is mandated by the contract. Employees and on-site supervisors work on a continuous basis at the supply center. Project tasks last for periods of 30 days or more and task extensions extend beyond 365 days. Site managers solicit additional work while visiting the supply center. The Taxpayer maintains a telephone number for the City B location, advertises work locations in City B on its website and receives electronic mail at the supply center. The Taxpayer work locations are designated and segregated from those of government employees.
The Department has addressed whether government contractors are subject to the BPOL tax in localities when their office is located elsewhere. In P.D. 10-277 (12/21/2010) and P.D. 10-278 (12/22/2010), the Department determined that a contractor that maintained a trailer on a military base with a phone line, computers and furniture in a trailer that was utilized by the contractors' employees had a definite place of business at the military base.
A, definite place of business, however, has been attributed to taxpayer performing continuous services at a clients' locality even without a separate physical space. In 1978-79 Op. Va. Att'y Gen 279, the Attorney General opined that a continuous and regular course of dealings at a location would seem to constitute a definite place of business in such location when employees are "more or less" permanently assigned to such a location. In P.D. 01-215 (12/12/2001), the Department found that a computer consultant whose work was performed at client locations on a regular and continuous basis in several localities could establish a definite place of business at such locations without all of the characteristics enumerated in P.D. 97-201. See also P. D. 11-161 (9/20/2011).
In this case, the Taxpayer and fits employees are engaged in work on a continuous basis at the supply center. Although workspace and office equipment is supplied by the military, it is clearly intended for the exclusive use by the Taxpayer during the life of the contract. Based on the facts presented, it would appear that the Taxpayer has a definite place of business at the supply center.
Situs
In determining the situs of gross receipts, Va. Code §§ 58.1-3703.1 A 3 a 4 and 58.1-3703.1 A. 3 b state that receipts from services are to be taxed based on (in order): (i) the definite place of business at which the service is performed, or if not performed at any definite place of business, (ii) the place from which the service is directed or controlled; or as a last resort (iii) when it is impossible or impractical to determine where the service is performed or from where the service is directed or controlled, by payroll apportionment between definite places of business.
Based on the facts presented, the Taxpayer's logistic support services are being performed at a definite place of business in City B. As such, the gross receipts generated from the logistic support services accruing in City B are subject to tax by City B.
If you have questions regarding this advisory opinion, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
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- Tax Commissioner
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AR/1-4721331802.B
Rulings of the Tax Commissioner