Tax Type
BPOL Tax
Description
Taxpayer was a provider of financial services with a definite place of business within the County.
Topic
Classification
Records/Returns/Payments
Tangible Personal Property
Taxable Income
Date Issued
09-19-2013
September 19, 2013
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 a final local determination upholding BPOL tax assessments for the 2009 through 2012 tax years issued by the ***** (the "County").
The local license tax and fee are imposed and administered by local officials. Virginia Code § 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, 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, regulations, and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department's web site.
FACTS
The Taxpayer, headquartered in ***** (State A), is a business finance company that has a definite place of business in the County. The Taxpayer offers a variety of financing options to businesses, such as purchasing future receipts and receivables, making loans, and providing access to credit.
The County assessed the Taxpayer for BPOL tax for the 2009 through 2012 tax years. The Taxpayer appealed the assessments to the County. In its final determination, the County stated that the Taxpayer agreed with it that the BPOL assessments should be based on the Virginia income tax return and upheld the assessments.
The Taxpayer filed an appeal to the Tax Commissioner, contending that the County's assessment method applied only to service companies and should not apply to the Taxpayer because it bought and sold tangible personal property and had no gross receipts subject to BPOL tax in Virginia.
ANALYSIS
Classification
The BPOL tax is imposed on businesses and professionals for the privilege of doing business in a locality. The tax is imposed at different rates according to the classification of an enterprise. See Va. Code § 58.1-3706. The classifications are explained under Title 23 of the Virginia Administrative Code (VAC) 10-500-10 et seq. Classification of a specific business must be determined based on consideration of all the facts and circumstances. Some of the factors to be considered include:
- 1. What is the nature of the enterprise's business?
2. How does the enterprise generate gross receipts?
3. Where the enterprise conducts its business?
4. Who are the enterprise's customers?
5. How does the enterprise hold itself out to the public?
6. What is the enterprise's North American Industry Classification System (NAICS) code?
Financial services companies are one classification of enterprise under Va. Code § 58.1-3706. Virginia Code § 58.1-3700.1 defines "financial services" as "the buying, selling, handling, managing, investing, and providing of advice regarding money, credit, securities, or other investments." In addition, Title 23 VAC 10-500-390 provides a list of specific activities that are considered financial services, including, but not limited to, financing accounts receivable, installment financing, inventory financing, providing loans or mortgages, and working capital financing.
For BPOL tax purposes, "services" are defined as "things purchased by a customer that do not have physical characteristics, or that are not goods, wares, or merchandise" and include "financial services" as defined in Va. Code § 58.1-3700.1. See Title 23 VAC 10-500-10.
The Taxpayer contends the County erred by assessing the Taxpayer using a methodology applicable to service providers. Responding to the Department's request for additional information, the Taxpayer explained that it "purchases" future credit and debit card receipts from businesses. In fact, the Taxpayer makes cash advances to businesses in exchange for a percentage of their credit and debit card receipts (in a monetary sense) paid over time. Information obtained by the Department indicates that the Taxpayer offers other business financing options as well, including the purchase of future receivables and different types of loans. As such, the Taxpayer appears to be a provider of financial services for purposes of the BPOL tax.
Situs - Gross Receipts
The general rule for establishing situs for the BPOL tax is that whenever the tax is measured by gross receipts, "the gross receipts included in the taxable measure shall be only those gross receipts attributed to the exercise of a privilege subject to licensure at a definite place of business within [the] jurisdiction." See Va. Code § 58.1-3703.1 A 3 a. For BPOL tax purposes, "gross receipts" are defined as "the whole, entire, total receipts, without deduction." See Virginia Code § 58.1-3700.1.
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 definite place of business 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.
The Taxpayer asserts it did not purchase any credit or debit card receipts from businesses in Virginia. However, it has provided no documentation to support its claim. In addition, it has provided no information concerning its other lines of business.
Virginia Code § 58.1-3109 6 grants local assessing officers the authority to require records and other information necessary to verify the accuracy of a taxpayer's BPOL tax returns. In addition, pursuant to Va. Code § 58.1-3703.1 A 5 b, a local assessing officer may require the submission of additional information or documentation deemed necessary in order to make a proper and equitable determination of an application for correction. As indicated above, an assessment issued by a locality is deemed prima facie correct. See Va. Code § 58.1-3703.1 A 5 b. As such, it is incumbent upon the Taxpayer to prove to the satisfaction of the local assessing officer the appropriate amount of gross receipts on which BPOL tax may be assessed.
DETERMINATION
The Taxpayer has the burden of proving that the County's BPOL tax assessments are incorrect. The evidence provided indicates the Taxpayer was a provider of financial services with a definite place of business within the County.
Based on a lack of documentation provided by the Taxpayer as to its activities in Virginia, however, this case is being remanded back to the County with the instruction to reconsider the Taxpayer's appeal with regard to the 2009 through 2012 tax years. The Taxpayer should provide the County with sufficient documentation to describe its operations, both in Virginia and elsewhere, and determine its gross receipts subject to BPOL tax. Such documentation should be submitted within 30 days of the date of this letter.
Once the County determines the Taxpayer's proper classification, it should make any appropriate adjustments to the Taxpayer's liability for the tax years at issue. If the Taxpayer fails to provide sufficient documentation, the County's assessments will be considered correct.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5405754129.M
Rulings of the Tax Commissioner