September 10, 2015
Re: Request for Advisory Opinion
Business, Professional and Occupational License Tax
Dear *****:
This is in response to your correspondence in which you request an advisory opinion concerning the proper tax treatment of a business (the "Taxpayer") for purposes of the Business, Professional and Occupational License (BPOL) tax in the ***** (the "Town").
The local license fee and tax are imposed and administered by local officials. Virginia Code § 58.1-3701 authorizes the Department to promulgate guidelines and 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, regulation 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, a provider of information technology services, has a definite place of business in the Town. The majority of its services are performed at customer facilities. Consequently, the vast majority of the Taxpayer's employees work at the customer facilities and not at the definite place of business in the Town. The Taxpayer has been situsing almost its entire gross receipts outside the Town. The Town requests guidance as to how the Taxpayer's gross receipts should be sitused.
OPINION
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 the definite place of business where the service is performed or from where the service is directed or controlled, by payroll apportionment between definite places of business.
In this case, the Taxpayer has a definite place of business in the Town, but it also has employees that work at customer locations. It appears the Taxpayer may consider these customer facilities to be definite places 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 thirty consecutive days or more." A definite place of business can include a location leased or otherwise obtained from another entity on a temporary or seasonal basis. Some characteristics that may help determine whether the location is a definite place of business include, but are not limited to, the following on-site 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.
Pursuant to Title 23 of the Virginia Administrative Code (VAC) 10-500-200, when a service provider performs services at a location away from its established or principal office and does not maintain a continuous presence for more that 30 consecutive days at the other location, its definite place of business remains at the established or principal office. See Example 7 of the regulation.
In 1978-79 Op. Va. Att'y Gen 279, the Attorney General determined that a continuous and regular course of dealing 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 addition, the Department has previously ruled on a similar issue. 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).
Thus, if the Taxpayer's employees are working at customer facilities on a regular and continuous basis, the Taxpayer may have established a definite place of business at those facilities. The Taxpayer would be required to get a business license for each customer location at which it has established a definite place of business and pay the license tax or fee to the appropriate Virginia locality, if such locality imposes the BPOL tax.
If, however, the Taxpayer's employees are not found to be working at customer locations on a regular and continuous basis, the gross receipts from these services would be sitused to the definite place of business from which the services are directed or controlled. Because the Taxpayer is headquartered in the Town, it is likely that such services would be considered to be directed or controlled at the definite place of business in the Town.
If you have any questions regarding this response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-6090177876.o