August 7, 2024
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 on behalf of your client, ***** (the “Parent”) and its related entities, regarding the application of the Business, Professional and Occupational License (BPOL) tax.
The BPOL local license fee and tax is imposed and administered by local officials. Virginia Code § 58.1-3703.1 authorizes the Department to issue advisory opinions on local business tax matters. The following opinion has been issued subject to the facts presented by the Taxpayer to the Department as summarized below. Any changes in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections, regulations, and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department’s website.
FACTS
The Taxpayer produces and provides liquified natural gas on a global basis. The Parent, a holding company headquartered in Virginia, is the ultimate owner of several limited liability companies, including ***** (LLC A), ***** (LLC B), and ***** (LLC C). The limited liability companies are treated as disregarded entities for federal income tax purposes. The Parent performs certain corporate executive functions, including legal, accounting, and tax services, for which its related entities pay a fee.
LLC A owns and operates a manufacturing plant and export facility located in ***** (State A). Based on the information provided in the request, the facility in State A is LLC A’s only location.
LLC B provides marketing services to related entities. Although the request does not indicate the location of any definite place of business, the facts indicate that all of its employees are located outside the United States. It solicits customers and negotiates contracts for the sale of liquified natural gas outside the United States. The contracts are approved by Parent and fulfilled by LLC A’s operations.
LLC C provides LLC A with operational and maintenance services at LLC A’s manufacturing plant. Under the service arrangement, LLC A has contracted with LLC C to provide personnel to operate and maintain the plant. The request does not specify where LLC C is located or whether it provides similar services to other members of the Taxpayer.
According to the request, neither LLC A, LLC B, nor LLC C have an office, employees, or other connections in Virginia. The Taxpayer requests a ruling concerning whether LLC A would be subject to BPOL tax in the Virginia locality in which the Parent is based.
OPINION
BPOL Taxation of Separate Entities
The BPOL tax is imposed on businesses and professionals for the privilege of doing business in a locality. The tax is based on gross receipts which are defined as “the whole, entire, total receipts, of money or other consideration received by the taxpayer...” Title 23 of the Virginia Administrative Code (VAC) 10-500-10 [emphasis added]. When a taxpayer holds a separate certificate of incorporation or organization and has its own federal employer identification number, it is considered a separate entity for local business tax purposes. See Public Document (P.D.) 07-191 (11/21/2007), P.D. 11-167 (9/28/2011), and P.D. 20-3 (1/7/2020).
In addition, an entity’s status as a disregarded entity for federal income tax purposes is not relevant to a determination as to whether the entity is subject to BPOL tax. See P.D. 99-9 (1/11/1999). The Parent and LLC A are separate legal entities such that each would be required to obtain a BPOL license and pay BPOL tax if they had gross receipts sitused to a definite place of business within a Virginia locality that has adopted a BPOL ordinance that requires a license.
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. 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 onsite activities: (1) a continuous presence; (2) having an office or 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 P.D. 97-201 (4/25/1997), P.D. 01-215 (12/12/2001), and P.D. 10-277 (12/21/2010). 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.
Consistent with the principle that the BPOL tax is assessed on a separate entity basis, the Department has determined that separate entities that had no definite place of business in a Virginia locality were not subject to that locality’s BPOL tax, even if an affiliate’s employees performed services for them in Virginia. See P.D. 11-145 (8/5/2011) and P.D. 11-167.
In this case, although the Parent may be performing some services for LLC A, LLC A itself does not have an office or other location at which occurs a regular and continuous course of dealing in Virginia and thus does not have a definite place of business in a Virginia locality.
Where a Virginia locality has adopted a BPOL ordinance that requires a license, every person engaged in a licensable activity at a definite place of business in such locality must apply for a license. See Title 23 VAC 10-500-30. Because LLC A does not have a definite place of business in Virginia, it would not be required to obtain a business license or pay BPOL tax on its gross receipts.
This opinion addresses the BPOL tax liability of LLC A only. The Department expresses no opinion about whether and to what extent the Parent, LLC B, or LLC C may be subject to BPOL tax.
If you have any questions regarding this opinion, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at ***** or *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4746.X