Tax Type
BPOL Tax
Description
Situs; Data entry and courier service
Topic
Local Power to Tax
Date Issued
06-03-1997
June 3, 1997
Re: Request for an Advisory Opinion: BPOL Tax
Dear****************
This will response to your facsimile dated May 12, 1997, regarding the taxation of a company which has three separate lines of business.
The license tax is a local tax which is imposed and administered by local officials. The Code of Virginia limits the involvement of the Department of Taxation to promulgating guidelines and issuing advisory opinions. However, the department shall not be required to interpret any local ordinance.
While addressing the questions raised in your letter, this response is intended to provide advisory guidance only and does not constitute a formal or binding ruling. I will address each line of business separately in what follows.
Temporary Housing
FACTS
Company A provides Temporary housing for the transitional employees of several companies. Company A enters into lease contracts with an apartment complex in your locality. In addition, Company A also enters into lease contracts with an apartment complex in State B. Company A pays all rents and utilities associated with such contracts. The businesses in turn pay Company A for all expenses incurred plus a management fee. You ask the following questions:
1 ) Is a business license required for company A for this activity?
2) If so, should the total amount paid to Company A be included in gross receipts or only the management fee?
3) Should gross receipts include the amount received for the apartments located:
-
- a) in your locality?
b) in Virginia but outside your locality (if apartments were located in this outside locality)?
c) in State B?
- a) in your locality?
OPINION
Code of Virginia § 58.1-3703 A, copy enclosed, provides that a locality may require an entity to obtain a business license if that entity is engaged in the exercise of a licensable privilege at a definite place of business in that locality. An entity has a definite place of business in a locality if it has U...an office or location at which occurs a regular and continuous course of dealing occurs for 30 consecutive days or more." Code of Virginia § 58.1-3700.1, copy enclosed. The placement of individuals in Temporary housing is an activity which constitutes the exercise of a licensable privilege. Company A has a definite place of business since it has an office in your locality and regularly and continuously engages in the business of employee placement for more than 30 consecutive days. Thus, Company A is subject to licensure for its Temporary housing business in your locality.
-
- § 1 of the 1997 BPOL Guidelines, copy enclosed, provides that:
-
- Gross receipts are the whole, entire, total receipts, of money or other consideration received by the taxpayer as a result of transactions with others besides himself and which are derived from the exercise of a licensed privilege to engage in a business or profession in the ordinary course of business, without deduction or exclusion except as provided by law.
Gross receipts include expenses which a business incurs on behalf of, and subsequently passes on to the customer. See P.D. 97-1, copy enclosed. Thus, the total amount of receipts paid to Company A is included in gross receipts.
Providing Temporary housing is a business service. Gross receipts for business services “.. shall be attributed to the definite place of business at which the services are performed or, if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled." Code of Virginia § 58.1-3703.1 A 3a 4, copy enclosed. Company A performs its housing placement service at its definite place of business which is located in your locality. Thus, the gross receipts derived from providing Temporary housing should be sited to your locality regardless of where the apartments are located.
The gross receipts derived from the apartments in State B may be deductible from Company A's gross receipts. “Any receipts attributable to business conducted in another state or foreign country in which the taxpayer is liable for an income or other tax based upon income" shall be deducted from gross receipts. Code of Virginia § 58.1-3732 B 2, copy enclosed. If the gross receipts derived from the apartments in State B are subject to State B's income or income like tax, these receipts would be deductible from Company A's gross receipts.
Temporary Employees
FACTS
Company A provides long term Temporary employees for several companies. Company A hires employees and pays all employment costs including wages, payroll taxes and fringe benefits (if applicable). Company A employs approximately 40 employees who work at businesses located in your locality and approximately 25 employees in State B. The businesses in turn pay Company A for all expenses incurred plus a management fee.
1) Is a business license required for company A for this activity?
2) If so, should the total amount paid to Company A be included in gross receipts or only the management fee?
3) Should gross receipts include the amount received for the individuals employed:
-
- a) in your locality?
b) in Virginia but outside your locality (if employees were placed outside your locality)?
c) in State B?
- a) in your locality?
OPINION
Code of Virginia § 58.1-3703 A provides that a locality may require an entity to get a business license if that entity is engaged in the exercise of a licensable privilege at a definite place of business in that locality. An entity has a definite place of business in a locality if it has "... an office or a location at which occurs a regular and continuous course of dealing for 30 consecutive days or more." Code of Virginia § 58.1-3700.1. Company A performs the service of employee placement on a continuous and regular basis at its office in your locality for 30 consecutive days. Thus, Company A is subject to licensure for its Temporary placement business at the site of its main office in your locality.
The total amount of receipts should be included in gross receipts based on the same analysis in the Temporary Housing section.
Providing Temporary employees is a business service. Gross receipts for business services are sited to "... the definite place of business at which the services are performed or, if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled". Code of Virginia § 58.1-3703.1 A 3a 4. Company A is in the business of placing Temporary long term employees. This service is performed at Company A's office which is located in your locality. Although the Temporary employees work for longer than 30 consecutive day periods outside of your locality, they do not establish a definite place of business in these locations. These Temporary employees perform the work of the customer. They do not perform the service of placing Temporary employees at customer sites. Thus, all gross receipts derived from the placement of Temporary employees, regardless of the location of their placement, would be sited to your locality.
Data Entry and Courier Service
Company A provides data entry and courier services for several companies. Data entry is performed at the office located in your locality. The courier service is also operated from this same office with routes in your locality and a daily route to State B. The businesses in turn pay Company A for all expenses incurred plus a management fee.
1) Is a business license required for company A for this activity?
2) If so, should the total amount paid to Company A be included in gross receipts or only the management fee?
3) Should gross receipts include the amount received for the courier routes:
-
a) in your locality?
b) in Virginia but outside your locality (if apartments were located in this outside locality)?
c) in State B?
OPINION
Code of Virginia § 58.1-3703 A provides that a locality may require an entity to get a business license if that entity is engaged in the exercise of a licensable privilege at a definite place of business in that locality. An entity has a definite place of business in a locality if it has "... an office or location at which occurs a regular and continuous course of dealing occurs for 30 consecutive days or more." Code of Virginia § 58.1-3700.1. Data entry and courier services are licensable privileges subject to taxation. The data entry and courier service has a definite place of business in your locality as it operates continuously there for more than 30 consecutive days. Thus, the data entry and courier services are subject to licensure in your locality.
The total amount of receipts should be included in gross receipts based on the same analysis in the Temporary Housing section.
Providing courier services is a business service. Gross receipts for business services "... shall be attributed to the definite place of business at which the services are performed or, if not performed at any definite place of business, then to the definite place of business from which the services are directed or controlled." Code of Virginia § 58.1-3703.1 A 3a 4. Company A does not have a definite place of business at any site outside your locality. Although it delivers goods on regular routes outside your locality, it does not have an office or location at these sites. Thus, gross receipts must be sited to your locality which is the definite place of business where the courier service is directed or controlled.
I hope that the above information will be beneficial to you. Although I believe this letter conforms with the law, it is written only for your guidance, and the final determination is with the locality.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12537B
Rulings of the Tax Commissioner