Tax Type
BPOL Tax
Local Taxes
Description
Business classifications
Topic
Local Power to Tax
Date Issued
07-28-1999
July 28, 1999
Re: Taxpayer:
Locality Assessing Tax:
Final State Determination Appeal of
Business. Professional and Occupational License (BPOL) Tax
Dear***
This is in response to your appeal of a reclassification of (the "Business') by the ***** (the "City') filed by you with the Department of Taxation pursuant to Code of Virginia §58.1-3703.1 (A)(5)(c). You appeal a final local determination by the Commissioner of the Revenue of the City upholding an audit assessment of the Business's BPOL taxes due. I apologize for the delay in responding to your application for correction.
The local license fee and tax are imposed and administered by local officials. Section 58.1-3701 of the Code of Virginia authorizes the department to promulgate guidelines and issue advisory opinions on local license tax issues. Additionally, §58.1-3703.1 (A)(5) authorizes the department to receive taxpayer appeals of certain local license tax assessments and to issue determinations on such appeals. However, in no case is the department required to interpret any local ordinance with the exception of those appeals in which a local ordinance is relevant to the appeal of an assessment. Code of Virginia §58.1-3701. The following determination has been made subject to the facts presented on appeal to the department, as summarized below.
Code of Virginia §58.1-3703.1(A)(5)(a) provides that, on appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the local assessment will stand unless the taxpayer proves that it is incorrect.
FACTS
In an audit conducted in 1994, the Business was classified as a contractor for license years 1992 and 1993. In a more extensive audit conducted in August 1996, the City reclassified the Business as a business service under the local subclassification of "landscape service.' The Business was found by the City's auditor to be "primarily engaged in providing tree removal services, including stump grinding, surgery, fertilization and spraying services.' The Business concurs that this is an accurate description of its day-to-day activities. On the basis of the reclassification, the City found that the Business owed an additional ***** in BPOL taxes
The City performed another audit of the Business in 1998 which was precipitated by the Business' failure to pay any license tax for the 1998 license year. The Business was assessed with tax, penalty, and interest in the amount of *****. The Business continues to dispute its reclassification from a contractor to a provider of business services, the latter licensable privilege subject to a higher local license tax rate under the City's tax ordinances.
The Business has asked for a determination that its license tax classification is properly that of a contractor, and that the 1998 assessment be recalculated using the City's license tax rate for contractors.
OPINION
The City's Reclassification of the Business is Correct under Applicable Law
Code of Virginia §58.1-3714. Tree removal services, including stump grinding, surgery, fertilization and spraying services clearly do not fall within the contractor definition provided under §58.1-3714.
The Business is Properly Classified as a Business Service for License Taxes
Under § 9.2 of the 1997 BPOL Guidelines, tree surgeons, trimmers and removal services are among enumerated occupations classified as business services. The Business does not dispute that its primary business activities are that of performing tree surgeries, tree trimming, and removal services. As a result, it is clearly evident that the City's reclassification of the Business from a contractor to that of a provider of business services is in accord with applicable law.
Conclusion
In this case, we do not reach the question of whether or not the 1996 reclassification by the City and additional assessment of BPOL tax was the result of an audit. Code of Virginia §58.1-3703.1(A)(5) states that "(a)ny person assessed with a local license tax as a result of an audit may apply within ninety days from the date of such assessment to the assessor for a correction of the assessment.' Assessments as a result of an audit are subject to further administrative review by this department.
Neither the Business nor the City questions whether the Business had the legal right to appeal this assessment to the department.
As the Business has not shown sufficient proof that the assessment made by the locality for license years 1995-1998 is incorrect, the assessment stands, as is. If you have other questions, please do not hesitate to contact ***** Tax Policy Analyst, in my Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21709
Re: Taxpayer:
Locality Assessing Tax:
Final State Determination Appeal of
Business. Professional and Occupational License (BPOL) Tax
Dear***
This is in response to your appeal of a reclassification of (the "Business') by the ***** (the "City') filed by you with the Department of Taxation pursuant to Code of Virginia §58.1-3703.1 (A)(5)(c). You appeal a final local determination by the Commissioner of the Revenue of the City upholding an audit assessment of the Business's BPOL taxes due. I apologize for the delay in responding to your application for correction.
The local license fee and tax are imposed and administered by local officials. Section 58.1-3701 of the Code of Virginia authorizes the department to promulgate guidelines and issue advisory opinions on local license tax issues. Additionally, §58.1-3703.1 (A)(5) authorizes the department to receive taxpayer appeals of certain local license tax assessments and to issue determinations on such appeals. However, in no case is the department required to interpret any local ordinance with the exception of those appeals in which a local ordinance is relevant to the appeal of an assessment. Code of Virginia §58.1-3701. The following determination has been made subject to the facts presented on appeal to the department, as summarized below.
Code of Virginia §58.1-3703.1(A)(5)(a) provides that, on appeal, a BPOL tax assessment is deemed prima facie correct. In other words, the local assessment will stand unless the taxpayer proves that it is incorrect.
FACTS
In an audit conducted in 1994, the Business was classified as a contractor for license years 1992 and 1993. In a more extensive audit conducted in August 1996, the City reclassified the Business as a business service under the local subclassification of "landscape service.' The Business was found by the City's auditor to be "primarily engaged in providing tree removal services, including stump grinding, surgery, fertilization and spraying services.' The Business concurs that this is an accurate description of its day-to-day activities. On the basis of the reclassification, the City found that the Business owed an additional ***** in BPOL taxes
The City performed another audit of the Business in 1998 which was precipitated by the Business' failure to pay any license tax for the 1998 license year. The Business was assessed with tax, penalty, and interest in the amount of *****. The Business continues to dispute its reclassification from a contractor to a provider of business services, the latter licensable privilege subject to a higher local license tax rate under the City's tax ordinances.
The Business has asked for a determination that its license tax classification is properly that of a contractor, and that the 1998 assessment be recalculated using the City's license tax rate for contractors.
OPINION
The City's Reclassification of the Business is Correct under Applicable Law
-
- The term contractor for purposes of the local business license tax means:
1. Accepting or offering to accept orders or contracts for doing any work on or in any building or structure, requiring the use of paint, stone, brick, mortar, wood, cement, structural iron or steel, sheet iron, galvanized iron, metallic piping, tin, lead, or other metal or any other building material;
2. Accepting or offering to accept contracts to do any paving, curbing or other work on sidewalks, streets, alleys, or highways, or public or private property ...
3. Accepting or offering to accept an order for or contract to excavate earth, rock, or other material for foundation or any other purpose or for cutting, trimming or maintaining rights-of-way;
4. Accepting or offering to accept an order or contract to construct any sewer..
5. Accepting or offering to accept orders or contracts for doing any work on or in any building or premises involving the erecting, installing, altering, repairing, servicing, or maintaining electric wiring, devices or appliances ... or the erecting, repairing or maintaining of lines for the transmission or distribution of electric light and power; or
6. Engaging in the business of plumbing and steam fitting.
- The term contractor for purposes of the local business license tax means:
Code of Virginia §58.1-3714. Tree removal services, including stump grinding, surgery, fertilization and spraying services clearly do not fall within the contractor definition provided under §58.1-3714.
The Business is Properly Classified as a Business Service for License Taxes
Under § 9.2 of the 1997 BPOL Guidelines, tree surgeons, trimmers and removal services are among enumerated occupations classified as business services. The Business does not dispute that its primary business activities are that of performing tree surgeries, tree trimming, and removal services. As a result, it is clearly evident that the City's reclassification of the Business from a contractor to that of a provider of business services is in accord with applicable law.
- Local assessing officers are required to assess tax for any tax year of the three preceding tax years in cases where it has been ascertained that the correct amount of tax has not been paid. Code of Virginia §58.1-3903. In this case, the City became aware of its incorrect classification of the Business as a contractor and changed the Business' classification to that of a business service. In doing so, the City assessed additional license taxes for the difference between the contractor license tax rate and the business services license tax rate. In summary, the City corrected a classification mistake as it was required to do under Code of Virginia §58.1-3903.
Conclusion
In this case, we do not reach the question of whether or not the 1996 reclassification by the City and additional assessment of BPOL tax was the result of an audit. Code of Virginia §58.1-3703.1(A)(5) states that "(a)ny person assessed with a local license tax as a result of an audit may apply within ninety days from the date of such assessment to the assessor for a correction of the assessment.' Assessments as a result of an audit are subject to further administrative review by this department.
Neither the Business nor the City questions whether the Business had the legal right to appeal this assessment to the department.
As the Business has not shown sufficient proof that the assessment made by the locality for license years 1995-1998 is incorrect, the assessment stands, as is. If you have other questions, please do not hesitate to contact ***** Tax Policy Analyst, in my Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21709
Rulings of the Tax Commissioner