Did a contractor's vehicle-storage facility create a city definite place of business, and where were its receipts and trucks taxed?

Subject

Taxpayer's definite place of business in the County and vehicles subject to BTPP tax

Plain-English summary

The contractor's storage facility in the city was not a definite place of business for BPOL purposes. The contractor stored vehicles and equipment there, employees met and loaded trucks there, and assignments were given there. But it received no mail, kept no records, had no fixed phone, performed no administrative functions, and did not hold itself out as doing business at the facility. On the full facts, mere storage and startup activity at third-party property were insufficient.

Because no definite place of business existed elsewhere, the owner's county residence was deemed the business location. The county could situs the contractor's gross receipts there, but had to allow subtraction of receipts taxable in another locality under the contractor rule.

Vehicle-situs remand

The analysis stated that vehicles over 10,000 pounds were taxable where garaged in the city, while vehicles of 10,000 pounds or less were sitused at the definite place of business in the county. The published determination then contains an apparent internal wording conflict by naming the city for both weight categories. The Department remanded the case for documentation of each truck's weight and appropriate local adjustments, so this summary does not resolve that conflict beyond the ruling's stated analysis.

What this means for you

• Storage and daily dispatch activity do not automatically create a definite place of business.
• Mail, records, fixed communications, management, advertising, employees, and continuous on-site dealing all matter.
• A residence can become the statutory definite place of business when no other qualifying location exists.
• Contractors should document receipts taxable in other localities and the registered weight of each commercial vehicle.

Common questions

Did the city facility count because employees started work there every day?

No. Considering all facts, the Department found the location lacked enough characteristics of a definite place of business.

Was the amount of BTPP tax finally decided?

No. The contractor had to supply vehicle-weight evidence on remand.

Citations and references

• Va. Code §§ 58.1-3703.1(A)(5), 58.1-3983.1(D)(1), 58.1-3700.1, 58.1-3703.1(A)(3)(1), 58.1-3715, 58.1-3511, 58.1-3518, and 58.1-3980(A).
• P.D. 97-201 and P.D. 01-215, cited in the ruling.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-275

Original ruling text

December 16, 2010

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business, Professional and Occupational License (BPOL) Tax

Business Tangible Personal Property (BTPP) Tax

Dear *:

This final state determination is issued upon the application for correction filed by * (the "Taxpayer") with the Department of Taxation. The Taxpayer appeals a final local determination by the (the "County") holding that the residence of the Taxpayer's owner is its definite place of business for BPOL tax purposes for the 2006 and 2007 tax years. The Taxpayer also contends that its commercial vehicles are subject to the BTPP in the ** (the "City"). I apologize for the delay in responding to your letter.

The local license tax and fee and business tangible personal property tax are imposed and administered by local officials. Virginia Code §§ 58.1-3703.1 A 5 and 58.1-3983.1 D 1 authorize the Department to issue determinations on taxpayer appeals of certain BPOL and BTPP tax assessments respectively. On appeal, a local 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 and public documents cited are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.virginia.gov.

FACTS

The Taxpayer, a contractor, leased space at a self-storage facility in the City where it stored five commercial vehicles and all its equipment. The facility was owned by an unrelated third party and provided storage space for vehicles and equipment for the general public. Every work day, the Taxpayer's employees met at the facility to get assignments and start their work day. Construction jobs were assigned and the trucks were loaded at the facility. The owner conducted all business by mobile phone. The Taxpayer did not receive mail ( e.g. , bills, tax returns, or payments) at the storage facility, and no administration functions were performed in the City.

The County examined the Taxpayer and determined that it did not have a definite place of business in the City for the tax years at issue. As such, the County issued BPOL tax assessments to the Taxpayer for the 2006 and 2007 tax years because the Taxpayer's sole owner resided in the County.

Further, the County found that some of the Taxpayer's commercial vehicles garaged at the storage facility weighed less than 10,000 pounds. The County sitused these vehicles to the owner's home in the County and assessed BTPP tax for the tax years at issue.

The Taxpayer paid the assessments and appealed the County's assessments, contending its definite place of business was located in the City and that all of its vehicles weighed more than 10,000 pounds. In its final determination, the County determined that the Taxpayer's definite place of business was not directed or controlled from the facility in the City and, by default, the Taxpayer's definite place of business reverted to the County under Va. Code § 58.1-3700.1. The County also held that the Taxpayer was liable for the BTPP tax on any vehicles that weighed less than 10,000 pounds because they were directed and controlled from the definite place of business in the County. The Taxpayer filed an appeal with the Tax Commissioner, contending it did not have a definite place of business in the County and that none of its vehicles were subject to the BTPP tax in the County.

ANALYSIS

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. 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 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. In this case, the Taxpayer did not receive mail, keep records, have a telephone or hold itself out as engaging in business at the facility located in the City.

The Taxpayer did, however, keep all of its vehicles and other equipment at the storage facility. Employees met. there at the beginning of the work day where they were given assignments and load the trucks. Although it may be argued that some control of the business was conducted at the storage facility, the owner could direct and control the business with his mobile phone from anywhere.

Based on the specific facts presented, it is my determination that the mere storage of commercial vehicles and equipment at the facility does not constitute a "regular and continuous" business activity. The usage of commercial property owned by an unrelated party without any other characteristics of a definite place of business is not sufficient to create a definite place of business„

The facts in this case do riot clearly indicate where the Taxpayer received mail, kept records, and provided general management of the business or conducted sufficient activities to establish a definite place of business. The definition of a definite place of business in Va. Code § 58.1-3700.1, however, provides that "[a] person's residence shall be deemed to be a definite place of business if there is no definite place of business maintained elsewhere and the person is not subject to licensure as a peddler or itinerant merchant." See P.D. 01-215 (12/12/2001).

Situs - Gross Receipts

Under Va. Code § 58.1-3703.1 A 3 1, the gross receipts of a contractor are generally attributed to the definite place of business where its services are performed. If a contractor performs services in a locality in which it does not maintain a definite place of business, then gross receipts from such services are attributed to the definite place of business where its services are initiated, controlled or directed, unless the contractor is subject to Va. Code § 58.1-3715. Under this statute, a contractor must obtain a license in a locality when its business in such locality exceeds $25,000, regardless of whether the contractor has a definite place of business in such locality.

The Taxpayer does not appear to have had a definite place of business in the City. Accordingly it would appear that the Taxpayer's gross receipts would be sitused to the owner's residence unless the Taxpayer conducted contracting activities generating more than $25,000 in gross receipts in another locality during the tax years at issue. If the Taxpayer would be required to pay a BPOL tax in any locality other than the County on its gross receipts derived from contracting, the Taxpayer would be allowed to subtract those gross receipts from its gross receipts reported to the County.

Situs - BTPP

Virginia Code § 58.1-3511 provides in pertinent part:

(ii) if the owner of a business files a return pursuant to § 58.1-3518 for any vehicle with a weight of 10,000 pounds or less registered in Virginia and used in the business with the locality from which the use of such vehicle is directed or controlled and in which the owner's business has a definite place of business, as defined in §58.1-3700.1, the situs for such vehicles shall be such locality ....

The Taxpayer's five vehicles are garaged in the facility located in the City. Any of the vehicles weighing more than 10,000 pounds would be subject to BTPP in the City, while vehicles weighing less than 10,000 would be sitused at the Taxpayer's definite place of business.

DETERMINATION

Based on facts presented, the Taxpayer did not have a definite place of business in the City and the County properly sitused the gross receipts within its jurisdiction. However, the County must permit the Taxpayer a subtraction for gross receipts sitused to other localities as provided under Va. Code § 58.1-3715.

With regard to the trucks, the Taxpayer would be subject to the BTPP tax in the City for any truck weighting more than 10,000 pounds and, because the Taxpayer's definite place of business is in the County, it would be subject to the BTPP tax in the City for any truck weighing less than 10,000 pounds. Insufficient evidence has been provided on which to make a determination as to which of the trucks is subject to BTPP in each locality.

I am remanding this case back to the County in order for it to make the appropriate adjustments in accordance with this determination. The Taxpayer must provide the County documentation concerning its gross receipts from contracting activities outside the County. Further, the Taxpayer will need to furnish evidence concerning the weight of its five vehicles to the County in order to determine the correct situs of the trucks.

Such documentation or evidence should be provided to the County within 30 days of the date of this determination. If the required documentation is not provided within the time allowed, the assessments will be upheld as issued and the County may proceed with collection action.

In addition, if the Taxpayer has paid BPOL or BTPP tax in error to the City, it may file claims for refunds under the applicable statute of limitations. See Va. Code § 58.1-3980 A.

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/1-4476750475.B