Could a Virginia county impose BPOL tax on real-property lessors operating inside a town that could not itself tax those lessors?

Subject

A county may not impose a BPOL tax on businesses operating in a town that lies within its borders unless it has the town's permission

Plain-English summary

Virginia advised that the county could impose BPOL tax on real-property lessors inside the town only if the town gave permission. The town could not tax those lessors because it had not imposed that tax before January 1, 1974. The county had imposed it before that date and therefore retained authority to tax lessors within its own jurisdiction.

That county authority did not automatically extend inside the town. Va. Code § 58.1-3711 generally kept a county license tax from applying within a town's limits and allowed it there when the town's governing body authorized the county tax.

The separate uniformity rule did not require the county to reach into the town. Virginia concluded that the county could tax lessors operating inside the town only after the town permitted it.

What this means for you

• County and town BPOL boundaries are distinct even when the town lies inside the county.
• A locality's pre-1974 rental-tax history affected whether it could tax real-property lessors.
• County authority outside the town did not by itself authorize taxation inside town limits.
• Written town authorization was the key condition identified in this opinion.

Common questions

Did the town's inability to impose this tax give the county automatic authority?

No. The town still had to permit the county tax within the town.

Was this a taxpayer appeal?

No. It was an advisory opinion jointly requested by the localities.

Citations and references

• Va. Code §§ 58.1-3700.1, 58.1-3701, 58.1-3703(C)(7) and (C)(19), 58.1-3705, and 58.1-3711.
• P.D. 02-131 and P.D. 97-176.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-4

Original ruling text

January 7, 2011

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 as to whether a county may assess Business, Professional and Occupational License (BPOL) tax on the lessor of real property that operates in a town within the county if the town cannot impose the BPOL tax.

The local license fee and tax are imposed and administered by local officials. Virginia Code § 58.1-3701 authorizes the Department to 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 and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site.

FACTS

Persons or other entities are engaged in the business of renting real property within the town of * (the "Town"). The Town is located in the *** (the "County"). The Town cannot impose a BPOL tax on lessors of real property because it did not impose a BPOL tax on these lessors prior to January 1, 1974. The County, however, can impose a BPOL tax on lessors of real property because it did impose a BPOL tax on lessons of property prior to January 1, 1974. The County and the Town have jointly requested an advisory opinion as to whether the County is permitted to impose the BPOL tax on lessors of real property within the Town.

OPINION

The BPOL tax is a gross receipts tax imposed on the persons, firms and corporations for the privilege of engaging in business. While Va. Code § 58.1-3700.1 defines the term "gross receipts" as "the whole, entire, total receipts, without deduction," the law provides for certain deductions and exclusions from gross receipts. Included among these is an exemption for the rental of real property. Virginia Code § 58.1-3703 C 7 provides that no locality may impose a license fee or license tax:

Upon any person, firm or corporation for engaging in the business of renting, as the owner of such property, real property other than hotels, motels, motor lodges, auto courts, tourist courts, travel trailer parks, lodging houses, rooming houses and boardinghouses; however, any county, city or town imposing such a license tax on January 1, 1974, shall not be precluded from the levy of such tax by the provisions of this subdivision.

The Town did not impose such a tax prior to 1974; therefore, rentals of real property, as described above, are exempt from the Town's BPOL tax. The County, however, did impose a BPOL tax on the rental of real property prior to 1974. As such, it can impose a BPOL tax on persons or entities located within its jurisdiction engaged in the rental of real property as described in Va. Code § 58.1-3703 C 7.

Under Va. Code § 58.1-3711:

Any county license tax imposed pursuant to this chapter shall not apply within the limits of any town located in such county, where such town now, or hereafter, imposes a town license tax on the same privilege. If the governing body of any town within a county, however, provides that a county license tax shall apply within the limits of such town, then such license tax may be imposed within such towns.

Virginia Code § 58.1-3705 provides that a license tax must be uniform for all persons engaged in the same business within the locality. The County contends that because the Town cannot impose a BPOL tax on the lessors of real property under Va. Code § 58.1-3711, it is required to impose BPOL tax on the lessors of real property in the Town because those entities are operating within the County.

The Town contends that the County does not have the authority to tax lessors of real property within the Town because the uniformity requirement in Va. Code § 58.1-3705 only applies to a locality's taxing boundaries and the Town's taxing boundaries are separate from those of the County. The Town also argues that the term "privilege" means the general right to impose the BPOL tax, rather than the right to tax a specific business. As such, the County would not have the right to impose a BPOL tax on the lessors of real property located within the Town. In addition, the Town avers that the BPOL situs rules equalize towns and counties and limits the application of county ordinances to counties, not to towns that lie therein.

Virginia Code § 58.1-3703 C 19 provides that "[g]ross receipts from the sale and rental of real estate and buildings remain taxable by the locality in which the real estate is located provided the locality is, otherwise authorized to tax the rental of real estate. In this case, the Town is not authorized to tax the lessors of real property within its borders.

In general, a county may not impose a BPOL tax on businesses operating in a town that lies within its borders unless it has the town's permission. See Public Document (P.D.) 02-131 (10/08/2002). Specifically, a county may only impose a BPOL tax on the lessors of real property within a town that lies within the county, if the town gives them such permission. See P.D. 97-176 (4/16/1997). As such, in this case, the County may not tax the lessors of real property located in the Town unless the Town has given the County permission to impose the BPOL tax on such lessors.

If you have any questions, regarding this advisory opinion, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4474853919.B