Could a telecommunications provider exclude its local BPOL tax from the sales price subject to Virginia communications sales tax?

Plain-English summary

Virginia included BPOL tax in the sales price subject to communications sales and use tax. The telecommunications provider argued that separately stated government taxes and fees were excluded.

The communications-tax base included the total amount charged for the right to use communications services and could not be reduced by provider expenses such as property tax, purchased-service sales tax, net-income taxes, or universal-service fees.

BPOL tax was imposed on the provider for the privilege of doing business in the locality. It was not imposed on the customer's communications purchase and was not a government assessment required to be added to the customer's price.

Virginia therefore upheld the paid audit assessment and denied a refund.

What this means for you

• Distinguish provider operating taxes from taxes legally imposed on the customer transaction.
• Separately stating a provider expense does not necessarily remove it from the communications-tax base.
• The exclusion applies only to taxes or required fees fitting the statutory wording.

Common questions

Q: Is BPOL tax imposed on the customer purchase?
A: No. It is imposed on the business for the privilege of operating in the locality.

Q: Did separate billing exclude it?
A: No. Its legal character, not merely invoice presentation, controlled.

Q: What was the result?
A: The assessment was upheld and no refund was due.

Citations and references

• Va. Code §§ 58.1-647 and 58.1-648 B.
• Virginia Public Document 11-145.

Subject

Inclusion of BPOL tax in the taxable base or sales price

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-105

Original ruling text

June 14, 2013

Re: § 58.1-1821 Application: Communications Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the "Taxpayer) in which you seek correction of the communications sales and use tax assessment issued for the period January 2007 through March 2011. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer is a provider of telecommunications services. The Taxpayer contests the inclusion of the BPOL tax in the taxable base or sales price upon which the assessment was computed in the audit. Relying on Va. Code § 58.1-648, the Taxpayer maintains that the BPOL tax is specifically exempted from inclusion in the sales price. The Taxpayer has paid the assessment in full.

DETERMINATION

Pursuant to Va. Code § 58.1-647, sales price is defined as:

The total amount charged in money or other consideration by a communications services provider for the sale of the right or privilege of using communications services in the Commonwealth, including any property or other services that are part of the sale. The sales price of communications services shall not be reduced by any separately identified components of the charge that constitute expenses of the communications services provider, including but not limited to, sales tax on goods or services purchased by the communications services provider, property taxes, taxes measured by net income, and universal-service fund fees. [Emphasis added.]

Virginia Code § 58.1-648 B provides, in pertinent part:

The sales price on which the tax is levied shall not include charges for: (i) an excise, sales or similar tax levied by the United States or any state or local government on the purchase, sale, use or consumption of any communications service that is permitted or required to be added to the sales price of such service, if the tax is stated separately; (ii) a fee or assessment levied by the United States or any state or local government, including but not limited to, regulatory fees and emergency telephone surcharges, that is required to be added to the price of service if the fee or assessment is separately stated.

The BPOL tax is imposed on businesses and professionals for the privilege of doing business in a locality. See, Public Document 11-145 (8/5/11). The BPOL tax is not a tax levied by a government entity on the purchase, sale, use or consumption of communications services, nor is it a fee or assessment levied by a government entity that is required to be added to the price of the service. The BPOL tax is not the type of tax or fee considered in Va. Code § 58.1-648 B that would be excluded from the sales price, as defined in Va. Code § 58.1-647. Accordingly, the inclusion of the BPOL tax in the sales price upon which the audit assessment was computed is correct. The assessment is correct as issued, and the Taxpayer is not due a refund.

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. If you have any questions about this response, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4851616210.P