Could a Virginia locality issue one group BPOL license to itinerant merchants and exempt merchants at sponsored events?

Plain-English summary

Virginia said a county could create a group or “umbrella” BPOL license for itinerant merchants, but the structure had to stay within statutory limits and treat comparable merchants alike. The ordinance allowed more than two merchants operating in the same general location for five or fewer consecutive days to share one $500 license fee.

Localities had discretion to create subclassifications and charge less than the statutory maximum. Because the group divided the $500 fee, no merchant exceeded the maximum. But Va. Code § 58.1-3705 required the same tax basis for persons engaged in the same business, so a merchant operating in the same place for the same period could not be arbitrarily excluded from the umbrella license.

The county also exempted merchants participating in county, agency, religious, or charitable sponsored events while charging other merchants. That distinction was permissible only if the difference was real, relevant to a local governing purpose, and not wholly arbitrary in relation to the different treatment. The county had to make that determination; the Department did not interpret the ordinance itself.

The opinion added that taxing itinerant merchants protected regular local retailers from competitive disadvantage, but whether to impose the tax and at what permitted rate remained local policy. The BPOL-specific statutory definition of itinerant merchant controlled, and the statute was intended to permit local taxation of temporary sellers rather than restrict their activities.

What this means for you

• A locality could group short-term merchants into a BPOL subclassification and divide the fee.
• No merchant's share could produce a charge above the statutory maximum.
• Merchants in materially the same business, location, and time period had to receive consistent treatment.
• Sponsored-event exemptions needed a real, relevant, and nonarbitrary classification.
• Because BPOL is locally administered, the actual ordinance and local determination remain critical.

Common questions

Q: Was a group itinerant-merchant license automatically valid?
A: No. It had to comply with fee limits, subclassification rules, and equal-treatment requirements.

Q: Could the county exempt merchants at its own or nonprofit events?
A: Potentially, if the distinction satisfied the three-part constitutional classification test described in the opinion.

Q: Did the Department approve the county's ordinance itself?
A: No. The Department addressed BPOL statutes but said it was not required to interpret the local ordinance.

Q: Were itinerant merchants the same as regular retailers for BPOL purposes?
A: No. The opinion applied the separate BPOL definition for temporary or transient businesses occupying a location for less than one year.

Citations and references

• Va. Code §§ 58.1-3700.1 A 1, 58.1-3701, 58.1-3703, 58.1-3703.1, 58.1-3705, 58.1-3706, and 58.1-3717.
• 23 VAC 10-500-20 A and C.
• Chesterfield Cablevision v. Chesterfield County, 241 Va. 252, 401 S.E.2d 678 (1991).
• City of Richmond v. Confrere Club of Richmond, Virginia, Inc., 239 Va. 77, 387 S.E.2d 471 (1990).
• Virginia Public Documents 97-86 and 01-173.

Subject

Question regarding BPOL to itinerant merchants as a group

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-148

Original ruling text

July 31, 2013

Re: Request for Advisory Opinion

Business, Professional and Occupational License (BPOL) Tax

Dear *:

This is in response to your letter in which you request an advisory opinion as to whether a locality may issue a Business, Professional and Occupational License (BPOL) to itinerant merchants as a group, rather than on an individual basis.

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 facts or the introduction of new facts may lead to a different result.

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site.

FACTS

The local ordinance of the * (the "County") requires that itinerant merchants obtain a BPOL Licenses. The fee for the licenses is the maximum $500 allowed by statute. The County has amended its ordinance to allow more than two itinerant merchants to obtain a group license. The amended ordinance also provides that itinerant merchants are not required to pay a license tax for participating at events sponsored by the County, County agencies, or religious and charitable organizations exempt from income taxation under Internal Revenue Code (IRC) § 501(c)(3).

You present several questions regarding the County's amended ordinance and whether it exceeds the statutory authority of the Code . Virginia Code § 58.1-3701 provides that while the Department has the authority to address the BPOL statutes, it is not required to interpret any local ordinance.

OPINION

Virginia Code § 58.1-3703 authorizes localities to enact an ordinance levying a BPOL tax or a fee, or both for issuing a license. Every ordinance adopted or maintained by a locality that levies a license tax is required to be substantially similar to the provisions in Va. Code § 58.1-3703.1. Further, Va. Code §§ 58.1-3703 and 58.1-3706 set statutory maximums for license rates and fees. Localities may choose not to require a license or impose fees, or localities may assess rates and fees that are less than the maximums stated in the statute. See Title 23 of the Virginia Administrative Code (VAC) 10-500-20 A. Localities may also establish subclassifications within the classifications set out in state law and provide for different rates or exemptions for such subclassifications, as long as no rate exceeds the maximum permitted by state law. See Title 23 VAC 10-500-20 C. As such, Va. Code §§ 58.1-3703 and 58.1-3706 are permissive statutes that allow localities wide latitude to set rates and establish gross receipt thresholds within the statutory maximum amounts.

Question 1

Does statutory authority exist for issuing group itinerant merchant licenses?

For BPOL tax purposes, an itinerant merchant is defined as "any person who engages in, does, or transacts any temporary or transient business in any county, city or town and who, for the purpose of carrying on such business, occupies any location for a period of less than one year." The BPOL tax may be imposed on such merchants pursuant to local ordinance and may not exceed $500 per year. See Va. Code § 58.1-3717.

In this case, the County has created a subclassification for certain itinerant merchants, called an umbrella license. Under this license, a group of itinerant merchants operating in the same general location for five or fewer consecutive days are permitted to obtain one license and divide the $500 fee. Because the $500 fee would be divided among the group of itinerant merchants, the rate would not exceed the statutory maximum. As such, a group of merchants can be given a group license as a sub-classification of the itinerant merchant classification.

However, whenever any county, city, or town levies a license tax, the basis of such tax, whether it be gross receipts or otherwise, shall be the same for all persons engaged in the same business, trade, occupation or calling. See Va. Code § 58.1-3705. Therefore, no business classified as an itinerant merchant operating in the same general location for the same period of time as other businesses granted an umbrella license could be excluded by the locality from the group license.

Question 2

Does statutory authority exist for either the County or non-profit organizations to sponsor events when itinerant merchants who do not participate in the sponsored event are required to pay the maximum fee for an itinerant merchant's license?

As stated above, a locality has the authority to require itinerant merchants to get a BPOL license and to establish subclassifications. A locality may choose to charge different rates on any classification or subclassification subject to constitutional limitations. See Public Document (P.D.) 97-86 (2/19/1997). A subclassification is permissible when "1) the difference is real, 2) the distinction has some relevance to the local governing purpose, and 3) the differing treatments are not so disparate, relative to the difference in classification, as to be wholly arbitrary." See Chesterfield Cablevision v. Chesterfield County , 241 Va. 252, 256, 401 S.E.2d 678, 680 (1991).

The County will have to determine whether charging itinerant merchants who do not participate in County or non-profit sponsored events while exempting itinerant merchants who do satisfies each part of the test specified in Chesterfield Cablevision . If the rate structure enacted into the County's ordinance for itinerant merchants fulfills the Chesterfield Cablevision test and the tax never exceeds the $500 maximum, the County or non-profit organizations would not be prohibited from sponsoring events exempting participating itinerant merchants.

Question 3

Does the amended ordinance place retail merchants at a competitive disadvantage with itinerant merchants?

Typically, in order to be subject to the BPOL tax in a particular locality, an entity must have a definite place of business which is an office or a location at which occurs a regular and continuous course of dealing for 30 consecutive days or more. See Va. Code § 58.1­3700.1 A 1.

Itinerant merchants, however, do not generally operate in a definite place of business for at least 30 days. Instead, they operate at markets ( e.g. , flea markets), from carts on sidewalks, from temporary stands along the side of the road, or at events such as fairs, festivals, bazaars and craft shows, which generally only operate for a few days.

The Department has stated, "[T]the reason for including itinerant merchants under the BPOL statute is so that local retailers who are subject to local licensure as retail merchants are not placed at a competitive disadvantage." See P.D. 01-173 (10/31/2001). Even though these merchants do not operate at a definite place of business within a locality, the General Assembly has authorized localities to impose a BPOL tax on these temporary activities. The determination as to whether itinerant merchants are taxed, or the tax rate imposed on itinerant merchant, is a policy decision for localities to decide. See Chesterfield Cablevision.

Question 4

Is it the intention of the General Assembly to separately classify itinerant merchants in order to distinguish between a retail merchant and those persons who sell merchandise on a temporary basis, or is it the intent to limit itinerant merchants from selling their merchandise at local events?

In City of Richmond v. Confrere Club of Richmond, Virginia, Inc. , 239 Va. 77, 387 S.E.2d 471 (1990), the Virginia Supreme Court concluded that "when a statute is clear and unambiguous, its plain meaning must be accepted without resort to extrinsic evidence or to the rules of construction." Virginia Code § 58.1-3717 B defines itinerant merchants as those individuals that engage in "any temporary or transient business in any county, city or town and who, for the purpose of carrying on such business, occupies any location for a period of less than one year." In accordance with the plain meaning of the statute, Va. Code § 58.1-­3717 B distinguishes an itinerant merchant from a retail merchant. Based on the statutory language, it is my opinion that the General Assembly intended to permit localities to tax such businesses, and not limit their activities.

Question 5

Is the definition of "itinerant merchant" in Va. Code § 54.1-4300 applicable to the BPOL tax?

As previously mentioned, Va. Code § 58.1-3717 B defines the term "itinerant merchant" for BPOL tax purposes. Because the term is specifically defined for BPOL taxation purposes, the definition of "itinerant merchant" under Va. Code § 58.1-4300 would not applicable.

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/1-5371156849.B