Does a contractor's continuous work at a Virginia military facility create a definite place of business subjecting its service receipts to county BPOL tax?

Plain-English summary

A contractor provided support services for the U.S. military at a facility in a Virginia county. All 14 employees worked exclusively at that location, and the county assessed BPOL tax on the related service receipts. The Tax Commissioner upheld the assessments.

Under Va. Code § 58.1-3700.1, a definite place of business includes a location where a regular and continuous course of dealing occurs for 30 consecutive days or more. An office, phone, mail, records, property, or advertising can help show a location, but none is indispensable. Here the employees continuously performed the contract at the client's location for longer than 30 days throughout the years at issue. The contract's statement that the taxpayer's home office was its definite place of business could not override Virginia law.

Because the services were performed at a definite place of business in the county, the receipts were sited there under Va. Code § 58.1-3703.1. The fact that the work occurred on a military base did not change the result. The ruling relied on the Buck Act, 4 U.S.C. §§ 105-110, which prevents a person from escaping otherwise applicable state and local taxes merely because transactions or services occur in a federal area.

What this means for you

A client's site can become your BPOL location

Regular, continuous work at a customer or government facility for 30 days or more may create a definite place of business even if you own no office there and receive no mail or phone calls there.

Contract labels do not control

Calling a home office the contractor's only business location does not determine BPOL situs. Virginia applies the statutory facts-and-circumstances test.

Federal property is not automatically tax-free

Performing services on a military base did not immunize the receipts from local BPOL tax.

Common questions

Why was the military facility a definite place of business? Fourteen employees worked there exclusively and continuously for more than 30 consecutive days.

Did the lack of a contractor-owned office matter? No. Those office features are indicators, not mandatory conditions.

Why could the county tax receipts earned on federal property? The Department concluded that the Buck Act permits applicable state and local taxation for activities conducted in federal areas.

Citations and references

• Va. Code § 58.1-3700.1 -- definite place of business.
• Va. Code § 58.1-3703.1 A 3 a (4) and A 3 b -- situs hierarchy for service receipts.
• 4 U.S.C. §§ 105-110 -- Buck Act.
• P.D. 97-201, 01-215, 10-277, and 11-161 -- client-site and definite-place-of-business guidance discussed in the ruling.
• 1978-79 Op. Va. Att'y Gen. 279 and Op. Va. Att'y Gen. 11-029 -- contractor locations and BPOL tax on federal property.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-62

Original ruling text

April 21, 2020

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business, Professional and Occupational License Tax

Dear *:

This final state determination is issued upon the application for correction filed by you on behalf of * (the “Taxpayer”), with the Department of Taxation. You appeal assessments of the Business, Professional and Occupational License (BPOL) tax issued to the Taxpayer by *** (the “County”) for the 2017 through 2019 tax years.

The BPOL tax is imposed and administered by local officials. Virginia Code § 58.1-3703.1 authorizes the Department to issue determinations on taxpayer appeals of BPOL tax assessments. On appeal, a BPOL 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, regulations 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 Taxpayer provided support services for the United States military at a location based in the County during the tax years at issue. The Taxpayer had 14 employees who were exclusively located and performed all activities at that location.

The County audited the Taxpayer and determined that the Taxpayer should have reported taxable gross receipts to the County. As a result, assessments were issued. The Taxpayer appealed to the County. The County concluded that the Taxpayer’s gross receipts were taxable because they were attributable to services performed at a definite place of business in the County. The Taxpayer filed an appeal with the Department, contending its activities within the County were insufficient to establish a definite place of business.

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 thirty consecutive days or more.” A definite place of business can include a location leased or otherwise obtained from another entity on a temporary or seasonal basis. Some characteristics that may help determine whether the location is a definite place of business include, but are not limited to, the following on-site 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), P.D 01-215 (12/12/2001), P.D. 10-277 (12/21/2010).

Although these activities are indicative of a definite place of business, in an economic environment that is constantly evolving, all facts and circumstances concerning the nature of a taxpayer's operations must be considered. In P.D. 01-215, the Department found that a computer consultant whose work was performed at client’s locations on a regular and continuous basis could establish definite places of business at such locations. Similarly, in P.D. 11-161 (9/20/2011), the Department advised that a Taxpayer that maintained a regular and continuous presence at its client’s location for more than 30 consecutive days established a definite place of business even through it did not advertise, own business or personal property or have a telephone at its customer’s location.

The Taxpayer argues that its definite place of business was controlled by the terms of the contract, which defined its definite place of business as the Taxpayer’s home office. However, the Code of Virginia controls the determination of the Taxpayer’s definite place of business for purposes of the BPOL tax, not the contract.

In 1978-79 Op. Va. Att’y Gen 279, a maintenance contractor serviced hospitals and office buildings. The Attorney General opined that a continuous and regular course of dealing at a customer’s location would seem to constitute a definite place of business in such location when employees are “more or less” permanently assigned to work at the location for the duration of the contract. In this case, the Taxpayer and its employees were engaged in work on a continuous basis at the client’s location, which was mandated by the terms of the contract, and exceeded 30 consecutive days during all tax years at issue.

Situs

In determining the situs of gross receipts, Virginia Code § 58.1-3703.1 A 3 a (4) and § 58.1-3703.1 A 3 b state that receipts from services are to be taxed based on (in order): (i) the definite place of business at which the service is performed, or it not performed at any definite place of business, (ii) the place from which the service is directed or controlled; or as a last resort (iii) when it is impossible or impractical to determine where the service is performed or from where the service is directed or controlled, by payroll apportionment between definite places of business. In this case, gross receipts were attributable to services performed at the Taxpayer’s definite place of business in the County.

Federal Jurisdiction

The Taxpayer believes that because the work was being performed on a military base owned by the federal government, the City was barred from assessing a BPOL tax on activities carried out on the property. In Op. Va. Att’y Gen . 11-029 (2/24/2012), the Attorney General concluded that the City of Virginia Beach was authorized to impose its BPOL tax on gross receipts derived from activities conducted exclusively on federal property. The Attorney General reasoned that the BPOL tax came within the protection of the Buck Act, codified at 4 U.S.C. §§ 105-110, which prevents persons from being relieved of state and local tax obligations that arise from transactions occurring, or services being performed, in federal areas.

DETERMINATION

Based on the facts presented, the Taxpayer’s continuous course of dealing in the County created a definite place of business. As such, the gross receipts generated from the services provided at that definite place of business were subject to BPOL tax by the County. The fact that the Taxpayer was providing services on federal property has no bearing on the outcome of this appeal. Therefore, the assessments are upheld.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/2215.A

Related Documents

97-201

01-215

10-277

10-278

11-192

11-161