by Terry Barrett, CPA | Tax Senior Manager | State & Local Tax Team | December 2015
Shortly after January 1, businesses in Virginia may find in their mailboxes notices from their local governments regarding their business license tax renewals. The due date for filing the business license applications and paying the taxes due generally is March 1 for the City of Richmond and surrounding counties.
That provides businesses with two months to turn around the returns. We caution you to not wait until the last minute to focus on this. Many do and wind up paying either too much or not enough. Either way, that is not good.
In this article, we provide some BPOL basics and generalities. While there are uniform ordinance provisions that all localities must follow, localities do have some lee-way in their actual application and interpretation of BPOL. Thus, one must be mindful of this if operating in more than one locality.
The business license tax, technically called the Business, Professional and Occupational License Tax (or “BPOL” for short), is imposed by all cities and many counties and towns in Virginia for the privilege of doing business within the locality. The tax is generally imposed on individuals and businesses that are engaged in a business, trade profession, occupation or calling from a “definite place of business” in the particular locality. This “definite place of business” may be an office, a warehouse, store, or it may be the home of a self-employed person. Even a consultant who spends a lot of time traveling from client to client and who has no real office per se but who keeps all her records in her car is subject to BPOL – her home is considered her business location. Businesses that have various offices in various localities may be subject to BPOL in each of those localities, depending upon what they are doing and where they are doing it.
BPOL may be a license fee or tax, or possibly both, depending upon the locality and the volume of receipts. The following illustrates the City of Richmond’s current BPOL fee structure:
- If the basis of the tax is less than $5,000 – no tax or fee is due
- If the basis of the tax is between $5,000 and $99,999.99, a flat fee of $30 is due
- If the basis is $100,000 or more, the tax due is the basis multiplied by the tax rate applicable to the business classification. [Source: City of Richmond website]
The taxable basis for BPOL is the gross receipts of a business – “the whole, entire, total receipts, without deduction” — not its net income. Thus, BPOL generally is due regardless of whether a business earns a profit. However, notwithstanding the statutory definition of “gross receipts” there are actually some deductions and exclusions from taxable “gross receipts.” A careful review and consideration of these may help reduce the BPOL tax due.
The tax rate for BPOL generally is based upon a business’ classification – whether a retailer, wholesaler, services provider, contractor, etc. The business’ receipts are sitused or attributed to localities based upon that classification. For example, a retailer’s gross receipts are attributed to the place where the sales solicitation occurs, or if solicitations are not made at any definite place of business the place where the solicitation activity is directed or controlled. For wholesalers where the tax is measured by purchases rather than gross receipts (this is unique to wholesalers in some localities), the situs is the place from which delivery of goods are made to customers. For service providers, the gross receipts are attributed to the place where the services are rendered or if the services are not performed at any definite place of business, the place where services are directed or controlled. Special rules may apply to contractors, sellers of hardware/software to the government, and others. And, it is noteworthy that some businesses may have more than one classification. A change in classification(s) could possibly result in some BPOL savings – and possibly on a retroactive basis (refunds).
In recent years, some localities have sought BPOL relief or incentives for new or small businesses to encourage business location therein. Legislation has been passed by the General Assembly to allow localities to adopt a business license incentive program that may include for qualifying businesses:
- (i) an exemption, in whole or part, of license taxes;
- (ii) a refund or rebate, in whole or in part, of license taxes paid; or
- (iii) other relief from license taxes that is not prohibited by state or federal law.
In addition, a locality may provide BPOL relief by imposing BPOL on a business’ Virginia taxable income rather than its gross receipts. Further, for taxable years on or after January 1, 2012, any locality may exempt, by ordinance, license fees or license taxes on any business that does not have an after-tax profit for the taxable year. These certainly are factors that should be considered by businesses when locating to a jurisdiction.
Again, we advise you not wait until the last minute to complete your BPOL return. With some careful analysis of your business activities and income it may be possible to reduce your BPOL taxes. In addition, possible refund opportunities may exist for prior years. On the flip side, too, if you are in a locality that imposes BPOL and you have not registered/been paying the tax, now may be a good time to correct that oversight.
Please contact your Keiter advisor for more information on this issue or email@example.com | 804.747.0000.
 Surrounding counties as referenced herein include Chesterfield, Goochland, Hanover, and Henrico. But, note that Hanover imposes business license tax requirements only on certain businesses such as contractors, electric contractors, plumbers, and steam fitters (source: Hanover County website).
 Va. Code § 58.1-3703.
 Va. Code § 58.1-3703.1.
 Ruling of the Tax Commissioner, PD 01-210 (December 12, 2001).
 Va. Code § 58.1-3700.1.
 Va. Code § 58.1-3703.1 A 3.
 Va. Code § 58.1-3703 D.
 Va. Code § 58.1-3702.
 Va. Code § 58.1-3703 E.
Terry Barrett specializes in state and local tax concerns for her clients. She has over 30 years of experience working in the public and private accounting sector. She is a graduate of Virginia Commonwealth University. You can read more of Terry’s state and local tax insights here.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.