Current through Register Vol. 41, No. 3, September 23, 2024
A.
Multiple businesses conducted by a person at a single location are required to
obtain a separate license for each business. If an entity has multiple
businesses at one location with each separate business licensed, it would then
count each separate licensed business for purposes of the threshold in order to
trigger the BPOL tax under § 58.1-3706 of the Code of Virginia. For
purposes of the license fee imposed under § 58.1-3703 of the Code of
Virginia, it is within the locality's discretion whether or not to assess
multiple fees for the issuance of multiple licenses where one entity exercises
several licensable privileges at one location; however, every license issued
carries with it a separate rate threshold. Examples:
1. XYZ Co. operates a business at one
location in City A at which automobiles are repaired and auto parts are sold.
City A requires XYZ to obtain a retail business license and also a repair
services license, charging a $100 fee for each license. XYZ Co. has two
thresholds for purposes of establishing gross receipts for the applicability of
the BPOL tax, one for the repair business and one for the retail
business.
2. Same facts as in
Example 1, except that XYZ Co. operates several business locations in City A at
which automobiles are repaired and auto parts are sold. XYZ will be required to
obtain two licenses for each location in City A and each licensable business
will have a separate threshold for purposes of establishing gross receipts for
the applicability of the BPOL tax.
3. Same facts as in Example 1, except that
the locality chooses to charge the business only one fee for the issuance of
two licenses. As in Example 1, XYZ Co. would have two thresholds for purposes
of establishing gross receipts for the applicability of the BPOL tax, one for
the repair business and one for the retail business.
B. Each such business must be clearly
identifiable as a separate business and not merely activities ancillary to the
primary business. An activity for which no separate charge is made is presumed
to be ancillary to the activity for which a charge is made, but separately
stating charges for different activities does not create a presumption that
each such activity is a separate business. Gross receipts attributable to any
ancillary activities are taxable as part of the primary licensable business.
Gross receipts that are not ancillary to a licensable business must rise to the
level of a separate business to be taxable. The following are examples of
activities that may be ancillary or de minimis:
1. A merchant (retail or wholesale) offers an
extended warranty with the merchandise it sells. The warranty covers parts and
labor, and may include replacement of defective merchandise. Although a
separate charge is made for the warranty, at the time of sale it is impossible
to determine how much of the charge will be used (if any) for labor, parts, or
replacement merchandise. The charge for an extended warranty is ancillary to
the sale of the merchandise.
2. A
retail merchant offers to deliver the merchandise it sells for a fee. The
merchant has its own delivery trucks, but also contracts with third parties to
make some of the deliveries. The fee charged to the customer varies with
distance, but does not depend on whether the merchandise is delivered by the
merchant or a third party. Because the delivery service is only offered with
respect to merchandise sold by the merchant, the delivery charge is ancillary
to the merchandising business.
3. A
repair service must occasionally replace small, inexpensive parts. It does not
separately charge for the parts. The provision of parts is ancillary to the
repair service.
4. A firm offers
repair service at numerous offices in several states. At its headquarters the
firm employs lawyers and certified public accountants to assist in managing its
operations. The firm also employs a real estate professional, engineer and
architect to find and develop locations for new offices. None of these
employees offer their services to anyone other than the firm, and the firm does
not separately charge anyone for the activities of its professional employees.
The activities of these employees are ancillary to the firm's repair business
and do not generate gross receipts.
5. A retail merchant offers installment
contracts in conjunction with the sale of its merchandise. Each contract
provides for the payment of interest and collection costs, including attorneys
fees of 20% of any delinquent amount collected by legal action.
a. Interest received pursuant to the
installment sales contract is ancillary to the retail sale of the
merchandise.
b. If the merchant
employs a salaried staff attorney to collect delinquencies under the
installment sales contract, any amounts collected would be ancillary to the
retail sale of merchandise. (But see
23VAC10-500-90 for the impact of
the cash or accrual method of accounting.)
C. Localities may permit, but may not
require, a taxpayer to elect any of the following:
1. Multiple businesses conducted at a single
location may be taxed under a single license if all are taxable at the same
rate;
2. Multiple businesses
conducted at a single location may be taxed at the highest rate if the
businesses are subject to tax at different rates; or
3. A single business may be issued separate
licenses for its primary business and one or more ancillary activities that
would be taxed at a different rate if the ancillary activities constitute a
separate business.
D.
The following are examples of multiple businesses that may be required to
obtain multiple licenses:
1. When a merchant
conducts both a wholesale and a retail business, the merchant is subject to the
retail license tax on the retail portion of the business and subject to the
wholesale license tax on the wholesale portion of the business. However, the
locality may permit but not require the merchant to pay the license tax as a
retailer on both the retail and wholesale portions of the business.
2. Any person engaged in repair service who
sells parts as part of the repair service is engaged in a licensable service
business. If the person sells parts in addition to the repair service, he is
engaged in retail or wholesale sales as to the sales of the repair
parts.
3. Any boardinghouse or
lodging house that also furnishes or sells food or merchandise for compensation
may be engaged in retail sales as to the sale of the food or
merchandise.
4. An optometrist who
also fills prescriptions for or fits corrective lenses and eyeglass frames in a
regular course of dealing is engaged in two licensable businesses. The
optometrist is rendering a professional service when examining eyes and is
conducting business as a retail merchant when filling prescriptions and fitting
corrective lenses and eyeglass frames.
5. Any practitioner of a profession who sells
goods, wares or merchandise in connection with the practice of the profession
may be engaged in making retail sales depending on the nature of the products
sold and the service performed.
6.
A medical doctor who engages in the sale of drugs or other merchandise as well
as the practice of medicine is a merchant as to those sales. However, a medical
doctor is not a merchant as to the drugs used in giving an immunization to a
patient.
7. A chiropodist who sells
shoes in connection with his practice is a retail merchant as to such
sales.
8. An attorney practices law
in Town A, Virginia, and has receipts from clients for trying cases, providing
advice, lobbying, periodically teaching law at Town A Law School, the sale of
stock received as a fee for incorporating a business, interest from the bank on
his business accounts, and from gambling during a client-sponsored trip.
Receipts from clients for trial work, legal advice, lobbying, the value of
stock received as a fee in the year received are all taxable as gross receipts.
Teaching law, the sale of stock as a fee, interest earned from the business
accounts at the bank and gambling winnings are not taxable because the lawyer
is not regularly engaged in these activities as a business and these activities
are not ancillary to the practice of law. However, if some of the nontaxable
activities were conducted on a regular basis as defined in the statute, they
might constitute the conduct of business and be subject to separate
licensure.
Statutory Authority
§ 58.1-3701 of the Code of
Virginia.
