Current through Register Vol. 41, No. 3, September 23, 2024
A. Section 58.1-3703 of the Code of Virginia
authorizes localities to enact an ordinance levying a local license (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 § 58.1-3703.1 of the Code of Virginia. Further,
§§ 58.1-3703 and 58.1-3706 of the Code of Virginia 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.
B. Localities may levy license taxes at rates
above the statutory maximum only if subject to the "rollback" provisions of
§ 58.1-3706B of the Code of Virginia. Any locality that had, on January 1,
1978, a license tax rate for any of the categories listed in § 58.1-3706A
of the Code of Virginia that is higher than the maximum prescribed in §
58.1-3706A of the Code of Virginia, may maintain a higher rate in such
category, but no higher than the rate applicable on January 1, 1978, subject to
the following conditions:
(i) a locality may
not increase a rate on any category that is at or above the maximum prescribed
for such category in § 58.1-3706A of the Code of Virginia;
(ii) if a locality increases the rate on a
category that is below the maximum, it shall apply all revenue generated by
such increase to reduce the rate on a category or categories that are above
such maximum; and
(iii) a locality
shall lower rates on categories that are above the maximums prescribed in
§ 58.1-3706A of the Code of Virginia for any tax year after 1982 if it
receives more revenue in tax year 1981, or any tax year thereafter, than the
revenue base for such year. The revenue base for tax year 1981 shall be the
amount of revenue received from all categories in tax year 1980, plus one-third
of the amount, if any, by which such revenue received in tax year 1981 exceeds
the revenue received for tax year 1980. The revenue base for each tax year
after 1981 shall be the revenue base of the preceding tax year plus one-third
of the increase in the revenues of the subsequent tax year over the revenue
base of the preceding tax year. If in any tax year the amount of revenues
received from all categories exceeds the revenue base for such year, the rates
shall be adjusted as follows: the revenues of those categories with rates at or
below the maximum shall be subtracted from the revenue base for such year. The
resulting amount shall be allocated to the category or categories with rates
above the maximum in a manner determined by the locality, and divided by the
gross receipts of such category for the tax year. The resulting rate or rates
shall be applicable to such category or categories for the second tax year
following the year whose revenue was used to make the calculation.
C. While localities must follow
the exemptions, rates, classifications and thresholds as set forth in Chapter
37 (§ 58.1-3700 et seq.) of Title 58.1 of the Code of Virginia, their
local ordinances may:
1. Set tax rates at
levels lower than those authorized by state law, or select the classifications
to tax or not tax;
2. 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;
3. Establish graduated tax rates for any
classification or subclassification so that the rate increases or decreases
with volume, as long as no rate exceeds the statutory maximum for the
classification under state law; and
4. Establish a threshold amount of gross
receipts below which no tax will be imposed, or a maximum tax for any
classification.
D.
Localities may establish classifications and subclassifications based upon
reasonable distinctions in municipal policy, and through the establishment of
classifications and subclassifications, localities may choose to exempt certain
categories of taxpayers.
E. Section
58.1-3704 of the Code of Virginia provides that no locality shall be required
to impose either a license tax on merchants or a tax on the capital of
merchants.
Statutory Authority
§ 58.1-3701 of the Code of
Virginia.
