Current through Register Vol. 41, No. 3, September 23, 2024
A. Generally, gross receipts for license tax
purposes exclude any amount not derived from the exercise of the licensed
privilege to engage in a business or profession in the ordinary course of
business. The following is a partial list for illustrative purposes:
1. Amounts received and paid to the United
States, the Commonwealth or any county, city or town for the Virginia retail
sales or use tax, for any local sales tax or any local excise tax on
cigarettes, or amounts received for any federal or state excise taxes on motor
fuels;
2. Amounts representing the
liquidation of debt or the sale of a capital asset;
3. Amounts allowed by a business to its
customers for returns and allowances;
4. Receipt of loan proceeds by a licensee
where it is the obligor;
5. Return
of principal either on a loan to a licensee-creditor or where a licensee sells
a capital asset;
6. Rebates or
discounts taken or received on account of purchases by the licensee;
7. Certain withdrawals from inventory;
or
8. Investment income not
directly related to an entity's exercise of its licensed privilege, unless the
entity's licensable activity is that of financial services.
B. Examples:
1. A lawyer is advanced funds by his client
to pay court filing fees and the cost of a court reporter. He also receives
payment from City A on account of a refund of excess taxes paid by his client.
With his client's permission, lawyer deducts from the tax refund the cost of
his services for handling the tax case, including telephone tolls, meals,
copying and certain other charges the client has agreed to reimburse. The
lawyer is taxable on the amount of his fee including any amount separately
billed to the client. Amounts advanced to pay expenses on the client's behalf
are not gross receipts, nor is the amount of the tax refund because it is
received by the lawyer as the client's agent. "Trust fund" receipts,
technically speaking, are not derived from the exercise of a licensable
privilege; therefore, "trust fund" receipts do not constitute gross
receipts.
2. A lawyer handles a
real estate closing for a real estate developer and receives the sale proceeds,
net after costs withheld by the purchaser's attorney. He mails the proceeds,
net of his fee, to the real estate developer. The lawyer is taxable only on his
fee, and not on the full sales proceeds of the transaction. The developer is
taxable on the whole of the proceeds of the transaction, including the fee
withheld by the attorney.
3. Corp.
C, in County D, Virginia purchases a portfolio of loans for its own account. So
long as the corporation's activities in the locality are limited to purchasing
and holding portfolios for its own account, there is no tax.
4. Same facts as in Example 3 except that
Corp. C sells interests in its investment pools through public offerings. There
is no tax. Proceeds attributable to capital transactions in the nature of
raising capital in the equity markets are not subject to BPOL tax.
C. Section 58.1-3732.2 of the Code
of Virginia provides an exclusion for certain gross receipts of real estate
brokers. Section 58.1-3732.3 of the Code of Virginia provides an exclusion for
certain gross receipts of providers of funeral services. Section 58.1-3732.4 of
the Code of Virginia provides an exclusion for certain gross receipts of
certain staffing firms.
Statutory Authority
§ 58.1-3701 of the Code of
Virginia.
