Business, Professional and Occupation License (BPOL) Tax in Fauquier County

 

The BPOL tax was imposed in Fauquier County in 1989.  The last major change to the BPOL Ordinance was as a result of action by the Board of supervisors in 2000 which revised the tax rate structure of five categories of business that set the rates to match the then published rates of the Town of Warrenton.  Those rates are currently in effect and are set at 50% of the State authorized maximums.  Subsequent to that, the entire ordinance was revised to conform to the changes mandated by the General Assembly during its 1996 session.

 

Under Chapter 720 of the 1996 Acts of the General Assembly, the legislature adopted several amendments to the enabling provisions of the Code of Virginia relating to the administration and assessment of the BPOL tax.  During that session, several counties, Commissioners of the Revenue, and Virginia Department of Taxation representatives conferred and through the Virginia Municipal League, developed a uniform model local Ordinance.  This model ordinance was used to develop the ordinance Fauquier County operates under today.  While most changes were mandatory, certain provisions were permissive and required Board direction before enacting the ordinance.

 

Legislative permission allows that certain localities may either impose a fee on Businesses that gross less than $100,000 or exempt them.  Under the enabling legislation, localities are not able to impose fees for the issuance of a license, in addition to license taxes.  Based on the County’s population, the Code of Virginia required that businesses, subject to licensure, with gross receipts of $100,000 and under be exempt from the license tax.  The exemption applies to the tax rate only; it does not apply to the fee for issuance of the license and all businesses may still required to file an application for a license. The Code of Virginia permits the County to charge a fee, on all business, for issuing a license in an amount not to exceed $50.  Fauquier County currently does not impose this fee.

 

The enabling legislation also permitted localities to exempt in whole or part, the design, development or other creation of software.  Based on the survey of other jurisdictions, very few are exempting software developers from the tax.

 

 

Below is a summary of mandatory changes that were required under the uniform model ordinance and incorporated into the Fauquier County Ordinance:

 

ADMINISTRATIVE

·        Provided that only one penalty in the amount of 10 percent will be imposed when both the applications and the payment are late; unless there is a history of noncompliance.  Both penalties are levied, as appropriate, under current law.

·        Granted the Commissioner of the Revenue or Treasurer, as appropriate, more latitude in waiving penalties if the failure to file or pay was not the fault of the taxpayer.  Also provides definitions of “fault”.

·        Required the payment of interest on refunds at the same rates charged for delinquent payments.

·        Allowed for mutual agreement on extensions for the time to collect or assess taxes under certain cases.

·        Codified certain taxpayer rights in the areas of appeals and interpretative rulings.  Taxpayers may now contest an audit finding to the State Tax Commissioner or obtain a written ruling on the interpretation of the uniform ordinance or BPOL guidelines.  The appeal decision may be binding or advising based on certain conditions.

·        Required the suspension of collection activity while an appeal is pending either with the Commissioner of Revenue or the State Tax Commissioner.

·        Created a separate class of professions and defines professional.

·        Added certain definitions for “situs”, “engaged in business” and clarifies the taxation of receipts attributable to another state.

·        Required a uniform filing date of March 1, we had March 15, same as business personal property. This change was not beneficial.

EXCLUSIONS:

 

·        Established a threshold of $100,000 in gross receipts before a business is subject to the BPOL tax by rate.

·        Excluded receipts of a charitable nonprofit organization, except for unincluded business income, which is taxed by the IRS.  The expansion of the current Code is to include 501(c) (3) organizations and organizations to which contributions are deductible by the contributor under Section 170 of the Internal Revenue Code.

·        Businesses $100,000 and above have no fee and no exclusions.

 

TAX RATE DISCUSSION

 

In the discussions regarding the BPOL tax, there was mention of the effect of creating a single uniform tax rate for all major classifications of businesses.  This tax rate would be established to generate a revenue neutral position for the county.  The table below lists the four major business classification with their current (2005) data and a chart depicting the effect of a uniform rate across these classes.

 

Major Business Classifications

Current Gross Receipts

Current Revenue

Current Tax Rate

Uniform Rate All Classes

Effect of Uniform Rate

 

Contractors/Developers

$528,594,552

$449,305.37

0.0850

0.1200

41.2%

Increase

Retail

$301,634,170

$301,634.17

0.1000

0.1200

20.0%

Increase

Business, Personal & Repair Services

 

 

 

 

 

 

Hotels, Mineral Extraction

$150,961,700

$282,298.38

0.1870

0.1200

-35.8%

Decrease

Professional Services

$54,005,163

$160,665.36

0.2975

0.1200

-59.7%

Decrease

 

 

 

 

 

 

 

 

$1,035,195,586

$1,193,903.28