Taking the Edge off of the BPOL Tax Laws: Proposed HB 110

Posted on January 20, 2010 by Heidi Meinzer

Virginia Delegate Mark Cole is up to it again, proposing another amendment to the business, professional and occupational (“BPOL”) tax laws. Delegate Cole sits on the House of Delegates Finance Committee, and represents the 88th District, spanning Stafford, Spotsylvania and Fauquier Counties and the Town of Remington. As you may recall from my last blog post on proposed business tax reforms in the Commonwealth, he sponsored HB 57, which would freeze BPOL tax rates, and prohibit those localities that do not have a BPOL tax from imposing one.

Currently, the BPOL tax is targeted at a business’s gross receipts, defined by Virginia Code Section 58.1-3700.1 as a company’s “whole, entire, total receipts, without deduction.” Delegate Cole’s proposal, HB 110, would allow localities to decide whether to impose their BPOL tax on a business’s gross receipts, or on its Virginia taxable income.  HB 110 provides two methods to calculate "Virginia taxable income," depending on which is applicable to the business -- a calculation under Virginia Code Section 58.1-322 (Virginia taxable income for residents) or under Virginia Code Section 58.1-402 (Virginia taxable income for corporations). 

Undoubtedly, localities may be skittish of these changes in the face of some very hard economic times and dwindling local budgets. However, businesses should view HB 110 as a welcome change to take the sting out of what many consider to be the harshest aspect of the BPOL tax – the notion of taxing gross receipts with no ability to consider adjustments or deductions.
 

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What To Do When Cash-Strapped States and Localities Come Knocking on Your Door

Posted on September 1, 2009 by Heidi Meinzer

The economy has affected the budgets of not just individuals and companies, but also state and local governments. In these hard economic times, governments are facing serious shortfalls of revenue, made worse by the plunging value of real estate, shriveling sources of funding and growing budget deficits.  In response, states and municipalities have become much more proactive about checking and enforcing compliance with all taxes, including business taxes.

You are likely aware of business license requirements, but  you may not realize that you could be required to obtain a nonresident construction license if you work in other states, such as Maryland. Additionally, you could be subject to further business tax obligations above and beyond your business license fee, such as sales or gross receipts taxes and use taxes.

One of the most notable examples of business taxes can be found in Virginia, where counties, cities and towns are authorized to levy “BPOL” (Business, Professional and Occupational License) taxes. BPOL taxes are geared towards a company’s gross receipts, making these taxes controversial and often the subject of political attack. Most local governments in Virginia, including those in Northern Virginia, have opted to impose BPOL taxes. 

Generally, BPOL taxes are levied where the company has its “definite place of business.” Special provisions apply to contractors, including one provision that allows a locality outside the contractor’s “definite place of business” to impose BPOL taxes if the contractor does more than $25,000 of business in a year in that locality. Because there is no centralized administration for BPOL taxes, you must work with each locality to ensure compliance.

In an effort to encourage businesses and individuals who are behind on or non-compliant with payments, some jurisdictions will extend a form of amnesty. Starting September 1, 2009 and extending until October 30, 2009, Maryland is extending Tax Amnesty to business taxpayers. You can find more information and an application on the Comptroller of Maryland’s website.

The District of Columbia has an ongoing “Voluntary Disclosure Program” through its Office of Tax and Revenue (“OTR”). With this Program, the District may agree to a three- to five-year look-back period and may waive civil penalties if the tax and interest are paid in full. You can find information and a form Voluntary Disclosure Agreement on OTR’s website.

Because state and local governments are currently hungry for tax revenue and actively enforcing compliance with local taxes, it is vital to ensure that you are in full compliance with your licensing and business tax obligations.

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