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Ensuring all available deductions and exclusions are taken

Many Virginia localities impose a Business, Professional, and Occupational License (BPOL) tax based on the gross receipts in the locality. A BPOL return is either an application for a business license or a renewal of the license to do business in the jurisdiction and is typically due on March 1 of each year based on the gross receipts for the prior year. There are various tax rates and classifications depending on the locality. Certain exclusions from gross receipts that are subject to tax are set forth by the Code of Virginia and/or from guidance found in the local ordinances of a jurisdiction. In order to claim some deductions and exclusions, some jurisdictions may require additional supporting worksheets, which are often not attached to the business license renewal form.

Inconsistent practices

This tax raises significant revenue for jurisdictions and is a consistent source of revenue as it is based on gross receipts, regardless of the business’s profitability. In recent years, taxing jurisdictions have become increasingly aware of the tax revenue that can be generated from the VA BPOL Tax. With 95 Counties, 38 independent cities and over one hundred Virginia localities imposing the BPOL tax, we have found that many of these jurisdictions interpret the law differently. This creates issues for taxpayers for a tax that appears to be rather simple.

Based on our experience there also are not consistent practices among jurisdictions with regards to administering the BPOL tax. As a result, BPOL tax on similar businesses can vary significantly from jurisdiction to jurisdiction. It is not only critical to understand the different rules and regulations, but it is vital that companies pay attention to recent court cases and rulings issued by the VA Tax Commissioner. These rulings provide context and guidance for taxpayers, which can lead to potential tax refunds from jurisdictions that may not have been applying the laws correctly.

“As a taxpayer with multiple locations throughout Virginia, you should be on the lookout as jurisdictions are often inconsistent in how they apply the law. We have worked with many companies that overpaid their BPOL tax either due to not keeping abreast of court decisions and Tax Commissioner Ruling or simply not reviewing their past filings to take advantage of the proper tax rate, or deductions and exclusions that are available,” explains James Francis, who leads Altus Group’s Transaction Tax Practice.

Refund opportunities

There are many rulings issued each year by the Virginia Tax Commissioner. These rulings, along with numerous court cases, can provide a unique opportunity for tax savings for multiple years. Savings can be realized for a four-year period by filing an appeal by December 31st (Code of Virginia § 58.1-3980). Localities also provide for payment of interest if the taxpayer is successful in finding that an overpayment of local taxes has been made. Please keep in mind these important dates:

Important Dates:

December 31st: Deadline to file an appeal before the oldest open tax year falls out of statute
January 1st: Virginia BPOL assessment date
March 1st: BPOL Compliance Deadline (for most jurisdictions)
May 1st: BPOL Compliance Deadline (for some jurisdictions)

Proactive compliance

There are many ways of proactively getting ahead of the March 1st deadline. For example, businesses may reach out to jurisdictions prior to the January 1st assessment date to make the jurisdiction aware of a new location and ensure that compliance requirements are met. This is especially important as more jurisdictions move toward online renewals and BPOL tax filing.

Taking a proactive approach to compliance reporting can make the March 1st deadline seamless. When necessary, taxpayers should utilize worksheets to show the application of situsing rules and to always be sure to document support for exclusions and deductions. It is helpful to also know why the BPOL tax base differs from income tax returns and to have an understanding of recent legal provisions.

“Certain jurisdictions can be helpful at answering a new taxpayer’s questions, but it is also critical for a company to understand the current climate and positions taken throughout the State of Virginia with regards to properly reporting taxable gross receipts. Companies must remain attentive to make sure businesses are not overpaying their BPOL tax,” explains Amber Guenther, Senior Manager, who specializes in BPOL tax matters at Altus Group.

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