Did a federal-contract joint venture create a Virginia definite place of business merely by using a member's office address for nine months?

Subject

Definite place of business; Situs gross receipts without employees

Plain-English summary

Virginia advised that the joint venture had no definite place of business in the locality and therefore no 2009 BPOL filing requirement. The venture used a member's Virginia corporate address for nine months, but had no employees or property there, no phone or directory listing, no name on the building, and no business records at the site. Its records were kept in another state.

A definite place of business requires a regular and continuous course of dealing at a location for at least 30 consecutive days. A phone, mail, staff, records, advertising, and other on-site activity can be evidence, but the full operational facts control.

On these facts, sharing office space and an address did not establish regular and continuous business activity. Because there was no definite place of business, the venture did not need a local BPOL license or return, and Virginia did not decide how its gross receipts would otherwise be sitused.

What this means for you

• A mailing or corporate address is evidence, but not automatically a definite place of business.
• Document where employees work, records are kept, property is located, mail is received, and the business holds itself out publicly.
• BPOL is imposed and administered under local ordinances.
• Gross-receipts situs becomes relevant only after a local taxable presence and activity are established.

Common questions

Did the member's employees perform the federal work in Virginia?

Yes, but they were employees of the member, which billed the joint venture. The joint venture itself had no employees or property at the shared address.

Did Virginia decide where the joint venture's receipts belonged?

No. Without a definite Virginia place of business, there was no BPOL obligation requiring a situs decision.

Citations and references

• Va. Code §§ 58.1-3701 and 58.1-3700.1.
• 23 VAC 10-500-30.
• P.D. 97-201.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-49

Original ruling text

April 4, 2011

Re: Request for Advisory Opinion

Business, Professional and Occupational License Tax

Dear *:

This is in response to your letter in which you request an advisory opinion regarding the application of the Business, Professional and Occupational License (BPOL) tax to a joint venture (the "Taxpayer") formed to perform services for the federal government. I apologize for the delay in the Department's response.

The local license fee and tax are imposed and administered by local officials. Virginia Code § 58.1-3701 authorizes the Department to issue advisory opinions on local license tax issues. The following opinion has been made subject to the facts presented to the Department summarized below. Any change in these facts or the introduction of new facts may lead to a different result.

The Code of Virginia sections, regulation and public documents cited are available on-line at www.tax.vir,ginia.gov in the Tax Policy Library section of the Department's web site.

FACTS

The Taxpayer, formed as a joint venture in * (State A), is a limited liability company with four members. The Taxpayer took over federal contracts from one of the members (Member A) to perform business services for the federal government. The services are performed by employees of Member A at Member A's facilities in Virginia and other states. Member A bills the Taxpayer for the services it performs, which in turn, bills the federal agency for the services plus a markup.

The Taxpayer's corporate address was at Member A's definite place of business for nine months in 2009. While the Taxpayer's business address was in Virginia, it had no employees or property. It did not have a phone number or an address listed in the phone book. It did not have its, name on the building or listed in the building directory. The Taxpayer's business records were kept at a facility in * (State B). In January 2010, the Taxpayer's address was changed to the State B facility.

The Taxpayer requests an advisory opinion as to whether it has a definite place of business in Virginia. The Taxpayer asks whether it had a BPOL filing requirement for the nine months in 2009 that it was located in the Virginia locality. Finally, the Taxpayer asks how it should it situs gross receipts without employees if it is subject to BPOL tax.

OPINION

Virginia Code § 58.1-3700.1 defines a "definite place of business" as an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more. Some characteristics that may help determine whether the location is a definite place of business include, but are not limited to, the following on­site activities: (1) a continuous presence; (2) having an office with a phone; (3) the reception of mail; (4) having employees; (5) record keeping; (6) and advertising or otherwise holding oneself out as engaging in business at the particular location. See Public Document (P. D.) 97-201 (4/25/1997).

Although these activities are indicative of a definite place of business, all facts and circumstances concerning the nature of a taxpayer's operations must be considered. In this case, the Taxpayer did not have a phone, employees, advertise or otherwise hold itself out as engaging in business at Member A's office during the nine months it shared Member A's corporate address.

Based on the specific facts presented, it is my determination that the presence of the Taxpayer at Member A's office does not constitute a "regular and continuous" business activity. The mere sharing of office space with an entity in a Virginia locality without having employees, property, phone, or in any way advertising or holding itself out as engaging in business in that particular location is not sufficient to create a definite place of business.

Where a Virginia locality has adopted a BPOL ordinance that requires a license, every person engaged in a licensable activity at a definite place of business in such locality must apply for a license. See Title 23 of the Virginia Administrative Code (VAC) 10-500-30. As the Taxpayer had no definite place of business in a Virginia locality, it would not be required to get a BPOL license and it would not be required to file a BPOL tax return for the 2009 tax year. Because the Taxpayer was not subject to the BPOL tax, the issue as to where gross receipts would be sitused need not be addressed.

If you have any question regarding this advisory opinion, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4579981353.B