Was a federally registered interstate motor carrier exempt from county BPOL tax when its local office also arranged hauling by independent providers?

Plain-English summary

The interstate trucking company qualified for Virginia's motor-carrier BPOL exemption. Its county office solicited freight business and arranged transportation with unrelated providers when the company could not use its own equipment. The county viewed that local activity as a taxable freight-forwarding business service.

The company documented that it was formerly certified by the Interstate Commerce Commission and currently registered with the relevant federal transportation authority. Virginia's exemption applied to a motor carrier with the required governmental certification or registration; it was not necessarily limited to receipts from physically carrying freight with the carrier's own trucks.

Hiring independent truckers did not destroy the company's exemption. Those independent operators would need to qualify separately for their own exemption, but the qualifying motor carrier remained exempt.

The Commissioner directed the county to abate the assessments and refund all BPOL tax paid for 2008 through 2011 on gross receipts generated at the county office.

Common questions

Q: Did using independent transportation providers make the company a taxable freight forwarder?
A: No. The evidence established that the taxpayer itself qualified as a motor carrier for the statutory exemption.

Q: Was only revenue from the company's own trucks exempt?
A: No. The ruling said the carrier-status exemption was not necessarily limited to receipts from carrying property or passengers itself.

Q: Did the independent truckers automatically share the exemption?
A: No. An independent contractor had to qualify separately.

Citations and references

• Va. Code §§ 58.1-3703(C)(1) and 58.1-3703.1.
• 49 U.S.C. § 13102(8).
• Virginia Public Documents 99-84 (April 22, 1999) and 11-42 (March 16, 2011).
• 1997 Op. Va. Att'y Gen. 183.

Subject

Taxpayer is a motor carrier exemption from BPOL tax

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-172

Original ruling text

November 2, 2012

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business, Professional and Occupational License Tax

Dear *:

This final state determination is issued upon the application for correction filed by you on behalf of * (the "Taxpayer") with the Department of Taxation. You appeal an assessment of Business, Professional and Occupational License (BPOL) taxes issued to the Taxpayer by the *** (the "County") for the 2008 through 2011 tax years.

The BPOL tax is imposed and administered by local officials. Virginia Code § 58.1-3703.1 authorizes the Department to issue determinations on taxpayer appeals of BPOL tax assessments. On appeal, a BPOL tax assessment is deemed prima facie correct, i.e. , the local assessment will stand unless the taxpayer proves that it is incorrect.

The following determination is based on the facts presented to the Department summarized below. The Code of Virginia section and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site.

FACTS

The Taxpayer, an interstate trucking company headquartered in * (State A), maintains a definite place of business in the County. The office in the County primarily arranges for the transportation of goods with unrelated transportation providers when the Taxpayer is unable to provide transportation services with its own equipment. It also solicits potential customers and new tonnage from existing customers within an assigned territory.

The Taxpayer filed BPOL tax returns for the 2008 through 2011 tax years with the County and deducted those gross receipts passed through to third party independent transportation providers. Under audit, the County disallowed the deductions and issued assessments. The Taxpayer filed an appeal requesting a refund of all BPOL taxes paid, maintaining it is exempt from the BPOL tax. In its final local determination, the County held that the Taxpayer is not operating as a motor carrier in the County, but is providing a business service as a freight forwarder. Accordingly, the County denied the Taxpayer's request for refund. The Taxpayer appeals the County's final determination to the Tax Commissioner, contending it is a motor carrier and, therefore, exempt from BPOL taxation.

ANALYSIS

Virginia Code § 58.1-3703 C 1 provides that no county, city, or town shall impose a license fee or levy any license tax on "any public service corporation or any motor carrier, common carrier, or other carrier of passengers or property formerly certified by the Interstate Commerce Commission or presently registered for insurance purposes with the Surface Transportation Board of the United States Department of Transportation, Federal Highway Administration . . . ." Unlike other exemptions from the BPOL tax that apply to the privilege of conducting a particular business, the exemption in Va. Code § 58.1-3703 C 1 applies to a "motor carrier, common carrier, or any carrier of passengers or property" so certified by an authoritative agency of the federal or state government. As such, this exemption from the BPOL tax is not necessarily limited to gross receipts generated from the activity of carrying property or passengers.

The County asserts that the Taxpayer is not operating as a motor carrier in the County. In its final determination, the County determined that the Taxpayer was a "freight forwarder." Virginia law does not define freight forwarder. However, under 49 U.S.C. § 13102(8), a freight forwarder is an entity that provides transportation of property for compensation and conducts a number of other activities in the normal course of business. These activities include:

1. assembling and consolidating, or providing for assembling and consolidating, shipments and performs or provides for break-bulk and distribution operations of the shipments;

2. assuming responsibility for the transportation from the place of receipt to the place of destination; and

3. using for any part of the transportation a carrier subject to jurisdiction under this subtitle.

The Taxpayer argues that it did not meet all the elements of a freight forwarder in 49 U.S.C. § 13102(8). Instead, the Taxpayer asserts that it is a motor carrier formerly certified by the Interstate Commerce Commission and has provided documentation to show that it is currently registered with the Surface Transportation Board of the United States Department of Transportation, Federal Highway Administration.

In 1997 Op. Va. Att'y Gen. 183, the Attorney General explained the application of the exemption for motor carriers under Va. Code § 58.1-3703 C 1. Further, the Department has determined that a truck driver operating as an independent contractor for the motor carrier would be required to qualify for the exemption separately from the motor carrier. See Public Document (P.D.) 11-42 (3/16/2011) and P.D. 99-84 (4/22/1999). Under these rulings, the Department has acknowledged that a motor carrier could qualify for the exemption from the BPOL tax even when it hires independent truckers to haul property on behalf of such motor carrier.

DETERMINATION

Based on the evidence, I find that the Taxpayer is a motor carrier for purposes of the exemption from the BPOL tax pursuant to Va. Code § 58.1-3703 C 1. As such, the County is prohibited from imposing BPOL tax on the Taxpayer's gross receipts generated at the definite place of business in the County. Accordingly, the County is instructed to abate the BPOL tax assessments issued to the Taxpayer and to refund all BPOL tax paid for the 2008 through 2011 tax years.

If you have any questions regarding this determination, you may call * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5075772620.B