I install fences and patios along with roofing and deck work — can my county tax my fence and patio revenue at a higher rate than my other contracting work?

Plain-English summary

A business that provided roofing repair services and designed, built, and installed fences, decks, patios, and porches was audited by its county for 2019 through 2021 Business, Professional, and Occupational License (BPOL) tax. The county agreed that roofing repairs and deck/porch work qualified for the (lower) contractor BPOL rate, but decided the business needed a SECOND BPOL license as a personal and business service provider for its fence and patio installation revenue — reasoning that fences and patios aren't "structures" and aren't attached to one, so that work fell outside the statutory contractor definition.

"Structure" gets its ordinary meaning — and it includes fences. Virginia's BPOL contractor definition (§ 58.1-3714 D 1) requires doing work "on or in any building or structure." The Department rejected the county's narrower reading. Using the ordinary dictionary definition of "structure" (something built by assembling parts) and pointing to MULTIPLE other places in the Code of Virginia that expressly list fences among "structures" — statutes covering defaced buildings/walls/fences, construction on wetlands, and fences around cemetery property — the Department concluded both fences and patios fit the definition. It also noted the business's own NAICS industry code, "All Other Specialty Trade Contractors" (238990), specifically covers paver and fence installation, reinforcing the same conclusion. The business's separate state contractor's LICENSE, by contrast, was NOT itself determinative — a regulatory license doesn't control a business's BPOL classification — but here the substantive factors independently supported treating the business as a contractor across the board.

Result: one classification, one rate. Because fence and patio installation counted as contracting just like the rest of the business's work, ALL of its gross receipts were subject to BPOL tax at the (lower) contractor rate — not split between two license categories. The Department remanded the case to the county to adjust the assessment accordingly.

A situs bonus: the $25,000 deduction rule. The ruling also confirmed how a contractor's gross receipts are sited for BPOL purposes: generally attributed to the definite place of business where the work is performed (§ 58.1-3703.1 A 3 a), with a special rule under § 58.1-3715 letting a contractor deduct gross receipts earned in OTHER localities once its volume there exceeds $25,000 — but only if it actually paid a BPOL license tax in that other locality (a license FEE doesn't qualify, and the tax must have actually been assessed and paid, not merely owed). The business was told to provide the county documentation to determine which out-of-locality receipts, if any, qualified for that deduction.

What this means for you

Fence, patio, hardscaping, and similar specialty contractors

Don't assume your locality will automatically classify fence, patio, deck, or similar installation work as "contracting" for BPOL purposes just because it seems obviously related to construction. If your locality tries to split your business into two license categories at different rates, this ruling — and the Code of Virginia's own repeated use of "fence" among "structures" — is strong support for a single, lower contractor rate across your whole business.

Contractors working in multiple localities

Keep records proving you actually PAID a BPOL license tax (not just a fee) in any other locality where your volume of business exceeds $25,000 — that documentation is what unlocks the deduction from your home locality's taxable gross receipts.

Accountants and tax professionals

When a locality tries to reclassify part of a contractor's work into a higher-rate category, look for supporting definitions elsewhere in the Code of Virginia (not just the BPOL statute itself) and the business's own NAICS code — both were persuasive here in establishing that fences and patios are "structures."

Common questions

Q: Are fences and patios "structures" for Virginia BPOL purposes?
A: Yes, according to this ruling — the Department relied on the ordinary dictionary meaning of "structure" and several other Code of Virginia provisions that list fences among structures.

Q: Does having a state contractor's license guarantee BPOL contractor classification?
A: No — the ruling explicitly says a regulatory contractor's license is not determinative of BPOL classification, though it can be one supporting fact among several.

Q: How do I get credit for BPOL tax paid on work done in another locality?
A: Under § 58.1-3715, you can deduct gross receipts from another locality once your volume there exceeds $25,000, but only if you actually paid (not merely owed) a license tax to that other locality — a license fee doesn't count.

Q: What happened to this business's assessment?
A: The Department remanded the case to the county to re-tax the fence and patio revenue at the lower contractor rate, alongside the roofing, deck, and porch work already taxed that way.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-3706 — BPOL tax rates vary by classification
• 23 VAC 10-500-10 et seq. — BPOL classification factors
• Va. Code § 58.1-3714 D 1-6 — statutory definition of "contractor"
• Va. Code § 58.1-3703.1 A 3 a — situs of a contractor's gross receipts
• Va. Code § 58.1-3715 — $25,000 threshold for deducting gross receipts taxed in another locality

Prior rulings the Department relied on (described here, not linked): P.D. 07-179 (11/14/2007) (a regulatory license doesn't control BPOL classification); P.D. 04-5 (2/17/2004) and P.D. 01-47 (4/23/2001) (the § 58.1-3715 out-of-locality deduction requires an actual license TAX payment, not merely a fee).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 25-9

Original ruling text

January 15, 2025

Re: Appeal of Final Local Determination

Taxpayer: *

Locality Assessing Tax: County of *

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 assessments of Business, Professional, and Occupational License (BPOL) tax issued to the Taxpayer by the County of *** (the “County”) for the 2019 through 2021 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 sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website.

FACTS

The Taxpayer provided roofing repair services and designed, built, and installed fences, decks, patios, and porches for residential and commercial customers. During the tax years at issue, the Taxpayer’s only definite place of business was in the County.

The Taxpayer filed its 2019 through 2021 BPOL tax returns with the County and classified itself as a contractor. The County audited the Taxpayer and determined that it should be classified as a personal and business service provider and not a contractor. The Taxpayer filed an administrative appeal with the County, asserting that it should be classified as a contractor.

In its final determination, the County determined that the Taxpayer would require two BPOL licenses, one as a personal and business service provider and another as a contractor. The County agreed with the Taxpayer that gross receipts derived from its roofing repair services and porch and deck design and construction services were taxable at the rate applicable to contractors. The County concluded, however, that the Taxpayer’s gross receipts derived from building fences and installing patios were taxable at the rate applicable to personal and business services. The Taxpayer appealed to the Department, contending that it should be classified as a contractor only. As such, the Taxpayer also requested that the situs of all of its gross receipts be determined using the rules that apply to contractors.

ANALYSIS

Classification Generally

The BPOL tax is imposed on businesses and professionals for the privilege of doing business in a locality. The tax is imposed at different rates according to the classification of an enterprise. See Virginia Code § 58.1-3706. These classifications are regulated under Title 23 of the Virginia Administrative Code (VAC) 10-500-10 et seq. Classification of a specific business must be determined based on consideration of all the facts and circumstances. Some of the factors to be considered include:

1. What is the nature of the enterprise’s business?

2. How the enterprise generates gross receipts.

3. Where the enterprise conducts its business.

4. Who are the enterprise’s customers?

5. How the enterprise holds itself out to the public.

6. The enterprise’s NAICS code.

Contractors

Virginia Code § 58.1-3714 D 1-6 includes the following definitions for the term “contractor”:

• Accepting or offering to accept orders or contracts for doing any work on or in any building or structure, requiring the use of paint, stone, brick, mortar, wood, cement, structural iron or steel, sheet iron, galvanized iron, metallic piping, tin, lead, or other metal or any other building material;

• Accepting or offering to accept contracts to do any paving, curbing or other work on sidewalks, streets, alleys, or highways, or public or private property, using asphalt, brick, stone, cement, concrete, wood or any compositions;

• Accepting or offering to accept an order for or contract to excavate earth, rock or other material for foundation or any other purpose or for cutting, trimming or maintaining rights of way;

• Accepting or offering to accept an order or contract to construct any sewer of stone, brick, terra cotta or other material;

• Accepting or offering to accept orders or contracts for doing any work on or in any building or premises involving the erecting, installing, altering, repairing, servicing, or maintaining electric wiring, devices or appliances permanently connected to such wiring, or the erecting, repairing or maintaining of lines for the transmission or distribution of electric light or power; or

• Engaging in the business of plumbing and steam fitting.

In its final determination, the County concluded that building decks and porches and performing roofing work fell within the definition of contractor but that installing fences and patios did not. The County asserted that, to be considered a contractor for BPOL purposes, a taxpayer must be doing work on or in a building or structure, unless it is performing certain specified activities, including paving, curbing, excavating, sewer construction, plumbing, or steam fitting. The County determined that fences and patios are not structures nor are they attached to a structure. The County reasoned further that leveling ground for a patio or digging holes for fence posts does not qualify as excavating.

The Taxpayer contends that fences and patios are structures. Alternatively, the Taxpayer argues that patio and fence installation involve excavation and paving work.

Virginia Code § 58.1-3714 D 1 requires, in relevant part, that work be done “on or in any building or structure” in order to be considered contracting for purposes of BPOL tax classification.

There are several sections of the Code of Virginia that include fences in lists of structures. For example, Virginia Code § 15.2-908 A authorizes localities to remove or repair the defacement of “buildings, walls, fences and other structures.” Similarly, Virginia Code § 2.2-2402 B provides the framework for the Governor’s approval of the “construction or erection of any bridge, arch, gate, fence or other structure or fixture” and Virginia Code § 28.2-1302 addresses the construction on wetlands of “catwalks, piers, . . . fences, . . . and other similar structures.” Further, fences are included in a list of “human-made structures” that qualify as human-made barriers for purposes of the Wildlife Corridor Action Plan. See Virginia Code § 29.1-578. Finally, Virginia Code § 57-27.1 provides rules for the erection of a “wall, fence or other structure” on private property on which a cemetery or graves are located.

According to the American Heritage Dictionary 1208 (2nd Col. Ed. 1985), a structure is defined, in part, as “[s]omething made up of a number of parts that are held or put together in a particular way” and as “[s]omething constructed, esp a building or part.” In addition, the verb “construct” is defined as “[t]o form by assembling parts; build.” Id. at 315. Based on the common meaning of the terms, the Department believes both fences and patios fit the definition of structure.

Further, classifying the Taxpayer as a contractor is consistent with the descriptions provided by the North American Industry Classification System (NAICS) for Sector 23, covering the construction industry. In particular, the NAICS code used by the Taxpayer for “All Other Specialty Trade Contractors” (code 238990) includes businesses that provide paver and fence installation.

The Taxpayer also contends that the fact that it has a state contractor’s license is indicative of its status as a contractor for BPOL purposes. The County points out that the Taxpayer’s status as a contractor for regulatory licensing purposes does not control the classification of the Taxpayer’s business for BPOL purposes pursuant to Public Document (P.D.) 07-179 (11/14/2007). The Department agrees that it is not determinative, but, in this case, the facts support the Taxpayer’s classification as a contractor for the reasons stated above.

Situs

Generally, under § 58.1-3703.1 A 3 a, the gross receipts of a contractor are attributed to the definite place of business where its services are performed. If a contractor performs services in a locality in which it does not maintain a definite place of business, then gross receipts from such services are attributed to the definite place of business where its services are initiated, controlled, or directed, unless the contractor is subject to the provisions of Virginia Code § 58.1-3715.

Pursuant to Virginia Code § 58.1-3715, a locality may require a contractor to obtain a license when its volume of business in the locality exceeds $25,000 without regard to whether the contractor has a definite place of business in such locality. Contractors with a definite place of business in a locality that imposes the BPOL tax may deduct those gross receipts attributed to work performed in other jurisdictions only if the volume of business in those jurisdictions exceeds $25,000 and the contractor pays a license tax in that other jurisdiction. See P.D. 04-5 (2/17/2004). It is important to emphasize that: (1) a license tax must have been assessed and paid, and (2) license fees do not qualify for the deduction. See P.D. 01-47 (4/23/2001). Accordingly, if a locality from which the Taxpayer’s gross receipts exceeded $25,000 did not impose a BPOL tax, such gross receipts would have remained subject to BPOL tax in the County, where the Taxpayer had its only definite place of business.

DETERMINATIONx

The ordinary usage of the term “structure” includes fences and patios. This definition is supported by references to structures in the Code of Virginia as well as NAICS industry descriptions. In the Department’s opinion, the installation of fences and patios qualifies as work done on or in a structure. As such, the Taxpayer’s gross receipts were subject to BPOL tax at the rate applicable to contractors only. The Taxpayer was also eligible to deduct from gross receipts attributable to the County any receipts in excess of $25,000 on which the Taxpayer paid BPOL tax in other localities.

The Department is remanding this case to the County to adjust the assessment in accordance with this determination. The Taxpayer must provide the County with the necessary documentation to allow the County to determine which gross receipts from other localities, if any, were eligible for deduction under the provisions of Virginia Code § 58.1-3715.

If you have any questions regarding this determination, you may contact * in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at or **@tax.virginia.gov.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

Related Documents

01-47

04-5

07-179