Virginia Law

A. Multiple businesses conducted by a person at a single location are required to obtain a separate license for each business. If an entity has multiple businesses at one location with each separate business licensed, it would then count each separate licensed business for purposes of the threshold in order to trigger the BPOL tax under § 58.1-3706 of the Code of Virginia. For purposes of the license fee imposed under § 58.1-3703 of the Code of Virginia, it is within the locality's discretion whether or not to assess multiple fees for the issuance of multiple licenses where one entity exercises several licensable privileges at one location; however, every license issued carries with it a separate rate threshold. Examples:

1. XYZ Co. operates a business at one location in City A at which automobiles are repaired and auto parts are sold. City A requires XYZ to obtain a retail business license and also a repair services license, charging a $100 fee for each license. XYZ Co. has two thresholds for purposes of establishing gross receipts for the applicability of the BPOL tax, one for the repair business and one for the retail business.

2. Same facts as in Example 1, except that XYZ Co. operates several business locations in City A at which automobiles are repaired and auto parts are sold. XYZ will be required to obtain two licenses for each location in City A and each licensable business will have a separate threshold for purposes of establishing gross receipts for the applicability of the BPOL tax.

3. Same facts as in Example 1, except that the locality chooses to charge the business only one fee for the issuance of two licenses. As in Example 1, XYZ Co. would have two thresholds for purposes of establishing gross receipts for the applicability of the BPOL tax, one for the repair business and one for the retail business.

B. Each such business must be clearly identifiable as a separate business and not merely activities ancillary to the primary business. An activity for which no separate charge is made is presumed to be ancillary to the activity for which a charge is made, but separately stating charges for different activities does not create a presumption that each such activity is a separate business. Gross receipts attributable to any ancillary activities are taxable as part of the primary licensable business. Gross receipts that are not ancillary to a licensable business must rise to the level of a separate business to be taxable. The following are examples of activities that may be ancillary or de minimis:

1. A merchant (retail or wholesale) offers an extended warranty with the merchandise it sells. The warranty covers parts and labor, and may include replacement of defective merchandise. Although a separate charge is made for the warranty, at the time of sale it is impossible to determine how much of the charge will be used (if any) for labor, parts, or replacement merchandise. The charge for an extended warranty is ancillary to the sale of the merchandise.

2. A retail merchant offers to deliver the merchandise it sells for a fee. The merchant has its own delivery trucks, but also contracts with third parties to make some of the deliveries. The fee charged to the customer varies with distance, but does not depend on whether the merchandise is delivered by the merchant or a third party. Because the delivery service is only offered with respect to merchandise sold by the merchant, the delivery charge is ancillary to the merchandising business.

3. A repair service must occasionally replace small, inexpensive parts. It does not separately charge for the parts. The provision of parts is ancillary to the repair service.

4. A firm offers repair service at numerous offices in several states. At its headquarters the firm employs lawyers and certified public accountants to assist in managing its operations. The firm also employs a real estate professional, engineer and architect to find and develop locations for new offices. None of these employees offer their services to anyone other than the firm, and the firm does not separately charge anyone for the activities of its professional employees. The activities of these employees are ancillary to the firm's repair business and do not generate gross receipts.

5. A retail merchant offers installment contracts in conjunction with the sale of its merchandise. Each contract provides for the payment of interest and collection costs, including attorneys fees of 20% of any delinquent amount collected by legal action.

a. Interest received pursuant to the installment sales contract is ancillary to the retail sale of the merchandise.

b. If the merchant employs a salaried staff attorney to collect delinquencies under the installment sales contract, any amounts collected would be ancillary to the retail sale of merchandise. (But see 23VAC10-500-90 for the impact of the cash or accrual method of accounting.)

C. Localities may permit, but may not require, a taxpayer to elect any of the following:

1. Multiple businesses conducted at a single location may be taxed under a single license if all are taxable at the same rate;

2. Multiple businesses conducted at a single location may be taxed at the highest rate if the businesses are subject to tax at different rates; or

3. A single business may be issued separate licenses for its primary business and one or more ancillary activities that would be taxed at a different rate if the ancillary activities constitute a separate business.

D. The following are examples of multiple businesses that may be required to obtain multiple licenses:

1. When a merchant conducts both a wholesale and a retail business, the merchant is subject to the retail license tax on the retail portion of the business and subject to the wholesale license tax on the wholesale portion of the business. However, the locality may permit but not require the merchant to pay the license tax as a retailer on both the retail and wholesale portions of the business.

2. Any person engaged in repair service who sells parts as part of the repair service is engaged in a licensable service business. If the person sells parts in addition to the repair service, he is engaged in retail or wholesale sales as to the sales of the repair parts.

3. Any boardinghouse or lodging house that also furnishes or sells food or merchandise for compensation may be engaged in retail sales as to the sale of the food or merchandise.

4. An optometrist who also fills prescriptions for or fits corrective lenses and eyeglass frames in a regular course of dealing is engaged in two licensable businesses. The optometrist is rendering a professional service when examining eyes and is conducting business as a retail merchant when filling prescriptions and fitting corrective lenses and eyeglass frames.

5. Any practitioner of a profession who sells goods, wares or merchandise in connection with the practice of the profession may be engaged in making retail sales depending on the nature of the products sold and the service performed.

6. A medical doctor who engages in the sale of drugs or other merchandise as well as the practice of medicine is a merchant as to those sales. However, a medical doctor is not a merchant as to the drugs used in giving an immunization to a patient.

7. A chiropodist who sells shoes in connection with his practice is a retail merchant as to such sales.

8. An attorney practices law in Town A, Virginia, and has receipts from clients for trying cases, providing advice, lobbying, periodically teaching law at Town A Law School, the sale of stock received as a fee for incorporating a business, interest from the bank on his business accounts, and from gambling during a client-sponsored trip. Receipts from clients for trial work, legal advice, lobbying, the value of stock received as a fee in the year received are all taxable as gross receipts. Teaching law, the sale of stock as a fee, interest earned from the business accounts at the bank and gambling winnings are not taxable because the lawyer is not regularly engaged in these activities as a business and these activities are not ancillary to the practice of law. However, if some of the nontaxable activities were conducted on a regular basis as defined in the statute, they might constitute the conduct of business and be subject to separate licensure.