Virginia Law

A. In bringing their goods to market most manufacturers engage in a wholesale function. So long as this function is ancillary to the manufacturing function, i.e., it does not rise to the level of becoming a separate business activity, the manufacturer is not licensable as a wholesaler or subject to the wholesaler BPOL tax. The following wholesale functions are ancillary to a manufacture's privilege of manufacturing and selling goods at wholesale at the place of manufacture and not subject to BPOL tax:

1. All facilities of manufacturer at same location. In this case, the wholesale function and the related sales personnel are located at the place of manufacture. The wholesale function is ancillary to the principal business of manufacturing and thus not licensable or taxable as a wholesale operation for BPOL purposes.

2. Manufactured goods distributed from place of manufacture - sales function performed in several separate jurisdictions. Even though in this case sales activity is taking place in other jurisdictions, the activity does not rise to the level of a separate wholesale business because the goods to be sold remain at the place of manufacture. All sales activity is directed towards delivery of the goods from the place of manufacture to the customer and thus within the statutory exemption for manufacturing.

3. All facilities of manufacturer at same location except completed goods warehoused in separate jurisdiction. The result in this example is the same as in the previous two. Assuming the warehouse is a storage facility that conducts no other business functions, its existence in another jurisdiction does not provide this other jurisdiction with grounds to levy a license tax on the facility. Mere storage of completed goods is ancillary to manufacturing regardless of where the storage takes place.

B. Examples of wholesale activities:

1. Company C manufactures parts for automobiles outside Virginia. Some of its production is sold directly to governmental, institutional, business, and industrial entities, and some of its production is sold through a store in City D, Virginia. Customers of that store include individuals purchasing at established retail prices, businesses purchasing at the same prices, and other businesses purchasing on a fleet basis at a discount. Sales by Company C directly to government, institutional, business, and industrial entities from the factory are wholesale sales provided that the purpose of the customer in buying such goods is to resell them in one form or another or to use them for business needs as supplies or equipment. Sales made at Company C's store in City D are wholesale to the extent made to businesses on a fleet basis at discount. Its sales made to other businesses not on a fleet and discounted basis are retail sales.

2. Corp. A, from its facility in City C, manufactures widgets that are installed in commercial, industrial, and governmental customer locations. Components are not for sale separately, nor can customers purchase unmade widgets. There is no tax. The company is a manufacturer selling at wholesale at the place of manufacture.