Administrative Code

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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 500. Business, Professional and Occupational License Tax Regulations

23VAC10-500-70. Exclusions from gross receipts.

A. Generally, gross receipts for license tax purposes exclude any amount not derived from the exercise of the licensed privilege to engage in a business or profession in the ordinary course of business. The following is a partial list for illustrative purposes:

1. Amounts received and paid to the United States, the Commonwealth or any county, city or town for the Virginia retail sales or use tax, for any local sales tax or any local excise tax on cigarettes, or amounts received for any federal or state excise taxes on motor fuels;

2. Amounts representing the liquidation of debt or the sale of a capital asset;

3. Amounts allowed by a business to its customers for returns and allowances;

4. Receipt of loan proceeds by a licensee where it is the obligor;

5. Return of principal either on a loan to a licensee-creditor or where a licensee sells a capital asset;

6. Rebates or discounts taken or received on account of purchases by the licensee;

7. Certain withdrawals from inventory; or

8. Investment income not directly related to an entity's exercise of its licensed privilege, unless the entity's licensable activity is that of financial services.

B. Examples:

1. A lawyer is advanced funds by his client to pay court filing fees and the cost of a court reporter. He also receives payment from City A on account of a refund of excess taxes paid by his client. With his client's permission, lawyer deducts from the tax refund the cost of his services for handling the tax case, including telephone tolls, meals, copying and certain other charges the client has agreed to reimburse. The lawyer is taxable on the amount of his fee including any amount separately billed to the client. Amounts advanced to pay expenses on the client's behalf are not gross receipts, nor is the amount of the tax refund because it is received by the lawyer as the client's agent. "Trust fund" receipts, technically speaking, are not derived from the exercise of a licensable privilege; therefore, "trust fund" receipts do not constitute gross receipts.

2. A lawyer handles a real estate closing for a real estate developer and receives the sale proceeds, net after costs withheld by the purchaser's attorney. He mails the proceeds, net of his fee, to the real estate developer. The lawyer is taxable only on his fee, and not on the full sales proceeds of the transaction. The developer is taxable on the whole of the proceeds of the transaction, including the fee withheld by the attorney.

3. Corp. C, in County D, Virginia purchases a portfolio of loans for its own account. So long as the corporation's activities in the locality are limited to purchasing and holding portfolios for its own account, there is no tax.

4. Same facts as in Example 3 except that Corp. C sells interests in its investment pools through public offerings. There is no tax. Proceeds attributable to capital transactions in the nature of raising capital in the equity markets are not subject to BPOL tax.

Statutory Authority

C. Section 58.1-3732.2 of the Code of Virginia provides an exclusion for certain gross receipts of real estate brokers. Section 58.1-3732.3 of the Code of Virginia provides an exclusion for certain gross receipts of providers of funeral services. Section 58.1-3732.4 of the Code of Virginia provides an exclusion for certain gross receipts of certain staffing firms.§ 58.1-3701 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 24, Issue 23, eff. October 6, 2008.

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