Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, September 22, 1993 TAG: 9309220056
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: Richmond Times-Dispatch
DATELINE: RICHMOND (AP) LENGTH: Medium
It hasn't been the state income tax, either.
The heavy hitter has been the BPOL tax, a 180-year-old business license tax charged by almost all Virginia cities and most large counties. It targets company revenues instead of net income or profits.
"The BPOL tax doesn't differentiate between companies that are doing well profit-wise and those that are not doing well profit-wise," said Edward H. Bersoff, president of BTG. "It becomes a very burdensome tax."
Complaints from Bersoff and other company officials have led to a review of the business, professional and occupational license tax by a special General Assembly subcommittee.
"A company could be losing its shirt and still be required to pay what could be a substantial BPOL tax," said Del. David Brickley, D-Woodbridge, chairman of the subcommittee.
The panel is considering whether to recommend repealing the tax or changing it.
Repeal is considered unlikely because it is a valuable source of revenue for local governments, many of which already are financially strapped.
If the tax were eliminated, localities would would have to raise real estate tax rates to make up the difference, according to the Virginia Municipal League.
The license tax was recognized as a source of revenue in Virginia after the War of 1812, according to a history of the tax prepared for the subcommittee. By 1850, the policy of levying a license tax on virtually all well-established businesses and professionals had been adopted.
The tax was studied by the General Assembly in the mid-1970s and the legislature then placed limits on the rates localities could charge. The tax is based on gross receipts, essentially total sales.
The maximum tax rates, established by the legislature in 1978, are based on the following four categories of businesses:
Contracting - 16 cents per $100 of gross receipts
Retail sales - 20 cents per $100
Finance, real estate and professional services - 58 cents per $100
Repair, personal and business services and all other businesses - 36 cents per $100.
The minimum tax is $30. In some localities, rates set before 1978 are higher than the maximums because the locality has not been required to roll them back.
Virtually all the cities and towns in Virginia levy the BPOL tax. Of the 96 counties, 40 charge the tax on contractors, 39 on professional and repair services, and 37 on retailers. Most of the rest of the counties charge the merchants' capital tax, assessed as a percentage of inventory.
Each locality is free to set its own tax rates and determine into which category a business falls. But those variations cause confusion.
"It's a nightmare," said Sandra D. Bowen, vice president of government affairs for the Virginia Chamber of Commerce. "The business community probably dislikes this tax more than any other single tax I can think of."
The same business may fall into different categories in different localities, said Bersoff, whose firm operates in three Northern Virginia counties.
He said he knows of one computer company that recently moved to Maryland because of the tax.
Brickley said complaints from the Northern Virginia Technology Council prompted him to introduce the resolution that led to the subcommittee study.
One option is for the state Department of Taxation to establish standards and regulations for the tax, Brickley said. Betty Long, director of fiscal policy for the municipal league, said local governments probably would not oppose changes that do not reduce the amount of taxes they can collect.
Changing to another kind of tax - such as increasing the sales tax - may result in some localities losing revenue.
Another reason for eliminating or simplifying the tax is that it is one of many factors considered by companies that may move to Virginia.
The effect of the tax varies from industry to industry, but at least one company - Baxter Healthcare Corp., now Caremark International Inc. - chose Hanover County for a mail-order pharmacy center over other localities because it assesses the tax only on a handful of businesses.
The company was expected to have to pay about $30,000 a year in Hanover's merchants' capital tax, compared with $150,000 or more in business license taxes had it located in Chesterfield, Henrico or Richmond.
"It was a big deal to them," said John W. Fairburn, Hanover's director of economic development. "They're a high-volume, high-dollar type of operation."
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