Gross Receipts Tax
Municipal gross receipts based taxes are an often overlooked area of exposure and potential planning. Many states empower gross receipts assessment and municipalities enforce their application. These tax regimes encompass definitional nuances and exemption provisions and contain highly complex rules for receipt sourcing.
Our business license experiences have made us skilled negotiators and advocates for our clients. We have been able to obtain refunds and negotiate successful audit resolutions.
Examples of issues include:
- Sourcing receipts for internet trading operations
- Defining a “definite place of business” for government contract service providers
- Refund analysis focused on exemptions for software and technology development firms
- Refund analysis for government contractors that provide staffing services
Sourcing of Receipts
Gross receipts from the performance of services are attributed to the “definite place of business where the services are performed, or if not performed at any definite place, then they are attributed to the definite place of business where the services are directed or controlled.” In Virginia, business license tax rates range from $0.03 per dollar to $0.33 per dollar depending on the activity the client is involved.
Determination of the appropriate receipts sourcing is complex in industries where services may be performed at a location that differs from the source of contract formation. Determination of sourcing is fact and circumstances dependent. Contract analysis is an important element to sourcing of receipts.
Exemptions/Exclusions from BPOL
- Amount paid for computer hardware and software sold to the Federal or State Governments
- Receipts attributable to business conducted in another state or foreign country
- Tax based on margins attributable to temporary staffing arrangements
- Any person, firm, or corporation designated as the prime contractor receiving identifiable federal appropriations for research and development
- Gross receipts of trade associations [IRC 501(c)(6)] and charitable nonprofit organizations [IRC 501(c)(3)], except unrelated income
- Venture capital and investment funds, except commissions, fees, or proceeds from sale or rental of real estate in Arlington
- Publishing or printing periodical newspapers, magazines, newsletters
The statute of limitations for refund opportunities is three years.
Additionally, it is important to note that other states and/or municipalities impose gross receipts-type taxes. The following states have imposed a gross receipts tax:
- Arizona – Transaction Privilege Tax (TPT)
- Delaware – Business and Occupational Gross Receipts Tax
- Hawaii – General Excise Tax (GET)
- New Mexico – Gross Receipts Tax
- Ohio – Commercial Activity Tax (CAT)
- Washington – Business and Occupation Tax (B&O)
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