08.19.11

BPOL Tax Refund Opportunities for Virginia Companies

Virginia companies that have paid Business Professional and Occupational License (“BPOL”) taxes in Loudoun County may qualify for significant refunds.

A refund opportunity is available for companies that are eligible for the BPOL tax deduction, which exempts from gross purchases materials purchased and resold to government entities in calculating BPOL tax for Loudoun County.  Under Loudoun County Code §840.11(b)(1) and Code of Virginia §58.1-3732(B)(1), a company is entitled to deduct any amount paid for computer hardware and software that is sold to the federal government or a state government.  Consequently, qualifying companies can reduce the BPOL tax liability by reducing their gross receipts by these qualifying purchases.

Another refund opportunity exists for the BPOL tax paid on receipts of equipment that is drop shipped by vendors into taxing jurisdictions where the company does not have a business presence.  Qualifying companies are those that resell computer hardware or software in Virginia to government agencies and/or have agreements with vendors to drop ship equipment to customers.  Situs for the BPOL tax is effectively measured by gross receipts because “gross receipts included in the taxable measure shall be only those gross receipts attributed to the exercise of a privilege subject to licensure at a definite place of business within [the] jurisdiction.”  Va. Code 58.13703.1(A)(3a).  A definite place of business is “an office or location at which occurs a regular and continuous course of dealing over a period of thirty (30) consecutive days or more.”  Loudoun County Code §840.01(f).  If the goods purchased by a company on behalf of its clientele did not originate or enter Loudoun County, even if a company has definite place of business Loudoun County, they should be not subject to Loudoun County BPOL tax.  Thus, certain companies may be unnecessarily including some gross receipts in calculating their BPOL tax obligations in Loudoun County.

Should you have any questions about how this development might affect you, please contact Samer Zelof at szelof@argy.com or 703-770-1017.

Business Owner is Personally Liable for Unpaid Ohio Withholding Tax

An Ohio Court of Appeals recently held the President and sole shareholder of a corporation was personally liable for unpaid withholding tax to the Ohio Department of Taxation.
From 1964 to 2002, Jimmy Lee Peters was the president and sole shareholder of Skiles Truck Body Shop, Inc. (“Skiles Truck” or the “Company” hereinafter).  Jill Heindl, Peters’ daughter, was an employee of the company and was responsible for filing its taxes returns from 1985 to 2002.

Since April of 1999, Skiles Truck received numerous withholding tax assessments from the Ohio Tax Commissioner, but the company neither paid nor appealed the assessment.  On January 11, 2010, the Department of Taxation sued Peters and Heindl in order to hold them personally liable for delinquent withholding taxes. On September 28, 2010, the trial court granted the Department’s motion for summary judgment finding Peters personally liable for those unpaid taxes since he was the 100% owner of Skiles Truck and Heindl’s supervisor and had authority to exercise control over relevant tax duties.

Peters appealed and argued that he was not liable for the unpaid tax duties because “he was not involved in the day-to-day operations of the company and had retired.  However, the court of appeals rejected his argument.  Pursuant to Ohio Rev. Code Ann. 5747.07(G), “an employee of a corporation …having control or supervision of or charged with the responsibility of filing the report and making payment, or an officer, member, manager, or trustee of a corporation …who is responsible for the execution of the corporation's …fiscal responsibilities, shall be personally liable for failure to file the report or pay the tax due as required by this section.”

In addition, Ohio Rev. Code Ann. 5739.33 states that “if any corporation …required to file returns and to remit tax due to the state under this chapter …fails for any reason to make the filing or payment, any of its employees having control or supervision of or charged with the responsibility of filing returns and making payments, or any of its officers, members, mangers, or trustees who are responsible for the corporation's …fiscal responsibilities, shall be personally liable for the failure.”  Therefore, because Peters, as the President and sole shareholder exercised control over Skiles Truck's fiscal responsibilities, he was personally liable for the unpaid withholding taxes.

Consequently, business owners in closely held corporations need to pay close attention to their tax compliance procedures to avoid personal liability of tax obligations.

Should you have any questions about how this development might affect you, please contact Mike Fletcher at mfletcher@argy.com or 703-770-0533.

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