The Virginia Tax Commissioner determined that a taxpayer’s gross receipts from refueling services performed under government contracts at U.S. military installations in a foreign country were properly sourced to its place of performance abroad, concluding that the totality of the circumstances established that the taxpayer had a “definite place of business” at those foreign locations for purposes of the county-imposed Business, Professional, and Occupational License Tax (BPOL).
Although the Tax Commissioner referenced a 2021 ruling in which the Department had previously stated that “activities must be performed by employees, not independent contractors, in order to establish a definite place of business for the employer,” the Tax Commissioner suggested that worker classification may not be determinative where a taxpayer does not rely solely on the activities of its workers as establishing a definite place of business. Ultimately, the Tax Commissioner determined that the taxpayer’s workers were properly classified as employees, rendering the issue moot.
The Tax Commissioner further emphasized the need for reasonableness in resolving complex BPOL matters, advocating for business operations to be analyzed on a fundamental level and for “reasonable conclusions” to be drawn. What the Tax Commissioner found would be unreasonable—and arguably unconstitutional under principles of fair apportionment – would be the Virginia county’s taxation of 100 percent of the taxpayer’s gross receipts based solely on its Virginia headquarters, where the taxpayer was compensated only for services actually performed in the foreign country.