Section 4-7.2-1. Definitions and requirements.
A. General definitions. Except as otherwise provided by Subsection B of this Section, the words and phrases defined in this section when used in this Article shall have the following meanings, unless a different meaning clearly is required by the context:
"Affiliated group" means:
(1) One or more chains of corporations subject to inclusion connected through stock ownership with a common parent corporation which is a corporation subject to inclusion if:
(a) Stock possessing at least eighty percent of the voting power of all classes of stock and at least eighty percent of each class of the nonvoting stock of each of the corporations subject to inclusion, except the common parent corporation, is owned directly by one or more of the other corporations subject to inclusion; and
(b) The common parent corporation directly owns stock possessing at least eighty percent of the voting power of all classes of stock and at least eighty percent of each class of the nonvoting stock of at least one of the other subject to inclusion corporations. As used in this subdivision, the term "stock" does not include nonvoting stock which is limited and preferred as to dividends; the phrase "corporation subject to inclusion" means any corporation within the affiliated group irrespective of the state or country of its incorporation; and the term "receipts" includes gross receipts and gross income.
(2) Two or more corporations if five or fewer persons who are individuals, estates or trusts own stock possessing:
(a) At least eighty percent of the total combined voting power of all classes of stock entitled to vote or at least eighty percent of the total value of shares of all classes of the stock of each corporation; and
(b) More than fifty percent of the total combined voting power of all classes of stock entitled to vote or more than fifty percent of the total value of shares of all classes of stock of each corporation, taking into account the stock ownership of each such person only to the extent such stock ownership is identical with respect to each such corporation.
(3) When one or more of the corporations subject to inclusion, including the common parent corporation is a nonstock corporation, the term "stock" as used in this subdivision shall refer to the nonstock corporation membership or membership voting rights, as is appropriate to the context.
"Assessment" means a determination as to the proper rate of tax, the measure to which the tax rate is applied, and ultimately the amount of tax, including additional or omitted tax, that is due. An assessment shall include a written assessment made pursuant to notice by the Director or a self-assessment made by a taxpayer upon the filing of a return or otherwise not pursuant to notice. Assessments shall be deemed made by the Director when a written notice of assessment is delivered to the taxpayer by the Director or an employee of the Department of Tax Administration, or mailed to the taxpayer at his last known address. Self-assessments shall be deemed made when a return is filed, or if no return is required, when the tax is paid. A return filed or tax paid before the last day prescribed by this Article for the filing or payment thereof shall be deemed to be filed or paid on the last day specified for the filing of a return or the payment of tax, as the case may be.
"Base year" means the calendar year preceding the license year, except for contractors subject to the provisions of Va. Code § 58.1-3715 or for a different period for measuring the gross receipts of a business, such as for beginning businesses filing estimated license applications pursuant to Section 4-7.2-5 of this Article.
"Business" means a course of dealing which requires the time, attention and labor of the person so engaged for the purpose of earning a livelihood or profit. It implies a continuous and regular course of dealing, rather than an irregular or isolated transaction. A person may be engaged in more than one business. The following acts shall create a rebuttable presumption that a person is engaged in a business: (i) advertising or otherwise holding oneself out to the public as being engaged in a particular business or (ii) filing tax returns, schedules and documents that are required only of persons engaged in a trade or business.
"Calendar year" means the period beginning on January 1 of each year and ending on December 31 of each year.
"Definite place of business" means an office or a location at which occurs a regular and continuous course of dealing for thirty consecutive days or more. A definite place of business for a person engaged in business may include a location leased or otherwise obtained from another person on a temporary or seasonal basis and real property leased to another. A person's residence shall be deemed to be a definite place of business if there is no definite place of business maintained elsewhere and the person is not subject to licensure as a peddler or itinerant merchant.
"Department of Tax Administration" means the Fairfax County Department of Tax Administration.
"Director" means the Director of the Fairfax County Department of Tax Administration, or the designated agent of the Director.
"Financial services" means the buying, selling, handling, managing, investing, and providing of advice regarding money, credit, securities, or other investments.
"Gross purchases" means all goods, wares and merchandise received for sale at each definite place of business of a wholesale merchant. Gross purchases shall include all costs incurred in the manufacture or acquisition of property of any nature or description acquired (i) for resale to retail merchants or (ii) for sale at wholesale to other wholesale merchants, institutional, commercial or industrial users. Gross purchases does not mean any costs incurred for the acquisition of property of any nature or description which, when sold by a wholesale merchant, is subject to taxation by the Virginia Retail Sales and Use Tax Act, Va. Code § 58.1-600 through § 58.1-639, as amended, or by any similar retail sales and use tax. A wholesale merchant may elect to report the gross receipts from the sale of manufactured goods, wares and merchandise if it cannot determine the cost of manufacture or chooses not to disclose the cost of manufacture.
"Gross receipts" means the whole, entire, total receipts, without deduction. Gross receipts consist of the gross receipts from any business, profession, trade, occupation or calling, including cash, credits, fees, commissions, brokerage charges and rentals, and property of any kind, nature or description from either sales made or services rendered without any deduction therefrom on account of cost of the property sold, the cost of material, labor or services or other costs, interest or any expense whatsoever, and such term shall include in case of merchants the amount of the retail value of supplies and goods furnished to or used by the licensee or his family or other person for which no charge is made. Gross receipts include receipts from all sales and services rendered or conducted from a place of business within the County to persons in the County or to persons outside the County and all other receipts from all activities having a taxable situs within the County for local license taxation authorized by Virginia law. For the purposes of this definition, receipts from rendering sales and services to persons include all gross receipts from government agencies, as well as those entities described within the definition of "person" provided by this Section.
"License year" means the calendar year for which a license is issued for the privilege of engaging in business.
"Person" means any individual, firm, partnership, corporation, company, association or joint stock association. Person includes any trustee, receiver, assignee or personal representative thereof carrying on or continuing a business, profession, trade, occupation or calling, but shall not include a court-appointed trustee, receiver or personal representative in the liquidation of assets for immediate distribution or a sergeant or sheriff, or any deputy, selling under authority of process or writ of a court of justice.
"Real estate services" means providing a service with respect to the purchase, sale, lease, rental, or appraisal of real property.
"Tax commissioner" means the chief executive officer of the Virginia Department of Taxation, or delegated representative.
B. Special definitions, exclusions and provisions. The general definitions provided by this Article shall be subject to the following limitations, unless a different meaning clearly is required by the context:
(1) Exclusions from the definition of gross receipts:
(a) Gross receipts do not include those receipts excluded by Virginia law pursuant to Va. Code § 58.1-3703(C).
(b) Gross receipts do not include revenues that are attributable to taxable business activity conducted in another jurisdiction within the Commonwealth of Virginia and the volume attributable to that business activity is deductible pursuant to Va. Code § 58.1-3708 and § 58.1-3709.
(c) Pursuant to Va. Code § 58.1-3732, gross receipts do not include those amounts not derived from the exercise of the licensed privilege to engage in a business or profession in the ordinary course of business.
(d) Gross receipts do not include revenues that are attributable to business activity with a taxable situs in another jurisdiction not within the Commonwealth of Virginia which shall include any amount attributable to business conducted in another state or foreign country in which the taxpayer is liable for an income or other tax based upon income.
(e) Gross receipts do not include those receipts which are subject to a license tax on the same business activity imposed by a town government in accordance with Va. Code § 58.1-3711.
(f) Gross receipts do not include any 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, for any federal or state excise taxes on motor fuels.
(g) Gross receipts do not include any amount paid for computer hardware and software that are sold to a United States federal or state government entity provided that such property was purchased within two years of the sale to said entity by the original purchaser who shall have been contractually obligated at the time of purchase to resell such property to a state or federal government entity. This deduction shall not occur until the time of resale and shall apply to only the original cost of the property and not to its resale price, and the deduction shall not apply to any of the tangible personal property which was the subject of the original resale contract if it is not resold to a state or federal government entity in accordance with the original contract obligation.
(h) Gross receipts do not include licenses, admission taxes or pari-mutuel wagering pools established under Va. Code § 59.1-392 or § 59.1-393 in accordance with the provisions of Va. Code § 58.1-3732.1.
(i) Gross receipts do not include any amounts received by a real estate broker which arise from real estate sales transactions to the extent that such amounts are paid to a real estate agent as a commission and the agent is subject to a business license tax on such gross receipts in accordance with the provisions of Va. Code § 58.1-3732.2. Real estate brokers must include all such receipts within their taxable gross as individual real estate agents are not licensed separately under Chapter 4, Article 7.2 of the Fairfax County Code. In addition, gross receipts, when used in connection with Section 4-7.2-34 of this Article, means all commissions received by real estate brokers with respect to the purchase, sale or purchase and sale of any real estate and the management fees paid by real estate agents to real estate brokers as established in accord with a contractual agreement between the broker and the agents of that broker. After December 31, 1995, gross receipts, when used in connection with Section 4-7.2-34 of this Article, do not include management fees paid by real estate agents to real estate brokers as established in accord with a contractual agreement between the broker and the agents of that broker. Such receipts are taxable in accordance with Section 4-7.2-23 of this Article.
(j) Gross receipts do not include the value of any trade-in vehicle accepted in trade by a motor vehicle dealer who accepts a trade-in as part of a sale of a motor vehicle pursuant to Va. Code § 58.1-3734.1.
(k) Gross receipts do not include all amounts received in the course of conducting the state lottery by a lottery sales agent licensed by the State Lottery Board, but gross receipts do include the compensation actually paid to a lottery sales agent in accordance with the provisions of Va. Code § 58.1-4011.
(l) Gross receipts do not include membership dues collected by trade, business, professional, service or civic associations, or other similar nonprofit organizations.
(m) Gross receipts do not include amounts paid by advertising agents and agencies for any customer for advertising space, radio time, television time, electrical transcription, pressing, art work, engraving, plate, mats, printing stock and postage.
(n) Gross receipts do not include income which is exempt from the federal income tax pursuant to § 501(c)(6) of the United States Internal Revenue Code, as amended. However, this exclusion pertaining to organizations which are exempt from the federal income tax pursuant to § 501(c)(6) of the United States Internal Revenue Code does not exempt unrelated business income received by those organizations which is taxable pursuant to § 501(b) of the United States Internal Revenue Code, as amended.
(o) Gross receipts do not include:
(i) the income of a charitable nonprofit organization except to the extent an organization has receipts from an unrelated trade or business the income of which is taxable under Internal Revenue Code § 511 et seq. For the purpose of this subsection, "charitable nonprofit organization" means an organization which is described in Internal Revenue Code§ 501(c)(3) and to which contributions are deductible by the contributor under Internal Revenue Code § 170, except that educational institutions shall be limited to schools, colleges and other similar institutions of learning.
(ii) On or measured by gifts, contributions, and membership dues of a nonprofit organization. Activities conducted for consideration which are similar to activities conducted for consideration by for-profit businesses shall be presumed to be activities that are part of a business subject to licensure. For the purpose of this subsection, "nonprofit organization" means an organization exempt from federal income tax under Internal Revenue Code § 501, other than charitable nonprofit organizations.
(p) Gross receipts do not include receipts which are the proceeds of a loan transaction in which the licensee is the obligator, or the return of principal of a loan transaction in which the licensee is the creditor. Gross receipts also do not include the return of principal or basis upon the sale of a capital asset. Gross receipts, when used in connection with or in respect to financial transactions involving the sale of notes, stocks, bonds or other securities or the loan, collection or advance of money or the discounting of notes, bills or other evidence of debt, mean the gross interest, gross discount, gross commission or other gross receipts earned by means of, or resulting from such financial transactions, but gross receipts do not include any amount received as payment of debt.
(q) Gross receipts do not include the pass-through funds of any money lender duly organized, registered and doing business as a cooperative association under the Virginia Cooperative Association Act or any corresponding cooperative association act of any other state or the District of Columbia. However, all funds used for operating expenses, retained margins and reserves of any such cooperative association are gross receipts which are taxable in accordance with Section 4-7.2-31 of this Article. Any cooperative money lender whose gross receipts are subject to taxation in accordance with this subparagraph shall submit such documentary proof as required by the Director that the cooperative money lender is duly organized, registered and doing business as a cooperative association in the manner provided herein.
(r) Gross receipts do not include donations, gifts or contributions made without consideration to a nonprofit organization described in Internal Revenue Code § 501.
(s) Gross receipts do not include any amounts received from withdrawals from inventory for purposes other than sale or distribution and for which no consideration is received and the occasional sale of assets other than inventory whether or not a gain or loss is recognized for federal purposes.
(t) Gross receipts do not include investment income not directly related to the privilege exercised by a business subject to licensure not classified as rendering financial services. This exclusion shall apply to interest on bank accounts of the business, and to interest, dividends and other income derived from the investment of its own funds in securities and other types of investments unrelated to the licensed privilege. This exclusion shall not apply to interest, late fees and similar income attributable to an installment sale or other transaction that occurred in the regular course of business.
(u) Gross receipts do not include general and administrative intra-company receipts or intra-company reimbursements or transfer payments.
(v) Gross receipts do not include receipts on any venture capital fund or other investment fund, except commissions and fees of such funds. Gross receipts from the sale and rental of real estate and buildings remain taxable.
(w) Gross receipts do not include rebates and discounts taken or received on account of purchases by the licensee. A rebate or other incentive offered to induce the recipient to purchase certain goods or services from a person other than the offeror, and which the recipient assigns to the licensee in consideration of the sale goods and services shall not be considered a rebate or discount to the licensee, but shall be included in the licensee's gross receipts together with any handling or other fees related to the incentive.
(x) Gross receipts do not include any amount representing the liquidation of a debt or conversion of another asset to the extent that the amount is attributable to a transaction previously taxed (e.g., the factoring of accounts receivable created by sales which have been included in taxable receipts even though the creation of such debt and factoring are a regular part of its business).
(y) Gross receipts do not include any amount representing returns and allowances granted by the business to its customer.
(z) Effective January 1, 1999, gross receipts derived solely from the design, development or other creation of computer software for lease, sale or license shall be subject to an exclusion in the amount set forth in the table below. This exclusion shall apply only to those receipts attributed to computer software design, development or creation activities actually performed at a definite place of business within Fairfax County as specified by Section 4-7.2-6.
The amount of gross receipts excluded by this section shall be determined as follows:
Tax Year Beginning
January 1, 1999
33-1/3% of software receipts
January 1, 2000
66-2/3% of software receipts
January 1, 2001
100% of software receipts
(2) Exclusions from the definition of person:
(a) Person does not include: (i) volunteer fire departments; (ii) volunteer rescue squads; or (iii) nonprofit charitable, cultural, educational or recreational organizations which are created to operate a community center, a swimming pool, a tennis court or some other facility or service for the exclusive benefit of the residents of Fairfax County.
(3) Other special provisions:
(a) Notwithstanding the provisions of Section 4-7.2-22 of the Article, every person conducting or engaging in the occupation, business, trade or calling of leasing aircraft shall be taxed on the gross receipts of that activity at the annual license tax rate imposed on wholesale merchants by Section 4-7.2-30.
C. The calculation of gross purchases and gross receipts for annual license tax or fee purposes shall be on a cash, a modified accrual or an accrual basis used for the preceding calendar year, but the basis used for such calculation of gross receipts for each person shall be the same system of accounts used by that person for federal income tax purposes.
D. Any person claiming the benefit of any exclusion, exemption, restriction or limitation to the taxes or fee imposed by this Article shall bear the burden of showing that the exclusion, exemption, restriction or limitation is applicable to their claim.
E. Where, before the expiration of the time prescribed for the assessment of any license tax imposed pursuant to state law, both the Director and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.
F. Notwithstanding Va. Code § 58.1-3903, the Director shall assess the local license tax omitted because of fraud or failure to apply for a license for the current license year and the six preceding license years.
(2) No tax or fee assessment shall be delinquent and subject to collection during the pendency of any administrative appeal made to the Director in accordance with Va. Code § 58.1-3980, so long as the administrative appeal is filed within ninety days of the date of the assessment. Any such appeal shall be in writing. Any such administrative appeal shall state the factual or legal basis for the appeal, and it shall provide copies of any documents which support the claim. If an administrative appeal has been filed in accordance with this Subsection, no tax assessment shall be deemed delinquent and subject to collection for a period of thirty days after the date of the final determination of the appeal by the Director. Nothing in this paragraph shall be construed to preclude the assessment or refund, following the final determination of such appeal, of such interest as otherwise may be provided by general law as to that portion of a tax bill which has remained unpaid or was overpaid during the pendency of such appeal and is determined in such appeal to be properly due and owing.
(3) The period for collecting any license tax or fee shall not expire prior to the period specified in Va. Code § 58.1-3940, two years after the date of assessment if the period for assessment has been extended pursuant to Section 4-7.2-1(E) of this Article, two years after the final determination of an appeal for which collection has been stayed pursuant to Section 4-7.2-11 of this Article, or two years after the final decision in a court application pursuant to Va. Code § 58.1-3984 or similar law for which collection has been stayed, whichever is later.
B. Refunds. Except as otherwise provided by this Article or by state law, there shall be no refunds of any license tax paid under the provisions of this Article.
(1) In the event a person permanently ceases to engage in a business, profession, trade, occupation or calling within the County during a year for which a license tax has already been paid, that person shall be entitled, upon application, to a refund for that portion of the license tax already paid, prorated on a monthly basis so as to ensure that the licensed privilege is taxed only for that fraction of the year during which it is exercised within the County. For the purposes of proration, a period of more than one-half of a month (at least sixteen days) shall be considered a full month and a period of less than one-half of a month shall not be counted. However, if a person has obtained a license by payment of a license fee pursuant to Section 4-7.2-7(D) of this Article, then no refund shall be allowed.
(2) No interest shall be paid on a refund, provided the refund is made not more than thirty days from the date of the payment that created the refund or the due date of the tax, whichever is later.
(3) Whenever an assessment of additional or omitted tax by the Director is found to be erroneous, all interest and penalty charged and collected on the amount of the assessment found to be erroneous shall be refunded together with interest on the refund from the date of payment or the due date, whichever is later. Interest shall be paid on the refund of any license tax from the date of payment or due date, whichever is later, whether attributable to an amended return or other reason. Interest on any refund shall be paid at the same rate charged under Va. Code § 58.1-3916.