When Cash-Strapped States and Localities Come Knocking
The economy has affected the budgets of not just individuals and entities, but also state and local governments. In these hard economic times, states and localities face serious shortfalls of revenue, made worse by the plunging value of real estate, shriveling sources of funding and growing budget deficits. This is why states and municipalities have begun to proactively check and enforce compliance with all taxes, including business taxes.
You are likely aware of your requirement to have a business license. But you may not know that you could be required to obtain a nonresident construction license if you work in other states, such as Maryland. Additionally, you could be subject to further business tax obligations above and beyond your business license fee, such as sales or gross receipts taxes and use taxes.
One of the most notable examples of business taxes can be found in Virginia, where counties, cities and towns are authorized to levy Business, Professional and Occupational License (BPOL) taxes. BPOL taxes are geared toward a company’s gross receipts, making these taxes controversial and, often, the subject of political attack. Most local governments in Virginia, including those in northern Virginia, have opted to impose BPOL taxes.
Generally, BPOL taxes are levied where the company has its “definite place of business.” However, special provisions apply to contractors, with one such provision allowing a locality outside the contractor’s definite place of business to impose BPOL taxes if the contractor does more than $25,000 of business in a year in that locality. Because there is no centralized administration of BPOL taxes, you must contact each applicable locality to ensure you are in full compliance with your BPOL taxes.
In an effort to encourage businesses and individuals who are behind on or noncompliant with payments, some jurisdictions will extend a form of amnesty. Maryland is extending Tax Amnesty to business taxpayers from Sept. 1 to Oct. 30, 2009. You can find more information and a link to an application on the Comptroller of Maryland’s Web site at http://business.marylandtaxes.com/paymentinfo/amnesty2009.asp.
The District of Columbia has an ongoing Voluntary Disclosure Program through its Office of Tax and Revenue (OTR). With this program, the District may agree to a three- to five-year look-back period and may waive civil penalties if the tax and interest is paid in full. You can find information and a form Voluntary Disclosure Agreement on OTR’s Web site at http://otr.cfo.dc.gov/otr/frames.asp?doc=/otr/lib/otr/information/pdf/Voluntary_Disclosure_Program.pdf.
Because state and local governments currently are hungry for tax revenue and actively enforcing compliance with local taxes, it is vital to ensure you are in full compliance with your licensing and business tax obligations.
This article is not intended to provide specific legal advice but, instead, as a general commentary regarding legal matters. Consult with an attorney regarding your legal issues, as the advice will depend on your facts and the laws of your jurisdiction.
- 42April 2013 Government Affairs Estate Tax Op-Ed Congressman Tom Rice (SC-07) Family business owners and entrepreneurs are all too familiar with our country’s onerous estate tax. The fiscal cliff negotiations at the end of last year halted the 55 percent estate tax rate from again taking effect, but the negotiated 40 percent rate and $5.12…
- 36April 2009 President's Message Are you a Contractor Member of the MCAA? Tom Daniel President, Mason Contractors Association of America Are you a contractor member of the MCAA? If you are, you need to be applauded. Why? As one of our contractor members, you are in the unique position of being a small business owner.…
- 33January 2012 Legal Issues Business Succession Planning Part II: Critical Tools By Timothy R. Hughes, Esq. and Lauren K. Keenan, Esq. Editor’s Note: In Part I of business succession planning, the critical importance of business succession planning to the small or family-owned business was discussed. In Part II, some of the common tools used for…