News Article

Retailers plead to dump local BPOL taxes

Thursday, August 19, 2010
Louis Llovio
Richmond Times-Dispatch

Richmond, Va. -- Retailers asked a state commission charged with giving Virginia businesses a boost to consider eliminating or making changes to the state's business, professional and occupational license tax, commonly referred to as the BPOL tax.

Merchants and industry advocates packed a hearing at the state Capitol yesterday to plead their case before a panel of the Governor's Commission on Economic Development and Job Creation.

Gov. Bob McDonnell appointed the commission this year to generate ideas regardless of political or fiscal consequences. Not all the ideas will be accepted when the final recommendations are made to him in mid-October.

The retailers' pleas were heard by the Small Business Subgroup. The subgroup is trying to find ways to spur entrepreneurship, expand existing businesses and create new jobs, according the state's website.

Retailers are pushing for a repeal of the BPOL tax, but would be satisfied if it was made equitable, said George Peyton, director of government affairs with the Virginia Retail Federation.

BPOL is charged in 39 cities and 47 counties throughout the state and across several business sectors. The tax is a percentage based on the total revenues earned throughout the year.

That's unfair, retailers argue, because they have higher overhead, cost of inventory and thinner profit margins than other categories, such as professional services.

The retailers say if the state doesn't eliminate the tax, it should be based on profits as opposed to revenue.

Another option, Peyton said, would be to change how categories are established based on profit margins. For example, a business category that typically has a 10 percent profit margin would pay a higher percentage than a category with a 5 percent profit margin.

Tom Kinerk, owner of Jeness Uniform Center in Norfolk, testified that he lost $70,000 last year but still had to pay the tax.

"I had to cough up $70,000 from my savings to keep the business afloat and then got the privilege of paying $4,000 [in BPOL tax]," he said.

Jim Regimbal, an analyst for Fiscal Analytics, studied the affect of the BPOL tax for the Virginia Association of Counties and the Virginia Municipal League.

Regimbal testified that the BPOL tax generated $660 million in revenue to localities in fiscal year 2009, which works out to about 3.9 percent of the localities' budgets.

Cutting that much out of the budgets would be a blow to for already cash-strapped local governments, he said.

"If you change [the money generated from the BPOL], how they going to fill the hole?" he asked.

After the meeting yesterday, subgroup members said making changes to the BPOL tax was high on their agenda, though members cautioned that it is a complicated issue.

For additional information contact Ibbie Hedrick at 804-225-2487 or ibbie.hedrick@ltgov.virginia.gov.