Posted: January 28, 2011

By Philip Newswanger

philip.newswanger@insidebiz.com

The bill to change the BPOL tax has passed the House and is headed for the Senate Finance Committee.

Del. Sal Iaquinto, R-Virginia Beach, introduced the bill at the request of Virginia Beach City Council. The city of Chesapeake joined the bill in support.

The bill would permit localities to rebate or forgive the Business Professional Occupational License tax for two years for companies that open for the first time in their boundaries. The tax is levied on the gross receipts of a business.

Businesses despise the tax.

Iaquinto said in a voice mail message that the bill is gaining a little steam and moving forward pretty rapidly.

"There's a good chance this will become law," Iaquinto said.

The Virginia Municipal League, a coalition of Virginia's cities, supports the bill.

Localities have the legal authority to raise, lower or exempt all businesses from the tax. But localities have to apply the law equitably. This bill would give localities more leeway.

Del. Mark L. Cole, R-Fredericksburg, introduced a bill that broadens the BPOL exception. His bill gives localities the option to tax on gross receipts or a company's taxable income. The bill has been referred from committee and is headed for the Senate.

The BPOL tax was instituted to pay for the War of 1812.

In December, Virginia Beach City Council member Rosemary Wilson drafted a resolution to give new companies a break on the BPOL tax for two years and the city council approved it unanimously. Iaquinto then drafted the legislation at the city's request.

Wilson said in an earlier interview the bill isn't a tax loophole for existing businesses.

"This is for bona fide new businesses to get started," she said.

The change would not reduce or impact existing city revenue, Wilson said.

Virginia Beach collects more than $40 million a year in taxes from the BPOL tax, mostly for education. Each locality sets its own BPOL tax rate. But the fees vary by company type and locality.

If passed, the legislation would be effective July 1.

Republicans retain a majority in the Virginia House of Delegates, but Democrats control the Senate. nib