The House this week approved a bill that would freeze localities’ Business, Professional and Occupational Licenses tax rates at their 2011 levels. The measure also would prevent localities that don’t currently levy the tax from imposing it.
In addition, House Bill 10 would alter the methods of calculating the BPOL tax. Currently, all businesses are taxed on Virginia taxable income. HB 10 would tax businesses defined as pass-through entities or sole proprietorships at levels related to their net income, while still taxing corporations on taxable income.
“I’m not a fan of BPOL, but I know we just can’t stop it because localities rely heavily on [the tax revenue],” said a co-sponsor of the bill, Delegate Mike Watson, R-Williamsburg.
“But I would like to ... wean ourselves off of that, because it is a deterrent to businesses moving here and expanding here.”
On Thursday, the House agreed. Delegates passed HB 10 on an 88-12 vote. That sent the bill to the Senate, where it was assigned Friday to the Senate Finance Committee.
Watson said that under the current system, the BPOL tax is unfair because businesses pay based on gross sales and not on profit. As a result, businesses that aren’t making money – such as startups – are paying more in BPOL taxes than some companies turning a profit, he said.
BPOL taxes are imposed in some form in all 39 cities and 46 of the 95 counties in Virginia. Localities choose which types of businesses to tax and how much, up to a maximum that differs by industry.
Under HB 10, local governments would not be able to raise their BPOL taxes above the levels they set for fiscal year 2011.
Watson and Delegate Mark Cole, R-Fredericksburg, were the chief patrons of the bill. Delegate Michael Webert, R-Marshall, also was a sponsor.