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Tuesday, April 14, 2009

Contractor's Hit Hard By Taxes/Licenses

If you do construction contract work in Virginia, you may wonder when the taxes end and the profits begin. Both federal and state laws require income taxes, but you may not realize the extent to which localities can pick your pocket. Here is a brief summary of some of the taxes and fees that Virginia counties, cities and towns can levy on your business:

§58.1-3703 - Counties, cities and towns can require a license, impose a fee and assess a license tax.

§58.1-3706
- Under the new BPOL tax restrictions, localities cannot impose a license tax on gross receipts of $100,000 if the locality has more than 50,000 people or $50,000 to $25,000 if the locality has between 25,000 and 50,000 people. For contractors, the rate can be no higher than 16 cents per $100 gross receipts. However, BPOL rates can be set higher if a locality had such rate set on January 1, 1978.

§58.1-3714
- Contractors subject to a license tax can also be required to post a bond and prove maintenance of workers' compensation coverage before getting a business license.

§58.1-3715
- Contractors are exempt from paying to other localities if they pay the required license tax in their office locality. However, if the work in another locality exceeds $25,000, that locality may assess a license tax.

Virginia also has no shortage of licensing requirements, including:

§54.1-1106 - Class licenses are required by all contractors doing work valued over $70,000 in a single contract or project; or $500,000 over a twelve month period.

§54.1-1108
- Class B licenses are required by all contractors doing work valued over $7,500 in a single contract or project but less than $70,000; or a total of $150,000 but less than $500,000 over a twelve month period.

§54.1-1108.2
- Class C licenses are required by all contractors doing work valued over $1,000 in a single contract or project but less than $7,500; or a total of less than $150,000 over a twelve month period.

§54.1-1111
- Before issuing a building permit, a locality can require proof of licensing or an affidavit demonstrating that a license is not required. In addition, an applicant must prove that required license fees and taxes have been paid.

§54.1-1113
- Nonresident bidders cannot bid on jobs in Virginia without appointing the Director of the Department of Professional and Occupational Regulation as their agent for lawful process.

§54.1-1115
- A fine of $500 per day can be assessed for failure to obtain a valid Virginia contractor's license or certificate, as well as conviction of a Class 1 misdemeanor.

§54.1-1117
- Counties, cities and towns can require local licenses if contractors do not have a Class A license.

The above article is not meant to replace legal counsel. To speak to an attorney, contact the offices of Gross & Romanick today.