BPOL And Meals Tax Compliance

Published 3:33 pm Tuesday, September 13, 2011

FARMVILLE – Add Farmville to the list of localities wanting to assess compliance with the BPOL and meals taxes.

Town officials are also hopeful that simply talking publicly about BPOL and meals tax compliance might have a productive impact.

Some localities audit their businesses to ensure the meals tax is being added to food bills and paid into local coffers, and that the gross receipts upon which the BPOL tax is assessed are, in fact, the accurate gross receipts.

Henrico, in fact, has 1,000 field agents and 10 auditors, with each auditor conducting 100 to 200 audits each year among the county's 25,000 businesses.

The Town of Appomattox, meanwhile, is in the process of getting its business license ordinance updated to be able to perform audits and expects to begin random audits in the next six months.

Localities want to ensure they are getting all the tax revenue that should be paid and believe doing nothing about compliance is unfair to those businesses that do accurately assess and pay the meals and the BPOL taxes.

In Farmville, those taxes are the two largest revenue sources for the Town, which has been working to make ends meet.

During last Wednesday's work session, Town Council continued its discussion on tax compliance.

Town Manager Gerald Spates raised the issue of “the BPOL tax and checking some of the businesses. I think this is an issue that a lot of localities are dealing with. Of course your bigger localities, like Henrico, they have CPAs on staff to do that.”

Smaller localities, such as Farmville, do not necessarily have such abilities in-house.

“I don't see how we would have the expertise or wherewithal to do a lot of this,” Spates said. “And there's been some discussions…among the legislators to require, instead of people coming in an estimating what they're going to (make), they actually use their income tax return.”

Spates told Town Council, “We need to figure out a way to be able to spot-check these businesses. I don't think we have any expertise in-house to actually audit a business.”

The issue of BPOL and meals tax compliance was raised by Town Council's now defunct budget committee

“It was brought up by our committee,” budget committee member Dr. Edward I. Gordon said. “…An idea to double-check things. So the whole committee said, 'Hey, we ought to check.'”

Fellow budget committee member David E. Whitus told council members that perhaps the issue is “something we could bring up at VML (the Virginia Municipal League) and maybe talk to some other localities and see what they do.”

When it was suggested the Town check with other localities, Spates said, “that's what we did, but you've got places like Henrico, they've got their own CPAs on staff…”

Referring to a smaller community, Town Clerk Lisa Hricko added that “Appomattox has a CPA as a treasurer also and they're doing audits there. South Boston is looking at outside; they're looking at getting someone to come in from the outside and audit.”

Looking for practical ways for the Town of Farmville to ensure accurate payment of the meals and BPOL taxes by town businesses, Spates wondered about hiring someone who would get a percentage of any unpaid meals and BPOL tax revenues. The Town already does something similar with unpaid bill collection.

“I wonder if you could do something similar to…like this lawyer out of Richmond that's collecting our bills for us. We get our 100 percent but he charges 10 or 20 percent on top of that. I was just wondering if…why couldn't you get a CPA in the off-season and pay him a percentage of what he finds for the Town?” Spates asked.

Taking Spates' idea and expanding upon it, Town Attorney Donald C. Blessing offered the notion of localities pooling their resources to hire a CPA that they would all share.

“I wonder,” Blessing told council, “if small communities could say, 'We're not big enough to have our own' and could go together in a pool and advertise for someone who will do the auditing services for…”

For BPOL and the meals tax, Whitus interjected.

“…For a number of communities,” Blessing continued, completing his sentence and his thought. “Because to get anybody to do it-money makes the world go around-it's got to be worth it to whoever you want to do it.”

Continuing the thought process, Spates contemplated the issue as one the Commonwealth Regional Council might help address. The CRC, for example, secured software which localities were able to use in the recent redistricting, software the localities did not deem affordable on their own.

“That could be a service they could provide that everybody paid into…like a circuit rider that went around doing spot checks” on BPOL and meals tax payment, Spates said.

Meanwhile, simply talking about the issue may have an effect on compliance, Town officials hope.

“I think if people knew they were going to get spot-checked,” Whitus said.

“Just that idea of getting checked would create that, when they're ready to fill that line out,” Dr. Gordon agreed.

“To think twice,” Whitus added.

“The rumor definitely gets them thinking,” council member Tommy Pairet said.

“That's how the IRS keeps people honest, not the audit but the (threat) of the audit,” noted Blessing.

In summing up Wednesday's discussion, Spates told Town Council, “that's where we are and we are looking into it and I think it's an issue that all localities are taking a good look at now.”