BPOL in Prince William – what is it and why does it matter?

Prince William County businesses are still paying toward the fund for the War of 1812.

The Business, Professional and Occupational License (BPOL) tax was started in the United States for that purpose several centuries ago, and has persisted today in the county.

Who pays the BPOL tax?

The BPOL tax is required of all businesses in the county above a minimum threshold, and varies by industry. The tax is calculated based on a business’ gross (total) receipts.

Over the years, people in government and the business community have lobbied for the elimination of the tax, as well as raising the threshold.

“When I first came into office 12 years ago, the county had a policy that said that BPOL taxes would be issued to all businesses with a Prince William County business license…except for those businesses that have less than $100,000 gross receipts,” said Coles Supervisor Marty Nohe.

According to Nohe, the BPOL tax makes it harder for small business startups.

“It’s important to understand that the BPOL tax is a tax on the business’ total receipts – not its profits…I have always struggled with the concept that we tax the revenues and sales of small businesses – very small businesses – even when that company may not make a profit, or may be a startup that hasn’t had the opportunity to make a startup yet… I think that BPOL is a fundamentally unfair tax,” said Nohe.

While the threshold was originally $100,000 of gross receipts, over the years it rose to $200,000, then $250,000 and this year the county board of supervisors raised the threshold to $300,000.

“I think that there’s a recognition now that if we want to encourage small business growth in the county, we’re not going to accomplish that by doing the kind of recruitment efforts we do…small businesses tend to respond to market forces. Stores open where the customers are…but one way we can encourage that business growth is to stop the disincentives against startups that exist, with the BPOL tax,” said Nohe.

Revenue generated from the BPOL tax makes up about 3% – or $25 million – of the county’s annual budget.

What does raising the threshold/eliminating the tax do?

In addition to raising the threshold to $300,000 this year – which means only  county businesses that make more than that amount each year (before expenses) will pay the tax – the board also agreed to raise the threshold even higher in the coming years.

Nohe stated that as part of the board’s 5-year budget plan, the BPOL threshold will rise an additional $50,000 a year until 2022 – when the threshold will become $500,000.

According to Brendon Shaw, a spokesperson for the Prince William Chamber of Commerce – one of the organizations in opposition to the tax – increasing the threshold will give more than 1,000 area businesses a tax savings of $850,000.

Shaw also stated that while raising a threshold is a step in the right direction, the Chamber would ultimately like the BPOL tax eliminated.

This was done in Stafford County in 2010, although they still do charge business and merchant related taxes.

“[The] Chamber is in support of continuing to increase the threshold and hopefully will ultimately see it phased out as Stafford County has done.  The trick is to do so without raising an additional tax on business to fill the hole,” said Shaw.

As an alternative, Shaw also stated that changing the structure from taxing gross receipts to net receipts (profit) would be something that the county Chamber of Commerce would support.

Nohe stated that the amount the county would “miss” from the BPOL tax revenue would not be significant, but that the board of supervisors would have to closely evaluate before making a decision on eliminating the BPOL tax.

“The amount of revenue that the county will forgo through that decision – it’s not nothing – but it’s a relatively small amount, in the context of our own budget. But it will mean that over 50% of the businesses operating in the county will no longer pay this tax and we won’t be burdening our very small businesses,” Nohe commented.