840.11   EXCLUSIONS; DEDUCTIONS.
   Any person claiming the benefit of any exclusion, deduction or limitation to the license taxes or fees imposed shall bear the burden of showing that the exclusion, deduction or limitation is applicable to their claim through appropriate documentation and shall provide it upon request of the Commissioner of the Revenue.
   (a)   Gross receipts for license tax purposes shall not include any amount not derived from the exercise of the licensed privilege to engage in a business, profession, trade or occupation in the ordinary course of business.
      The following items shall be excluded from gross receipts:
      (1)   Amounts received and paid to the United States, the Commonwealth of Virginia or any county, city or town for the Virginia retail sales or use tax, for any local sales tax or any local excise tax on cigarettes, or amounts received for any Federal or State excise tax on motor fuels.
      (2)   Any amounts representing the liquidation of a debt or conversion of another asset, to the extent that the amount is attributable to a transaction previously taxed (e.g., the factoring of accounts receivable created by sales which have been included in taxable receipts, even though the creation of such debt and the factoring are a regular part of its business).
      (3)   Any amount representing returns and allowances granted by the business to its customers.
      (4)   Receipts which are the proceeds of a loan transaction in which the licensee is the obligor.
      (5)   Receipts representing the return of principal of a loan transaction in which the licensee is the creditor, or the return of principal or basis upon the sale of a capital asset.
      (6)   Rebates and discounts taken or received on account of purchases by the licensee. A rebate or other incentive offered to induce the recipient to purchase certain goods or services from a person other than the offeror, which the recipient assigns to the licensee for consideration of the sale of goods and services, shall not be considered a rebate or discount to the licensee, but shall be included in the licensee's gross receipts, together with any handling or any other fees related to the incentive.
      (7)   Withdrawals from inventory for purposes other than sale or distribution and for which no consideration is received, and the occasional sale or exchange of assets other than inventory, whether or not a gain or loss is recognized for Federal income tax purposes.
      (8)   Investment income not directly related to the privilege exercised by a business subject to licensure not classified as rendering financial services. This exclusion shall apply to interest on bank accounts of the business and to interest, dividends and other income derived from the investment of its own funds in securities and other types of investments unrelated to the licensable privilege. This exclusion shall not apply to interest, late fees and similar income attributable to an installment sale or other transaction that occurred in the regular course of business.
      (9)   Gross receipts from the design, development or other creation of computer software for lease, sale or license.
      (10)   Gross receipts from charitable non-profit organizations which qualify for federal exemption as a section 501(c)(3) organization and to which contributions are deductible under Internal Revenue Code § 170, except to the extent that they have receipts from unrelated business income.
      (11)   Gross receipts from gifts, contributions and membership dues of a non- profit organization, defined as an organization, other than a charitable non-profit organization, which is exempt from Federal income tax under Internal Revenue Code § 501. Activities conducted for consideration which are similar to activities conducted for consideration by for- profit businesses shall be presumed to be activities that are part of a business subject to licensure.
      (12)   Whenever a motor vehicle dealer accepts a trade-in as part of a sale of a motor vehicle, the dealer's gross receipts for license tax purposes shall not include the amount of the trade-in.
      (13)   Gross receipts for license tax purposes under Chapter 37 (§ 58.1-3700 et seq.) of the Code of Virginia, as amended, shall not include the license and admission taxes established under §§ 59.1-392 and 59.1-393, respectively, nor shall it include pari-mutuel wagering pools as established under § 59.1-392 of the Code.
      (14)   Gross receipts of real estate brokers for license tax purposes under Chapter 37 (§ 58.1-3700 et seq.) of the Code of Virginia, as amended, shall not include amounts received by any broker that arise from real estate sales transactions to the extent that such amounts are paid to a real estate agent as a commission on any real estate sales transaction and the agent is subject to the business license tax on such receipts. The broker claiming the exclusion shall identify on its license application each agent to whom the excluded receipts have been paid, the amount of such excluded receipts, and the jurisdiction in the Commonwealth of Virginia in which the agent is subject to business license taxes.
         In the event that a real estate agent receives the full commission from the broker less an adjustment for the business license tax paid by the broker on such commissions and the agent pays a desk fee to the broker, the desk fee and other overhead costs paid by the agent to a broker shall not be included in the broker's gross receipts. If the agent files separately, the agent must identify on its license application the broker to whom such excluded receipts have been paid, and the amount of such receipts that were included in the broker's license application.
      (15)   Gross receipts of providers of funeral services for license tax purposes under Chapter 37 (§ 58.1-3700 et seq.) of the Code of Virginia, as amended, shall not include amounts collected by any provider of funeral services on behalf of, and paid to, another person providing goods or services in connection with a funeral. The exclusion provided by this section shall apply if the goods or services were contracted for by the provider of funeral services or the customer. A provider of funeral services claiming the exclusion shall identify on its license application each person to whom the excluded receipts have been paid and the amount of the excluded receipts paid by the provider of funeral services to such person. As used in this section, “provider of funeral services” means any person engaged in the funeral service profession, operating a funeral service establishment, or acting as a funeral director or embalmer.
      (16)   Gross receipts of a staffing firm shall not include employee benefits paid by a staffing firm to, or for the benefit of, any contract employee for the period of time that the contract employee is actually employed for the use of the client company pursuant to the terms of a Professional Employer Organization (PEO) services contract or temporary help services contract. The taxable gross receipts of a staffing firm shall include any administrative fees received by such firm from a client company, whether on a fee-for-service basis or as a percentage of total receipts from the client company.
      (17)   Gross receipts of a security broker or security dealer for license tax purposes under this chapter shall not include amounts received by the broker or dealer that arise from the sale or purchase of a security to the extent that such amounts are paid to an independent registered representative as a commission on any sale or purchase of a security. The broker or dealer claiming the exclusion shall identify on the person's license application each independent registered representative to whom the excluded receipts have been paid, the amount of the excluded receipts, and, if applicable, the jurisdictions in the Commonwealth of Virginia in which the independent registered representative is subject to business license taxes.
      (18)   Gross receipts of internet access services in accordance with the Internet Tax Freedom Act (P.L. 105-277) and the Trade Facilitation and Trade Enforcement Act of 2015 (P.L. 114-125).
   (b)   The following shall be deducted from gross receipts or gross purchases that would otherwise be taxable:
      (1)   Any amount paid for computer hardware and software that are sold to a United States Federal or state government entity, provided that such property was purchased within two years of the sale to said entity by the original purchaser, who shall have been contractually obligated at the time of purchase to resell such property to a state or Federal government entity. This deduction shall not occur until the time of resale and shall apply only to the original cost of the property and not to its resale price, and the deduction shall not apply to any of the tangible personal property which was the subject of the original resale contract if it is not resold to a state or Federal government entity in accordance with the original contract obligation.
      (2)   Any receipts attributable to business conducted in another state or a foreign country in which the taxpayer (or its shareholders, partners or members in lieu of the taxpayer) is liable for an income or other tax based upon income.
(Ord. 96-08. Passed 10-16-96; Ord. 11-18. Passed 12-12-11; Ord. 21-01. Passed 1-13-21; Ord. 22-16. Passed 10-12-22.)