Title: Ford Motor Credit Co. v. Chesterfield County
Citation: N/A
Docket Number: 092158
State: Virginia
Issuer: Virginia Supreme Court
Date: March 4, 2011

Present:  Kinser, C.J., Lemons, and Mims, JJ., and Carrico, 
Russell, Lacy, and Koontz, S.JJ.
* 
 
 
FORD MOTOR CREDIT COMPANY 
 
 
 
OPINION BY 
v.  Record No. 092158 
CHIEF JUSTICE CYNTHIA D. KINSER 
 
 
 
March 4, 2011 
CHESTERFIELD COUNTY 
 
FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY 
Michael C. Allen, Judge  
 
In this appeal, Ford Motor Credit Company (FMCC) challenges 
the assessment of Business, Professional and Occupation License 
(BPOL) taxes by Chesterfield County (the County) on the gross 
receipts that the County attributed to a branch office of FMCC 
located in the County (the Richmond Branch) for the tax years 
2001 through 2004.  The Court must determine whether the circuit 
court erred in holding that the County included in the taxable 
measure only those gross receipts attributable to the exercise 
of the licensed privilege at a definite place of business in the 
County.  Because the Court concludes that the circuit court so 
erred, we will reverse its judgment for the County. 
MATERIAL FACTS AND PROCEEDINGS 
Pursuant to Code §§ 58.1-3702 and –3703(A), and 
Chesterfield County Code § 6-4, the County levied BPOL taxes 
against FMCC in the amounts of $327,137.85, $306,435.65, 
                     
* Justice Koontz presided and participated in the hearing 
and decision of this case prior to the effective date of his 
$432,620.96, and $449,740.59 for the tax years 2001, 2002, 2003, 
and 2004, respectively.  In February 2007, following the 
County's 2004 denial of FMCC's request for a partial refund of 
BPOL taxes paid for the years in question, FMCC filed in the 
circuit court an "Application for Correction of Erroneous 
Assessment of Business, Profession[] and Occupation License 
Tax," seeking a refund of BPOL taxes in the amount of 
$1,515,935.05.1  See Code § 58.1-3984.  Citing Code § 58.1-
3703.1(A)(3)(a)(4) and (A)(3)(b), FMCC alleged that, in the 
foregoing years, it had "mistakenly paid BPOL tax[es] to [the] 
County on the entire gross receipts of loans related to its 
Richmond Branch," instead of apportioning the receipts "to 
reflect the limited contribution of the Richmond Branch to 
[FMCC's] nationwide business."  FMCC asserted that the 
assessments violated the attribution requirement of Code § 58.1-
3703.1, the deduction requirement of Code § 58.1-3732(B)(2), and 
the Commerce Clause's fair apportionment requirement.  Cf. U.S. 
Const. art. I, § 8. 
The material facts are uncontested.  FMCC is a subsidiary 
of Ford Motor Company and is headquartered in Dearborn, 
                                                                  
retirement on February 1, 2011; Justice Kinser was sworn in as 
Chief Justice on February 1, 2011. 
1 FMCC initially filed its application in 2004, but 
subsequently nonsuited that action.  It refiled the application 
in 2007. 
2 
Michigan.  It is a "financial services provider, primarily to 
the automobile purchase or loan lessee environment," but it also 
"finance[s] dealer floor plan[s]" and "dealer capital loans."2  
The capital necessary to make loans originates from FMCC 
headquarters in Michigan, as do the policies and criteria 
governing loan approval, contract terms, and other management 
issues. 
Until its closing in 2007, the Richmond Branch was one of 
FMCC's 300 sales branches and, at one time, was one of three 
operating in the Commonwealth.  Approximately 75 percent of the 
Richmond Branch's business was "retail and lease contracts from 
dealerships," generally referred to as consumer financing for 
the purchase of vehicles, but its business also included FMCC's 
other revenue-producing activities:  "floor plan loan financing 
and dealership loan financing."3  The Richmond Branch was tasked 
with contacting and training dealers to increase vehicle sales 
and the number of loans made by FMCC, approving loan 
applications, determining loan interest rates, and providing 
                     
2 FMCC also had a division called "Primus" that provided 
loans for the purchase of "non-Ford vehicles."  There were only 
"negligible differences" between the way FMCC and Primus 
operated at the branch level. 
3 "Dealership loan financing," also referred to as "dealer 
capital loans," involved financing for physical plant 
improvements and dealership property acquisitions. 
3 
programs and training for dealers concerning FMCC's financing 
programs. 
During the period in question, the Richmond Branch reported 
to a regional office in Chantilly, Virginia, while offices in 
Baltimore, Maryland;4 Nashville, Tennessee; Omaha, Nebraska; 
Mesa, Arizona; and Livonia, Michigan also played a role in 
managing and administering loans that originated in FMCC's 
Richmond Branch.  The Chantilly office managed all the branches 
within the region and approved certain larger loan amounts, such 
as dealer floor plan financing.  The Baltimore office operated 
as a "service center[]" and was responsible for processing loan 
payments to insure that customer payments were credited to the 
correct account, maintaining customer contact records, working 
with customers on late payments and refinancing, and handling 
the titling of vehicles when loans were initially made and then 
paid in full.  The Baltimore service center did "the bulk of the 
work" that went into ensuring receipt of monies from loans 
closed by the Richmond Branch.  The Nashville office was also a 
service center, but handled Primus loans exclusively as the 
headquarters of FMCC's Primus division.  Some Primus loans were 
processed through FMCC's Richmond Branch.  Finally, the service 
                     
4 The Baltimore service center is located in Columbia, 
Maryland and is alternatively referred to as the Columbia 
service center. 
4 
center located in Omaha, Nebraska "handle[d] overflow business 
only." 
FMCC also had centers that dealt with loans originating in 
the Richmond Branch, and elsewhere, that subsequently went into 
default.  One such office in Mesa, Arizona, "the national 
recovery service center," was responsible for "ensur[ing] that 
[FMCC] obtain[ed] payment for any loans or leases that [were] in 
default."  Its objective was to "get all the monies due [FMCC] 
under the loans or the leases."  The other collection office 
that served the Richmond Branch was the Livonia office, which 
housed "the bankruptcy specialists."  All the loan receivables 
"managed by FMCC [were] the receivables owned by FMCC." 
With regard to the installment financing of vehicle 
purchases, the Richmond Branch reviewed loan applications from 
customers who sought to "purchase or lease a vehicle" from a 
Ford Motor Company dealership, and decided "whether or not to 
approve the loan . . . based on procedures set out by [FMCC 
headquarters in] Dearborn."  The Richmond Branch also determined 
interest rates, sometimes approving a lower rate for a customer 
with a good credit score.  However, most of the interest rates 
were set by the headquarters in Michigan.  When the Richmond 
Branch approved a loan application, it notified the dealership, 
where the customer actually executed the installment loan 
contract.  After the documents were signed and returned to the 
5 
Richmond Branch, it collected "all the paperwork" and forwarded 
the documents to a service center, which "then t[ook] over the 
duties of . . . get[ting] the title for the vehicle" and 
"maintain[ing] the loan."  When a "contract package [came back] 
into the branch," information was entered into a database, an 
activity that signaled the headquarters in Michigan "to wire 
funds electronically . . . to the dealership's bank account."  
The money was used to finance either the customer's purchase or, 
in the case of a lease, FMCC's purchase of the vehicle from the 
dealership. 
The process of deciding whether to approve a loan 
application, and then processing an approved application and 
completed loan usually took "20 to 30 minutes for one 
application for one customer," while the "standard Ford Credit 
loan or lease usually stay[ed] on the books right at 30 months."  
The entire process "from the time that the loan application 
[came] in until the time the paperwork [was] completed and 
shipped out" took "three days to a week."  After "the packet of 
documents [was] sent off," the Richmond Branch had no further 
involvement with the loans.  The Richmond Branch did not process 
funds, receive payments, engage in collection or other customer 
service activities, or handle delinquent debts.  During the 
years in question, the Richmond Branch processed "around 20,000 
[retail loans and leases] a year." 
6 
The Richmond Branch performed similar activities with 
respect to "floor plan financing," with rates and approval 
guidelines set by, and money sent from, FMCC's headquarters.  
But, the regional office and headquarters exercised a greater 
degree of control over how much money was loaned to a particular 
dealer.  Once such a loan was approved, the Richmond Branch's 
"responsibilities were limited to auditing the [dealer's] 
inventory" and occasionally facilitating inventory trades 
between dealerships. 
Likewise, the Richmond Branch's role as to "dealership loan 
financing" or "dealer capital loans" was comparable to its role 
with "floor plan financing."  But, in the case of "dealership 
loan financing," the Richmond Branch actually received payments 
on the loan amount, noted their receipt, and then forwarded the 
payments "to a Ford Credit lockbox for posting to the account." 
FMCC's witness who qualified as an "expert in the field of 
accounting" and "in state and local . . . business license 
taxes" summarized in detail how a consumer installment loan to 
purchase a vehicle was processed, maintained, and serviced by 
FMCC: 
A loan gets made at the dealer level and the 
paperwork goes to the branch, it's approved at the 
branch.  Branch personnel make sure that the 
underwriting standards are in keeping with the 
parameters of the company.  They then approve the loan 
and then within 30 days, that loan package is then 
7 
forwarded on to a service office.  In this case, it 
was Columbia during the four years in question.  
At the service office, the loan is administered.  
If there are late payments, someone follows up.  They 
record the payments. If there is a need for 
administrative changes in the loans, such as change of 
address, they handle that.  If there's a problem with 
a loan, if refinancing is a requirement, if a payment 
needs to be skipped, they handle these matters.  They 
also handle matters relating to the loan if the loan 
goes into default, and then they bring in either the 
Livonia office, which would handle the bankruptcy 
proceeding, if one was involved, or – and/or one of 
the recovery centers, and recovery centers handle 
repossession of the underlying security, the 
automobile, and then also the disposal of that 
automobile in recovery of the principal on the debt.  
The headquarters serves a very important function 
as well.  They handle the marketing of the company.  
They handle the general overall strategy of the 
company.  They set the audit or, rather, the 
underwriting standards so that they can mitigate the 
risk on the loans in the loan portfolios that are made 
by FMCC.  They also work within the marketplace to 
secure capital so that the capital can be loaned to 
individuals to buy automobiles.  They also handle 
securitization for those loan packages, and 
securitization is merely a secondary market activity 
where they securitize the loans and then receive funds 
in exchange for the securitization so that they can 
reloan those funds to the borrowers. 
The accounting expert also testified that FMCC used an 
accrual accounting method, meaning that FMCC recorded loans as 
receivables on a balance sheet when they were made, and "booked" 
revenue on an income statement when payments of interest and 
fees were due.  In the event of a default on a loan, "revenue 
would be booked when the security [was] sold and the principal 
satisfied on the note," resulting in "either . . . a gain or a 
8 
loss on the loan."  Loans approved and closed by the Richmond 
Branch were not "booked" there for Virginia or federal income 
tax, or any other, purposes. 
The expert testified that the "internal accounting system" 
relied on by the County to justify their attribution of gross 
receipts to the Richmond Branch, known as "MAPS" or "management, 
analysis, and performance system," was accurate but was a 
"contract revenue-based system."  He stated that MAPS 
"associates revenue attributable to loans . . . and leases . . . 
that . . . come from the business that FMCC conducts with its 
dealers," allowing FMCC to determine at which dealers the loans 
"were completed," and which branches processed the loans.  
However, according to the expert, MAPS was "not an activity[-
]based system at all" and thus did not attribute revenue based 
on the activities or work of personnel at the Richmond Branch, 
or anywhere else, or even track "which office is responsible for 
what activities with respect to a particular loan[.]"  The 
expert doubted whether "a system could be devised . . . to track 
and attribute revenue based on where services are performed," 
concluding "it would be very difficult to do."  He explained 
that "[t]here's no way to take . . . one payment or . . . one 
dollar of interest . . . and take that and distribute it among 
all of the activities that may come into play on that loan."  
Thus, he concluded that it was "impossible or impractical to 
9 
utilize . . . the general rule" of attribution and that "payroll 
apportionment" was the appropriate method to determine the BPOL 
tax FMCC owed the County during the years in question.  The 
expert explained that payroll apportionment reflects all the 
activities that generated revenues when FMCC loaned money to 
customers, received payments from customers, addressed inquiries 
from customers, and repossessed vehicles from customers. 
Having completed a payroll apportionment calculation, 
FMCC's expert stated that either the sum of $1,428,534 or 
$1,414,913 should be refunded to FMCC.  He believed that FMCC 
erred in reporting gross receipts for all loans originating in 
the Richmond Branch and failing to take into account "that other 
offices [came] into play to administer those loans and those 
leases and the important functions that Dearborn provide[d] in 
order for the business to be viable."  Explaining the deduction 
allowed in Code § 58.1-3732(B)(2), he also stated that FMCC 
failed to take the deduction "for receipts that [were] 
attributable to the conduct of business in other states where 
the company [was] liable for an income tax." 
A regional sales manager for FMCC testified that without 
the work of the various offices that dealt with loans 
originating in the Richmond Branch, FMCC would not collect the 
full amount due under its loan contracts.  Similarly, FMCC's tax 
counsel opined that the service centers "add value" to the loans 
10 
because their activities "generat[e] monies."  He further stated 
that tracking revenue based on services provided by FMCC was not 
possible. 
In contrast, the County's Commissioner of Revenue (the 
Commissioner) stated that FMCC provided "a product to their 
customers, the product being money in the form of loans.”  He 
further testified that for purposes of BPOL taxation for a 
financial services company like FMCC, "[g]enerating gross 
receipts is the set of activities or things that a business does 
to actually get the receipt into the business," i.e., "the 
activities . . . directly related to creating the receivable" 
such as having "a customer sign on the dotted line and issue the 
loan, giv[ing] the money to the dealer so that customer can 
drive that car home."  But, according to the Commissioner, 
"[c]ollecting gross receipts" is not a "set of activities . . . 
that a business does to actually get the receipt into the 
business" but is only a "necessary process of any business that 
has a receivable."  He also stated that "[g]enerating is taking 
the necessary actions to create a receivable or to make the sale 
so that somebody pays you" and that "receipt occurs after 
somebody collects what they want to collect."  FMCC's centers 
outside the Richmond Branch did not, in the Commissioner's 
opinion, "generate gross receipts."  Nevertheless, he admitted 
that he had never seen a document that tracked FMCC's revenues 
11 
based on the location where services were provided.  The 
Commissioner admitted that "there is no proper way to apportion" 
FMCC's gross receipts. 
Upon reviewing the evidence, presented through exhibits and 
testimony, the circuit court denied FMCC's application and 
dismissed it with prejudice.  In a letter opinion incorporated 
in its final order, the circuit court found that FMCC's business 
was that of providing "retail financing, wholesale financing 
(also called 'floor plan financing'), and a . . . catchall 
category referred to as 'other financing.'"  According to the 
court, "the Richmond Branch operated as a loan origination 
office" for all three types of financing, and "marketed and 
closed" primarily "consumer loans for individual new and used 
cars." 
The circuit court concluded that "the Richmond Branch's 
marketing and closing operations generated gross receipts in the 
form of interest and fees."  FMCC then "recorded the loans as 
receivables and forwarded them to service centers for servicing 
and collection."  The court found that MAPS "allowed the company 
to accurately track the gross receipts generated by each sales 
office," thereby attributing to the Richmond Branch only the 
gross receipts generated there.  The court expressly rejected 
FMCC's argument that "the MAPS figures for the Richmond Branch 
were intended for internal management purposes only" and did not 
12 
reflect where the gross receipts were actually generated.  
Instead, the court found "that the MAPS figures accurately 
reflect the gross receipts generated as [a] result of the 
distinct efforts of the Richmond Branch."  Thus, the court 
concluded that "[b]ecause the Richmond Branch generated gross 
receipts from a definite place of business in Chesterfield 
County, imposition of BPOL tax on the gross receipts generated 
[there is] consistent with" Code § 58.1-3703.1(A)(3)(a)(4). 
Although the circuit court also found that "[a]fter 
closing, loans generated by the Richmond Branch were transferred 
for portfolio management to 'service centers' organized and 
operated by FMCC in three other states[,]" it nevertheless 
concluded, "[t]he service centers neither created new loans nor 
added value to existing loans--they simply managed loans 
generated and closed by the Richmond Branch[; t]he service 
centers did not generate gross receipts."  (Emphasis added.)  
Likewise, the court concluded that although the Richmond Branch 
was "overseen by a regional office . . . and by FMCC corporate 
headquarters," which provided "management policy" assistance to 
the Richmond Branch and were "known as 'cost centers,'" "neither 
office generated gross receipts."  (Emphasis added.) 
Further, the circuit court found that no "gross receipts 
generated by the Richmond Branch were taxed by, or rendered 
subject to taxation by, any other jurisdiction," as "FMCC 
13 
reported none of the gross receipts taxed by [the] County for 
taxation in any other state."  However, the parties did 
stipulate that for all the relevant tax years, "FMCC filed state 
income tax or income tax-like returns in 47 states and the 
District of Columbia." 
The circuit court, thus, also rejected FMCC's argument that 
the gross receipts must be "apportioned by payroll," concluding 
that "determination of the gross receipts generated by the 
Richmond Branch . . . is neither impractical nor impossible."  
The circuit court expressly noted that "MAPS[] provides a 
reliable and accurate accounting of the gross receipts generated 
by the Richmond Branch," and that none of the "service centers" 
or "cost centers" located elsewhere "generated gross receipts 
within the meaning of applicable BPOL guidelines," but only 
"served the interests of FMCC."  Therefore, it held that "the 
assessments in this case were based solely on gross receipts 
generated by the Richmond Branch for services performed within 
the County." 
Also, the circuit court rejected FMCC's challenge to the 
assessments as violating the fair apportionment prong of the 
four-part Commerce Clause test for local taxation set forth in 
Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977).  
The circuit court determined that "the income attributed to the 
Richmond Branch was not 'out of all appropriate proportion' to 
14 
the business transacted in the locality," and that FMCC faced no 
risk of "double taxation."  The circuit court, accordingly, 
entered an order denying FMCC's application, affirming the 
assessment (with the County's requested increase),5 and 
dismissing the action.  We awarded FMCC this appeal. 
ANALYSIS 
Although FMCC raises multiple assignments of error 
challenging the circuit court's judgment, the dispositive issue 
is whether the circuit court erred in holding that the County 
properly attributed all gross receipts for loans that originated 
in the Richmond Branch to FMCC's services provided in the 
County, without apportionment or deduction.  Because this issue 
presents a mixed question of law and fact, we conduct a de novo 
review.  Luria v. Board of Dirs. of Westbriar Condo. Unit Owners 
Ass'n, 277 Va. 359, 365, 672 S.E.2d 837, 840 (2009). 
"In our review of the circuit court's application of the law to 
the facts, we give deference to the circuit court's factual 
findings and view the facts in the light most favorable to the 
[County], the prevailing party below."  Id. 
The provisions of Code § 58.1-3703(A) set forth the sole 
grant of authority for localities to levy BPOL taxes.  In 
pertinent part, the statute states: 
                     
5 The circuit court actually increased the County's BPOL 
assessment to $1,791,438.13, which is the subject of an 
15 
The governing body of any county, city or town 
. . . may levy and provide for the assessment and 
collection of county, city or town license taxes on 
businesses, trades, professions, occupations and 
callings and upon the persons, firms and corporations 
engaged therein within the county, city or town. 
See Code § 58.1-3702 ("The provisions of this chapter[, Chapter 
37, titled License Taxes, of Subtitle III, titled Local Taxes, 
of Title 58.1, titled Taxation,] shall be the sole authority for 
counties, cities and towns for the levying of the license taxes 
described herein.") 
When reviewing whether a particular subject of taxation, in 
this case, gross receipts, falls within a locality's statutory 
power to tax, we apply the rule that such  
[s]tatutes imposing taxes are to be construed most 
strongly against the government, and in favor of the 
citizen, and are not to be extended by implication 
beyond the clear import of the language used. Whenever 
there is a just doubt, "that doubt should absolve the 
taxpayer from his burden." 
City of Winchester v. American Woodmark Corp., 250 Va. 451, 456-
57, 464 S.E.2d 148, 152 (1995) (Woodmark I) (quoting 
Commonwealth Natural Res., Inc. v. Commonwealth, 219 Va. 529, 
537-38, 248 S.E.2d 791, 796 (1978)); accord Commonwealth v. 
Appalachian Electric Power Co., 193 Va. 37, 46, 68 S.E.2d 122, 
127 (1951). 
Nevertheless, "a tax assessment made by the proper 
authorities is prima facie correct and valid, and the burden is 
                                                                  
assignment of error. 
16 
on the taxpayer to show that such assessment is erroneous."  
Commonwealth v. American Radiator & Standard Sanitary Corp., 202 
Va. 13, 18, 116 S.E.2d 44, 47 (1960); see also Code § 58.1-
3984(A) (in proceedings to correct erroneous assessment of local 
levies, "the burden of proof shall be upon the taxpayer to show 
that . . . the assessment is . . . invalid or illegal"); LZM, 
Inc. v. Virginia Dep't of Taxation, 269 Va. 105, 109, 606 S.E.2d 
797, 799 (2005) (applying presumption of validity to an 
assessment of sales tax and stating that "the burden is on the 
taxpayer to show that such assessment was the result of 
'manifest error' or in 'total disregard of controlling 
evidence' ") (citation omitted); Department of Taxation v. Lucky 
Stores, Inc., 217 Va. 121, 127, 225 S.E.2d 870, 874 (1976) 
(holding in a challenge to the imposition of income taxes that 
"the taxpayer [was] confronted with a presumption of validity 
attached to the decision" of the taxing authority and that "the 
burden [was] on the taxpayer to prove that the assessment [was] 
contrary to law or that the [taxing authority] abused [its] 
discretion and acted in an arbitrary, capricious or unreasonable 
manner"). 
The General Assembly has imposed certain restrictions on 
the assessment of BPOL taxes.  The provisions of Code § 58.1-
3706 impose limits on the rate of taxation that localities may 
impose on gross receipts.  Further, any local ordinance "levying 
17 
such license taxes [must] include the provisions of [Code] 
§ 58.1-3703.1."  Code § 58.1-3703(A); see also Code § 58.1-
3703.1(A). 
Code § 58.1-3703.1 contains the primary limitations 
governing BPOL taxation, and provides a "[g]eneral rule" for the 
situs of gross receipts in subsection (A)(3)(a): 
Whenever the tax imposed by this ordinance is 
measured by gross receipts, the gross receipts 
included in the taxable measure shall be only those 
gross receipts attributed to the exercise of a 
privilege subject to licensure at a definite place of 
business within this jurisdiction. 
Code § 58.1-3703.1(A)(3)(a).  That subsection then specifies 
four different situs rules applicable to four types of 
businesses, including one for service businesses: "The gross 
receipts from the performance of services shall be attributed to 
the definite place of business at which the services are 
performed or, if not performed at any definite place of 
business, then to the definite place of business from which the 
services are directed or controlled."  Code § 58.1-
3703.1(A)(3)(a)(4). 
Neither party contests that FMCC was a service business for 
purposes of Code § 58.1-3703.1(A)(3)(a)(4).  Specifically, FMCC 
provided "[f]inancial services," meaning "the buying, selling, 
handling, managing, investing, and providing of advice regarding 
money, credit, securities, or other investments."  Code § 58.1-
18 
3700.1; see also 23 VAC § 10-500-10 (defining "financial 
services" as "the buying, selling, handling, managing, and 
investing [of] money, credit, securities, or other investments 
for others, as well as providing advice to others on such 
matters") (emphases added); 23 VAC § 10-500-390 (providing a 
list of financial services, including "[i]nstallment financing," 
"[i]nventory financing," "[c]onsumer financing," and "[l]oan or 
mortgage companies").  Thus, the general rule of attribution set 
forth in Code § 58.1-3703.1(A)(3)(a)(4) applies to FMCC unless, 
as the licensee, it "has more than one definite place of 
business and it is impractical or impossible to determine to 
which definite place of business gross receipts should be 
attributed under the general rule."  Code § 58.1-
3703.1(A)(3)(b).  In that instance, gross receipts must be 
"apportioned between the definite places of business on the 
basis of payroll."  Id. 
Both parties, and the circuit court, also agreed that FMCC 
had several definite places of business outside the County that 
managed FMCC generally, oversaw the Richmond Branch's 
operations, and administered the loans originating at the 
Richmond Branch.  See Code § 58.1-3700.1 (defining "definite 
place of business" to mean "an office or a location at which 
occurs a regular and continuous course of dealing for thirty 
consecutive days or more").  FMCC, however, disputes the circuit 
19 
court's holding that the gross receipts in question were solely 
"generated by the Richmond Branch for services performed within 
the County."  Because, according to FMCC, most of the gross 
receipts were not "directly attributable to the taxable 
privilege exercised within [the County]" but rather to the 
performance of financial services at various FMCC offices across 
the nation, it contends that it was "impractical or impossible 
to determine to which definite place of business gross receipts 
should be attributed."  Code § 58.1-3703.1(A)(3)(b).  Thus, FMCC 
asserts that "the gross receipts of [FMCC's Richmond Branch 
must] be apportioned between the definite places of businesses 
on the basis of payroll," pursuant to Code § 58.1-
3703.1(A)(3)(b). 
Relying on language appearing in the Virginia 
Administrative Code, the County, however, contends that the 
financial service FMCC provided was "the 'selling' of 'money' 
through installment loans 'to others.' "  23 VAC § 10-500-10.  
FMCC's service centers and cost centers, according to the 
County, did not provide " 'financial services' to others."  
(Emphasis added.)  Instead, argues the County, those out-of-
state centers merely served FMCC's interests by collecting the 
receivables generated when the Richmond Branch sold and closed a 
loan, with the terms and amount of repayment being fixed at 
closing.  Thus, the County contends that only the Richmond 
20 
Branch's activities qualified as a financial service business 
that generated gross receipts. 
Because FMCC, as a financial services business, had 
definite places of business in multiple jurisdictions outside 
the County, this Court must determine, first, whether the 
circuit court erred in its application of the law to the facts 
of this case by holding that all the gross receipts taxed by the 
County were attributable "to the exercise of a privilege subject 
to licensure at a definite place of business within" the County.  
Code § 58.1-3703.1(A)(3)(a); see also 23 VAC § 10-500-10 
(defining "gross receipts" as "money . . . received . . . as a 
result of transactions with others . . . and that are derived 
from the exercise of the licensed privilege").  If we answer 
that question affirmatively, we then must decide whether the 
circuit court erred in holding that it was "neither impractical 
nor impossible" to attribute the gross receipts to the 
performance of services at a specific, definite place of 
business, and that payroll apportionment was not required.  In 
other words, the questions are whether FMCC carried its burden 
to prove that the gross receipts taxed by the County were not 
attributable solely to the performance of financial services at 
a definite place of business in the County, Code § 58.1-
3703.1(A)(3)(a)(4), and whether the County's BPOL assessment 
must be "apportioned . . . on the basis of payroll" because "it 
21 
is impractical or impossible to determine to which definite 
place of business gross receipts should be attributed."  Code 
§ 58.1-3703.1(A)(3)(b). 
In determining whether the gross receipts in question were 
attributable solely to FMCC services rendered in the County, we 
turn for guidance to this Court's decision in City of Winchester 
v. American Woodmark Corp., 252 Va. 98, 471 S.E.2d 495 (1996) 
(Woodmark II).  In that case, the City of Winchester had imposed 
BPOL taxes on "100% of American Woodmark's revenues" although 
only its corporate headquarters were located in the City, and 
"manufacturing and distribution centers as well as service and 
sales offices" numbering "24 facilities in 13 different states" 
were also part of American Woodmark's business operations.  Id. 
at 103, 471 S.E.2d at 498.  American Woodmark had alleged, and 
the trial court agreed, that the assessments violated the 
Commerce Clause "because the City had not fairly apportioned the 
assessments to tax only those gross receipts attributable to 
[its] business activities within the City."  Id. at 101, 471 
S.E.2d at 497.  In resolving this challenge, the Court applied 
the relevant Commerce Clause test, which requires that the BPOL 
tax apply "only to the 'portion of the revenues from the 
interstate activity which reasonably reflects the in-state 
component of the activity being taxed.' "  Id. at 102, 471 
S.E.2d at 497 (quoting Goldberg v. Sweet, 488 U.S. 252, 262 
22 
(1989)).  The Court concluded that "[c]ommon sense compels the 
conclusion that these [out-of-jurisdiction] operations added 
value to American Woodmark's business product and were revenue 
producing activities."  Id.  "[I]t [was] equally axiomatic that 
the value added to the product by the Winchester operations 
could not possibly produce 100% of the revenues."  Id.  Thus, in 
resolving American Woodmark's Commerce Clause challenge to the 
BPOL taxes, the Court held that "American Woodmark [had] met its 
burden of proof by presenting clear and cogent evidence that the 
income which the City through its assessments attributed to 
operations conducted in Winchester [were] 'out of all 
appropriate proportions to' and [had] 'no rational relationship' 
to the business transacted in Winchester."  Id.  Although a 
statutory challenge6 was not presented in Woodmark II but only a 
challenge under the Commerce Clause, the Court's holding, by 
implication in the context of the present case, means that the 
gross receipts the City had included in the taxable measure were 
not "only those gross receipts attributed to the exercise of a 
privilege subject to licensure at a definite place of business" 
in the City of Winchester.  Code § 58.1-3703.1(A)(3)(a).  See 
                     
6 The BPOL situs statute then in effect was former Code 
§ 58.1-3707, which limited the localities' power to tax based on 
"volume" to "the volume attributable to practice in" the 
relevant locality, with "volume" meaning "gross receipts or any 
other base for measuring a license tax which is related to the 
amount of business done."  Former Code § 58.1-3707(A) and (D). 
23 
Woodmark II, 252 Va. at 103, 471 S.E.2d at 498 (holding that 
because the out-of-jurisdiction activities were "revenue 
producing," "[b]y definition, assessments based on 100% of 
American Woodmark's revenues included revenues realized from 
value produced in locations other than in the taxing 
jurisdiction").  
Turning to the case before us, we recognize that when a 
consumer or dealer executed an installment loan contract with 
FMCC and the loan documents were returned to the Richmond Branch 
and then forwarded to a service center, FMCC's entitlement to 
monies (principal, interest, and fees) with respect to that 
particular loan was fixed by the loan contract's terms.  In the 
County's nomenclature, money had been sold at that point, but 
FMCC had only a receivable, not gross receipts.  As the County's 
Commissioner of Revenue acknowledged, "[t]here is" "a difference 
. . . between a gross receipt . . . and a receivable," and Code 
§ 58.1-3703.1(A)(3)(a)(4) renders that difference significant 
here.  When, as in this case, the BPOL tax "is measured by gross 
receipts," the gross receipts that the County could include "in 
the taxable measure" were "only those gross receipts attributed 
to the exercise of" the licensed privilege, financial services, 
at a definite place of business in the County.  Code § 58.1-
3703.1(A)(3)(a).  And when financial services provided in other 
jurisdictions contribute to the derivation of the gross 
24 
receipts, those services must be accorded some proportion of the 
gross receipts, and the BPOL “taxable measure” reduced 
accordingly. 
Thus, we do not agree with the County's position that gross 
receipts were generated when, for example, a customer simply 
signed "on the dotted line" and the loan was made.  The gross 
receipts derived from the exercise of FMCC's licensed privilege 
to conduct a financial services business – to provide 
installment and inventory financing – were not attributable 
solely to the performance of financial services at the Richmond 
Branch.  To accept the County's position and the circuit court's 
holding would mean that all services necessary to FMCC's 
deriving gross receipts from its consumer installment and 
inventory financing operations were provided at the Richmond 
Branch.  But, such are not the facts of this case. 
The money to sell to consumers and dealers through 
installment and inventory financing came from FMCC's 
headquarters in Michigan.  Part of the headquarters' operations 
was the securing of capital so that money could be loaned to 
consumers to purchase vehicles and to dealers for floor-plan 
financing and physical plant improvements.  FMCC's headquarters 
also obtained securitization of loan packages.  The operations 
of FMCC's service centers included, among other things, helping 
consumers with administrative changes in their loans such as 
25 
changes of address and re-financings.  FMCC also served its 
customers by titling vehicles, tracking loan repayment progress, 
providing statements, and logging payments.  All these 
activities were an integral part of the financial service of 
installment and inventory financing and were proven by “clear 
and cogent evidence.”  Woodmark II, 252 Va. at 103, 471 S.E.2d 
at 498.  In other words, the operations of the Richmond Branch 
did not produce 100 percent of the gross receipts that the 
County taxed.7  See id. 
Thus, we conclude that the circuit court erred in holding 
that all the taxed gross receipts were "attributed to the 
exercise of a privilege subject to licensure at [the Richmond 
Branch] within [the County]."  Code § 58.1-3703.1(A)(3)(a).  We 
find support for the conclusion we reach today in the rulings of 
the Virginia Department of Taxation (the Department).  See Code 
§ 58.1-205(3) (directing courts to "accord[] judicial notice" to 
the Department's duly promulgated rulings).  In Public Document 
(P.D.) 97-284 (June 25, 1997), the Tax Commissioner advised a 
                     
7 Nothing in our analysis of Code § 58.1-3703.1(A)(3)(a) 
should be read to control when gross receipts may be taxed, but 
only which gross receipts, whenever taxable, a locality may tax 
under Code § 58.1-3703.1(A)(3)(a).  Even though gross receipts 
may be reported based on the accrual method, see, e.g., Monument 
Assocs. v. Arlington Cnty. Bd., 242 Va. 145, 147-78, 408 S.E.2d 
889, 890 (1991), the BPOL taxable measure can only include 
"those gross receipts attributed to the exercise of a privilege 
subject to licensure at a definite place of business" in the 
taxing jurisdiction.  Code § 58.1-3703(A)(3)(a). 
26 
locality with regard to the assessment of BPOL taxes on a 
business that operated a laboratory for collecting specimens.  
The business sent the collected specimens to facilities outside 
the locality for "actual testing," and the business' billing and 
collection operations occurred at its headquarters located in 
another state.  The Tax Commissioner concluded that "both the 
collection and the testing of specimens [were] part of the 
services performed by the taxpayer."  Thus, the locality could 
impose a BPOL tax on the gross receipts that were attributed to 
the specimens' collection, but not on the gross receipts 
attributable to the specimens' testing.  The Tax Commissioner 
further stated that if it was "impossible or impractical to 
determine which gross receipts [were] attributed to the 
collection of the specimens and which gross receipts [were] 
attributed to the testing of the specimens," the locality should 
apportion gross receipts on the basis of payroll. 
The operations of FMCC's headquarters in securing capital 
for loans to consumers and dealers are comparable, for our 
purposes, to the laboratory's collecting of specimens.  
Obviously, specimens cannot be tested until they are collected 
and, similarly, loans cannot be made unless there is available 
capital.  Moreover, loans, by definition, cannot be made without 
any mechanism for repayment and administrative changes.  In 
short, those activities – obtaining capital, collecting 
27 
payments, and helping customers make changes in their loans – 
provide a financial service "to others."  23 VAC § 10-500-10.  
Thus, we reject the County's argument that FMCC's service 
centers "serve[d] only the taxpayer's interest, and no other," 
and thus did "not give rise to gross receipts."  23 VAC § 10-
500-60; see P.D. 99-92 (Apr. 30, 1999) (stating that a locality 
may attribute gross receipts to a "[b]usiness's 'bookkeeping' 
operation" if the bookkeeping "includes soliciting orders for 
coal, offering bookkeeping services to others, or engaging in 
transactions involving customers"); see also 23 VAC § 10-500-10 
(requiring that "financial services" be provided "to others"). 
The Tax Commissioner followed a similar rationale regarding 
attribution of gross receipts in P.D. 99-87 (Apr. 23, 1999).  
There, a locality requested an advisory opinion on the 
attribution of gross receipts regarding a financial services 
business that "originates loans and forwards all responsibility 
for loan servicing, customer relations and possible sale to an 
office of the business located in another locality or state."  
The Tax Commissioner stated that he lacked "sufficient facts to 
determine the definite place of business to which the receipts 
should be attributed," but did offer that "the receipts . . . 
appear to be derived from activities conducted at definite 
places of business both within and without your jurisdiction."  
(Emphasis added.)  The Tax Commissioner, accordingly, directed 
28 
that the locality "ascertain the nature of the business 
activities conducted at the different places of business and the 
extent to which these activities contribute to the different 
types of receipts."  This opinion, contemplating attribution of 
gross receipts to activities such as “loan servicing” and 
“customer relations” by a financial services business is 
inconsistent with the bright-line rule pressed by the County, 
which is that all gross receipts received by FMCC for the loans 
that originated and were closed at the Richmond Branch were 100 
percent attributable to that situs. 
Our conclusion is not altered by FMCC's internal accounting 
system, MAPS.  As explained by FMCC's expert, that was a 
"contract revenue-based system" and did not track gross receipts 
based on financial services rendered to others.  Even the 
Commissioner of Revenue admitted that he was not aware of any 
document that tracked FMCC's revenues based on the location 
where financial services were provided.  Therefore, the fact 
that MAPS assigned revenue to the Richmond Branch does not 
determine where gross receipts properly were attributable 
pursuant to Code § 58.1-3703.1(A)(3)(a). 
Further, the circuit court erred in concluding that it was 
not "impractical or impossible to determine to which definite 
place of business gross receipts should be attributed" under the 
rule that the "gross receipts from the performance of services 
29 
shall be attributed to the definite place of business at which 
the services are performed."  Code § 58.1-3703.1(A)(3)(a)(4) and 
(b).  As already noted, there was uncontradicted evidence that 
MAPS tracked revenues by contract, but did not track the 
financial services performed over the life of the loan.  And, 
FMCC's expert testified that "[t]here's no way to take . . . one 
payment or . . . one dollar of interest . . . and take that and 
distribute it among all of the activities that may come into 
play on that loan."  Therefore, having concluded that the facts, 
as found by the circuit court, demonstrated that financial 
services outside the County contributed to the realization of 
FMCC's gross receipts, we further conclude that it would be 
impossible or, at least, impractical to perform that process on 
every one of the approximately 20,000 loans processed annually 
by the Richmond Branch, spanning the tax years of 2001, 2002, 
2003, and 2004.  See P.D. 04-80 (Aug. 25, 2004) (holding that 
"payroll apportionment" is "the most appropriate method of 
assessing the Taxpayer for BPOL purposes" "[g]iven the 
Taxpayer's multistate activities and the fact that its 
accounting procedures are contract driven, rather than service 
driven"); accord P.D. 05-117 (July 19, 2005) (same).  
Accordingly, we hold that because the gross receipts in question 
were attributable to services performed outside the County, and 
that "it is impractical or impossible to determine to which 
30 
definite place of business gross receipts should be attributed," 
FMCC's BPOL tax assessment must be calculated using payroll 
apportionment.  See Code § 58.1-3703.1(A)(3)(b). 
Finally, when FMCC's BPOL tax assessment is re-calculated, 
FMCC's entitlement to a deduction under Code § 58.1-3732(B)(2) 
must be determined.  That statute provides that "[a]ny receipts 
attributable to business conducted in another state or 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" "shall be deducted from gross 
receipts . . . that would otherwise be taxable."  Code § 58.1-
3732(B)(2).  FMCC contends that the stipulation to its filing 
"income or income-like tax returns in 47 states and the District 
of Columbia" means that it was entitled to deduct all gross 
receipts "attributable to business conducted" in those states.  
Cf. 23 VAC § 10-500-80(A)(2) ("A Virginia taxpayer is liable for 
an income or other tax based upon income if the taxpayer files a 
return for an income or income-like tax in that state or foreign 
country.")  While a "taxpayer . . . need not actually pay any 
tax to take the deduction," 23 VAC § 10-500-80(A)(2), a taxpayer 
may deduct gross receipts attributable to business conducted in 
another state only if the taxpayer demonstrates that it 
"actually reports those receipts . . . on its out-of-state 
31 
income tax returns."8  P.D. 07-142 (Sept. 5, 2007) (emphasis 
added). 
CONCLUSION 
For the foregoing reasons, we will reverse the judgment of 
the circuit court and remand the case for further proceedings.9 
Reversed and remanded. 
SENIOR JUSTICE LACY, with whom SENIOR JUSTICE CARRICO joins, 
dissenting. 
 
The majority opinion holds that to determine the Business, 
Professional, and Occupational (BPOL) license tax assessment for 
the Richmond Branch of Ford Motor Credit Company (FMCC or the 
company), an international lending institution, Chesterfield 
County must apportion the gross receipts generated by the 
Richmond Branch1 by the payroll apportionment method based on 
FMCC’s entire payroll.  To reach this result, the majority holds 
that (1) even though the company itself considers its gross 
receipt revenues as generated by the location where the loan 
contract was originated and designates other locations and their 
activities as “cost” or “service” centers, other activities of 
                     
8 We express no opinion regarding FMCC's entitlement to a 
deduction under Code § 58.1-3732(B)(2) or regarding what portion 
of FMCC's payroll should be included in a payroll apportionment 
calculation. 
9 In view of the Court's decision, it is unnecessary to 
address the remaining assignments of error. 
1 FMCC produced an exhibit showing that the amount of the 
gross receipts generated by the Richmond Branch ranged from 4.0 
32 
the company, such as those directed at collecting monies owed 
the company pursuant to an executed contract, are activities 
contributing to the “realization” or the “derivation” of the 
company’s gross receipts, a standard not heretofore applied by 
this Court or the Tax Commissioner; and (2) because the company 
only utilizes a tracking system that assigns gross receipts to 
the site at which the contract securing those receipts is 
executed, it is “impractical or impossible” to determine what 
part of the gross receipts revenue came from the locations at 
which these other activities and services were conducted.  
I cannot join the majority opinion for the following 
reasons.  First, as the majority recites, the Richmond Branch of 
FMCC “was tasked with contacting and training dealers to 
increase vehicle sales and the number of loans made by FMCC, 
approving loan applications, determining loan interest rates, 
and providing programs and training for dealers concerning 
FMCC’s financing programs.”  The company’s gross receipts, fees 
and interest are generated and established at the time the loan 
contract is executed.  These executed contracts are the result 
of activities undertaken by the Richmond Branch. 
In my opinion, collection activities of a company do not 
add value or generate any further gross receipts.  This view is 
                                                                  
percent to 5.3 percent of the company’s total gross receipts for 
the years in question. 
33 
consistent with the views of the Tax Commissioner as set out in 
the guidelines promulgated and opinions rendered for the 
application of the BPOL tax.  See Virginia Department of 
Taxation, Business, Professional and Occupational License Tax: 
2000 BPOL Guidelines (Jan. 1, 2000) (hereinafter BPOL 
Guidelines).  In Chapter 1 of the BPOL Guidelines the “[s]itus 
of gross receipts” is defined as “the definite place of business 
that generated taxable gross receipts.”  (Emphasis added.)  
Section 2.4 of the BPOL Guidelines provides that “[a]ctivities 
of a taxpayer which serve only the taxpayer’s interest, and no 
other, do not give rise to gross receipts.”  BPOL Guidelines 
§ 2.4.  The collection activities at issue here, in my opinion, 
do not benefit the borrower and do not generate or add value to 
the product whose sale produces gross receipts for the company.  
These collection services are only a cost of doing business for 
the lending company.  
Our case law has recognized services or activities that 
enhance the product delivered to the consumer as services that 
generate gross receipts.  For example, in City of Winchester v.  
American Woodmark Corp., 252 Va. 98, 471 S.E.2d 495 (1996) 
(Woodmark II), the products manufactured and sold were cabinets.  
We determined that American Woodmark’s cabinet manufacturing and 
distribution centers, as well as its service and sales offices, 
added value to its product and generated revenue.  Id. at 103, 
34 
471 S.E.2d at 498.  These activities enhanced American 
Woodmark’s product bought by the consumer.  Id.  In this case, 
the collection activities cited by the majority do not in any 
way enhance the loan or its interest and fees “purchased” by the 
consumer.  Similarly, although the majority looks to the 
corporate headquarters as providing the funds for the loans, the 
record also contains evidence that those funds were generated by 
offices, such as the Richmond Branch, that originated the loans.  
Further, neither the evidence, the company nor the majority 
identifies any enhancement or value added by the regional center 
to which the Richmond Branch office reported. 
The majority’s holding also relies heavily on a distinction 
between a “receipt” and a “receivable.”  Certainly, the actual 
funds generated by the loan contracts are received at locations 
other than the Richmond Branch.  Applying this distinction, 
however, leads to a curious result.  If the assessment of the 
BPOL tax depends on the actual receipt of the gross receipts 
there could be no assessment at the Richmond Branch because the 
payments are sent elsewhere.  This has never been suggested as 
part of the law governing the application of the BPOL tax.  More 
important, the receipt of the interest and fees is a collection 
activity, not a generation activity.  Nevertheless, using this 
distinction, the majority concludes that such financial 
collection services are activities that “contribut[e] to the 
35 
realization of gross receipts” and, thus, are relevant 
activities for BPOL assessment purposes.  This is not the 
standard that we have heretofore applied.  As recited above, for 
BPOL assessment purposes, an activity must have “produc[ed]” the 
gross receipts or “added value” to the product sold.  Woodmark 
II, 252 Va. at 103, 471 S.E.2d at 498.  “Realization” or actual 
receipt of a company’s gross receipts has not been, and I submit 
should not be, the standard.  
The second reason I cannot join the majority relates to the 
burden of proof that must be applied in this case.  Even if one 
accepts the thesis that these auxiliary activities generate some 
part of the company’s gross receipts, the company still carries 
the burden of showing that it is “impractical or impossible” to 
determine attribution of the gross receipts.  Code § 58.1-
3703.1(A)(3)(b).  In this case, the company itself relied upon 
an accounting and tracking system (MAPS) that it had devised for 
tracking revenue – assigning the revenue to the originating 
locations, such as the Richmond Branch, and designating the 
collection activities and other services as “cost centers.”  The 
majority discounts this accounting system because the system is 
a “contract revenue-based system” and because a company witness 
testified that it would be “very difficult” to create a system 
allocating gross receipts to these other services.  That a 
system might be difficult to create does not make it impractical 
36 
or impossible to create.  There is no evidence that FMCC, 
sophisticated enough to create its extensive accounting system, 
MAPS, ever attempted to apportion the gross receipts based on 
its new theory of revenue generation, even though it could 
identify those locations which it now claims are not cost 
centers but revenue centers with regard to gross receipts 
originated by the Richmond Branch.  Although the company clearly 
identifies which of these “cost centers” were involved with the 
Richmond Branch,10 the majority allows FMCC to use the payroll 
allocation method based on FMCC’s entire national and 
international payroll for assessing the BPOL tax due on the 
gross receipts originating at FMCC’s Richmond Branch.  
In summary, for the years 2001 through 2004, FMCC paid 
Chesterfield County $1,515,935.05 in BPOL taxes based on the 
gross receipts reported by FMCC for the Richmond Branch.  In 
this lawsuit, FMCC seeks a refund of $1,414,913.05, 
approximately 93 percent of those payments, based on the 
application of the payroll apportionment method, using all 
employees on FMCC’s payroll regardless of their location or 
                     
2 The offices identified by FMCC included the home office in 
Dearborn, Michigan; a regional office in Chantilly, Virginia; 
loan administration offices in Baltimore, Maryland, Nashville, 
Tennessee, and Omaha, Nebraska; a national recovery center in 
Mesa, Arizona; and a bankruptcy specialist office in Livonia, 
Michigan.  Other than the home and regional office, these other 
locations were engaged in administering the loans generated by 
the Richmond Branch. 
37 
connection to the loans, fees and interest generated by the 
Richmond Branch.  In my opinion, FMCC is not entitled to such a 
refund because the gross receipts at issue were generated by the 
Richmond Branch as originally reported by FMCC, and even under 
the majority’s approach of “contribut[ing] to the realization” 
of the gross receipts at issue, FMCC did not carry its burden to 
justify the use of the payroll apportionment method of 
assessment including its entire national and international 
payroll.  Accordingly, I respectfully dissent. 
 
38