Extras on Excise: U.S. Supreme Court to Decide Whether to Review Loudoun County BPOL Case, Possibly Adding a Second Major State Tax Case to its Docket


Loudoun County, Virginia officials, Dulles Duty Free, LLC, and numerous interested parties are anxiously awaiting the U.S. Supreme Court decision on whether to grant Loudoun County’s petition for a writ of certiorari of the Virginia Supreme Court decision in Dulles Duty Free, LLC v. County of Loudoun. The court’s decision is expected shortly after the regularly scheduled justices’ conference on March 29, 2018.

The dispute began in 2014, when Dulles Duty Free sought a refund of BPOL taxes paid to Loudoun County on its international sales from 2009 through 2013, arguing that those sales were not subject to the BPOL tax due to the U.S. Constitution’s import-export clause. The company operates stores in Dulles International Airport in Loudoun County, Va., where it sells merchandise to both domestic and international travelers. Duty Free employs separate procedures for domestic and international sales and also tracks which sales are international and which are domestic. The circuit court ruled in favor of Loudoun County, finding that the BPOL tax as applied to the company’s international sales did not violate the import-export clause.

The Virginia Supreme Court, however, reversed that decision, relying on the Richfield Oil Corp v. State Bd. Of Equalization rule that “once goods have been placed with a common carrier for export, ‘or have been started upon such transportation in a continuous route or journey’ (i.e., the goods are in transit), they are exports for purposes of the Import-Export Clause and may not be taxed.” Because Duty Free’s international export sales are sales of goods on a final, continuous journey out of the country, imposition of BPOL tax on those sales is unconstitutional.

The questions presented in Loudoun County’s petition for writ of certiorari are:

  • Should the validity under the import-export Clause of a non-discriminatory local business license tax calculated on the basis of gross receipts be evaluated using this Court’s [U.S. Supreme Court] approach in Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976), or in Richfield Oil Corp. v. State Bd. of Equalization, 329 U.S. 69 (1946)?
  • Does a local business license tax calculated based on gross receipts, which does not specifically target imports or exports, violate the import-export clause if some of the gross receipts include export sales?

The Internal Municipal Lawyers Association, which is a non-profit professional organization of local government attorneys, filed a brief in support of Loudoun County, arguing in part that the Richfield test on which the Virginia Supreme Court relied is outdated and inapplicable and that the court’s decision unlawfully interferes with the taxation power of state and local governments, thus impeding their sovereignty.  A coalition of tax law professors also submitted a brief, as discussed with Ryan Prete of Bloomberg Tax, urging the U.S. Supreme Court to grant certiorari and “restore rationality to the tax treatment of the export sector.”

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should the U.S. Supreme Court grant certiorari for Loudoun County’s challenge to the decision prohibiting application of BPOL tax to international export sales?

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