Stafford Weighs Gross-Receipts Tax for Restaurants, Hotels and Other Businesses

Stafford County —

Restaurants, hotels, wineries and other Stafford County businesses could face a tax calculated on total revenue rather than profit, under a proposal going to a public hearing Tuesday.

The Board of Supervisors will consider Ordinance O26-34, establishing a Business, Professional and Occupational License tax, known as BPOL. The hearing block opens at 6:30 p.m. on Sept. 15 at the Stafford Government Center, 1300 Courthouse Road. BPOL is Item 10, the last of four public hearings on the agenda, so it will be heard some time after 6:30.

The advertised ordinance sets a $2 million gross receipts exemption and a rate of 16 cents per $100 of qualifying receipts for retailers, contractors, service businesses and professional services.

Nothing has been adopted. Supervisors voted 4-2 in August to advertise the hearing, a procedural step that does not approve the tax.

The $2 million line is a cliff, not a deduction

This is the provision every Stafford operator needs to understand, and it is the one most likely to be misread.

A business at $2 million or less in gross receipts pays no percentage tax. Once a business passes that figure, the rate applies to all qualifying receipts, not to the amount above $2 million.

The county’s own worked example in the meeting packet makes it explicit. For a business with $2.5 million in receipts: “Exemption doesn’t apply, since Gross Receipts are over $2.0M. Taxes are per $100 or $2,500,000/100 = $25,000. Multiply by the license tax rate of $0.16 = $4,000.”

Under a deduction model that bill would be $800. It is $4,000.

Annual qualifying receipts	Estimated BPOL tax
$2 million	$0
$2,000,001	about $3,200
$2.5 million	$4,000
$3 million	$4,800
$5 million	$8,000
$10 million	$16,000

So the single dollar that carries a business from $2,000,000 to $2,000,001 costs roughly $3,200. These figures ignore statutory exclusions, deductions and the rules allocating receipts among locations.

That shape is not a Stafford invention. Va. Code § 58.1-3706 measures the tax on “gross receipts,” and § 58.1-3700.1 defines gross receipts as “the whole, entire, total receipts, without deduction.” A locality can soften the edge by raising the exemption or lowering the rate, but there is no provision letting it tax only the excess.

$2 million is not a large restaurant. It works out to about $38,500 a week.

Restaurants and hotels are covered

The ordinance does not name restaurants or hotels. It applies generally to businesses operating from a definite place of business in the county. Restaurants would most likely be classified as retailers, hotels as services, and both carry the same 16-cent rate.

Lodging is squarely reachable. Va. Code § 58.1-3703(C)(7) bars localities from licensing someone for renting real estate they own, but it carves out “hotels, motels, motor lodges, auto courts, tourist courts, travel trailer parks, campgrounds, bed and breakfast establishments, lodging houses, rooming houses, and boardinghouses.”

Final classification would rest with the Commissioner of the Revenue, and a business can appeal a classification or an assessment.

Because the tax is measured on revenue, a business can owe it in a year it made no money after rent, payroll, food cost, utilities and insurance.

For scale: the National Restaurant Association put a typical restaurant’s pretax margin at roughly 5 percent before the pandemic, and its July 8 analysis argues most operators can no longer reach that, with 42 percent reporting no profit in 2025. Against a 5 percent margin, a tax of 0.16 percent of revenue takes about 3.2 percent of pretax profit. Against today’s thinner margins it takes more.

Wineries and breweries should not assume they are exempt

The draft handles craft beverage the way many operators will assume it works, and the assumption is wrong.

Va. Code § 58.1-3703(C)(4) exempts a manufacturer “for the privilege of manufacturing and selling goods, wares and merchandise at wholesale at the place of manufacture.” A farm winery, brewery, cidery or distillery is a manufacturer, and its wholesale sales from the production site are protected.

Tasting room sales are not. In Ruling 20-88, a 2020 case involving a distillery, the Tax Commissioner held that “[b]ecause tastings were sold directly to consumers, the Department agrees with the City that such sales would be considered retail sales,” and upheld the assessment on the ground that the taxpayer was “operating a separately licensable retail tasting business.”

Event revenue is treated the same way. Rulings 12-220 and 20-18, both farm winery cases, held that a winery renting its facility for weddings and events is engaged in a separately licensable business. Ruling 22-42 states the general principle plainly: “As a manufacturer, the Taxpayer was exempt from the BPOL tax on sales at wholesale at the place of manufacture. Any retail sales made, however, would not be exempt.”

A Stafford farm winery with a tasting room, a kitchen and a wedding business would therefore have exempt wholesale receipts and taxable retail, food and event receipts, and would need to keep them apart. Receipts genuinely ancillary to the wholesale business can ride along, but separately charged activities generally do not.

What counts as receipts is not fully settled

Stafford currently levies a 6 percent meals tax and an 11 percent transient occupancy tax. Those are consumer taxes a business collects and remits. BPOL would be a tax on the business itself.

Va. Code § 58.1-3732 excludes some collected taxes from BPOL receipts, but the list is specific: Virginia retail sales and use tax, local sales tax, local cigarette excise tax, and federal and state motor fuel excise taxes. The local meals tax and the transient occupancy tax are not on it.

There is a respectable argument that they should be excluded anyway, since § 58.1-3833(B) deems meals tax collections to be “held in trust” for the locality and the regulations say trust fund receipts are not derived from a licensable privilege. But no ruling settles it, and the Department of Taxation has no appeal jurisdiction over meals or lodging taxes.

The same uncertainty covers mandatory service charges and gratuities. Virginia does exempt gratuities from the meals tax under § 58.1-3833(C), up to 20 percent of the sales price, but that provision is about the meals tax and does not reach BPOL, and no Virginia guidance addresses gratuities in a BPOL base.

For a restaurant doing $2 million in food and beverage, a 6 percent meals tax is $120,000 passing through the register. Whether that sits inside or outside the BPOL base is a real question, and it is one the county should answer before Tuesday rather than after.

Advertised rates

Category	Advertised rate
Retailers	$0.16 per $100 of receipts
Contractors	$0.16 per $100 of receipts
Financial, real estate and professional services	$0.16 per $100 of receipts
Repair, personal, business and other services	$0.16 per $100 of receipts
Wholesalers	$0.05 per $100 of purchases
Gross receipts exemption	$2 million
Annual license fee	$50

Note the wholesale line: it is measured on purchases rather than receipts, and it sits under § 58.1-3716 rather than the rate caps in § 58.1-3706.

State maximums are 20 cents for retail, 36 cents for repair, personal, business and other services, 58 cents for financial, real estate and professional services, and 16 cents for contractors. Stafford’s proposed 16 cents is at the ceiling for contractors and below it for everything else.

One drafting conflict is worth raising at the hearing. Section 6.5-3(e) charges the $50 fee to businesses “not subject to” the gross receipts tax, and the county’s example shows a taxed business paying no fee. But § 6.5-11 opens by imposing the tax “in addition to the fee specified in sec. 6.5-3(e).” As advertised, the ordinance says both things.

Smaller businesses still file

A business below the exemption owes no percentage tax but still pays the $50 annual fee and still files. Section 6.5-3(f) requires every business to “file a declaration of gross receipts with the Commissioner annually, regardless of an exemption from the payment of a license tax or fee.”

A separate license is generally required for each definite place of business. A company running several activities at one location may elect a single license if the rates match, or agree to be taxed on all of them at the highest applicable rate.

Existing businesses would apply by March 1 and pay by April 15. With a Jan. 1, 2027 effective date, the first bill would be calculated on 2026 receipts, which are already being earned. New businesses would estimate and reconcile later. Late filings can draw penalties and interest.

The money

The county estimates $3.5 million to $4 million in fiscal 2027, but that is not net new revenue.

Stafford expects about $1.15 million from its Merchants’ Capital Tax in fiscal 2027, and under Va. Code § 58.1-3704 a license tax on merchants is “in lieu of a tax on the capital of merchants.” The county cannot keep both on that category. It could replace Merchants’ Capital with BPOL, keep Merchants’ Capital and set the merchant BPOL rate to zero, or adopt only the license fee.

Worth noting: the advertised ordinance creates the new chapter without repealing the merchants’ capital chapter, even though it includes retailers at 16 cents.

Standing up the system costs money too. Resolution R26-341 appropriates $90,500 for two new positions in the Commissioner of the Revenue’s office at mid-year, $119,500 for software and $8,000 for equipment.

Commissioner of the Revenue Scott Mayausky has said the county cannot compel businesses to report the gross receipts data a precise forecast would need until a licensing system exists. The estimate is an estimate.

Who is opposing it

The Fredericksburg Area Association of Realtors filed a letter of opposition Sept. 9. The Fredericksburg Regional Chamber of Commerce followed Sept. 10, with chief executive Susan Spears saying a new gross receipts tax “could undermine Stafford’s competitive position at a time when businesses of all sizes are already managing increased costs for labor, insurance, utilities, materials, and other operating expenses.”

Former Stafford supervisor and former state delegate Paul Milde is running a campaign against it and has presented a petition with more than 2,000 signatures.

Supporters argue BPOL would broaden the county’s revenue base and lean less on residential property taxes. The ordinance as advertised does not cut real estate rates or dedicate the money to anything; any effect on property taxes would be a separate budget decision.

What supervisors can do Tuesday

Because the county advertised maximum terms, supervisors can go softer without re-advertising: lower a rate, raise the exemption, cut the fee, or drop categories. They cannot go above the advertised rate or below the $2 million exemption without new notice.

They could also adopt the fee without the percentage tax, apply BPOL to some categories only, set the merchant rate at zero and keep Merchants’ Capital, adopt the tax without the fee, or decline entirely.

The packet includes Ordinance O26-34 and Resolution R26-341. It does not guarantee a final vote the same night.

If you operate in Stafford

• Work out your 2026 gross receipts now. The first bill, if this passes, is built on this year’s numbers.
• If you are anywhere near $2 million, know that the line is a cliff. There is no tapering.
• If you run a winery, brewery, cidery or distillery, separate wholesale receipts from tasting room, food, lodging, merchandise and event receipts. Only the first is exempt.
• Ask the Commissioner of the Revenue in writing how meals tax, occupancy tax, service charges and gratuities would be treated. Get the answer before a classification is set rather than after.
• The hearing is Tuesday at 1300 Courthouse Road, Item 10.