Richmond raises BPOL tax exemption threshold for small businesses

Richmond City Hall (BizSense file)

More small businesses in the City of Richmond can now pay less in annual license fees after an adjustment to a tax exemption threshold that took over a year to get across the finish line.

Richmond City Council last week approved an increase to the exemption threshold for the city’s BPOL tax, or Business, Professional and Occupational License Tax, from $250,000 to $500,000 in gross taxable receipts.

The change exempts businesses’ first $500,000 in receipts from the city’s BPOL tax rate of up to 58 cents per $100. Businesses earning less than $500,000 in annual revenue would instead pay a flat $30 license fee.

The exemption increase makes nearly 70% of all businesses in the city eligible for the incentive, which is aimed at providing tax relief for small businesses and encouraging others to locate in the city. With the previous the $250,000 threshold, less than half of Richmond businesses were eligible, according to the city.

The adjustment makes Richmond more competitive with neighboring Chesterfield and Henrico counties, which have made a push in recent years to increase their own BPOL exemption thresholds. The increase to $500,000 brings Richmond’s threshold in line with Chesterfield, which currently has a $550,000 exemption. Henrico’s, which was doubled last year, now stands at $1 million.

The city’s exemption threshold was last increased, from $100,000 to $250,000, in 2022. This latest increase, likewise proposed by then-Councilmember Andreas Addison, was introduced to council in June of last year but was deferred multiple times with several amendments made, extending the process beyond Addison’s time on council and across the change in mayoral administrations.

Stephanie Lynch

Councilmember Stephanie Lynch, who took the baton from Addison after his term ended in December, said the proposal had been floated in various forms over three years, effectively since the last exemption increase. She attributed the duration to an amendment that required council to find the funds that would offset the additional exemptions and resulting loss in BPOL tax revenue.

Lynch said those funds will be coming from savings to be realized by reforms to the city’s employee purchasing card program and fuel program, which are being revamped after city audits found $5 million in questionable transactions and insufficiencies in controls for both programs.

Lynch said approval at the council’s July 28 meeting allows the adjustment to be worked into the budget that Mayor Danny Avula’s administration will be drawing up in coming months, though she acknowledged the length of time it took to get to this point.

“I was very determined to get it done before we recessed for (August), and I was glad that it had landed on this docket for the July 28 meeting. The timing could not be more perfect to pass a piece of legislation like this,” Lynch said.

“The fact that Henrico sits at $1 million and Chesterfield sits at $550,000, and we’re only at $500,000, we absolutely need to stay competitive with the counties and support our small businesses, particularly after the year that our small businesses have had,” she said, noting lingering challenges with water service, meals taxes and tax rebates.

“There’s been a host of things that have been really challenging for small businesses that they’ve endured being in the city, so anything we can do to support them,” she said. “The BPOL tax relief is just one of those things, but anything we can do to support them is so critical. It’s so important for us to have a vibrant small-business ecosystem.”

More information on the BPOL tax and exemption is available on the city’s website.

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