Do I need a business license?

November 6, 2009 7:31 AM

Last year I got most of my income for working from home in the state of Virginia. I did work for a company that is not owned by me and was located in another town in Virginia. I got a 1099 as an individual from the company for the work that I did. This work was all conducted by phone and email, no one came to my home. I recently got a letter in the mail from the City of Winchester, VA saying that I did not register as a business in the city and that I needed to pay back licensing fees. I know you're not my lawyer, but do I have to do this?
posted by jefeweiss to law & government (13 comments total)

Which is in Winchester, the company or your home?
posted by JimN2TAW at 7:34 AM on November 6

Were you living in Winchester, or was the business you were doing work for in Winchester?
posted by SirStan at 7:34 AM on November 6

I was working in Winchester, VA and the business was located in Fairfax, VA. Sorry if that was unclear.
posted by jefeweiss at 7:40 AM on November 6

Also, did you work for more than one company, or just the one company?
posted by amtho at 7:41 AM on November 6

I got paid by just one company.
posted by jefeweiss at 7:45 AM on November 6

To be clear, I wasn't intending to be evasive by saying that I got paid by just one company. The company that pays me does work for different companies. I do the work and the company I work for gets paid by the other companies and then pays me.
posted by jefeweiss at 7:48 AM on November 6

The correct answer here, as I suspect you already know, is going to be "get a lawyer" -- even if you're 100% in the right here you're not going to be able to make this go away on your own. I've worked as a 1099 contractor for years and have never heard of such a requirement, but you may be up against some local ordinances that don't apply outside your city or state.
posted by ook at 8:02 AM on November 6

I'm assuming you were hired as an independent contractor and not an employee, based on the fact that you got a 1099 (-MISC?) and not a W2. If you meet the criteria for being an employee then your company may be responsible for payroll taxes for you.
posted by reptile at 8:07 AM on November 6

Since you got a 1099, you're a contractor, not an employee. As such, you are an independent business. A brief review of the Winchester Business Guide seems to indicate that yes, you do need various licenses, paperworks, seals, and other supplications and payments to your local taxing entities. The phrase that stood out for me was:

"All businesses (individuals, persons, firms, corporations and businesses) operating within the city limits of Winchester must have a current business license from the City Commissioner of the Revenue's office."

Because you worked from home and your residence seems to be in Winchester, they want to ding you.
posted by jdfan at 8:09 AM on November 6 [2 favorites]

On the plus side you can deduct your home office ( a percentage of all home expenses like heat rent, electric,) from your federal taxes. You may also be able to do so on your VA taxes. You may also be able to take depreciation on your computer, printer etc.
posted by Gungho at 8:28 AM on November 6

jdfan has it right. This varies by locality, but it looks like Winchester's requirements are pretty clear.

As an independent contractor, you will also have to pay self-employment tax.

Talk to a lawyer or accountant or both.
posted by peanut_mcgillicuty at 9:02 AM on November 6

If you do talk to an accountant or tax lawyer (which sounds like a good idea), I'd also bring up the point that reptile mentioned: make sure that it isn't likely that the IRS will re-classify you as an employee, rather than a contractor. 'Cause having that happen after paying local self-employment fees would really suck.
posted by serathen at 9:28 AM on November 6

I guess another factor is that I only lived there for a short period of time, and I don't live there anymore.
posted by jefeweiss at 4:41 PM on November 7