Tax Type
Forest Products Tax
Local Taxes
Description
Forest Products Tax; Machinery and Tools; Situs of Motor Vehicle for Personal Property Tax
Topic
Basis of Tax
Local Power to Tax
Local Taxes Discussion
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
01-10-1991
Machinery and Tools
[Opinion - Virginia Attorney General: 1991 at 244]
REQUEST BY: The Honorable Hunt A. Meadows, III Commissioner of the Revenue for Pittsylvania County P.O. Drawer 31 Chatham, Virginia 24531
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask a number of questions concerning the Forest Products Tax Act, §§ 58.1-1600 through 58.1-1622 of the Code of Virginia, the classification under § 58.1-3508 of machinery and tools used directly in the harvesting of forest products and the situs for personal property taxation of motor vehicles pursuant to § 58.1-3511.
I. Applicable Constitutional Provision and Statutes
Article X, § 1 of the Constitution of Virginia (1971) provides that "[t]he General Assembly may define and classify taxable subjects."
Sections 58.1-1600 through 58.1-1622 impose a tax on forest products and detail the procedures for its reporting, calculation and collection. The forest products tax is paid by manufacturers and shippers of forest products for sale, profit, or commercial use. § 58.1-1602. § 58.1-1601 defines " shipper" as "any person in this Commonwealth who sells or ships outside the Commonwealth by railroad, truck, barge, boat or by any other means of transportation any forest product in an unmanufactured condition, whether as owner, lessee, woodyard operator, agent or contractor."
Section 58.1-3008 authorizes the governing body of any locality to "impose different rates of levy on . . . tangible personal property or any separate class thereof authorized under Chapter 35 (§ 58.1-3500 et seq.), and machinery and tools, or it may impose the same rate of levy on any or all of these subjects of taxation."
Section 58.1-3508 designates machinery, tools, repair parts and replacements "used directly in the harvesting of forest products" as a special classification of personal property or machinery and tools for local taxation. The provisions of § 58.1-3508 are applicable only to taxpayers liable for payment of the forest products tax.
Section 58.1-3511(A) generally establishes the locality in which the property is physically located on the tax day as the situs for the assessment and taxation of tangible personal property, merchants' capital and machinery and tools, but further provides that the situs for purposes of assessment of motor vehicles, travel trailers, boats and airplanes as personal property shall be the county, district, town or city where the vehicle is normally garaged, docked or parked . . . . In the event it cannot be determined where such personal property, described herein, is normally garaged, stored or parked, the situs shall be the domicile of the owner of such personal property.
II. General Assembly Has Authority to Define Classifications of Property for Tax Purposes
You first ask who has the authority to apply the machinery and tools classification provided in § 58.1-3508?
Exercising the authority granted it by Article X, § 1 to "define and classify taxable subjects," the General Assembly has enacted § 58.1-3508, which designates machinery, tools and repair parts used directly in harvesting forest products as a separate classification of property for local taxation. § 58.1-3008 authorizes, but does not require, a local governing body to impose different rates of tax on separate classes of tangible personal property and machinery and tools. § 58.1-3508, read in conjunction with § 58.1-3507, provides that the tax rate imposed on machinery and tools used directly in the harvesting of forest products shall not exceed the rate imposed upon the general class of tangible personal property. Such machinery and tools, however, may be taxed at a lower rate than other tangible personal property.
Based on the above, it is my opinion that the General Assembly has established a separate classification for machinery and tools used in the harvesting of forest products. The governing body may set a different tax rate for this classification, which may be lower, but not higher, than the rate on other tangible personal property. Whether the particular machinery and tools are actually used for harvesting forest products, however, is a question of fact to be resolved by you, as the local assessing official. See 1989 Att'y Gen. Ann. Rep. 339, 341 (commissioner of revenue must determine if certified property is used for pollution abatement).
III. Situs of Machinery, Tools and Motor Vehicles for Tax Purposes Is their Ordinary Location on Tax Day
You state that the property of the taxpayer about whom you inquire includes motor vehicles as well as machinery and tools. You then ask what local jurisdiction may tax such property when the vehicles and the machinery and tools are moved to various localities during the tax year. § 58.1-3511(A) establishes the situs of machinery and tools for purposes of the tangible personal property tax. The first sentence of that section provides that the situs shall be the locality where the property is physically located on tax day.1 "Situs," however, means more than simply the momentary location of the property. See Hogan v. County of Norfolk, 198 Va. 733, 96 S.E.2d 744 (1957). The actual physical presence on tax day is not conclusive. 1974-1975 Att'y Gen. Ann. Rep. 480. "Situs" implies permanent location, not the place where property is casually or incidentally located while in transit. See Hogan, 198 Va. at 735, 96 S.E.2d at 746. Thus, the place where machinery and tools are ordinarily kept or maintained is the situs for tax purposes. See 1980-1981 Att'y Gen. Ann. Rep. 358.
Likewise, § 58.1-3511 establishes the situs for taxation of motor vehicles2 in the locality where they are normally garaged or parked.3 Prior Opinions of this Office consistently conclude that the place where the property is normally located throughout the year, based upon the assessing officer's evaluation of the facts as they existed on January 1, is the situs for tax purposes. See, e.g., 1984-1985 Att'y Gen. Ann. Rep. 369, 370. Factors to be considered are the location, time, purpose, and use of the vehicle, all of which are relevant to a determination of situs. See Arlington County v. Stull, 217 Va. 238, 241-42, 227 S.E.2d 698, 700 (1976). If it cannot be determined where a motor vehicle is normally garaged, then, pursuant to § 58.1-3511, the situs is presumed to be the domicile of the owner.
Based on the above, it is my opinion that the situs for taxation of both machinery and tools and motor vehicles is the locality where such property is normally kept or garaged, as you determine those facts to exist as of tax day.
IV. Person Shipping Unmanufactured Forests Products Out of Commonwealth Is Liable for Forest Products Tax
You also ask whether a contract logger who fells trees and, occasionally but not always, hauls them to a destination outside the Commonwealth is liable for the tax upon forest products imposed by §§ 58.1-1600 through 58.1-1662. Under § 58.1-1602, that tax is payable by a manufacturer or shipper of forest products. I assume, for purposes of this Opinion, that the contract logger you describe does not do anything to the logs he cuts that would cause him to fall within the definition of a "manufacturer." A "shipper" is defined in § 58.1-1601 as any person who sells or ships unmanufactured forest products outside the Commonwealth. As to unfinished logs delivered for sale or processing within the Commonwealth, therefore, the contract logger is neither a "manufacturer" nor a " shipper" within the meaning of the definitions in § 58.1-1602. See also Dep't Tax'n, Va. Forest Products Tax Reg. § 630-19-1602 (Jan. 1, 1985).
Based on the above, it is my opinion that a contract logger is not liable for the tax on unfinished logs delivered in the Commonwealth, but is liable for the tax imposed by § 58.1-1602 on any quantity of logs that he transports out of state.
V. For Equipment to Be Classified as Machinery and Tools, Taxpayer Must Be Liable for Forest Products Tax
Finally, you ask whether the contract logger you describe is eligible for his machinery and tools to be classified as § 58.1-3508 property, if, as discussed in Part IV above, he pays the forest products tax only on a part of the logs he cuts.
Section 58.1-3508(B) specifically provides that the special machinery and tools classification applies "only to taxpayers liable for payment of forest products taxes." It is a general rule of statutory construction that the words of a statute are to be given their usual, commonly understood meaning. 1989 Att'y Gen. Ann. Rep. 153, 154. Among the dictionary definitions of "liable" is "exposed or subject to a given contingency . . . which is more or less probable." Black's Law Dictionary 915 (6th ed. 1990).
Based on the above, it is my opinion that the contract logger you describe is "liable" for the forest products tax, in years when he ships some logs out of state, even though he does not pay the tax on logs delivered within the Commonwealth. It is further my opinion, therefore, that the logger's machinery and tools used directly in logging operations are eligible for the special machinery and tools classification established by § 58.1-3508(A) in years when he ships logs out of state. Such machinery and tools, however, would not be eligible for that special classification in years when he ships no logs out of state.
1 I assume for purposes of this Opinion that tax day in your jurisdiction is January 1. See § 58.1-3515.
2 Whether a particular item of equipment is a motor vehicle, taxed as tangible personal property, or is machinery and tools is a factual determination to be made by the commissioner of the revenue. See 1989 Att'y Gen. Ann. Rep. 339, 341 (commissioner of revenue must determine if certified property is used for pollution abatement). See also § 46.2-100 (definition of motor vehicle).
3 I assume that the motor vehicles are not operating over interstate routes in the rendition of common, contract or other private carrier service; if they are, property taxation is apportioned in the same percentage as miles traveled within the Commonwealth bear to the total number of miles traveled. See § 58.1-3511(B); 1987-1988 Att'y Gen. Ann. Rep. 578, 585.
Attorney General's Opinion