Tax Type
Property Tax
Description
Merchants' Capital;County Tax;Business License Tax Paid to Town
Topic
Property Subject to Tax
Date Issued
02-16-1979
A county may permissibly impose a merchants' capital tax under §58-833 upon a business located in a town within the county, even though the town has imposed a license tax on the same business under §58-266.1. The limitation in §58-266.1, providing that a local business license tax shall be in lieu of a merchants' capital tax, does not preclude a county-imposed property tax on merchants' capital from applying in a town imposing a business license tax because the uniformity provision of the state constitution requires any county tax to be applied uniformly within the county.
You ask if a county may impose a merchants' capital tax upon a business which also pays a local license tax to an incorporated town located within the county.
Facts Presented
The county imposes a merchants' capital tax as provided in §58-832, et seq., of the Code of Virginia (1950), as amended. The town imposes a license tax on the gross receipts of the business. The principal place of business is physically located in the town.
Discussion
This question is answered by the application of three general rules recognized in Virginia, unless some statute provides otherwise.
First, all property taxes apply within the territorial boundaries of the county, including any towns located therein. Watkins v. Barrow, 121 Va. 236, 240, 92 S. E. 908, 909 (1917). Because the merchants' capital tax is a tax on property, its effect is county-wide.
Second, a town may impose a non-property tax which affects only that town. Ashland v. Board of Supervisors, 202 Va. 409, 413-414, 117 S. E. 2d 679, 682 (1961).
Third, a license tax is not a property tax. Ashland v. Board of Supervisors, supra, 202 Va. at 413, 117 S. E. 2d at 682.
Applying these principles to the facts, I conclude that the county tax on merchants' capital, being a property tax, applies within all political subdivisions in the county. Consequently, the tax extends to all businesses located in the town. Further, the town may impose a license tax (a non-property tax) upon any business located within its jurisdiction. Hence, the town's license tax is valid.
The question remains whether the result reached by application of these general rules has been modified by statute.
Section 58-266.1A(5), as amended, which became effective January 1, 1979, provides that "[w]henever any county, city or town imposes a license tax on merchants, the same shall be in lieu of a tax on the capital of merchants, as defined by §58-833.'
This statute is susceptible of two interpretations. First, if a town imposes a license tax on merchants, a county tax on merchants' capital is of no effect in the town. Second, if a town imposes a license tax on merchants, a tax on merchants' capital is void only if imposed by the town.
The first interpretation must be discarded because it is in conflict with Article X, § 1, of the Constitution of Virginia (1971), which provides that "[a]ll [property] taxes shall be levied and collected under general laws and shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax. . . .' If a county-imposed merchants' capital tax was not applicable in a town located within the county the result would be in conflict with the "uniformity' requirement of the Constitution.
No constitutional infirmity exists with the second interpretation.
Where a statute is susceptible of two constructions, one of which is plainly within the legislative power and the other without, the court must adopt the former construction. See Ocean View Improvement Corp. v. Norfolk & Western Railway Co., 205 Va. 949, 955, 140 S. E. 2d 700, 704 (1965).
Based upon the foregoing, it is my opinion that a tax imposed by a county on merchants' capital under §58-833 is applicable in a town located within the county, even though the town has imposed a license tax on the same business under §58-266.1.
Attorney General's Opinion