Attorney General Opinions

The Honorable Robert F. McDonnell

Member, House of Delegates

You ask whether the 1996 amendments to the local business license tax provisions of Title 58.1 of the Code of Virginia¹ require those localities that currently issue licenses for a fiscal year period to change to a calendar year period. You also ask whether, by not requiring proration when a locality changes its license year from a fiscal year to a calendar year, § 58.1­3703.1(B)(1) permits the imposition of an unconstitutional tax.

The 1996 amendments to the local business license tax statutes² include the addition of two new statutes: § 58.1­3700.1, a definitional section; and § 58.1­3703.1, a uniform ordinance section. The definitions in § 58.1­3700.1 apply for purposes of the statutes and for purposes of any local ordinance adopted pursuant to the statutes and thus are incorporated into the uniform ordinance requirements of § 58.1­3703.1.

Section 58.1­3700.1 defines "license year" as "the calendar year for which a license is issued for the privilege of engaging in business." (Emphasis added.) § 58.1­3703.1(A)(2)(a) establishes March 1 of the "license year" as the due date for payment of the license tax,³ and § 58.1­3703.1(B)(3) provides that every locality must adopt a March 1 due date for license applications no later than the 2001 "license year."

An accepted rule of statutory construction requires that statutes dealing with the same subject matter are to be construed together to give effect to all of the provisions.⁴ It is my opinion that the provisions of § 58.1­3703.1, read together with § 58.1­3700.1, require every locality to adopt a calendar license year. To conclude that the statutes require all localities to establish a payment date of March 1 of the "license year" but permit any locality to have the payment cover a fiscal year period ignores the definition of "license year" in § 58.1­3700.1. Such a result also would do little to advance the purpose of uniformity in local license ordinances.

Section 58.1­3703.1(B)(1) contains a transitional provision applicable in those localities currently using a fiscal license tax year when they change to a calendar license tax year:

A locality which changes its license year from a fiscal year to a calendar year and adopts March 1 as the due date for license applications shall not be required to prorate any license tax to reflect a license year of less than twelve months, whether the tax is a flat amount or measured by gross receipts, provided that no change is made in the taxable year for measuring gross receipts.

Neither this provision nor the other amendments regarding the March 1 payment date operate to permit a locality to tax the gross receipts of a business more than once. The amount of a license tax, whether paid on March 1 or on some later date, is calculated on the gross receipts of the "base year." The "base year," as defined in § 58.1­3700.1, is "the calendar year preceding the license year."⁵ (Emphasis added.) The "base year" does not change when a locality changes its "license year."⁶ In fact, the final clause of § 58.1­3703.1(B)(1) expressly provides that the nonproration language applies only if there is no change in the taxable year for measuring gross receipts.

It is my opinion that § 58.1­3703.1(B)(1) contains no constitutional infirmity. The only impact of the legislative change is the possible acceleration in some localities of the due date for the payment of a license tax. The amount of the payment continues to be based on the gross receipts from the preceding calendar year.⁷

¹See Chs. 715, 720, 1996 Va. Acts 1233, 1247, respectively (amending and reenacting §§ 58.1­3700, 58.1­3701, 58.1­3703, 58.1­3706, 58.1­3708, 58.1­3732; adding §§ 58.1­3700.1, 58.1­3703.1; repealing §§ 58.1­3707, 58.1­3725).

²Sections 58.1­3700 to 58.1­3735.

³If a person was not subject to the license tax on or before January 1, the person is to apply for a license before beginning business. § 58.1­3703.1(A)(2)(a).

⁴Vollin v. Arlington Co. Electoral Bd., 216 Va. 674, 222 S.E.2d 793 (1976); Op. Va. Att'y Gen.: 1995 at 146, 147; 1994 at 114, 116.

⁵The definition of "base year" provides an exception for contractors subject to § 58.1­3715 and permits a locality to provide a different base year for a particular business or to allow a taxpayer to use the same fiscal year used for federal income tax purposes. § 58.1­3700.1.

⁶For example, assume that a locality has a May 1, 1997, due date for payment of the tax, with the license covering the fiscal year period of May 1, 1997, through April 30, 1998. In 1998, the locality changes to a March 1, 1998, due date, with the license covering the calendar year period of January 1, 1998, through December 31, 1998.

The May 1, 1997, payment would be based on the business's gross receipts for the 1996 calendar year, i.e., "the calendar year preceding the license year." § 58.1­3700.1 (defining "base year"). The March 1, 1998, payment would be based on the business's gross receipts for the 1997 calendar year.

The result of the change is that the period between January 1, 1998, and April 30, 1998, is included within both the 1997 license period and the 1998 license period. The taxpayer will, however, pay taxes on the gross receipts received between January 1, 1998, and April 30, 1998, only once, when he pays his license tax on March 1, 1999.

The nonproration language of § 58.1­3703.1(B)(1) merely clarifies that, although the 1998 license technically covers only eight months because the 1997 license does not expire until April 30, 1998, the locality is not required to make an adjustment. This result is appropriate because the change in the payment date and the license year has no effect on the "base year," i.e., the taxable year on which the gross receipts are computed.

⁷You also ask whether, under the enactment clauses of Chapters Ch. 715 and 720, a locality may apply the transitional provision of § 58.1­3703.1(B)(1) to calendar year 1996. For the transitional provision of § 58.1­3703.1(B)(1) to apply to calendar year 1996, the locality would have to establish March 1, 1996, as the due date for payment of the tax. This date precedes the April 6, 1996, date on which the Governor approved the bill and the general effective date of July 1, 1996. VA. CONST. art. IV, § 13 (1971). Thus, a locality could not, as a practical matter, apply the transitional provision of § 58.1­3703.1(B)(1) to calendar year 1996, irrespective of any language in the enactment clauses.