Opinion Number
12061972
Tax Type
Property Tax
Description
Used in Manufacture;Held for Sale
Topic
Property Subject to Tax
Date Issued
12-06-1972

I have received your letter of November 17, 1972, inquiring whether a corporation engaged in manufacturing in Bedford until November 19, 1971, is liable for 1972 personal property taxes on its machinery and tools located in the city of Bedford and held for liquidation on January 1, 1972. You indicate that the manufacturing facility was not operated after November 19, 1971, but that the machinery and equipment were not sold until March 1972 and had not been dismantled as of January 1, 1972. The corporation's counsel asserts that § 58-412, Code of Virginia (1950), as amended, does not authorize the city to tax the property because it was not being used in a manufacturing business on January 1, 1972.

Article X, §1, of the Constitution of Virginia requires that all property be taxed unless it is exempted pursuant to other constitutional provisions. Exemptions are provided by Article X, §6; however, there is no general exemption for property, real or personal, owned by a manufacturer, whether or not it is used in manufacturing.

Sections 58-834 and 58-835 establish the situs for the assessment of tangible personal property and machinery and tools and fix the tax date of January first of each year. §58-831 requires that machinery and tools segregated for local taxation only should be taxed as provided by § 58-412. §58-412 provides, in pertinent part:
  • "Machinery and tools used in a manufacturing . . . business taxable on capital under § 58-418 shall not be held to be capital under the preceding section, nor shall such machinery and tools be hereafter assessed as real estate. . . . All such machinery and tools used in a manufacturing . . . business . . . shall be listed for local taxation exclusively and each city, town and county shall make a separate classification for all such machinery and tools and fix the rate of levy thereon . . . .'
The phrase "used in a manufacturing business' cannot be interpreted to exclude machinery and tools which are temporarily not being used by a manufacturer on January first; otherwise, the machinery and tools of seasonal businesses not in operation on January first of each year would not be subject to the tax. Nor should it be interpreted to preclude the taxation of such property pending its sale solely because its owner has ceased to operate the plant in which it is located. In Hamilton Mfg. Co. v. City of Lowell, 274 Mass. 477, 175 N.E. 73 (1931), the court upheld an assessment of machinery owned by a cotton cloth manufacturer pursuant to a statute taxing "[m]achinery employed in any branch of manufacture or . . . used in the conduct of [the] business . . .' although at the time of assessment the company was in receivership and had not operated its manufacturing plant for more than six months. The court stated, at 175 N. E. 77:
  • "The words of the statute `employed in manufacture' and `used in manufacture' are of broad signification and import a degree of permanence. [Cites] They have acquired in tax statutes a comprehensive denotation and do not lend themselves to a narrow or technical construction.'
In the Hamilton case, part of the plant had been dismantled but its integrity as a manufacturing facility had not been impaired, although its potential capacity had been reduced.

In consideration of the foregoing, it is my opinion that a manufacturer's machinery and tools are taxable under § 58-412, notwithstanding that on the tax day they are being held for sale when they have not been dismantled and the manufacturing facility in which they were formerly used retains its physical integrity.



Attorney General's Opinion

Last Updated 08/25/2014 16:42