Document Number
Tax Type
Tangible - Machinery & Tools: Equipment Not Yet in Use
Date Issued


September 26, 2019

Re:  Request for Advisory Opinion
        Local Machinery and Tools Tax
Dear *****:

This is in response to your e-mail in which you request an opinion concerning the taxation of machinery and tools that may be on site on tax day but not yet operational. 

The machinery and tools (M&T) tax is imposed and administered by local officials. Virginia Code § 58.1-3983.1 J 2 authorizes the Department to issue advisory opinions on local business tax matters. The following opinion has been issued subject to the facts presented to the Department summarized below. Any change in facts or the introduction of new facts may lead to a different result.

The Code of Virginia sections and public documents cited are available on-line at in the Laws, Rules and Decisions section of the Department’s web site.


The Taxpayer has a manufacturing facility in the City. Some of the Taxpayer’s machinery may be on site as of tax day but not yet operating. The City requests an opinion concerning whether such machinery would be subject to the M&T tax.


All tangible personal property, unless declared intangible under the provisions of Virginia Code § 58.1-1100 et seq., is reserved for local taxation by Article X, § 4 of the Constitution of Virginia. Included in the category of tangible property that is declared intangible and subject to state taxation only is “[c]apital which is personal property, tangible in fact, used in manufacturing (including, but not limited to, furniture, fixtures, office equipment and computer equipment used in corporate headquarters).”  See Virginia Code § 58.1-1101 A2.

The machinery and tools, motor vehicles and delivery equipment of a manufacturing business are not defined as intangible personal property. Such property is to be taxed locally as tangible personal property. Virginia has established a separate classification of tangible personal property for machinery and tools used in manufacturing. Virginia Code § 58.1-3507 A provides:

Machinery and tools, except idle machinery and tools . . . used in a manufacturing . . . business shall be listed and are hereby segregated as a class of tangible personal property separate from all other classes of property and shall be subject to local taxation only.

The Attorney General has consistently opined that “machinery and tools” used in a particular manufacturing business are the machinery and tools that are necessary in the particular manufacturing business and which are used in connection with the operation of machinery that is actually and directly used in the manufacturing process. See 1985-1986 Att’y. Gen. Ann. Rep. 316 at 317 and 1987-1988 Att’y. Gen. Ann. Rep. 590. 

Generally, tangible personal property is presumed to be used from the date it is placed in service, usually the date it is purchased or received by the business. As indicated above, machinery and tools are considered to be used in a manufacturing business if they are necessary in the manufacturing business and are either used in the manufacturing process or are used in connection with the operation of machinery used in the manufacturing process. See 1985-1986 Att'y. Gen. Ann. Rep. 316 at 317 and 1987-1988 Att'y. Gen. Ann. Rep. 590. According to these opinions, machinery and tools may not be considered to be used in a manufacturing business until they are actually used in the manufacturing process. The Department has recognized that some manufacturing machinery requires a period of preparation and testing before it is used to manufacture a product. See Public Document (P.D.) 14-55 (4/24/2014). 

In P.D. 08-88 (6/16/1988), the manufacturer had autopackers that were never operational and some of which were stored at an offsite location. The Department determined that this machinery should not have been subject to the M&T tax because it was never installed. Similarly, in P.D. 14-55, a business purchased machinery from another business, but the machinery was not operational until ten months after purchase. The Department opined that the machinery would not be considered to be used in a manufacturing business until it began producing products. 

In this case, it appears that the machinery is not yet operational and is not yet producing products. Accordingly, in the Department’s opinion, it should not yet be considered to be machinery used in a manufacturing business. Therefore, the machinery would be considered to be the capital of a manufacturing business and thus intangible property not subject to the M&T tax until is operational as machinery actually being used in the manufacturing process.

If you have any questions regarding this opinion, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.



Craig M. Burns
Tax Commissioner


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Last Updated 01/15/2020 06:58