SD6 - Report of the Joint Subcommittee Studying the Merchants' Capital Tax
Executive Summary: The capital of merchants is a category of property in Virginia which is subject only to local taxation. Merchants' capital is defined for tax purposes as (a) the inventory of a business; (b) the excess of bills and accounts receivable over bills and accounts payable; (c) daily rental passenger cars; and (d) all other taxable personal property except for money on hand and on deposit and tangible personal property not offered for sale as merchandise. Localities may exempt from taxation the excess of bills and accounts receivable over bills and accounts payable. The merchants' capital tax is assessed for the most part by counties, although cities and towns may do so. Any locality which levies this tax is precluded from taxing a merchant's gross receipts. The merchants' capital tax is used as a revenue source by many counties because they are prohibited from taxing gross receipts in any town which does so. The normal assessment date for the merchants' capital tax is January 1. Appendix A shows the effective tax rate and revenues received from the merchants' capital tax by counties levying it during fiscal year 1981. Complaints have been voiced, especially m recent years, that the merchants' capital tax is an unfair one. Catalog stores are accused of paying far less than their fair share of this tax, since the inventories from which their customers make purchases are maintained outside the state. Likewise, interstate businesses, which can transfer or hold inventories outside of Virginia, are thought by some to be paying less of this tax than they should. Merchants with stores in towns have objected to what they consider double taxation, since they often have to pay a tax on their gross receipts to the town, and then one on their capital to the county. In order to evaluate these problems and see if statutory changes with respect to the merchants' capital tax were in order, Senate Joint Resolution 32 was approved by the 1982 Session of the General Assembly. Following passage of the resolution, the following individuals were appointed to the Subcommittee: Senators Elmo G. Cross, Jr. and Madison E. Marye; Delegates David G. Brickley, Harry J. Parrish, and Vivian G. Watts; and citizen members George L. Gordon, Jr. (Stafford County's Commissioner of the Revenue) and Barry Greene (a Martinsville businessman). At its first meeting, the Subcommittee elected Senator Cross as chairman and Delegate Brickley as vice-chairman. |
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