Rulings of the Tax Commissioner
VIRGINIA INTANGIBLE PERSONAL PROPERTY TAX REGULATIONS
VIRGINIA INTANGIBLE PERSONAL PROPERTY TAX REGULATIONS
January 1, 1985
These regulations for the Virginia Intangible Personal Property Tax are published by the authority granted the State Tax Commissioner under Virginia Code § 58-48.6 (§ 58.1-203 effective January 1, 1985) and are subject to amendment, revision and supplemental regulations as required or appropriate.
Amendments, revisions and updates to these regulations will be issued as replacement pages, each replacement page having on it the date of revision.
Each regulation section is numbered to reference the section of Title 58.1 of the
Code of Virginia
which it interprets. The first three digits, 630, identify these regulations, for purposes of the Virginia Register of Regulations, as regulations of the Department of Taxation. The digits following the first hyphen indicate the tax type, and the digits following the second hyphen indicate the section of Title 58.1 being interpreted. For example, the section number 630-16-1101 identifies the agency (630), the intangible personal property tax (16), and the section of Title 58.1,
Code of Virginia
, which is interpreted (1101).
These regulations do not reflect any statutory changes effective on and after January 1, 1984. The 1984 Session of the General Assembly enacted legislation effective subsequent to January 1, 1984 which amended statutes on intangible personal property. One statutory amendment eliminated the imposition of state tax on intangible personal property. These regulations do not reflect such a change.
W. H. Forst
State Tax Commissioner
Virginia Department of Taxation
P. O. Box 6-L
Richmond, Virginia 23282
VIRGINIA INTANGIBLE PERSONAL PROPERTY TAX REGULATIONS
EFFECTIVE DATE: January 1, 1985, with retroactive effect according to § 58-48.6 (recodified as § 58.1-203).
EXPIRATION DATE: N/A
SUPERSEDES: All previous documents and any oral directives in conflict herewith.
Code of Virginia
§§58.1-1100 through 58.1-1118 are regulated herein.
AUTHORITY: § 58-48.6,
Code of Virginia
, and § 58.1-203 on and after January 1, 1985.
SCOPE: Applicable to all taxpayers having capital from a trade or business subject to the intangible personal property tax.
SUMMARY: These are initial regulations interpreting certain provisions of the Virginia intangible personal property tax, consisting of §§630-16-1100 through 630-16-1118.
ADOPTION DATE: September 19, 1984
P. D. 84-176
TABLE OF CONTENTS
630-16-1100 INTANGIBLE PERSONAL PROPERTY;
SEGREGATED FOR STATE TAXATION
630-16-1101 CLASSIFICATION, RATE OF TAX
Rate of tax
Machinery and tools, motor vehicles
and delivery equipment
630-16-1102 INTANGIBLE PERSONAL PROPERTY OF CERTAIN
POULTRY AND LIVESTOCK PRODUCERS
630-16-1103 EXEMPT PROFESSIONS AND BUSINESSES: HOW
PROPERTY USED THEREIN TAXABLE .
Exempt trades or businesses
630-16-1104 TO WHAT EXTENT DAIRIES TAXABLE ON
INTANGIBLE PERSONAL PROPERTY
630-16-1105 SUPPLIERS OF PULPWOOD, VENEER LOGS, MINE
PROPS AND RAILROAD CROSSTIES
630-16-1106 SITUS; NONRESIDENTS, BRANCHES OUTSIDE
630-16-1107 DATE AS OF WHICH INTANGIBLE PERSONAL
PROPERTY MUST BE RETURNED
Election to average intangible
630-16-1108 TIME FOR FILING RETURNS; PAYMENT OF TAX
Payment of tax
630-16-1109 EXTENSION OF TIME FOR FILING RETURNS
630-16-1110 WHERE TO FILE RETURN; DUTY OF THE
COMMISSIONER OF REVENUE; AUDIT AND
Where individual to file
Where unincorporated companies to file
Where corporations to file
Schedule A of Form 761
630-16-1111 APPLICATION TO FIDUCIARIES GENERALLY
630-16-1112 FORWARDING TO AND, AUDIT OF RETURNS BY
630-16-1113 PENALTY FOR FAILURE TO FILE RETURN OF
INTANGIBLE PERSONAL PROPERTY IN TIME;
DELINQUENTS; ASSESSMENTS ON ESTIMATES
Penalty for failure to file
Assessments on estimates
630-16-1114 ASSESSMENT AND PAYMENT OF DEFICIENCY;
PENALTIES; APPLICATION FOR CORRECTION
Penalty on audit deficiency
Limitation on assessment
630-16-1115 REFUND OF OVERPAYMENT
630-16-1116 FAILURE TO PAY TAX WHEN DUE; CIVIL
Example of application of penalties
630-16-1117 HOW INTANGIBLE PERSONAL PROPERTY TAX
630-16-1118 INTANGIBLE PERSONAL PROPERTY ASSESSMENT
SHEETS OR FORMS
630-16-1100. INTANGIBLE PERSONAL PROPERTY; SEGREGATED FOR STATE
(1) Chapter 11, of Title 58.1 of the
Code of Virginia
, defines intangible personal property. Prior to January 1, 1983, §§58-410 through 58-412 of Title 58 of the
Code of Virginia,
1950, as amended, defined the capital of a trade or business subject to State tax as intangible personal property and § 58-418 levied a tax on such capital at the rate of 30 per $100 of its actual value.
(2) The 1982 Session of the General Assembly enacted legislation effective January 1, 1983 which repealed these sections and amended § 58-405 to define as intangible personal property all property previously defined as capital but levied an intangible personal property tax on inventory,
, at the rate of 30 per $100 of actual value.
630-16-1101. CLASSIFICATION, RATE OF TAX
. The statutory definition of intangible personal property, which is segregated for State taxation, only, includes: (a) inventory, (b) personal property, tangible in fact, used in manufacturing, mining, radio or television broadcasting, dairy, dry cleaning or laundry businesses, and also cable television businesses which were added by 1983 legislation with specific property exceptions, (c) money, (d) bonds, notes and other evidences of debt, demands and claims, (e) shares of stock, (f) accounts receivable, (g) all other property which has been defined as capital pursuant to §§58-411 and 58-412 prior to repeal, and (h) by 1983 legislation, effective July 1, 1983, imported merchandise located in foreign trade zones in Virginia and merchandise in such zones which is destined for export. All property defined as Intangible Personal Property is exempt from local property taxation whether or not State Intangible Personal Property Tax is imposed on such property.
. (a) Generally. Inventory means all stock on hand, including raw materials, goods in process, finished goods, and supplies of every kind for use in a business, whether located or stored on the taxpayer's premises or elsewhere in this State; except inventory of merchants (§ 58.1-3510); and subject to the limitations of § 58-412 prior to repeal; and inventory of imported merchandise or merchandise destined for ultimate export and located in a foreign trade zone.
(i) Inventory includes goods stored for distribution from a public warehouse and owned by an out-of-state manufacturer with no business location in Virginia.
(ii) Inventory of agricultural products. Inventories of agricultural products held by manufacturers in this State for manufacturing or processing are includible in taxable inventory only for the first taxable year such products become reportable as inventory if the product or products are normally required to be stored for more than one year in order to age or condition it for manufacture. This provision applies principally to tobacco manufacturers' inventories of leaf stock and strips.
(i) Inventories of businesses other than manufacturing, mining, radio or television broadcasting, dairy, dry cleaning or laundry businesses, are defined as intangible personal property only if held for resale directly or indirectly.
(a) Inventory held for resale directly. The term "inventory held for resale directly" means inventory of stock on hand for sale to customers.
(b) Inventory held for resale indirectly. The term "inventory held for resale indirectly" means inventory of materials or component parts which will become an identifiable part of the product or service to be sold or to be compensated for.
(ii) The material inventories of -a building contractor are not normally held for resale directly, but such inventories become component parts of the products or services to be sold. They are, therefore, held for resale indirectly and are includible in intangible personal property as inventory.
(iii) Building materials which have been used in completed or partially completed real estate improvement are not includible in inventory since they have become a part of real estate.
(iv) The inventories of gasoline or fuel of an airline or common carrier are not held for resale directly, nor would such inventories be considered to be held for resale indirectly. Such inventories are not includible in taxable intangible personal property inventory.
(v) Inventories of all imported merchandise or merchandise destined for ultimate export are excluded from taxable inventory if located in a foreign trade zone within the Commonwealth.
Personal property, tangible in fact
(a) The general rule is that tangible personal property is segregated for local taxation. However, to the extent that such property is statutorily defined as intangible personal property, it is not assessable for local taxation. (
(b) Certain property, tangible in fact, (i.e., office furniture, fixtures and other equipment not specifically excluded) of a manufacturing, mining, radio or television broadcasting, dairy, dry cleaning or laundry business was defined as the capital of a trade or business by Code § 58-412 prior to repeal and is now defined as intangible personal property by § 58.1-1101 and is exempt from local taxation.
(c) Machinery and tools, motor vehicles and delivery equipment were specifically excluded from the definition of capital of a trade or business by Code § 58-412 prior to repeal and are accordingly excluded from the definition of intangible personal property and are assessable for local taxation.
(d) The 1983 General Assembly amended § 58-405,
Code of Virginia
, to specifically exclude from the definition of intangible personal property machinery and tools, trunk and feeder cables, studio equipment, tuners, converters, antennae and office furniture and equipment of cable television businesses. Such items are assessable for local taxation.
C. Rate of tax
. The rate of tax is thirty cents on each $100 of the actual value of inventory, only. No tax is imposed on other property defined by this regulation as intangible personal property.
(1) Actual value of property. The actual value of inventory for purposes of intangible personal property taxation is the cost or market value, whichever is lower, of stock on hand without reduction by reserves of any kind. Inventory values as computed for federal income tax purposes are generally acceptable for purposes of this tax and any deviation from such values must be substantiated.
D. Machinery and tools, motor vehicles and delivery equipment
. Machinery and tools, motor vehicles and delivery equipment are subject to
local taxation exclusively
and are exempt from the intangible personal property tax. Trunk and feeder cables, studio equipment, tuners, converters, antennae and office furniture and equipment of cable television businesses are also exempt from the intangible personal property tax and are subject to local taxation as tangible personal property.
(1) This section requires that machinery and tools used in a manufacturing, mining, processing, or reprocessing, radio or television broadcasting, dairy, dry cleaning or laundry business be separately classified for local property taxation. The applicable rate must not exceed the rate imposed by the locality on other classes of tangible personal property.
(2) Motor vehicles and delivery equipment are subject to local taxation as tangible personal property.
(a) Limitation. "Motor vehicles and delivery equipment" are vehicles designed for use upon the highways and subject to Virginia Motor Vehicle Sales and Use Tax imposed by Chapter 24, Title 58.1 of the Code of Virginia. Mobile homes or other drawn vehicles are not within this definition unless utilized for delivery purposes. Boats and aircraft are not "motor vehicles" and are "delivery equipment" only if utilized primarily for delivery of tangible property.
(b) Mobile homes or other drawn vehicles, boats and aircraft of a manufacturing, mining, radio or television broadcasting, dairy, dry cleaning or laundry business and not
utilized for delivery purposes
were defined as a part of the capital of a trade or business by Code § 58-412 prior to repeal. They are now defined as intangible personal property exempt from local taxation.
630-16-1102. --INTANGIBLE PERSONAL PROPERTY OF CERTAIN POULTRY AND
. Farmers raising poultry and livestock are exempt from State intangible personal property tax. This exemption
apply to businesses which enter into contracts with farmers for the production of poultry or livestock when such businesses (a) furnish the poultry or livestock, feed and supplies to the farmers and (b) assume all financial risks, including all losses in the growing and marketing of such poultry or livestock. These businesses are subject to State intangible personal property tax except that poultry and livestock, while under production contract with farmers, are assessable locally as tangible personal property and not as a part of intangible personal property. Inventory of poultry processors is subject to intangible personal property tax and exempt from local taxation if (1) the processing significantly utilizes machinery or mechanical devices, (2) the processed poultry is ready for human consumption, except for cooking and (3) the poultry is sold to customers who are subject to wholesale merchants' license taxation.
630-16-11.03. EXEMPT PROFESSIONS AND BUSINESSES: HOW PROPERTY USED THEREIN TAXABLE.
. Professions regulated by State law, industrial development corporations organized pursuant to the terms of §§13.1-140 through 13.1-155 and farming businesses are exempt from State intangible personal property.
B: Exempt Trades or Businesses
: Trades or businesses-specifically exempt from intangible personal property tax, with references to the code sections providing the exemptions, are listed below:
(1) Banks and trust companies (§ 58.1-1202)
(2) Farming business and business of growing nursery products.
(3) Insurance companies (§ 58.1-2508). The exemption applies only to insurance companies subject to State license tax on gross premium income.
(4) Merchants (§§ 58.1-3000, 58.1-3509, and 58.1-3510).
(5) Oyster packers (§ 28.1-119).
(6) Professional associations (Title 54 Chapter 25) and professional corporations (§ 13.1-554.1) regulated by law which render personal services to the public. Professional services, for purposes of this exemption are the personal services rendered by architects, attorneys-at-law, certified public accountants, dentists, engineers, medical doctors and veterinary surgeons. Other businesses and occupations rendering personal services, even if regulated by State law, are taxable on inventory as defined in Regulation 630-16-1101.
(7) Public -service corporations (Title 58.1, Chapter 26),- The exemption applies to telegraph and telephone companies and water or heat, light and power companies.
(8) Restaurant keepers and caterers (§ 58.1-3000). Restaurant keepers and caterers are classified as merchants for purposes of this tax.
(9) Repair shops of automobile and truck dealers (§ 58.1-3510). The service departments of motor vehicle dealerships are subject to local merchants' capital tax and are exempt from State tax on capital not otherwise taxed. This is applicable
to dealers in motor vehicles subject to Virginia Motor Vehicle Sales and Use Tax.
630-16-1104. TO WHAT EXTENT DAIRIES TAXABLE ON INTANGIBLE PERSONAL PROPERTY
. A dairy business may or may not be classified as a manufacturing business, depending on its specific operations and its specific methods of operation. However, the capital as defined by §§58-411 and 58-412, prior to repeal thereof, relating to that part of a dairy business which consists of the purchase, pasteurization and sale of milk and cream and the production of buttermilk, as well as that part of a dairy business which consists of the manufacture of butter, condensed milk, evaporated milk, ice cream mix, ice cream, milk powder and cheese is defined as-intangible-personal property and inventory attributable to such part of a dairy business is taxable as intangible personal property and not as merchants' capital under local ordinances.
630-16-1105. SUPPLIERS OF PULPWOOD, VENEER LOGS, MINE PROPS AND
. - NOT REGULATED
630-16-1106. SITUS; NONRESIDENTS, BRANCHES OUTSIDE OF STATE
. The taxable situs of property defined and taxed as intangible personal property (inventory) is in Virginia if the property is physically located in Virginia on January 1 of the taxable year. Property in transit in interstate or foreign commerce does not have Virginia situs.
630-16-1107. DATE AS OF WHICH INTANGIBLE PERSONAL PROPERTY MUST BE
. A business is subject to intangible personal property tax from the time it is getting ready to do business, while doing an active business, and finally closing out business. Intangible personal property tax is assessed on the actual value of taxable property determined as of January 1 of every tax year. The taxpayer may elect to make a return based on the average actual value of taxable property on January 1, of the tax year and August 1 of the preceding tax year.
B. Election To Average Intangible Personal-Pro
perty. The election to make return based on the average actual value of taxable property must be made for each tax year and is binding only for the year for which the election is made.
How Election Is Made
. The election is made by filing Form 761, Return of Intangible Personal Property Tax, on the basis of the average value of inventory on January 1 of the tax year and August 1 of the preceding tax year. The return must include a schedule disclosing inventory on the respective dates and the inventory average thereof.
. The election to average is applicable only if taxpayer was doing business subject to tax on both January 1 of the tax year and on August 1 of the preceding year.
630-16-1108. TIME FOR FILING RETURNS; PAYMENT OF TAX
. Every person, firm or corporation with inventory subject to intangible personal property tax is required to file annually Form 761 - Return of Intangible Personal Property. Returns are due on or before May 1 of each tax year regardless of taxpayer's fiscal accounting period.
. If a taxpayer is engaged in dual businesses where a portion of the inventory is subject to State intangible personal property tax, the taxpayer is required to keep accurate book accounts segregating the items which constitute taxable inventory. In cases where no accounting segregation is made and where it is impractical to segregate all specific items of inventory employed in the several segments of a business, an apportionment of total inventory may be made based on a percentage. The numerator is the gross receipts derived from the part of the business which is subject to intangible personal property tax and the denominator is total gross receipts. A schedule reflecting the details of total inventory, computation of the apportionment percentage, and the application of the apportionment percentage shall be attached to and filed with the return.
Return of Dual Businesses
. Taxpayers engaged in dual businesses wherein a portion of total inventory is subject to intangible personal property tax, shall submit with Form 761 a schedule reflecting the details of total inventory and the portion subject to taxation.
. Consolidated returns
are not allowed
. Every person, firm or corporation subject to tax is required to file a separate return regardless of relation, affiliation or common ownership. When any person, firm or corporation conducts business from two or more locations in Virginia, the inventory of the several locations may be combined and reported in one return.
C. Payment Of Tax
. The full amount of tax as shown on the face of. the return is due at the time of filing the return and is required to be paid to the Treasurer of the county or city with whose Commissioner of the Revenue the taxpayer files his return. (If filed in Albemarle, Fairfax, Henrico, or Prince William County, or the City of Alexandria or Richmond, check or money order should be made payable to "Director of Finance of the County (City) of ...")
630-16-1109. EXTENSION OF TIME FOR FILING RETURNS
. The department may grant a reasonable extension of filing time when in its judgment good cause exists. No extension may be granted for more than six months except in the case of a taxpayer who is absent from the continental United States on the day the return is due and who requests an extension prior to the due date. Whenever an extension is granted, interest will be charged and collected at a rate equal to the rate of interest established pursuant to § 58.1-15 of the
Code of Virginia.
Such interest rate is applied from the original due date to the time of payment. If any taxpayer who has been granted an extension fails to file his return within the extended time and to pay the full amount of tax as shown on the face of the return at the time of filing and the accrued interest, the case shall be treated as if no extension had been granted. For penalty provisions, see Regulations 630-16-1113 and 630-16-1116.
NOTE: No extension granted for any other tax, whether federal, state or local, will be construed as representing an extension for filing Form 761, Return of Intangible Personal Property.
Requests for extension should be addressed to Virginia Department of Taxation, P. 0. Box 6-L, Richmond, Virginia 23282.
630-16-1110. WHERE TO FILE RETURN; DUTY OF THE COMMISSIONER OF REVENUE, AUDIT AND ASSESSMENT
A. Where individual to file
. A resident individual must file with the commissioner of the revenue for the county or city in which taxpayer is a resident for tax purposes. A nonresident individual must file with the commissioner of the revenue for the county or city in which his business, or a major part thereof, is conducted.
B. Where unincorporated companies to file
. Partnerships, joint ventures and unincorporated companies must file with the commissioner of the revenue for the county or city in which the business, or a major part thereof, is conducted.
C. Where corporations to file
. Virginia corporations must file with the commissioner of the revenue for the county or city in which the taxpayer's principal office is located by charter or in which the registered office is located. Foreign corporations must file with the commissioner of the revenue for the county or city in which is located the place designated as the office in Virginia at which all claims against the corporation may be paid or in which the registered office is located.
D. Schedule A of Form 761
. Separate Schedule A of Form 761 should be filed with Form 761 by qualifying manufacturers who hold inventory of agricultural products requiring storage for more than one year in order to age or condition. The schedule may be obtained from the Department.
630-16-1111. APPLICATION TO FIDUCIARIES GENERALLY
. Fiduciaries must file with the commissioner of the revenue for the county or city in which the fiduciary is qualified, or if there has been no qualification in this state, in the county or city in which the beneficiaries or any of them may reside.
630-16-1112. FORWARDING TO AND AUDIT OF RETURNS BY DEPARTMENT
. Not regulated.
630-16-1113. PENALTY FOR FAILURE TO FILE RETURN OF INTANGIBLE PERSONAL PROPERTY IN TIME; DELINQUENTS; ASSESSMENTS ON ESTIMATES
A. Penalty For Failure To File
. A taxpayer who fails to file a return by the required due date is subject to a penalty of 10% of taxes assessable, for delinquent filing.
In no case will the penalty be less than $10.00
. The assessed penalty becomes a part of the tax, subject to interest and other possible penalties.
B. Assessments On Estimates
----If a delinquent taxpayer fails or refuses to file a return, and such delinquency continues for fifteen days after notice of delinquency, the department may estimate the value of taxable inventory on the basis of the best information available to it and assess and collect taxes, penalties and interest on the basis of the estimates.
630-16-1114. ASSESSMENT AND PAYMENT OF DEFICIENCY; PENALTIES;
APPLICATION FOR CORRECTION.
. Audit deficiencies, if any, will be assessed by the department and Notices of Assessment will be mailed to taxpayers. The tax deficiency and interest at a rate equal to the rate of interest established pursuant to § 58.1-15 of the
Code of Virginia
, is payable to the Department of Taxation within thirty days after the Notice of Assessment is mailed to taxpayer.
B. Penalty On Audit Deficiency
. If the return was made in good faith and the understatement of the amount in the return
was not due
, no penalty will be added to the additional tax because of the understatement.
If the return is false or fraudulent with intent to evade the tax, a penalty of 1001 of the unpaid tax will be added.
C. Limitation on Assessment
. State intangible personal property taxes may be assessed within three years from the date on which such taxes became due and payable, except that in the case-of a false-or fraudulent return with intent to evade payment of the taxes, or a failure to file a return, the taxes may be assessed at any time within six years from the date on which such taxes became due and payable.
630-16-1115. REFUND OF OVERPAYMENT
. If the amount of tax computed in audit or otherwise determined, is less than the amount previously paid, the excess will be refunded together with interest at a rate equal to the rate of interest established pursuant to § 58.1-15 of the
Code of Virginia.
630-16-1116. FAILURE TO PAY TAX WHEN DUE; CIVIL PENALTIES
. If payment is not made in full when due, the unpaid balance including penalty for late filing, if applicable, is subject to a penalty of 5%. In the case of additional tax assessed, the penalty will not apply if return was made in good faith and the understatement was not due to any fault of taxpayer.
B. Example Of Application Of Penalties And Interest
EXAMPLE: Tax on delinquent return filed
on July 1 $1,000.00
10% Penalty for late filing
(becomes part of tax)
Total Tax $1,100.00
5% penalty for failure to pay
Total Tax and Penalty $1,155.00
Interest on ($1,155.00) total
tax and penalty from June 1
until July 1, date paid.
(1 month at 20% per annum)
Total Assessment $1,173.99
630-16-1117. HOW INTANGIBLE-PERSONAL..-PROPERTY TAX COLLECTIBLE
. Not regulated.
630-16-1118. INTANGIBLE PERSONAL PROPERTY ASSESSMENT SHEETS OR FORMS.
Title 58 Title 58.1 - Cress Reference Table