Present: Hassell, C.J., Keenan, Koontz, Lemons, Goodwyn, and
Millette, JJ., and Russell, S.J.
CITY OF LYNCHBURG
OPINION BY
v. Record No. 081344 SENIOR JUSTICE CHARLES S. RUSSELL
April 17, 2009
ENGLISH CONSTRUCTION COMPANY,
INCORPORATED, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF LYNCHBURG
Mosby G. Perrow, III, Judge
This appeal involves the power of a city to impose
business license taxes on the gross receipts of a contractor,
whose principal place of business is within the city, from
business done outside the city. The city contends that it is
entitled to impose taxes on all the contractor’s gross
receipts from work done anywhere in the Commonwealth, subject
only to the contractor’s right to deduct taxes actually paid
to other localities on those receipts. The contractor
contends that the city has the power to tax only those
extraterritorial receipts derived from business done in
localities in which the contractor has no definite place of
business. This issue arises because some localities, although
authorized by law to impose business license taxes on the
gross receipts of contractors for work done locally,
nevertheless decline to impose such taxes. The city contends
that it has the authority to tax such extraterritorial
receipts which would otherwise remain untaxed.
Facts and Proceedings
The parties filed a written stipulation of facts in the
circuit court and agree that the case presents a pure question
of law. English Construction Company, Incorporated, and W.C.
English, Inc. (collectively, English) are “contractors” as
defined by Code § 58.1-3714(D) and have their headquarters and
principal offices in the City of Lynchburg (the City). The
City has, for many years, assessed business license taxes on
the gross receipts of general contractors having their
principal offices in the City, including receipts from
construction projects in other localities, subject to a
deduction for license taxes the contractor has actually paid
to other localities on the same receipts.
In 2004, pursuant to an audit of English’s records by the
City’s Commissioner of the Revenue, the City identified gross
receipts in excess of $115,000,000 that English had received
from work done in localities outside the City in the tax years
2001 through 2004, which had not been reported to the City.
English contended that the City was not authorized to tax
those receipts, but after some adjustments for taxes paid to
other localities, English paid the taxes assessed by the City
on the receipts at issue. English maintained a “definite
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place of business,” as defined by Code § 58.1-3700.1, 1 in each
of the localities in which it engaged in the construction
projects that generated the disputed receipts, but those
localities had imposed no license taxes on them.
English filed, on behalf of the two English corporations,
applications for relief from erroneous assessments, pursuant
to Code § 58.1-3984, against the City. The parties stipulated
the facts and submitted the cases together to the circuit
court on cross-motions for summary judgment. 2
In letter opinions, the court ruled that the City had no
statutory authority to assess license taxes on the gross
receipts of contractors derived from business done within any
Virginia locality outside the City, when the contractor had a
definite place of business in such a locality. The court
entered summary judgments in favor of the two English
corporations, denied the City’s motions for summary judgment,
1
“ ‘Definite place of business’ means an office or a
location at which occurs a regular and continuous course of
dealing for thirty consecutive days or more.” Code § 58.1-
3700.1. The statutory definition includes rented property and
even a person’s personal residence in certain circumstances.
Id.
2
Although the parties agreed that the case was
appropriate for summary judgment, the City was permitted to
present limited evidence concerning the prevailing
administrative practices in other Virginia cities and counties
relating to the taxation of contractors’ extraterritorial
gross receipts.
3
ordered an abatement of the challenged assessments and ordered
a refund of the disputed taxes. We awarded the City an
appeal. 3
Analysis
For the purposes of this appeal, it is useful to divide
the categories of contractors’ gross receipts affected by the
business license tax statutes into several classifications:
(1) Receipts from work done within the locality in
which the principal office is located;
(2) Receipts from work done in another locality in
which the contractor has a definite place of
business but which are not taxed by that other
locality;
(3) Receipts from work done in another locality in
which the contractor has a definite place of
business and which are taxed by that other locality;
(4) Receipts amounting to $25,000 or less in any
year from work done in another locality in which the
contractor has no definite place of business; and
(5) Receipts amounting to more than $25,000 in any
year from work done in another locality in which the
contractor has no definite place of business.
The controversy between the City and English
involves only receipts of the second class described
above, but consideration must be given to all of them in
order to determine the legislative intent and give the
applicable statutes harmonious effect.
3
By leave of this Court, briefs amici curiae were filed
by the Local Government Attorneys of Virginia, the
Commissioners of the Revenue Association of Virginia, the
Treasurers Association of Virginia and the Virginia Municipal
League, in support of the City, and by the Virginia Chamber of
Commerce, in support of English.
4
Code § 58.1-3703(A) authorizes the governing bodies
of counties, cities and towns to levy local license taxes
on “businesses, trades, professions, occupations and
callings and upon the persons, firms and corporations
engaged therein within the county, city or town.”
(Emphasis added.) Code § 58.1-3706 imposes limitations
upon the tax rates that the localities may levy on the
gross receipts of the various businesses subject to such
license taxes. Code § 58.1-3703(A) provides that every
local ordinance imposing license taxes must include the
uniform provisions set forth in Code § 58.1-3703.1. The
City’s local license tax ordinance contains those uniform
provisions.
The provisions of Code § 58.1-3703.1 applicable to the
City’s appeal are:
§ 58.1-3703.1. Uniform ordinance provisions.
A. Every ordinance levying a license tax
pursuant to this chapter shall include provisions
substantially similar to this subsection. As they
apply to license taxes, the provisions required by
this section shall override any limitations or
requirements in Chapter 39 (§ 58.1-3900 et seq.) of
this title to the extent that they are in conflict.
. . . .
3. Situs of gross receipts.
a. General rule. Whenever the tax imposed by
this ordinance is measured by gross receipts, the
gross receipts included in the taxable measure shall
be only those gross receipts attributed to the
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exercise of a privilege subject to licensure at a
definite place of business within this jurisdiction.
In the case of activities conducted outside of a
definite place of business, such as during a visit
to a customer location, the gross receipts shall be
attributed to the definite place of business from
which such activities are initiated, directed, or
controlled. The situs of gross receipts for
different classifications of business shall be
attributed to one or more definite places of
business or offices as follows:
(1) The gross receipts of a contractor shall
be attributed to the definite place of business at
which his services are performed, or if his services
are not performed at any definite place of business,
then the definite place of business from which his
services are directed or controlled, unless the
contractor is subject to the provisions of § 58.1-
3715; . . . .
Code § 58.1-3715(A) provides as follows:
§ 58.1-3715. License requirements for contractors.
A. When a contractor has paid any local
license tax required by the county, city or town in
which his principal office and any branch office or
offices may be located, no further license or
license tax shall be required by any other county,
city or town for conducting any such business within
the confines of this Commonwealth. However, when
the amount of business done by any such contractor
in any other county, city or town exceeds the sum of
$25,000 in any year, such other county, city or town
may require of such contractor a local license, and
the amount of business done in such other county,
city or town in which a license tax is paid may be
deducted by the contractor from the gross revenue
reported to the county, city or town in which the
principal office or any branch office of the
contractor is located.
In harmonizing the foregoing sections, the circuit court
necessarily considered the effect of the last clause of Code
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§ 58.1-3703.1(A)(3)(a)(1): “unless the contractor is subject
to the provisions of § 58.1-3715.” Citing our decision in
Alger v. Commonwealth, 267 Va. 255, 259-60, 590 S.E.2d 563,
565-66 (2004), the court applied the “last antecedent” rule of
statutory construction, whereby “[r]eferential and qualifying
words and phrases, where no contrary intention appears, refer
solely to the last antecedent.” Id. The “last antecedent” is
the immediately preceding word, phrase or clause “that can be
made an antecedent without impairing the meaning of the
sentence.” Id.
Applying that rule to the “unless” clause, the court held
that it applied only to the clause immediately preceding it:
“if his services are not performed at any definite place of
business, then the definite place of business from which his
services are directed or controlled.” Code § 58.1-
3703.1(A)(3)(a)(1). It follows from that holding that the
“unless” clause has no effect upon the present case, because
it is stipulated that all the gross receipts in issue were
derived from English’s work done in localities in which it had
a definite place of business, and Code § 58.1-3715 would apply
only to receipts from localities in which the contractor had
no definite place of business. For the reasons stated below,
we agree with the circuit court’s reasoning.
7
The City argues on appeal that this was error, that the
“unless” clause qualifies the entire subsection, that Code
§ 58.1-3715 is a specific statute applicable to contractors
that prevails over any general statutory rules, and that it
makes no distinctions based upon the existence of a “definite
place of business.” The City contends that Code § 58.1-3715
permits the contractor only to deduct license taxes actually
paid to other jurisdictions. The City further contends that
English actually seeks an exemption from taxes on gross
receipts derived from work done outside the City and points
out that exemption provisions, like deduction provisions, are
construed strictly against the taxpayer.
It is true that exemption and deduction provisions are
strictly construed against the taxpayer, but those rules only
apply when a local governing body has the clear statutory
authority to impose a tax in the first place. In Commonwealth
v. Carter, 198 Va. 141, 147, 92 S.E.2d 369, 373 (1956), we
said that there was a “well-established principle that
statutes imposing taxes are to be construed most strongly
against the government and are not to be extended beyond the
clear import of the language used . . . and the official who
seeks to enforce a tax must be able to put his finger on the
statute which confers such authority.” More recently, we
said: “Taxing statutes must be construed strongly in the
8
taxpayer’s favor, and will not be extended by implication
beyond the clear import of the statutory language.” Shelor
Motor Co. v. Miller, 261 Va. 473, 478, 544 S.E.2d 345, 348
(2001). Our analysis is guided by those principles.
The statutes applicable to this appeal are contained in
Chapter 37 (“License Taxes”) of Title 58.1 of the Code of
Virginia (§§ 58.1-3700 through -3735). Code § 58.1-3702
provides: “The provisions of this chapter shall be the sole
authority for counties, cities and towns for the levying of
the license taxes described herein” (emphasis added). As
quoted above, the uniform ordinance provisions required by
Code § 58.1-3703.1(A)(3) specify as a general rule that the
gross receipts to be included in the taxable measure shall be
only those attributable to “the exercise of a privilege
subject to licensure at a definite place of business within
[the City].”
That section goes on to provide:
The situs of gross receipts for different
classifications of business shall be attributed to
one or more definite places of business or offices
as follows:
(1) The gross receipts of a contractor shall
be attributed to the definite place of business at
which his services are performed.
Code § 58.1-3703.1(A)(3)(a) (emphasis added).
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Code § 58.1-3715, upon which the City relies, contains no
language granting the City authority to levy a tax on gross
receipts from services performed by a contractor in other
localities in which he has a definite place of business. The
City, however, seeks such authority by implication. Our
holding in Shelor precludes that construction.
It is the duty of the courts to construe statutory
enactments so as to avoid repugnance and conflict between them
and, if possible, to give force and effect to each of them.
Sexton v. Cornett, 271 Va. 251, 257, 623 S.E.2d 898, 901
(2006). Statutes should be construed as a whole, and the
courts should adopt that interpretation that will carry out
the legislative intent. Garrison v. First Federal Sav. &
Loan, 241 Va. 335, 340, 402 S.E.2d 25, 28 (1991). No part of
an act should be treated as meaningless unless absolutely
necessary. Id. The City’s interpretation renders meaningless
Code § 58.1-3703.1(A)(3)(a)(1) and ignores the clear
legislative intent underlying the General Assembly’s 1996
revision of the business license tax laws, of which that
section is a part. That revision relies strongly on the
importance of a “definite place of business” in determining
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the taxable situs of gross receipts. See 1996 Acts chs. 715,
720. 4
Application of the familiar principles of statutory
construction cited above makes clear the propriety of the
circuit court’s reasoning in applying the “last antecedent"
rule when construing Code § 58.1-3703.1(A)(3)(a)(1). So
construed, the applicable statutes operate in harmony and each
is given effect. Thus, a locality may tax a contractor’s
gross receipts from services performed in that locality if the
contractor has a definite place of business there, and no
other locality has authority to tax those receipts. If the
contractor’s services are performed in a locality in which he
has no definite place of business, gross receipts therefrom
are attributed to the definite place of business from which
the services were directed or controlled. If, however, the
contractor received gross receipts in excess of $25,000 in any
year from services performed in a locality in which he has no
definite place of business, that locality may tax those
receipts despite the lack of a definite place of business
there, and the contractor may deduct those receipts from those
4
The City presented the testimony of two Commissioners of
the Revenue of other Virginia jurisdictions, both of whom
testified that their practice was to tax the extraterritorial
gross receipts of contractors whose principal office was
located in their jurisdiction without any regard to whether
11
reported to the locality from which the services were directed
or controlled.
Conclusion
Because the circuit court correctly construed and applied
the applicable tax laws, we will affirm the judgments from
which these appeals were taken.
Affirmed.
the contractors had a definite place of business in the
locality in which the work was done.
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