Present: All the Justices
CITY OF VIRGINIA BEACH
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 011307 April 19, 2002
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
Thomas S. Shadrick, Judge
In this appeal, we consider whether a city has the
authority to tax satellite transponders that are located on
satellites that orbit the earth, but are owned and used by a
corporation that had offices in that city.
International Family Entertainment, Inc. (International),
filed its first amended petition for correction of erroneous
assessment of personal property against the City of Virginia
Beach (the City). International sought a correction of
assessments for personal property it owned for the tax years
1993 through 1998, and it sought a refund of all taxes paid on
the basis of those assessments. The City filed responsive
pleadings and disputed International's claims.
The following facts were either stipulated by the
litigants or adduced during an ore tenus hearing.
International was at all relevant times a corporation
organized under the laws of the State of Delaware.
International is a cable television network that produces and
distributes family-oriented entertainment, including "made-
for-television" movies and informational programming.
International's corporate offices, as well as its corporate
books and records, were located in Virginia Beach.
International's income tax records and its filings with the
federal Securities Exchange Commission identified Virginia
Beach as the address of the corporation.
International owns three transponders that are
permanently affixed to communications satellites that orbit
the earth. The satellites are physically located
approximately 22,300 miles above the earth's equator in an
assigned geostationary orbit. A transponder is a device that
amplifies and relays transmissions between transmitting and
receiving stations. The transponders receive audio and video
program signals from an "uplink" and transmit the signals to
satellite dishes on the earth. Cable television companies and
home satellite dishes receive these signals. The cable
television companies transmit these signals to cable
subscribers throughout the United States.
The transponders have never had a physical presence in
Virginia Beach. They were not constructed or assembled in
Virginia Beach or anywhere else in Virginia.
During the tax years 1993 through 1998, International was
assessed and paid personal property taxes to the City on the
transponders in the amount of $120,169.12 per year. No other
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jurisdiction taxed or asserted the right to tax the value of
the transponders for those tax years. International
identified the transponders as machinery and tools on its tax
returns. International excluded the transponders on its 1998
tax return, and ultimately, it paid the City's assessed tax
bill under protest. International filed amended returns for
1993 through 1997, seeking to delete the transponders from its
tax returns for those years.
The circuit court ruled that the City lacked the
statutory authority to assess a tax on the transponders. The
court entered a judgment that awarded International a refund
of taxes assessed and paid with respect to the transponders in
the amount of $480,676.48. The City appeals.
Code § 58.1-3507(A) states in relevant part:
"Machinery and tools . . . used in a
manufacturing, mining, water well drilling,
processing or reprocessing, radio or television
broadcasting . . . 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."
Code § 58.1-3511(A) states in relevant part:
"The situs for the assessment and taxation of
tangible personal property, merchants' capital and
machinery and tools shall in all cases be the
county, district, town or city in which such
property may be physically located on the tax day.
However, the situs for purposes of assessment of
motor vehicles, travel trailers, boats and airplanes
as personal property shall be the county, district,
town or city where the vehicle is normally garaged,
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docked or parked; however, the situs for vehicles
with a weight of 10,000 pounds or less registered in
Virginia but normally garaged, docked or parked in
another state shall be the locality in Virginia
where registered. Any person domiciled in another
state, whose motor vehicle is principally garaged or
parked in this Commonwealth during the tax year,
shall not be subject to a personal property tax on
such vehicle upon a showing of sufficient evidence
that such person has paid a personal property tax on
the vehicle in the state in which he is domiciled.
In the event it cannot be determined where such
personal property, described herein, is normally
garaged, stored or parked, the situs shall be the
domicile of the owner of such personal property."
The City argues that the transponders were properly
identified by International as machinery and that this
category of property is taxable pursuant to Code § 58.1-3507.
The City also asserts that Code § 58.1-3511 is not applicable
to a determination whether the City may assess a personal
property tax on the transponders. Rather, the City argues
that Code § 58.1-3511 applies only when there is a dispute
between potentially competing localities about which locality
may tax specific items of taxable personal property.
Continuing, the City contends that when "no taxable situs can
otherwise be determined, [Code § 58.1-3511] calls for the
application of the pre-existing common law rule of mobilia
sequuntur personam, – 'movables follow the person' – by
providing that 'the situs shall be the domicile of the owner
of such personal property.' "
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Responding, International asserts that Code § 58.1-
3511(A) is controlling in this appeal and that the General
Assembly has not authorized the City to tax the transponders
that are located in space. Continuing, International argues
that even though the General Assembly has authorized
localities to impose taxes on certain items of tangible
personal property including machinery and tools, the "property
must also meet the requirements of § 58.1-3511(A) . . . which
imposes statutory limits relating to the situs for
assessment." International also contends that the City's
reliance upon the common law doctrine of mobilia sequuntur
personam is misplaced because of this Court's decision in
Hogan v. County of Norfolk, 198 Va. 733, 96 S.E.2d 744 (1957).
We agree with International.
Certain well-established principles govern our resolution
of this appeal. We have stated:
"[P]roperty can only be taxed in the mode prescribed
by law, and . . . the Constitution [of Virginia]
imposes upon the legislature the duty of passing
such laws as are necessary to carry into effect its
provisions relating to taxation, and unless it does
so the tax cannot be collected; . . . taxes can only
be assessed, levied and collected in the mode
pointed out by express statutory enactment.
Statutes imposing taxes are construed most strongly
in favor of the taxpayer, and will not be extended
by implication to the prejudice of the taxpayer
beyond the clear import of the language used.
"Taxes are imposed by the State in the exercise
of its sovereign power. This power is exerted
through the legislature, and an executive officer
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who seeks to enforce a tax must always be able to
put his finger upon the statute which confers such
authority. Taxes can only be assessed, levied and
collected in the manner prescribed by express
statutory authority."
Hampton Nissan v. City of Hampton, 251 Va. 100, 104, 466
S.E.2d 95, 97 (1996) (quoting Commonwealth v. P. Lorillard
Co., Inc., 129 Va. 74, 81-82, 105 S.E. 683, 685 (1921));
accord Shelor Motor Co. v. Miller, 261 Va. 473, 478-79, 544
S.E.2d 345, 348 (2001); Commonwealth v. General Electric Co.,
236 Va. 54, 64, 372 S.E.2d 599, 605 (1988).
Additionally, we have held that "it is well established
in Virginia that a municipal corporation, such as [a city],
can only derive its taxing power through positive grants of
authority from the General Assembly." City of Winchester v.
American Woodmark Corp., 250 Va. 451, 456, 464 S.E.2d 148, 151
(1995); accord Hampton Nissan, 251 Va. at 104, 466 S.E.2d at
97; Commonwealth v. Carter, 198 Va. 141, 147, 92 S.E.2d 369,
373 (1956); Woodward v. City of Staunton, 161 Va. 671, 673,
171 S.E. 590, 591 (1933); Whiting v. Town of West Point, 89
Va. 741, 743, 17 S.E. 1, 2 (1893).
Applying the aforementioned principles, we hold that the
City does not have the statutory authority to tax
International's transponders. Code § 58.1-3507 segregates a
class of tangible personal property, separate from all other
classes of property, that shall be subject to local taxation
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only. This statute must be read in conjunction with other
statutes contained in Title 58.1. We have stated that Code
§ 58.1-3511(A) "is part of a comprehensive scheme that
authorizes local governments to assess, levy, and collect a
tax on certain categories of property." Shelor Motor Co., 261
Va. at 478, 544 S.E.2d at 348.
The City has the power to tax the category of property
contained in Code § 58.1-3507(A), in this instance machinery
and tools. Code § 58.1-3511, which deals with the situs of
taxation, prescribes limitations upon the City's power to tax.
Code § 58.1-3511(A) specifically states that the "situs for
the assessment and taxation of . . . machinery and tools shall
in all cases be the . . . city in which such property may be
physically located on the tax day." It is undisputed that the
transponders in this case, which are affixed to satellites
22,300 miles above the earth, have never been physically
located in Virginia Beach.
Even though Code § 58.1-3511(A) creates different rules
for the determination of a situs for certain property that is
mobile in nature, such as motor vehicles, travel trailers,
boats, or airplanes, the statute does not contain any rules
for the determination of a situs for transponders or the
satellites to which the transponders are affixed. We note
that had the General Assembly chosen to create a situs for
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satellites, it certainly knew how to do so because the General
Assembly made references to satellites in other statutes found
in Title 58.1 of the Code. See, e.g., Code § 58.1-609.3(13)
(exempting satellites and tangible personal property placed on
or used aboard satellites from the retail sales and use tax);
Code § 58.1-3506(A)(19) (classifying equipment used to
manufacture, test or operate satellites as taxable tangible
personal property); Code § 58.1-3818.2 (referring to
satellites in its definitions relating to video programming
excise tax). We also observe that the General Assembly
specifically authorized in Code § 58.1-3506(A)(19) the
taxation of tangible personal property used in the
manufacture, testing, or operation of satellites in certain
localities, but the General Assembly did not authorize the
taxation of the satellites or the transponders affixed to
satellites.
We reject the City's argument that the common law
doctrine of mobilia sequuntur personam permits the City to tax
the transponders. This doctrine is based on the common law
principle that the rights of ownership and the transfer of
movable property must be determined by the law of the owner's
domicile. In Hogan, 198 Va. at 735, 96 S.E.2d at 745, we
stated that
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"[a]t the present day, the separation of the
situs of personal property from the domicil of the
owner for the purposes of taxation is a familiar
doctrine, and the maxim 'mobilia sequuntur personam'
is no longer controlling on the question of taxation
of personal property which has an actual situs
elsewhere than at the owner's domicil. It may be
taxed where it is situated or located, although the
domicil of the owner is elsewhere. The test of
situs for taxation purposes is the place of its
location and use."
We also stated in Hogan that the common law rule that the
situs of personal property for taxation follows the owner may
be changed by the General Assembly, and we held that this rule
had been changed in Virginia by former Code § 58-834, which
was a precursor to Code § 58.1-3511(A). Id. at 735, 96 S.E.2d
at 745-46. Accordingly, to the extent any ambiguity exists,
we hold that this common law rule does not apply to the taxing
scheme at issue in this case.
We find no merit in the City's argument that Article X of
the Constitution of Virginia permits the City to impose a tax
on the transponders. Article X, § 1 of the Constitution of
Virginia states in part:
"All taxes shall be levied and collected under
general laws and shall be uniform upon the same
class of subjects within the territorial limits of
the authority levying the tax . . . ."
Article X, § 4 of the Constitution of Virginia states:
"Real estate, coal and other mineral lands, and
tangible personal property, except the rolling stock
of public service corporations, are hereby
segregated for, and made subject to, local taxation
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only, and shall be assessed for local taxation in
such manner and at such times as the General
Assembly may prescribe by general law."
Contrary to the City's assertions, these constitutional
provisions are not self-executing, and the General Assembly
must enact specific legislation that authorizes a taxing
authority to enact a tax. See Southern Railway Co. v.
Commonwealth, 200 Va. 431, 433, 105 S.E.2d 814, 816 (1958);
County of Prince William v. Thomason Park, 197 Va. 861, 867,
91 S.E.2d 441, 446 (1956); Old v. City of Norfolk, 178 Va.
378, 382, 17 S.E.2d 427, 428-29 (1941). And, we note that the
City does not identify a specific grant of statutory authority
that confers such taxing power upon it.
Finding no merit in the City's remaining arguments, we
will affirm the judgment of the circuit court.
Affirmed.
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