Present: Carrico, C.J., Compton, Stephenson, Lacy, Hassell,
and Keenan, JJ., and Poff, Senior Justice
HAMPTON NISSAN LIMITED PARTNERSHIP, ET AL.
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 950732 January 12, 1996
CITY OF HAMPTON
FROM THE CIRCUIT COURT OF THE CITY OF HAMPTON
Walter J. Ford, Judge
In this appeal, we consider whether a city may collect,
as license taxes, payments in excess of the rate permitted
by law that a motor vehicle dealer had collected improperly
from motor vehicle purchasers.
The litigants have stipulated the relevant facts. The
City of Hampton is a municipal corporation. Hampton Nissan
Limited Partnership is a Virginia limited partnership which
sells new and used motor vehicles at its dealership in
Hampton. Hampton Nissan of Virginia, Inc., a Virginia
corporation, is the general partner of Hampton Nissan
Limited Partnership. Hampton Nissan Limited Partnership and
Hampton Nissan of Virginia, Inc., collectively will be
referred to as Hampton Nissan.
Code § 58.1-3703 permits a governing body of a city to
levy and provide for the assessment and collection of
license taxes on businesses. Code § 58.1-3706 establishes
the maximum rate of taxation for license taxes and imposes
certain limitations upon the tax rate. The City Council of
Hampton enacted ordinances that established the license tax
at the maximum rate authorized by the General Assembly,
twenty cents per $100 of gross sales. The litigants have
stipulated that Hampton Nissan has paid this amount.
Hampton Nissan, however, improperly charged its
customers an amount in excess of the imposed license tax
rate. Hampton's commissioner of revenue forwarded a letter
to Hampton Nissan and requested that it remit to the City
$47,199.70, the amount of the overpayments. Subsequently,
Hampton Nissan published a notice in a local newspaper and
offered to refund the overpayments to its customers.
Hampton Nissan refunded $2,020.65 to its customers and
retained the balance of the overpayments.
The City filed its motion for judgment against Hampton
Nissan, seeking to collect the overpayments. The City
stated in its motion for judgment that "[a]ny judgment
received by the City for the disputed amounts will be
treated as a tax. Any purchaser may apply for a refund with
appropriate documentation within the applicable statute of
limitations. Monies will be refunded by the City to those
purchasers at that time."
The trial court held that Hampton Nissan collected the
overpayments as license taxes and awarded summary judgment
in favor of the City. We awarded Hampton Nissan an appeal.
Hampton Nissan argues that the City does not have the
statutory authority to collect, under the guise of a tax,
the overpayments that Hampton Nissan had improperly received
from its customers. Hampton Nissan asserts that the City
may not collect a tax unless it has specific statutory
authority to do so and that no such authority exists.
The City, relying upon Code § 58.1-16 and certain
provisions of the City's Code, contends that it has express
authority to collect the overpayments as license taxes. We
disagree with the City.
Code § 58.1-16 states:
Any person responsible for collecting any tax
administered by the Department [of Taxation] or
the Division of Motor Vehicles who overcollects
such tax and fails to account for and pay such
overcollection to the appropriate state agency by
the time his regular monthly or quarterly return
is due shall be liable for the amount of such
overcollection, and in addition a penalty of
twenty-five percent of such overcollection. The
Commissioner administering such tax may waive such
penalty for good cause.
Contrary to the City's assertion, Code § 58.1-16 is
simply not applicable here. As the City's stipulations of
fact demonstrate, the license tax, which is at issue in this
case, is administered and imposed by the City, not the
Department of Taxation or the Division of Motor Vehicles.
The stipulations also indicate that the license tax is paid
annually, not monthly or quarterly. Additionally, Hampton
Nissan is not a "person responsible for collecting any tax
administered by the Department [of Taxation] or the Division
of Motor Vehicles." Therefore, Code § 58.1-16 does not
confer a positive grant of taxing power upon the City to
collect the excess tax payments.
We also reject the City's argument that § 6.17 of the
Hampton Code gives the City express authority to collect the
overpayments as a tax. Section 6.17 of the Code states:
The city collector of taxes shall have any or
all the powers which are now or which may be
hereafter vested in any office of the state
charged with the collection of state taxes and may
collect the same in the same manner in which the
state taxes are collected by any officer of this
state.
The plain language in this provision merely permits the
City's collector of taxes to utilize any powers which are
conferred upon state officers when the City's collector
seeks to collect state taxes on behalf of the state.
The City also relies upon § 18-5 of the Hampton Code
which states:
As to all questions in regard to the duty and
conduct of officers of the city on collecting and
enforcing the taxes imposed by this chapter and in
regard to questions of construction, and for
definitions of terms used in this chapter and the
rules and regulations applicable to putting the
same in operation, reference is hereby made to the
laws of the state for the assessment, levy and
collection of taxes for the current year, or to so
much thereof as is applicable to this chapter and
is not inconsistent with it and the general
ordinances of the city. For the conduct and
guidance of the officers of the city and other
parties affected by this chapter and for fixing
their powers, rights, duties and obligations, the
provisions of such laws, so far as applicable, are
hereby adopted, without being specifically herein
quoted.
Relying upon this provision, the City says that "[t]he
effect of the above . . . ordinance is that the City
possesses powers for the enforcement and collection of taxes
to the same extent as the state. Significantly, this power
or authority includes the power to seek overcollected taxes
not paid over by a business to the state or local
government."
We disagree with the City. We find no language in this
provision which permits the City to collect the excess
payments and treat such payments as a tax. And, as we have
stated:
[P]roperty can only be taxed in the mode
prescribed by law, and . . . the Constitution
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 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.
Commonwealth v. P. Lorillard Co., Inc., 129 Va. 74, 81-82,
105 S.E. 683, 685 (1921); see also Commonwealth v. General
Electric Co., 236 Va. 54, 64, 372 S.E.2d 599, 605 (1988).
Here, the City's efforts to collect the overpayments
must fail because the City is unable to put its finger upon
any statute which confers such authority. Woodward v.
Staunton, 161 Va. 671, 673, 171 S.E. 590, 591 (1933); accord
Commonwealth v. Carter, 198 Va. 141, 147, 92 S.E.2d 369, 373
(1956). We also observe 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, ___ S.E.2d ___,
___ (1995); accord Whiting v. Town of West Point, 89 Va.
741, 743, 17 S.E. 1, 2 (1893).
The City also argues that even if it does not have
express authority to collect the overpayments as a tax, then
it has the implied powers to do so. We disagree. As
discussed above, a city can derive its taxing power only
through positive grants of authority from the General
Assembly, and the City must be able to put its finger on the
statute which confers upon the City the power to tax.
Additionally, statutes imposing taxes "are to be construed
most strongly against the government, and in favor of the
citizen, and are not to be extended by implication beyond
the clear import of the language used." City of Winchester,
250 Va. at 456, ___ S.E.2d at ___ (quoting Commonwealth
Natural Resources, Inc. v. Commonwealth, 219 Va. 529, 537,
248 S.E.2d 791, 796 (1978)). We decline the City's
invitation to deviate from our well-established precedent.
Accordingly, we will reverse the judgment of the trial
court and enter a final judgment here in favor of Hampton
Nissan.
Reversed and final judgment.