Present: All the Justices
CITY OF WINCHESTER
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 950013 November 3, 1995
AMERICAN WOODMARK CORPORATION
FROM THE CIRCUIT COURT OF THE CITY OF WINCHESTER
John E. Wetsel, Jr., Judge
I.
In this appeal, we consider whether Code §§ 58.1-1100
and -1101 authorize a city to tax certain personal property
owned by a manufacturer.
II.
Relying upon the provisions of Code §§ 58.1-1100 and
-1101(A), American Woodmark Corporation filed a pleading
referred to as an "Application to Correct Erroneous
Assessments of Local Taxes and Claim for Tortious Violation
of Constitutional Rights" against the City of Winchester.
American Woodmark sought a refund of $464,637 for taxes it
had paid during the years 1989 through 1992.
Code § 58.1-1100 states in pertinent part:
Intangible personal property, including
capital of a trade or business of any person, firm
or corporation, . . . is hereby segregated for
state taxation only.
Code § 58.1-1101(A) states in pertinent part:
A. The subjects of taxation classified by
this section are hereby defined as intangible
personal property [taxable by the state]:
. . . .
2. Capital which is personal property,
tangible in fact, used in manufacturing . . .
businesses. Machinery and tools, motor vehicles
and delivery equipment of such businesses shall
not be defined as intangible personal property for
purposes of this chapter and shall be taxed
locally as tangible personal property according to
the applicable provisions of law relative to such
property.
American Woodmark alleged that its personal property is
used in its manufacturing business and, therefore, is
classified as intangible personal property under the
provisions of Code § 58.1-1101(A)(2), not subject to local
taxation under the provisions of Code § 58.1-3500. In
response, the City asserted that American Woodmark's
furniture, fixtures, office equipment, and computer
equipment located in Winchester, are not used directly in a
manufacturing facility in Winchester and, therefore, cannot
be classified as intangible personal property. Accordingly,
the City claimed that such property is subject to local
taxation.
The trial court held that the personal property in
question was classified as intangible personal property
pursuant to Code §§ 58.1-1100 and -1101 and, therefore, was
not subject to local taxation. The trial court entered a
judgment including postjudgment interest in favor of
American Woodmark. We awarded the City an appeal.
III.
The litigants have stipulated the relevant facts.
American Woodmark, a Virginia corporation, maintains its
corporate headquarters in Winchester. American Woodmark's
executive officers, accounting personnel, credit management
personnel, computer systems managers and operators, senior
sales marketing personnel, operations and customer service
personnel, and senior manufacturing officers work at the
headquarters. "Functions performed at the corporate
headquarters . . . include establishing and monitoring
overall corporate direction and strategy, overall management
of American Woodmark's business, consolidated reporting of
its financial information, approving extensions of credit to
prospective customers, selling and marketing of cabinets and
vanities produced by other American Woodmark facilities,
invoicing sales, collecting accounts receivable, paying
purchase invoices, maintaining a company wide computer
network, and fulfilling the accounting, tax and regulatory
compliance functions required to manage and operate the
company's business activities."
American Woodmark purchases green lumber, other raw
materials, and component parts and uses these items to
manufacture kitchen cabinets and bathroom vanities at
certain manufacturing facilities located in several states.
American Woodmark does not manufacture any kitchen cabinets
or bathroom vanities either at its corporate headquarters or
at any other location in Winchester.
American Woodmark has distribution facilities,
warehouses, service centers, and sales offices throughout
the United States. These facilities are part of "a computer
network which is controlled by and operates through a large
mainframe computer located at American Woodmark's corporate
headquarters in . . . Winchester. . . . The computer system
is used to provide data and information to the appropriate
company personnel to enable . . . them to make informed
decisions and to manage their areas of responsibility."
This computer system is an integral part of American
Woodmark's corporate operations and is used for such vital
purposes as: the acquisition of raw materials and
components; distribution and sales of cabinets and vanities;
inventory control; and billing and accounts receivables.
The computer system is not directly used in product design
or research and development.
IV.
A.
The City argues that American Woodmark's personal
property located at its corporate office is subject to local
taxation because American Woodmark's headquarters is not a
manufacturing business under the provisions of Code § 58.1-
1101(A), and the personal property in issue is not "used in"
that business. Alternatively, the City contends that if the
property is used in a manufacturing business within the
City, it is a part of the "machinery and tools of" that
manufacturing business and thus taxable under the provisions
of Code § 58.1-1101(A)(2).
To buttress its position, the City asserts that the
intangible property located in American Woodmark's corporate
headquarters cannot be deemed capital used in a
manufacturing business because American Woodmark does not
manufacture any products within Winchester's geographical
boundaries. The City further argues that Code §§ 58.1-1100
and -1101 are tax exemptions and must be strictly construed
against the taxpayer.
American Woodmark contends that it is a manufacturing
business within the plain meaning of Code §§ 58.1-1100 and
-1101 and that the furniture, fixtures, office equipment,
and computer equipment in its corporate headquarters are
"used in" its manufacturing business even though no products
are specifically manufactured in Winchester. We agree with
American Woodmark.
We first determine whether Code §§ 58.1-1100 and
-1101(A)(2) are tax exemptions, construed against American
Woodmark, or limitations on the City's power to tax personal
property, construed against the City. In another context,
we have broadly defined "exemption" as "[f]reedom from a
general duty or service; immunity from a general burden,
tax, or charge." National R.R. Passenger Corp. v. Catlett
Volunteer Fire Co., Inc., 241 Va. 402, 410, 404 S.E.2d 216,
220 (1991) (quoting Black's Law Dictionary at 571). Another
authority defines "exemption" as "freedom from any charge or
obligation to which others are subject." Webster's Third
New International Dictionary 795 (1986 ed.).
Code §§ 58.1-1100 and -1101(A)(2) do not provide
freedom from the City's personal property tax to which other
entities are subject, but rather classify certain personal
property, tangible in fact, as intangible personal property
and segregate that property for state taxation only. See
City of Roanoke v. Michael's Bakery Corp., 180 Va. 132, 143-
54, 21 S.E.2d 788, 793-98 (1942) (discussing history of
segregation and classification of personal property for
taxation). These statutes also prohibit the City from
assessing a personal property tax upon property within this
classification.
And, it is well established in Virginia that a
municipal corporation, such as the City, can only derive its
taxing power through positive grants of authority from the
General Assembly. Whiting v. Town of West Point, 89 Va.
741, 743, 17 S.E. 1, 2 (1893). Therefore, we hold that Code
§§ 58.1-1100 and -1101(A)(2) reflect the General Assembly's
decision not to grant a specific taxing power to the City,
and these statutes must be treated as general tax statutes.
Thus, the following principle is applicable here:
[S]tatutes 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. Whenever there is a just doubt,
'that doubt should absolve the taxpayer from his
burden.'
Commonwealth Natural Resources, Inc. v. Commonwealth, 219
Va. 529, 537-38, 248 S.E.2d 791, 796 (1978); accord,
Commonwealth v. P. Lorillard Co., 129 Va. 74, 81-82, 105
S.E. 683, 685 (1921).
We also observe that when we interpret unambiguous
statutes, such as Code §§ 58.1-1100 and -1101(A)(2), we
apply the plain meaning rule.
While in the construction of statutes the
constant endeavor of the courts is to ascertain
and give effect to the intention of the
legislature, that intention must be gathered from
the words used, unless a literal construction
would involve a manifest absurdity. Where the
legislature has used words of a plain and definite
import the courts cannot put upon them a
construction which amounts to holding the
legislature did not mean what it has actually
expressed.
City of Virginia Beach v. ESG Enterprises, Inc., 243 Va.
149, 152-53, 413 S.E.2d 642, 644 (1992).
Applying these principles, we hold that American
Woodmark's personal property in question constitutes capital
used in manufacturing businesses that is not subject to
taxation by the City. We find no language in Code §§ 58.1-
1100 or -1101(A)(2) which requires that capital be used in a
manufacturing facility physically located within the
geographical boundaries of Winchester. Accordingly, we
decline the City's invitation to construe Code § 58.1-
1101(A)(2) as requiring that a manufacturer maintain a
manufacturing facility within the City's geographical
boundaries or that the manufacturer's capital, which is
personal property, tangible in fact, be used "directly" in
the manufacturing process. These limitations simply do not
appear in Code § 58.1-1101(A)(2). And, as we recently said,
"[w]hen the General Assembly 'has spoken plainly' on a
subject, we must not 'change or amend its enactments under
the guise of construing them.'" City of Martinsville v.
Tultex Corp., 238 Va. 59, 63, 381 S.E.2d 6, 8 (1989).
B.
Alternatively, the City argues that even if "American
Woodmark's personal property is 'used in' a manufacturing
business, its computer system and office equipment are
'machinery and tools . . . of such business' and not exempt
from personal property tax." The City relies upon the
following portion of Code § 58.1-1101(A)(2) which states
that "[m]achinery and tools . . . of [manufacturing]
businesses shall not be defined as intangible personal
property for purposes of this chapter and shall be taxed
locally as tangible personal property according to the
applicable provisions of law relative to such property."
American Woodmark argues, and the trial court held, that
American Woodmark's computer system and office equipment in
its headquarters are not "machinery and tools" within the
meaning of Code § 58.1-1101(A)(2).
Since 1950, Virginia's tax commissioner has opined that
the phrase "machinery and tools" contained in Code § 58.1-
1101(A)(2) and its precursors means machinery used in the
actual process of manufacturing. See Commonwealth v.
Carter, 198 Va. 141, 146-47, 92 S.E.2d 369, 373 (1956)
(construction of taxation statute by tax commissioner
charged with its enforcement is entitled to great weight);
accord, Commonwealth v. Wellmore Coal Corp., 228 Va. 149,
154, 320 S.E.2d 509, 511 (1984). Likewise, the Attorney
General has consistently opined that "'machinery and tools
used in a particular manufacturing business' are the
machinery and tools which are necessary in the particular
manufacturing business and which are used in connection with
the operation of machinery which is actually and directly
used in the manufacturing process." 1985-1986 Att'y Gen.
Ann. Rep. 316 at 317; see also 1987-1988 Att'y Gen. Ann.
Rep. 590.
Even though the General Assembly has been aware of the
Attorney General's interpretation of the phrase "machinery
and tools" as used in Code § 58.1-1101(A)(2), the General
Assembly has taken no action to modify that definition.
And, we have repeatedly held that the General Assembly is
presumed to have knowledge of the Attorney General's
interpretation of statutes, and the General Assembly's
failure to make corrective amendments evinces legislative
acquiescence in the Attorney General's interpretation.
Browning-Ferris, Inc. v. Commonwealth, 225 Va. 157, 161-62,
300 S.E.2d 603, 605-06 (1983); Richard L. Deal and Assoc. v.
Commonwealth, 224 Va. 618, 622, 299 S.E.2d 346, 348 (1983);
Albemarle County v. Marshall, 215 Va. 756, 762, 214 S.E.2d
146, 150 (1975). Therefore, we hold that American
Woodmark's furniture, fixtures, office equipment, and
computer equipment are not "machinery and tools" within the
meaning of Code § 58.1-1101(A)(2) because these items are
not used in connection with the operation of machinery which
is actually and directly used in the manufacturing process.
V.
The City argues that the trial court erred by awarding
postjudgment interest against it. The City contends that
judgment interest may only be awarded on a refund of local
taxes if provision for the payment of interest is contained
in an ordinance adopted by the affected local government in
accordance with Code § 58.1-3991. The City observes that it
has adopted no such ordinance. American Woodmark argues
that it is entitled to judgment interest as permitted by
Code § 8.01-382. We agree with the City.
Code § 58.1-3987 states in relevant part:
If the court is satisfied from the evidence
that the assessment is erroneous . . . the court
may order that the assessment be corrected . . . .
If the tax has been paid, the court shall order
that it be refunded to the taxpayer, with interest
if authorized pursuant to § 58.1-3991.
Code § 58.1-3991 states:
The governing body of any county, city or
town may provide by ordinance that all erroneously
assessed taxes refunded under the provisions of
this article be repaid with interest at a rate not
to exceed the rate imposed by such locality for
delinquent taxes. Such interest shall run from
the date such taxes were required to be paid or
were paid, whichever is later.
Code § 8.01-382 states in relevant part:
Except as otherwise provided in § 8.3-122, in
any action at law or suit in equity, . . . the
judgment or decree of the court, may provide for
interest on any principal sum awarded, or any part
thereof, and fix the period at which the interest
shall commence. The judgment or decree entered
shall provide for such interest until such
principal sum be paid. If a judgment or decree be
rendered which does not provide for interest, the
judgment or decree awarded shall bear interest
from its date of entry, at the rate as provided in
§ 6.1-330.54, and judgment or decree entered
accordingly.
Contrary to American Woodmark's assertion, we must
apply Code §§ 58.1-3987 and -3991 in this appeal because
these are statutes of specific application which take
precedence over Code § 8.01-382, a statute of general
application. "[W]hen one statute speaks to a subject in a
general way and another deals with a part of the same
subject in a more specific manner, . . . where they
conflict, the latter prevails." Dodson v. Potomac Mack
Sales & Service, 241 Va. 89, 94-95, 400 S.E.2d 178, 181
(1991) (quoting Virginia Nat'l Bank v. Harris, 220 Va. 336,
340, 257 S.E.2d 867, 870 (1979)). The plain and unambiguous
language in Code § 58.1-3987 permits a trial court to order
interest only if such interest is authorized pursuant to
Code § 58.1-3991. The City, however, did not enact an
ordinance pursuant to Code § 58.1-3991 which would permit an
award of interest against it. Therefore, the trial court
erred by awarding interest on the "assessed taxes refunded"
against the City.
VI.
In view of our disposition of this appeal, we need not
consider the City's remaining arguments. Additionally, we
do not consider the City's constitutional arguments because
they are not the subject of an assignment of error. Rule
5:17. Accordingly, the judgment of the trial court will be
affirmed in part, reversed in part, and we will enter final
judgment here.
Affirmed in part,
reversed in part,
and final judgment.