lo . 7. Y IS I if I INDEX. References are to Numbers. A. Administrator, fund not taxable to where life estate is given to one with remainder over 68 personally liable for taxes when he neglects to retain same out of estate 70 Administrator or executor, estate closed by, omitted taxes 66 Agricultural productions, in hands of purchaser or producer, how taxed 61 Ancillary executor, extent of liability for taxes 59 Appeals, right of taxpayer to. . . x 20 Assessment, capital of corporations, what jurisdiction 17 Assignment of note, secured by deed of trust, to whom taxed. ... 62 Attorneys, loans for clients, Local Boards of Review can call for disclosures 34 Automobile dealers, on purchases 53 B. Bailment, grain received as deposit and mingled with that pur- chased by flour manufacturer not such 72 Banks, checking accounts 9 that refuse to give information to examiners of records, how proceeded against 69 Barrels and ice, peddler of 54 Beginning business, capital, first class under gross assets 28 purchases of merchants, how estimated 15 Boards of Review, information that can be required as to bor- rowed money 67 Boarding houses, summer, license 4 Bonds, fiduciary money not taxed as such 57 municipal 3 q 4 The State Tax Board. of defunct corporations 18 U. S. not taxable as income 31 Branch establishments out of State, Virginia corporation, in- come of 12 Building association, that borrows money, can be required to fur- nish information as to loans 67 Building Contractor, capital, who pays license tax . ... 50 Building and Loan Association, income tax 58 C. Capital, building contractor, who pays license tax 50 computing, deductions in excess of assets 51 cut timber as part thereof 39-46 dairy farm and products 61 deducting amount owing on purchases 41 grain received as deposit and mingled with that purchased by flour manufacturer taxable as such 72 money deposited with trustees as such 49 persons beginning business, first class under gross assets. . 28 silk manufacturing corporation 47 situs of for taxation 29 surplus of fishing corporations 21 tobacco in warehouses, how returned 16 rule as to excess 45 where assessable 17 Capitation Taxes, delinquent 10 of veterans, 52 Cattle, farm stocked with under will, intangible property 42 Clothing Houses, orders sent out of State 48 Contractor, building, who pays license tax, taxability of capital . . 50 Corporations, income tax, deductions and exemptions 22 income, doing all of business out of State 23 income, doing business out of State, meetings held in Virginia 24 situs of capital for taxation 29-40 situs of income for taxation 37 Digest of Opinions. value of stock held by 56 Correction of assessment, omitted taxes, real estate 55 County Taxes for Prior Years, right to 14 Cut Timber, how assessed 39-46 D. Dairy Farm, proceeds taxed as capital 61 Decrease in assessment, time within which Local Board may act. 63 Declaration, principal office, corporation, conclusive 17 Deductions to Corporations, capital, money borrowed to pay bill not allowed 41 in excess of assets, capital 51 income tax 1-22 Deduction from income, shrinkage in value of real estate 44 Defunct Corporations, omitted tax on bonds 18 Deposit, of grain received by flour manufacturer and mingled with that purchased, taxable as capital 72 Depreciation, in value of real estate not deducted from income . . 44 Dividends, from stock in foreign corporations, taxable as income. 6 Domicile, for purpose of taxation 33 Double assessment, relief from 39 Drugs, held by physician 32 Drug Store, selling soda water, etc., how taxed 65 E. Estates, stock owned by 59 Erroneous Assessment, omitted taxes, time allowed for appeal. . . 20 Examiner of Records, how to proceed when bank refuses to fur- nish information 69 shall report judgments ' 19 Exemptions to Corporations, income tax 1-22 Executor, farm stocked with cattle under will, intangible prop- erty 42 Executor or Administrator, estate closed by, omitted taxes 66 Excess of Deductions over Assets, in computing capital 45-51 6 The State Tax Board. F. Farmers’ Unions, co-operative 43 Felled Timber, how assessed, land or capital. 46 Fiduciary, where fund is left as life estate to one with remainder over, taxability 68 Fiduciaries, funds in the hands of, distribution prior to Febru- ary 1st 64 Fiduciary, money in hands, taxed as such 57 Fine, against bank for refusing to furnish information to exami- ners of records, how collected 69 Firms and Partnerships, income tax, returns 2 Fishing corporations, surplus of as capital 21 Flour manufacturer, grain received as deposit and mingled with that purchased, taxable as capital 72 Foreign Corporation, capital ...... 47 hides used by Virginia corporation, to whom taxable 38 situs of capital for taxation 29 stock of 5 Funds in Hands of Fiduciaries, distribution made prior to Feb- ruary 1st 64 G. Gasoline, sale of 25-26 Gifts, of money returned as income . . . . : 27 of U. S. bonds not taxable as income 31 Guardian, who holds money in bank, how assessed 57 H. Hides, owned by foreign corporation, used by Virginia corpo- ration 38 Digest of Opinions. 7 I. Ice, license required of manufacturer that sells to largest stock- holder 9 Ice and Barrels, peddler of 54 Income, branch establishments out of Virginia 12 building and loan associations 58 corporation doing business out of State holding meetings in Virginia 24 deduction for loss in sale of real estate 44 derived from sale of real estate, not such 60 dividends from stock of foreign corporations 6 exemptions to corporations 1-22 firms and co-partnerships . 2 gifts of money as such 27 gifts of U. S. bonds not such 31 judiciary of cities 13 State and national banks 35 situs for taxation, corporation 37 Virginia corporations doing business out of Virginia 23 Increase, in Value of Land, how assessed 60 in assessment, time within which Local Board may act. . . 63 Information, that can be required by Board of Review of Build- ing Association 67 how bank proceeded against when refuses to furnish Ex- aminers of Records 69 Intangible property, farm stocked with grazing cattle under will. 42 Intent to change domicile 33 J. Judgments, taxation of 19 Judiciary, income from salaries 13 Jurisdiction for Taxation, ancillary executor 59 / The State Tax Board. 6 L. Land, increase in value of how assessed 60 Life estate fund, does not come under control of fiduciary when remainder over 68 Liability (personal), of administrator for taxes who does not re- tain funds out of estate 70 License, automobile dealer on basis of purchases 53 beginner in business, merchant’s purchases how estimated, 15 boarding houses 3 farmers’ unions 43 ice manufacturer that sells to largest stockholder 8 oil and gasoline, peddler or merchant 25-26 merchant who discounts notes not private banker 36 merchant, local representative taking orders for suits. ... 48 merchant, purchases no local stock 11 peddler, steamboat captain who sells barrels and ice 54 lodging furnished to travelers 3 storage tanks 7 warehouse, storage tanks 7 Local Board of Review, can call for disclosures 34 time within which assessment may be increased or de- creased 63 information that can be required of building association. . 67 Lumber, how assessed 39 M. Market value, of stock held 56 Merchants, automobile dealers 53 beginner in business, purchases, how estimated 15 not considered private bankers who renew notes 36 sale of oil and gasoline 25-26 sending orders out of State 48 Merchant’s license, purchases, no local stock kept 11 drug store that sells soda water, etc 65 tax omitted, penalty of 5% to be imposed 71 Digest of Opinions. 9 Milk, proceeds from sale of, taxed as capital 61 Money, gift of, taxed as income 27 loaned by attorneys for clients, Local Board of Review can call for disclosure 34 remainder in after life estate not taxable to administrator . 68 Money in bank, as checking account 9 held by guardian, how assessed 57 Money deposited with trustees, capital 49 Municipal Bonds, taxation of 30 N. National Banks, not subject to income tax 35 Notes, taxed in hands of holder on February 1st 62 O . Oil Company, peddler or merchant 25 Omitted Property, bonds of defunct corporation 18 Omitted Taxes, estate closed by administrator or executor 66 right of appeal, time allowed 20 right of county to 14 stock, holding corporation 56 Omitted merchant’s license tax, penalty of 5% to be imposed. . . .71 Omitted real estate 55 P. Partnership, income tax, returns 2 Peddlers, ice and barrels 54 oil and gasoline 25-26 Penalty, of 5% to be imposed on omitted merchant’s license tax. . 71 Personal liability of Administrator, who does not retain fund out of estate to pay taxes 70 Physician, drugs in possession of 32 Presumption of payment, capitation taxes 10 Principal Office, situs of for taxation of corporation 37-40 10 The State Tax Board. corporation, declaration conclusive 17 Private entertainment, house of, license 3 Private Banker, merchant not such 36 Producer, agricultural productions in hands of, how taxed 61 Purchaser, agricultural productions in hands of, how taxed 61 Purchases, beginner in business 15 R. Raw materials, owned by foreign corporation, capital 47 Real estate, income from sale of 60 omitted from books 55 shrinkage in value, no deduction from income 44 Remainder, in fund after life estate not taxed to administrator. . 68 Residence, intent to change, tax domicile ' 33 S. Salaries, judiciary, liability for income tax 13 Shrinkage in Value, real estate, not deducted from income 44 Soda Water, etc., sold by drug store, how taxed 65 Silk, capital of corporation manufacturing 47 Situs for taxation, corporation, income tax 37 corporation, capital, etc 40 State and National Banks, not subject to income tax 35 Stock, foreign corporation, income tax..... 6 market value thereof 56 of foreign corporations 5 owned by estate, ancillary executor 59 Stockholder, buys ice and resells, license 8 Storage Tanks, license for 7 T. Timber, when classified as capital 39-46 Time, within which the Local Board of Review may increase or decrease assessment 63 Digest of Opinions. II Tobacco, assessed as capital 16 Town Bonds, taxation of 30 Trustee, who holds money as guaranty 49 U. Unions, farmers local co-operative 43 United States Bonds, gift of not taxable as income 31 V. Veterans, capitation taxes of 52 W. Warehouse, license for storage tanks 7 Will, farm stocked with cattle under, intangible property 42 t DIGEST OF OPINIONS 1. Income tax — Exemptions to Corporations — Deductions. Does the new income tax law approved March 22, 1916, pro- vide any exemptions for corporations such as are provided for individuals ? Held: No exemptions are allowed corporations such as are allowed in- dividuals, for instance income up to $1,200, the exemption to hus- band and wife, and for each unmarried or legally adopted child. In arriving at net income both corporations and individuals are allowed the deductions found on page 23, Virginia Tax Laws. 2 . Income tax — Firms and Partnerships — Returns. Should firms and co-partnerships make the same returns of income as provided for corporations? Held: Firms and partnerships as entities are not required to make returns of income, but the individual members of firms and part- nerships are required to make returns of income. 3 . License Tax — Furnishing lodging to travelers occasionally. A and B living in different sections of the country in which there are no hotels, and occasionally drummers or traveling men are forced to spend the night or to take a meal, say five or six times during the year. Should A and B be required to take out a license for running a house of private entertainment? Held: If A and B charge compensation for furnishing lodging and diet to travelers or sojourners, they should be required to take out 4-8 The State Tax Board. a license, even though the furnishing of lodging or diet be occa- sional and not regular. (Secs. 93, 94 and 95, Virginia Tax Laws.) 4. License Tax — Summer Boarding house — One who keeps boarders occasionally. Under what sections is a person who keeps a summer boarding house taxed? Held: Under sections 93, 94 and 95 of Virginia Tax Laws only quasi- public houses are taxed, where boarders are habitually kept and transients received, and that are held out as places of that kind. One who only keeps boarders occasionally, and who does not re- ceive transients is not taxed. 5. Taxation of Stock in hands of resident of Virginia — West Virginia corporation doing business in Virginia. A resident of Virginia is the holder of stock in a West Virginia corporation, which pays no franchise tax in Virginia, but as that corporation does a part of its business in Virginia, it pays to the State of Virginia a tax on its capital used in such business. Is the resident of Virginia liable for taxation on the stock in said West Virginia corporation? Held: A resident of Virginia who holds stock in West Virginia cor- poration is liable for taxation on same under Schedule “C”, sec. 8, sub-sec. 5, Virginia Tax Laws. 6. Income tax — resident of Virginia — stock — West Virginia corpora- tion — Doing business in Virginia. A resident of Virginia is the holder of stock in a West Virginia corporation, which pays no franchise tax in Virginia, but as that Digest of Opinions. 4-8 corporation does a part of its business in Virginia, it pays to the State of Virginia a tax on its capital used in such business. Are his dividends from such stock to be returned as a part of his in- come subject to taxation in Virginia? Held: The dividends from such stock are taxable as income, and are not within the deductions in the income tax law. This opinioon is based on law of 1916, but the law has been the same since 1903. 7. Warehouse License— Storage Tanks of Paper Mills — Liquid Stored for Benefit of Purchasers. A paper mill has built some storage tanks in which it proposes to store some of the liquid materials made at the plant. The idea is that it will sell some of this material and store it for the benefit of the purchaser, issuing to him a storage receipt as evidence of the purchaser’s title. The question arises as to whether a general warehouse license is required, and, if so, how the amount to be paid for such a license is to be computed. Held: This company is subject to a license tax of $10.00 for every lot or yard containing one or more storage tanks, if the compensa- tion to the owner is $50.00 or more per annum, under sections 131 and 132 of the Tax Bill. 8 . License — Manufacturer of Ice that sells all product to largest Stockholder who resells. A manufacturer of ice sells all of its products to one man, w r ho is the largest stockholder in the manufacturing company, who in turn sells the ice from wagons. Is a license required of this manu- facturer ? Held: This manufacturer is subject to the same license as if it sold ice to any one from its wagons, because a corporation and 9-13 The State Tax Board. its members are separate legal entities, and it makes no difference if the buyer is the largest stockholder in the corporation. 9. Money in Bank — Checking Account — Taxable as capital or money. Is money in bank used as a checking account taxable? Held: Money on deposit with a bank other than money used or em- ployed in any trade or business not otherwise taxed, is taxable by the State as money. If money is used by a manufacturer, or in any other business subject under the laws of the State of Virginia to a tax on capital, it is taxable as capital. 10 . Capitation tax — Presumption of payment — not returned delinquent or marked paid. A county treasurer finds that a man has paid his capitation taxes for 1913 and 1915, but that he is neither returned delinquent for 1914 or marked paid on the 1914 voting list. Question is as to whether the treasurer should make any presumption as to whether or not the man has paid his capitation taxes, in making out the voting list. Held: The list made by a treasurer is required to be verified by his oath. Before taking oath to a list upon the facts which are given above, more detailed information should be gained from the tax- payer if possible. It would be violative of the treasurer’s oath to make any presumption one way or the other. 11 . Merchant’s License — purchases — No stock of goods kept in local house. All goods of a company for a certain territory pass through local city house, but no stock of goods is kept on hand to fill orders Digest of Opinions. 9-13 in local store. When orders are taken the goods are in New York, and the manager of the local store orders goods from New York to anticipate the receipt of orders from agents in this territory. In other words, there is a constantly changing stock of goods in the local store sent in response to orders from this territory, but this constantly changing stock of goods is carefully not sent out to any orders taken while the goods are in the local house. Are these goods taxable? Held: These goods are taxable, and the Commissioner of the Revenue should request the company to report the value of all goods shipped into the local house for distribution in the territory, and if the company refuses to give such a report, the Commissioner of the Revenue should assess them upon the best information possible., 12 . Income tax— Virginia Corporation — Earnings of branch out of State. Does the income tax law, passed by the Legislature in 1916, require a Virginia Corporation, having an establishment in Vir- ginia and a branch establishment out of the State, to pay an in- come tax upon the earnings of the business done by the establish- ment out of Virginia? Held: The law does not exempt from taxation the income derived from the branch outside of Virginia. 13. Income tax— Salaries judiciary— derived from State. Is the income derived by the judiciary of a city from the State on account of salaries, taxable under the income tax law ? Held: These salaries are subject to taxation under the income tax law. 14-18 The State Tax Board. 14. Omitted taxes — county taxes prior to 1912. In 1915 the Commissioner of the Revenue for a certain county assessed a party with omitted taxes, both State and local, for the years 1910, 1911, 1912, 1913 and 1914. These taxes have not been paid and the party is willing to pay said taxes, but claims that the county taxes for the years 1912, 1913 and 1914 are all that can be required under the amendment to section 508 of the Code, found in Virginia Tax Laws, 1916, page 158. The assessment was made under the old law, that is prior to the General Assembly of 1916. Is this assessment affected by the amendment, and has the county a right to the taxes assessed against this property for the years 1910 and 1911? Held: The express terms of the law of 1916 prevent the collection of county taxes for years prior to 1912, whether assessed or not. 15. Purchases of Merchants — how estimated — beginning business. How shall a Commissioner estimate the purchases of merchants * who began business in the middle of the year 1915? In this case a Commissioner fixed the tax on purchases for six months, the mer- chant only having purchased goods for six months of the year 1915. Held: An estimate should be made of the goods, wares and merchan- dise which would be offered for sale during the year. This estimate can be arrived at by taking the amount of goods bought to com- mence with, together with all purchases up to the time when the assessment of the merchant’s license tax is made. 16. Capital— Tobacco on hand in this State. Is tobacco which a tobacco company has on hand in this State for purposes of manufacture to be treated as tangible personal Digest of Opinions. 14-18 property under Schedule “B”, or should it be returned as capital under Schedule “C”? Held: This tobcaco should be returned as capital. 17. Capital of Corporation — where listed — declaration of principal office in certificate of incorporation of domestic corporation conclusive. Where should the capital of a corporation be listed for taxa- tion? Held: The capital of a corporation should be listed for taxation where its principal office is located. The declaration in the certificate of incorporation of the principal office of a domestic corporation is conclusive as to this. 18. Omitted Tax on bonds — Defunct corporation — to whom payable. About thirty years ago a telephone company was formed which operated for about twenty-five years. In 1910 it sold all of its property to another company, a part of the consideration con- sisting of bonds issued by the latter company. About three years ago the original company became a defunct corporation. Sometime in 1914 or 1915 the bonds were paid, but the State did not realize any tax on these bonds. Question is as to whether or not the bonds are assessable for omitted taxes, and if so, in whose name? Held: These bonds are assessable to the person by whom they are held on the first day of February prior to the time the corporation went out of existence. 19-25 The State Tax Board . 19 . Judgments — report of examiners of records. Should judgments be reported for taxation by Examiners of Records? Held: They should be reported. 20 . Omitted taxes — report local board receives — failure to appear — may go into court — time allowed for appeal. May a taxpayer, who after having been reported to a local board of review for omitted taxes, and after having been notified, fails to appear before the local board of review, go into court and show that the taxes are not properly assessable against him? Held: The taxpayer may go into court and show that the taxes are not properly assessable against him. The taxpayer has one y$ar in which to apply to the court for the correction of an erroneous as- sessment of a license tax, and two years in which to apply for the correction of an erroneous assessment of a property tax. 21 . Capital — Fishing corporations — Surplus — Carried over; how taxed. Is the surplus carried over by a fishing corporation from one year to another, and not distributed to its stockholders before Feb- ruary 1st, taxable on that date as a part of its capital? Held: Such surplus is taxable as a part of the capital. 22 . Income tax — Exemptions — Deductions. Are exemptions allowed on income to a corporation as in the case of individuals? Digest of Opinions. 19-25 Held: A corporation is subject to a tax upon its income just as an individual is, but there are no exemptions in the case of a corpora- tion as in the case of an individual. 23 . Income tax — Corporation chartered in Virginia doing all its busi- ness in another State. Is a corporation chartered in Virginia and doing all of its busi- ness of every kind in another State subject to an income tax? Held: Such a corporation is not subject to an income tax. 24 . Income tax — corporations doing business in another State — hold meetings in Virginia. A corporation chartered in Virginia does all of its business in another State, but for convenience because the officers of the corpo- ration live here, it keeps an office in this State to which reports of this foreign business are made and where its accounts are kept and audited. Is the income of this corporation taxable? Held: The mere holding of stockholders meetings in this State by such corporations as required by law is not doing business in this State, and their income is not taxable. 25 . License Tax — Peddlers — Oil Company — Sale only to merchants. An oil company maintains in a city tanks from which it delivers oil and gasoline to its regular customers, who are merchants only. It is the custom of the company to have its wagons make a regular call upon these merchants and sell any quantity of gasoline or oil needed. Is such a company guilty of peddling when there was no previous order? 26-30 The State Tax Board . Held: Such a company is not taxable as a peddler if it sells only to retail stores. 26 . License Tax — Oil Company — Order Form. An oil company has a tank in a certain city from which it fills its wagons used in delivering oil and gasoline to its customers; the company uses an order form which its customers fill out and which reads as follows: “B Oil Company (Incorporated in C) Please deliver to me gallons of oil and gallons of gasoline, and have your wagon call on its regular trips, delivering as much oil and gasoline as I may need at the time of the call. This is to be a standing order until you are notified to the contrary. After the form is filled out by the customer the wagon stops on regular trips and fills the order, which the company holds as a con- tinuous order. Held: If the oil company, when it fills previous orders for gasoline or oil, at the same time delivers more gasoline or oil than was origi- nally ordered, it cannot be held to be guilty of peddling without a license. But if the oil company sells from its wagons gasoline or oil to any automobile owner or other persons in need thereof with- out previous orders therefor, this would constitute the company a peddler. If the company has no definite place of business and does not deliver standing orders, it is taxable as a peddler, but if it has ‘a tank or warehouse which can be taken as a definite place of busi- ness and delivers only on standing orders and does not deliver to irregular takers upon the street, it is a merchant and should be re- quired to take out a license as such. Digest of Opinions. 26-30 27 . Income tax — Gift of money. Under our income tax law would a taxpayer be required tu include as income sums of money which were given to him during the year? Held: He would be required to include sums of money given him as income. 28 . Capital — First class under gross assets — beginning business. To what does the first enumerated class under gross assets in the definition of capital as contained in detail list “2” of the per- sonal interrogatory, “The money realized from shares of stock or money adventured in business” apply? Held: This class only applies to corporations or persons beginning business. 29 . Foreign corporations — Tax on Capital used in Virginia — situs. Are foreign corporations with plants in a certain county in Virginia required to pay a tax upon their capital used or employed in that county? Held: They are required to pay a tax upon capital used in that county. 30 . Bonds of a town — Liability for Taxation. Bonds of a certain town are held by A. Are these bonds ex- empt from taxation? 31-86 The State Tax Board. Held: The locality may exempt these bonds from local taxation, but our State Constitution requires such property to be taxed for State purposes and the law has also specifically provided that bonds of coanties, cities and towns are subject to State taxation. 31. Income tax — United States Bonds — Gift of. Should United States bonds be returned as part of income? Held: A gift of United States bonds is not taxable as income. 32. Drugs in possession of physicians — taxability — under what section. Is the value of drugs in the possession of a practicing physician taxable under Schedule “B”, paragraph 22? Held: The value of such drugs is taxable under Schedule “B”, para- graph 22. 33. Tax Domicile Intent to change residence. A party who has resided in the State of Virginia for a good many years inherited a few years ago a considerable estate from her father who lived in the State of New York. She still main- tains her home, which she owns, in the State of Virginia. The Examiner of Records called upon her for a report of her intangibles, and was referred by her to her attorney in New York, who advised that soon after her father’s death she decided to change her resi- dence to the State of New York, as her property was in New York, and that since that time she had been paying taxes in the State of New York. Question is, whether such a decision on her part is sufficient under the circumstances to relieve her from the payment of taxes tQ the State of Virginia. Digest of Opinions. 31-36 Held: The party cannot acquire a residence in New York by bald in- tent to reside there, but in order to establish a tax domicile there she must lose her domicile in Virginia. To establish a domicile two things are needed: an actual residence, habitation or home must be acquired, and the party acquiring it must intend to remain there permanently or for an indefinite period of time. In this cas% the party seems to have the intention but never has acquired a habitation or home in New York. 34. Local Boards of Review — Information to be obtained from attorneys can call for disclosures — money loaned for clients. Can Local Boards of Review call on attorneys loaning money for their clients to disclose all information in regard thereto, so that said property may be made subject to taxation? Held: Local Boards of Review can call for such information. 35. Income tax — State and National Banks. Are State and national banks subject to an income tax? Held: State and national banks are not subject to an income tax. 36. License — Private Banker— renewal of notes by merchant does not constitute. A merchant accepts from his customers promissory notes of amounts varying from $10 to $50 payable from thirty to sixty days. Upon these notes he makes a charge of fifty cents when any of them are renewed, or refuses to renew them unless this fee is charged, claiming that the bank charges him this amount. It does not appear whether these notes are taken in payment of merchandise or not, 37-41 The State Tax Board. but for the purpose of this opinion it is assumed that they are so taken. The notes are endorsed for collection to the credit of the merchant at his bank. Should he be required to pay a license tax as a private banker? Held: No license as a private banker should be required in this case. 37. Income Tax — Corporations — Principal Office — Situs of for taxation. Where should corporations report their income for taxation? Held: A corporation chartered under the laws of this State should report all of its income for taxation to the Commissioner of the Revenue in whose district its principal office under its articles of incorporation, is located; a corporation chartered under the laws of another State should return all of its income taxable in this State to the Commissioner of the Revenue in whose district its principal office is located by the certificate of authority to do busi- ness in this State issued by the State Corporation Commission. 38. Foreign Corporation Property — hides — used by Virginia Corpora- tion — taxability. Hides are owned by a company outside of the State but are used by a corporation in Virginia to be tanned by the latter. To whom should the Hides be taxed? Held: Our tax system requires that taxes on property be paid by the owner, and if the owner be a foreign corporation, such tax should be assessed to it and paid by it. 39. Capital— Cut Timber used in Business — real estate or capital — lumber — relief. A in 1915, sells to B a lot of standing timber located upon the Digest of Opinions. 37-41 land of A. The timber is assessed to B and the land to A. B in 1916, pays taxes on the standing timber and during 1916 cuts the timber and stores the said timber after cutting it for use in his milling business. Held: If it be true that this timber on February 1, 1917, still remains for the use of B in his business, he should return the timber as a part of his capital. B is given a remedy for relief from assessment of this timber as real estate, by applying to the local board of re- view of the county and asking that the assessment be stricken from the land books. Such relief may be granted at any time prior to February 1, 1917. 40. Corporation — Situs for taxation — principal office — provisions of certificate. A manufacturing corporation has its principal office in a city and conducts its business in a county. Should it be taxed where its principal office is located or in the counay where it conducts its business ? Held: A corporation is to be taxed on its intangibles, including capi- tal, at its principal place of business and the provision in its cer- tificate of incorporation as to its principal place of business is con- clusive on this question. 41. Capital — Deductions — Money borrowed to pay bill. A merchant on January 29, 1916, owed to a seller $5,000 for goods, wares and merchandise bought by him of the seller, and in order to save discount he borrowed the money to pay the bill, giving their note. Question is as to whether in assessing the local capital of merchants he should be allowed to deduct the amount of this note? 42-46 The State Tax Board . Held: In assessing the local capital of this merchant the amount of the note should not be deducted. 42. Intangible property — Cattle— Held by executor under will. A, testator who died during 1915, provided by will that his farm should not be partitioned for a certain number of years, and provided that his son, who is executor, should keep the farm stocked with grazing cattle during those years, and divide the profits be- tween the widow and another son. The Examiner of Records charged personal property as intangible property this year against the executor. The question is whether the cattle should be charged as intangible or tangible property next year? Held: These cattle should be assessed as intangible personal property under the clause of the will providing that the farm should be kept stocked. 43. License Tax — Farmers’ Union — Buys materials for members. A local farmers’ branch of a chartered organization of Vir-‘ ginia, buys fertilizers, grass seed and farm implements for the use of its individual members. Is it liable for the merchants’ license tax? Held: This union is not liable for the merchants’ license tax, as it does not sell aforesaid materials to the individual members, but acts as distributor, and does not buy or sell anything in connection with distribution. A county has no right to require payment of a merchant’s license tax in this case,*as the State has not right to do so. 44 . Deduction from income — shrinkage in value— real estate. A loss is sustained by A in the sale of certain real estate in Digest of Opinions. 42-46 1915, which had been purchased in 1900, by property depreciating in value. Is there any deduction allowed? Held: No deduction is allowed on account of shrinkage in value of the original property or capital in reporting income. 45. Capital — Excess of deductions over assests. The amount of borrowed money and other deductions are in excess of the net assets of a business. Held: Under definition of capital as contained in the tax laws, “net assets” is ordinarily the taxable capital, but when the amount of borrowed money and other deductions are in excess of the net assets, then such excess shall also be taxed as capital. 46. Felled timber and lumber — how assessed — land or capital. Lumber has been sawed by the owner of land and is in his possession. The owner operates a sawmill. How is this lumber assessed? Held: As long as the timber remains in the possession of the owner in unchanged form, that is timber felled by the owner of land without any manufacturing work being done thereon, when the owner pays taxes on the land he also pays taxes on the timber, but as soon as this timber has been put through a sawmill and the form changed to lumber of any kind, and if it remains on hand until the first of February, it is taxable as part of the inventory of stock on hand, and should be returned as capital by the owner, although he is also the owner of land. The law contemplates that the owner of timber lands may procure a correction of his assessment after removal of the timber. 47-51 The State Tax Board. 47 . Foreign corporation — Capital — Retains title to raw materials used by local corporation — By whom reported. A corporation operating in a city owns machinery and a plant and employs workmen who are engaged in the manufacture of raw silk into silk thread. Another corporation furnishes to this corpo- ration all the raw silk, retaining title thereto during the process of manufacture. Held: The former corporation should report all of its captal for taxa- tion, and such capital should embrace all accounts receivable, bills receivable, machinery and tools not taxed as real estate, money on hand and on deposit; but stock on hand is not subject to taxation. All raw materials and stock on hand should be assessed and taxed as tangible personal property in the name of the non-resident corpo- ration owning the same. 48 . Merchant’s license tax on purchases — local representatives taking orders for suits. Merchants in a city allow representatives of clothing houses to take orders for suits of clothes, assisting the representatives by taking measurements and in other ways. The suits are afterwards sent to the merchants who deliver them to the customers and then the merchants receive the money and send it to the clothing houses receiving therefor a commission. The question is whether this method of doing business is one that would require a license, or in the case of merchants doing other mercantile business, whether they money received from such business would have to be reported as purchases ? 1 Held: The inerchant is not required to take out a license for business of this kind, and therefore does not have to report the purchase price of these goods in making up his purchases as required by law. Digest of Opinions. 47-51 49. Capital — held by trustee as guaranty — to whom taxed. A corporation engaged in buying and selling real estate be- comes a guarantor in a certain matter, and in order to provide funds which may be necessary to make good the guarantee takes money which is a part of its capital and places the same in the hands of a trustee to be held by the said trustee to meet such lia- bility of the corporation as may arise by reason of the guarantee which was made. This transaction is not a matter of public record. The corporation reports to N the Examiner of Records the amount involved as money on deposit, and not as capital. Held: This money should be taxed as capital to the corporation. 50. Taxability Capital — Building Contractor who pays license tax. Certain capital is employed in their business by building con- tractors, who also pay a specific license tax based on the volume of work done by them. Held: This capital is taxable as such, although the contractors pay the specific license tax based on their volume of business. 51. Capital — Method of computation — Deductions in excess of gross assets. What is the method of arriving at the taxable capital of one whose deductions are in excess of his gross assets? Held: Assume man has gross assets of $100,000 and is entitled to de- ductions amounting to $110,000. The excess of deductions over net assets amounts to $110,000. Assuming the party is still actively engaged in business ; has not gone into the hands of a receiver, 52-55 The State Tax Board. made assignment or been adjudged a bankrupt, his taxable capital is $110,000, the value of the net assets in this case being nothing. 52. Capitation taxes — liability of war veterans. Is a person liable for capitation taxes who during the war be- tween the States served in the army or navy of the United States or the Confederate States, or any State of the United States or of the Confederate States? Held: Veterans of the Civil War who are pensioned by this State for military services are exempt from the payment of poll taxes; vete- rans not pensioned are liable for poll taxes, and all veterans of the late war between the States may vote, other requisites being present, whether their poll taxes have been paid or not. 53. Merchant’s license — Automobile dealers — basis of purchases. What is the liability of automobile dealers for taxation as mer- chants on the basis of purchases? Held: Each dealer in automobiles must pay a license fee of $50.00 re- quired under section 3-b, and the payment of a license fee re- quired under section 3-a will not relieve him of this liability. A dealer in automobiles or other motor vehicles who keeps a place for the sale of such motor vehicles and who owns the machines he sells is liable for the merchant’s license tax, based on the purchases made by him, under section 45 of the Tax Bill. 54. License — Peddler — Steamboat captain v/ho sells barrels and ice. The captain of a steamboat that makes daily stops at wharves in a county is engaged in the business of selling empty barrels and ice to the customers who meet him at the wharf where his boat stops Digest of Opinions. 52-55 and where the entire business is transacted. This party is engaged in the business of selling the aforesaid barrels and ice on his own account and will sell barrels or ice, or both, to any person desiring to purchase the same. Should he be required to pay a license as a peddler? Held: The captain should be considered a peddler and required to take out the proper license. 55 . Omitted taxes — Real estate — correction of assessment. A certain corporation is charged on the land book of a county with a tract of land described thereon as containing 20,000 acres, and which it purchased in 1910. Within the generally recognized boundaries of this tract of land are a number of smaller tracts aggregating 5,000 acres, each lying within its own definite bound- aries and each claimed by some individual who pays taxes on it and to whom it is charged on the land book. In June, 1916, a commitiee of citizens of the county called the attention of the local board of review to the alleged fact that the tract of land charged to the corporation actually contained considerably more than 20,000 acres, and requested the board to make such a correction of the assess- ment of this property as would compel the corporation to pay a proper tax on its holdings. Accordingly the local board of review employed the county surveyor of the county to ascertain the acre- age of the land in question, which he now reports to be 35,000 acres, inclusive of the smaller tracts owned by individuals as mentioned above. What is the proper procedure on these facts, and liability of the corporation for back taxes on so much of the said land as has heretofore been omitted from the land book, or as does not now appear thereon? Held: The commissioner of the revenue has the power under section 479 of the Code of Virginia to make the proper entry and assess- ment. This case can be handled by use of this Code section and section “M” of the act creating the Local Board of Review. The 56-58 The State Tax Board. corporation should not have a greater quantity of land charged to it than it actually owns. If the entire tract contains 35,000 acres, of which 5,000 acres is claimed by individuals already pay- ing taxes thereon, the total amount charged to the corporation should be 30,000 acres. If there is a conflict of title between the corporation and the individuals as to the 5,000 acres of land, the matter is to be settled 'by the circuit court ; and when the matter is finally adjudicated the proper entry can be made on the land book. The present owner of this real estate is liable for taxation on it only from the time of its purchase. See Virginia Constitution, section 174. 56. Omitted taxes — Stock— Holding Corporation — How assessed. A corporation, whose purpose as set forth in its charter cer- tificate, is “to purchase or otherwise acquire, sell dispose of and deal in real estate and personal property of all kinds” reports to the Commissioner of the Revenue for the year 1910 certain shares of stock of corporations all of whose capital is not taxed by this State. The corporation making this return reports the value of this stock at $48,277.66, and the Commissioner of the Revenue as- sesses it at that figure. This valuation is known by the corporation to be too low and the Commissioner of the Revenue has no means of determining the true valuation or actual market value, which is, as a basis of the valuation given to the Commissioner of the Revenue. In 1916 the Examiner of Records, acting under section 508 of the Code of Virginia, discovers that the actual market value of said shares of stock was $59,912.66, and makes an assessment of $11,635.00 as omitted property, this figure being the difference be- tween the valuation reported to the Commissioner of the Revenue as of February 1, 1910, and the actual market value as of that date. Is the assessment so made by the Examiner of Records legal? Held: 56-58 Digest of Opinions . The Examiner of Records can assess for omitted taxes the dif- ference between the amount returned and the fair market value of the stock. 57 . Money in bank — held by guardian — how assessed. Mrs. A qualified as guardian of her infant child in February, 1915, and a few weeks after qualification received $2,500 on an insurance policy for the benefit of her infant child. This money was put in bank. In 1915 this money was assessed as money in bank. In 1916 it was reported as bonds. A correction was asked by the attorneys for Mrs. A, claiming that $1,643 of the amount assessed was money in bank. The question is, whether this should be assessed as bonds, or as money in bank?' Held: The money in the hands of this fiduciary should be reported as money in bank and not as bonds. 58 . Income — Building and Loan Association — To whom assessed. A domestic building and loan association, organized on the mutual basis, and which pays a minimum license tax to the State, has its principal office at A. Approximately one-third of the stock of this corporation is owned by residents of the city of A, one-third by citizens of Virginia living outside of the city of A, and the re- maining one-third by persons residing without the State of Vir- ginia. The income of the association for the past year was $18,000, of which $15,000 was distributed among the stockholders in the form of dividends and $3,000 credited to surplus. The question is as to the liability of a building and loan association, organized on the mutual basis, for an income tax under the laws of Virginia. Held: This corporation is liable for State taxes on income, but per- sons who own stock in this corporation are not liable for State taxes on income derived from same. 59-62 The State Tax Board. 59. Ancilliary Executor — Extent of liability for taxes. A, a resident of a county in New York, died in 1898, leaving surviving him a widow and two children. Under his will, which was duly admitted to probate in New York, his entire estate was left to his wife for her lifetime, with remainder to his two children. His wife was appointed executrix and qualified in New York. At the time of his death, A owned stock in various non-Virginia cor- porations, the aggregate value of which stock was $12,980. He also owned real estate in a Virginia county valued at $4,000. Neither A nor his wife, or either of their children has ever been a resident of the State of Virginia, nor has any of the said stock been within the State of Virginia. In 1914 the real estate mentioned was sold, the purchase price being $4,000. By ancillary proceedings the wife of A qualified as executrix under the said will in the Virginia county and took into her hands the $4,000 which was the purchase price of the land mentioned. For some reason not understood she stated an account with the Commissioner of Accounts of the Virginia county, purporting to show her receipts and disbursements as such executrix, but in this account no mention is made of the sum of $4,000 received from the sale of the real estate, while a complete inventory of the stock aggregating $12,980 and the income arising therefrom was included in the account. The question is as to lia- bility of the executrix for taxes assessed on the stock valued at $12,980. Held: The ancillary executrix who qualified in Virginia in this case is only liable for taxation on the property that came into her hands as ancilliary executrix and is not liable for taxation in Virginia on the stock valued at $12,980. 60 . Increase in value of land — how assessed. A taxpayer buys a tract of land in 1912 for $5,000 and sells it during the year 1916 for $7,000. Eliminating all questions with 59-62 Digest of Opinions. regard to rent, interest, etc., what is the profit which is subject to taxation under section 10, clause 3 of Schedule “D”, in regard to income taxes? Held: The difference between $5,000 at which the property was bought in 1912 and $7,000 at which it was sold in 1916, should not be taxed as income, but increase in capital or principal money. 61 . Agricultural production in hands of a purchaser — dairy farm — pro- ceeds how taxed. Under Schedule “B”, section 6, sub-section 15, is there any tax on the value of milk, where a man has and maintains a herd of cattle for the purpose of producing and selling milk and supposing that the land on which the herd is maintained is not cultivated for them, beyond the grass it produces, and the feed supplied to them from other sources is not raised on the land but bought; in other words, it is generally known as a dairy farm. Question is as to whether or not the milk is an agricultural produc- tion within the meaning of sub-section 15, referred to above. Held: In order to be taxed under this section the property must be in the hands of a purchaser. 62 . Note secured by deed of trust — assignment — to whom taxed. B executes a note for $1,000 dated August 1, 1915, payable to A and secured by a deed of trust on real estate; the amount rep- resents the purchase price of this real estate purchased by B from A. On August 1, 1915, A assigns this note to C, and C is the holder thereof on February 1, 1916. The deed of trust securing this note is duly admitted to record and is of record on February 1, 1916, though there is no entry to show who is the holder thereof. The Examiner of Records, relying on the record of this deed of trust, reports this note for assessment against A and the assessment is 63-67 The State Tax Board. duly made by the Commissioner of Revenue. How should the proper tax on this note be assessed and collected? Held: From the statement of facts it is clear that C and not A was the holder of the note on February 1, 1916. This is sufficient to make it clear that the taxes on this note should be paid by C and not by A; also that the assessment as against A is erroneous, and A is entitled to relief. Further, as a matter of law, no correct as- sessment of taxes on this note has been made. C should have re- ported it for taxation in 1916. Not having done so he is liable for taxes on it still as omitted property, and it should be reported and assessed against him in 1917. This applies provided C is not a bank; if C is a bank no assessment should have been made, and none is proper now. 63. Local Board of Review — increase or decrease in assessment — time limit. What is meant by the expression ‘ ‘ within 60 days after the books have been completed by the Commissioner of the Revenue, etc., the Local Board of Review may increase or decrease assess- ment, etc.”? Held: The terms of this statute set a definite time limit of 60 days within which the Local Board of Review may be requested to in- crease or decrease assessments. The “may” simply puts it in their discretion whether to act or not within that time. 64. Fiduciaries — funds in the hands of — distribution made prior to February 1st. Is the statute taxing funds in the hands of fiduciaries as of February 1st following the qualification, constitutional, when dis- tribution is made prior to the following February 1st? A dies June Digest of Opinions. 63-67 1, 1917, B qualifies June 30, 1917, and settles his accounts and makes distribution before February 1, 1918. Held: The question of constitutionality is not one that can be passed on by the State Tax Board, but the statute must be followed by the State’s tax officers, and must be tested out in the courts when raised. The terms of the law make it plain that the fiduciary in the above case should retain the amount of taxes out of the estate. 65 . Drug store that sells soda water, etc. — merchant’s license. Should the amount invested in soda water, cigars, etc., sold by a drug store be taxed as capital, or should the merchant’s license be imposed on entire purchases? Held: The merchant’s license should be imposed on entire purchsaes, in accordance with the terms of section 45, page 62, Tax Laws. 66 . Omitted taxes — estate closed by administrator or executor. A certain estate is held by the administrator or executor. In- ventory shows party or parties had not listed with commissioner or examiner as much as inventory shows. How to proceed ? Held: An assessment for omitted property can be made on the above statement of facts, under section 508 of the Code. The omitted taxes should be assessed to the executor or administrator. 67 . Information that can be required by examiners or boards of review Building association that borrows money. A building association has borrowed large sums from various individuals and gives its notes to the lenders. Can the building association be required to furnish a list of those persons who have loaned it money, to the examiner? 68-70 The State Tax Board. Held: The Examiner of Records does not have authority to require this information to be furnished, but the Local Board of Review is given authority to require information of this character under sub-section “f” of section 7 of the act creating the State Tax Board and the Local Boards of Review. 68 . Taxability of remainder in fund in hands of fiduciary — that is left as life estate to one with remainder to others — Does not come under control of fiduciary. A died intestate and owning a piece of real estate in the city of Roanoke. Surviving him were a widow, Mrs. A. and two daugh- ters, B. and C. Subsequently these two heirs executed a joint deed conveying to their mother a life estate in the land mentioned. In September, 1916, all parties interested joined in a deed conveying this property. The net proceeds of this sale amounting to $16,934 were deposited in bank in Roanoke with the understanding that the interest accruing on this deposit should be paid annually to Mrs. A during her life. Mrs. A died in January, 1917, and the money was withdrawn from the bank and divided between the heirs. B and C qualified as administratrices of the estate of their mother. The question is as to the liability of this fund for taxation in the hands of B and C in their fiduciary capacity, the estate to be settled within twelve months from the date of their qualification. Held: This fund of $16,934 became the joint property of the heirs of A immediately upon the death of Mrs. A, and in no way properly came under the control of B or C in their fiduciary capacity. This fund therefore is not assessable for taxes in their hands. Digest of Opinions. 68-70 69 . Bank refuses to furnish information to examiner of record* — how proceeded against. A bank located in a certain circuit refuses to furnish the Ex- aminer of Records with the information required under section 3326-a of the Code, described on page 152 of the Tax Laws as sub- section 4, which reads as follows : * * * “Any bank, banking-house, corporation or person holding money or evidences of debt or personal property of any kind under the control of any court or to the credit of any cause pending in said court or to the credit of any receiver, commissioner, or fiduci- ary shall upon application furnish the examiner of records with a statement or list thereof, and any bank, banking-house, corporation, or person refusing such a statement or list or failing to furnish the same shall be liable to a fine of not less than ten dollars nor more than twenty-five dollars for each day’s failure to fur- nish the same after five days’ notice to do so. * * * What procedure is to be followed to collect the fine provided for therein? Held: Criminal proceedings can be taken under section 9 of an act approved March 17, 1916, found on page 1040 of the fourth volume of Pollard’s Code of Virginia. The procedure will be governed by section 712 of the Code of Virginia, found on page 349 of the first volume of Pollard’s Code. 70 . Administrator’s personal liability for taxes when he neglects to retain same out of estate — how proceeded against. A dies on March 1, 1916; B qualifies as administrator of the personal estate of the decedent on April 1, 1916; B then proceeds 71-72 The State Tax Board. to distribute the entire estate and make ex parte settlement before the Commissioner of Accounts of the county in which he is quali- fied, which account of receipts and disbursements, such as is re- quired by the statute, is confirmed (by the expiration of the statu- tory period) on October 1, 1916. B has failed to retain any funds out of this estate with which to pay the taxes due the Common- wealth thereon. The question now is as to B’s personal liability for such taxes. Held: B, the administrator, should be held personally liable for this tax. The Attorney for the Commonwealth should proceed against the administrator by a suit in equity for the recovery of the taxes that should have been paid. 71. Omitted merchant’s license tax — penalty of 5% to be imposed. Should a penalty of 5% be imposed on omitted merchant’s license taxes assessed under section 508 of the Code, as amended, the license being that of an ordinary merchant referred to in sec- tion 46 of the Tax Bill ? Held: A penalty of 5% should be imposed under section 603 of the Code in the case of an omitted merchant’s license tax, the same being a State tax. 72. Capital — deposit of grain received by a flour manufacturer taxable as such when he mingles it with his own. A large manufacturer of flour conducts the greater portion of his business in this way: He receives his customers’ grain as a deposit, and enters into a contract with said customer to deliver to him the same amount of grain, or the product of the amount of grain, at any time the customer may call for it, receiving as his compensation a certain toll. He mingles this wheat thus on deposit with the wheat he purchases outright, and grinds it, and sells the Digest of Opinions. 71-72 product. Is the grain thus used, or the products therefrom, a part of his capital? In other words, he handles the grain just as a banker handles the deposits of his customer, using the wheat to manufacture flour which he sells, but always retaining enough of grain and flour to meet the demands of his depositors. Held: The contract made by this manufacturer with persons deliver- ing grain to him is a sale and not a bailment, and such grain (or the products thereof) taxable as capital under the definition of capital found on page 18 of the Virginia Tax Laws.