Amherst County officials are considering changes to local taxes affecting businesses to take effect in 2021 as part of an effort to begin reducing the county’s heavy reliance on real estate taxes.
Under the proposed slate of changes, the county plans to eliminate the merchant’s capital tax, which is a local tax on a business owner’s capital, or inventory on hand as of Jan. 1; factor in depreciation of assets for the business equipment tax; and initiate a Business, Professional and Occupational License (BPOL) tax in all business types in the county.
“The proposed rates are expected to prevent some businesses from avoiding taxation and to allow all businesses to take advantage of depreciation of their assets,” a Nov. 25 news release from the county states. “The [Amherst County Board of Supervisors] wanted to particularly address the movement of inventory out of the county to avoid the Merchant’s Capital tax, put a more realistic depreciation in place for Business Equipment tax and include the gross receipts of all retail and wholesale businesses without overburdening small businesses that have high gross receipts but low margins.”
The planned adjustments are intended to make taxes more equitable across all business types, meaning some businesses will be paying more or a different type of tax than before, according to the county. The proposed rates are generally equal or below similar tax rates in Campbell County.
County Administrator Dean Rodgers said the goal is for the planned changes to become “revenue neutral” so the county doesn’t lose tax revenue. The current merchant’s capital tax on business’s inventory allows for car dealers to move vehicles off their lots so they won’t be taxed on Jan. 1, which Rodgers said is “kind of unfair” since not all businesses can do that.
By state law, no locality may impose a merchant’s capital tax if it also imposes a BPOL tax on retail merchants. The BPOL tax is levied on the gross receipts of a business, trade, profession or occupation and allows localities the option to impose it on some classifications of businesses but not others.
“Now we’re going to treat all businesses the same. They are all going to pay BPOL,” Rodgers said.
According to a document breaking down current revenue and anticipated revenue from the tax changes, the merchant’s capital tax generates nearly $291,000. The planned BPOL tax on retail, retail fuel and wholesale categories is projected to bring in $305,000 in tax revenue, according to the document.
The document has anticipated revenue yielding nearly $13,000 more than the current revenue, bumping $4.62 million to $4.63 million. Of that total, the machinery and tools, meals tax and lodging tax would remain unchanged and the business equipment tax would result in a slight decrease of about $1,600, according to the projected figures.
Rodgers emphasized the planned rates are designed to specifically not hurt “mom and pop” locally owned stores that profit off gasoline sales. The planned new tax of 8 cents per $100 net receipts on gas, diesel and kerosene, after state and federal taxes, is lower than Campbell County’s rate to ensure those local store owners can still have high gross sales based on fuel sales, according to Rodgers.
Amherst County is among localities in Virginia that have a machinery and tools tax that uses a constant assessment ratio regardless of the age of machinery, a practice Rodgers has said is unfriendly to businesses based on feedback it has received.
The county is working to adopt a sliding-scale system that takes into account depreciation of property and gives more relief to businesses. County officials have compared the new sliding-scale system as akin to a person paying less in taxes on their vehicle as it gets older.
Rodgers said the county is trying to move toward business tax and reduce its dependence on the real estate tax rate. With many pressing needs on the horizon, he has publicly said he plans to seek a real estate tax increase for the 2020-21 fiscal budget process, though a proposal has not yet been made.
The county’s most recent local real estate tax increase, a 5-cent hike per $100 of assessed value, took effect in 2016.
“What we need to be tapping into the success of our businesses. This revenue rises and falls with their sales,” Rodgers said of the proposed changes. “If the businesses do well, we do well. And that is less burdensome on businesses.”
The board has discussed the changes since the fall of 2018 but didn’t have time to put them into place by 2020, partly due to this being a heavy local election year, according to Rodgers.
The county will solicit public input on the proposal in coming months and Commissioner of the Revenue Jane Irby will conduct a survey to better understand how the proposed changes will affect business owners. A town hall meeting will be scheduled in 2020.
Supervisor David Pugh recently said it is important to make sure businesses are kept well aware of the plans and are not blindsided.
The county’s release said residents are encouraged to engage with Amherst County Board of Supervisors in coming months and share their concerns or questions. For more information email Joy Niehaus, the county’s public information officer, at firstname.lastname@example.org or (434) 946-9400.
Reach Justin Faulconer at (434) 385-5551.