The Richmond Virginian. (Richmond, Va.) 1910-1920, 1913-09-15
Taxation in Virginia
The Corporation Tax 1.-The Earliest Taxation
of CorpOraiIonS In Iirrinia
ny EDGAR ACKNOWLEDGEMENTS


The term Corporation" is capable of being
much misunderstood, and there is ample evil
dence in public discussions that it is used within
widely different meanings. BY some corpora
tiors are used to refer solely to what diff.
ferent'ated in the minds of others as trusts"
BY ether Corporations" mean only railroad
corporations. BY sill others corporations are
used in reference to public service corporations
There doubtless other ways In which the
term Is used with varying degrees of inclusive
ness
While corporation may mean anything to
which that form of permission 10 exist known
as II charter is given, whether 1t be fishing
club or college fraternity, a family estate in
corporated to dodge property taxation. or a uni
versity, q manufacturing enterprise or a COM
r1or carrier it Is legitimate for this discussion
! believe, first to limit the term Corporation"
TO aggrcgations of individuals to whom is
granted charter for doing busness-that is
fo. performing some kind Of service supply
}9g some kind kinds of commodities for
which remuneration is demanded and given. We
'I'us may consider only those corporations
whose purpose 1t is to be who productive
agencies. But there should be another lirnita-
Hor. terms IL corporations exist for the per-
formacce of some service Of a general pub
Tic nature they. are called public service cor
oorations Instances Of these street rail-
ways, steam railways, ferries. lighting companies,
ct. If they exist for the performance of pr-
vatc service, service not generally used in the
way by individuals alike, for the sup
plying of tangible commodities, they may be
dcnom mated private corporations. Instances Of
these Incorporated manufacturing enter
prises grocery stores and other Incorporated
mercantile businesses, and the like The pc
cular form of taxation known the corpora
ton tax is more commonly applied to the for
ner of these two classes--the public service cor
poraticn. 1t is the taxation of the public SER
vice corporation In Virginia with which the
writer intends to treat from historical stand
PORT in this and few succeeding articles.
Since the corporation is modern creation,
:he history of It's taxation does not GO back very
far THE corporation tax it, is obvious is
outgrowth of the license tax, or the tax on bust
ness. since the license tax is the payment of
sum il return for the privilege of doing bust
ness. When the corporate form. of business APP
peared the license tax applied equally to this
new taxpayer, individual whose existence was
solely legal one 1t had to pay a license tax.
as Of the corporations do to this day FUR
thormore as corporation enterprise because
more general and stronger, II had to pay prop
erty tax because this legal individual owned
property. Furthermore. owing its very existence
the vote Of the government, In most instances
It is called upon to pay tax for the privilege
Of existence, the franchise tax. Not all corpora
TORS OF public service character pay taxes for
their existence Ia sort of combined corporate,
poll ard income tax), on their property and
for the right to engage in business but this Is
the theory Of the corporation tax in Virginia
1t has been a theory which Is the result Of q
develoI ment, however; it wa not invented IN It's
present form or practiced in its present methods
What was the reason for this evolution of the
corporation tax theory? What steps in its his
tory indicate the character and scope of It's de-
The earliest taxation of enterprise the public
service nature of which cannot be disputed, is
in the taxation of railroads tolls and ferries and
al internal Improvement companies operating
toll gates on highways, or owning ana operating
canals. etc. in the act of 1S42-fS43 ny this
act one and one-half per cent of all dividends
Of profit was the rate of the tax. This method
and this rate remained until after the adoption
/ Of the constitution of 1851.
There two points about this earliest form
Of corporation tax that deserve attention
The first Is it's operation The receipts from
the tax were insignificant In ISAAC the tax
On dividends totaled but s5,55l; in 1S45-4b,
IS. 0b9, In 1846-47. s24,1TS; in 1880 $16llS.
There were two reasons for this The numoer
of successful public service corporations in
which the State was not important and even
a chief stockholders were very few and the net
profits small. How correctly profits were
reported for taxation, moreover. Is matter OF
|conjecturc. Secondly there were many eNemp-
1 lions In practically all Of the "joint stock" in
ternal Improvement companies the state itself
had large share of ownership in fact there Is
ample evidence to indicate that In most cases
the paid in capital Of these Incorporated COM
I;,anir- was contributed chiefly by the state gov
eminent, In the very few eases where these
i,ompanie were profitable enough 10 pay divi-
dends. nothing in the form Of taxes came IN
because Of their exemption from taxation After
1872 nearly all charters Incorporating rail
roads and canal companies contained provisions
tnxempt!ng them from taxation II was IN a
period when every effort of the state was turned
toward the announcement of turnpiks, canals,
bridges and railroads, and not oniY was every
advantage in the nature Of tax exemption given
them. but millions of dollars of the public
moneys rs we'll as of private investment were
subscribed to further their construction and
Eequipme mt.
4 The second point of interest is In the method
of the corporation tax prior 10 the constitution
of 1854. 1t was tax on earnlngs-~not on prop
erty rs DIR. ID, S. Freeman in his report TO the
tax commission points out. Apparently a cor
Iooration tax on earnings, in the light of much
of the present discussion of corporation taxation
At that time seems extraordinary but seen in the
| tight of the graduated license tax which we nave
already reviewed and of the percentage license
tax which has appeared occasionally, 1t may be
regarded as having precedents Ii not indeed
proeerit ors AS early 1914. auctions, mills
4 coal nits tanyards and FORCES and furnaces were
taxed q certain percentum of their rentals. al
though this was an extraordinary tax we have
seen In 1880 ordinaries began to be taxed q
definite sum and certain per cent of their
rental. and In 1871 boarding houses were ike
wise taxed. In unmistakahle sense this renta
ltax was tax earnings, since the amount OF
he rental value dependent upon the
/ nrontatleness of the business. The rental value