Evening star., 1939-02-24
Business Tax
Test 10 Go 10
High StateCourt
Arlington County
Case May Have
For-Reoching Effect

TON county, va, WHICH may nave
far-reaching effect on merchants
paying a so-called business priv
ilege tax, will be carried to the
Virginia Supreme Court of Ap-
peals by the Commonwealth, it
was learned from county court Off
cials today.
Judge Walter T. Mccarthy has
entered an order requiring the
Commonwealth of Virginia to re-
fund to the Blue Ridge Coal Co
of South Washington, Arlington
County, 1895 81 of $44457 which the
company paid for 1887 license tax
The refund is based on the proper
ton of business the coal compan,
reputedly transacted in Washing
ton, although maintaining its place
of business in Virginia.
It is believed by court observer
that this is the first Virginia lega
case in which the status of the
District of Columbia as Stat
has been recognized. This SAM
question was ruled on in Washing
ton last year when Justice Jenning;
Bailey of District Court heard
District Grocery Stores suit
Assessments Protested.
While Judge Mccarthy has issued
no written ruling on the coal COM
pany suit, attorneys believe that from
the petition filed by the company
and the evidence presented. the
court has inferentially recognized the
status of the District as a State-for
tax purposes, at least.
In the Virginia suit, styled IL.
Dewey Hood. trading as Blue Ridge
Coal Co. VS.. Commonwealth of Vir-
ginia," the petitioner alleges assess
ments placed against him on a basis
of sales made in the District are er-
roneous and illegal 1t Is charged
that such an assessment constitutes
tax on interstate commerce which
in turn constitutes burden in vio-
lation of the commerce clause Of the
United States Constitution.
Through Attorneys j. Foster Hag-
an of Arlington, and J. Randall Can
ton. jr., of Alexandria, Mr.. Hood filed
the suit in Arlington-the jurisdic-
ton in which the merchants license
tax was imposed.
The attorneys also attempted to
obtain refund on income taxes
which Mr. Hood paid the State
Judge Mccarthy denied this latter
request. Mr.. Hood claimed he had
paid the State s724.34 for 1886 in
come taxes on the business trans
acted at South Washington, al
though only 7.8 per cent of the in
come was derived from business done
in Virginia. A similar claim was
made on the 1885 income tax OF
$757 46, of which it is alleged only
70 per cent was due to Virginia
transaction.
The petitioners contended that
for tax purposes the District is a
State, while the Commonwealth de-
MED this. The Commonwealth con-
ceded it could not impose a busi-
ness privilege tax on business done
in the State of Maryland by the
coal company.
The difficulty in defining the Dis
trict as State in the regulation of
interstate business arose from the
clause giving the Federal Govern
ment power to regulate commerce
with foreign nations, among the
several States and with the Indian
tribes" No mention is made of the
District in this connection, attor-
neys pointed out.
Lack of Authority.
The Interpretation placed on
Judge McCarthy's order by the pc
titioner's attorneys is that the State
can collect the income tax which
is based on net income, but the
State cannot impose a blanket gross
receipts tax on interstate type enter
prises because of lack of authority
to regulate business done in other
States.
Representing the Commonwealth
in the suit are w. w. Martin, as
sistant to the attorney general of
Virginia; Joseph L. Kelly of the
attorney generals Office and Com
monwealth's Attorney Lawrence w.
Douglas of Arlington. The Circuit
Court has given the Commonwealth
80 days in which to appeal it's ruling.
Meanwhile. Commissioner of Rev.
enue Harry K. Green of Arlington
said that If the State loses its appeal
on the business tax a stronger in
ventory tax likely would be adopted
at the next session of the Legisla-
$,yp
are now made to pay at the rate of
13 cents for each 500 volume of
business in lieu of another existing
capital tax on inventory of rs cents
per 500 valuation.
He limited that if merchants sue
ceed in defeating the present busi-
ness tax for their licenses, 1t prob
ably will prove more expensive in
the long run for the merchants.
Mrs. Lucille McForren