Title: Hampton Nissan v. City of Hampton
Citation: N/A
Docket Number: 950732
State: Virginia
Issuer: Virginia Supreme Court
Date: January 12, 1996

Present:  Carrico, C.J., Compton, Stephenson, Lacy, Hassell, 
 and Keenan, JJ., and Poff, Senior Justice 
 
HAMPTON NISSAN LIMITED PARTNERSHIP, ET AL. 
 
OPINION BY JUSTICE LEROY R. HASSELL, SR. 
v.   Record No. 950732         January 12, 1996 
 
CITY OF HAMPTON 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF HAMPTON 
 
Walter J. Ford, Judge 
 
 
In this appeal, we consider whether a city may collect, 
as license taxes, payments in excess of the rate permitted 
by law that a motor vehicle dealer had collected improperly 
from motor vehicle purchasers.   
 
The litigants have stipulated the relevant facts.  The 
City of Hampton is a municipal corporation.  Hampton Nissan 
Limited Partnership is a Virginia limited partnership which 
sells new and used motor vehicles at its dealership in 
Hampton.  Hampton Nissan of Virginia, Inc., a Virginia 
corporation, is the general partner of Hampton Nissan 
Limited Partnership.  Hampton Nissan Limited Partnership and 
Hampton Nissan of Virginia, Inc., collectively will be 
referred to as Hampton Nissan.   
 
Code § 58.1-3703 permits a governing body of a city to 
levy and provide for the assessment and collection of 
license taxes on businesses.  Code § 58.1-3706 establishes 
the maximum rate of taxation for license taxes and imposes 
certain limitations upon the tax rate.  The City Council of 
Hampton enacted ordinances that established the license tax 
at the maximum rate authorized by the General Assembly, 
twenty cents per $100 of gross sales.  The litigants have 
stipulated that Hampton Nissan has paid this amount. 
 
Hampton Nissan, however, improperly charged its 
customers an amount in excess of the imposed license tax 
rate.  Hampton's commissioner of revenue forwarded a letter 
to Hampton Nissan and requested that it remit to the City 
$47,199.70, the amount of the overpayments.  Subsequently, 
Hampton Nissan published a notice in a local newspaper and 
offered to refund the overpayments to its customers.  
Hampton Nissan refunded $2,020.65 to its customers and 
retained the balance of the overpayments.   
 
The City filed its motion for judgment against Hampton 
Nissan, seeking to collect the overpayments.  The City 
stated in its motion for judgment that "[a]ny judgment 
received by the City for the disputed amounts will be 
treated as a tax.  Any purchaser may apply for a refund with 
appropriate documentation within the applicable statute of 
limitations.  Monies will be refunded by the City to those 
purchasers at that time."   
 
The trial court held that Hampton Nissan collected the 
overpayments as license taxes and awarded summary judgment 
in favor of the City.  We awarded Hampton Nissan an appeal.  
 
Hampton Nissan argues that the City does not have the 
statutory authority to collect, under the guise of a tax, 
the overpayments that Hampton Nissan had improperly received 
from its customers.  Hampton Nissan asserts that the City 
may not collect a tax unless it has specific statutory 
authority to do so and that no such authority exists.   
 
The City, relying upon Code § 58.1-16 and certain 
provisions of the City's Code, contends that it has express 
authority to collect the overpayments as license taxes.  We 
disagree with the City.   
 
Code § 58.1-16 states: 
 
 
Any person responsible for collecting any tax 
administered by the Department [of Taxation] or 
the Division of Motor Vehicles who overcollects 
such tax and fails to account for and pay such 
overcollection to the appropriate state agency by 
the time his regular monthly or quarterly return 
is due shall be liable for the amount of such 
overcollection, and in addition a penalty of 
twenty-five percent of such overcollection.  The 
Commissioner administering such tax may waive such 
penalty for good cause. 
 
 
Contrary to the City's assertion, Code § 58.1-16 is 
simply not applicable here.  As the City's stipulations of 
fact demonstrate, the license tax, which is at issue in this 
case, is administered and imposed by the City, not the 
Department of Taxation or the Division of Motor Vehicles.  
The stipulations also indicate that the license tax is paid 
annually, not monthly or quarterly.  Additionally, Hampton 
Nissan is not a "person responsible for collecting any tax 
administered by the Department [of Taxation] or the Division 
of Motor Vehicles."  Therefore, Code § 58.1-16 does not 
confer a positive grant of taxing power upon the City to 
collect the excess tax payments.   
 
We also reject the City's argument that § 6.17 of the 
Hampton Code gives the City express authority to collect the 
overpayments as a tax.  Section 6.17 of the Code states: 
 
 
The city collector of taxes shall have any or 
all the powers which are now or which may be 
hereafter vested in any office of the state 
charged with the collection of state taxes and may 
collect the same in the same manner in which the 
state taxes are collected by any officer of this 
state.   
 
The plain language in this provision merely permits the 
City's collector of taxes to utilize any powers which are 
conferred upon state officers when the City's collector 
seeks to collect state taxes on behalf of the state.   
 
The City also relies upon § 18-5 of the Hampton Code 
which states: 
 
 
As to all questions in regard to the duty and 
conduct of officers of the city on collecting and 
enforcing the taxes imposed by this chapter and in 
regard to questions of construction, and for 
definitions of terms used in this chapter and the 
rules and regulations applicable to putting the 
same in operation, reference is hereby made to the 
laws of the state for the assessment, levy and 
collection of taxes for the current year, or to so 
much thereof as is applicable to this chapter and 
is not inconsistent with it and the general 
ordinances of the city.  For the conduct and 
guidance of the officers of the city and other 
parties affected by this chapter and for fixing 
their powers, rights, duties and obligations, the 
provisions of such laws, so far as applicable, are 
hereby adopted, without being specifically herein 
quoted. 
 
Relying upon this provision, the City says that "[t]he 
effect of the above . . . ordinance is that the City 
possesses powers for the enforcement and collection of taxes 
to the same extent as the state.  Significantly, this power 
or authority includes the power to seek overcollected taxes 
not paid over by a business to the state or local 
government."   
 
We disagree with the City.  We find no language in this 
provision which permits the City to collect the excess 
payments and treat such payments as a tax.  And, as we have 
stated: 
 
[P]roperty can only be taxed in the mode 
prescribed by law, and . . . the Constitution 
imposes upon the legislature the duty of passing 
such laws as are necessary to carry into effect 
its provisions relating to taxation, and unless it 
does so the tax cannot be collected; . . . taxes 
can only be assessed, levied and collected in the 
mode pointed out by express statutory enactment.  
Statutes imposing taxes are construed most 
strongly in favor of the taxpayer, and will not be 
extended by implication to the prejudice of the 
taxpayer beyond the clear import of the language 
used. 
 
 
 
Taxes are imposed by the State in the 
exercise of its sovereign power.  This power is 
exerted through the legislature, and an executive 
officer who seeks to enforce a tax must always be 
able to put his finger upon the statute which 
confers such authority.  Taxes can only be 
assessed, levied and collected in the manner 
prescribed by express statutory authority.  
 
Commonwealth v. P. Lorillard Co., Inc., 129 Va. 74, 81-82, 
105 S.E. 683, 685 (1921); see also Commonwealth v. General 
Electric Co., 236 Va. 54, 64, 372 S.E.2d 599, 605 (1988).   
 
Here, the City's efforts to collect the overpayments 
must fail because the City is unable to put its finger upon 
any statute which confers such authority.  Woodward v. 
Staunton, 161 Va. 671, 673, 171 S.E. 590, 591 (1933); accord 
Commonwealth v. Carter, 198 Va. 141, 147, 92 S.E.2d 369, 373 
(1956).  We also observe that "it is well established in 
Virginia that a municipal corporation, such as [a city], can 
only derive its taxing power through positive grants of 
authority from the General Assembly."  City of Winchester v. 
American Woodmark Corp., 250 Va. 451, 456, ___ S.E.2d ___, 
___ (1995); accord Whiting v. Town of West Point, 89 Va. 
741, 743, 17 S.E. 1, 2 (1893).   
 
The City also argues that even if it does not have 
express authority to collect the overpayments as a tax, then 
it has the implied powers to do so.  We disagree.  As 
discussed above, a city can derive its taxing power only 
through positive grants of authority from the General 
Assembly, and the City must be able to put its finger on the 
statute which confers upon the City the power to tax.  
Additionally, statutes 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."  City of Winchester, 
250 Va. at 456, ___ S.E.2d at ___ (quoting Commonwealth 
Natural Resources, Inc. v. Commonwealth, 219 Va. 529, 537, 
248 S.E.2d 791, 796 (1978)).  We decline the City's 
invitation to deviate from our well-established precedent.  
 
Accordingly, we will reverse the judgment of the trial 
court and enter a final judgment here in favor of Hampton 
Nissan. 
 
Reversed and final judgment.