Chap. 13.—An ACT to amend and re-enact section 188 of the Tax Code of
Virginia, as heretofore amended, in relation to the taxation of merchants.

[S B 13]
Approved February 12, 1936

1. Be it enacted by the General Assembly of Virginia, That section
one hundred and eighty-eight of the Tax Code of Virginia, as hereto-
fore amended, be amended and re-enacted so as to read as follows:

Section 188. Merchants—Wholesale.—Every person, firm and
corporation engaged in the business of a wholesale merchant shall pay
a license tax for the privilege of doing business in this State to be
measured by the amount of purchases made by him or it during the
next preceding year, and all goods, wares and merchandise manufac-
tured by such wholesale merchant and sold or offered for sale, in this
State, as merchandise, shall be considered as purchases within the
meaning of this section; provided, that this section shall not be con-
strued as applying to manufacturers taxed on capital by this State,
who offer for sale at the place of manufacture, goods, wares and
merchandise manufactured by them.

The term “wholesale merchant,’ as used in this section, means
every merchant who sells to other persons for resale only, or who sells
to institutional, commercial or industrial users.

For every license to a person, firm or corporation engaged in the
business of a wholesale merchant, the amount to be paid shall be as
follows:

If the amount of purchases throughout the then next preceding
calendar year did not exceed ten thousand dollars, the amount shall
be fifty dollars; when such purchases exceeded ten thousand dollars,
the amount shall be fifty dollars on the first ten thousand dollars, and
thirteen cents on every one hundred dollars upon all in excess of ten
thousand dollars.

To ascertain the amount of purchases it shall be the duty of such
wholesale merchant, on the first day of January of each year, or within
ten days thereafter, to make report in writing, under oath, to the com-
missioner of the revenue for the county or city in which is located his
place of business, showing purchases as herein defined, during the
next preceding calendar year. The forms of the reports required by
this section shall be prepared by the department of taxation, and fur-
nished to each commissioner of the revenue, and by him distributed
among all wholesale merchants within his county or city.

For the purpose of ascertaining the tax to be paid by a wholesale
merchant beginning business, his purchases shall be considered to be the
amount of goods, wares and merchandise bought to commence business
with, including goods, wares and merchandise manufactured by him
to be offered for sale at the place at which he conducts his business as a
wholesale merchant, provided such place is not the place of manufacture,
also including an estimate of purchases which the wholesale merchant
will make between the date of the issuance of his license and the thirty-
first of December following, and including an estimate of the amount of
goods, wares and merchandise manufactured by him to be offered for sale
at the place at which he conducts his business as a wholesale merchant,
provided such place is not the place of manufacture. [Every under-
estimate under this paragraph and the next succeeding paragraph shall
be subject to correction by the department of taxation, whose duty it
shall be to assess such wholesale merchant with such additional taxes
as may be found to be due after the close of the license year on the
basis of the true purchases.

The license tax of every wholesale merchant who was licensed at
a definite place of business for only a part of the next preceding license
year shall be computed for the then current license year on the basis of
an estimate of purchases which the wholesale merchant will make
throughout the then current license year, including an estimate of the
amount of goods, wares and merchandise manufactured by him to be
offered for sale at the place at which he conducts his business as a
wholesale merchant, provided such place is not the place of manufac-
ture.

If, after the close of the year for which the license is issued, the
wholesale merchant should elect not to renew it, but desires the priv-
ilege to sell whatever goods, wares and merchandise he may have on
hand at the time, it may be lawful for him to do so upon the payment
of a license tax upon said goods, wares and merchandise to be re-
garded as purchases for the purpose of computing the license tax.
A wholesale merchant’s license, the tax on which would be two
hundred dollars or more were it issued for the period of one year, may
be issued quarterly, as provided in section one hundred and thirty-five ;
but inasmuch as every wholesale merchant’s license tax is measured by
the purchases, no question of proration can arise.

ach wholesale merchant shall keep and preserve his invoices and
a record of all purchases, and from whom made, which record shall be
open to inspection and examination by the tax officers of the State,
and the report of purchases made by the wholesale merchant shall be
taken from that record; and he or his agents shall make oath to the
correctness of the report that the same is in accordance with said rec-
ord, and that the record has been accurately kept. It shall be the
duty of the commissioner of the revenue to examine the record of
purchases required to be kept by the wholesale merchant and to verify
the wholesale merchant’s report of purchases by that record.

Every wholesale merchant who does not keep the record herein
provided for shall be assessed with and pay a penalty of one hundred
dollars, in addition to such tax as may be ascertained as hereinafter
provided. Every wholesale merchant who does not keep the record
herein provided for shall be reported by the commissioner of the
revenue to the department of taxation and the department of taxation,
upon receiving such report, or in any case when it comes to the knowl-
edge of the department of taxation in any way that a wholesale merchant
has not kept, or is not keeping and preserving, the record herein pro-
vided for, the department of taxation shall ascertain the correct pur-
chases of such wholesale merchant and assess such wholesale merchant
with the State license tax provided by law upon the purchases so
ascertained, in addition to the penalty of one hundred dollars, here-
inbefore provided for. Such penalty shall in every such case be added
to the license tax, and shall become a part thereof, and shall be col-
lected in the same manner as taxes are collected; provided, however,
that any wholesale merchant who shall continue to violate the law
requiring such report to be kept, after receiving written notice from
the commissioner of the revenue or the department of taxation, shall be
subject to a further penalty of one hundred dollars for each month
such violation of the law shall continue after the giving of such notice,
which penalty shall be assessed and collected in the same manner as
taxes are assessed and collected.

The word “purchases,” as used in this section shall be construed to
include all goods, wares and merchandise received for sale at each
definite place of business of every wholesale merchant. The word
“purchases,” as so used shall not be construed to exclude any goods,
wares and merchandise otherwise coming within the meaning of the
said word. Every wholesale merchant shall keep at his each definite
place of business in this State the invoices and records required by
this section to be kept in this State; and the failure of any such whole-
sale merchant to keep such invoices and records at his each definite
place of business in this State shall constitute a violation of the pro-
visions of this section in relation to the keeping of such invoices and
records.
A manufacturer engaged in business in this State may, without a
wholesale merchant’s license, sell at the place of manufacture, the
goods, wares and merchandise manufactured by him. If a manufac-
turer desires to sell, at a definite place or store, other than the place of
manufacture, to other persons for resale, or to institutional, commer-
cial or industrial users, the goods, wares and merchandise manufac-
tured by him, then such manufacturer must take out a wholesale mer-
chant’s license, though this definite place or store be located in the
same county, city or town in which his place of manufacture is estab-
lished. When a manufacturer establishes a place or store for the sale
of his goods, other than at his place of manufacture, to other per-
sons for resale, or to institutional, commercial or industrial users, the
amount of the State license tax is to be measured not only by the
amount of purchases made by such manufacturer from others, but
also by the goods, wares and merchandise manufactured by him and
sent from the place of manufacture to his store for sale; and he is
required to report not only the amount of goods purchased by him
from others and offered for sale, but also the amount of goods man-
ufactured by him either within or without this State and offered for
sale by him at his store or definite place in this State other than the
place of manufacture. The cost of manufacture shall be taken as the
purchase price of the goods, wares and merchandise in the case of a
manufacturer who is also a wholesale merchant within the meaning of
the law.

A manufacturer taxable on capital by the State may, except as in
this section provided, sell and deliver at the same time to licensed
dealers or retailers, but not to consumers, anywhere in the State, with-
out the payment of any license tax of any kind for such privilege to
the State, or to any city, town or county.

A wholesale merchant, who has been duly licensed by the State, and
duly licensed by the city or town, if his place of business be in a city
or town, or in lieu of a license tax to the city or town, has been taxed
by the city or town on the capital employed in business, may, other
than at a definite place of business, sell and deliver at the same time
to licensed dealers or retailers, but not to consumers, anywhere in the
State, without the payment of any additional license tax of any kind
for such privilege to the State, unless otherwise provided by law.

For every distributing house or place in this State (other than the
house or place of manufacture) operated by any person, firm or cor-
poration engaged in the business of a merchant in this State, for the
purpose of distributing goods, wares and merchandise among his or
its retail stores, a separate license shall be required, and the goods,
wares and merchandise distributed through such distributing house or
place shall be regarded as purchases for the purpose of measuring the
license tax, which tax shall be the same as the license tax imposed
hereby on a wholesale merchant.

Merchants—Retail—Every person, firm and corporation engaged
in the business of a retail merchant shall pay a license tax for the
privilege of doing business in this State to be measured by the amount
of sales made by him or it during the next preceding year, and all
goods, wares and merchandise manufactured by such merchant and
sold in this State, as merchandise, shall be considered as sales within
the meaning of this section; provided, that this section shall not be
construed as applying to manufacturers taxed on capital by this State,
who sell at the place of manufacture, goods, wares and merchandise
manufactured by them.

The term “retail merchant,” as used in this section, means every
merchant who sells at retail only and not for resale.

For every license to a person, firm or corporation engaged in the
business of a retail merchant, the amount to be paid shall be as follows:

If the amount of sales throughout the then next preceding calendar
year did not exceed one thousand dollars, the amount shall be ten
dollars; when such sales exceeded one thousand dollars and did not
exceed two thousand dollars, the amount shall be twenty dollars;
when such sales exceeded two thousand dollars the amount shall be
twenty dollars on the first two thousand dollars, and thirteen cents on
every one hundred dollars upon all in excess of two thousand dollars.

To ascertain the amount of sales it shall be the duty of such retail
merchant on the first day of January of each year, or within ten days
thereafter, to make report in writing, under oath, to the commissioner
of the revenue for the county or city in which is located his place of
business, showing sales as herein defined, during the next preceding
calendar year. The forms of the reports required by this section shall
be prepared by the department of taxation, and furnished to each com-
missioner of the revenue, and by him distributed among all retail
merchants within his county or city.

For the purpose of ascertaining the tax to be paid by a retail mer-
chant beginning business, he shall estimate the sales which he will
make between the date of the issuance of his license and the thirty-
first of December following, including an estimate of the sales of
goods, wares and merchandise manufactured by him to be offered for
sale at the place at which he conducts his business as a retail merchant,
provided such place is not the place of manufacture. Every under-
estimate under this paragraph and the second paragraph following
shall be subject to correction by the department of taxation, whose
duty it shall be to assess such retail merchant with such additional
taxes as may be found to be due after the close of the license year on
the basis of the true sales.

If the freight paid by a retail merchant on any article sold by him
shall exceed twenty-five per centum of the price paid by him for the
article itself, the amount of such freight in excess of twenty-five per
centum of the said purchase price of the articles shall be eliminated
from consideration in ascertaining the amount of sales of such mer-
chant and the tax to be paid thereon.

The license tax of every retail merchant who was licensed at a
definite place of business for only a part of the next preceding license
vear shall be computed for the then current license year on the basis of
an estimate of sales which the retail merchant will make throughout
the then current license year, including an estimate of the sales of
goods, wares and merchandise manufactured by him to be offered for
sale at the place at which he conducts his business as a retail merchant,
provided such place is not the place of manufacture.

If, after the close of the year for which the license is issued, the
retail merchant should elect not to renew it, but desires the privilege
to sell whatever goods, wares and merchandise he may have on hand
at the time, it may be lawful for him to do so upon the payment of a
license tax measured by the retail sales value of such goods, wares and
merchandise, which value shall be estimated by the commissioner of
the revenue issuing the license, subject to review and revision by the
department of taxation.

A retail merchants’ license, the tax on which would be fifty dollars
or more were it issued for the period of one year, may be issued quar-
terly, as provided in section one hundred and thirty-five; but inasmuch
as every retail merchant’s license tax is measured by sales, no question
of proration can arise.

Each retail merchant shall keep and preserve his invoices and a
record of all purchases, and from whom made, and each retail mer-
chant shall keep and preserve an accurate record of all sales made by
him, which records shall be open to inspection and examination by the
tax officers of the State, and the report of sales made by the retail
merchant shall be taken from that record; and he or his agents shall
make oath to the correctness of the report that the same is in accord-
ance with said record, and that the record has been accurately kept.
It shall be the duty of the commissioner of the revenue to examine
the record of sales required to be kept by the merchant and to verify
the merchant’s report of sales by that record.

Every retail merchant who does not keep the records herein pro-
vided for shall be assessed with and pay a penalty of twenty-five dol-
lars, in addition to such tax as may be ascertained as hereinafter pro-
vided. Every retail merchant who does not keep the records herein
provided for shall be reported by the commissioner of the revenue to
the department of taxation and the department of taxation, upon
receiving such report, or in any case when it comes to the knowledge
of the department of taxation in any way that a retail merchant has
not kept or is not keeping and preserving the records herein provided
for, the department of taxation shall estimate the probable sales of
such retail merchant to the best of its ability and assess such retail
merchant with the State license tax provided by law upon the sales so
estimated, in addition to the penalty of twenty-five dollars hereinbe-
fore provided for. Such penalty shall in every such case be added to
the license tax, and shall become a part thereof, and shall be collected
in the same manner as taxes are collected; provided, however, that
any retail merchant who shall continue to violate the law requiring
such records to be kept, after receiving written notice from the com-
missioner of the revenue or the department of taxation, shall be sub-
ject to a further penalty of twenty-five dollars for each month such
violation of the law shall continue after the giving of such notice,
which penalty shall be assessed and collected in the same manner as
taxes are assessed and collected.

Every retail merchant shall keep at his each definite place of busi-
ness in this State the invoices and records of sales required by this
section to be kept in this State; and the failure of any such retail mer-
chant to keep such invoices and record of sales at his each definite
place of business in this State shall constitute a violation of the pro-
visions of this section, in relation to the keeping of such invoices and
records of sales.

A manufacturer engaged in business in this State may, without a
retail merchant’s license, sell at the place of manufacture, the goods,
wares and merchandise manufactured by him. If a manufacturer de-
sires to sell, at a definite place or store, other than the place of man-
ufacture, at retail only and not for resale, the goods, wares and mer-
chandise manufactured by him, then such manufacturer must take out
a retail merchant’s license, though this definite place or store be located
in the same county, city or town in which his place of manufacture is
established. When a manufacturer establishes a place or store for the
sale of his goods, other than at his place of manufacture, at retail only
and not for resale the amount of the State license tax is to be measured
not only by the amount of sales made by such manufacturer of goods,
wares and merchandise purchased from others, but also by the goods,
wares and merchandise manufactured by him and sent from the place
of manufacture to his store for sale and sold, and he is required to
report not only the amount of sales of goods purchased by him from
others and sold, but also the amount of sales of goods manufactured
by him either within or without this State and offered for sale by him
and sold at his store or definite place in this State other than the place
of manufacture.

Dealers in coal, wood or ice paying a retail merchant’s license tax
under this section may peddle the same from vehicles without paying
additional tax; provided that dealers in coal and wood in cities of
forty thousand inhabitants or more, who peddle the same from vehicles
shall pay an additional tax of fifty dollars for each vehicle thus used.

General provisions.—Any person, firm or corporation who or which
is both a wholesale merchant and a retail merchant, as defined in this
section, is hereby required to obtain both classes of licenses; provided,
however that any retail merchant who desires to do a wholesale busi-
ness also may elect to do such wholesale business under his retailer’s
license by paying license taxes under this section as a retailer on both
his retail business and his wholesale business; but this proviso shall
not apply to any retail merchant the greater part of whose business at
the licensed place during the next preceding year was wholesale, nor
to a beginner the greater part of whose business it is estimated will
be wholesale for the period covered by the license.

The sums imposed under and by virtue of this section shall be in
lieu of all taxes for State purposes on the capital actually employed by
any licensed merchants in his mercantile business, except the registra-
tion fee and franchise tax, and except that such merchant shall not be
exempt from the payment of county, district, and road or other levies
on the amount of capital on hand on the first day of January of each
year and may be required to pay the usual city, county, district, and
road or other levies thereon, notwithstanding this section.
Merchant’s capital, which is by law segregated for local taxation
exclusively, is hereby defined for purposes of local taxation, as fol-
lows: Inventory of stock on hand; the excess of bills and accounts
receivable over bills and accounts payable; money on hand and on
deposit, and all other taxable personal property of any kind whatso-
ever, except tangible personal property not offered for sale as mer-
chandise, which tangible personal property shall be reported and
assessed as such,

Goods, wares and merchandise not belonging to a merchant which
are offered for sale by the merchant or by another person at the mer-
chant’s duly licensed place of business shall require such merchant to
take out the license of a commission merchant.

No additional license, State or local, shall be required of any per-
son, firm or corporation licensed as a merchant in this State for en-
gaging in the business of selling goods, wares or merchandise by sam-
ple, where delivery is not made at the time of the sale and where the
goods, wares or merchandise subsequently delivered are not the sam-
ples.

This section, as hereby amended, shall be in force on and after
January first, nineteen hundred and thirty-seven.