Reply to: Revenue Section Telephone: (919) 716-6550 Fax: (919) 715-3550
November 9, 2001
Michael R. Isenburg Fairley, Jess, Isenberg & Green 109 East Moore Street Post Office Box 11028 Southport, North Carolina 28461
Re: Advisory Opinion; Taxation by the City of Southport of ferries owned by Bald Head Island Transportation, Inc. which operate both from locations at Southport and at Bald Head Island; N.C.G.S. § 105-304
Dear Mr. Isenburg:
Your recent letter raises two questions; this response in this letter is limited to the tax question. From your letter, supplemented by information from the Property Tax Division of the Department of Revenue, we understand that Bald Head Island Transportation, Inc. (“Transportation, Inc.”) operates a ferry service between terminals at Bald Head Island and Southport. The company’s principal place of business is in the village of Bald Head, and it currently pays personal property taxes to the taxing authority on Bald Head. The company sells tickets on the ferry at both the Bald Head Island and Southport facilities. The ferries are docked each night in Southport because their first run in the morning originates from Southport. The City of Southport wishes to tax the company on the values of the ferries.
The place for listing tangible personal property is governed by N.C.G.S. §105-304. The general rule provided under subsection (c ) is that tangible personal property is taxable at the owner’s residence. This codifies the common law rule of “mobilia sequuntur personam” (movables follow the person). CJS Taxation § 156; City of Winston v. City of Salem, 131 N.C. 404, 406, 42
S.E. 889, 892 (1902) (holding that the situs of property owned by a corporation was its principal place of business and that the Legislature may make regulations regarding the situs of personal property). Where the owner is not an individual, the residence shall be the place at which its principal place of business is located. § 105-304(c)(2), 304(f)(2). Transportation, Inc. lists Bald Head as its principal place of business in its filings with the Secretary of State. We accept this declaration as accurate.
The general rule is modified by subsection 304 (f)(2) of the statute which provides that “[t]angible personal property situated at or commonly used in connection with a business premises . . . shall be taxable at the place at which the business premises is situated.” The term “business premises” is defined to include, but is not limited to, a dockyard, office, place for the
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sale of property, etc. §105-304(b)(2). “Situated” is defined as “more or less permanently located.” §105-304(b)(1).
Reported decisions in North Carolina provide no guidance with regard to floating property. However, City of Newport News and Chesapeake Ferry Company v. Commonwealth of Virginia, 165 Va. 635, 183 S.E. 514 (1936) addresses a similar set of facts. There the City of Newport News wished to tax a ferry service which serviced its boats at a facility in Newport News but also had a dock and its principal place of business in Norfolk. Boats could be docked at either place and, with the exception of a barge which remained in Newport News, moved back and forth between the two locations.
Like North Carolina, Virginia had a statute determining the taxable situs for personal property generally. However, it differed in that situs was to be determined, not by the owner’s domicile, but by where the property was on the first day of the year. Virginia also had a statute requiring that floating property be reported the first day of May, identifying the specific city, town and school district in Virginia it was located on the previous January 1 for taxing purposes. Notably, the statutes did not provide for determining the taxable situs for floating property. Similarly, North Carolina’s statutes do not squarely address the situs of floating property.
The Supreme Court of Virginia stated that the common law rule was that floating property was taxed at the owner’s domicile. It held that this was still true in Virginia, unless the taxpayer could establish that the property had a permanent situs elsewhere. The Court found that
the physical location of property contemplated in the Virginia statutes means that property must have acquired a degree of permanency or to have become a part of the common mass of property in the taxing district, and that this is practically impossible in the case of floating property, such as is here involved.
Id. at 642, 183 S.E. 2d 514 at 516 (1936). The Court pointed out that ferries, by their nature, were supposed to be out in the waters, not tied up in a particular port. The Court further observed that
Despite the emphasis placed by the applicant upon the fact that certain of the vessels, when not in use, are tied up for a longer time at Newport News than at Norfolk, there is nothing in the evidence to show that they are placed at Newport News for permanency, so as to become a part of the permanent mass of the property of Newport News, but on the contrary, the evidence clearly shows that they were so placed to be used when ready, or when the demands of traffic should require. At such time as they were tied up at either Norfolk or Newport News, they were performing no service for which they were intended, and such tie-up was only incidental and in contemplation of law, only temporary. The time of such tie-up does not change the fact that it was temporary, and does not suffice to establish a Michael R. Isenburg
November 9, 2001
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permanent location.
Id. at 165 Va. 635, 648-649, 183 S.E. 514, 519. Finally, the court held that the situs of these ferries was Norfolk where the company had its principal place of business.
The North Carolina Supreme Court reached a similar result regarding rolling stock in In re Freight Carriers, Inc., 263 N.C. 345, 139 S.E.2d 633 (1965). The Court held that the situs of the corporate taxpayer’s tractors and trailers was Forsyth County, the corporation’s domicile. In reaching its holding, the Court noted that the corporation’s actual use of such property at terminals in other counties from fifty minutes to twenty four hours did not make them permanently situated in such counties. Further, the tractors and trailers were not permanently assigned to a specific terminal.
The statutory framework of § 105-304 is consistent with the holding in Newport News. North Carolina law determines the situs of property generally as being the principal place of business. Like Virginia’s statute, N.C.G.S. § 105-304 contemplates a permanent physical presence, as evidenced by the language of the subsection and the definition of “situated.” The situs is specified as the business premises in the case where the property is used at a place other than the owner’s residence. In this case the taxpayer has two premises but only one principal place of business. North Carolina has not enacted legislation determining the situs of floating property. Therefore, it would follow that the property should be taxed at the taxpayer’s principal place of business on Bald Head Island.
We hope the foregoing is helpful.
Sincerely,
Reginald L. Watkins Senior Deputy Attorney General
Alexandra M. Hightower
Assistant Attorney General RLW/AMH/sg:doc.#5679