Taxation: County can’t tax equipment located beyond its borders

Where the circuit court found that equipment owned by a logging company was not located in Franklin County on January 1 of three consecutive years, that equipment was not subject to Frankin County’s taxation.

Background                                                       

This case involves a dispute between Underwood Logging LLC and Frankin County. The parties dispute what years was the equipment of the logging company located in the county and subject to the county’s taxation, and at what rate should the county assess the equipment of the logging company.

Situs

A timber harvest report shows that Underwood started harvesting timber from a site in Pittsylvania County on Dec. 31, 2019, and notified the Virginia Department of Forestry of that activity on Jan. 2, 2020. The report amply supports the trial court’s finding that Underwood’s equipment was in Pittsylvania County on Jan. 1, 2020.

Furthermore, Underwood uses all of its forestry equipment when it is in the field on a job, and Underwood paid Pittsylvania County personal property taxes on its forestry equipment for tax year 2020, before Pittsylvania exempted it from taxation beginning in 2021. These additional facts bolster the trial court’s finding of situs in Pittsylvania County for the tax year 2020.

Franklin County argues that Underwood reported a job in Franklin County on Jan. 8, 2020, undermining a finding that the equipment was in Pittsylvania County on January 1 of that year. It does not. Because the harvest report shows that Underwood started a job on Dec. 31, 2019, in Pittsylvania County, and the harvest report shows that Underwood did not start its next job until Jan. 8, 2020, in Franklin County, a reasonable fact finder could conclude that Underwood’s equipment was located in Pittsylvania County on Jan. 1, 2020.

Franklin County also argues that the trial court ignored Underwood’s 1034 form for the first quarter of 2020, which only lists harvesting work in Franklin County. But the determinative issue for purposes of situs in this case is where Underwood’s forestry equipment was located on Jan. 1, 2020, and the 1034 form is silent on that issue.

The trial court next found that Underwood’s forestry equipment was located in Pittsylvania County on Jan. 1, 2021, based on timber harvest reports and on Ms. Underwood’s trial testimony. Franklin County asserts that there are no documents specifically showing that Underwood’s forestry equipment was in Pittsylvania County on Jan. 1, 2021. But Underwood was not required to produce such specific documents.

The County’s reliance on Ms. Underwood’s testimony that she could not say at trial whether Underwood moved its equipment to some specific location on Jan. 1, 2021, is misplaced. Ms. Underwood testified that Underwood began storing its equipment in Pittsylvania County in 2020 whenever it was not in use for the express purpose of obtaining better tax treatment. The fact that Ms. Underwood could not say at trial if Underwood “moved” its forestry equipment to a specific location on January 1 is not of consequence.

Finally, the trial court found that Underwood’s forestry equipment was located in Pittsylvania County on Jan. 1, 2022, based on timber harvest reports. Once more, the County has not met its burden of proving that the trial court erred.

Rate

Underwood argues that the court was incorrect in its determination that it participates in multiple lines of business and that all of its forestry equipment should be taxed at the machinery and tools rate. The court agrees.

Code § 58.1-3508 is clear in its application to “machinery or tools or repair parts . . . used directly in the harvesting of forest products for sale or for use of a component part of a product to be sold.” Underwood’s forestry equipment, as a forestry severer with a single line of business that uses all of its equipment in harvesting forestry products, fall squarely within the terms of this statute.

Under paragraph A, the rate of assessment on all applicable equipment is not to exceed the machinery and tools rate. Based on the plain language of the statute, Underwood’s contention is correct. Underwood is entitled to the reduced tax rate on all of its equipment.

Affirmed in part and reversed in part.

County of Frankin Virginia v. Underwood Logging LLC, Record No. 0092-24-3, July 15, 2025. CAV (unpublished opinion) (White). From the Circuit Court of Franklin County (Reynolds). Christopher S. Dadak (Guynn Waddell, P.C., on briefs), for appellant. Mitchell P. Goldstein (C. Steven Setliff; Setliff Law, P.C., on brief), for appellee. VLW 025-7-180. 14 pp.