We recently sent a letter to the Board of Supervisors that is meant to be read by Ted Wilmot and the Board. The letter is below. We can complain about the new ordinance 10-26 all we want but what good is it if we do not try and see if we can assist the county on getting it right and getting something passed that we can all be proud of. This is a crossroads area where something incredible can happen for everyone in the county or become a major disaster.
This message is meant mostly for Ted Wilmot, however, each of you will be able to benefit from the information contained. This is regarding Gloucester County Ordinance 10-26 just published along with all the state laws that pertain to 58.1-3717. From what I am able to see you are actually shooting yourselves in the foot on numerous levels that are either going to restrict your ability to collect taxes or flood the roadways with gypsies. Both are very possible the way you are presently presenting the new ordinance.
Let me explain as the key is in section C of 58.1-3717. Let's look at this then I will break it down for each of you.
What this means is that in lieu of someone paying taxes on income made, this acts like a pre paid tax. If you take an event like the Daffodil festival and throw all 160 plus vendors under a blanket umbrella $500.00 tax and then exempt yourself from having to pay those taxes, you eliminate your right to collect taxes from all of those vendors. You can not send out follow up forms to collect any taxes, you gave up that right under the umbrella and then didn't even pay yourselves.
Had you collected the $500.00 from someone else, you would collect less than $3.50 per merchant total and again would forfeit the right to send out follow up tax forms. If you try and charge each vendor a $500.00 prepaid tax, you will not have one vendor show up to something like the Daffodil festival. Most of the merchants would be hard pressed to make that in profit for the weekend. You would kill any chance for anyone to earn money.
The taxes we are talking about are taxes on gross sales receipts for sales in this area. What first must be established for 2014 is a proper amount of taxes on gross sales receipts for Gloucester from retail sales in Gloucester County. We are NOT talking about sales taxes required by the state and any additional 4% local prepared food taxes. When you have an event like the Daffodil Festival, you stand to collect much more than $500.00 in gross sales receipt taxes and you are already sending out the form for collecting state sales taxes anyway. You are only adding in a few lines to determine how much each merchant at the event owes after the event for gross sales receipts. (Like 32 cents per $100.00 in gross sales).
That is what needs to first be established in a uniform way. What the percentage of gross sales receipt taxes each merchant would be required to pay. That percentage can change from different types of merchants. Food sales can have either a higher or lower percentage than consumer goods retail sales.
A blanket $500.00 tax would be beneficial if used on a smaller event where it is held for say a weekend and there were only 50 vendors with only say about 7,000 people expected to attend.
A Dillon Rule Violation occurs when you restrict the merchant to 5 days or less. You can limit the event, but not the merchant. If you charge a merchant an advanced fee, that fee is good for the entire year. Another Dillon Rule violation is using the term vendor. It's not used by the state and has a new meaning these days than it once had. Vendor now is part of the supply chain for wholesale purposes, and exempt from the accompanied state laws.
Here is where you have some issues. If you grant a $500.00 tax license fee to someone, you do not have the ability to restrict them. I can then go out on 17 where 3 parking spaces are available, such as by Burger King on 17 and sell ugly oil paintings of Elvis for 11 and a half months and there is nothing you can do about it. You sold me a license to do so. You also have restricted your ability to collect gross sales receipt taxes from my sales. (Thank you). This law allows people to conduct sales as a regular brick and mortar business without having the expense of a brick and mortar overhead. All I have to do is put up a tent each day. (This has both good and bad potentials).
Here is what I see as a solution to the issues presently being worked on. For the 2014 Daffodil Festival, instead of thinking you need to charge each merchant a maximum $500.00 prepaid tax, you can charge each merchant a prepaid fee such as $10.00 per retail merchant and $20.00 per food merchant. No blanket, no follow up on gross sales receipts, no issues and everyone is happy. Chances are very high that you will collect more revenue this way and no one will be upset by it. But you have to set up the tax base structure to do so first.
Limitations. Restricting the amount of days a prepaid tax on a merchant can be done if it is based on a rate that would justify the restriction. Example, I want to sell ugly oil paintings of Elvis for 2 weeks. I have no idea what my sales receipts may be as this is the first time I ever tried this business idea. A $30.00 license tax would not be unreasonable and would clearly define the time limits. That the state laws allow from what I have read. The merchant or in reality peddler, would still owe and be responsible for collecting and paying state taxes, but would not be responsible for gross receipts sales taxes.
Look again at the statement in C, it says. Maximum tax that an itinerant merchant can be charged is $500.00. It does not say we recommend you charge each itinerant merchant the maximum license tax of $500.00. The state is NOT looking to hurt businesses. It's not in anyone's best interest to make doing business in the state near impossible. You do that you have no tax base left and county employees all become unpaid volunteers. Will you show up for work tomorrow if you know that you are now not getting paid?
Again, you shoot yourselves in the foot by exempting non profit organizations that bring in for profit merchants into a sales event. It's not the non profit that is hurt by the taxes. The non profit remains a non profit no matter what and nothing has to be added into 10-26 over it. You are leaving much needed tax revenue on the table by creating a blanket that removes your ability to collect gross revenue sales receipt taxes from the merchants.
If you want to help the non profits, then you determine a correct blanket that they can prepay and then they can add in those fees into the setup space charged each merchant. Then the merchant isn't responsible for taxes on gross sales receipts. Otherwise, go for the gross sales receipts taxes owed.
These laws were designed to make life easier for both local governments as well as businesses. Not restrict them and make everything harder and more expensive. It has the ability to increase the tax revenue base. More events mean more money for the county. Understand?
Here is where I think everyone gets confused. This was a dual purpose law that addressed a number of issues in the past. Going to the old door to door rug sucker salesperson, counties were not able to collect proper gross receipt sales taxes on retailers that entered into various counties. People were also fed up with door to door salespeople. This law initially allowed localities to create an assessment value on door to door companies which created an accounting nightmare for all of them. They were all forced to discontinue door to door sales because they then had to break up total sales and account for sales in each county and pay each county it's share of gross sales receipts earned in that locality. It became cost prohibitive.
You can't get rid of these laws or the door to door salespeople come back. You can structure new uses for the laws to help localities however. Event planning is perfect here. You have a tool to help you promote more events, hence increase tax revenues, not destroy the potential. Virginia is considered business friendly, not anti business. Now the confusion should be cleared up.
What you have here are tools if used properly become a wonderful new friend. Use them the wrong way and you have a nightmare where everyone loses. Anyone want to buy an ugly oil painting of Elvis? I can't seem to unload this stock anywhere.
The job an attorney does well is create ambiguous meaning to words. That's what all the college training is really about. I spent hours and hours going over these laws and was able to create a real nasty monster over it all. I was being ambiguous. I had to step back and look at the entire picture as a whole to see what it really meant. Now I am actually excited over all the possibilities, not threatened by them. I realized that it's not ambiguous after all. While I was being ambiguous, I saw the threat that anyone in a sales position can fall under these laws and an abusive ordinance could make criminals out of ordinary working people. And that is a reality. This is a great example of why our country is in such a mess and why government continues to grow and not shrink.
Ambiguity has many nasty potentials. What the county actually has here is what I would imagine anyone in government got into the job for to begin with. Something very exciting and not threatening. Re work the ordinance with the proper groundwork laid first and you have one of the most incredible tools at your fingertips that you can be proud to scream out to everyone about.
You can actually lay the groundwork for alternative forms of business to incubate from. Test the grounds at a low cost. This is an opportunity for Gloucester to take a very serious statewide lead on and change the nation. I would hazard a guess that most localities have no clue how these laws really work or should be applied. Step up and show them. What legacy would you leave behind? One where you worked against business that destroyed your tax base? Or one that you built a mountain of cash from because you saw the right opportunity for everyone to win and structured the right framework for that to happen? I already know where you can increase your revenues right away from structuring the ordinance properly, but will not divulge such until I see it done and at reasonable rates.
As far as 58.1-3717 actually applying to event planning, it has nothing to do with it. An event can be held that has no merchants and no admittance fees or financial collections this licensing tax would in no way apply. But I would imagine you all understand that. Entertainment events held to bring people into a particular store or area is very beneficial and raises gross sales receipts. It should be encouraged. It should also be planned properly for the intended purpose. Street entertainers should also be encouraged. Imagine having people sitting around playing guitars in the courthouse circle. It's like a free concert. It attracts people. If people throw money in their cases, look the other way.
Allow local merchants to set up tables at the courthouse circle area to sell foods and drinks at local concerts. If it works, charge them a small fee in the future for the space and it allows people to get to know the local merchants. Everyone wins. More events, more opportunities more revenues. Don't wait for opportunities, make them. Not everything will work. Or it may work some days and fail in others. You have no idea until you try.
Our Update Not Sent To The County.
I once again read the newspaper article on how this all came about. It was brought about by the commissioner of revenue, Kevin Wilson. Mr Wilson did not read 58.1-3717 properly and did not further read 58.1-3703 afterwards that explains all of this. I'm not blaming or faulting anyone. I spent hours reading and re reading all the laws. The second key was in 58.1-3703 that confirmed the gross sales receipts tax collection mentioned above. These laws are tricky and not easy to understand. On the one hand, Mr Wilson was not wrong about the merchants should prove they are legally entitled to do business in the state of Virginia, but that should have been in the application for reserving space ahead of time. The $500.00 fee was way off though. The reason it was never done in the past? It was better to collect the revenue on the gross sales receipts. It's one or the other. Not both.
I had a great teacher growing up. This guy sat the entire class down and he took out a book of matches. He said, I know you all know how to light a match, and we did, but pretend I am an alien from another world and explain to me how to light a match. We could not do it. Every step we told him to take, he took like an idiot alien. It was amazing. When you are looking at law, you have to try and get into the head of the person who wrote it to try and figure out what they were really trying to communicate because many times it's like trying to explain to aliens how to light a match. You can show them, but if you were texting them, they would never get it. So you dig for keys. Oftentimes, your education gets right in your way. It's right in front of you but if your mind is not in the right frame, you miss it over and over and over again.
We hope this helps county officials to get everything straight. Again, it's one thing to complain, it's another to get involved and help out when it's needed. Before we asked them what legacy they wanted to leave, we asked that of ourselves. I am continuing to look into all the laws surrounding this matter as this is a new area for me. I am not an attorney by any means but I am capable of reading and understanding law in many areas. There are some very complex laws here that need further work.
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