Ordinance 3778

ORD-3778

AN ORDINANCE TO AMEND THE TITLE OF 1

ARTICLE XII OF CHAPTER 35 AND SECTIONS 2

35-252 AND 18-104.1 AND TO REPEAL 3

SECTIONS 18-59 AND 18-60 OF THE CITY CODE 4

REGARDING TAXES UPON BUSINESSES THAT 5

RENT TANGIBLE PERSONAL PROPERTY 6

SECTIONS AMENDED: 35-252 and 18-104.1 8

SECTIONS REPEALED: 18-59 and 18-60 10

WHEREAS, there is a need to harmonize the tax treatment of all businesses that 12

engage in the short-term rental of tangible personal property and distinguish the 13

nomenclature of tangible personal property rentals from the rental of residences to 14

transients; 15

NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY 17

OF VIRGINIA BEACH, VIRGINIA, THAT: 18

1. The title of Article XII of Chapter 35 and Sections 35-252 and 18-104.1 of the City 20

Code are hereby amended and reordained and Sections 18-59 and 18-60 are 21

hereby repealed as follows: 22

ARTICLE XII. SHORT-TERM RENTAL TAX TAX ON SHORT-TERM RENTAL OF 24

TANGIBLE PERSONAL PROPERTY 25

Sec. 35-252. Short-term rental tax. Tax on short-term rental of tangible personal 27

property. 28

(a) Levied; amount. Pursuant to Code of Virginia § 58.1-3510.6, there is hereby 30

assessed and imposed on every person engaged in the short-term rental of tangible 31

personal property business a tax of one (1) percent on the gross proceeds of such 32

business defined in subsection (c)(1) and one and one-half (1 ½) percent of such 33

business defined in subsection (c)(2). Such tax shall be in addition to the tax levied 34

pursuant to Code of Virginia § 58.1-605. For purposes of this section, “gross 35

proceeds” means the total amount charged to each person for the rental of short-36

term rental of tangible personal property, excluding any state and local sales tax paid 37

pursuant to the Virginia Retail Sales and Use Tax Act. 38

(b) Short-term rental property defined. For purposes of this section, "short-term rental 40

property" means all tangible personal property held for rental and owned by a person 41

engaged in the short-term rental of tangible personal property business, except 42

trailers, as defined in Code of Virginia § 46.2-100 and other tangible personal 43

property required to be licensed or registered with the department of motor vehicles, 44

department of wildlife resources game and inland fisheries, or the department of 45

aviation. For purposes of this section, the terms “short-term rental property” and 46

“short-term rental of tangible personal property” shall have the same meaning. 47

engaged in the short-term rental of tangible personal property business if: 50

(1) Not less than eighty (80) percent of the gross rental receipts of such business 52

during the preceding year arose from transactions involving the rental of short-53

term rental property, other than heavy equipment property as defined in 54

subdivision (2), for periods of ninety-two (92) consecutive days or less, including 55

all extensions and renewals to the same person or a person affiliated with the 56

lessee; or 57

(2) Not less than sixty (60) percent of the gross rental receipts of such business 59

during the preceding year arose from transactions involving the rental of heavy 60

equipment property for periods of two hundred seventy (270) consecutive days 61

or less, including all extensions and renewals to the same person or a person 62

affiliated with the lessee. For purposes of this subdivision, "heavy equipment 63

property" means rental property of an industry that is described under code 64

532412 or 532490 of the 2002 North American Industry Classification System 65

as published by the United States Census Bureau, excluding office furniture, 66

office equipment, and programmable computer equipment and peripherals as 67

defined in Code of Virginia § 58.1-3503(A)(16). 68

For purposes of determining whether a person is engaged in the short-term rental 70

of tangible personal property business as defined in subdivisions (1) and (2), a person is 71

"affiliated" with the lessee of rental property if such person is an officer, director, partner, 72

member, shareholder, parent or subsidiary of the lessee, or if such person and the lessee 73

have any common ownership interest in excess of five (5) percent; any rental to a person 74

affiliated with the lessee shall be treated as rental receipts but shall not qualify for 75

purposes of the eighty (80) percent requirement of subdivision (1) or the sixty (60) percent 76

requirement of subdivision (2); and any rental of personal property which also involves 77

the provision of personal services for the operation of the personal property rented shall 78

not be treated as gross receipts from rental, provided however that the delivery and 79

installation of tangible personal property shall not mean operation for the purposes of this 80

subdivision. 81

A person who has not previously been engaged in the short-term rental of tangible 83

personal property business who applies for a certificate of registration pursuant to 84

subsection (j) shall be eligible for registration upon his certification that he anticipates 85

meeting the requirements of subdivision (1) or (2), designated by the applicant, during the 86

year for which registration is sought. 87

In the event that the commissioner of the revenue makes a written determination 89

that a rental business previously certified as short-term rental of tangible personal 90

property business pursuant to subsection (j) has failed to meet either of the tests set forth 91

in subdivision (1) or (2) during a preceding tax year, such business shall lose its 92

certification as a short-term rental of tangible personal property business and shall be 93

subject to the business personal property tax with respect to all rental property for the tax 94

year in which such certification is lost and any subsequent tax years until such time as 95

the rental business obtains recertification pursuant to subsection (j). In the event that a 96

rental business loses its certification as a short-term rental of tangible personal property 97

business pursuant to this subsection, such business shall not be required to refund to 98

customers daily rental property taxes previously collected in good faith and shall not be 99

subject to the assessment for business personal property taxes with respect to rental 100

property for tax years preceding the year in which the certification is lost unless the 101

commissioner makes a written determination that the business obtained its certification 102

by knowingly making materially false statements in its application, in which case the 103

commissioner may assess the taxpayer the amount of the difference between the short-104

term rental of tangible personal property taxes remitted by such business during the 105

period in which the taxpayer wrongfully held certification and the business personal 106

property taxes that would have been due during such period but for the certification 107

obtained by the making of the materially false statements. Any such assessment, and any 108

determination not to certify or to decertify a rental business as a short-term rental of 109

personal property business as defined in this subsection, may be appealed pursuant to 110

the procedures and requirements set forth in Code of Virginia § 58.1-3983.1 for appeals 111

of local business taxes, which shall apply mutatis mutandis to such assessment and 112

certification decisions. 113

114

A rental business that has been decertified pursuant to the provisions of this 115

subsection shall be eligible for recertification for a subsequent tax year upon a showing 116

that it has met one of the test provided in subdivisions (1) and (2) for at least ten (10) 117

months of operations during the present tax year. 118

119

(d) Taxation of rental property that is not short-term rental property. Except for short-120

term rental passenger cars, rental property that is not short-term rental property shall 121

be classified for taxation pursuant to Code of Virginia § 58.1-3503. 122

123

(e) Collection, reporting return and remittance of tax. Any person engaged in the short-124

term rental of tangible personal property business, as defined by subsection (c), shall 125

collect such tax from each lessee of rental property at the time of the rental. The 126

lessor of the short-term rental property shall transmit a quarterly report return, not 127

later than the fifteenth day following the end of each calendar quarter, to the 128

treasurer, reporting the gross rental proceeds derived from the short-term rental of 129

tangible personal property business. The commissioner of the revenue shall assess 130

the tax due, and the short-term rental of tangible personal property business shall 131

pay the tax so assessed to the treasurer not later than the last day of the month 132

following the end of the calendar quarter. The calendar quarters end on March 31, 133

June 30, September 30 and December 31. The return shall be upon such forms, 134

approved by the commissioner of the revenue and the treasurer, setting forth such 135

information as the commissioner of revenue may require, showing the amount of 136

gross receipts and the tax required to be collected. The taxes required to be collected 137

under this article shall be deemed to be held in trust by the person required to collect 138

such taxes until remitted as required in this article. 139

140

(f) Procedure upon failure to collect, report or remit taxes. If any person, whose duty it 141

is so to do, shall fail or refuse to collect the tax imposed under this article and to 142

make, within the time provided in this article, the returns and remittances required in 143

this article, the commissioner of the revenue shall obtain facts and information 144

necessary to create an estimate of the tax due. Within ten (10) days from the date 145

the tax was due, he shall proceed to determine and assess against such person the 146

tax and the late filing penalty established in subsection (g) below, and shall notify 147

such person, by hand-delivery, facsimile, electronic mail or certified mail, of the total 148

amount of such tax and penalty; a copy of the assessment shall be delivered 149

simultaneously to the treasurer. The total amount thereof shall be payable 150

immediately, and the treasurer shall proceed to collect same as authorized by law. 151

152

(g) Failure or refusal to remit tax; penalty. If any person, whose duty it is so to do, shall 153

fail or refuse to remit the tax required to be collected and paid under this article within 154

the time specified in the article, there shall be added to such tax a penalty in the 155

amount of ten (10) percent of the tax past due or the sum of ten dollars ($10.00), 156

whichever is the greater. The assessment of such penalty shall not be deemed a 157

defense to any criminal prosecution for failing to make any return or remittance as 158

required in this article. Penalty for failure to pay the tax assessed pursuant to this 159

article shall be assessed on the first day following the day such quarterly installment 160

payment is due. 161

162

(h) Late filing penalty. 163

164

(1) If a report is not filed on or before the due date set forth in subsection (a) above, 165

there shall be added a penalty in the amount of ten (10) percent of the tax 166

assessable on such return or ten dollars ($10.00), whichever is greater; 167

provided, however, that the penalty shall in no case exceed the amount of the 168

tax assessable. Such penalty shall not be assessed until the day after the report 169

is due. Any such penalty, when assessed, shall become part of the tax. 170

171

(2) No penalty for failing to file a report shall be assessed if such failure was not the 172

fault of the taxpayer or was the fault of the commissioner of the revenue. The 173

commissioner of the revenue shall make determinations of fault relating to failure 174

to file a report. 175

176

(i) Exclusions and exemptions. No tax shall be collected or assessed on (i) rentals by 177

the commonwealth, any political subdivision of the commonwealth or the United 178

States, or (ii) any rental of durable medical equipment as defined in Code of Virginia 179

§ 58.1-608(22). Additionally, all exemptions applicable in the Code of Virginia Title 180

58.1, Ch. 6 (section 58.1-600 et seq.) shall apply mutatis mutandis to the short-term 181

rental of tangible personal property tax. 182

183

(j) Renter's certificate of registration. Every person engaging in the business of short-184

term rental of tangible personal property shall file an application for a certificate of 185

registration with the commissioner of the revenue. The application shall be on a form 186

prescribed by the commissioner of revenue and shall set forth the name under which 187

the applicant intends to operate the rental business, the subdivision of subsection (c) 188

under which the business asserts that it is qualified for classification as a short-term 189

rental of tangible personal property business, the location and such other information 190

as the commissioner may require. 191

192

Each applicant shall sign the application as owner of the rental business. If the 193

rental business is owned by an association, partnership, limited liability company, or 194

corporation, the application shall be signed by a member, partner, executive officer or 195

other person specifically authorized by the association, partnership, limited liability 196

company, or corporation to sign. 197

198

Upon approval of the application by the commissioner of the revenue, a certificate 199

of registration shall be issued. The certificate shall be conspicuously displayed at all times 200

at the place of business for which it is issued. 201

The certificate is not assignable and shall be valid only for the person in whose name it 202

is issued and the place of business designated. 203

204

(k) Criminal penalties for violation of article. Any person violating or failing to comply with 205

any provision of this article shall be guilty of a Class 3 misdemeanor. Provided 206

however, if the amount of tax due and unpaid for any quarterly installment exceeds 207

one thousand dollars ($1,000.00), any person failing to remit payment when due shall 208

be guilty of a Class 1 misdemeanor. The treasurer may apply for the issuance of a 209

warrant or summons for such person in the manner provided by law. 210

211

(l) Copies of reports; appeal of estimated assessment. (i) The treasurer shall provide 212

the commissioner of the revenue by the fifteenth of each month with copies of all 213

reports submitted in the preceding month by persons required to collect the tax levied 214

by this article, and (ii) any person issued an estimated assessment as described in 215

subsection (f), who is aggrieved by the assessment, may apply to the commissioner 216

of the revenue for correction as provided by Code of Virginia § 58.1-3980. 217

218

(m) Duties of the commissioner of the revenue. The commissioner of the revenue shall 219

be charged with auditing the reports required by this article, ensuring that short-term 220

rental of tangible personal property businesses are registered to collect the tax levied 221

by this article, and responding to all inquiries that may be made by taxpayers or rental 222

businesses. 223

224

(n) Duties of the city treasurer. The city treasurer shall be charged with the receipt and 225

collection of the taxes imposed and levied by this article, and shall cause the same 226

to be paid into the general treasury of the city. 227

228

. . . . 229

230

Sec. 18-59. Beach equipment rental—Generally. 231

232

(a) The license tax rate for each person engaged in the business of renting beach 233

equipment in the city shall be 0.36 percent of the gross receipts in such business 234

during the preceding calendar year. 235

236

(b) For the purpose of this section, the term "beach equipment" shall mean dugouts, 237

umbrellas, chairs, windbreakers, air floats and life rafts. 238

239

Sec. 18-60. Same—Surfboards. 240

241

(a) The license tax rate for each person engaged in the business of renting surfboards 242

in the city shall be 0.36 percent of the gross receipts in such business during the 243

preceding calendar year. 244

245

(b) All surfboards offered for rent shall be marked with a permanent identification 246

indicating that they are for rent. 247

248

have presented a certificate, approved by the city attorney as to form and surety, of 250

personal injury liability insurance coverage in the amount of $100,000.00 per person 251

and $300,000.00 per accident and property damage liability insurance in the amount 252

of $5,000.00. 253

254

. . . . 255

256

Sec. 18-104.1. Short-term rental of tangible personal property business. 257

258

Every person engaged in the short-term rental of tangible personal property 259

business as defined in section 35-252 of this Code shall be classified in the category of 260

retail sales and shall pay a license tax rate equal to that imposed in section 18-89 on 261

merchants, retail. For purposes of this section and section 35-252, the rental of beach 262

equipment and the rental of surfboards shall be considered the short-term rental of 263

tangible personal property if such rentals meet the classification provided by section 35-264

252(c)(1) or (c)(2). 265

266

2. The effective date of this ordinance is January 1, 2025. 267

Adopted by the City Council of the City of Virginia Beach, Virginia, this 18

day of

June, 2024.