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In an effort to provide tax relief for small businesses, Bedford County has eliminated its Merchant’s Capital tax. That tax requires that businesses calculate their inventories on January 1, and pay a certain percentage of tax on that.
District 1 Supervisor Dale Wheeler, who made the motion last month to eliminate this tax, said the tax put retailers in a dilemma as the end of the year approached. If they didn’t buy enough, they could run out of inventory. If they bought too much, they got taxed.
“We need to look for creative ways for people in business to stay in business,” he said.
Wheeler said that surrounding localities—Lynchburg, Roanoke and Roanoke County—have either a merchant’s capital or a business and professional license (BPOL) tax, which requires every business to pay a tax based upon revenues, whether they have inventory or not. Virginia allows localities to tax one way or the other, but not both.
“But Bedford County has neither,” said Wheeler, “so it looks mighty inviting to me if you want to start a business.”
Wheeler hopes that doing away with this tax will help small businesses. He also noted that businesses were on an honor system when it came to paying this tax as the county has no one on staff to check merchants’ inventory.
According to a news release by the county, the tax yielded $218,000 last year. Only seven out of Virginia’s 130 localities do not impose either a merchants’ capital or BPOL tax. The removal of this tax is retroactive to Jan. 1, 2011.
How will this affect businesses?
“At the end of the year I usually have $1 million in inventory,” commented Jeff Powers, of Powers Tractor and Equipment Company.
Powers called this a step in the right direction to help small businesses.
The tax always created a year-end problem.
“You don’t want to have any more inventory than you absolutely have to have,” he said.
Now that that tax is gone, Powers said that he will be able to take advantage of early order incentives that manufacturers offer. Previously, any benefit he got from these incentives would have been taxed away. It also eliminates the risk of not having enough inventory on hand in the spring.
“I applaud the supervisors,” he said. “I think it’s a step in the right direction.”
“It’s nice to have a little bit of relief,” said Stuart Woodford, of Moneta Farm and Home Center.
Woodford said that it’s good to see an exception to what has always been an increase in both taxes and regulations on small businesses. He said the supervisors’ action will offset other expenses that have increased.
“It was appreciated,” he commented.
Stuart and Jim Woodford operate the family business which his parents started in 1973.
The supervisors’ decision to keep the real estate tax rate at 50 cents per $100 of assessed value also amounted to a tax cut, according to the county news release, as overall property values in Bedford County dropped in last year’s reassessment. Some properties, however, did go up in value and the owners of these properties will get a higher tax bill this year.