Call it a peculiar brand of hide-and-seek. For years, some Virginia merchants customarily moved their inventory on tax day to a jurisdiction with a lower rate. Now, thanks to a state Supreme Court ruling, it’s perfectly legal.

On April 20, the Virginia Supreme Court ruled that retail inventory and other taxable personal property might in fact not be taxable if the items in question are moved out of the taxing jurisdiction on the day the tax is assessed.

The court’s ruling stems from a lawsuit filed by Shelor Motor Company against the Montgomery County Commissioner of Revenue over the assessment of merchants’ capital tax, the tax retailers pay on the value of their inventory.

For many years, the company would move vehicles in late December to counties with lower tax rates than Montgomery’s so they were not in Montgomery County on Jan. 1, when taxes are assessed. The county contended that the tax is owed in the jurisdiction where the inventory is held during the normal course of business.

According to the Supreme Court’s 6-1 ruling, the items that might be moved to avoid the tax are limited to business personal property items, including business inventory held for retail sale, business furniture and fixtures, and business machinery and tools.

The ruling is based on the court’s interpretation of a 1972 amendment to Virginia law that the property be taxed in the jurisdiction where it is housed at tax time.

“It’s been a big dispute through the years about where a college student’s car is to be taxed,” explained Flippo Hicks, general counsel for the Virginia Association of Counties (VACo). “The tax commissioner at the time requested an amendment to clarify the statute.”

And now that amendment is being interpreted by the auto company and the state Supreme Court to mean the company may move its cars to jurisdictions with lower taxes from Dec. 28 to Jan. 2.

Because taxes vary so much from county to county in Virginia, Hicks said this could cause undue financial harm to counties with higher taxes.

Because VACo was unable to testify on behalf of counties, they have filed an amicus brief and requested a rehearing.

“The case has never been tried on its merits,” Hicks said. “There’s never been any testimony. We had one justice who dissented and we’re asking for a rehearing.”

If VACo is denied the rehearing, Hicks said they plan to lobby the Virginia State Legislature next session to change the law in order to close the loophole.