Machinery and Tools

Property Used Directly in Manufacturing and Processing

The Code of Virginia § 58.1-3507 provides that Machinery and Tools (M&T) are limited to property used directly in manufacturing, mining, water well drilling, processing or reprocessing, radio or television broadcasting, dairy, and dry cleaning or laundry businesses. The property is assessed at various percentages of the total capitalized cost, excluding capitalized interest, depending on the year of acquisition.

Eligibility Requirements

To determine who is a manufacturer or processor, taxpayers must complete a Business Classification Information (BCI) sheet (PDF) explaining the process and nature of your business activities. Process flow charts, pictures and site visits may also be used for a determination. Businesses classified as a processor will be required to file a return of business tangible property form as well.

Filing Requirements

A detailed itemized list must be included with the return, including all assets that have been sold, deleted, disposed of or idle. Machinery and tools may be reported as "Idle and Unused" if:

• They have been not in use continuously for at least one year prior to Jan. 1 of the current tax year.
• From Jan. 1 to April 1 of the current tax year, the M&T have been specifically identified in writing by the taxpayer to the Commissioner of the Revenue as expected to be withdrawn from service before Jan. 1 of the next tax year. Additionally, no reasonable prospect exists that the machinery and tools will be returned to use prior to Jan. 1 of the year following the next tax year.

Taxes and Tax Incentive

Machinery and Tools taxes are not prorated and must be filed on or before March 1 of each year, to avoid a 10% late filing penalty. An extension may be requested and submitted by March 1 to extend the deadline to May 1. Tax bills are mailed after processing and are to be paid on or before June 5 to avoid 10% late payment penalties and interest at a rate of 10% per year.

M&T taxpayers operating within Technology Zones may qualify for certain rebates and other tax incentives.