When a North Carolina ferry company has docks in two towns but its principal business in just one, which town can tax the ferry boats?

Plain-English summary

Bald Head Island Transportation, Inc. ran a ferry service between Bald Head Island and Southport. The company's principal place of business was on Bald Head Island, and it paid personal property taxes there. The ferries docked at Southport each night because their first morning run originated there. The City of Southport wanted to tax the ferries on the value sitting at its docks. The company's attorney, Michael Isenburg, asked the AG which town had taxing authority.

Senior Deputy AG Reginald Watkins and Assistant AG Alexandra Hightower concluded the ferries were taxable on Bald Head Island.

Under N.C.G.S. § 105-304(c), tangible personal property is taxable at the owner's residence. For corporations, this is the principal place of business (§§ 105-304(c)(2), 304(f)(2)). City of Winston v. City of Salem (1902) codified the common law rule mobilia sequuntur personam (movables follow the person). Transportation, Inc. listed Bald Head as its principal place of business in its Secretary of State filings.

The general rule has a business-premises exception in § 105-304(f)(2): property "situated at or commonly used in connection with a business premises" is taxable where that premises is located. "Situated" means "more or less permanently located" (§ 105-304(b)(1)). The question was whether the ferries' Southport tie-ups made them permanently located there.

The AG relied on City of Newport News v. Virginia (1936), which addressed a strikingly similar dispute. The Virginia Supreme Court held that ferries are by nature meant to be in the water, not tied to one port. The fact that vessels were tied up longer in Newport News than Norfolk did not establish permanent situs because the tie-ups were "incidental and in contemplation of law, only temporary." North Carolina's In re Freight Carriers (1965) reached the same conclusion about trucks and trailers spending up to 24 hours at terminals away from the corporation's domicile.

Applying these principles, the AG concluded that overnight ferry tie-ups in Southport did not give the ferries permanent situs there. The ferries' taxable location was Bald Head Island, where Transportation, Inc. had its principal place of business.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The property tax situs framework in N.C.G.S. § 105-304 has been amended over the years. Anyone evaluating a current vessel or floating-property tax dispute should consult current statutes and recent appellate decisions before relying on this analysis.

Background and statutory framework

The common law starting point. Mobilia sequuntur personam ("movables follow the person") meant in common law that personal property was taxable where its owner lived, regardless of where the property happened to sit on tax day. City of Winston v. City of Salem (1902) confirmed North Carolina's adherence to that rule and recognized the legislature's power to set situs rules by statute.

The statutory residence rule. N.C.G.S. § 105-304(c) codifies the common law principle for tangible personal property generally, treating the owner's residence as the situs. Subsection (c)(2) and (f)(2) specify that for non-individual owners, residence equals principal place of business.

The business-premises exception. § 105-304(f)(2) creates an exception where property is "situated at or commonly used in connection with a business premises." Then the situs is the business premises. "Situated" is defined as "more or less permanently located" (§ 105-304(b)(1)). "Business premises" includes (but is not limited to) dockyards, offices, places for sale of property (§ 105-304(b)(2)).

The Newport News precedent. No North Carolina case directly addressed floating property in 2001. The Virginia Supreme Court's 1936 decision in Newport News v. Virginia closed that gap by analogy. The Virginia court held that ferries' essential nature defeats any permanent location. Tie-ups, however long, were operational pauses, not establishment of situs. The North Carolina AG adopted that reasoning.

In re Freight Carriers (1965). The North Carolina Supreme Court applied the same logic to trucks and trailers. A corporation's tractors and trailers used at terminals in other counties for periods up to 24 hours were not permanently situated in those counties. The corporation's Forsyth County domicile was the controlling situs. The 2001 AG opinion drew on this case as direct North Carolina authority for the same principle the AG applied to the ferries.

Common questions

Q: What if the company had moved its principal place of business to Southport?

A: That would have changed the answer. Situs follows the principal place of business. Transportation, Inc. could have shifted situs to Southport by relocating its headquarters and updating its Secretary of State filings. The AG accepted the company's filed declaration that Bald Head was its principal place of business.

Q: Could Southport tax the dock facility itself?

A: Yes. Real property is taxed where it sits, not where the owner lives. The dock in Southport was real property at a fixed location and was taxable in Southport. The AG opinion addressed the ferries (tangible personal property), not the dock.

Q: What about a vessel that stayed in one port for months?

A: The opinion did not address that scenario directly, but the Newport News framework suggests that prolonged stationary use could shift situs. The line between operational tie-up and permanent stationing is fact-driven.

Q: Could a ferry company avoid all property taxation by frequent route changes?

A: The opinion rests on the principal-place-of-business rule, which ties property to the company's corporate domicile regardless of route changes. A company without a stable headquarters might face different situs disputes, but the AG opinion did not address that hypothetical.

Citations

Statutes:
- N.C.G.S. § 105-304 (situs of tangible personal property)
- N.C.G.S. § 105-304(b)(1) (definition of "situated")
- N.C.G.S. § 105-304(b)(2) (definition of "business premises")
- N.C.G.S. § 105-304(c) (general residence rule)
- N.C.G.S. § 105-304(c)(2), (f)(2) (corporate residence and business premises rule)

Cases:
- City of Winston v. City of Salem, 131 N.C. 404, 42 S.E. 889 (1902) (mobilia sequuntur personam codified; legislature may set situs)
- City of Newport News and Chesapeake Ferry Company v. Commonwealth of Virginia, 165 Va. 635, 183 S.E. 514 (1936) (ferry tie-ups do not establish situs)
- In re Freight Carriers, Inc., 263 N.C. 345, 139 S.E.2d 633 (1965) (rolling stock taxable at corporate domicile)

Source

• Landing page: https://ncdoj.gov/opinions/taxation-by-city-of-southport-of-ferries-owned-by-bald-head-island-trans/

Original opinion text

Reply to: Revenue Section
Telephone: (919) 716-6550 Fax: (919) 715-3550

November 9, 2001

Michael R. Isenburg
Fairley, Jess, Isenberg & Green
109 East Moore Street
Post Office Box 11028
Southport, North Carolina 28461

Re: Advisory Opinion; Taxation by the City of Southport of ferries owned by Bald Head Island Transportation, Inc. which operate both from locations at Southport and at Bald Head Island; N.C.G.S. § 105-304

Dear Mr. Isenburg:

Your recent letter raises two questions; this response in this letter is limited to the tax question. From your letter, supplemented by information from the Property Tax Division of the Department of Revenue, we understand that Bald Head Island Transportation, Inc. ("Transportation, Inc.") operates a ferry service between terminals at Bald Head Island and Southport. The company's principal place of business is in the village of Bald Head, and it currently pays personal property taxes to the taxing authority on Bald Head. The company sells tickets on the ferry at both the Bald Head Island and Southport facilities. The ferries are docked each night in Southport because their first run in the morning originates from Southport. The City of Southport wishes to tax the company on the values of the ferries.

The place for listing tangible personal property is governed by N.C.G.S. § 105-304. The general rule provided under subsection (c) is that tangible personal property is taxable at the owner's residence. This codifies the common law rule of "mobilia sequuntur personam" (movables follow the person). CJS Taxation § 156; City of Winston v. City of Salem, 131 N.C. 404, 406, 42 S.E. 889, 892 (1902) (holding that the situs of property owned by a corporation was its principal place of business and that the Legislature may make regulations regarding the situs of personal property). Where the owner is not an individual, the residence shall be the place at which its principal place of business is located. § 105-304(c)(2), 304(f)(2). Transportation, Inc. lists Bald Head as its principal place of business in its filings with the Secretary of State. We accept this declaration as accurate.

The general rule is modified by subsection 304(f)(2) of the statute which provides that "[t]angible personal property situated at or commonly used in connection with a business premises . . . shall be taxable at the place at which the business premises is situated." The term "business premises" is defined to include, but is not limited to, a dockyard, office, place for the sale of property, etc. § 105-304(b)(2). "Situated" is defined as "more or less permanently located." § 105-304(b)(1).

Reported decisions in North Carolina provide no guidance with regard to floating property. However, City of Newport News and Chesapeake Ferry Company v. Commonwealth of Virginia, 165 Va. 635, 183 S.E. 514 (1936) addresses a similar set of facts. There the City of Newport News wished to tax a ferry service which serviced its boats at a facility in Newport News but also had a dock and its principal place of business in Norfolk. Boats could be docked at either place and, with the exception of a barge which remained in Newport News, moved back and forth between the two locations.

Like North Carolina, Virginia had a statute determining the taxable situs for personal property generally. However, it differed in that situs was to be determined, not by the owner's domicile, but by where the property was on the first day of the year. Virginia also had a statute requiring that floating property be reported the first day of May, identifying the specific city, town and school district in Virginia it was located on the previous January 1 for taxing purposes. Notably, the statutes did not provide for determining the taxable situs for floating property. Similarly, North Carolina's statutes do not squarely address the situs of floating property.

The Supreme Court of Virginia stated that the common law rule was that floating property was taxed at the owner's domicile. It held that this was still true in Virginia, unless the taxpayer could establish that the property had a permanent situs elsewhere. The Court found that

the physical location of property contemplated in the Virginia statutes means that property must have acquired a degree of permanency or to have become a part of the common mass of property in the taxing district, and that this is practically impossible in the case of floating property, such as is here involved.

Id. at 642, 183 S.E. 2d 514 at 516 (1936). The Court pointed out that ferries, by their nature, were supposed to be out in the waters, not tied up in a particular port. The Court further observed that

Despite the emphasis placed by the applicant upon the fact that certain of the vessels, when not in use, are tied up for a longer time at Newport News than at Norfolk, there is nothing in the evidence to show that they are placed at Newport News for permanency, so as to become a part of the permanent mass of the property of Newport News, but on the contrary, the evidence clearly shows that they were so placed to be used when ready, or when the demands of traffic should require. At such time as they were tied up at either Norfolk or Newport News, they were performing no service for which they were intended, and such tie-up was only incidental and in contemplation of law, only temporary. The time of such tie-up does not change the fact that it was temporary, and does not suffice to establish a permanent location.

Id. at 165 Va. 635, 648-649, 183 S.E. 514, 519. Finally, the court held that the situs of these ferries was Norfolk where the company had its principal place of business.

The North Carolina Supreme Court reached a similar result regarding rolling stock in In re Freight Carriers, Inc., 263 N.C. 345, 139 S.E.2d 633 (1965). The Court held that the situs of the corporate taxpayer's tractors and trailers was Forsyth County, the corporation's domicile. In reaching its holding, the Court noted that the corporation's actual use of such property at terminals in other counties from fifty minutes to twenty four hours did not make them permanently situated in such counties. Further, the tractors and trailers were not permanently assigned to a specific terminal.

The statutory framework of § 105-304 is consistent with the holding in Newport News. North Carolina law determines the situs of property generally as being the principal place of business. Like Virginia's statute, N.C.G.S. § 105-304 contemplates a permanent physical presence, as evidenced by the language of the subsection and the definition of "situated." The situs is specified as the business premises in the case where the property is used at a place other than the owner's residence. In this case the taxpayer has two premises but only one principal place of business. North Carolina has not enacted legislation determining the situs of floating property. Therefore, it would follow that the property should be taxed at the taxpayer's principal place of business on Bald Head Island.

We hope the foregoing is helpful.

Sincerely,

Reginald L. Watkins
Senior Deputy Attorney General

Alexandra M. Hightower
Assistant Attorney General

RLW/AMH/sg:doc.#5679