Present:   All the Justices

BOARD OF DIRECTORS OF THE
TUCKAHOE ASSOCIATION, INC.

v.   Record No. 980343   OPINION BY JUSTICE BARBARA MILANO KEENAN
                                         January 8, 1999
CITY OF RICHMOND


           FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
                      Theodore J. Markow, Judge


      In this appeal, we consider the trial court's rulings that:

1) a city ordinance imposing utility taxes is unconstitutional

on equal protection grounds, and 2) a condominium unit owners'

association, which purchased utility services at commercial

rates, should be taxed as a residential purchaser under the

ordinance.

      The Tuckahoe Association, Inc. (the Association), a non-

stock corporation organized under the Virginia Condominium Act,

Code §§ 55-79.39 – 79.103, is comprised of the individual unit

owners of the Tuckahoe Condominium.   The condominium property

consists of one building containing 68 residential units and a

parking lot for the use of unit owners and their guests.

      The Association purchases at commercial rates electricity

from the Virginia Power Company and natural gas from the

Richmond Department of Public Utilities.   The amount of

electricity purchased is registered on one master meter and the

amount of gas purchased is registered on two master meters.   The
Association purchases these utility services with funds received

from the individual unit owners' annual assessments.    By

purchasing these services at commercial, rather than

residential, rates, the Association pays a significantly lower

amount for such services.

     Pursuant to § 2.02 of its City Charter, the City of

Richmond enacted an ordinance imposing a utility tax on

telephone, electric, and gas service, which is collected by the

seller of each service.   Richmond, Va., Code § 27-152.1.    The

ordinance establishes different tax rates for purchasers of

commercial and residential service.   Id.   The terms

"residential" and "commercial" are not defined in the ordinance.

Since the Association purchased electric and gas services from

the utility providers at commercial rates, the City imposed its

commercial tax rate on those purchases.

     The Association filed a motion for judgment under Code

§ 58.1-3984 to correct the City's allegedly erroneous assessment

of utility taxes.   The Association alleged that it was a

"residential user" of the utility services and was entitled to a

refund of the amount of utility taxes paid "in excess of the

residential [tax] rate [it] should properly be charged."     The

Association further alleged that the City's "classification of

[the Association] for purposes of the subject utility tax, not

having a reasonable basis for a commercial classification, is


                                 2
wholly arbitrary" and violates the equal protection clauses of

the United States and Virginia Constitutions.

        The City responded that its utility tax ordinance expressly

classifies taxpayers based on the type of utility service

purchased, rather than on the nature of the ultimate consumer of

the service.    Since the Association admitted that it purchases

commercial gas and electric service and is billed for those

services at the more advantageous commercial rates, the City

maintained that the Association was not entitled to be taxed for

those services under a residential classification.

        After hearing argument on the parties' motions for summary

judgment, the trial court ruled that the residential and

commercial classifications contained in the ordinance are "not

based on real differences" and, thus, are arbitrary and

unreasonable.    The court held that the ordinance

unconstitutionally delegates to the utility companies the right

to determine, based on their own internal regulations, who

qualifies for the more favorable residential service taxation

rate.    The court concluded that "[a]s [the Association] has

successfully rebutted the reasonableness of the [City's]

commercial/residential classification, the court invalidates

this utility taxation scheme on equal protection grounds."

        In an order denying the City's motion to reconsider, the

trial court stated that "the Richmond utility tax in this case


                                   3
is 'fatally indefinite' — it is literally devoid of any means to

determine how any utility service customer should be categorized

by the service provider for tax purposes. . . . [E]ach and every

customer classification is based upon utility company guesswork

and internal guidelines foreign to the ordinance itself."

     The Association then filed an amended motion for judgment

seeking, in the alternative, a full refund of all utility taxes

paid from January 1993 through September 1997, or a refund of

utility taxes paid in excess of the residential rate during that

time period.   The City filed a counterclaim, alleging that if it

had applied the residential tax rate to the Association's

utility purchases, the City would have assessed the utility tax

against each individual unit.   The City alleged that, under this

methodology, the total amount of utility taxes owed by the

Association was greater than the amount of taxes the Association

actually paid at the commercial rate.   The City requested

judgment pursuant to Code § 58.1-3903 in the amount of the

alleged underpayment.

     At a hearing to determine damages, the City presented the

testimony of Andrew Roundtree, the City official responsible for

assessing the City's utility tax.    Roundtree testified that if

the City were required to apply its residential tax rate to the

utility services supplied to the Tuckahoe Condominium, the City

would treat each unit owner as a residential customer.   Since


                                 4
the units do not have individual meters, Roundtree explained

that he would divide the Association's total electric and gas

service charges by the number of individual units in order to

determine an average charge per unit.   He would then apply the

tax rate to this average charge and multiply that amount by 68

to determine the total amount due from the Association.

Roundtree testified that, under this method, the Association

would owe $190.61 more for the time period at issue than the tax

that was actually assessed at the commercial tax rate.

     The trial court entered a final order holding that the

Association "should be classified as 'residential' for purposes

of the City's utility tax scheme."    In reaching this conclusion,

the court relied on § 27-151 of the City Code, which defines

"purchaser" as "every person who purchases a utility service."

The court stated that "each household/end-user at the Tuckahoe

building purchases these services on an individual basis through

its pro rata share of total condominium consumption."    The court

found that the Association would have paid an additional $190.61

in utility taxes if the 68 individual units had been taxed at

the City's residential rate.   On this basis, the court awarded

judgment on the counterclaim in favor of the City in that

amount.   This appeal followed.

     In reviewing the ordinance, we address the City's

assignments of cross-error because they determine the outcome of


                                  5
this appeal.   The City first contends that the trial court erred

in holding that the ordinance is unconstitutional, because the

tax classifications are reasonable, and do not effectively

delegate the authority to the utility providers to determine the

rate at which purchasers of utility services will be taxed.

     In response, the Association contends that the ordinance's

classifications are arbitrary, and that the ordinance improperly

delegates taxing authority to the utility providers by allowing

the providers to determine which purchasers qualify for the

different categories of services on which the tax is based.     We

disagree with the Association.

     The trial court did not specify in its ruling whether it

found the ordinance facially invalid or merely invalid as

applied to the Association.   Because the court's ruling

incorporates principles derived from each of these concepts, we

review the constitutionality of the ordinance in both contexts.

     When scrutinizing a tax classification contained in an

ordinance on equal protection grounds, we begin with the basic

principle that a government has broad powers of classification

for taxation purposes.   See Cox Cable Hampton Roads, Inc. v.

City of Norfolk, 247 Va. 64, 66, 439 S.E.2d 366, 367 (1994).

The constitutional guarantee of equal protection does not

mandate that taxpayers be given identical treatment under a




                                 6
taxation statute.   Id., 439 S.E.2d at 367-68.   Instead, we have

said that this guarantee

           "'only requires that the classification rest on real
           and not feigned differences, that the distinction have
           some relevance to the purpose for which the
           classification is made, and that the different
           treatments not be so disparate, relative to the
           difference in classification, as to be wholly
           arbitrary.' Walters v. City of St. Louis, Mo., 347
           U.S. 231, 237 (1954). If the classification is
           reasonable and not arbitrary, uniformity and equality
           are not required."

Id. at 66-67, 439 S.E.2d at 368, (quoting City of Portsmouth v.

Citizens Trust Co., 216 Va. 695, 698, 222 S.E.2d 532, 534

(1976)); see also City of Richmond v. Fary, 210 Va. 338, 343-44,

171 S.E.2d 257, 261 (1969).

     Like the ordinance in which they are found, the

classifications contained in an ordinance are presumptively

valid.   Sheek v. City of Newport News, 214 Va. 288, 290, 199

S.E.2d 519, 521 (1973); Kisley v. City of Falls Church, 212 Va.

693, 697, 187 S.E.2d 168, 171 (1972).    This presumption of

validity governs unless it is rebutted by unreasonableness

apparent on the face of the ordinance or by extrinsic evidence

clearly establishing unreasonableness.    Sheek, 214 Va. at 290,

199 S.E.2d at 521; Kisley, 212 Va. at 697, 187 S.E.2d at 171;

National Linen Service Corp. v. Norfolk, 196 Va. 277, 279, 83

S.E.2d 401, 403 (1954).    Thus, if a classification has some

reasonable basis and reasonably relates to the legislative



                                  7
objective of the ordinance, the local government may treat

different classes in different ways.       Duke v. Pulaski County,

219 Va. 428, 433, 247 S.E.2d 824, 827 (1978).

     We conclude that the present ordinance is facially valid.

Since the ordinance's classifications are based on the type of

utility service purchased, they contain distinctions resting on

real and not feigned differences.      As evidenced by the record,

these distinctions are related to the apparent purpose of the

classifications, which is to allocate fairly the tax burden

imposed on utility service purchasers.      The Association admitted

in the trial court that by purchasing commercial utility

services, it pays significantly less for its electricity and

natural gas than it would if it purchased residential utility

services in the same quantities.       The utility tax

classifications contained in the City's ordinance impose a

greater tax rate on such volume purchasers who receive the

benefit of a lower purchase price from the utility provider.

Conversely, purchasers of residential service who pay a higher

unit cost than commercial purchasers for their utility services

are given the benefit of a lower tax rate.      We hold that such

distinctions are not unreasonable or so disparate in their

treatment as to be arbitrary, and that the trial court erred in

concluding otherwise.




                                   8
     We also disagree with the trial court's ruling that the

ordinance's classifications effectively delegate governmental

authority, allowing the utility providers to "pick and choose"

which purchasers will be deemed eligible for the lower

residential tax rate.   Under the ordinance, the utility

providers' role is limited to collecting the utility tax.    The

providers do not determine the particular rate of tax each

purchaser must pay.

     When any individual or entity has purchased commercial

service from the provider, the provider is directed to collect

taxes based on the fixed commercial rate set by the ordinance.

Likewise, the utility provider is required to collect taxes due

from any purchaser of residential service at the fixed

residential rate contained in the ordinance.   Although the trial

court reasoned that it is within the utility provider's sole

discretion to determine what type of service each customer

receives, we find no evidence in the record supporting such a

conclusion.   The Association failed to prove its contention that

the utility providers control the ultimate tax imposed on a

customer by internal company rules regulating the availability

of commercial and residential services to a given purchaser.

     Since there is no language in the ordinance or evidence in

the record to show that the utility providers exercise

discretionary authority under the ordinance, we find no merit in


                                 9
the Association's contention that the present case is controlled

by Chapel v. Commonwealth, 197 Va. 406, 89 S.E.2d 337 (1955).

There, we held that a former statute known as the Dry Cleaners

Act was invalid, because it delegated to the State Dry Cleaners

Board the power to promulgate rules and regulations controlling

dry cleaning businesses, without fixing any standard to guide

and control the Board's exercise of its discretion.   Id. at 413-

14, 89 S.E.2d at 342.   Unlike the statute at issue in Chapel,

the present ordinance does not delegate discretionary authority

to the utility providers.   Thus, we hold that the trial court

erred in ruling that the ordinance is invalid on this basis.

     We also note that the record fails to support a conclusion

that the ordinance is unconstitutional as applied to the

Association.   The Association did not present evidence that it

was treated differently under the ordinance from any other

residential condominium unit owners' association with master

metering devices.   The Association also failed to demonstrate

that the ordinance's application of the commercial utility tax

classification to its purchases of commercial utility service

was arbitrary or unreasonable.

     We next consider the City's assignment of cross-error that

the trial court erred in ruling that the Association was

entitled to be classified as a purchaser of residential utility

services.   The City argues that, under the plain language of the


                                 10
ordinance, the Association's purchase of commercial utility

services required that it be taxed at the commercial rate.

     In response, the Association contends that the trial court

properly ruled that the Association is entitled to be classified

as a residential purchaser, because the Tuckahoe complex is used

solely as a place of residence.    The Association also argues

that since the ordinance classifies taxpayers based on the type

of service purchased, rather than the commercial or residential

nature of the purchaser of those services, the ordinance

conflicts with Code § 58.1-3814.       We disagree with the

Association.

     As stated above, the trial court based its ruling on the

reasoning that each "household/end-user at the Tuckahoe building

purchases these services on an individual basis through its pro

rata share of total condominium consumption."      This conclusion,

however, is directly refuted by the evidence, which showed that

the Association, a non-profit corporation, actually contracted

and paid for the utility services recorded on its master meters.

The fact that the individual unit owners' assessments are the

source of funds for payment of the corporation's obligations

does not alter the nature of those obligations or make the unit

owners purchasers under the ordinance.

     The authority of a city to impose a tax by ordinance

depends upon a positive grant of authority by the General


                                  11
Assembly.    Hampton Nissan Ltd. Partnership v. City of Hampton,

251 Va. 100, 104, 466 S.E.2d 95, 97 (1996); Williams v. City of

Richmond, 177 Va. 477, 484, 14 S.E.2d 287, 289 (1941).     If the

city's charter grants a particular power to the city, an

ordinance passed pursuant to that grant has the same status as

an act of the General Assembly.    Id.; Gordon Bros. v. City of

Newport News, 102 Va. 649, 650-51, 47 S.E. 828, 829 (1904).

     Here, § 2.02 of the City's charter, enacted by the General

Assembly, authorizes the City "to levy on and collect taxes from

purchasers of any public utility service used within the city,

which taxes may be added to and collected with the bills

rendered purchasers of such service."   1948 Va. Acts of

Assembly, ch. 116.   This grant of power plainly provides that

the purchasers, rather than the ultimate consumers or "end-

users," of such utility services are the proper objects of

taxation.   The City's ordinance reflects this authority granted

by the charter, by imposing utility taxes only on the actual

purchasers of utility services who are rendered a bill for those

services.

     We also find no merit in the Association's contention that

it is a "residential customer" within the meaning of Code

§ 58.1-3814 and, thus, that the ordinance conflicts with the

statute.    Code § 58.1-3814 provides, in relevant part:




                                  12
          A. Any county, city or town may impose a tax on
     the consumers of the utility service or services
     provided by any water or heat, light and power
     company. . . which tax shall not be imposed at a rate
     in excess of twenty percent of the monthly amount
     charged to consumers of the utility service and shall
     not be applicable to any amount so charged in excess
     of fifteen dollars per month for residential
     customers. Any city, town or county that on July 1,
     1972, imposed a utility consumer tax in excess of
     limits specified herein may continue to impose such a
     tax in excess of such limits, but no more.

The Association contends that the purpose of the statute would

be defeated if it is denied the benefit of the residential

utility tax "cap" and charged a commercial tax, merely because

it took advantage of the best available utility rates offered by

the utility providers.   We disagree.

     In authorizing local governments to levy a utility tax on

"consumers" of utility services, Code § 58.1-3814 places a limit

on the amount of tax that can be imposed on a "residential

customer."   As a commercial purchaser of utility services, the

Association is a "consumer" of those services, notwithstanding

the fact that the unit owners are the "end-users" of most of the

services provided.   However, the Association is not a

"residential customer" of the utility providers, within the

meaning of the statute, because it does not purchase residential

service from those providers.   The unit owners also are not

"residential customers" of the utilities, because they do not

individually contract and pay for their electric and gas



                                13
service.   Therefore, neither the Association nor the individual

unit owners are entitled to the benefit of the "cap" provided to

"residential customers" under the statute.

     Based on the above holding, we conclude that the trial

court erred in ruling that the Association was entitled to be

"classified as residential for purposes of the City's utility

tax scheme."   We also conclude that the trial court erred in

ruling that the individual unit owners should be treated as

purchasers of residential utility services, and that the

Association's utility tax should be computed on this basis.

     For these reasons, we will reverse the trial court's award

of summary judgment in favor of the Association on its motion

for judgment, reverse the court's judgment in favor of the City

on its counterclaim, and enter final judgment for the City on

the motion for judgment.

                                      Reversed and final judgment.




                                14
