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Spilman Wins Important Tax Case for Client in Supreme Court
September 28, 2012

Major Positive Implications for W.Va. Business Climate

Charleston, W.Va. —The law firm Spilman Thomas & Battle, PLLC (Spilman) announced that it recently won a favorable ruling for one of its corporate clients, Feroleto Steel Company, Inc. (Feroleto), in a tax case before the Supreme Court of Appeals of West Virginia (the Court). On September 25, 2012, the Court decided the case of Feroleto Steel Company, Inc. v. Oughten (Case No. 11-0666), reversing a ruling against Feroleto by the Circuit Court of Brooke County, and holding that Feroleto was entitled to a tax exemption for its warehouse inventory under the 1986 Freeport Amendment to the State Constitution.

The Court’s decision in the Feroleto case holds great importance for all business taxpayers in West Virginia. In this decision, the Court upheld the original, intended interpretation of the Freeport Amendment, reinforcing the exemption of warehouse goods awaiting shipment to a destination outside the state from ad valorem property tax. The Court also ruled that the exemption created by the Freeport Amendment should be liberally construed in favor of the taxpayer.

Michael G. Gallaway, of Spilman’s Wheeling, W.Va. office, argued the case for Feroleto in the Supreme Court. He said that if the lower court’s ruling had been permitted to stand, it would have had a chilling effect on businesses that currently warehouse property in West Virginia similar to Feroleto, as well as on new businesses considering West Virginia for their warehousing operations.

“The sound ruling by the Court will keep those businesses currently warehousing in West Virginia from possibly leaving the state for more tax-friendly jurisdictions and provide incentive for other businesses to consider West Virginia for their warehousing needs,” Gallaway stated.

The Freeport Amendment exempts certain items of personal property travelling in interstate commerce from the West Virginia ad valorem tax while the property is warehoused in the state. At its Brooke County, W.Va. facility Feroleto receives coils of steel imported from outside the state. Taking coils from its warehouse, Feroleto cuts the steel to narrower widths per customer specifications. Then it ships the cut-steel coils to customers located outside West Virginia. The Court found that Feroleto was entitled to the tax exemption under the Freeport Amendment because Feroleto’s cutting process did not result in a new or different product or one of different utility.  

In addition to Gallaway, the Spilman team consisted of David R. Croft and Dennis J. McGlaughlin, II, also of the firm’s Wheeling, W.Va. office, and Dale W. Steager of the firm’s Charleston, W.Va. office.
About Spilman Thomas & Battle, PLLC
Spilman Thomas & Battle is a full-service law firm with more than 145 attorneys. Founded in 1864, Spilman has offices in Charleston, Morgantown and Wheeling, W.Va.; Harrisburg and Pittsburgh, Pa.; Winston-Salem, N.C.; and Roanoke, Va.

Litigation State & Local Taxation David R. Croft
304.230.6952 Dennis J. McGlaughlin II