When is a Virginia waterfront facility exempt from VMRC bottomland-use royalties, and does a watercraft dealer license or oyster offloading qualify?

Plain-English summary

Under Virginia Code § 28.2-1206(B), the Virginia Marine Resources Commission (VMRC) generally must collect royalties from waterfront property owners who use state-owned bottomlands (the submerged land between the shore and navigable waters) under a permit. Three categories of commercial facilities are exempt from those royalties: (i) ship construction or repair facilities, (ii) facilities providing services relating to the shipping of domestic or foreign cargo, and (iii) facilities selling or servicing watercraft. The exemption does not extend to royalties for removal of bottom material.

The VMRC Commissioner asked four practical questions about applying the exemption. The AG's answers:

1. Oyster offloading: Whether a pier or wharf used to offload oysters that may be shipped to other states or countries qualifies as a "commercial facility providing services relating to the shipping of domestic or foreign cargo" is a fact-specific determination for VMRC. The AG declined to opine on the specific fact pattern but confirmed VMRC has authority to make reasonable determinations based on attendant facts.

2. Watercraft dealer license as evidence: A watercraft dealer's license from the Department of Game and Inland Fisheries (DGIF) is "persuasive evidence" that a facility is engaged in selling watercraft, but it is not conclusive. A licensee may not actually be conducting the licensed business at the facility. VMRC may require additional proof.

3. Exclusive use requirement: The statute does not require a facility to be used exclusively for an exempt purpose. As long as VMRC concludes the facility is a "commercial facility" and qualifies for one of the exempt categories, mixed uses do not disqualify it.

4. Scope of the exemption: The exemption applies to qualifying "commercial facilities," not to specific activities or specific portions of bottomland. So if a facility qualifies, the exemption covers the entire facility, including portions not used for the exempt purpose.

Currency note

This opinion was issued in 2019. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

Virginia's state-owned subaqueous bottomlands fall under VMRC management. Anyone wanting to build a pier, wharf, or other structure over state bottoms needs a VMRC permit. Code § 28.2-1205(E) provides that permits are in writing, must specify conditions and terms, and must include royalties "unless prohibited under other provisions of this chapter." Code § 28.2-1206(B) creates the prohibition relevant to this opinion. It exempts from royalties "(i) commercial facilities engaged in the business of ship construction or repair, (ii) commercial facilities providing services relating to the shipping of domestic or foreign cargo, and (iii) commercial facilities engaged in the business of selling or servicing watercraft."

VMRC's own Subaqueous Guidelines define "commercial" as a structure "in support of operations that charge for the production, distribution or sale of goods and services." The Guidelines do not have the force of statute, but they reflect VMRC's administrative judgment about what counts as "commercial."

For watercraft dealer licenses, Virginia's Watercraft Dealer Licensing Act (Code §§ 29.1-800 to -829) governs. DGIF issues a license to an eligible person who intends to carry out the "permanent business of bartering, trading and selling of watercraft ... in good faith" at a particular structure (Code § 29.1-801's definition of "established place of business"). Supplemental licenses can attach to additional places of business. The license is evidence that DGIF found the applicant intended to conduct the business; whether the licensee actually does conduct the business is a separate factual question.

Common questions

What is a "commercial facility" for purposes of the exemption?
The statute does not define the term, but VMRC's Subaqueous Guidelines treat it as a structure supporting operations that charge for the production, distribution, or sale of goods and services. VMRC has authority under Code §§ 28.2-101, 28.2-103, and 28.2-1212 to make reasonable determinations about whether a particular facility fits.

Why didn't the AG just say oyster offloading qualifies for the cargo-shipping exemption?
Because whether a particular oyster-offloading operation "relates to" the shipping of domestic or foreign cargo depends on the facts: how the oysters move from the pier, whether they go to interstate or international markets, what services the facility provides beyond just unloading. The AG traditionally declines to make those factual determinations. VMRC is the body with the staff and authority to investigate the facts.

Does having a DGIF watercraft dealer license guarantee the exemption applies?
No. The license shows that DGIF determined the applicant intended to operate a watercraft dealership at the location, but it does not prove the dealership is actually operating. VMRC can accept the license as persuasive evidence but can also require additional proof that the dealer is actively conducting watercraft sales or servicing at the facility.

Can a facility have multiple uses and still qualify?
Yes. The statute does not require exclusive use for an exempt purpose. A marina that sells watercraft but also rents docks, runs a restaurant, and stores boats can still qualify for the exemption if VMRC determines it is a "commercial facility" engaged in selling or servicing watercraft.

Does the exemption cover the entire facility or just the parts where the exempt activity occurs?
The entire facility. The statutory exemptions apply to "facilities" rather than to specific activities or bottomland portions. So a marina that sells watercraft is fully exempt from royalties for its bottomland use, even for parts of the facility used for non-watercraft purposes.

Does the exemption cover royalties on removing bottom material (dredging fees)?
No. Code § 28.2-1206(B) and (C) explicitly preserve royalties for the removal of bottom material. The exemption is specifically for the use of state-owned bottoms, not for taking material from them.

What if VMRC decides a facility is not a commercial facility under its interpretation?
The AG noted VMRC's discretion to make reasonable, fact-based determinations. A facility that disagrees with VMRC's determination would have administrative appeal options and potentially judicial review under the Virginia Administrative Process Act.

Citations

• Va. Code § 28.2-1206 (commercial-facility exemptions from royalties)
• Va. Code § 28.2-1205(E) (permit terms and royalties)
• Va. Code §§ 28.2-101, 28.2-103, 28.2-1212 (VMRC authority)
• Va. Code §§ 29.1-800 to -829 (Watercraft Dealer Licensing Act)
• Va. Code § 29.1-801 (definition of "established place of business")
• VMRC Subaqueous Guidelines (defining "commercial")

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/opinions/2019/18-013-Opinion-to-Steven-Bowman-VMRC-Issued.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Mark R. Herring
Attorney General

January 4, 2019

Mr. Steven G. Bowman
Commissioner, Virginia Marine Resources Commission
2600 Washington Avenue, Third Floor
Newport News, Virginia 23607

Dear Commissioner Bowman:
I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of
the Code of Virginia.

Issues Presented
You ask several questions regarding the interpretation of § 28.2-1206(B) of the Code of Virginia,
which provides that riparian owners of certain commercial facilities generally are exempt from the
payment of royalties assessed by the Virginia Marine Resources Commission (VMRC) for the use of
state-owned bottomlands.[1] Specifically, the exemption in § 28.2-1206(B) applies to "(i) commercial
facilities engaged in the business of ship construction or repair, (ii) commercial facilities providing
services relating to the shipping of domestic or foreign cargo, and (iii) commercial facilities engaged in
the business of selling or servicing watercraft."[2]

Your questions are as follows:

1) Does the exemption from the payment of royalties in § 28.2-1206(B) for "commercial
facilities providing services relating to the shipping of domestic or foreign cargo" apply if
an entity utilizes its pier or wharf to offload oysters that may be shipped to other states or
countries?

2) Does the issuance of a watercraft dealer's license from the Department of Game and
Inland Fisheries (DGIF) that is attached to a specific facility provide sufficient evidence
for that facility to satisfy the exemption from the payment of royalties in § 28.2-1206(B)
for "commercial facilities engaged in the business of selling or servicing watercraft"?

3) Must a facility be used exclusively for one or more of the activities described in
§ 28.2-1206(B) to qualify its owner for an exemption from the payment of royalties?

4) Do the exemptions from the payment of royalties in § 28.2-1206(B) for "commercial
facilities engaged in the business of ship construction or repair," and those "engaged in
the business of selling or servicing watercraft," apply to an entire facility, or only the
water bottom over which one of those activities occurs?

Applicable Law and Discussion

Question One
You first ask whether an entity that utilizes its pier or wharf to offload oysters that may be
shipped to other states or countries is eligible for exemption from the payment of royalties in
§ 28.2-1206(B) that applies to "commercial facilities providing services relating to the shipping of
domestic or foreign cargo." Answering this inquiry would require an examination of all relevant facts
pertaining to a particular facility. The Office of the Attorney General traditionally has declined to
comment on matters requiring factual determination.[3] Therefore, I respectfully decline to provide a
specific answer to this question.

I note, however, that it is within the scope of VMRC's authority to make reasonable
determinations, in light of the attendant facts, concerning 1) whether an entity's facility is a "commercial
facility,"[4] and if so, 2) whether a particular service provided at the facility "relates to" the shipping of
domestic or foreign cargo such that the facility's owner would be exempt from the payment of royalties
under § 28.2-1206(B).[5]

Question Two
You next ask whether the issuance of a watercraft dealer's license from the Department of Game
and Inland Fisheries (DGIF) that is attached to a specific facility provides sufficient evidence for the
facility to satisfy the exemption in § 28.2-1206(B) for "commercial facilities engaged in the business of
selling or servicing watercraft." The Virginia Watercraft Dealer Licensing Act[6] provides that DGIF may
issue a watercraft dealer's license to an eligible person who intends to carry out the "permanent business
of bartering, trading and selling of watercraft ... in good faith" in a particular building or structure.[7]
Because a person may be issued a watercraft dealer's license, yet fail to "engage[] in the business of
selling or servicing watercraft," issuance of a license does not per se establish that a person's facility is a
"commercial facility"[8] and entitled to the exemption described.

Accordingly, it is my view that VMRC may accept a watercraft dealer's license as persuasive
evidence that a facility is engaged in the business of selling watercraft, but it also may require additional
proof that such activity is, in fact, being conducted at the facility. Whether VMRC is required to
investigate any particular facility to determine whether it has satisfied the conditions for exemption, and
the matter of the evidence it deems satisfactory, are outside the scope of this opinion.

Question Three
You further ask whether a facility must be used exclusively for one or more of the activities
described in § 28.2-1206(B) to qualify its owner for an exemption from the payment of royalties. While a
facility must be deemed "commercial" in nature by VMRC for an exemption to apply,[9] the language of
§ 28.2-1206(B) does not expressly require that a facility be used exclusively for one or more of the
purposes described therein (that is, ship construction or repair, provision of services relating to the
shipping of cargo, or selling or servicing watercraft) for its owner to qualify for exemption from the
payment of royalties.

Question Four
Finally, you ask whether the exemptions from the payment of royalties for "commercial facilities
engaged in the business of ship construction or repair," and those "engaged in the business of selling or
servicing watercraft," apply to an entire facility, or only the water bottom over which one of those
activities occurs. The language of the exemptions in § 28.2-1206(B) applies to qualifying "commercial
facilities," rather than to activities. Therefore, in my opinion, provided a facility is deemed a "commercial
facility," an applicable exemption should cover the entire facility, including any parts that are not used for
one of the purposes described in § 28.2-1206(B).

Conclusion
Accordingly, it is my opinion that:

1) It is within the scope of VMRC's authority to make reasonable determinations, in light of
the attendant facts, concerning whether an entity's facility is a "commercial facility," and
if so, whether a particular service provided at the facility "relates to" the shipping of
domestic or foreign cargo such that the facility's owner would be exempt from the
payment of royalties under § 28.2-1206(B);

2) VMRC may accept a watercraft dealer's license as persuasive evidence that a facility is
engaged in the business of selling watercraft, but it also may require additional proof that
such activity is, in fact, being conducted at the facility;

3) While a facility must be deemed "commercial" in nature by VMRC for an exemption to
apply, the language of § 28.2-1206(B) does not expressly require that a facility be used
exclusively for one or more of the purposes described therein for its owner to qualify for
exemption from the payment of royalties;

4) Provided a facility is deemed a "commercial facility" by VMRC, an applicable
exemption in § 28.2-1206(B) should cover the entire facility, including any parts not used
for one of the purposes described in that subsection.

With kindest regards, I am,

Very truly yours,

Mark R. Herring
Attorney General

1. A permit issued by VMRC is required for the use of state-owned bottomlands. Pursuant to § 28.2-1205(E), all such permits "shall be in writing and specify the conditions and terms that the Commission determines are appropriate, and royalties unless prohibited under other provisions of this chapter [Chapter 12 of Title 28.2]" (emphasis added).
2. VA. CODE ANN. § 28.2-1206(B) (2016). The exemption, however, does not extend to assessments of royalties for the removal of bottom material. See id. at subsections (B) and (C).
3. See, e.g., 2013 Op. Va. Att'y Gen. 213, 216 & n.19.
4. VMRC's Subaqueous Guidelines provide that "[a] structure is considered commercial if it is in support of operations that charge for the production, distribution or sale of goods and services." VMRC, Subaqueous Guidelines, at 11, available at http://mrc.virginia.gov/regulations/subaqueous_guidelines.shtm.
5. See VA. CODE ANN. §§ 28.2-101 (2016), 28.2-103 (2016), 28.2-1212 (2016).
6. VA. CODE ANN. §§ 29.1-800 to -829 (2015).
7. VA. CODE ANN. 29.1-801 (definition of "established place of business"). See also VA. CODE ANN. §§ 29.1-808, -809, -819. Supplemental licenses also may be issued if the watercraft dealer has more than one place of business: each supplemental license attaches to a particular place of business. See § 29.1-812 (providing for the issuance of temporary and supplemental watercraft dealer's licenses).
8. See supra, note 4 and accompanying text.
9. See supra, note 4 and accompanying text.