Scale is part of the dealership's strategy. The "Shelor Motor Mile" draws customers from Roanoke and parts north, from West Virginia and even from the tri-cities area around Bristol. Those customers are squired around expansive lots in golf carts as they shop for Volkswagens, Fords, Subarus, Dodges, Chevrolets and Toyotas. Shelor aims to have whatever customers might want in stock.

All of them.

They spent about $50,000 on their end-of-year revolt. They loaded the company-owned tractor-trailer with new and used automobiles. They hired two more auto haulers to move vehicles. They enlisted staff, brought in temporary labor, leased extra space and turned the Shelor Motor Mile into a conspicuously empty parking lot. They took the automobiles to company-owned lots in Roanoke and Pulaski counties and made a parking lot of the New River Valley Speedway, rented for the occasion.

Shelor and company were already battling with the county in court over assessments and administration of the merchants' capital tax, which they say costs in excess of $300,000 annually. "We could see we weren't getting anywhere," Hagan says.

The revolt dramatized their frustration with the inventory tax, a second cousin to the business, professional and occupational license tax on gross receipts. BPOL and merchants' capital tax rates differ widely from locality to locality, and so do methods of applying them. It's a confusing mish-mash.

The General Assembly overhauled the BPOL tax in 1996, then fine-tuned business taxes again in 1999. Perhaps the most important measure coming out of this year's session will allow businesses with a beef over taxes -- BPOL, property, merchants' capital, machine and tool -- to appeal to the state tax commissioner rather than go to court.

The new law does not apply retroactively, so it won't do Shelor any good. But then, he's not banking on success. "You can't make money suing government," he says. "There's no profit in it."

Business taxes have a long history. BPOL was first introduced as a tax on blacksmiths to raise money for the War of 1812. "After the war got won, they decided to keep it around," says French Slaughter, a Charlottesville-based tax attorney with McGuire, Woods, Battle & Boothe.

Why bother with the inventory tax at all? Why not just collect BPOL from everybody? The reason has much to do with Virginia's system of local government in which towns share many of the same taxing powers as counties. Counties must get a town's permission to impose BPOL on businesses with town limits. Fairfax County may decide to forego collecting gross-receipts revenue from businesses in incorporated towns, but some other counties don't have that luxury.

"Probably Montgomery [County] is the most severe situation," Knapp says. It has two of the largest towns in Virginia -- Christiansburg and Blacksburg -- and most business activity takes place within town limits. "Montgomery County is left with the leavings. That's the dilemma." So the county imposes merchants' capital. The board in mid-April considered asking the town's permission to levy BPOL, but decided against it. So Shelor and other businesses pay both a gross-receipts tax to the town and an inventory tax to the county.

To confuse matters more, the State Code prohibits individual localities from imposing both merchants' capital tax and BPOL. But the Weldon Cooper Center report on 1998 tax rates notes that "a number of localities impose both of these taxes." They exempt merchants from BPOL. But "it should be noted that some towns impose both the merchants' capital and BPOL tax on merchants and therefore are not in accordance with the code in Virginia."

Knapp says that may occur because of misinterpretation, complexity of the laws or special waivers obtained by some localities -- a grandfather clause or special legislation. "The State Code ... doesn't make very clear reading."

Slaughter agrees: "This stuff is so fraught with exceptions."

"I think one of the problems is, be it your capital or business license tax, they aren't attuned to the modern sort of business forms," Rowe says.

Maybe there's no such thing as a good tax. But some are worse than others.

"If you take it as a given that you're going to have to raise a certain amount of revenue, then the question becomes: What are the best tax vehicles to use?" Knapp asks. "I think that the commonwealth faces some difficult questions in that area."

Virginia's economy is changing. Merchants like Shelor, and even small service businesses, are easier to tax than the new kids on the block. Economies were once led by manufacturing operations, and those operations chose a home based in large part on the availability of raw materials. "In more modern times," Knapp says, "selling services on the Internet or whatever, their location is more flexible." Businesses selling directly to the public, grocery stores and flower shops among them, have limited choices.

Knapp cites the example of Marriott Corp. in Maryland, which used the threat of relocating to Northern Virginia to win enticements from that state to stay put. "It's the classic case of a company that has a lot of flexibility about where to locate," Knapp says. "It puts a lot of pressure on localities to give a lot of concessions, or not have taxes on businesses. ... Since our economy is moving in that direction, we're going to be moving to more taxes on individuals as consumers, or property owners, or on their income."

Of course, taxes on businesses are a pass-through -- that is, someone eventually pays. "In the final result, taxes on businesses are either paid by the owners, or they're shifted to the consumer, or they're paid in part by the workers in lower wages," Knapp notes. "So taxes on businesses affect us." Yet a tax on corporations is more politically palatable than a tax on the little guy, no matter who pays in the end.

Current state budget surpluses "are being used to repeal the car tax and reduce sales tax on food," notes Rowe, the Hunton & Williams attorney. "The political arm of this state has spoken as to where they think the tax reduction priorities are, and I don't think there is any doubt from the voters."

Gov. Jim Gilmore made it into office by promising to abolish the car tax. The food tax cut was at the top of the General Assembly's agenda in 1999. Business won't get much direct tax relief. But the legislature has made the administration of business taxes a little less vexing. "BPOL, although we all would say it's a bad tax, it is a bit more friendly," says Sandra Bowen, chief lobbyist for the Virginia Chamber of Commerce.

The most recent reforms require that localities pay interest on refunds due -- a change Slaughter says will keep things moving. "I won a case in October last year, and I have yet to see a refund," he says. The dollars can add up -- the October case involved a $270,000 refund for personal property tax levied on a business. "Local guys would drag their feet because they didn't have any reason not to."

Slaughter says one county changed its tax rate on machinery and tools, but the local commissioner of the revenue refused to follow the rate change. "The local commissioners of revenue need to have some accountability to somebody," he says. That matter was resolved with a call to the county attorney, he notes, but the current reforms will ensure accountability beyond the local level.

Businesses have been able to appeal BPOL assessments to the state since 1997. While Rowe and other attorneys have filed appeals, none has reached a conclusion. Still, the administrative process is much simpler and much less expensive than going to court, Rowe says. "This gives the business community a better way to get a fair hearing."

Legislation passed during the 1999 assembly extends administrative appeals to other business taxes -- including merchants' capital and business property. The measure applies to disputes over assessments beginning Jan. 1, 2000, but will not apply to valuations until Jan. 1, 2001.

"We've made a great step in that we've given the law enough form and structure so that people can begin to understand it," Rowe says. "You give people like Shelor the chance to say, ÔI think this is unfair and here's why.'"

Rowe says the Department of Taxation is now coming up with interpretations that can be applied statewide. "Invariably, the nature of taxes is that people don't always agree with what the tax person says they owe," Rowe says. "What I'm finding in my practice is that the commissioners ... are being more careful about what they do because there are more clear rules. We're avoiding a lot of contests."

As business owners appeal and win or lose, tax policy will become more refined. The new laws have rules about what gets taxed where, by whom and at what rates, Bowen says.

One goal that remains is to come up with a more uniform valuation process. Appomattox County, for instance, bases its merchants' capital assessment on 85 percent of the inventory's original cost and Floyd County bases its assessment on 15 percent of the fair market value, according to the Weldon Cooper survey. Pulaski County values inventory at 22 percent, 5 percent or 1 percent of the original cost. It charges less when inventory values reach a certain level, giving a break to businesses with inventory over $20 million by valuing that amount at 1 percent.

"It's a mess," Bowen says. The chamber and other groups will propose recommendations to the assembly's finance committees by Dec. 15.

Business owners, for the most part, are involved in their communities. They recognize the stresses localities face in putting together their budgets. "We aren't ignoring their need for revenue in favor of profits," Slaughter says. "They just need to be fair about how they get it."

Shelor insists he isn't anti-tax. "We had an IRS audit a few years back. The agent was here five and a half months. It was very pleasant, very organized. I guess we just got a good agent. She could not believe ... the amount of money we set aside for this [inventory] tax."

Ed Stone, a Radford attorney, is representing Shelor in a number of lawsuits against the county. The suits argue that the county is assessing and auditing what Shelor owes differently than it does that of other retail businesses.

"Other merchants ... are reporting less than their actual inventory," Stone says. He doesn't have hard evidence -- that will come out through the suits' discovery stage, he says. But he argues that the county must be underassessing major retailers like Wal-Mart and Kmart because Shelor Automotive Group is paying such a big chunk of the tax collected. According to Montgomery County figures, Shelor's share represented 22 percent of all merchants' capital taxes collected in 1995 and 25 percent of those collected in 1996.

"This group is so easy for them to check on," Stone says. "They're huge, and in one spot." In 30 minutes the county can check on the dealership's inventory, he says.

Another suit asks for declaratory judgment on whether Montgomery County can tax inventory that's not in the county on Jan. 1. "We take the position that only property physically located in the county on Jan. 1 can be taxed," Stone says. "The county takes the position that if Shelor owned it, they can tax it."

The county administrator refused Virginia Business' requests for an interview. Montgomery County has argued in prepared statements, however, that in reviewing Shelor's returns "the commissioner of revenue had reason to believe that the value of the inventory on Jan. 1, 1997, had been underreported." A follow-up audit confirmed that belief, the county says. On the argument that others underreport, the county says it has no information to that effect.

As for the question of where the property's located, the county has said this: "Shelor has publicly stated that they have moved inventory out of the county for the sole purpose of avoiding their merchants' capital tax liability. Montgomery County will challenge any attempt to avoid taxes that are legally levied and accurately assessed."

If Shelor wins, Stone says, he'll be shifting his property in advance of Jan. 1 for the foreseeable future -- "as long as they have this idiotic merchants' capital tax." Yes, it's expensive to move 2,400 cars. But what's a little hassle and couple thousand when the tax tops $300,000?

He expects the suits won't end until they hit Richmond. "Whoever loses is going to appeal to the State Supreme Court."