title-110•Title 110 W. Va. C.S.R.
Tax Tax
Series 01A Valuation of Farmland and Structures Situated Thereon for Ad Valorem Property Tax Purposes
W. Va. Code R. § 110-1A-1 General
1.1. Scope. -- These regulations clarify and implement state law relating to the appraisal of farmland and structures situated thereon. Because these regulations provide context modifications of relevant parts of 110 C.S.R 1 and such regulations with context changes were adopted by the Tax Commissioner, W. Va. Code §11-1C-10(e), W. Va. Code §11-1C-5(b) eliminates the requirement that this filing be subject to the proceeding requirements of W. Va. Code §29A-3-1 et seq.
1.2. Authority. -- W. Va. Code §11-1C-5(b).
1.3. Filing Date. -- August 27, 2021
1.4. Effective Date. -- September 27, 2021
W. Va. Code R. § 110-1A-2 Valuation Rule
2.1. Scope. This rule prescribes how the appraised value of farmland and structures situated thereon will be determined for property tax purposes. This rule does not define what property is subject to assessment for ad valorem property taxes. Second, this rule does not prescribe how the appraised values determined under it will be adjusted on account of substitutions, accretions, improvements, additions, replacements, destructions, removals, casualties, acts of God, waste or any like occurrence. Third, this rule does not prescribe when appraised values determined under it will first be used.
2.2. Use of rule. This rule shall be followed by all persons valuing farmland and structures situated thereon in all counties in which such property is located or has a tax situs. This is necessary in order to meet the requirement in the West Virginia Constitution, article X, §1, that ad valorem property taxation be equal and uniform throughout the State. Consequently, once this rule is finally promulgated, it shall be binding upon the Tax Commission and his employees, county assessors and their employees, county commissions, sitting as boards of equalization and review and as administrative appraisal review boards, and the Board of Public Works. until amended or repealed by the Tax Commissioner in the manner prescribed by law, or abrogated by statutory amendment, or decision of the West Virginia Supreme Court of Appeals. See W. Va. Code §11-1a-24 (1983). The objective of these regulations is the appraisal of all real property used as farmland and structures situated thereon at its value for farm purposes.
2.3. Construction. This rule shall be applied, and interpreted in case of any ambiguity, in conformity with the West Virginia Constitution, and the several provisions of the W. Va. Code relating to the definition and determination of appraised value for purposes of ad valorem property taxation. In no event shall this rule be construed as requiring any property to be appraised in excess of its market value, or as subjecting to tax any property that is exempt from ad valorem property taxation under laws of the United States of this State.
2.4. Annual Updating. This rule shall be reviewed annually and amended as necessary in accordance with the provisions and requirements of W. Va. Code §29A-3-1 et seq., in order to properly reflect any future changes in statutory or case law, to clarify application(s) of existing laws or legislative regulations and to amend policies and procedures of the State Tax Department adopted by procedural or interpretive regulations to implement such laws or regulations. Whenever this rule requires the Tax Commissioner to annually determine factors such as capitalization rates, acreage classification, etc., notice of his determinations shall be given to the public by filing notice thereof in the State Register; and by sending a copy of the notice to each assessor.
2.5. Definition. The following definitions of terms as used in these regulations shall apply, unless the context clearly requires a different meaning.
2.5.1. Agriculture. The term "agriculture" shall mean cultivation of the soil, including the planting and harvesting of crops and the breeding and management of livestock. See W. Va. Code §11-5-3. Unless the context requires a more limited meaning, the term "agriculture" includes "horticulture" and "grazing". In this context, the term "agriculture" shall mean the production of food, fiber, and ornamental woodland products, by means of cultivation, tillage of the soil and by the conduct of farm animal, livestock, dairy, apiary, equine or poultry husbandry, and the practice of horticulture, or any other plant or farm animal production and all farm practices related, usual or incidental thereto, including storage, packing, shipping and marketing, but not including any manufacturing, milling or processing of such products by persons other than the producer thereof. See W. Va. Code §19-19-2(a). Agriculture shall not include commercial forestry or the growing of timber for commercial purposes: Provided, that the growing of Christmas trees, orchards and nursery stock shall not be deemed to be commercial forestry or the growing of timber for commercial purposes. See W. Va. Code §11-1a-3(f) and (g), definitions "farm" and "farming purposes".
2.5.2. Agricultural. The term “agricultural” shall mean of or relating to agriculture.
2.5.3. Agricultural Land. The term “agricultural land” shall mean of or relating to agriculture.
2.5.3.a. Not less than five (5) acres of land and the improvements thereupon, used or useable in the production of agricultural or farm products having an annual value of one thousand dollars ($1,000), or more, by the conduct of the business of agriculture, as defined in paragraph (1) of this section. See W. Va. Code §19-19-2(b), or
2.5.3.b. Less than five (5) acres of land, part, or all of which is used to produce agricultural or farm products for sale, if annual gross proceeds from such sales are five hundred dollars ($500.00) or more.
(Note: Agricultural land is not automatically eligible for farm use appraisal. See Section 2.6.3. for qualifications.)
2.5.4. Capitalization Rate. The term "capitalization rate" shall mean a rate used to convert an estimate of income to an estimate of market value.
2.5.5. Depreciation. The term "depreciation" means the loss in value of an object, relative to its replacement cost, and is divided into three (3) types: physical deterioration; functional obsolescence; and economic obsolescence.
2.5.5.a. Economic Obsolescence. - A loss in value of a property arising from "outside forces" such as changes in use, legislation that restricts or impairs property rights, or changes in supply and demand relationships.
2.5.5.b. Functional Obsolescence. The loss of value due to factors such as excess capacity, changes in technology, flow of material, seasonal use, part-time use or other like factors. The inability to perform adequately the functions for which an item was designed or the incapability to be adapted to alternative uses.
2.5.5.c. Physical Deterioration. A loss in value due to wear and tear.
2.5.5.d. Replacement Cost. The cost of constructing a building or improvement having the same utility, but using modern materials, design and workmanship.
2.5.6. Farm. The term "farm" shall mean a tract or contiguous tracts of land currently being used as part of a farming operation, primarily for farming purposes, whether by the owner thereof, or by a tenant, and which has been so used at least seasonally during the year immediately preceding the then current tax year (unless it qualifies for one of the exceptions in Section 2.6.3.b. of these regulations, but shall not include lands used primarily in commercial purposes: Provided, that the growing of Christmas trees or orchards and nursery stock shall not be deemed to be commercial forestry or the growing of timber for commercial purposes. See W. Va. Code §11-1a-3(f) and (g) defining "farm" and "farming purposes" and §11-4-3, defining "farm". For the purposes of this definition, "contiguous tracts" are farmlands which are in close proximity, but not necessarily adjacent: Provided, that all such contiguous tracts are operated as part of the same farm management plan.
2.5.7. Farm Animal. - The term "farm animal" shall mean and include any animal commonly found on a farm except that wildlife shall not be considered or deemed to be a farm animal unless intentionally and legally nurtured or raised and is intended for farm work, consumption as food or other commercial activity. This would include, but not be limited to, catfish, rabbits, buffalo, mink, foxes and otters.
2.5.8. Farm Building. The term "farm buildings" shall mean structures which directly contribute to the operation of the farm and shall include tenant houses and quarters furnished farm employees without rent as part of the terms of their employment: Provided, that conservation practices, such as high tunnels, shall not be considered as farm buildings or otherwise evaluated as structures for the purposes of applying this rule.
2.5.9. Farm Purposes. The term "farm purposes" shall mean the utilization of land to produce for sale, consumption or use, any agricultural products, including, but not limited to, livestock, poultry, fruit, vegetables, grains or hays or any of the products derived from any of the foregoing, tobacco, syrups, honey, and any and all horticultural and nursery stock, Christmas trees, all sizes of ornamental trees, sod, seed and any and all similar commodities or products including farm wood lots and the parts of a farm which are lands lying fallow or in timber or in wastelands. See W. Va. Code §11-1a-3(g).
2.5.10. Farm Rent. The term "farm rent" shall mean the consideration paid by a lessee to lease land used for farming purposes. Such consideration may be in cash or in kind, or a combination thereof.
2.5.11. Farm Use Application. The term "farm use application" means the application form designed by the Tax Commissioner which the landowner must complete and file with the county assessor on or before September 1st of each year in order to claim and obtain farm use valuation for the assessment year beginning July 1st of each year.
2.5.12. Application Form. The application form required to be filed with the assessor on or before September 1st of each year shall require certification that the farm complies with criteria set forth in Section 2.6.3. of these regulations, and renewal application from year to year shall be sufficient upon statement certifying that no change has been made in the use of farm property which would disqualify "farm use" classification for assessment purposes .
2.5.13. Farm Use Valuation. The term "farm use valuation" shall mean a value estimated by capitalizing the fair and reasonable income which farm property might be expected to earn in the locality where situated, if rented.
2.5.14. Filing Date. The term "filing date" shall mean the date by which the annual application for farm use must be received by the assessor of the county wherein the property is situated. This application for farm use must be annually filed and received by the assessor on or before September 1st following the July 1st assessment date.
2.5.15. Grazing. The term "grazing" shall mean the use of land for pasturage. See W. Va. Code §11-5-3.
2.5.16. High Tunnels, also known by other names, including but not limited to, polytunnels or hoophouses, are unheated, plastic-covered structures that provide an intermediate level of environmental protection and control compared to open field conditions and heated greenhouses.
2.5.17. Horticulture. The term "horticulture" shall mean plant production of every character except forestry and plants not legally grown. See W. Va. Code §11-5-3.
2.5.18. Horticultural. The term "horticultural" shall mean of or relating to horticulture.
2.5.19. Management Rate. The term "management rate" shall mean a rate reflecting a return to an investor for the management of similar investment portfolios.
2.5.20. Natural Resource. The term "natural resource" shall mean and include the coal, oil, gas, ore, limestone, fireclay or other mineral or mineral substance(s) in and under the surface of the land, and the timber thereon.
2.5.21. Non-Liquidity Rate. The term "non-liquidity rate “shall mean a rate reflecting a return to an investor representing the loss of interest on an investment arising from the time required to sell the investment.
2.5.22. Normal Gross Rent. The term "normal gross rent" shall mean the rental amount which a property would attain in the open market at the time of appraisal, whether it is higher, lower or the same as the actual contract rent.
2.5.23. Nursery. The term "nursery" shall mean and include any ground or premises on or in which plants are grown for sale or distribution and transplanting. This may include any place where nursery stock is being treated, packed, or stored in preparation for sale, if such place is leased to or owned by the same person (including a firm or corporation) who owns the plants while they are growing in the same nursery.
2.5.24. Nursery Stock. The term "nursery stock" shall mean all trees, shrubs and woody vines, including ornamentals, bush fruits, grapevines, fruit trees and nut trees, whether cultivated, native or wild, and all buds, grafts, scions, fruit pits and cuttings from such plants. It also shall mean sod, including sod plugs and sod producing plants, and herbaceous plants, including strawberry plants, narcissus plants and narcissus bulbs. Florists' or greenhouse plants for inside culture or use shall not be considered nursery stock, except that all woody plants, whether greenhouse or field grown, if for outside planting, are hereby defined as "nursery stock". See W. Va. Code §19-12-2(g). No plant shall be considered nursery stock unless it is situated in an actual "nursery," as defined in subsection 2.5.23. of this section.
2.5.25. Plant and Plant Products. The terms "plant" and "plant products" shall mean trees, shrubs, vines; forage, fiber, cereal plants, and all other plants; cuttings, grafts, scions, buds and all other parts of plants; and fruit, vegetables, roots, bulbs, seeds and all other parts of plants and plant products. See W. Va. Code §19-12-2(i).
2.5.26. Property Tax Component. The term "property tax component" shall mean a rate reflecting a provision for returning to an investor a sum of money equal to property taxes paid over the life of the investment.
2.5.27. Risk Rate. The term "risk rate" shall mean a rate reflecting a return to an investor a necessary to attract capital to an investment containing a possible loss of principal or interest, or both.
2.5.27.a. Safe Rate. The term "safe rate" shall mean a rate reflecting a return to an investor on an investment which has little, if any, likelihood of loss of principal or anticipated return on investment.
2.5.27.b. Wood Lot. The term "wood lot" shall mean that portion of a farm in timber but shall not include land used primarily for the growing of timber for commercial purposes except that Christmas trees, or nursery stock and woodland products, such as nuts or fruits harvested for human consumption, shall be considered farm products and not timber products.
2.5.27.c. Woodland Products. The term "woodland product" shall mean cut trees, firewood, posts, rails, splints, logs, limbs and similar wood products and hickory nuts, walnuts, beechnuts, butternuts, and similar edible nuts or fruits of woody plants and maple sap used in making syrup and maple sugar.
2.6. Valuation Procedure.
2.6.1. General. This rule prescribes valuation methodologies to be employed in the appraisal of farm real estate (including the natural resource present) and the method of assessment of lands or minerals owned by domestic or foreign corporations where the surface land is used for farm purposes: Provided, That the true and actual value of all farms used, occupied and cultivated by their owners or bona fide tenants shall be arrived at according to the fair and reasonable value of the property for the purpose for which it is actually used regardless of what the value of the property would be if used for some other purpose; and that the true and actual value shall be arrived at by giving consideration to the fair and reasonable income which the same might be expected to earn under normal conditions in the locality wherein situated, if rented: Provided, however, That nothing herein shall alter the method of assessment of lands or minerals owned by domestic or foreign corporation.
2.6.2. Criteria. The following factors shall be indicative of but not conclusive in determining whether lands which appear to be actively devoted to farm or agricultural use are in fact bona fide farms:
2.6.2.a. Present and past use of the land, in particular, the use during the year immediately preceding the then current tax year.
2.6.2.b. Participation in governmental or private agricultural programs such as soil conservation, farmland preservation or federal farm lending agencies.
2.6.2.c. Extent of production for sale of plants, livestock and food for human and animal consumption.
2.6.2.d. Size of the parcel or parcels farmed. In particular, whether such size is economically compatible with the agricultural use to which the land is purportedly devoted.
2.6.2.e. The amount of acreage in crops, pasture, and woodland.
2.6.2.f. The amount of livestock or poultry maintained thereon.
2.6.2.g. Whether or nor the farmer practices "custom farming" on the land in question.
2.6.2.h. The inventory of farm equipment and the condition thereof.
2.6.2.i. The number, type, utility, and condition of farm buildings.
2.6.2.j. The ratio of farm or agricultural use of the land to other uses of the land.
2.6.2.k. The occurrence of multiple sales for nonfarm uses of parcels out of a tract. The marketing of land as evidenced by such sales shall be strong, but not conclusive, evidence that the property is not a bona fide farm.
2.6.2.l. Woodland shall be considered land of a bona fide farm only if:
2.6.2.l.1. It is part of or appurtenant to a tract of land which is determined by the assessor to be actively devoted to farm or agricultural use; or
2.6.2.l.2. It is contiguous to or operated in common with a tract of land in the same ownership which has been determined by the assessor to be actively devoted to agricultural use, and such woodland is not used primarily in commercial forestry or the growing of timber for commercial purposes or any nonfarm use.
2.6.3. Qualification. - Qualifying farmland and the structures situated thereon shall be subject to farm use valuation, with primary consideration being given to the income which the property might be expected to earn, in the locality wherein situated, if rented. However, for land to qualify for farm use valuation, all the following criteria must be met:
2.6.3.a. The property must be classified as a "farm," as defined in Section 2.5 of these regulations.
2.6.3.b. The property must be agricultural land used for "farm purposes," as defined in Section 2.5 of these regulations, at least seasonally during the year immediately preceding the then current tax year, except that property which because of a change in management, natural disaster or other good reason was temporarily out of production, or temporarily operated at less than full production, and did not produce a sufficient crop in the immediately preceding year will nevertheless qualify if it otherwise meets the requirements: Provided, That no individual event shall be considered adequate to allow exemption under this paragraph for more than two (2) consecutive years. See W. Va. Code §§11-1a-3(f) and 11-1a-3(g).
2.6.3.c. The property must, in total, comprise not less than five (5) acres of land, except that property comprising less than five (5) acres, which otherwise qualifies, may nevertheless qualify if it meets the income test set forth in Section 2.6.3.d. below.
2.6.3.d. Unless excepted under Section 2.6.3.b., the land must be utilized to produce as follows:
2.6.3.d.1. General Rule. The farm must produce for sale, consumption or use agricultural products (as listed in the definition of Farm purposes in Section 2.5 of these regulations) having a fair market value to the producer of at least one thousand dollars ($1,000), including any government subsidies or payments for farm products which may be given away: or
2.6.3.d.2. Small Farm Rule. If the farm has a total area of less than five (5) acres, then it must produce and sell at least five hundred dollars ($500.00) worth of agricultural products (as listed in the definition of Farm Purposes in Section 2.5 of these regulations): or
2.6.3.d.3. Biennial Harvests. If the property would qualify for farm use appraisal, except that it produced little or no harvest in the preceding tax year because it is substantially being used to produce a farm produce which does not normally produce a harvest every year, this property shall be classified as farm property even during the years when there is no harvest and required to meet the one thousand dollars ($1,000.00) minimum production value, or the small farm five hundred dollars ($500.00) minimum production and sale, only during those years when there is an actual harvest: or
2.6.3.d.4. Pre-production Rule. If the property qualifies for farm use appraisal except for meeting the one thousand dollars ($1,000.00) annual farm production test, then, if the failure is due to the farm product being in the growing or development stage (which by its very nature requires more than one (1) year to mature) the property is eligible for farm use appraisal: Provided, That
2.6.3.d.4.A. The crop must have been planted (in whole or in part) on or before the July first assessment day for which farm use value is sought; or
2.6.3.d.4.B. The livestock must have been acquired (in whole or in part) on or before the July first assessment day for which farm use value is sought. Additionally, a farm development plan must be attached to the application, outlining by year the plan for development of a productive farm. Within ten (10) years thereafter (including the first year for which farm use value is sought), the value of farm production must reach an annual wholesale value of one thousand dollars ($1,000.00) or more. Otherwise, farm use value is lost for the next tax year.
2.6.3.e. The annual wholesale of such farm commodities or products must be fifty percent (50%) or more of the annual gross income derived from surface land use of the property.
2.6.3.f. The application for farm use value must be submitted as required in Section 2.8 of these regulations, and explain the basis for the applicant's estimate of value of farm commodities or products produced from the property for which farm use is sought.
2.6.3.g. Farm property producing income from natural resources, mineral income, or property from which the mineral estate has been severed, shall be treated in accordance with the provisions of Section 2.6.6.c. of these regulations.
2.6.4. Disqualifications. The following land is not eligible for farm land valuation
2.6.4.a. Land not used at least seasonally during the year immediately preceding the current year for farming purposes, unless it qualifies under Section 2.6.3.b of these regulations as land temporarily out of production or under Section 2.6.3.d.3. as land producing crops which do not produce an annual harvest or under Section 2.6.3.d.4. as land being developed to produce agricultural products.
2.6.4.b. Land consisting of a single tract of less than five (5) acres, (or contiguous tract of land, the combined acreage of which is less than five (5) acres) unless it qualifies as a small farm under Section 2.6.3.d.2.
2.6.4.c. Land used primarily in commercial forestry or the growing of timber for commercial purposes except that Christmas trees, ornamental plants and woodland products grown for human consumption are farm products grown not timber or forestry products.
2.6.4.c.1. Occasional casual sales of other wood or woodland products in relatively small quantities, or sales of wood or woodland products incidental to, and normal part of, the operation of a farm shall not constitute commercial forestry or the sale of timber for commercial purposes. Such sales may be counted toward the annual determination of the value of farm commodities on products under Section 2.6.3.d. of these regulations. If timber from a portion of a farm is sold for commercial timber, and the proceeds from the sale are greater than the value of agricultural crops produced by the land, the timber area (only) shall be appraised as commercial timberland until and unless it is used for some other purpose or is being converted to farm production uses.
Example. Sales by orchardists or Christmas tree growers of trees, logs, limbs, or similar wood products as a result of the clearing of old trees and planting of new trees in accordance with good farming practice, or as a result of periodic pruning or trimming or removal of damaged or deceased trees is incidental to, and a normal part of, the operation of orchards, and shall not constitute commercial forestry or the sale of timber for commercial purposes.
2.6.4.d. Land owned by a corporation that is not primarily engaged in the business of farming. In the event that the controlling stock interest in such corporation is owned by another corporation, that corporation owning the controlling interest must also be primarily engaged in the business of farming.
2.6.4.e. Property contained in a managed timberland application (110 C.S.R. 1H, §15).
2.6.5. Method. - Real property that is used primarily for farming purposes under these regulations shall be valued by giving primary consideration to the fair and reasonable income which the property might be expected to earn in the locality, where situated, if rented. To accomplish this valuation the following procedures shall be employed.
2.6.5.a. Rental information on a cash or share basis for pasture, tillable and wood lot land shall be collected and verified by the Tax Commissioner, or assessors in each county. Provided, That where rental information is not available or is deemed insufficient by the assessor in any given locale the rental information from similar neighboring locales, may be considered in order to determine the rent attributable to each classified acre of farmland. If that information is also deemed by the Commissioner to be insufficient, he may use the best rental information available to him.
2.6.5.b. Rental rates shall be established annually by the Assessors after a review of identifiable, willing seller-willing buyer arms-length farmland leases that have occurred in the State of West Virginia during the eight (8) years (W. Va. Code §11-1A-3) prior to the appraisal date and through review of any other appropriate information. The review shall give primary emphasis to the information and leases transacted during the most recent years.
2.6.6. Valuation.
2.6.6.a. Farmland. Farmland shall be classified based upon its actual farm use in the categories illustrated in Appendix 1. Rental amounts by class shall be assigned to each class of land on a per acre basis. The per acre rental value shall be capitalized to yield an appraised value per acre. The appraisal value per acre thus determined shall be multiplied by the number of farm surface acres to yield the appraised value of farmland. This value shall be the farm use value as required by W. Va. Code §11-1A-10.
2.6.6.b. Farm Buildings. Rental value of farm buildings and other improvements on the farmland, shall be valued by determining the replacement cost of the building or structure by usual farm construction practices, and farm labor standards and subtracting therefrom depreciation. Both of these determinations shall be made in accordance with the Tax's Department's real property appraisal manual as filed in the State Register in accordance with Chapter 29A of the Code of West Virginia, 1931, as amended, and as it relates to agricultural buildings and structures. One (1) acre of land shall be assigned to all buildings as a unit situate on the property, regardless of the actual acreage occupied by such buildings and shall be appraised at its farm-use valuation based on the highest class of farmland present on the farm.
2.6.6.c. Timber & Other Natural Resources. - Minerals, timber and other natural resources on or under farmland subject to farm use valuation will (except for woodlots) be valued based upon the following circumstances, except that timber managed in accordance with Section 2.6.4.c.1. shall be subject to farm use appraisal only.
2.6.6.c.1. Fee estates which include natural resources, where income is not derived from such natural resource(s), shall be subject to farm use valuation only. Such natural resource(s) as may underlie or be present on such fee estates shall not be valued so long as income is not derived therefrom.
2.6.6.c.2. Fee estates which include natural resources, where income is derived from such natural resource(s), shall be valued as follows:
2.6.6.c.2.A. Fee estates where the annual wholesale value of farm commodities or products, as enumerated in Section 2.5 of these regulations is fifty percent (50%) or more of the usual annual gross income from all uses of the property, shall be subject to farm use valuation.
2.6.6.c.2.B. Fee estates where the annual wholesale value of farm commodities or products as enumerated in Section 2.5 of these regulations is less than fifty percent (50%) of the usual annual gross income from all uses of the property, shall be valued by adding to the surface farm use value, the applicable natural resource value as provided in the applicable rules for valuation of minerals and other natural resources.
2.6.6.c.2.C. For the purposes of these regulations, payments in kind of natural resources to any person from such fee estates shall be considered nonfarm income. For example: Payments of so called "free gas" to lessors to tenants of a natural gas producing tract are nonfarm income for the purposes of these regulations.
2.6.6.c.3. Estates in land arising from the severance of the surface and any mineral estate, shall be valued as follows:
2.6.6.c.3.A. Each separate estate in land, if owned by the person requesting farm use valuation, shall be valued as follows:
2.6.6.c.3.A.1. Where the annual wholesale value of farm commodities or products as enumerated in Section 2.5 of these regulations is fifty percent (50%) or more of the usual annual gross income from all separate estates, the property shall be subject to farm use valuation only.
2.6.6.c.3.A.2. Where the annual wholesale value of farm commodities or products, as enumerated in Section 2.5 of these regulations is less than fifty percent (50%) of the usual annual gross income from all uses of the separate estates, the property shall be valued by adding to the surface farm use value, the applicable natural resource value as provided in the applicable rules for valuation of minerals and other natural resources.
2.6.6.c.3.B. Where the owner of any freehold estate in land is not the person requesting farm use valuation, those estates shall be valued as follows:
2.6.6.c.3.B.1. The estate which encompasses the surface land shall be subject to farm use valuation.
2.6.6.c.3.B.2. The estate(s) which do not encompass surface land shall be valued as provided in the applicable rules for valuation of minerals and other natural resources. Provided, however, that nothing herein shall alter the method of valuation of lands or minerals owned by domestic or foreign corporations. Property owned by a corporation or an unincorporated business is not considered a farm or land used for farming purposes unless the principal activity of the corporation or unincorporated business is the business of farming, and in the event that the controlling stock interest in a corporation is owned by another corporation, the corporation owning the controlling interest must also be in the business of farming. A corporation or unincorporated business shall be deemed to be primarily engaged in the business of farming if, the wholesale value of farm commodities or products as enumerated in Section 2.5 of these regulations is fifty percent (50%) or more of the annual gross income of the corporation or unincorporated business. An individual employed other than in farming is not an unincorporated business.
2.6.6.d. Life Estates and Estates and Interests Less Than Fee Simple. Life estates, dower interests, terms of years, remainders, remainder interests and similar estates and interests in property qualified for farm real estate valuation under these regulations shall be valued at present value based upon the farmland valuation of the property derived in accordance with these regulations.
2.7. Capitalization Rule.
2.7.1. Discussion. - A single statewide capitalization rate will be determined annually by the Tax Commissioner through the use of generally accepted methods for estimating such rates. The rate so developed will assume a level perpetual income series. The capitalization rate used to value farmland will be developed considered (1) a discount rate determined by the summation technique, (2) a recapture component, and (3) a property tax component.
2.7.2. Components. - Components of the capitalization rate are as follows:
2.7.2.a. Discount Component.
2.7.1.a.1. Summation Technique. The summation technique will be employed in developing a discount component in the valuation of farmland. Since land is a non-wasting asset and is expected to last indefinitely the rental income from land is assumed to be perpetual. The present value of future rentals for farmland will be estimated reflecting the following four (4) major subcomponents of a discounts of a discount rate:
2.7.1.a.1.A. Safe Rate. The "Safe Rate" will be developed through review of quarterly interest rates offered on thirteen (13) week United States Treasury Bills for a period of three (3) years prior to the appraisal date.
2.7.1.a.1.B. Risk Rate. The "Risk Rate" will be developed through review of data resulting from an annual survey of lending institution, such survey reflecting interest rates required on loans for acquisition and/or development of farmland. This survey will be conducted for a three (3) year period prior to the appraisal date. Results of the survey will be compared to quarterly interest rates offered on thirteen (13) week United States Treasury Bills for the same three (3) year period. An interest differential will then be selected representing the "Risk Rate."
2.7.1.a.1.C. Non-Liquidity Rate. The "Non-Liquidity Rate" will be developed through an annual survey to determine a reasonable estimate of time that farmland remains on the market before being sold. The selling time requirement thus determined will be used to identify United States Treasury Bills with similar time differentials in excess of thirteen (13) week Treasury Bills. The interest differential between these securities will be deemed to be representative of the "Non-Liquidity Rate."
2.7.1.a.1.D. Management Rate. The "Management Rate" will be developed through a survey of investment firms to identify charges for the management of investment portfolios.
2.7.2.b. Recapture Component. Land is a nonwasting asset and is expected to last indefinitely. Given this characteristic, inclusion of a recapture component in the capitalization rate is not appropriate.
2.7.2.c. Property Tax Component. This component will be derived by multiplying the assessment rate by the statewide average of tax rates on Class II property.
2.8. Farmland and Structures Situated Thereon Valuation Application; Appeal.
2.8.1. When to Apply. In order to qualify under the provisions of this rule for valuation purposes, the owner(s) of land must apply annually for farmland valuation after June 30th and on or before September 1st of each year. The application must be on forms prescribed by the State Tax Commissioner and filed with the assessor of the county wherein the land is situated. See Appendix 2 of these regulations for application timetable.
2.8.2. Response to Applicant. The assessor must notify each applicant, by first class mail, of his decision to grant or deny the application, no later than thirty (30) days following the receipt of the application. In those instances where the application is denied, the notice must include the basis for the denial, advise the applicant of the right to appeal and explain the appeal process.
2.8.3. Appeal Process. The applicant may, within thirty (30) days of notification of the denial of the application, appeal the assessor's decision to the State Tax Commissioner. The State Tax Commissioner shall rule on the petition not later than January 1st and shall notify the appellant and assessor thereof in due course. The Tax Commissioner may consider any appropriate information relevant to the determination. The decision, which shall be binding on the assessor and property owner, shall only apply to the eligibility of property for farm use valuation. The Tax Commissioner shall decide only the issue of whether the property constitutes a "farm" or "farms" within the meaning of W. Va. Code §11-1a-3(i) and these regulations. Question involving classification shall be resolved through W. Va. Code §11-3-24a. Questions involving appraised values shall be resolved through W. Va. Code §11-3-24.
APPENDIX 1
CATEGORIES OF FARMLAND
A. INTRODUCTION
(a) Appendix 1 divides farmland into three (3) categories according to utility or use of the land.
(b) Farmland is categorized as:
(1) Tillable. The term "tillable land" shall mean land used or usable and intended for use in raising crops.
(2) Pasture. The term "pasture land" shall mean used or usable and intended for use in grazing livestock.
(3) Woodland. The term "woodland" shall mean land used for growing timber.
(c) Each of these three (3) categories is divided into five (5) subcategories which grade the property according to quality and fitness for the particular utility or use category to which it has been relegated. These subcategories and designated "Grade A" through "Grade E." Land having less than the highest quality and fitness is classified as "Grade B" through "Grade E " "Grade E" being the lowest quality and fitness classification.
Any given tract of land may fall into any number of these categories and subcategories in accordance with the actual use to which the land is suited.
B. TILLABLE
Tillable land is categorized into five (5) grades.
Grade "A" This land is good loam soil that is easy to work (a tract approximately ten (10) acres or more in one (1) continuous parcel) and can be cultivated safely with ordinary good farm methods. This land is nearly level and there is little or no erosion.
Grade "B" This land is level to rolling and can be cultivated safely with ordinary good farm methods. The soil may need lime or fertilizing. The bottom land may need improved drainage.
Grade "C" This land is also level to rolling crop land. The drainage of the property is generally good. A small amount of erosion may be taking place. This land can be cultivated with care. It needs contour strip cropping usually best suited for hay and other grass crops. This type of property may be cut into smaller sections due to some sort of natural or man-made obstructions.
Grade "D" This land -is good hillside farmland; eighty percent (80%) of this land can be farmed with a tractor. The soil is generally of a good quality and the drainage is good. This type of land is generally best suited for the raising of hay.
Grade "E" This crop land is very steep hillside that is too steep to farm with modern farm machinery. The soil is generally of a poor quality and its cultivation may cause severe erosion.
C. PASTURE
Pasture land is categorized into five (5) grades.
Grade "A" This type of land could be used for either pasture or crop land. Its topography is level to rolling. The land can be clipped with a tractor; lime and fertilizer can be applied with modern farm equipment. The drainage of the property will be good and the soil will be good quality. The land is clear of any significant overgrowth such as excess trees or brush.
Grade "B" This land is of similar nature to Grade "A" Pasture land other than the fact that the quality of the soil is not good. The size of the parcel will be of small nature. This type of land, for some reason, is not suitable for tilling and generally best suited for permanent pasture.
Grade "C" This land will generally have a moderate amount of erosion. The topography of the land will be average.
Grade "D" This land is generally hillside pasture that has a very steep degree of slope. The pasture will generally have some natural obstruction such as overbrush, etc. The type of soil is generally of poor quality.
Grade "E" This land is generally very steep and there may be a mixture of overbrush and pasture throughout. Brush must be cleared with hand tools. The soil consistency is generally of poor quality; lime or fertilizer is seldom applied to this type of land and then only with hand tools.
D. WOODLAND
Woodland is categorized into five (5) grades:
Grade "A" This land is adaptable, upon clearing, for use as tillable land or pasture. The topography of the land will be level to slightly rolling. The soil type is general of loam. There will be a stand of trees of commercial species.
Grade "B" This land is also level to rolling. It is adaptable for other profitable uses. There may be a minimal amount of erosion. The soil is generally of a good quality.
Grade "C" The topography of this land indicates that its best use is for the growing of timber. There is a stand of sound trees of commercial species in good form.
Grade "D" The topography of this land is such that the land is not economically feasible to use for anything other than growing trees. There may be some erosion of the soil.
Grade "E" The topography of this land is generally steep. It will be difficult land from which to harvest the timber. This land generally exhibits poor soil quality.
APPENDIX 2
TIMETABLE FOR FILING APPLICATION AND APPEALS
The following timetable shows the final dates for filing the farm use application, for filing appeals and for the issuance of administrative decisions at each step of the application and appeal procedure.
September 1st The taxpayer's farm use application must be filed after June 30th and on or before September 1st of the calendar year for determinations applicable to the next tax year. See Section 10.8.1 of these regulations.
October 1st The assessor must grant or deny the application and notify the applicant of such action within thirty (30) days of receipt of the application. See Section 10.8.2 of these regulations.
October 31st The applicant may appeal the assessor's decision to the Tax Commissioner within thirty (30) days of notification thereof. See Section 10.8.3 of these regulations.
January 1st The Tax Commissioner must rule on the applicant's appeal on or before January 1st. See Section 10.8.3 of these regulations. An adverse decision of the Tax Commissioner may be appealed to the circuit court under W. Va. Code §11-3-25.
February 15th If the Tax Commissioner rules in favor of the applicant, finding that the property in controversy is a "farm" or "farms" within the meaning of W. Va. Code §11-1a-3(i) and these regulations, the taxpayer may then petition the county commission under the review and equalization provisions of W. Va. Code §11-3-24 for farmland valuation. The county commission must meet not later than February 1st for the purpose of equalization and review, and may not adjourn sine die before February 15th. See W. Va. Code §11-3-24.
Series 01H Valuation of Timberland and Managed Timberland
W. Va. Code R. § 110-1H-1 General
1.1. Scope. -- This legislative rule establishes the procedure for the classification and valuation of timberland and managed timberland.
1.2. Authority. -- W. Va. Code §§11-1C-5(a)(2)(B), 11-1C-11(c)(1) and 11-1C-11b(c).
1.3. Filing Date. -- April 28, 2026.
1.4. Effective Date. -- April 28, 2026.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on and after August 1, 2031.
W. Va. Code R. § 110-1H-2 Introduction
2.1. The appraised value of managed timberland shall be determined on the basis of the potential of the land to produce future income according to its use and productive potential. Potential future net income is discounted to its present value utilizing a discounted cash flow; this is the appraised value. The ability of a stand of timber to produce wood products for sale or use depends primarily on the quality of the soil and certain topographic and climatic features which can be expressed as a site index. Site index is the principal criterion influencing the appraised value of managed timberland. These factors shall be reviewed annually by the Tax Commissioner for necessary updating of the method described in order to properly reflect future changes in the values of managed timberland.
2.2. The appraised value of timberland (woodland/wasteland) shall be determined on the basis of market comparable derived through analysis of sales prices of comparable timberland (forested) properties. Timberland appraisal value shall always be more than the appraised value of equivalent grades of properties being classified as managed timberland in the county. The appraised value of timberland shall be determined by the county assessor based upon the Timberland Classification Schedule found in Appendix 1 of this rule.
2.3. The county assessor shall collect and analyze market data, including sales of timberland, segregated into the classes contained in the previously referenced classification schedule. Based upon this market analysis, the county assessor shall select the value for each class of timberland that best reflects the market value of the property if exposed to the market for sale as timberland. The values by class thus selected shall be entered, by the assessor, into the respective county land pricing tables and shall be used by the assessor to estimate the appraised value of timberland for property tax purposes.
W. Va. Code R. § 110-1H-3 Definitions
As used in this rule and unless the context clearly requires a different meaning, the following terms shall have the meaning ascribed in this section.
3.1. "Capitalization rate" means the rate used to convert an estimate of income into an estimate of present value. Details of the procedure for determining the capitalization rate are found in Section 12 of this rule.
3.2. "Cost" means a component of management costs and property taxes.
3.3. "dbh" means the diameter of trees at breast height, which is 4.5' above ground level.
3.4. "Division of Forestry" means the West Virginia Department of Commerce, Division of Forestry.
3.5. "Farm wood lot" means that portion of a farm in timber but may not include land used primarily for the growing of timber for commercial purposes except that Christmas trees, or nursery stock and woodland products, such as nuts or fruits harvested for human consumption, shall be considered farm products and not timber products.
3.6. "Harvest income per acre" means the expected after tax revenue and accrued interest for each harvesting interval. Interest is assumed to accrue at the rate of return from the period of harvest to the end of the 80 year rotation cycle.
3.7. "MBF" means thousand board feet.
3.8. "Management cost" means the cost determined tri-annually by the Tax Commissioner to be the average annual cost of maintaining and protecting a producing forest. Maintenance costs may include costs of inventory, boundary survey, security, maps, and any other items as can be shown to have been necessary. Protection may include costs of protection against forest fires; harmful insect and tree diseases; costs of repair and replacement resulting from damages reported to appropriate police agencies, including all-terrain vehicles (ATV's) and other vehicular damages, and costs of replacing and replanting forest production and/or plantations destroyed or injured by deer or other wild animals whose populations exceed the maximum carrying capacity of the site. Management costs shall be determined as an average for the entire State or by regions, by Managed Timberlands Productivity Grades or by parcel acreage and shall be deducted from gross annual income per acre to obtain net annual income per acre.
3.9. "Managed Timberland" means surface real property certified as managed timberland by the Division of Forestry pursuant to rules promulgated by the Division of Forestry.
3.10. "Managed Timberland Productivity Grades" means timberland classified as Grade 1 (excellent to very good), Grade 2 (good to fair), or Grade 3 (poor), according to the table in Appendix 4 of this rule.
3.11. "Owner of surface less timber" means any person who owns an interest in the surface where the timber rights have been sold to someone else.
3.12. "Owner of Timber" means any person who owns an interest in timber, including a lessor or sublessor and an owner of a contract right to cut timber. The owner of timber must have a right to cut timber for sale on his, her, or its own account for use in his, hers, or its trade or business in order to have property rights that are subject to ad valorem property taxes.
3.13. "Site Index" means a method of measuring the productivity of a site to grow trees. It is the height that average dominant and co-dominant trees will attain at a given age. For ad valorem property tax purposes, it is the height of upland oaks at fifty (50) years of age.
3.14. “Soil Productivity Data” means those site index data derived from the United States Department of Agriculture Natural Resource Conservation Service (NRCS), formerly the Soil Conservation Service (SCS), Soil Survey Geographic Database (SSURGO). These data are digital representations of county soil surveys which are mapped at 1 inch = 2,000 feet.
3.14.1. In those counties where SSURGO data is not yet available, the best available information shall be used.
3.14.1.a. For Pocahontas County, the article by G.R. Trimble, Jr., “An Equation for Predicting Oak Site Index Without Measuring Soil Depth,” Journal of Forestry, 62:325-327, shall be used.
3.14.1.b. For Wetzel, Doddridge, Braxton, Clay and Gilmer Counties, the article by L.R. Auchmoody and H. Clay Smith, “Oak Soil-Site Relationships in Northern West Virginia,” (USDA Forest Service Research Paper NE 434, 1979) shall be used.
3.14.1.c. For Wayne, Lincoln, Boone, Logan, Mingo and McDowell Counties, unpublished results of research at West Virginia University (1983) shall be used.
3.14.1.d. For Webster County, the rates of 48% for Grade 1, 34% for Grade 2 and 18% for Grade 3 shall be used for all certified managed timberland parcels.
3.14.1.e. For all counties not listed in the foregoing paragraphs 3.14.1.a through 3.14.1.d of this rule, the primary source of information shall be maps created by the Soil Survey, published by United States Department of Agriculture Natural Resource Conservation Service.
3.15. "Stumpage Price" means the market value of standing trees (on the stump) prior to felling and removal, and is expressed in dollars per unit of volume (MBF or cords). For appraisal purposes, real stumpage price will be adjusted to real price increases over various harvest periods during the 80 year rotation cycle. The real price increase shall be determined from the projected saw timber and pulpwood prices described in the most recent United States Forest Service Bulletin R.P.A. Timber Assessment Update and shall be calculated by the Tax Commissioner from reports based upon 16 inch (dbh) logs as prepared by the Division of Forestry and other available sources. A five-year weighted moving average shall be computed in order to minimize the effects of short-term fluctuations. Stumpage prices shall be computed for each stumpage price region in order to reflect regional differences in markets, topography, and accessibility.
3.16. "Stumpage Price Region" means a geographical region of the State, usually consisting of several counties, in which conditions of the timber, timber markets, topography, and accessibility are sufficiently similar to result in similar stumpage prices at any given time. The counties involved in each stumpage price region have been identified by the Division of Forestry and are found in Appendix 3 of this rule.
3.17. "Timber" means trees of any marketable species, whether planted or of natural growth, standing or down, located on public or privately owned land, which are suitable for commercial or industrial use.
3.18. "Timberland (Woodland/Wasteland)" means any surface real property, except farm woodlots of not less than ten contiguous acres, which is primarily in forest and which has, in consideration of their size, sufficient numbers of commercially-valuable species of trees to constitute at least forty percent (40%) normal stocking of forest trees, as shown in Appendix 2 of this rule, which are well distributed over the growing site. Additionally, land that has been recently harvested of merchantable timber and is growing into or being planted as a new forest may be classified as timberland.
W. Va. Code R. § 110-1H-4 Classification of Timberland and Managed Timberland
4.1. Managed Timberland. -- Property containing managed timberland, as properly certified by and compliant with the requirements of the Division of Forestry, shall be subject to the following guidelines when classifying managed timberland for property tax purposes.
4.1.1. Property containing managed timberland, which may have been properly taxed as Class II property prior to the managed timberland application, shall remain as Class II property unless there is some other event or change in the use of the property that disqualifies it from being taxed as Class II property.
4.1.2. Property containing managed timberland, which may have been properly taxed as Class III or Class IV property prior to the managed timberland application, shall be taxed as Class III or Class IV property depending upon location.
4.2. Timberland. -- Timberland shall be taxed as Class II, Class III, or Class IV property in accordance with provisions of West Virginia Code §11-8-5. In order for timberland to be taxed as Class II property, the timberland shall be used and occupied by the owner exclusively for residential purposes. (This section does not apply to farm woodlots. See, Valuation of Farmland and Structures Situated Thereon For Ad Valorem Property Tax Purposes, §110 C.S.R. 1H, §110-1H-5.)
4.3. Surface less timber -- Property where the owner of the surface does not include the timber rights is not eligible for managed timberland classification and shall be valued by the assessor.
4.4. Timber -- Property where the owner of the timber rights does not include the surface, is not eligible for managed timberland classification and shall be valued by the assessor.
W. Va. Code R. § 110-1H-5 Valuation of Farm Wood Lots
Farm wood lots shall be included in the valuation of farm property under W. Va. Code §11-1A-10, except when the farm wood lot is a separate parcel or tract entered in the land books, and/or except when the primary use of the farm wood lot is in commercial forestry or in a managed timberland contract.
W. Va. Code R. § 110-1H-6 Timberland Improvements
Improvements such as roads and service buildings that are a required (usual) part of timber management operations are not subject to an additional market value appraisal over and above the appraisal of the managed timberland. Improvements that are not a necessary part of the timber management operations, such as dwellings, cottages, hunting camps, other recreational facilities, and associated real estate are subject to additional market value appraisals. Additionally, haul roads, strip and/or mountaintop removal mines, plant facilities, powerline and gas/oil pipeline rights-of-way, and gas/oil well pads shall not be valued as managed timberland.
W. Va. Code R. § 110-1H-7 Appraised Value of Timberland
The appraised value per acre of timberland shall be determined based upon market comparables and shall be estimated by the county assessor. There are at least five (5) various timberland rates based on the timberland classification schedule described in Appendix 1 of this rule. Assessors shall tri-annually review and grade these non-managed timberland properties in order to assign the proper rate per acre to the property. The rate per acre shall be established by the assessor in conformity with requirements of subsection 2.2 of this rule.
W. Va. Code R. § 110-1H-8 Valuation of Less Than 10 Acres
A parcel, or contiguous parcels, of timberland totaling less than ten (10) acres shall not be considered for classification as managed timberland and shall be valued by the county assessor based upon market comparables.
W. Va. Code R. § 110-1H-9 Harvest Volumes Per Acre
Harvest Volumes per acre shall be based on site index and the ability of the site to yield timber measured in thousands of board feet (MBF) per acre (Scribner rule) or cords per acre with harvest intervals at thirty-five (35), fifty-five (55) and eighty (80) years for Grade 1 and Grade 2 soils, and at forty-five (45) and eighty (80) years for Grade 3 soil.
W. Va. Code R. § 110-1H-10 Appraised Value Per Acre of Managed Timberland
The appraised value per acre of managed timberland is the present worth of $1.00 times the difference between the future value of the harvest income less the future value of the management cost less a property tax adjustment for Class II, and a blend of Class III and Class IV tax rates for Class III and Class IV properties. However, the appraised value for any grade of managed timberland will not be less than $25 per acre. In no case may managed timberland values for Class III and IV property be lower than $225 per acre for Grade 1; $150 per acre for Grade 2; $75 per acre for Grade 3; and class II properties may not be lower than $200 per acre for Grade 1; $140 per acre for Grade 2; and $50 per acre for Grade 3.
W. Va. Code R. § 110-1H-11 Procedure for Determining Value Per Acre of Managed Timberland
The following is a step-by-step procedure for determining the appraised value per acre of managed timberland.
11.1. The Tax Commissioner shall enter the surface ownership maps (typically 1 inch = 400 feet or 1 inch = 800 feet) into a Geographic Information System (GIS). The GIS shall be used to register the surface ownership parcels to the same geographic coordinate system and scale as that of the soil productivity data (SSURGO). This process allows the calculation of the area of each soil productivity grade in each parcel.
11.1.1. In those counties where the GIS is not yet available, the soil productivity maps addressed in paragraphs 3.14.1.a through 3.14.1.e of this rule shall be utilized. These maps are the soil grades identified on USGS 7.5 minute topographical quadrangle sheets (1 inch = 200 feet). The West Virginia county surface ownership maps (commonly 1 inch = 400 feet of 1 inch = 800 feet) were reduced to 1 inch = 200 feet. The reduced scale surface maps were overlayed on the productivity grade maps and the grade boundaries were transferred, allowing the determination of the area at each grade for each ownership parcel.
11.2. Average stumpage price (5 year weighted moving average) is determined by stumpage price reports from the Division of Forestry and other available sources.
11.3. Total harvest income per acre over a rotation cycle of thirty-five (35) years, fifty-five (55) years and eighty (80) years for Grade 1 and 2 soils, and forty-five (45) years and eighty (80) years for Grade 3 soils shall be determined by the accumulated periodic harvest income plus accrued interest on the net income less state and federal tax payments.
11.4. End of rotation (80 year) total management costs per acre shall be determined by the accumulated after-tax management cost and accrued interest on those costs.
11.5. Appraised value per acre for managed timberland shall be determined by first deducting the end of rotation total management costs; second, calculating the present worth of that difference; and third, adjusting that value by the annual ad valorem property tax rate (either Class II or a blended Class III/IV).
11.6. The GIS (when available) shall be used to calculate the appraised value of managed timberland property on an annual basis. Until the GIS is available, soil grade calculations will be made from data described in paragraphs 3.14.1.a through 3.14.1.e and subdivision 11.1.1 of this rule. The appraised value of each managed timberland property shall be calculated using the formula found in Appendix 6 of this rule.
11.6.1. Those acreages involved in a managed timberland application where the use of the property is not for managed timberland purposes (e.g., homesite, pasture, tillable, recreation, stripmine, etc.) shall not be classified as managed timberland and shall be appraised by the county assessor.
W. Va. Code R. § 110-1H-12 Capitalization Rate
The average statewide capitalization rate (based on a 5-year weighted moving average of various components) for managed timberland shall be determined annually by the Tax Commissioner through the use of generally accepted methods of determining those rates. The rate shall be based on the assumption of a discounted cash flow model based upon harvest intervals reflected in Appendix 4 of this rule. The capitalization rate used to value managed timberland shall be developed considering the following:
12.1. Discount Component. -- The summation technique shall be used in developing a discount component of the capitalization rate. The five subcomponents of the discount component are:
12.1.1. Safe Rate. -- The safe rate shall reflect a rate of return that an investor could expect on an investment of minimal risk. This rate shall be developed through weighted averages of interest rates offered on five-year United States Treasury Bills for the five years immediately preceding the appraisal date.
12.1.2. Nonliquidity. -- The nonliquidity rate shall be developed through an annual review to determine a reasonable estimate of time that timberland, when exposed for sale, remains on the market before being sold. The time thus determined shall be used to identify United States Treasury Bills with similar time differentials in excess of thirteen-week Treasury Bills. The interest differential between these securities shall be used to represent the nonliquidity rate. For example, if it is determined that a tract of timberland remains on the market for an average of nine months (39 weeks) before being sold, the nonliquidity rate shall be derived by subtracting the rate on 13-week Treasury Bills from the rate on one year Treasury Bills. This review shall consider the weighted average of these differences for a five-year period immediately preceding the appraisal date.
12.1.3. Risk Rate. -- The relative degree of risk of an investment in timberland shall be developed through an annual review of thirty-year United States Treasury Bills less five-year United States Treasury Bills. The review shall consider the weighted averages of debt and equity components of these differences for a five-year period immediately preceding the appraisal date.
12.1.4. Management Rate. -- The management rate represents the cost of managing the investment, not the cost of managing the timberland. Historically, the management rate has been one-half of one percent (0.5%); therefore, this rate shall be considered the industry standard for current applications.
12.1.5. Inflation Rate (negative). -- Nominal interest rates, including the "safe rate" mentioned in subdivision 12.1.1 of this rule, are higher than real rates by an amount representing expectation of future inflation. However, net annual income from timberland is to be estimated assuming level future prices (no inflation). Therefore, the capitalization rate must be a real rate, net of expectation of inflation. The inflation rate shall be established through a weighted average analysis of the most recent five calendar year's urban consumer price index as determined by the United States Department of Labor, Bureau of Labor Statistics.
12.1.6. Discount Component. -- In determining the discount component of the capitalization rate, the Tax Commissioner shall take the sum of the safe rate, the nonliquidity rate, the risk rate, and the management rate, and shall deduct from this sum the inflation rate.
12.2. Property Tax Component. -- The property tax component shall be derived by multiplying the assessment rate by the statewide five-year weighted average of tax rates on Class II and on a blended rate for Class III and Class IV properties. The discounted property tax rates shall be deducted from the discounted difference between total harvest income and end of rotation management costs.
W. Va. Code R. § 110-1H-13 Summary of Method of Determining Appraised Value
The formula to be used in determining the appraised value of property categorized as managed timberland is found in Appendix 5 of this rule.
APPENDIX 1
Timberland Classification Schedule Class "A"
This land is adaptable for use as forest property. It may be adaptable to other profitable uses. There is a stand of trees of commercial species, the size being from fourteen (14) to twenty (20) inches dbh and above.
Class "B"
This land is also adaptable for use as forest property. It may be adaptable for other profitable uses. There is a stand of trees of commercial species, the size being from ten (10) to fourteen (14) inches dbh.
Class "C"
This land is adaptable for use as forest property. There is a stand of trees of commercial species, the size being from six (6) to ten (10) inches dbh.
Class "D"
This land is adaptable for use as forest property. There is a stand of trees of commercial species, the size being from four (4) to six (6) inches dbh.
Class "E"
This land is adaptable for use as forest property. There are trees of commercial species less than four (4) inches dbh. This class of timberland also includes clear cut property and property subjected to total harvest where the remaining commercial species are less than four (4) inches dbh.
APPENDIX 2
Minimum Number of Trees Required Per Acre to Determine 30 Square Feet of Tree Basel Area of 40% Stocking for Classification as Forest Land --------------------------------------------------------------------------------------------------------------------- D.B.H. D.B.H. in 2” Basel Area Per Per Per Range Classes Per Tree Acre 1/5 Acre 1/10 Acre --------------------------------------------------------------------------------------------------------------------up to 2.9”.......... Seedlings 400 80 40 3.0-4.9”............. 4 0.0873 400 80 40 5.0-6.9”............ 6 0.1964 153 31 15 7.0-8.9”............. 8 0.3491 86 17 9 9.0-10.9”........... 10 0.5454 55 11 6 11.0-12.9”......... 12 0.7854 38 8 4 13.0-14.9”......... 14 1.0690 28 6 3 15.0”+............... 16+ 1.3983 21 4 2 NOTE:
(a) Area 1/5 acre, circle, diameter 105'4”; square 93.4” per side (b) Area 1/10 acre; circle, diameter 74'6”; square 66'
(c) Number of seedlings present may qualify on a percentage basis; Example, 100 seedlings would be equivalent of 7.5 square feet of basal area (25% x 30 - 7.5)
(d) Seedlings per acre are based on total pine and hardwood stems. Where intensive pine management is practiced a minimum of 250 well distributed pine seedlings will qualify.
APPENDIX 3
Stumpage Price Regions Region 1 Region 2 Region 3 Region 4 Region 5 Brooke Braxton Barbour Berkeley Boone Cabell Calhoun Greenbrier Grant Fayette Hancock Clay Monroe Hampshire Kanawha Jackson Doddridge Nicholas Hardy Lincoln Marshall Gilmer Pendleton Jefferson Logan Mason Harrison Pocahontas Mineral McDowell Ohio Lewis Preston Morgan Mercer Pleasants Marion Randolph Mingo Putnam Monongalia Tucker Raleigh Tyler Ritchie Upshur Summers Wetzel Roane Webster Wayne Wood Taylor Wyoming Wirt
APPENDIX 4
TABLE OF HARVEST VOLUMES PER ACRE WITHTABLE OF HARVEST VOLUMES PER ACRE WITH
HARVEST INTERVALS OVER AN 80 YEAR ROTATION CYCLE 35 Years 55 Years 80 Years Total Grade 1 Site Index (75 or more) 4.6 Cords 2.6 Cords 3.3 Cords 10.5 Cords (Very Good to Excellent) 1.5 MBFs 4.4 MBFs 8.6 MBFs 14.5 MBFs Grade 2 Site Index (65-74) 3.3 Cords 7.0 Cords 4.6 Cords 14.9 Cords (Fair to Good) 1.0 MBFs 3.2 MBFs 5.5 MBFs 9.7 MBFs 45 Years 80 Years Total Grade 3 Site Index (less than 65) 3.1 Cords 15.4 Cords 18.5 Cords (Poor) .8 MBFs 3.7 MBFs 4.5 MBFs Scribner rule. Schnur, G. Luther. UNITED STATES DEPARTMENT OF AGRICULTURE Tech. Bul. No. 560. 1937. The Tax Commissioner may adopt a different timber scale and revise yields as standards of timber utilization change or as new information becomes available on timber yields of forest stands.
APPENDIX 5
For Class II Parcels:
Appraised Value Per Acre = [[Present worth of 1] x [(Future value of Harvest Income) - (Future value of management costs)]] less discounted property tax Class II rate.
For Class III & IV Parcels:
Same formula except the discounted property tax rate for Class III and Class IV properties is used.
Until the present natural resource and county computer systems can be programmed to change appraisals based on tax classifications or until a new computerized appraisal system can be put into effect, the property tax discount shall be a blended rate including both Class II and Class III rates.
APPENDIX 6
AV = (P1V1) + (P2V2) + (P3V3) where AV = Property Appraised Value P1 = Total Acreage of Parcel in Soil Productivity Grade 1 P2 = Total Acreage of Parcel in Soil Productivity Grade 2 P3 = Total Acreage of Parcel in Soil Productivity Grade 3 V1 = Value of Soil Productivity Grade 1 V2 = Value of Soil Productivity Grade 2 V3 = Value of Soil Productivity Grade 3 110CSR1H
Series 01I Valuation Of Active And Reserve Coal Property For Ad Valorem Property Tax Purposes
W. Va. Code R. § 110-1I-1 General
1.1. Scope. -- This rule clarifies and implements State law as it relates to the appraisal at market value of active and reserve coal properties.
1.2. Authority. -- W. Va. Code §§11-1A-11 and 11-1C-5(b).
1.3. Filing Date. -- April 11, 2006.
1.4. Effective Date. -- May 1, 2006.
W. Va. Code R. § 110-1I-2 Introduction
2.1. Coal is one of the several estates in real property which may be owned either separately or in conjunction with other estates. If coal is owned as a separate estate, either absolute, as a leasehold, or in conjunction with other estates, West Virginia property tax law requires ownership to be listed, valued and taxed. Coal may be owned without being mined. Coal title may exist where no coal is actually present (barren), or where the coal is unmineable or mined-out. For valuation purposes this rule classifies coal property into the following categories: Active; Reserve; Unmineable; Mined-out; and Barren.
W. Va. Code R. § 110-1I-3 Definitions
As used in this rule, and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section:
3.1. “Active acre” means mineable acreage of a bed of coal on an active mining property that will be extracted within the maximum “life of mining” on the property.
3.2. “Active mining property” means a mineable bed of coal on a property or portion of a property involved in a mining operation. Each and every bed of coal being mined in a permitted mining operation is a separate active mining property.
3.3. “Adjusted property value” means the sum of the adjusted individual coal bed values contained within a property.
3.4. “Adjusted individual coal bed value” means the individual coal bed index for each coal bed on a property, multiplied by the aggregate ratio.
3.5. “Aggregate value” means the total value of in-place mineable coal in the State.
3.6. “Aggregate active value” means the total value of active acres on an active mining property in the State on the November 15th next succeeding the July 1st assessment date.
3.7. “Aggregate ratio” means aggregate reserve value divided by the aggregate reserve index.
3.8. “Aggregate reserve value” means the aggregate value less the aggregate active value.
3.9. “Aggregate reserve index” means the sum of products of the individual property calculations as determined by the reserve coal valuation model (RCVM).
3.10. “Annual acres mined” means the annual production (as defined in this Section 3) divided by the product of the average thickness in feet of the coal bed being mined (as detailed in annual mining reports), multiplied by eighteen hundred (1800) tons per acre-foot coal density, multiplied by the clean coal recovery rate (either run-of-mine or washed). Appendix A, Formula 1, of this rule is the formula used for calculating annual acres mined.
3.11. “Annual production” means the production of coal from mining operations as reported by coal bed and by mine.
3.11.1. Annual production, for active mining valuation purposes, means the arithmetic mean of the annual rate of coal production of three (3) years' production for the three most recent calendar years preceding the July 1st assessment date. If production during any of the three (3) years occurred during a period of less than eleven (11) months, the production shall be annualized before an annual production is calculated.
3.11.2. Annual production, for purposes of determining the aggregate value, means the arithmetic mean of the last three calendar years of the total tons of coal mined in West Virginia, as reported to the Office of Miners’ Health, Safety, and Training, adjusted for coal actually mined from other states but produced through portals located in West Virginia.
3.12. “Average coal price” for purposes of the reserve coal valuation model, means the arithmetic mean of the sum of the last three calendar years of total FOB-source (point of sale, no transportation) values of steam coal mined in West Virginia and sold on the spot market as reported on FERC Form 423 to the United States Department of Energy (USDOE) and to the West Virginia Public Service Commission (WVPSC), divided by annual production, expressed in dollars/ton. Average coal price can also be expressed in dollars per million BTU and is determined by dividing the arithmetic mean of the sum of coal sales, by the sum of all steam coal BTU mined in West Virginia and sold on the "spot" market as reported on FERC Form 423 to the United States Department Of Energy and to the West Virginia Public Service Commission for the three most recent calendar years preceding the July 1st assessment date, calculated for the entire state as well as by coal bed and by location.
3.13. “Average royalty rate” for purposes of the reserve coal valuation model, means the arithmetic mean of blended underground and surface coal royalty rates, for leases that have occurred within at least the five (5) calendar years immediately preceding the July 1st assessment date.
3.14. “Barren” means fee/mineral/coal properties where the coal rights are owned but the coal was never deposited and/or has been subsequently removed by erosion.
3.15. “Base market location value” means the coal price per million BTU by coal bed by location, multiplied by the royalty rate by coal bed by location.
3.16. “BTU content” means number of British thermal units (BTU) in one pound of dry coal.
3.17. “BTU adjustment factor” means the penalties or bonuses on price related to the BTU content versus market price interaction.
3.18. “Capitalization rate” means the rate used to convert an estimate of income into an estimate of market value. The method for calculating the capitalization rate is set forth in Subsection 4.1 of this rule.
3.19. “Clean coal recovery rate” means:
3.19.1. for active mining purposes, a decimal representing the percentage of marketable coal that is recovered, whether the coal is classified as run-of-mine-clean or washed-clean. The clean coal recovery rate must reflect the difference between calculated whole bed tonnage (tons-in-place) and mined tonnage as reported to the Office of Miners’ Health, Safety and Training; and
3.19.2. for reserve coal valuation purposes, a decimal representing an estimate of clean coal that may be recovered based on estimated tons-in-place, estimated mine recoveries and estimated wash recoveries based on area and coal bed information derived from taxpayer reports, other taxpayer-supplied information, publicly-available information, and other information that comes to the attention of the Commissioner.
3.20. “Coal bed” means all the coal and associated rock partings, if any, lying between logical and/or practical roof and floor strata.
3.21. “Coal bed index factor” is the sum of all reserve coal bed valuation factors, divided by three and rounded to the nearest value of 20, 40, or 80.
3.22. “Coal in-place price” means the price per million BTU of estimated clean and marketable coal, before mining. Coal in-place price equals coal price multiplied by the average royalty rate.
3.23. “Coal Price” means the FOB-source (point of sale, no transportation) price per million BTU of clean, marketable coal.
3.24. “Coal property transfer” means the transfer of coal rights on properties by sale or lease.
3.25. “Commissioner” or "Tax Commissioner" means the Tax Commissioner for the State of West Virginia, or his or her delegate.
3.26. “Discount component” means a rate reflecting a provision for returning to an investor a sum of money equal to the aggregate of the anticipated return-on-investment over the economic life of an investment.
3.27. “Environmental factor” means an index that reflects the environmental impediments to mining, such as wild and scenic rivers, severe acid mine drainage problems, areas designated unsuitable for mining as identified by the Division of Environmental Protection, and other identified impediments.
3.28. “GIS” means a geographical information system, which, for purposes of this rule, is a computerized system to map and manage coal-related data.
3.29. “Individual coal bed index” means the preliminary derived value for a specific coal bed on a property before adjustment using the aggregate ratio.
3.30. “Life of mining (mine life)” means the number of years required to exhaust a coal bed on a particular mining operation.
3.30.1. In the case of appraisal of active mining property, life of mining means the number of years required to exhaust the coal bed at the annual production rate, to a maximum of fifteen (15) years for underground mines and five (5) years for surface mines. Fractional years are rounded to the nearest whole number.
3.30.2. In the case of appraisal of reserves, for the calculation of aggregate value, life of mining means the number of years required to exhaust the total known reserves of coal in West Virginia.
3.31 “Local Drainage” means the base-stream-bed elevation of local permanent streams.
3.32 “Management rate” means a rate reflecting a return to an investor for the management of similar investment portfolios.
3.33. “Market interest factor” means an index that indicates the relative coal market activity in a specified area.
3.34. “Market mineability factor” means an index that indicates the relative cost of mining in a specified area.
3.35. “Metallurgical coal” means bituminous coal that is suitable for making coke by industries that refine, smelt, and work with iron and/or steel.
3.36. “Mineable coal bed” means coal which is situated so that it may be mined using generally accepted mining practices and suitable equipment. Coal beds which are of a thickness of less than thirty inches (30") shall not be classified as mineable coal unless there is evidence to the contrary.
3.37. “Mined-out coal bed” means a bed of coal, or any portion of the bed, which has been depleted by prior mining operations and from which no additional coal is recoverable by generally accepted mining practices and suitable equipment, unless there is evidence to the contrary.
3.38. “Mining operation” means an enterprise permitted by the West Virginia Office of Miner's Health Safety and Training/Office of Mining and Reclamation to engage in actively obtaining or preparing to obtain coal or its by-products from the earth's crust, including underground, surface and/or auger mines. Each mining operation may have more than one (1) area designated as "Active mining property."
3.39. “Multiplier” means the "Present Worth of One (1) Per Period" for the life of the mining operation employing the capitalization rate determined in Subsection 4.1 of this rule, through application of a standard mid-year life calculation.
3.40. “Nonliquidity rate” means a rate reflecting a return to an investor representing the loss of interest on an investment arising from the time required to sell the investment.
3.41. “Operator” means an individual, partnership or corporation that is engaged in actively obtaining or preparing to obtain coal and/or its by-products from the earth's crust on an active mining property.
3.42. “Present value per acre” means the present value per acre of a coal bed on a reserve property.
3.43. “Prime coal bed” means the thickest, previously mined, stratigraphically-highest coal bed in an area, with sufficient mineable tons to sustain mining for two (2) years in a specified area at the average rate of mining in the bed, in the general area, for the most recent three (3) calendar years or at a default rate of 100,000 tons per year.
3.44. “Prime coal bed factor” means an index that indicates the relative profitability of a set of coal beds in a specified area.
3.45. “Properties” means a parcel or group of parcels that are owned or otherwise controlled by a single entity, that are contiguous or otherwise so situated that they could all be treated as a single parcel for purposes of exploiting the coal contained therein.
3.46. “Property tax component” means a rate reflecting a provision for returning to an investor a sum of money equal to property taxes paid over the economic life of an investment.
3.47. “Recapture component” means a rate reflecting a provision for returning to an investor a sum of money equal to his or her investment.
3.48. “Reserves” means those beds of coal, or portions of the beds, which contain mineable coal, but are not active acres on an active mining property.
3.49. “Reserve coal property” means any property for which coal rights are part of the owned estate and which is not part of an active mining property.
3.50. “Reserve coal valuation model” is a computerized valuation method applied in a mass appraisal environment to estimate value of reserve coal property for ad valorem property tax purposes.
3.51. “Risk rate” means a rate reflecting a return to an investor necessary to attract capital to an investment containing a possible loss of principal and/or interest.
3.52. “Safe rate” means a rate reflecting a return to an investor on an investment which has little, if any, likelihood of loss of principal or of loss in anticipated return on investment.
3.53. “Steam coal” means bituminous coal that is mineable but that is not suitable for coking by industries that refine, smelt, and work with iron and/or steel.
3.54. “Sulfur adjustment factor” means the penalties or bonuses on price related to the Sulfur content versus market price interaction.
3.55. “Sulfur content” means a decimal representing the percent of sulfur in dry coal.
3.56. “Summation discount component” means a discount rate expressed as the aggregate of a safe rate, risk rate, nonliquidity rate, and management rate, adjusted for inflation.
3.57. “Thickness” means the measurement of all coal, including any thinner coals (splits) and also rock partings seen above or below the main block of coal, that comprises part of what is generally understood to be a logical mining unit. Methods of determining thickness for valuation are described in Subsection 4.1 and Subsection 4.2.
3.58. “Unmineable coal bed” means coal which is not in a mineable coal bed.
3.59. “Volatility content” means a decimal representing the percentage of volatile matter in dry coal.
3.60. “Volatility factor” means a factor that identifies coal with a volatility content sufficiently low to render it unsuitable for steam coal markets.
3.61. “1800 tons per acre foot” means the weight, in tons, of a relatively clean coal bed one (1) foot in thickness (Thk) and covering one (1) acre, that has an assumed specific gravity of 1.32. The formula for calculating "1800 tons per acre foot" is set forth in Appendix A, Formula 2 of this rule.
W. Va. Code R. § 110-1I-4 Valuation Methods
4.1. Valuation of active mining property.
4.1.1. General. -- The value of active mining property is the sum of the value of active acres and reserves that are included in the active mining property. In no case shall the value per active acre on a coal bed be less than the applicable present value per acre on the coal bed. Unmineable, mined-out and barren acres will not be valued on active mining property.
4.1.2. Determination of active mining property. -- The designation of Active mining property areas shall be determined as follows:
4.1.2.a. An operator may designate or assign a portion of the properties to an active mining property when only that portion is suitable for the particular mining purposes. For purposes of determining the actual area of the active mining property, all contiguous properties or portions of properties containing the mineable coal beds that are under lease, regardless of ownership, that fall within the mining portion, shall be included. Properties not leased or owned (adverse), that fall within the mining portion of active mining property shall have the requisite mineable beds of coal valued as reserves;
4.1.2.b. Any mining operation producing coal from one coal bed shall be designated as an active mining property. If the mining operation is producing coal from multiple coal beds under a single permit, then each coal bed shall be designated as a separate Active mining property;
4.1.2.c. Any mining operation producing coal from one (1) coal bed at different portals and/or high-walls under one (1) specific permit, shall be designated as one (1) Active mining property. If the production of coal involves different mining techniques (e.g. surface/auger or underground mining method), or if mining sites are separate and generally independent, then each site shall be designated as a separate Active mining property;
4.1.2.d. If more than one permitted mining operation is mining a given coal bed on the same land or mineral property, then each mining operation is a separate Active mining property. Under no circumstances shall the sum of the active acres for all mining operations on each bed exceed the total property acres. As necessary, the Commissioner shall apportion the number of acres for each mining operation, based upon a review of relevant taxpayer and/or operator information and leases, and the respective rates of average annual production;
4.1.2.e. If the permitted mining operation has not begun production by the July 1 assessment date, the mineable coal shall be reported on the Annual Appraisal Report for Production of Coal and valued as reserves. Once a property or portions of a property have been assigned or designated to an Active mining property, it shall continue to be listed on an Annual Appraisal Report until such time as the permit has been retired;
4.1.2.f. If the mine ceases production before the July 1st assessment date, and there is mineable coal remaining in the coal bed, the remainder shall be valued as reserves for the current tax year; and
4.1.2.g. The maximum active mining portion for each coal bed shall be fifteen (15) years for underground mines and five (5) years for surface mines multiplied by the annual acres mined. If the available mineable acreage of the coal bed being mined is less than the maximum amounts listed above, then the total available acreage shall be considered for designation as the active mining portion.
4.1.3. Determination of annual production. -- Annual production shall be determined as follows:
4.1.3.a. An arithmetic mean shall be taken of tonnage as reported by producers and verified by the Commissioner through research of West Virginia Office of Miners’ Health, Safety, and Training records and/or audit-derived information, for the three most recent calendar years preceding the July 1 assessment date; and
4.1.3.b. If production has not occurred in either the second or third most recent years, the arithmetic mean of the available one or two years production shall be used.
4.1.4. Value per active acre. -- In the application of the valuation formula to an Active mining property, the appropriate calculation shall be based upon the actual market to which the coal from the bed is currently being sold, whether it is metallurgical and/or steam. The factors to be used for the valuation formula are: the coal thickness in feet (Thk), 1800 tons per acre foot (1800), the clean coal recovery rate (RR), the Steam Coal royalty rate, underground or surface (SRoy), the Steam Coal Market (SCM), a net present value multiplier (M) and the mine life in years (ML); and the coal thickness in feet (Thk), 1800 tons per acre foot (1800), the clean coal recovery rate (RR) the Metallurgical Coal royalty rate, underground or surface (MRoy), the Metallurgical Coal Market (MCM), a net present value multiplier (M), and the mine life in years (ML). The formula used to determine the value per active acre ($/ac) is found at Appendix A, Formula 3 of this rule.
4.1.5. Thickness (ft.) -- Thickness shall be determined as follows:
4.1.5.a. An arithmetic mean shall be taken of thickness as reported by producers and verified by the Commissioner through review of audit-derived information, for the three most recent calendar years preceding the July 1st assessment date.
4.1.5.b. If production has not occurred in either the second or third most recent years, the arithmetic mean of the available one or two years thickness shall be used.
4.1.6. Royalty rate. The royalty rates to be used in Formula 3 (Appendix A), shall be determined for each of the following four (4) different types of coal mining operations.
4.1.6.1. Underground mines, steam coal;
4.1.6.2. Underground mines, metallurgical coal;
4.1.6.3. Surface and/or auger mines, steam coal; and
4.1.6.4. Surface and/or auger mines, metallurgical coal.
These royalty rates shall be established annually by the Tax Commissioner after a review of both recorded and unrecorded, willing seller-willing buyer coal property leases that have occurred in the State of West Virginia and appropriate portions of adjacent states during at least the last five (5) years prior to the July 1 assessment date, and through inspection of any other appropriate information. The Tax Commissioner shall maintain a data base on royalty rates and file a preliminary summary of results in the State Register on or before July 1 of each year; shall accept written public comment on the results until August 1 of each year; and shall issue the final royalty rates on or before September 1 of each year. From this survey, the Tax Commissioner shall select the royalty rates that best typify the coal property leases. In order to convert decimal royalty rates into specific dollars per ton rates, the Tax Commissioner shall separately conduct a review of West Virginia coal selling prices, and select specific selling price rates based on prices best typifying activity in each appraisal year. The selected selling prices per ton when multiplied by the decimal royalty shall result in the specific dollar per ton royalty.
4.1.7. Determination of capitalization rate. -- For use in determining the net present value multiplier (M) used in Formula 3, prescribed in this Section 4, a single statewide capitalization rate for coal shall be determined annually by the Tax Commissioner through the use of generally accepted methods of determining those rates. The rate shall be based on the assumption of a level, non-inflating income series. The capitalization rate used to value coal shall be developed considering (1) a discount rate determined by the summation technique, (2) a recapture component, and (3) a property tax rate.
The Commissioner shall conduct a study to develop components for determining the capitalization rate annually and the preliminary results shall be filed in the State Register on or before July 1st of each year. Public comment on the study shall be accepted until August 1st of each year, and final results to be used shall be issued on or before September 1st of each year and filed in the State Register.
4.1.7.1. Determination of discount component. -- The summation technique shall be used in developing a discount component of the capitalization rate. The Commissioner shall determine the sum of the safe rate, the nonliquidity rate, the risk rate, and the management rate, and subtract the inflation rate from the sum. The five subcomponents of the discount component are as follows:
4.1.7.1.a. Safe Rate. -- The safe rate shall reflect a rate of return that an investor could expect on an investment of minimal risk. It shall be developed by averaging interest rates offered on thirteen-week United States Constant Maturity Treasury Yields for a period of three (3) calendar years prior to the appraisal date.
4.1.7.1.b. Nonliquidity rate. -- The nonliquidity rate shall be developed through an annual study to determine a reasonable estimate of time that coal property, when exposed to the market for sale, remains on the market until being sold. The time thus determined shall be used to identify United States Constant Maturity Treasury Yields with similar time differentials in excess of thirteen-week Constant Maturity Treasury Yields. The interest differential between these securities shall be used to represent the nonliquidity rate. For example, if it is determined that a coal property remains on the market for an average of nine months (39 weeks) before being sold, the nonliquidity rate shall be derived by taking the rate on one year Constant Maturity Treasury Yields minus the rate on thirteen-week Constant Maturity Treasury Yields.
4.1.7.1.c. Risk rate. -- The relative degree of risk of an investment in coal property is difficult to determine from published interest rates. Interest rates required on loans for acquisition and/or development of coal properties shall be calculated by adding two percent (2%) to the Prime Rate Charged By Banks as published in the Economic Indicators Prepared By The Council Of Economic Advisors For The Joint Economic Committee for each of the three calendar years prior to the July 1 assessment date. The three-year average shall be compared to interest rates offered on thirteen-week United States Constant Maturity Treasury Yields for the same three-year period. The difference between the two combined with bands of investment analysis shall be used as a basis to estimate the risk rate.
4.1.7.1.d. Management rate. -- The management rate represents the cost of managing the investment, not the cost of managing the coal property. Because the management rate has historically been one-half of one percent (0.5%) of the value of investment portfolios, for purposes of determining the discount component the management rate shall be one-half of one percent (0.5%).
4.1.7.1.e. Inflation rate (negative). -- Nominal interest rates, including the "safe rate" mentioned above, are higher than real rates by an amount representing expectation of future inflation. However, net annual income from coal property is to be estimated assuming level future royalties (no inflation). Therefore, the capitalization rate must be a real rate, net of expectation of inflation. The inflation rate will be estimated through analysis of the most recent three calendar years of an appropriate United States Department of Labor, Bureau of Labor Statistics price index, as determined by the Tax Commissioner. Beginning in Tax Year 2003, the inflation rate shall be estimated through analysis of the most recent three calendar years of an appropriate United States Department of Labor, Bureau of Labor Statistics price index, as determined by the Tax Commissioner.
4.1.7.2. Recapture component. -- Selection of a multiplier will be accomplished through access of a standard mid-year Life Inwood table. The Inwood table has a recapture built into the table coefficients. Inclusion of a recapture component in the capitalization rate is therefore not appropriate.
4.1.7.3. Determination of property tax component. -- This component shall be derived by multiplying the assessment rate by the statewide average of tax rates on Class III property. At the present time, research indicates that royalty rates do not include property taxes as a component; rather, property taxes are paid by the producer as additional compensation. Thus, this component shall not be used in the capitalization rate as defined in this rule unless the general practice of the coal industry changes.
4.1.8. Determination of value of active mining portion. -- The valuation of the active mining portion (VAMP) shall be determined by multiplying the annual acres mined (AAM), by the mine life (ML), by the valuation rate of the active acre ($/ac). The formula used to determine the value of the active mining portion is found at Appendix A, Formula 4 of this rule.
4.2. Valuation of reserves.
4.2.1. General. -- Reserve coal shall be valued according to the reserve coal valuation model (RCVM). Only data that has been received or otherwise made available and has been entered into the computer system by November 15th next succeeding the July 1st assessment date shall be used for purposes of the RCVM procedures.
4.2.1.a. The minimum valuation placed on reserves may never be less than a rate of $5.00 per acre.
4.2.1.b. Any unmineable, mined-out or barren coal shall be valued as part of the reserve coal property and according to the methods described in this section.
4.2.2. Determination of reserves. -- The determination of reserve coal beds and quantities on any reserve coal property may be made by use of: taxpayer-supplied information, publicly-available information, audit-derived information, and Geographical Information System (GIS)-derived information.
4.2.3. Reserve coal valuation model. -- In order to derive the RCVM portion of the value of reserves in this State. The following procedures shall be used.
4.2.3.1. Data collection and maintenance procedures -- The Tax Commissioner shall maintain a Geographic Information System (GIS) which includes the following data sets:
4.2.3.1.a. Coal Bed Maps: Coal data including indications of the areal extent, mineable extent, thickness and various quality parameters for each identified coal bed
4.2.3.1.b. Mine Maps: Coal Mine operation data indicating the location and other pertinent data of all reporting coal mines currently operating and as many closed mines as possible
4.2.3.1.c. Prices: Coal sales information indicating the source location (coal mine), destination (buyer), transportation, and FOB-source price of coal sold from mines in West Virginia
4.2.3.1.d. Transactions: Coal property transaction information indicating the terms and locations of leases and sales of coal properties
4.2.3.1.e. Royalties: Coal royalty information indicating the location and terms of coal royalty agreements
4.2.3.1.f. Environmental Conflicts: Information indicating the general location of potential environmental problems which could impede the permitting of mining operations.
4.2.3.1.g. Use Conflicts: Data reflecting oil or gas well location or density, which may affect the cost of mining.
4.2.3.1.h. Reserve Coal Property Location: Information indicating the general location of taxable reserve coal property
4.2.3.1.i. Production: Data reflecting coal produced annually by mine and by coal bed.
4.2.3.1.j. Capitalization rate: Market data necessary to develop a capitalization rate estimate.
4.2.3.1.k. Current Active Mine Data: Active mine data from the Natural Resources Appraisal System.
These data sets shall be used to create maps and tabular data for the determination of reserve coal property value. The data sets and maps shall be managed as specified in Subdivisions 4.2.3.2 through 4.2.3.16 of this rule:
4.2.3.2. Coal bed maps -- The Tax Commissioner, together with the West Virginia Geological and Economic Survey, shall develop and maintain a Geographic Information System (GIS) comprised of maps and data files of all reserves in the State of West Virginia providing information concerning:
Coal bed name Thickness BTU content Volatility Sulfur The information shall be obtained from the following sources:
West Virginia Division of Environmental Protection West Virginia Geological and Economic Survey United States Geological Survey United States Energy Information Administration West Virginia Public Service commission Academic institutions Any other sources that come to the attention of the Tax Commission The maps and data files created shall be updated at least biannually. The maps shall be interpolated from known data points using computer software containing accepted geologic and geographic interpolation procedures as determined by the Tax Commissioner. Map interpolation shall be limited by the resolution of the reserve property location, and in the absence of specific location information, valuation parameters shall default to District-level parameters.
4.2.3.3. Mine maps -- The Tax Commissioner, together with the W. Va. Geological and Economic Survey shall maintain data files compatible with the Geographic Information System (GIS) which describe the location, size, and ownership of all reporting coal mines (historic and current) in the State of West Virginia, as available. These files shall include but are not limited to the following:
Mine location Mine name and permit number Operator name Annual tons mined Coal beds mined Thickness Coal quality (BTU, Ash, Sulfur, Volatility, Moisture)
Royalty rates Coal sales (prices, destination, quantity and quality)
The information shall be obtained from but not limited to the following sources:
West Virginia Division of Environmental Protection Office of Miners’ Health, Safety, and Training US Energy Information Administration West Virginia Public Service Commission Any other sources as may come to the attention of the Tax Commission The maps and data files created shall be updated annually. The maps shall be interpolated from known data points using computer software containing accepted geologic and geographic interpolation procedures as determined by the Tax Commissioner. Map interpolation shall be limited by the resolution of the reserve property location, and in the absence of specific location information, valuation parameters shall default to District-level parameters.
4.2.3.4. Prices -- The Tax Commissioner shall maintain data files compatible with the Geographic Information System (GIS) which document the FOB-source price of coal sales throughout the State. These files shall be used to create price maps. These files shall include but are not limited to records and estimates of:
Coal source: mine location, mine name Tons shipped per sale Coal bed(s) mined, if listed Coal quality: sulfur, BTU, ash, moisture Transport mode Transport cost, if available Prices paid: delivered and FOB-source Destination The information shall be obtained from but not limited to the following sources:
US Energy Information Administration West Virginia Public Service Commission Any other sources as may come to the attention of the Tax Commission The Commissioner shall use this data to create an overall FOB-source price trend map and for individual coal beds, for the state of West Virginia. The data shall also be used to determine overall sulfur and BTU adjustment factors by an annual survey of the market to determine price adjustments required by major purchasers of coal, attributable to BTU and sulfur content.
The maps and data files created shall be updated at least biannually, using the most recent three (3) calendar years of published data. The maps shall be interpolated from known data points using computer software containing accepted geologic and geographic interpolation procedures, as determined by the Tax Commissioner. Map interpolation shall be limited by the resolution of the reserve property location, and in the absence of specific location information, valuation parameters shall default to District-level parameters.
4.2.3.5. Transactions -- The Tax Commissioner shall maintain data files compatible with the Geographic Information System (GIS) which describe the terms, location, size, coal beds, and grantor/grantee of all coal property leases, sales, and permit applications in the State of West Virginia, as available. These transaction files shall be used as:
An indication of the location and extent of the general interest in coal by ascertaining the number of transactions surrounding a property (leases, sales, and permits). These data shall be incorporated in the GIS; and A subset of the lease documents shall be verified by contacting the lessee and/or lessor and used to create the GIS royalty trend map.
The maps and data files created shall be updated at least biannually. The maps shall be interpolated from known data points using computer software containing accepted geologic and geographic interpolation procedures, as determined by the Tax Commissioner. Map interpolation shall be limited by the resolution of the reserve property location, and in the absence of specific location information, valuation parameters shall default to District-level parameters.
4.2.3.6. Royalties -- The Tax Commissioner shall maintain data files compatible with the Geographic Information System (GIS) which describe the terms, location, grantor, grantee, identified coal beds, identified mining method, and the term and royalty rates of leases/coal royalty agreements. Values shall be maintained as a percentage per FOB-source price.
The maps and data files created shall be updated at least biannually. The maps shall be interpolated from known data points using computer software containing accepted geologic and geographic interpolation procedures, as determined by the Tax Commissioner. Map interpolation shall be limited by the resolution of the reserve property location, and in the absence of specific location information, valuation parameters shall default to District-level parameters.
4.2.3.7. Environmental conflicts -- The Tax Commissioner shall maintain data files compatible with the Geographic Information System (GIS) which provide general information concerning environmental restrictions and impediments to mining of coal. This data shall be incorporated into the GIS. Information shall be obtained from the following sources.
West Virginia Division of Environmental Protection West Virginia Division of Natural Resources West Virginia Geological and Economic Survey United States Department of the Interior Any other sources that may come to the attention of the Tax Commission The maps and data files created shall be updated when necessary, as determined by the Tax Commissioner. The maps shall be interpolated from the known data points using computer software containing accepted geologic and geographic interpolation procedures, as determined by the Tax Commissioner. Map interpolation shall be limited by the resolution of the reserve property location, and in the absence of specific location information, valuation parameters shall default to District-level parameters.
4.2.3.8. Use Conflicts -- The Tax Commissioner shall maintain data files compatible with the Geographic Information System (GIS) which specify the location of all gas and oil wells in the state. This data shall be used to correlate historical resource use with potential cost impediments for mining. Sources for this information are the West Virginia Geological and Economic Survey and the West Virginia Division of Environmental Protection, Office of Oil and Gas.
The maps and data files created shall be updated at least biannually. The maps shall be interpolated from known data points using computer software containing accepted geologic and geographic interpolation procedures, as determined by the Tax Commissioner. Map interpolation shall be limited by the resolution of the reserve property location, and in the absence of specific location information, valuation parameters shall default to District-level parameters.
4.2.3.9. Reserve coal property location -- The Tax Commissioner shall maintain files compatible with the Geographic Information System (GIS) which describe the general location, size, and ownership of all reserve properties in the State of West Virginia. These files shall include but are not limited to:
The geographic location (Latitude and Longitude of at least one point identifying the general location of the property) In the absence of an identifying location the valuation procedures shall be based on identifying descriptive data such as coal bed name to obtain tax district average values for all pertinent valuation parameters. In the absence of identified coal bed names, the valuation procedures shall be based on the prime coal bed for the District The names of coal beds located on the property. In the absence of identified coal bed names the valuation procedures shall be based on the prime coal bed for the District The size in acres of the property The size in acres of each known coal beds The fractional interest of undivided ownership, if available The name and address of all owners of record, if available Any known previous mining of any coal bed which could affect the use of the property Any known current or proposed mining activity affecting the property The maps and data files created shall be updated annually. The maps shall be interpolated from known data points using computer software containing accepted geologic and geographic interpolation procedures, as determined by the Tax Commissioner. Map interpolation shall be limited by the resolution of the reserve property location, and in the absence of specific location information, valuation parameters shall default to District-level parameters.
4.2.3.10. Production files -- The Tax Commissioner shall maintain data files compatible with the Geographic Information System (GIS) which compile the annual tons of coal produced from all reporting mines. The production files shall be maintained by permit number and shall be used to indicate mineability of specific coal beds, over- and under-mining of specific coal beds and to calculate remaining tonnage. These files shall be based on coal bed-specific production subsequent to 1980, and on the allocation of production and depletion from the best available information for all known (reported) mines prior to 1981. The sources for this data include but are not limited to:
West Virginia Department of Tax and Revenue West Virginia Office of Miners’ Health, Safety, and Training
4.2.3.11. Capitalization rate file -- The Tax Commissioner shall maintain data files containing financial and market information to be used to develop the capitalization rate estimate for coal property financing. These files shall include information enabling the development of a capitalization rate as described in Subsection 4.1 of this rule.
4.2.3.12. Active mine data -- The Tax Commissioner shall maintain data files reflecting information used to appraise Active mining property. These files shall include information enabling the valuation of Active mining property as described in Subsection 4.1 of this rule.
4.2.3.13. Reserve coal property coal bed(s) to be valued -- The Tax Commissioner shall determine the name of each coal bed occurring at the reserve property location (either from property descriptive data or, in absence of specific information, by comparing the property with the GIS maps). In all cases the property data shall be compared to the GIS maps and conflicts shall be resolved either by revising the coal bed maps or by revising the coal bed data contained in the property record file.
4.2.3.14. Reserve coal property coal quantity -- The Tax Commissioner shall determine the quantity of reserves by multiplying the thickness (in feet) of each coal bed at a GIS location by the areal extent of a coal bed (coal bed file) by 1800 tons per acre foot by the typical recovery rate for each coal bed at a GIS location. The reserve tonnage for each coal bed thus determined shall be adjusted as follows:
Over- or Under-Mining Percent of Subject Coal Bed Over- or Under-Mined Percent of Subject Coal Bed Considered Mineable Immediately Below 10 to 20 % 50 % Immediately Below 20 to 50 % 25% Immediately Above 20 to 50 % 75% Immediately Above and Immediately Below Over 50% 0 %
4.2.3.15. Clean coal recovery rate -- Using the GIS coal bed maps, the GIS historic production files, and the current mining files, the Tax Commissioner shall calculate the recovery rate for each coal bed at all mapped locations. This recovery rate shall be used to determine mineable tonnage and mineable BTU.
4.2.3.16. Reserve coal property prime coal bed -- The Tax Commissioner shall determine the prime coal bed at a location as follows:
The stratigraphically-highest coal bed which is also the thickest of all coal beds greater than or equal to 30 inches; which has been or is currently being mined within the general area of the subject location; and which contains sufficient mineable tons to sustain mining for two (2) years in a specified area at the average rate of mining in the bed, in the general area, for the most recent three (3) calendar years; Provided, That if an average rate of mining in the bed cannot be determined, a default rate of 100,000 tons per year shall be used.
If the property is too small (less than or equal to 10 acres) to specifically estimate a prime coal bed, then the prime coal bed shall be considered to be the prime coal bed of the general area, as determined by the procedure referenced above.
4.2.3.17. Reserves coal bed valuation factors -- The Tax Commissioner shall determine a valuation factor for each coal bed at a location as follows:
4.2.3.17.a. Market interest factor -- The Tax Commissioner shall assign a relative market interest factor based upon market transaction GIS maps. Based on geostatistical analysis of the correlation between transaction density and mining activity a factor of from 20 to 80 will be assigned each property.
4.2.3.17.b. Market mineability factor -- The Tax Commissioner shall assign a market mineability factor based upon the history of mining in the area of a property, within a radius to be determined biannually by geostatistical analysis. A factor will be assigned as follows: no record of mining factor of 80 mining in area only between 1974 and 1983 factor of 40 mining in area prior to 1974 and continuing to present factor of 20
4.2.3.17.c. Prime coal bed factor -- The Tax Commissioner shall assign a prime coal bed factor to coal beds occurring on a property as follows: if a coal bed does not receive a prime coal bed designation factor of 80 if a coal bed receives prime coal bed designation factor of 20
4.2.3.17.d. Environmental factor -- The Tax Commissioner shall assign an environmental factor to each coal bed occurring on the property as follows: identified environmental problem which would significantly preclude mining factor of 80 identified environmental problem which would significantly impede mining factor of 40 identified environmental problem which may affect mining factor of 20 no identified environmental problem affecting mining at a location factor of 0
4.2.3.17.e. Use conflict factor -- The Tax Commissioner shall assign a use conflict factor for each coal bed occurring on a property based on geostatistical analysis of distribution of oil and gas wells compared to the distribution of active coal mines, to be performed biannually. A factor ranging from 0 to 80 will be assigned based on the results of the analysis.
4.2.3.17.f. Volatility factor -- The Tax Commissioner shall assign a volatility factor based on the volatility content (using the coal bed characteristics GIS maps and data files) for each coal bed occurring on the property as follows: volatility less than or equal to 17% factor of 80 volatility greater than 17% factor of 0
4.2.3.17.g. Coal bed index factor -- This factor shall be assigned to each coal bed and expressed as the sum of all the factors referenced above, divided by three and rounded to the nearest value of 20, 40 or 80. This factor shall be used as the exponent "t" for each coal bed, in the present worth formula as described in the following Subdivision 4.2.3.18.
4.2.3.17.h The Commissioner shall conduct studies biannually to determine components affecting the various factors set forth in this subdivision and the preliminary results shall be filed for public comment in the State Register on or before July 1st of the year in which the studies are conducted. Public comment on the studies shall be accepted until August 1st of that year, and the final results to be used shall be issued on or before the immediately following September 1st and published in the State Register.
4.2.3.18. Valuation of individual coal beds per reserve coal property -- The factors to be used by the Tax Commissioner to determine the present value per acre of individual coal beds on reserve coal properties are as follows: coal price per million BTU ($/mmBTU), royalty rate (Roy), BTU and sulfur adjustment factor [1 " (_BTU + _S)], current market value of one BTU [(1/(1+I)(t+0.5))X(1/106)], BTU content (BTU), two thousand lbs. per ton (2000), 1800 tons per acre foot (1800), clean coal recovery rate (RR), and thickness in feet (Thk). The formula used in determining the present value per acre per bed ($/ac/bed) is found at Appendix A, Formula 6 of this rule.
4.2.3.18.a. A narrative version of this formula is as follows:
The base market location value is the starting point of the valuation. The base market location value for a location shall be determined by multiplying the coal price per million BTU for a location ($/mmBTU) by the royalty rate (Roy) for the location.
A current market location value is then calculated for each coal bed, by multiplying the base market location value by a BTU and sulfur adjustment factor [1 " ( BTU + S)] for each coal bed at a location.
The present value of one BTU of each coal bed at a location is then calculated by multiplying the current market location value by 1/ million (1/106), and then multiplying the resulting product by the standard mid year present worth factor calculated as 1/(1+I)(t+0.5) where: the discount rate is “I” the valuation factor is the exponent “t”
Yielding the present value per acre of a coal bed on a property.
The present value per coal bed per property at a location is determined by: multiplying the present value of one BTU, by the BTU per pound of a coal bed at a location, then multiplying by 2000 pounds per ton, then multiplying by 1800 tons per acre foot, then multiplying by the clean coal recovery rate for the coal bed at the location, and then multiplying by the thickness of the coal bed at the location, and multiplying the present value per acre by the reserve acres of each coal bed at the location
4.2.3.19. Determination of aggregate value -- The aggregate value of all unmined coal in West Virginia shall be determined by multiplying the average coal price by, the average royalty rate by the annual production, divided by the capitalization rate. The formula used to determine the aggregate value is found at Appendix A, Formula 7 of this rule.
4.2.3.20. Determination of aggregate active value -- The aggregate active value shall be determined by summing all of the values of active acres on active mining properties for which returns have been timely filed and for which data has been entered into the computer system no later than the November 15th next succeeding the July 1st assessment date.
4.2.3.21. Determination of aggregate reserve value -- The aggregate reserve value shall be determined by subtracting the aggregate active value from the aggregate value as determined in the foregoing subdivision 4.2.3.19.
4.2.3.22. Final RCVM valuation procedures -- The Tax Commissioner shall determine the final RCVM value of a coal bed as follows:
4.2.3.22.a. The sum of all the individual property coal bed values throughout the state is calculated to yield the aggregate reserve index. The aggregate reserve value is then divided by the aggregate reserve index yielding the aggregate ratio.
4.2.3.22.b. The coal bed index is multiplied by the aggregate ratio, yielding the adjusted coal bed value.
4.2.3.22.c. The total value of each individual property is determined by summing all the adjusted individual coal bed values for the property.
4.3. Valuation of unmineable coal properties. -- Unmineable coal shall be valued under one of the following circumstances:
4.3.1. Properties in which each and every coal bed is unmineable or where each bed is partially unmineable and the remaining portion is mined out, shall be valued at a rate of five dollars ($5.00) per deed acre; and
4.3.2. Properties in which an acre or more of unmineable coal coexists with mineable coal in any bed, shall be valued at a rate of five dollars ($5.00) times the amount of unmineable acreage in the bed containing the least amount of unmineable acreage.
4.4. Valuation of mined-out coal properties. Mined-out coal property shall be valued under one of the following circumstances:
4.4.1. Properties in which each and every coal bed is completely mined-out, shall be valued at a rate of one dollar ($1.00) per deed acre; and
4.4.2. Properties in which an acre or more of mined-out coal coexists with mineable coal in any bed, shall be valued at a rate of one dollar ($1.00) times the amount of mined-out acreage in the bed containing the least amount of mined-out acreage.
4.5. Valuation of barren coal properties. Barren coal properties shall be valued under one of the following circumstances:
4.5.1. Properties in which each and every coal bed is completely barren shall be valued at a rate of one dollar ($1.00) per deed acre; and
4.5.2. Properties in which an acre or more of barren coal coexists with mineable coal in any bed, shall be valued at a rate of one dollar ($1.00) times the amount of barren acreage in the bed containing the least amount of barren acreage.
4.6. Total coal appraisal. -- The total coal appraisal for any coal property is the sum of the value for all active acres, all reserve acres and proper administrative values calculated for unmineable, mined-out, and barren acreage. The total amount of coal acres valued for any properties shall not be less than the amount of deed acres.
4.7. Leasehold interests. -- This rule generally attributes the value of coal to the owner of the coal property. In those circumstances where the owner of the property is subject to a lease requiring the owner to permit mining at royalty rates substantially below current market rates, the owner may petition the Tax Commissioner to attribute a portion of the value of the coal determined by this rule to the leaseholder.
4.8. Farm properties. -- The coal rights, that are part of a "fee" estate where the use of the surface has qualified for farm use appraisal, shall be valued as described in the Division=s rule, Valuation of Farmland and Structures situated thereon for Ad Valorem Property Tax Purposes, 110 C.S.R. 1A.
4.9. Property reports. -- On or before August 1st of each year the producer is required to file an Annual Appraisal Report for Production of Coal with the Tax Commissioner with acknowledgement to the coal owners and the county assessors of the counties in which the mine is located. On or before August 16th of each year, the coal owner of any property that is part of a permitted mining operation under lease is required to file an Annual Appraisal Return for Reserve Mineral Properties with the Tax Commissioner. Owners of other coal properties may file an Annual Appraisal Return for Reserve Mineral Properties, on or before September 16th, with the Tax Commissioner; otherwise the properties shall be valued using the best available information.
4.10. Confidentiality -- All information provided by or on behalf of a natural resources property owner or by or on behalf of an owner of an interest in natural resources property to any state or county representative for use in the valuation or assessment of natural resources property or for use in the development or maintenance of a legislatively funded mineral mapping or geologic information system is confidential. The information is exempt from disclosure under provisions of West Virginia Code §29B-1-4, and shall be kept, held, and maintained confidential except to the extent the information is needed by the State Tax Commissioner to defend an appraisal challenged by the owner or lessee of the natural resources property subject to the appraisal: Provided, That this section may not be construed to prohibit publication or release of information generated as part of the minerals mapping or geologic information system, whether in the form of aggregated statistics, maps, articles, reports, professional talks, or otherwise presented in accordance with generally accepted practices and in a manner so as to preclude the identification or determination of information about particular property owners.
APPENDIX A
Formula 1 Annual Acres Mined = Annual Production_________ Ave. Thickness X 1800 X Clean coal recovery rate Formula 2 1800 tons/ac.ft.= (62.4 lbs.water/ft3)x(1.32 lbs.coal/1 lb.water)x(43,560 ft2/acre)x(1Thk) 2000 lbs./ton WHERE: Thk = 1 foot thickness Formula 3 $/ac = [(Thk)x(1800)x(RR)x(SRoy)x(SCM)x(M)]+[(Thk)x(1800)x(RR)x(MRoy)x(MCM)x(M)]
ML Where: $/ac = appraisal rate per acre Thk = coal thickness in feet 1800= 1800 tons per acre foot RR = clean coal recovery rate SRoy = steam coal royalty rate SCM = decimal representing percent of coal sold to steam market M = net present value multiplier Thk = coal thickness in feet MRoy = Metallurgical coal royalty rate MCM = decimal representing percent coal sold to metallurgical market ML = mine life in years Formula 4 VAMP = (AAM) X (ML) X ($/ac)
Where: VAMP = value of active mining portion AAM = annual acres mined ML = mine life in years $/ac = value per active acre Formula 5 tons = (Thk) X (ac.) X (1800) X (RR)
Where: tons = Reserve Property Coal Quantity Thk = Thickness in feet of a coal bed ac. = areal extent of coal bed 1800 = 1800 tons per acre foot RR = clean coal recovery rate Formula 6 $/ac/bed=($/mmBTU)X(Roy)X[1"( BTU+ S)]X[(1/(1+I)(t+0.5))x(1/106)]X(BTU)X(2000)X (1800)X(RR)X(Thk)
Where: $/ac/bed = present value per acre of an individual coal bed on property $/mmBTU = coal price (FOB-source) per million BTU Roy = average royalty rate [1 " ( BTU + S)] = BTU and sulfur adjustment factor 1/(1 + I)(t+0.5) = standard mid-year present worth factor (1/106) = 1 divided by 1,000,000 BTU = BTU content of one pound of dry coal by coal bed by location 2000 = two thousand lbs. per ton 1800 = 1800 tons per acre foot RR = clean coal recovery rate Thk = coal bed thickness in feet Formula 7 Aggregate value=(Ave.Coal price)X(Ave.Royalty rate)X(Annual production)
Capitalization rate 110CSR1I 110CSR1I
Series 01J Valuation of Producing and Reserve Oil, Natural Gas Liquids, and Natural Gas for Ad Valorem Property Tax Purposes
W. Va. Code R. § 110-1J-1 General
1.1. Scope. -- This rule provides the mass appraisal methodology the State Tax Commissioner shall use to determine the appraised value of producing and reserve oil and natural gas properties for ad valorem tax purposes.
1.2. Authority. -- W. Va. Code §§11-1C-5(b), 11-1C-5a, and 11-1C-10(d).
1.3. Filing date. -- April 24, 2023.
1.4. Effective date. -- April 24, 2023.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on August 1, 2028.
W. Va. Code R. § 110-1J-2 Introduction
Estates in oil, natural gas liquids, or natural gas, or any combination of the three, are among the several estates in real property that may be owned either separately or in conjunction with other estates. If oil, natural gas liquids, or natural gas is owned as a separate estate, either absolute, as a leasehold, or in conjunction with other estates, West Virginia property tax law requires that ownership be listed, valued, and taxed in proportion to its value to be ascertained as directed by law. If oil, natural gas liquids, or natural gas is owned in conjunction with an undivided or fee interest in an estate, the value of the oil or natural gas shall be included in the value of that estate. Oil, natural gas liquids, or natural gas may be owned without being produced. Oil, natural gas liquids, or natural gas title may exist where no oil, natural gas liquids, or natural gas is known to be present, or where the oil, natural gas liquids, or natural gas is unproducible or depleted.
2.1. Categories for valuing oil, natural gas liquids, or natural gas properties. -- Parcels of property bearing or having the potential to bear oil, natural gas liquids, or natural gas or having the oil, natural gas liquids, or natural gas mineral interests separated from the fee of the property shall be categorized as:
2.1.1. producing property (to include home use, farm use, and industrial use on-property consumption);
2.1.2. non-producing property;
2.1.3. barren property; or
2.1.4. plugged and/or abandoned property.
W. Va. Code R. § 110-1J-3 Definitions
As used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
3.1. “Abandoned well” means any well which is required to be plugged under the provisions of W. Va. Code §22-6-19.
3.2. “Actual annual operating costs” means all lease operating expenses, lifting costs, gathering, compression, processing, separation, fractionation, and transportation costs. These costs are limited to the actual costs incurred by the producer, prior to the arm-length sale of the well output to a buyer, without reference to items such as general administration, overhead, or any costs indirectly related to producing, processing, or transporting the well output.
3.3. “Appraised value” means the value of oil producing properties or natural gas producing properties, including real and personal property, determined in accordance with this rule.
3.4. “Assessment date” means the July 1 date preceding the start of the property tax year as defined in W. Va. Code §11-3-1, et seq.
3.5. "Bands of investment discount component" means a discount rate derived by assigning rates to various debt and equity investment financing tiers and summing these rates, weighted by their respective percentages of total financing, as specified in the annual variables filed pursuant to section heading 10 of this rule.
3.6. “Barrel” or “BBL” means a unit of measurement of volume equal to 42 US gallons.
3.7. "Barren property" means those acres, tracts, and parcels owned in fee in West Virginia where data suggests with reasonable certainty that the presence of oil, natural gas liquids, or natural gas is very unlikely.
3.8. "Capitalization rate" means a single state-wide capitalization rate for oil, natural gas, and natural gas liquids producing property, which shall be determined annually by the Tax Department based on a “Build-up-Model” of the Weighted Average Cost of Capital (WACC).
3.9. "Coalbed methane" means methane gas, and other well output which can be produced from a coal seam, the rock or other strata in communication with a coal seam, a mined-out area, or a gob well.
3.10. "Commissioner" or "Tax Commissioner" means the Tax Commissioner of the State of West Virginia, or his or her delegate.
3.11. "Communitized area" means an area involving more than one lease, due to a cooperative agreement or legal mandate, and is developed for the drilling and operation of a single or multiple oil or gas wells, or both, by one or more operator.
3.12. “Compression costs” are the actual costs in the process of raising the pressure of minerals.
3.13. “Condensate” means liquid hydrocarbons (normally exceeding 40 degrees of API gravity) recovered at the surface without processing. For purposes of this rule, condensate, along with certain other components of well output, constitutes a natural gas liquid.
3.14. “Deeded acre” means an acre of land one owner transferred, or deeded, to a new owner.
3.15. "Discount component" means an element in the determination of a rate reflecting a provision for returning to an investor a sum of money equal to the aggregate of the anticipated return-on-investment over the economic life of an investment.
3.16. “Economic interest” in oil, natural gas liquids or natural gas means that the person has acquired by investment any interest in oil, natural gas liquids or natural gas in place and secures, by any form of legal relationship, current, future, or potential income derived from the extraction of the oil, natural gas liquids or natural gas, to which the person must look for a return of the person’s capital.
3.17. “Farm-use well” means a gas well that produces gas solely for the use of the farmer who owns the land where the gas is in place. Ownership of the gas by the farmer is not required to qualify as a farm-use well. The gas produced may not be sold, traded, or bartered.
3.18. “Flat Rate royalty” means a royalty rate in which the amount paid per year (e.g., $100 per year) is set within a lease and is not dependent on the production or income derived from the well.
3.19. "Flush production" means the production of oil and/or natural gas from any well on an oil and/or natural gas property with an initial production date that is two (2) calendar years or less prior to the July 1st assessment date. Production beginning after December 31st and prior to the July 1st assessment date must be reported.
3.20. “Gathering costs” means the actual costs of transportation of oil, natural gas, natural gas liquids, condensate, or any combination thereof from multiple wells by separate and individual pipelines to a central point of accumulation, dehydration, compression, separation, heating and treating or storage.
3.21. “Fractionation costs” means the actual costs incurred by the producer in fractionation. Fractionation is the separating of components of a mixture through differences in physical or chemical properties. Fractionation is the process by which raw hydrocarbons are separated into products.
3.22. "Gross receipts" or “gross proceeds” means the total income received for the production on any well, without reduction for any royalties, costs, allowances, expenses, or adjustments of any kind, determined at the point of a metered or measured first sale to an unrelated third party. "Gross receipts" or “gross proceeds” includes total monies and other consideration paid, payable or accruing to a producer for the disposition of the oil, natural gas liquids, natural gas, residue gas, well output, or gas plant products, or any combination thereof, produced. "Gross receipts" or “gross proceeds” also includes, but is not limited to, payments and accruals to the operator for certain services such as metering, dehydration, liquids separation, measurement, and gathering, or any combination thereof. Monies and other consideration, to which an operator is contractually or legally entitled, but which the operator does not seek to collect through reasonable efforts, are also part of "gross receipts" or “gross proceeds.” For purposes of this definition, the total amounts paid, payable, or accruing shall be determined under the method of accounting used for federal income tax purposes.
3.23. “Horizontal well” or “directional well” – For purposes of this rule, and notwithstanding the definitions set forth in W. Va. Code §22-6A-4 and §22-6B-2, the term “horizontal well” or “directional well” means a well, the wellbore of which is initially drilled on a vertical or directional plane and which is curved to become horizontal or nearly horizontal, in order to parallel a particular geological formation and which may include multiple horizontal or stacked laterals.
3.24. “Home-use well” means a gas well that produces gas solely for the use of the homeowner who occupies the land where the gas in place. Ownership of the gas by the homeowner is not required to qualify as a home-use well. The gas produced may not be sold, traded, or bartered.
3.25. “Lease” means the area encompassed in the leasehold granting the right to explore for or produce oil or natural gas, which may include a single tract or multiple tracts of land described in the instrument granting the leasehold;
3.26. “Lease operating expenses” means the actual costs incurred to bring the subsurface minerals (oil, natural gas, and natural gas liquids) up to the surface and convert them to marketable products. Lease operating expenses refers to the costs of operating the wells and equipment. “Lease operating expenses” includes actual costs of labor, fuel, utilities, materials, rent or supplies, which are directly related to the production, processing, or transportation of oil, natural gas, natural gas liquids, or any combination thereof and that can be documented by the producer. For the purposes of this calculation, depreciation, depletion, extraordinary expenses, ad valorem taxes, capital expenditures, intangible drilling costs, expenditures relating to vehicles or other tangible personal property not permanently used in the production of oil, natural gas, natural gas liquids, or any combination thereof shall not be included as lease operating expenses.
3.27. “Lifting costs” means the actual costs incurred to operate a well during production.
3.28. “Marginal well” means a well that, in the calendar year immediately preceding the July 1 assessment date, has an average daily production of two (2) barrels of oil or less, and an average daily production of ten (10) MCF of natural gas or less.
3.29. “Marketing affiliate” means an affiliate of the lessee whose function is to acquire only the lessee's production and to market that production.
3.30. “M.C.F.” or “MCF” when used with respect to natural gas, means 1,000 cubic feet of natural gas measured at a pressure of 14.73 pounds per square inch (absolute) and a temperature of 60 degrees Fahrenheit.
3.31. “Natural gas” means natural gas, coalbed methane, synthetic gas useable for fuel, or mixtures of natural gas and synthetic gas. For purposes of the valuation of natural gas producing property under this rule, references to “natural gas” includes natural gas liquids and liquefied natural gas when those products have not been processed from the natural gas.
3.32. “Natural gas liquids” means propane, ethane, butanes, and pentanes (also referred to as condensate), or a combination of them that are subject to recovery from raw gas liquids by processing in field separators, scrubbers, gas processing and reprocessing plants, or cycling plants.
3.33. "Natural gas producing property" means the property from which natural gas or natural gas liquids has been produced or extracted at any time during the calendar year preceding the July 1 assessment date. Natural gas producing property includes the interest or interests underlying an area of up to one hundred twenty-five (125) acres of surface per vertical well for property with active wells on the parcel; and communitized acres of surface per horizonal well for properties with one or more active wells. All acreage of a natural gas producing property in excess of one hundred twenty-five (125) acres per vertical well, or the communitized acres per horizontal well, shall be valued at the non-producing rate per acre referenced in section heading 4 of this rule.
3.34. “Net proceeds” means actual gross receipts on a sales volume basis determined from the actual price received by the taxpayers as reported on the taxpayer’s returns, less royalty interest receipts, and less actual annual operating costs as reported on the taxpayer’s returns.
3.35. “Non-Producing or Shut-in Well” means a well, which due to the producer’s decisions, market reasons, or product performance, or any other reason or combination of reasons, was non-productive during the entire most recent calendar year preceding the July 1 assessment date.
3.36. “Non-producing property” means properties that were not engaged in production of well output, as herein defined, during the calendar year next preceding the July 1 assessment date. This category includes any acreage that has been shut-in for the entire year.
3.37. "Oil" means natural crude oil or petroleum, and other hydrocarbons, regardless of gravity, which are produced at the well in liquid form by ordinary production methods and which are not the result of condensation of gas after it leaves the underground reservoir.
3.38. "Oil producing property" means property from which oil has been produced or extracted at any time during the calendar year preceding the July 1 assessment date. Oil producing property includes the interest or interests underlying an area of up to forty (40) acres of surface per well with one (1) or more active well(s) on the parcel. All acreage of an oil producing property in excess of forty (40) acres per well, shall be valued at the non-producing rate per acre referenced in section heading 4 of this rule.
3.39. "Overriding royalty" means the fractional interest in the gross production payable to a person who is neither the producer nor the owner of the oil or natural gas estate and who is not required to bear a share of the development or operating costs of the well.
3.40. "Personal property" used in oil or natural gas production means machinery and equipment on the lease or communitized area used in oil production or natural gas production from the well to the point of sale. It shall not include vehicles or other tangible personal property not permanently used in production, nor shall it include third party equipment used to enhance or remarket the gas after the oil or natural gas has left the lease or communitized area.
3.41. “Plant gas products” means separate marketable elements, compounds, or mixtures, whether in liquid, gaseous, or solid form, resulting from processing natural gas, excluding residual gas.
3.42. “Plugged and abandoned well property" means plugged and abandoned wells that produced or were intended to produce well output, as herein defined, without regard to whether the well historically produced well output or was a so-called “dry hole” that failed to produce well output.
3.43. “Processing costs” means the actual costs incurred by the producer for activities occurring beyond the inlet to an oil, natural gas, or natural gas liquids processing facility that changes the physical or chemical characteristics, enhances the marketability, or enhances the value of the separate components. Processing costs are limited to the costs for the following activities: fractionation, adsorption, flashing, refrigeration, cryogenics, sweetening, dehydration within a processing facility, beneficiation, stabilizing, compression, and separation which occurs within a processing facility.
3.44. “Processing, separation and fractionation costs” means de-ethnization fees, processing or fractionation fees, pipeline or transportation fees, fuel fees, and electric fees charged by a processing or fractionation plant to the producer.
3.45. “Producer” or “Operator” means any person or persons, corporation, partnership, joint venture or other enterprise or entity that proposes to or does locate, drill, produce, manage, or abandon any well. “Producer” or “Operator” includes, but is not limited to, lessees, as herein defined, and any person or persons, corporations, partnership, joint venture or other enterprise or entity that owns the economic interest in the natural resource produced, as the term economic interest is defined in §110-13A-1, et seq., Code of State Rules.
3.46. “Property owner” means the person or persons who own the natural gas or oil in place, except where a different meaning is required by the context in which “property owner” is used in this article.
3.47. “Raw gas” or “raw natural gas” means natural gas as it is produced from the underground reservoir.
3.48. “Raw gas liquids” or “raw make” is a combined stream of propane, butane and pentanes, plus any other liquid hydrocarbon, or any mixtures thereof, which are separated from residue gas and processed at a processing or fractionation plant into plant gas products.
3.49 “Related parties” shall have the same meaning as in the Severance And Business Privilege Tax Act, W.Va. Code §11-13A-1, et. seq.
3.50. “Residue gas” means the hydrocarbon gas, consisting principally of methane, resulting from processing gas.
3.51. "Risk rate" means a rate reflecting a return to an investor necessary to attract capital to an investment containing a possible loss of principal, or interest, or both.
3.52. "Royalty interest" means the fractional interest in oil production or natural gas production, or both, that may or may not be subject to development costs or operating expenses and extends undiminished over the life of the property. Typically, it is retained by the oil or natural gas rights owner or lessor or the oil or natural gas, or both.
3.53. "Storage wells" means drilled and completed wells on any property used for the artificial injection or storage of natural gas into a natural reservoir strata.
3.54. “Total Production” means the total amount of well output. It includes the total amount of oil, measured in barrels, total amount of natural gas liquids, measured in MCF, and the total amount of natural gas, measured in MCF, of all oil, natural gas liquids and, natural gas actually produced and sold from a single well that is developed and producing on the assessment date. For commonly metered wells, “total production” means the total amount of oil, the total amount of natural gas, and the total amount of natural gas liquids, of all oil, natural gas liquids, and natural gas actually produced and sold from the commonly metered wells divided by the number of the commonly metered wells.
3.55. “Transportation costs” means the actual costs of moving oil, natural gas, natural gas liquids, unprocessed gas, residue gas, or gas plant products or any combination thereof to a point of sale.
3.56. “Vertical well” means any well producing either gas or oil, or both gas and oil, that is not a horizontal well as defined in this rule.
3.57. "Well" means any shaft or hole sunk, drilled, bored, or dug into the earth or into underground strata for the extraction of oil or gas.
3.58. “Well output” means oil, natural gas liquids, natural gas, condensate, raw gas, raw natural gas liquids, plant gas products, residue gas, or any other natural resource produced from a well or any combination thereof.
3.59. "Working interest" means the fractional interest in oil production or natural gas production, or both, subject to development and operating expenses and owned by the leaseholder or operator, or both.
W. Va. Code R. § 110-1J-4 Methods of Valuation
4.1. General. -- The value of oil producing property or natural gas producing property, or property producing both, shall be determined through the process of applying a yield capitalization model to the net receipts (gross receipts less royalties paid and less actual annual operating costs) for the working interest and a yield capitalization model applied to the gross royalty payments for the royalty interest. Where ownership is split through a lease or royalty arrangement, different values shall be determined for the working interest and the royalty interest. If the well produced for less than twelve (12) months during the first calendar year of production, or during the first calendar year of production after being shut-in during the previous calendar year, the gross receipts and royalties paid shall be annualized prior to the process of applying a yield capitalization rate. Each term in this valuation is discussed below.
4.2. Method for valuing oil producing property. -- Except as otherwise provided in this section, the appraised value of a producing oil well, including personal property at the well necessary to recover the oil, shall be determined as follows:
4.2.1. For producing oil wells, the appraised value shall be determined as in section heading 5 of this rule.
4.2.2. Safe harbor. – The Tax Commissioner may annually determine a safe harbor amount for operating costs for marginal wells to be published in the State Register. For those operators choosing to use the safe harbor amount rather than calculate their actual annual operating costs, that safe harbor amount will be considered the costs associated with the production of the oil, typical of the producing area and strata.
4.2.3. For the purposes of valuing oil wells, the appraised value is to include the net proceeds from the sale of oil and the net proceeds from the disposition of any condensate recovered after the decline rate and capitalization rate has been applied to each product.
4.3. Method for valuing natural gas producing property. – Except as otherwise provided in this section, the appraised value of a producing gas well on assessment dates beginning on and after the effective date of this rule, including personal property on the lease or communitized area necessary to recover the gas, shall be determined under this section.
4.3.1. For producing natural gas wells, the appraised value shall be determined as in section heading 5 of this rule.
4.3.2. Safe Harbor. -- The Tax Commissioner may annually determine a safe harbor amount for operating costs for marginal wells to be published in the State Register. For those operators choosing to use the safe harbor amount rather than calculate their actual annual operating costs, that safe harbor amount will be considered the costs associated with the production of the natural gas and natural gas liquids, typical of the producing area and strata.
4.3.3. For the purposes of valuing natural gas wells, if the natural gas is sold after processing or fractionation or if the producer receives proceeds from the sale of processed natural gas liquids based upon its sales contract, the appraised value is to include the combined net proceeds from the disposition of the plant gas products and the gross proceeds from disposition of the residue gas after the decline rate and capitalization rate has been applied to each product. If the natural gas is sold prior to processing, then the appraised value is to include the net proceeds from the disposition of the raw gas after the decline rate and capitalization rate has been applied.
4.4. Percentage interest in oil, natural gas liquids, or natural gas, or a combination thereof. -- Where the ownership of oil, natural gas liquids, or natural gas in place is divided through a lease or other arrangement, leases typically contain a royalty clause, designating the compensation to the property owner, typically measured as a percentage or portion of the gross value of production without deduction of costs of production.
4.4.1. For example: Where the ownership of oil or natural gas in place, or both, is divided through a lease or other arrangement, the compensation to the property owner is typically derived by designating a percentage (generally one-eighth) of the production income to be the royalty payment to the owner. The remainder (generally seven-eighths) is the working interest. Royalty clauses may have any number of different measures for calculation of royalties.
4.4.2. The Tax Commissioner shall annually determine working and royalty percentage interests on a per well or lease basis, through a review of oil and natural gas producer annual property tax returns. These percentages shall be determined annually by dividing the total royalty paid by the reported gross income.
4.5. Valuation of home-use only wells. -- The appraised value of home-use wells will be an annual appraised value determined from information published by the U.S. Department of Energy, Energy Information Administration. If the home-use well owner has ownership in the mineral rights, the assessed value will be added to the real property assessment. However, if the home-use well owner only has rights in the surface, the assessed value will be added to the personal property assessment. This value of home use gas wells will be included in the tentative natural resource variables published in the State Register on or before July 1 each year. If the well also produces oil, that portion of the well will be separately valued.
4.6. Valuation of industrial use wells. -- The appraised value of wells used for industrial purposes only will be based on the actual most recent calendar year preceding the July 1 appraisal date MCF usage times the average West Virginia spot price for that calendar year determined by the "Natural Gas Monthly," published by the U.S. Department of Energy, Energy Information Administration.
4.7. Valuation of farm-use gas wells. -- The appraised value of a gas well, when the gas produced by the well is used only for farm purposes, such as heating the barn and farmhouse, will be an annual appraised value determined from information published by the U.S. Department of Energy, Energy Information Administration. If the farm-use well owner has ownership in the mineral rights, the assessed value will be added to the real property assessment. However, if the farm-use well owner only has rights in the surface, the assessed value will be added to the personal property assessment. This value shall be included in the tentative natural resource variables published in the State Register on or before July 1 each year. If the well also produces oil, that portion of the well will be separately valued.
4.8. Valuation of non-producing acreage. -- The value per acre of non-producing acreage, which includes shut-in wells, shall equal the discounted annual lease payment per acre. A valuation schedule for non-producing properties shall be determined annually by the Tax Commissioner for each district within a county, where data is available. The Tax Commissioner shall annually conduct a review of oil or natural gas lease agreements, or lease agreements addressing both, transacted at arms-length in all fifty-five (55) counties to determine the average annual delay rental lease payment per acre, and lease term. The per-acre value for nonproducing property shall be the sum of the projected annual income stream from delay rental during the lease term discounted in each year by a capitalization rate. A valuation of $1.00 per acre shall be used where property is located in those areas of the State where drilling activity or production have not been established and the property is presumed to be barren.
4.9. Valuation of plugged acreage. -- The appraised value of plugged well property acreage shall be valued to the oil or gas owner at the nominal rate of one dollar ($1.00) per acre. This category includes any plugged and abandoned acreage of up to one hundred twenty-five (125) acres per natural gas well, and the communitized acres per horizontal gas well. In the case of a plugged oil well, this section shall apply to up to forty (40) acres per vertical oil well and the communitized acreage per horizontal oil well. Any additional acreage will be valued as reserve acreage.
4.10. Valuation of abandoned well property acreage. -- The appraised value of abandoned well acreage shall revert to the value of reserve oil and gas acreage in the county provided there is no other producing or plugged well on the property.
4.11. Valuation of barren oil and natural gas areas. -- The appraised value of oil or natural gas interests in barren oil and natural gas property shall be one dollar ($1.00) per deeded acre. When two or more persons own the acreage, this appraised value shall be allocated among the owners based upon the percentage of their ownership of the acreage.
4.12. Valuation of wells that produce both oil and natural gas. -- The appraised value of wells that produce both oil and natural gas shall be determined by use of the methods described in this rule. These values shall then be summed to result in the overall value of the oil or natural gas producing acreage or acreage producing both oil and natural gas.
4.13. Valuation of storage well areas. – The valuation of storage well areas shall equal the discounted annual lease payment per acre that is applied to the reserve oil and gas acreage within the county. The minimum value applied to the areas will not be less than $5.00 per deeded acre. The value shall not include inventories stored within. Natural gas storage inventories shall be assessed to the inventory owner.
4.14. Farm properties. -- The oil and gas rights, that are part of a "fee" estate where the use of the surface has qualified for farm use appraisal, shall be valued as described in the Tax Commission's rule, Valuation of Farmland and Structures Situated Thereon For Ad Valorem Property Tax Purposes, 110 C.S.R. 1A. For purposes of this subsection, “farm fee estate” means absolute ownership of the farmland unencumbered by any other interest or estate.
4.15. Valuation of the Producer’s Personal Property at Non-Producing or Shut-In wells. -- The appraised value of the producer’s personal property that is part of a non-producing or shut-in well’s appraisal will be assigned to the producer at the same appraised value applied to machinery and equipment at home use only wells.
4.16. Valuation of Pre-Production or Permit Leaseholds -- Chattel real accounts (personal property) for pre-production/permit leaseholds will be valued by the county assessor.
4.17. Valuation of Producing Flat-Rate Royalty accounts -- The appraised value of a producing flat-rate royalty will be valued using a discounted cash flow series of the flat rate. It will not include production decline rates.
4.18. Valuation of tangible personal property not used in the production of gas or oil, or both gas and oil, in and about the well shall be valued by the county assessor, except that pipelines of public service businesses that are operating property shall be valued by the Board of Public Works as provided in W. Va. Code §11-6-1 et seq.
W. Va. Code R. § 110-1J-5 Yield Capitalization Model
5.1 Yield capitalization model. -- A yield capitalization model shall be developed for each producing property. The model shall use as a beginning point and include for each producing well, the gross receipts (both working interest and royalty interest) based upon the total production amounts from the most recent production year preceding the July 1 assessment date. This total gross proceeds amount will be apportioned to the working interest model and royalty interest model.
5.2. The total amount determined under section 5.1 shall be apportioned to the working interest and to the royalty interest:
5.2.1. Working interest model. -- In order to determine the working interest gross receipts income series, the total gross receipts referenced in section 5.1 of this section heading shall be reduced by the actual annual operating expenses as set forth in this rule to yield a net working interest income series. The net working interest income series shall be discounted by applying, on an annual basis, a decline rate and a mid-year life Inwood factor reflecting the capitalization rate referenced in section 5.4 of this section heading. The total of the annual discounted income stream shall be the market value estimate for the working interest of the producing oil or natural gas wells, including personal property. The minimum appraised value for any producing well will not be less than the machinery and equipment value. This minimum rate will not apply to home-use only wells or farm-use wells.
5.2.2. Royalty interest model. – In order to determine the royalty interest gross receipts income series, the total gross receipts referenced in section 5.1 of this section heading shall be discounted by applying, on an annual basis, a decline rate and a mid-year life Inwood factor reflecting the capitalization rate referenced in section 5.4 of this section heading. This amount will then be proportionally distributed to each royalty owner based on the royalty percentage received during the most recent calendar year to the July 1 assessment date. The summation of the annual discounted income streams shall be the market value estimate for the royalty interest of the producing oil or natural gas well for an area of up to one hundred twenty-five (125) acres per producing natural gas wells and up to forty (40) acres per producing oil wells.
5.3. Decline Rate. -- The net working interest receipts and the net royalty interest receipts will be multiplied by the applicable decline rates. The amounts determined under section 5.2 of this section heading will be adjusted by an appropriate production decline rate of 18 months that is derived and applied based upon the age of the well and typical of the producing area and strata. Net receipts and production amounts shall then be proportionately reduced by application of the appropriate annual rate to yield a declining terminal income series typical of the producing area and strata. Where the well did not produce during the entire calendar year, the net receipts and royalties paid will be annualized prior to the process of applying a yield capitalization procedure. This net amount is then multiplied by the applicable capitalization rate. Nothing shall prohibit a taxpayer from supplying information concerning additional actual gross receipts and actual operating expense information that may be supplemented or used in lieu of the annualization calculations.
5.4. Capitalization Rate. -- A single state-wide capitalization rate for oil, natural gas, and natural gas liquids shall be determined annually. The declining terminal series for the working interest and royalty interest, for each well, as set forth in section 5.3 of this section heading will be multiplied by the capitalization rate in order to determine the value of the well for property tax purposes.
5.4.1. Oil and gas reserves that are actively being produced represent depleting assets. The valuation of the reserves must take the rate of depletion into account by calculating the present worth of the likely future income related to the ongoing production. The present worth of the future income stream is calculated by discounting the annual amounts of production income estimated. The Tax Department will use an annual calculation to be applied when valuing natural gas and oil producing properties based on a “Build-up-Model” of the Weighted Average Cost of Capital (WACC). The WACC provides an estimate of the overall expected rate of return required by industry equity participants and financial investors to continue to invest in the relevant ongoing industry, and in comparison to other investment options. The rate is converted to a table of annual multipliers known as the Inwood Table.
5.4.2. On an annual basis, the Tax Commissioner will use published information as described below to determine the proportion of equity and debt generally used by the industry to support its ongoing exploration, development, and production activities. The WACC is developed annually by the Tax Commissioner using the following factors:
5.4.2.a. Equity Portion:
5.4.2.a.1. Risk Free Rate: Also known as the “safe rate” represents the rate of return on a low-risk investment. Examples of investments with safe rates include U.S. Treasury securities and investment grade bonds.
5.4.2.a.2. Equity Risk Premium: This factor represents the historical premium over the risk-free rate commanded by market participants to invest in the overall or broad portfolio of marketable securities. This premium is added to the risk-free rate.
5.4.2.a.3. Industry Risk Adjustment: This adjustment is related to the difference between the expectations of one specific industry to those of the overall market. It is typically measured as "beta." It is a measure of the risk inherent in an investment that cannot be diversified away in a portfolio. The beta coefficient is mathematically converted to a rate premium and added to the risk-free rate.
5.4.2.a.4. Size Premium: This premium is based on research which shows that, generally, there is a relationship between the size of a company or an industry and the expected returns on investment. Smaller companies and industries, especially less established ones, generally command higher rates of returns. This risk is added to the risk-free rate.
5.4.2.a.5. Real Estate Tax and Management Component: This factor represents the average cost to maintain the investment as real estate. It is based on an annual survey of costs as a percentage of net income. The factor is added to the above risk components.
5.4.2.b. Debt Portion:
5.4.2.b.1. Borrowing Rate: Based on surveys of published bank and bond rates applicable to the industry.
5.4.2.b.2. Income Tax Rate: Based on surveys of published effective tax rates applicable to the industry. This rate is used to modify the debt rate.
W. Va. Code R. § 110-1J-6 Gross proceeds
6.1. Gross proceeds shall be determined at the point of ultimate sale of the well output, or any part thereof, by the producer of that product. The transaction price and volumes used to determine the gross proceeds must be in connection with a bona fide arm's-length sale.
6.1.1. Where the lessee's contract for the sale of natural gas prior to processing provides for the sales price to be determined based upon a percentage of the purchaser's gross proceeds resulting from sales after processing the gas, the gross proceeds, for purposes of this section, shall never be less than a value equivalent to 100 percent of the sales price of the residue gas attributable to the processing of the lessee's raw gas plus the gross proceeds from sales of the natural gas liquids.
6.1.2. For purposes of this section, well output which is sold or otherwise transferred to the lessee's marketing affiliate and then sold by the marketing affiliate shall be valued based upon the gross proceeds derived from the sale by the marketing affiliate.
6.1.3. In transactions involving related parties, the gross value will be determined the same as in the Severance Tax under W.Va. Code §11-13A-2(c)(6)(B).
6.1.4. If a purchaser, or any other person, is providing certain services, the cost of which ordinarily is the responsibility of the lessee to place the residue gas or gas plant products in marketable condition or to market the residue gas and gas plant products, then those costs are included in the gross proceeds.
6.2. The gross proceeds that the lessee reports under this section is subject to monitoring, review, and audit.
6.2.1. The producer shall retain all data relevant to the determination of gross value. Such data shall be subject to review and audit by the Tax Commissioner.
6.2.2. In conducting reviews and audits, the Tax Commissioner may examine whether the contract reflects the total consideration actually transferred either directly or indirectly from the buyer to the seller for the well output. If the contract does not reflect the total consideration, then the Tax Commissioner may require that the well output sold pursuant to that contract be valued in accordance with section heading 8 of this rule. Gross proceeds may not be less than the gross proceeds accruing to the lessee, including any additional consideration.
W. Va. Code R. § 110-1J-7 Actual Annual Operating Costs
7.1. For the working interest, the Tax Commissioner shall allow a deduction against the gross proceeds determined under this rule for the actual annual operating costs. Actual annual operating costs are those costs or fees incurred by the producer from the well to the point of sale. The annual actual operating costs shall be the actual costs incurred by the producer, under that contract, except as provided in subsection 7.2.2. of this section, subject to monitoring, review, and audit by the Tax Commissioner.
7.2. Transportation costs must be allocated among all products produced and transported.
7.2.1. The deduction for transportation costs shall be determined on the basis of the lessee's cost of transporting each product through each individual transportation system. Where more than one product in a gaseous phase is transported, the allocation of costs to each of the products transported shall be made in a consistent and equitable manner in the same proportion as the ratio of the volume of each product (excluding waste products which have no value) to the volume of all products in the gaseous phase (excluding waste products which have no value).
7.2.2. Processing costs must be allocated among the gas plant products. A separate processing allowance must be determined for each gas plant product and processing plant relationship. Natural gas liquids shall be considered as one product for the purposes of allocation.
7.2.3. The costs of processing the NGLs after the residue gas has been removed cannot be applied against the value of the residue gas.
7.2.4. The lessee shall propose a cost allocation procedure to the Tax Commissioner. The lessee shall submit all relevant data to support its proposal. The Tax Commissioner shall then determine the transportation allowance based upon the lessee's proposal and any additional information the Tax Commissioner deems necessary.
7.3. Allowable costs in determining actual annual operating costs. -- Actual annual operating costs are limited to the following:
7.3.1. Lifting costs. Lifting costs are the actual costs incurred to operate a well during production.
7.3.2. Lease operating expenses. Lease operating expenses are the actual costs incurred to bring the subsurface minerals (oil, natural gas liquids, and natural gas) up to the surface and convert them to marketable products while on the lease or communitized area. Lease operating expenses refers to the costs of operating the wells and equipment on a producing lease. Items specifically listed as non-allowable costs in this Rule shall not be included in lease operating expenses.
7.3.2.a. Allowable lease operating expenses include the actual costs of labor, fuel, utilities, materials, rent, or supplies, which are directly related to the production, processing, or transportation of natural gas or oil, and that can be documented by the producer.
7.3.2.b. For the purposes of this calculation, depreciation, depletion, extraordinary expenses, ad valorem taxes, capital expenditures, intangible drilling costs, expenditures relating to vehicles or other tangible personal property not permanently used in the production of natural gas or oil shall not be included as lease operating expenses.
7.3.3. Transportation costs. Transportation costs are the actual costs of moving unprocessed gas, residue gas, or gas plant products to a point of sale. These costs are limited to the following:
7.3.3.a. Firm demand charges paid to pipelines. -- Lessees may deduct, as a component of the transportation allowance, firm demand charges or capacity reservation fees paid to a pipeline, including charges or fees for unused firm capacity that the lessee has not sold. If a lessee receives a payment from any party for release or sale of firm capacity or capacity reservation after reporting a transportation allowance that included the cost of that unused firm capacity, or reservation, or if a lessee receives a payment or credit from the pipeline for penalty refunds, rate case refunds, or other reasons, the lessee must reduce the allowance reported by the amount of the payment, credit or reduction of charges or fees claimed.
7.3.3.b. Gas supply realignment (GSR) costs. -- The GSR costs result from a pipeline reforming or terminating supply contracts with producers to implement the restructuring requirements of FERC Orders in 18 CFR part 284;
7.3.3.c. Commodity charges. -- The commodity charge allows the pipeline to recover the costs of providing service;
7.3.3.d. Wheeling costs. -- Hub operators charge a wheeling cost for transporting gas from one pipeline to either the same or another pipeline through a market center or hub. A hub is a connected manifold of pipelines through which a series of incoming pipelines are interconnected to a series of outgoing pipelines;
7.3.3.e. Gas Research Institute (GRI) fees. -- The GRI conducts research, development, and commercialization programs on natural gas related topics for the benefit of the U.S. gas industry and gas customers. GRI fees are allowable, provided such fees are mandatory in FERC approved tariffs;
7.3.3.f. Temporary storage services. -- This includes short duration storage services offered by market centers or hubs (commonly referred to as “parking” or “banking”), or other temporary storage services provided by pipeline transporters, whether actual or provided as a matter of accounting. Temporary storage is limited to 30 (thirty) days or less; and
7.3.3.g. Costs for compression, dehydration, and treatment of gas. -- The Tax Commissioner allows these costs only if such services are required for transportation or are necessary to place production into marketable condition.
7.3.3.g.1. “Gathering costs” are the actual costs of transportation of oil, condensate, or natural gas from multiple wells by separate and individual pipelines to a central point of accumulation, dehydration, compression, separation, heating and treating or storage.
7.3.3.g.2. “Compression costs” are the actual costs directly incurred in the process of raising the pressure of gas.
7.3.4. Processing, Separation and Fractionation costs -- The actual costs of processing, separation or fractionation may be included in the actual annual operating costs. These costs may include de-ethnization fees, processing or fractionation fees, pipeline or transportation fees, fuel fees, and electric fees charged by a processing or fractionation plant to the producer.
7.3.4.a. “Fractionation costs” means the actual costs incurred by the producer in the fractionation. Fractionation is the separating of components of a mixture through differences in physical or chemical properties. For the purposes of this rule, fractionation is the process by which raw make is separated into gas plant products.
7.3.4.b. “Processing costs” means the actual costs incurred by the producer for activities occurring beyond the inlet to a natural gas processing facility that changes the raw gas’s physical or chemical characteristics, enhances the marketability of the raw gas, or enhances the value of the separate components of the raw gas. Processing costs are limited to the costs for the following activities: fractionation, adsorption, flashing, refrigeration, cryogenics, sweetening, dehydration within a processing facility, beneficiation, stabilizing, compression, and separation which occurs within a processing facility.
7.3.5. Producers may not use any cost as a deduction that duplicates all or part of any other cost that the lessee uses under this section heading 7.
7.4. Nonallowable costs. -- The costs that a producer may not include in their actual annual operating costs include, but are not limited to, the following:
7.4.1. Overhead and administrative costs. – These costs are not allowed, whether or not those costs are directly or indirectly attributable and allocable to the operation and maintenance of the transportation system.
7.4.2. Taxes and Fees. -- State and Federal taxes, income taxes, severance taxes, and other fees, including royalties.
7.4.3. Costs of surety. -- Costs of surety are the costs of securing a letter of credit, or other surety, that the pipeline requires the producer to maintain.
7.4.4. Fees or costs incurred for storage. -- This includes storing production in a storage facility, whether on or off the lease, for more than 30 (thirty) days;
7.4.5. Aggregator or marketer fees. -- This includes fees paid to another person (including payment to affiliates) to market oil or gas, including purchasing and reselling the oil or gas, or finding or maintaining a market for the well’s production;
7.4.6. Penalties incurred as shipper. -- These penalties include, but are not limited to:
7.4.6.a. Over-delivery cash-out penalties. -- This includes the difference between the price the pipeline pays for over-delivered volumes outside the tolerances and the price received for over-delivered volumes within the tolerances;
7.4.6.b. Scheduling penalties. -- This includes penalties incurred for differences between daily volumes delivered into the pipeline and volumes scheduled or nominated at a receipt or delivery point;
7.4.6.c. Imbalance penalties. -- This includes penalties incurred (generally on a monthly basis) for differences between volumes delivered into the pipeline and volumes scheduled or nominated at a receipt or delivery point; and
7.4.6.d. Operational penalties. -- This includes fees incurred for violation of the pipeline's curtailment or operational orders issued to protect the operational integrity of the pipeline;
7.4.7. Intra-hub transfer fees. -- These are fees paid to hub operators for administrative services (e.g., title transfer tracking) necessary to account for the sale of gas within a hub;
7.4.8. Fees paid to brokers. -- This includes fees paid to parties who arrange marketing or transportation, if such fees are separately identified from aggregator or marketer fees;
7.4.9. Fees paid to scheduling service providers. -- This includes fees paid to parties who provide scheduling services, if such fees are separately identified from aggregator or marketer fees;
7.4.10. Internal costs. -- This includes salaries and related costs, rental costs, space costs, office equipment costs, legal fees, attorneys’ fees and expenses, and other costs to schedule, nominate, and account for sale or movement of production; and
7.4.11. Other costs. -- Depreciation, depletion, extraordinary expenses, ad valorem taxes, capital expenditures, intangible drilling costs, expenditures relating to vehicles or other tangible personal property not permanently used in the production of natural gas or oil shall not be included as operating costs.
W. Va. Code R. § 110-1J-8 Default method of valuation
8.1. When the producer does not file a complete return for a well on or before the August 1 due date of the return, as required by §11-6K-1 of the West Virginia Code, and section heading 9 of this rule, the Tax Commissioner shall use the average industry price of the producing area and strata, multiplied by the amount of production from the well reported to the West Virginia Department of Environmental Protection, to estimate the value of the well.
8.2. When the producer does not report the production of a well to the West Virginia Department of Environmental Protection, the Tax Commissioner shall estimate the appraised value of the well from information available to the Tax Commissioner.
W. Va. Code R. § 110-1J-9 Annual property returns
9.1. On or before August 1 of each year, as required by §11-6K-1 of this Code, the producer shall file the West Virginia Oil and Gas Producer/Operator Return with the State Tax Commissioner, with acknowledgement to the county assessors in the counties where the oil and natural gas property is located. This Return form shall be designed by the State Tax Commissioner so that information pertinent to the valuation of the producing property, and the plugged and abandoned well property shall be reported properly by the producer of oil or gas or both.
9.1.1. Producers shall annually report on a form prescribed by the Tax Commissioner the following information, by well:
9.1.1.a. The identity of the well;
9.1.1.b. The number of MCFs of gas produced;
9.1.1.c. The number of barrels of oil produced;
9.1.1.d. The MCFs of NGLs, including breakdown of type;
9.1.1.e. The amount of gross revenue received;
9.1.1.f. The amount of net revenue received; and
9.1.1.g. The amount of royalties paid.
9.1.2. Actual annual operating costs claimed must be supported by schedules and statements of cost by the producer and will be subject to review and audit, and possible assessment or refund as a result of such audit, by the Tax Department.
9.1.3. The producer must also produce any records or documents that the Commissioner may require proving or verifying the gross proceeds or actual annual operating costs claimed by the producer, including but not limited to:
9.1.3.a. Invoices and receipts;
9.1.3.b. The United States Department of Interior, Office of Natural Resources Revenue (ONRR) form ONRR-2014, or the pro forma form ONRR-2014; and
9.1.3.c. Contracts and Agreements related to costs claimed or gross proceeds received.
9.2. When a producer or operator files annual property tax returns for twenty-five (25) or more wells, the returns and other documents required by this rule shall be filed electronically. A producer or operator that files less than twenty-five (25) annual property tax returns may file the returns electronically.
9.3. Format requirements for electronic filing. -- The requirements and formats for electronic filing are listed in instructions for electronic filing of the form. These formats are available on the State Tax Department’s webpage.
W. Va. Code R. § 110-1J-10 Annual reports of variables
10.1. The Tax Commissioner shall, on or before July 1 of each year, publish and file in the State Register an annual summary of the variables to be considered in arriving at the value of the specific oil or natural gas related property. Public comments shall be accepted until August 1 of each year with the final results filed in the State Register on or before September 1 of each year.
10.2. The published variables shall include, but not be limited to, information about the components of the capitalization rates and the safe harbor rates.
W. Va. Code R. § 110-1J-11 Confidentiality
11.1. All information provided by or on behalf of a natural resources property owner or by or on behalf of an owner of an interest in natural resources property to any state or county representative for use in the valuation or assessment of natural resources property or for use in the development or maintenance of a legislatively funded mineral mapping or geologic information system is confidential under §11-1A-23 and §11-1C-14 of this code. The information provided is exempt from disclosure under the provisions of §29B-1-4 of this code, and shall be kept, held, and maintained confidential except to the extent the information is needed by the Tax Commissioner to defend an appraisal challenged by the owner or lessee of the natural resources property subject to the appraisal: Provided, That this section may not be construed to prohibit publication or release of information generated as part of the minerals mapping or geologic information system, whether in the form of aggregated statistics, maps, articles, reports, professional talks, or otherwise presented in accordance with generally accepted practices and in a manner so as to preclude the identification or determination of information about particular property owners.
11.2. Confidentiality of annual industry operating costs information.
11.2.1. Financial information and other data of oil and natural gas producers disclosed to the Tax Commissioner pursuant to reporting annual actual operating costs shall be considered confidential and exempt from disclosure under the provisions of §29B-1-1 et seq., of this code.
11.2.2. Any information disclosed to the Tax Commissioner pursuant to this rule shall have the confidentiality protections given to property tax return information under §11-1A-23 and §11-1C-14 of this code.
Series 01K Valuation Of Natural Resources other Than Coal, Oil Or Natural Gas For Ad Valorem Property Tax Purposes
W. Va. Code R. § 110-1K-1 General
1.1. Scope. -- This rule provides the methodology the Tax Commissioner shall use to determine the appraised value of natural resources properties other than coal, oil or natural gas for ad valorem property tax purposes.
1.2. Authority. -- W. Va. Code ''11-1C-5(a) and (d), 11-1C-5a and 11-1C-10(d).
1.3. Filing Date. -- April 6, 1999.
1.4. Effective Date. -- May 1, 1999. This rule applies to tax years beginning on or after January 1, 2000.
1.5. Repeal of former rule. -- This legislative rule repeals and replaces WV 110 C.S.R. 1K, Valuation of Natural Resources Property Other Than Coal, Oil or Natural Gas for Ad Valorem Property Tax Purposes, filed July 26, 1991 and effective July 26, 1991.
W. Va. Code R. § 110-1K-2 Introduction
2.1. Natural resources, such as limestone, fireclay, dolomite, sandstone, shale, sand and gravel, and salt are some of the several estates in real property. These estates may be owned either as a separate estate, or in conjunction with other estates, usually as fee ownership or as mineral ownership. If other natural resources are owned as a separate estate, either absolute or as a leasehold, West Virginia property tax law requires the ownership to be listed, valued and taxed.
2.2. Other West Virginia natural resources, such as lead, zinc, manganese, iron ore, radioactive minerals, and oil shale, which at present are not being actively mined, shall be valued in accordance with this rule when those estates are separate from the fee interest, or are being leased and/or actively mined.
2.3. The natural resources set forth in subsections 2.1 and 2.2 of this Section may be owned without being mined. Specific title to those natural resources may exist where the resource is not present (barren), or where the natural resource is unmineable, or mined out.
2.4. For valuation purposes, this rule classifies other natural resource property into the following categories:
2.4.1. Active
2.4.2. Reserves
2.4.3. Unmineable
2.4.4. Mined-Out
2.4.5. Barren
W. Va. Code R. § 110-1K-3 Definitions
As used in this rule and unless the context clearly requires otherwise, the following terms have the meaning ascribed in this section.
3.1. "Annual acres mined" means the average annual production, as defined in subsection 3.3 of this section, divided by the product of the average thickness (Thk) in feet of the natural resource being mined, as detailed in annual mining reports, multiplied by the tons per acre foot (as set out in Appendix A, Formula 2 to this rule) multiplied by the clean resource recovery rate (RR) at the mining operation, or as calculated from tonnage reported to the West Virginia Office of Miner's Health, Safety and Training/Office of Mining and Reclamation if substantially different. Appendix A, Formula 1, is the method to be used for calculating annual acres mined.
3.2. "Active mining property" means a mineable natural resource on a parcel or portion of a parcel involved in a mining operation, as defined in this Section, permitted by the West Virginia Office of Miner's Health, Safety and Training/Office of Mining and Reclamation. Each and every mineable natural resource shall be considered a separate active mining property.
3.3. "Average annual production" means the arithmetic mean of the annual rate of natural resource production of the three (3) most recent calendar years preceding the July 1st assessment date. If production during any of these three (3) calendar years involved a period of less than eleven (11) months, that production shall be annualized before the average annual production is calculated.
3.4. "Bands of investment discount component" means a discount rate derived by assigning rates to various debt and equity investment financing tiers and summing these rates, weighted by their respective percentages of total financing.
3.5. "Barren" means fee or mineral properties where other natural resource rights are owned, but a specific natural resource may never have been deposited or may have been subsequently removed by erosion.
3.6. "Capitalization rate" means a rate used to convert an estimate of income into an estimate of market value.
3.7. "Clean resource recovery rate" means the percentage of marketable resource that is recovered. The clean resource recovery rate must reflect the difference between calculated whole bed tonnage (tons-in-place) and mined tonnage as reported to the West Virginia Office of Miner's Health, Safety and Training/Office of Mining and Reclamation.
3.8. "Commissioner" or "Tax Commissioner" means the State Tax Commissioner of the State of West Virginia, or his or her delegate.
3.9. "Discount component" means a rate reflecting a provision for returning to an investor a sum of money equal to the aggregate of the anticipated return-on-investment over the economic life of an investment.
3.10. "Economic life method of recapture" means a method of developing a recapture rate by estimating the period of time an investment shall produce a return and estimating an equal periodic rate of recapture of the investment over this return period.
3.11. "Life of mining operation" means the number of years required to exhaust the natural resource at the average annual production rate. Fractional years shall be rounded to the nearest whole number.
3.12. "Management rate" means a rate reflecting a return to an investor for the management of similar investment portfolios.
3.13. "Mineable natural resource" means a natural resource which is so situated that it may be mined using generally accepted mining practices and suitable equipment. The condition of mineability presupposes that the resource is under lease and is being or is about to be mined.
3.14. "Mined-out" means a natural resource, or any portion thereof, determined to be depleted by prior mining operations.
3.15. "Mining operation" means an enterprise, permitted by the West Virginia Office of Miner's Health, Safety and Training/Office of Mining and Reclamation, which is engaged in actively obtaining or preparing to obtain a natural resource or its by-products from the earth's crust by underground, surface and auger mines. Each mining operation may have more than one (1) area designated as "Active Mining Property," as defined in this Section.
3.16. "Multiplier" means the "Present Worth of One (1) Per Period" for the life of the mining operation, as defined in this Section, employing the capitalization rate established in Section 4 of this rule, as determined by a standard mid-year life Inwood Table.
3.17. "Nonliquidity rate" means a rate reflecting a return to an investor representing the loss of interest on an investment arising from the time required to sell the investment.
3.18. "Operator" means an individual, partnership, corporation or other enterprise that is engaged in actively obtaining or preparing to obtain a natural resource or its by-products from the earth's crust in an active mining property.
3.19. "Property tax component" means a rate reflecting a provision for returning to an investor a sum of money equal to property taxes paid over the economic life of an investment.
3.20. "Recapture component" means a rate reflecting a provision for returning to an investor a sum of money equal to his or her investment.
3.21. "Reserves" means the natural resource acres or portions of those acres, which: contain the mineable natural resources; are within a permitted mining property; and, are not within the active mining portion of the property.
3.22. "Risk rate" means a rate reflecting a return to an investor necessary to attract capital to an investment containing a possible loss of principal and/or interest.
3.23. "Royalty rate" means the rates determined annually by the Tax Commissioner which reflect the current market royalty rates for willing buyer-willing seller transactions for each of the natural resources and types of mining operations derived in Section 4 of this rule. The royalty rates are considered to be paid to each owner of a natural resource estate for all actively mined resources.
3.24. "Safe rate" means a rate reflecting a return to an investor on an investment which has little, if any, likelihood of loss of either principal or anticipated return on investment.
3.25. "Summation discount component" means a discount rate expressed as the aggregate of a safe rate, risk rate, nonliquidity rate, and management rate, adjusted for inflation.
3.26. "Thickness" means the measurement of all the visible natural resource, including any thinner resource beds seen above or below the main bed that comprise part of what is generally understood to be a logical mining unit. The thickness used in calculating the annual acres mined are set forth in Section 4 of this rule.
3.27. "Tons per acre foot" means the weight, in tons, of a relatively clean resource one foot in thickness and covering one acre. Appendix A, Formula 2, in this rule contains the method for calculating "tons per acre foot." From this formula, the following in-place tons per acre-foot (resource density) figures shall be used:
Limestone = 3,600 tons per acre foot (2.65 lbs. resource/ 1 lb. water)
Sandstone = 3,400 tons per acre foot (2.50 lbs. resource/ 1 lb. water)
Clay and Shale = 3,250 tons per acre foot (2.39 lbs. resource/ 1 lb. water)
Sand and Gravel = 2,400 tons per acre foot (1.77 lbs. resource/ 1 lb. water)
Salt = 2,950 tons per acre foot (2.17 lbs. resource/ 1 lb. water)
3.28. "Unmineable natural resource" means a natural resource which is not a mineable natural resource as defined in this Section 3.
W. Va. Code R. § 110-1K-4 Valuation Methods
4.1. Method for determining value of active mining property.
4.1.1. General. -- The value of Active Mining Property is the value per active acre multiplied by the amount of active acres. In no case shall the active mining property be valued at less than its value as reserve property.
4.1.2. Determination of active mining property. -- The designation of "Active Mining Property" is determined as follows:
4.1.2.a. An Operator may designate or assign a portion of a parcel to an Active Mining Property when only that portion is suitable for mining purposes. For determining the actual area of the Active Mining Property, the operator shall include all contiguous parcels or portions of parcels containing the mineable natural resource(s) which are under lease, regardless of ownership. Parcels that are not leased or owned and that fall within the mining portion of the Active Mining Property shall have the requisite mineable resource valued at the applicable reserve rate for the life of the mining operation.
4.1.2.b. For purposes of determining the actual area of the active mining property, the operator shall treat all contiguous parcels or portions of parcels containing the mineable natural resource(s) that are under lease, regardless of ownership, as active mining property. If more than one (1) natural resource is being mined under a permit, each natural resource represents a separate active mining property.
4.1.2.c. If the permitted operation has not begun production by the July 1st assessment date, the operator shall report the mineable natural resource(s) on an active property return and value them as reserves for the applicable tax year. Once a parcel or a portion of a parcel has been assigned to or designated as an active mining property, the parcel, or portion of the parcel, shall continue to be listed on the active return, filed annually, until such time as the permit has been retired.
4.1.2.d. Should the mining operation cease production after January 1st but prior to July 1st of the most recent calendar year preceding the July 1st assessment date, and there is mineable natural resource(s) remaining, the remainder shall be valued at the reserve rate for the current tax year.
4.1.2.e. Any permitted mining operation producing only one (1) natural resource shall be designated as "Active Mining Property". If the mining operation is producing more than one (1) natural resource, each natural resource shall be designated as an "Active Mining Property".
4.1.2.f. If the mining operation is producing a natural resource at different locations, portals and/or faces under one (1) specific permit, that operation shall be designated as one (1) "Active Mining Property". If the production of the natural resource involves different mining techniques (surface, auger or deep mining method), or if mining sites are separate and generally independent, then those sites shall be designated as separate "Active Mining Properties".
4.1.2.g. For use in this rule, the maximum active mining portion for each natural resource is fifteen (15) years multiplied by the annual acres mined, except for salt. The active mining portion around each salt production well is a maximum of thirty-five (35) acres. After a well's first year of production, active mining property shall be derived by subtracting acres mined from the thirty-five (35) acres.
4.1.2.h. If the available mineable acreage of the natural resource being mined is less than the maximums listed the foregoing subdivision 4.1.2.g, the total available acreage may be considered for designation as active mining property.
4.1.3. Determination of average annual production -- Average annual production, as defined in Section 3 of this rule, is determined as follows:
4.1.3.a. An arithmetic mean shall be calculated on tonnage by the producer and verified by the Tax Commissioner through research of the West Virginia Office of Miner's Health, Safety and Training and/or audit-derived information for the three (3) most recent calendar years preceding the July 1st assessment date.
4.1.3.b. If there was no production in either the second (2nd) and/or third (3rd) most recent calendar years, an arithmetic mean of the available year(s) production shall be used.
4.1.4. Value per active acre -- Application of the valuation formula for active mining property shall be based on the actual quantity of resource produced and sold. Factors to be used for the specific active mining property are: resource thickness in feet (Thk); tons per acre foot (Appendix A, Formula 2); Clean Resource Recovery Rate (RR%); Royalty Rate (Roy%); net present value Multiplier (M); and, Mine Life in years (ML). See Appendix A, Formula 3 of this rule for the formula to determine the value per active acre.
4.1.5. Thickness (ft). -- As defined in Section 3 of this rule, thickness is determined as follows:
4.1.5.a. An arithmetic mean shall be taken of thickness as reported by producers and verified by the Commissioner through research of West Virginia Office of Miner's Health, Safety, and Training records and/or audit-derived information for the three (3) most recent calendar years prior to the July 1st assessment date.
4.1.5.b. If there has been no production in either the second and/or third most recent calendar years, an arithmetic mean of the available years shall be used.
4.1.6. Royalty rate. -- For use in the formula prescribed by this rule, the royalty rates shall be determined for each natural resource and types of mining operations. These royalties shall include specific rates for:
4.1.6.a. limestone/dolomite mines;
4.1.6.b. sandstone (industrial) and/or aggregate mines;
4.1.6.c. clay and/or shale surface mines;
4.1.6.d. clay and/or shale underground mines;
4.1.6.e. sand and gravel surface mines; and
4.1.6.f. salt brine wells.
Royalty rates shall be established annually by the Tax Commissioner after review of both recorded and unrecorded, willing seller-willing buyer natural resource property leases that have occurred in the State of West Virginia during at least the five (5) calendar years prior to the appraisal date, and through inspection of other appropriate information. This review shall place a greater emphasis on information from leases transacted during the most recent years. For those natural resources involved in few or no recorded lease agreements, the Tax Commissioner shall derive a royalty rate through surveys conducted by his or her staff, data provided by the other pertinent State agencies, and other appropriate information as may be made available from the specific natural resource producers. The Tax Commissioner shall maintain this summary report of royalty rates and file the results in the State Register on or before July 1st of each year; shall accept written public comment on the tentative values until August 1st of each year; and, shall file final royalty rates in the State Register on or before September 1st of each year. From this data, the Tax Commissioner shall select the royalty rates that best typify transactions. In order to convert percentage royalty rates into specific value per ton rates, the Tax Commissioner shall, if necessary, conduct a review of the specific natural resource selling prices in West Virginia by requesting the selling prices from private purchasers, the State Department of Highways, and the West Virginia Geological and Economic Survey, as well as other informative sources available, and select specific selling price rates based on prices best typifying activity in each appraisal year. The selected selling prices per ton when multiplied by the percentage royalty rate shall result in a royalty price per ton.
4.1.7. Capitalization rate. -- A single statewide capitalization rate for other mined natural resources shall be determined annually by the Tax Commissioner through the use of generally accepted methods of determining these rates. The rate shall be based on the assumption of a level, non-inflating income series. The capitalization rate used to value other mined natural resources shall be developed considering a discount rate determined by the summation technique.
4.1.7.1. Discount component -- The summation technique shall be used in developing a discount component of the capitalization rate. The five subcomponents of the discount rate are:
4.1.7.1.a. Safe rate -- The safe rate shall reflect a rate of return that an investor could expect on an investment of minimal risk. It shall be developed through review of interest rates offered on thirteen-week United States Treasury Bills for a period of three (3) calendar years prior to the appraisal date.
4.1.7.1.b. Nonliquidity rate -- The nonliquidity rate shall be developed through an annual study to determine a reasonable estimate of time that natural resource property, when offered for sale, remains on the market. The time determined shall be used to identify United States Treasury Bills with similar time differentials in excess of thirteen-week Treasury Bills. The interest differential between these securities shall be used to represent the nonliquidity rate. For example, if it is determined that other natural resource property remains on the market for an average of nine months (39 weeks) before being sold, the nonliquidity rate shall be derived by taking the rate on one (1) year Treasury Bills minus the rate on thirteen-week Treasury Bills.
4.1.7.1.c. Risk rate -- The relative degree of risk of an investment in other natural resource property is difficult to determine from published interest rates. Interest rates required on loans for acquisition and/or development of other natural resource properties shall be calculated by adding two percent (2%) to the Prime Rate Charged By banks as published in the Economic Indicators Prepared By The Council Of Economic Advisors For The Joint Economic Committee for each of the three calendar years prior to the July 1 assessment date. The three year average shall be compared to interest rates offered on thirteen-week United States Treasury Bills for the same three (3) calendar year period. The difference between the two, combined with bands of investment analysis, shall be used as a basis to estimate the risk rate.
4.1.7.1.d. Management rate -- The management rate represents the cost of managing the investment, not the cost of managing the other natural resource property. Because the management rate has historically been one-half of one percent (0.5%) of the value of investment portfolios, for purposes of determining the discount component the management rate shall be one-half of one percent (0.5%).
4.1.7.1.e. Inflation rate (negative) -- Nominal interest rates, including the "safe rate" mentioned, are higher than real rates by an amount representing expectation of future inflation. However, net annual income from other natural resource property is to be estimated assuming level future royalties (no inflation). The capitalization rate must be a real rate, net of expectation of inflation. The inflation rate shall be estimated through analysis of the most recent three (3) calendar year's urban consumer price index as determined by the United States Department of Labor, Bureau of Labor Statistics.
4.1.7.2. In determining the discount component of the capitalization rate, the Tax Commissioner shall deduct the inflation rate from the sum of the safe rate, nonliquidity rate, risk rate, and management rate.
4.1.7.3. Property tax component -- This component shall be estimated by multiplying the assessment rate by the statewide average of tax rates for Class III property. At the present time, research indicates that royalty rates on other natural resources include a component for property tax, with no additional compensation from the producer. As a result, the property tax component shall be used in the capitalization rate. If this described general practice changes and property taxes are paid as additional compensation, the use of this component shall be deleted.
4.1.7.4. Results of capitalization rate summary -- The data used for development of components referenced in Paragraph 4.1.9.1 of this rule shall be reported and filed annually by the Tax Commissioner in the State Register on or before July 1st of each year. Public comment on the tentative results shall be accepted until the subsequent August 1st, and the final results shall be filed in the State Register on or before September 1st of each year.
4.2. Valuation of reserves. -- Reserve valuation rates for limestone, sandstone, clay and shale, sand and gravel, and salt shall be determined annually by the Tax Commissioner after review of recorded willing seller-willing buyer natural resource, production-specific, property sales that have occurred in the State of West Virginia during at least the five (5) calendar years prior to the July 1st appraisal date, through inspection of other appropriate information, and from quantitative data that might reflect current market values. This review shall place a greater emphasis on the most current data. For those natural resource properties involved in few or no recorded sale agreements, the Tax Commissioner may also derive the valuation through reviews conducted by his or her staff, data provided by other State agencies, and other appropriate information as may be made available by the specific natural resource producers involved. The Tax Commissioner: shall maintain this review of natural resource property sales and file summarized results in the State Register on or before July 1st of each year; shall accept written public comment on the tentative valuations until the subsequent August 1st; and shall file the final valuations for each natural resource in the State Register on or before September 1st of each year.
4.3. Valuation of unmineable other natural resource properties. -- Properties in this category are valued at one dollar ($1.00) per acre.
4.4. Valuation of mined-out other natural resource properties. -- Properties in this category are valued at one dollar ($1.00) per acre.
4.5. Valuation of barren other natural resource properties. -- Properties in this category are valued at one dollar ($1.00) per acre.
4.6. Total other natural resource valuation. -- The total other natural resource valuation for any parcel shall involve the value for all active acres, all reserve acres, all unmineable acres, all mined out and all barren acreage.
4.7. Leasehold interests. -- This rule generally attributes the value of the natural resource to the owner of the natural resource property. In those circumstances where the owner of the property is subject to a lease requiring the owner to permit mining at royalty rates substantially below current market values, the owner may petition the Tax Commissioner, to attribute a portion of the value of the natural resource determined by this formula to the leaseholder.
4.8. Farm properties. -- The natural resource rights that are part of a "fee" estate where the use of the surface has qualified for farm use appraisal shall be valued as described in 110 C.S.R. 1A, Valuation of Farmland and Structures Situated Thereon For Ad Valorem Property Tax Purposes.
4.9. Property reports. -- On or before September 1st of each year the producer shall file an Annual Appraisal Report for Production of Other Mined Minerals with the Tax Commissioner with acknowledgment to the natural resource owners and the county assessors in the counties where the mines is located. On or before September 16th of each year the natural resource owner of any property that is part of a permitted mining operation shall file an Annual Appraisal Return for Reserve Mineral Properties with the Tax Commissioner. Owners of natural resource properties may file an Annual Appraisal Return for Reserve Mineral Properties, on or before September 16th, with the Tax Commissioner; otherwise, the properties shall be valued using the best available information.
4.10. Confidentiality -- All information provided by or on behalf of a natural resources property owner or by or on behalf of an owner of an interest in natural resources property to any state or county representative for use in the valuation or assessment of natural resources property or for use in the development or maintenance of a legislatively funded mineral mapping or geologic information system is confidential. The information is exempt from disclosure under provisions of W. Va. Code '29B-1-4, and shall be kept, held, and maintained confidential except to the extent the information is needed by the State Tax Commissioner to defend an appraisal challenged by the owner or lessee of the natural resources property subject to the appraisal: Provided, That this section may not be construed to prohibit publication or release of information generated as part of the minerals mapping or geologic information system, whether in the form of aggregated statistics, maps, articles, reports, professional talks, or otherwise presented in accordance with generally accepted practices and in a manner so as to preclude the identification or determination of information about particular property owners.
W. Va. Code R. § 110-1K-5 Severability
5.1. If any provision of this rule or the application of this rule to any person or circumstances is for any reason held to be invalid, the remainder of the rule and the application of the provisions to other persons or circumstances shall not be affected by the holding.
APPENDIX A
Formula 1 Annual acres mined = Average Annual Production (Thk)x(___tons/ac. ft.)x(RR)
Formula 2 Tons/ac.ft. = (62.4 lbs.water/ft3)x(__lbs.resource/1 lb.water)x(43,560 ft2/acre)x(1ft thickness) 2000 lbs./ton Formula 3 $/ac = (Thk)x(___tons/ac. ft)x(RR)x(Roy)x(M)
ML 110CSR1K
Series 01M Valuation of Public Utility Property for Ad Valorem Property Tax Purposes
W. Va. Code R. § 110-1M-1 General
1.1. Scope. -- This rule clarifies and implements State law as it relates to the appraisal, at market value, of property subject to taxation as public utilities; and general rules for distinguishing between operating and non-operating public utility property for ad valorem taxation purposes.
1.2. Authority. -- W. Va. Code §11-1C-5(b).
1.3. Filing Date. -- April 28, 2026.
1.4. Effective Date. -- April 28, 2026.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect after August 1, 2031.
W. Va. Code R. § 110-1M-2 Definition
As used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
2.1. "Bands of investment technique" means a synthesis of capital components used in financing and investment to estimate the overall capitalization rate of a property. It involves combining the capitalization rates of different components of a capital investment (e.g., debt and equity) to arrive at a weighted average overall rate for the entire property.
2.2. "Capitalization rate" means a rate, used to convert an estimate of income to an estimate of market value. Capitalization rate is typically a ratio that compares a commercial property's net operating income to the property’s market value. Capitalization rate is typically expressed as a percentage and indicates the estimated expected rate of return from a property investment.
2.3. “Interstate commercial motor vehicle” means a qualified motor vehicle registered under a proportional registration agreement, or a qualified motor vehicle that, except for the fact that it is engaged only in intrastate commerce, would otherwise be subject to registration under proportional registration agreements. “Commercial motor vehicle” status may, at the option of the party registering the vehicle, be conferred upon a non-qualified motor vehicle such as a vehicle that has a gross vehicle weight of 26,000 pounds or less, that has only two axles, or that is used in the transportation of charter parties.
2.4. "Cost approach" means the appraisal process in which cost of the property being valued is considered in determining an estimate of fair market value. As a general rule, original cost shall be used to value public utility operating property. However, when such original cost is not available, replacement cost or reproduction cost may be considered.
2.5. "Economic obsolescence" means a loss in value of an asset caused by external economic conditions or events not directly related to the asset's condition or design. This loss in value could, for example, arise from factors such as changes in use, legislation that restricts or impairs property rights, or changes in supply and demand relationships.
2.6. "Fair market value" means the highest price in terms of money that a property will bring in a competitive and open market, assuming that the buyer and seller are acting prudently and knowledgeably, allowing sufficient time for the sale, and on the condition that the price is not affected by improper manipulation or influences, with neither the buyer or the seller being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.
2.7. "Final assessed values" means values established by the Board of Public Works required by W. Va. Code §11-6-11.
2.8. "Functional obsolescence" means a loss in value of a property due to changes in style, taste, or technology, or due to outdated design, diminished utility or usefulness, inefficient technology, or poor condition.
2.9. "Gross capital cost" means the actual cost of the new or used vehicle at the time of purchase, as illustrated on the bill of sale, purchase contract, or similar document showing the purchase price of the vehicle. The cost at the time of purchase means 100% of the cost as shown on the books and records of the purchaser and includes freight, installation charges, trade-ins, federal tax allowances and any applicable credits utilized by the purchaser at the time of purchase.
2.10. "Income approach" means the appraisal process of discounting an estimate of future benefits into an expression of present worth.
2.11. "Market data approach" means the appraisal process of examining sales data and translating the data into an estimate of present worth.
2.12. "Operating property" means utility operating property used for purposes immediately connected with providing the respective utility service or in providing microgrid power or data center services. The Tax Commissioner construes "utility operating property used for purposes immediately connected with providing utility service" to be synonymous with properties considered by regulatory bodies in constructing the utility rate base for rate making purposes. The Tax Commissioner shall therefore give primary consideration to whether property is included in the “utility operating property” classification as reflected in the applicable uniform system of accounts, when deciding operating versus non-operating property issues. If the business is a certified high impact data center as defined in W.Va. Code § 11-6N-2 or power generation enterprise within a certified microgrid district and not subject to regulation by a rate-making regulatory body, the valuation of property of the business shall be made with consideration paid to whether the property is necessary to perform the function of the enterprise. Property necessary to perform the function of the certified high impact data center or power generation enterprise(s) within a certified microgrid district is hereby designated “operating property” for the purposes of ad valorem property tax valuation and for the purposes specified with reference to certified high impact data centers or certified microgrid districts in sections 4.3 et seq. of these rules.
2.13. "Original cost" means the initial cost paid for constructing or acquiring property.
2.14. "Physical deterioration" means a loss in value due to wear and tear in service.
2.15. “Proportional registration agreement” means an agreement entered into by the West Virginia Commissioner of Motor Vehicles under the authority of W. Va. Code §17A-2-10a.
2.16. "Public service corporation" means business entities contemplated by the provisions of W. Va. Code §11-6-1 et seq.
2.17. “Public utility” means a “public service corporation” as herein defined.
2.18. “Qualified motor vehicle” means a motor vehicle used, designed or maintained for the transportation of persons and property and:
2.18.1. Which is a self-propelled unit having a gross vehicle weight in excess of 26,000 pounds;
2.18.2. Is a self-propelled unit having three or more axles, regardless of weight;
2.18.3. Is used in combination with another vehicle, when the combined gross vehicle weight exceeds 26,000 pounds; or
2.18.4. The combined gross vehicle weight or combined registered gross vehicle weight of the two or more vehicles exceeds 26,000 pounds.
2.19. "Rate base" means that group of accounts or derivatives of those accounts, from the Uniform System of Accounts, on which a public utility is allowed a return on investment.
2.20. "Regulation" means the oversight of public service corporations by applicable federal and state regulatory bodies.
2.21. "Replacement cost" means the cost, including material, labor, and overhead, that would be incurred in constructing an improvement having the same utility to its owner as the improvement in question, without necessarily reproducing exactly any particular characteristic of the property.
2.22. "Reproduction cost" means the cost, including material, labor, and overhead, that would be incurred in constructing an improvement having exactly the same characteristics as the improvement in question.
2.23. "Return on investment" means a margin of profit generally expressed as a percentage of investment capital.
2.24. "Stock and debt technique" means a process of reviewing market trading prices of securities in order to arrive at an estimate of value.
2.25. "Tentative assessments" means property valuation estimates furnished by the Tax Commissioner to the Board of Public Works in accordance with W. Va. Code §11-6-9.
2.26. "Uniform system of accounts" means the most current system of accounting developed and required by state and federal regulatory bodies, as further described in section 4.3 et seq. of these rules.
2.27. "Unit rule" means an appraisal of an integrated property as a whole without any reference to the values of its component parts.
W. Va. Code R. § 110-1M-3 Situs
3.1. Generally, when the cost approach is used, operating properties physically located in West Virginia shall be considered for tax purposes; however,
3.1.1. When the income approach is used, the unit of value shall be allocated to the state of West Virginia using operating plant data after which;
3.1.2. Apportionment of physical plant tax revenues, considering the location in the various taxing districts, shall be made by the West Virginia State Auditor's Office.
W. Va. Code R. § 110-1M-4 Valuation of Operating Public Utility Property (excluding interstate commercial motor vehicle property)
4.1. Unit method. -- The Tax Commissioner provides tentative assessments based on fair market value of operating property of public service corporations to be used as a guide by the Board of Public Works in establishing final assessed values for property tax purposes. In this regard the Tax Commissioner shall use the "Unit Rule" where applicable in furnishing tentative valuation estimates for the Board's consideration.
4.2. Generally accepted appraisal methods. -- In determining tentative assessments the Tax Commissioner shall consider, and use where applicable, three (3) generally accepted approaches to value: (A) cost, (B) income, and (C) market data. Application of these approaches shall recognize the impact of regulation on the value of utility operating property where applicable.
4.2.1. Cost approach. -- Recognizing that public service corporations are predominantly cost regulated, when the cost approach is used in the valuation process, original cost less applicable depreciation shall be employed. In applying the cost approach, the Tax Commissioner shall consider three (3) types of depreciation (a) physical deterioration, (b) functional obsolescence, and (c) economic obsolescence.
4.2.2. Income approach. -- In developing income approach valuations, the Tax Commissioner shall estimate capitalization rates considering the interrelationships of the income to be capitalized and the capitalization rate. In this regard, net operating income after taxes, but before interest on long-term debt shall be given primary consideration as the point on the income stream to be capitalized. The bands of investment technique shall be employed in estimating appropriate capitalization rates.
4.2.3. Market data approach. -- Recognizing that a sufficient number of sales of public service corporations do not occur to enable application of the market data technique, the Tax Commissioner shall consider the substitute stock and debt technique. The stock and debt technique shall be used in instances where a utility class possesses actively traded stocks and bonds that enable reasonable valuation estimates to be made.
4.2.4. Correlations. -- Once generated, the various estimates of value shall be correlated into a final value estimate. The income approach value shall generally be given primary consideration in the correlation process.
4.3. Classification of public utility and certain common carrier operating properties.
4.3.1. Electric utilities. -- Operating property for electric utilities shall primarily include properties that are considered by the Federal Energy Regulatory Commission (FERC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FERC Uniform System of Accounts prescribed for Electric Utilities shall be used.
4.3.2. Gas utilities. -- Operating property for natural gas utilities shall primarily include properties that are considered by the Federal Energy Regulatory Commission (FERC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FERC Uniform System of Accounts prescribed for Natural Gas Utilities shall be used.
4.3.3. Gas pipeline utilities. -- Operating property for natural gas utilities shall primarily include properties that are considered by the Federal Energy Regulatory Commission (FERC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FERC Uniform System of Accounts prescribed for Gas Pipeline Utilities shall be used.
4.3.4. Telephone companies. -- Operating property for telephone carriers shall primarily include properties that are considered by the Federal Communications Commission (FCC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FCC Uniform System of Accounts prescribed for Telephone Utilities shall be used.
4.3.5. Telegraph carriers. -- Operating property for telegraph carriers shall primarily include properties that are considered by the Federal Communications Commission (FCC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FCC Uniform System of Accounts prescribed for Wire-Telegraph and Ocean-Cable Carriers shall be used.
4.3.6. Airline companies. -- Operating property for air carriers shall primarily include properties that are considered as operating property by the Department of Transportation. In determining which properties are properly included as operating property, the most recent Uniform System of Accounts and Reports for Certified Air Carriers shall be used.
4.3.7. Interstate railroads. -- Operating property for interstate railroads shall primarily include properties that are considered as operating property by the Surface Transportation Board. In determining which properties are properly included as operating property, the most recent Uniform System of Accounts for Railroad Companies shall be used.
4.3.8. Intrastate railroads. -- Operating property for intrastate railroads shall primarily include properties that are considered by the West Virginia Public Service Commission as operating property. In determining which properties are properly included as operating property, the most recent Uniform System of Accounts for Railroad Companies as prescribed by the Surface Transportation Board shall be used.
4.3.9. Water utilities. -- Operating property for water utilities shall primarily include properties that are considered by the Public Service Commission as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, water utilities shall use the most recent Uniform System of Accounts of the National Association of Regulatory Utility Commissioners for Class A and B, and Class C and D water utilities.
4.3.10. Sewer utilities. -- Operating property for sewer utilities shall primarily include properties that are considered by the Public Service Commission as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, sewer utilities shall use the most recent Uniform System of Accounts of the National Association of Regulatory Utility Commissioners for Class A and B, and Class C and D sewer utilities.
4.3.11. Carline companies. -- Operating property for carline companies shall include consideration of Rolling Stock used in transportation of freight or passengers.
4.3.12. Underground gas storage companies. -- For public service corporations with underground gas storage and no other West Virginia property, operating property shall consist of only the gas stored underground.
4.3.13. Certified Microgrid Districts. -- Operating property for a certified microgrid district shall include all property used by a microgrid power generator within a certified microgrid district including but not limited to all generation systems and equipment, all distribution systems and equipment, all storage systems and equipment, any equipment connecting to the power grid outside the certified microgrid district, and all rolling stock.
4.3.14. Certified High Impact Data Centers. -- Operating property for a certified high impact data center shall include all property used at a data center’s location to construct, outfit, operate, support, power, cool, dehumidify, secure, or protect a data center and any contiguous dedicated substations. The term includes, but is not limited to, construction materials, component parts, machinery, equipment, computers, servers, installations, redundancies, back-up equipment and property, emergency equipment and property, and operating or enabling software, including any replacements, updates and new versions, and upgrades to or for such property, regardless of whether the property is a fixture or is otherwise affixed to or incorporated into real property.
4.3.15. Reorganization of regulatory bodies. -- In the event that there should be a reorganization of federal or state regulatory bodies, and any of the public service corporations described herein would be required to report to an agency other than that listed in the applicable subdivision; or in the event that there should be any other utilities considered taxable by the Board of Public Works, operating property for the public service corporations shall include properties that would be considered as operating property by the appropriate state or federal regulatory body in the prescribed Uniform System of Accounts.
4.3.16. Exceptions. -- Circumstances may arise where properties may be considered operating property by the appropriate regulatory body, but a portion of the property may be devoted to non-utility use. The Tax Commissioner may in these instances where deemed appropriate classify a portion of the property as non-operating and require that the non-operating portion so determined be assessed by the county assessor. In these instances adjustment to the public utility appraisal will be made to remove from the West Virginia unit values a proportionate value for such non-operating property.
W. Va. Code R. § 110-1M-5 Valuation of Interstate Commercial Motor Vehicles
5.1. Classification of interstate motor carrier operating property. -- Operating property shall include each power unit used as an interstate commercial motor vehicle registered under a proportional registration agreement.
5.2. Appraisal method. A cost approach shall be used to determine the appraised value of an interstate commercial motor vehicle. The gross capital cost of the interstate commercial motor vehicle shall be multiplied by a percentage factor representing the remainder of the vehicle’s value after depreciation.
5.2.1. The Tax Commissioner shall annually provide the depreciation schedule for power units to the West Virginia Commissioner of Motor Vehicles for use in assessing power units subject to proportional registration agreements. The property assessment and tax collection upon interstate power units will occur at the time of registration through the International Registration Plan.
5.3. Interstate Motor Carrier Apportionment Factor. For each interstate truck, road tractor and power unit registered under a proportional registration agreement, the appraised value, as determined under Subsection 5.1 of this rule, shall be multiplied by an apportionment factor the numerator of which represents the total fleet miles driven in the most recent taxable year in West Virginia and the denominator of which represents the total fleet miles driven in the most recent taxable year everywhere; the mileage amounts shall be the mileage amounts as reported to the West Virginia Division of Motor Vehicles.
W. Va. Code R. § 110-1M-6 Taxpayer Returns For All Public Utility Property Except Commercial Motor Vehicles
6.1. Returns for all property subject to valuation by the Board of Public Works shall be filed on a form provided by the State Tax Division. The forms may be provided by the Tax Division electronically or on paper. The forms shall be made available to taxpayers for completion and return. The Tax Division may require that the form be filed electronically, and forms may be found at the Tax Division’s website, https://tax.wv.gov.
6.2. To assure equality and uniformity in administration, no assessor or taxpayer shall substitute or supplement any other form for the Tax Commissioner's prescribed returns, without the prior approval of the Tax Commissioner. All approvals granted by the Tax Commissioner prior to the effective date of this rule are withdrawn.
6.3. All taxpayers shall prepare one (1) copy of the appropriate property tax return and file it with the Tax Commissioner.
6.4. Public utility property tax returns shall be filed no later than May 1st of each year.
6.5. The Tax Commissioner, for good cause shown, may grant an extension of filing deadlines.
110CSR1M
Series 01N Valuation Of vehicles, watercraft, And aircraft For ad valorem property tax purposes
W. Va. Code R. § 110-1N-1 General
1.1. Scope. -- These regulations clarify and implement state law as it relates to the appraisal at market value of vehicles, watercraft and aircraft for ad valorem property tax purposes. Because these regulations provide context modifications of relevant parts of 110 C.S.R. 1 and such regulations with context modifications were adopted by the Tax Commissioner, W. Va. Code '11-1C-5(b) eliminates the requirement that this filing be subject to the procedure requirements of W. Va. Code '29A-3-1 et seq.
1.2. Authority. -- W. Va. Code '11-1C-1 et seq.
1.3. Filing Date. -- July 26, 1991.
1.4. Effective Date. -- July 26, 1991.
W. Va. Code R. § 110-1N-2 Definitions
As used in these regulations and unless the context clearly requires a different meaning, the following terms shall have the meaning ascribed herein, and shall apply in the singular or in the plural.
2.1. Vehicles. -- The term "Vehicle" shall include, but is not limited to, automobiles, trucks, truck tractors, trailers, motor homes, campers, motorcycles, motorbikes and mopeds.
2.2. Assessment day. -- The term "Assessment Day" means the first (1st) day of July of each assessment year for ad valorem property tax purposes.
W. Va. Code R. § 110-1N-3 Valuation of Automobiles
3.1. The several county assessors shall appraise motor vehicles as follows: The State Tax Commissioner shall annually compile a schedule of automobile values based upon the lowest values shown in a nationally accepted used car guide, which said schedule shall be furnished to each assessor and shall be used by the several county assessors to determine the assessed value for all motor vehicles in an amount equal to sixty percent of said lowest values.
3.2. The Tax Commissioner may use a separately published schedule, copies of subject guides furnished to assessors, a data file on the statewide property tax computer network, or a combination of any of these methods to accomplish this purpose.
3.3. Older vehicle models in this classification which are excluded from the schedule of the Tax Commissioner because of their age, shall have their last appraised value depreciated by ten percent (10%) per year until the value reaches two hundred dollars ($200). Thereafter, the appraised value will remain constant for so long as the vehicle is owned by the taxpayer.
W. Va. Code R. § 110-1N-4 Valuation of Trucks, Recreational Vehicles, Motorcycles, Mopeds and Other Vehicles
4.1. The local assessor shall use a current appraisal guide published by a recognized authority, directed by the Tax Commissioner for the month of July of the current assessment year to ascertain the appraised value of such vehicles, based on the lowest values in subject guide.
4.2. Older vehicle models in this classification which are excluded from recognized appraisal guides because of their age, shall have their last appraised value depreciated by ten percent (10%) per year until the value reaches two hundred dollars ($200). Thereafter, the appraised value will remain constant for so long as the vehicle is owned by the taxpayer.
W. Va. Code R. § 110-1N-5 Valuation of Watercraft
5.1. The Tax Commissioner shall direct the purchase of nationally recognized comprehensive price listing service for watercraft such as power boats, bass boats, canoes, row boats, pontoon boats, cabin cruisers, etc., as the basis of appraised values. The Tax Commissioner shall supply this listing to each county assessor for use in determining the appraised value of watercraft.
5.2. Older watercraft models which are excluded from recognized appraisal guides because of their age, shall have their last appraised value depreciated by ten percent (10%) per year until the value reaches two hundred dollars ($200). Thereafter, the appraised value will remain constant for so long as the vehicle is owned by the taxpayer.
W. Va. Code R. § 110-1N-6 Valuation of Airplanes
6.1. The Tax Commissioner shall annually, in writing, direct county assessors to use an aircraft appraisal guide published by a nationally recognized authority, which guide shall be purchased by each assessor who has aircraft located in his county.
6.2. The local assessors shall determine the appraised value of special radio equipment and radar and other avionic equipment purchased and installed in the aircraft. The total appraised value of the aircraft shall be determined based on the retail value of both the aircraft and its navigational equipment.
W. Va. Code R. § 110-1N-7 Taxpayer Return
7.1. The Tax Commissioner shall print taxpayer return forms. Such forms shall be furnished to each assessor who will distribute said forms to taxpayers for completion and return.
7.2. To assure equality and uniformity in administration, no assessor or taxpayer shall substitute or supplement any other form for the Tax Commissioner's prescribed returns, without the prior approval of the Tax Commissioner. All such approvals granted by the Tax Commissioner prior to the effective date of this rule are hereby continued.
7.3. All taxpayers shall prepare one (1) copy of appropriate property tax returns and file it with the assessor of the county wherein the real property lies, or where the taxpayer lives when reporting personal property.
7.4. All other property appraisal returns required by this rule shall be filed no later than October 1st of each year.
7.5. The assessor, for good cause shown, may grant an extension of filing deadlines.
110CSR1N
Series 01P Valuation of Commercial and Industrial Real and Personal Property for Ad Valorem Property Tax Purposes
W. Va. Code R. § 110-1P-1 General
1.1. Scope. -- These regulations clarify and implement State law as it relates to the appraisal at market value of commercial and industrial real and personal property under W. Va. Code §11-10C-10.
1.2. Authority. -- W. Va. Code §11-1C-5(b).
1.3. Filing date. -- May 21, 2013.
1.4. Effective date. -- July 1, 2013.
W. Va. Code R. § 110-1P-2 Definitions
For purposes of this rule, the following terms have the meanings ascribed in this section, unless the context in which they are used requires a different meaning.
2.1. "Active industrial or commercial land" means that portion of land used for industrial and commercial purposes.
2.2. "Capitalization rate" means a rate used to convert an estimate of future income to an estimate of present market value.
2.3. "Commercial property" means income producing real property used primarily, but not exclusively, for the sale of goods or services, including but not limited to offices, warehouses, retail stores, apartment buildings, restaurants and motels.
2.4. "Cost approach" means the appraisal process in which replacement cost of improvements, less all types of depreciation, is added to a land value in determining an estimate of the fair market value for improved real property.
2.5. "Economic obsolescence" means a loss in value of property arising from outside forces such as changes in use, legislation that restricts or impairs property rights, or changes in supply and demand relationships.
2.6. "Economic rent" means the rental amount which a space or property would attain in the open market at the time of appraisal, whether it is lower, higher or the same as the actual contract rent.
2.7. "Fair market value" means the highest price in terms of money that a property will bring in a competitive and open market, assuming that the buyer and seller are acting prudently and knowledgeably, allowing sufficient time for the sale and assuming that the price is not affected by undue stimulations.
2.8. “Functional obsolescence.” - The loss of value due to factors such as excess capacity, changes in technology, flow of material, seasonal use, part-time use or other like factors. Functional obsolescence includes loss of value due to the inability of an item to perform adequately the function for which the item was designed.
2.9. "Freehold estate" means an estate in land or other real property, of uncertain duration; that is, either of inheritance or which may possibly last for the life of a tenant at the least, possessing two (2) characteristics: (1) immobility and (2) indeterminate duration (no fixed termination of the interest).
2.10. "Gross lease" means a lease agreement where the lessor pays all fixed charges (property taxes, maintenance, etc.).
2.11. "Heavy industrial site" means an industrial site containing five (5) acres or more of land.
2.12. "Income approach" means the appraisal process of discounting an estimate of future income into an expression of present worth.
2.13. "Industrial parks" means a parcel or group of parcels dedicated primarily to commercial and industrial development.
2.14. "Leased fee" means the interest remaining in one who has granted possession and occupancy to another for a designated term under a lease contract. Generally, it is the interest of the owner in his or her property after it has been leased.
2.15. "Leasehold" and "leasehold estate" mean an interest in real property created by a lease contract.
The leasehold is the right to occupy and use the property for the term fixed in the lease, at a stated rental, and subject to conditions set forth in the contract.
2.16. "Light industrial or commercial site" means an industrial site containing less than five (5) acres of land.
2.17. "Market approach" means the appraisal process of examining sales data and translating the data into an estimate of present worth.
2.18. "Mine site" means a parcel of land containing the mine portal or shaft, parking lots, water treatment facilities, mine fan areas, refuse piles and preparation plant sites.
2.19. "Net rental" means an agreement specification where the lessor receives an annual rent net, with the lessee paying all property taxes, insurance and cost of building maintenance, as well as operating expenses.
2.20. "Physical depreciation " means a loss in value due to natural wear and tear of property resulting from age, use, abuse, etc.
2.21. "Property residual method of valuation" means that, at the expiration of the term of the lease, even though the building may have little value, the land will have a reversionary value. Both the income stream for the estimated useful life of the building and the reversionary interest in the land are discounted to present worth. This method is applicable where the building is old, the site under-improved, or the improvements have a short remaining useful or economic life.
2.22. "Replacement cost" means the cost of constructing a building or improvement having the same use, but using modern materials, design, and workmanship.
2.23. "Residual industrial or commercial land" means that portion of a parcel of real estate that is currently nonproductive in terms of the industrial or commercial activity located on it. This classification of land would include land held for industrial expansion, land marginally suitable for industrial use and excess acreage.
W. Va. Code R. § 110-1P-3 Appraisal of Valuation of Commercial and Industrial Real Property
3.1. Introduction. – This rule describes the method for determining the appraised value (market value) of commercial and industrial real property other than natural resources real property, land used for farming purposes and operating public utility property.
3.1.1. The market value of commercial and industrial real property is the price at or for which the property would sell if it was sold to a willing buyer by a willing seller in an arms-length transaction without either the buyer or the seller being under any compulsion to buy or sell. In determining appraised value, primary consideration shall be given to the trends of price paid for like or similar property in the area or locality in which the property is situated. Additionally, for purposes of appraisal of any tract or parcel of real property used for commercial or industrial purposes, including chattels real, the appraisal shall consider the following factors:
3.1.1.1. The location of the property;
3.1.1.2. Its site characteristics;
3.1.1.3. The ease of alienation, considering the state of its title, the number of owners, and the extent to which the property may be the subject of either dominant or servient easements;
3.1.1.4. The quantity of size of the property and the impact which its sale may have upon surrounding properties;
3.1.1.5. If purchased within the previous eight years, its purchase price and the date of each purchase;
3.1.1.6. The recent sale of, or other transactions involving, comparable property;
3.1.1.7. The value of the property to its owner;
3.1.1.8. The condition of the property;
3.1.1.9. The income, if any, which the property actually produces and has produced within the preceding three (3) years; and
3.1.1.10. Any commonly accepted method of ascertaining the market value of the property, including techniques and methods peculiar to any particular species of property if the technique or method is used uniformly and applied to all property of like species.
3.1.2. There are two (2) types of improvements which are considered in the appraisal process; these are improvements to the land and improvements on the land.
3.1.2.1. Improvements to the land are land improvements, the value of which are included in the value of land. Some examples of these improvements include privately owned drainage systems, driveways, walks, etc.
3.1.2.2. Improvements on the land are buildings and structures. They are valued separate and apart from the land.
3.1.3. In addition to improvements, other important considerations affecting the value of land, excluding farm land, are:
3.1.3.1. Location;
3.1.3.2. Size;
3.1.3.3. Shape;
3.1.3.4. Topography;
3.1.3.5. Accessibility;
3.1.3.6. Present use;
3.1.3.7. Highest and best use;
3.1.3.8. Easements;
3.1.3.9. Zoning;
3.1.3.10. Availability of utilities;
3.1.3.11. Income imputed to the land; and
3.1.3.12. Supply and demand for land of a particular type.
3.1.4. Each of these factors should be considered in the appraisal of a specific parcel. Some factors, however, may be given more weight than others.
3.2. Generally accepted appraisal methods are used to establish the value of industrial and commercial real properties.
3.2.1. In determining an estimate of fair market value, the Tax Commissioner shall consider and use where applicable, three (3) generally accepted approaches to value: (A) cost, (B) income, and (C) market.
3.2.1.1. Cost approach. - To determine fair market value under this approach, replacement cost of the improvements is reduced by the amount of accrued depreciation and added to an estimated land value. In applying the cost approach, the Tax Commissioner shall consider three (3) types of depreciation: physical depreciation, functional obsolescence, and economic obsolescence.
3.2.1.2. Income approach. - A property's present worth is directly related to its ability to produce an income over the life of the property. The selection of an overall capitalization rate shall be derived from current available market data by dividing annual net income by the current selling price of comparable properties. The present fair market value of the property shall then be determined by dividing the annual economic rent by the capitalization rate.
3.2.1.3. Market approach. - The Tax Commissioner shall apply the market approach by considering the selling prices of comparable properties.
3.2.2. Correlation. - Once generated, the Tax Commissioner may consider the various estimates of value in determining a final value estimate. However, the income approach is ordinarily inappropriate for properties such as franchised restaurants, governmental properties, hospitals, etc. In these cases, the cost or market approaches may be more suitable in estimating fair market value.
3.2.2.a. When possible, the Tax Commissioner should use the most accurate form of appraisal, but because of the difficulty in obtaining necessary data from the taxpayer, or due to the lack of comparable commercial or industrial properties, the choice between the alternative appraisal methods may be limited.
3.2.3. Industrial and commercial site classification. - For purposes of valuing active and residual industrial and commercial land in West Virginia, the Tax Commissioner shall separate valuing sites into four (4) broad categories: heavy industrial sites, light industrial or commercial sites, industrial parks, and mine sites. The Tax Commissioner shall further classify these sites, when appropriate, into active and residual portions. The Tax Commissioner will consider these classifications when applying and establishing the valuation method to the industrial or commercial properties.
3.3. Valuation of leaseholds in industrial and commercial real properties.
3.3.1. General.
3.3.1.1. A leasehold in real property is taxable for ad valorem property tax purposes, if it has a separate and independent value from the freehold. Where leaseholds are of short duration, the rent paid usually reflects income to the owner of the freehold commensurate with the fair market value of the real property. Under ordinary conditions, the leasehold itself will not have any ascertainable market value.
Consequently, in normal circumstances, determine the appraised value of the freehold subject to a leasehold in the same manner that the appraised value of similar commercial or industrial real property not subject to a leasehold is determined.
3.3.1.2. However, under circumstances involving long-term leaseholds where the leasehold is itself a marketable asset of value, the leasehold shall be valued as set forth in this rule. The leasehold interest being a chattel real shall be listed and taxed as Class III or Class IV tangible personal property depending on the location of the freehold.
3.3.1.3. The appraised value of a freehold estate is the appraised value of the freehold determined without regard to the leasehold, minus the appraised value of the leasehold.
3.1.4. In valuing a leasehold:
3.3.1.4.a. The total value of the property must be estimated and then allocated among the various interests in the property under the terms of the lease; and
3.3.1.4.b. The appraiser shall determine whether or not value has been created as a result of a favorable lease, in addition to the total value of the property.
3.3.1.5. In deciding whether a leasehold has value, and if so, what value to assign, the appraiser shall:
3.3.1.5.a. Estimate the value of the entire property, as though not encumbered by the lease; then
3.3.1.5.b. Estimate the value of one (1) of the partial interests, either the leasehold estate of the lessee or the leased fee of the lessor.
3.3.1.5.c. The appraiser shall deduct the value of the partial interest arrived at from the value of the entire property to obtain the value of the other partial interest.
3.3.1.6. To value a leasehold interest, the appraiser shall consider the present (discounted) worth of the rent saving, when the contractual rent at the time of appraisal is less than the current market rent. If the land is improved by the lessee, then the value of the leasehold interest shall be the value of the saving in ground rent, if any, in addition to the value (not cost) of the improvements of the lessee. If the contractual rent is greater than the currently established market rent, the appraiser shall subtract present worth of the difference from the value of the improvement.
3.3.1.7. When a property is under long-term lease to a prime tenant, such as a nationallyknown chain store concern, and the estimated useful life of the building exceeds the term of the lease, the appraiser may use the "Property Residual Technique" of evaluation along with other generally accepted appraisal techniques, i.e., cost and market approaches.
3.4. Valuation of commercial and industrial personal property.
3.4.1. General. - The object of this rule is to provide methodologies for appraising commercial and industrial furniture, fixtures, machinery, equipment, inventory, material and supplies.
3.4.2. Situs.
3.4.2.1. The situs of commercial and industrial furniture, fixtures, machinery, equipment, inventory, material and supplies shall depend upon an analysis of the residence of the owner, and the location of the personal property and whether the personal property is subject to personal property taxation by another state and is taxed by the other state.
3.4.2.2. All commercial and industrial personal property belonging to persons or corporations residing in this State, whether the property is in or out of the State is taxable, as personal property, unless the property is actually and permanently located in another state, and is subject to taxation as personal property and is actually taxed as personal property in the other state.
3.4.2.3. All commercial and industrial personal property located within this State, though owned by persons or corporations residing in another state is taxable as personal property by this State.
3.4.3. Valuation of commercial and industrial personal property.
3.4.3.1. Three (3) approaches to fair value considered and used in estimating fair market value are: (A) cost, (B) income, and (C) market.
3.4.3.2. Correlation. - Once generated, consider the various estimates of value when estimating final value. Of the three (3) approaches to value, the cost approach may apply most consistently to machinery, equipment, furniture, fixtures, and leasehold improvements because of the availability of data. The market approach is used less frequently, principally due to a lack of meaningful sales. The income approach is not normally used because of the difficulty in estimating future net benefits to be derived except in the case of certain kinds of leased equipment.
3.4.3.2.a. When possible, use an audit appraisal method. Use a physical appraisal method if experiencing difficulty in obtaining necessary accounting data from the taxpayer or lack comparable commercial or industrial personal properties.
3.4.3.3. Adjustments. – When physically inspecting commercial and industrial personal property for appraisal, use three (3) types of depreciation: should be considered; physical deterioration depreciation, economic obsolescence and functional obsolescence.
3.4.3.4. Valuation of common commercial and industrial personal property. Use current appraisal guidelines furnished by the Tax Commissioner to local assessors when valuing frequently encountered commercial and industrial personal properties common to numerous businesses within a taxing district.
3.5. Depreciation Adjustments.
3.5.1. Physical Depreciation - Depreciation tables for commercial and industrial personal property are developed using the Marshall Valuation Service as the source guide.
3.5.2. Economic Obsolescence - Economic obsolescence can best be measured by either a market approach method or an income method. Due to the lack of sales volume for comparable commercial or industrial properties, an income approach is normally used. However a market approach method may be used where the specific facts and circumstances would indicate that that method would achieve a more accurate measure of value.
3.5.3. Functional Obsolescence - Some functional obsolescence is accounted for in the Marshall Valuation Service depreciation tables. Functional obsolescence can be either curable or incurable.
Curable functional obsolescence can be measured by the use of cost to cure methods. Incurable functional obsolescence can be measured by either a market approach method or an income approach method. Due to the lack of sales volume for comparable commercial or industrial properties, an income approach method is normally used. However a market approach method may be used where the specific facts and circumstances would indicate that that method would achieve a more accurate measure of value.
Cost to cure means the cost of repairs, the cost of investment in substitution or replacement of property and the cost of additional property, including installation costs, necessary to bring a subject property to current market standards or industry standards and optimize the value of the property.
3.5.3.1. Curable and Incurable Functional Obsolescence.
3.5.3.1.1. Superadequacy -- Superadequacy is functional obsolescence which occurs when property has unnecessary or excess productive capacity such that the commercial or industrial property is underutilized, or where the property or a portion or component of the property adds no value based on the current use of the property or anticipated future use of the property. Superadequacies often result from decreases in demand for a product produced at the subject property, such that the productive capacity of the subject property is underutilized. A superadequacy is curable if it is economically feasible to remove or remediate the superadequacy, and is not curable if removal or remediation of the superadequacy is not economically feasible.
3.5.3.2. Deficiency – Deficiency is functional obsolescence which occurs when property has a capacity or quality that is less than current market standards or industry standards, and which requires additional investment in repairs, or in substitution or replacement of property or installation of additional property, to bring the subject property to current standards and improve the income producing capacity or productivity of the property. Deficiencies often result from age and from failures of timely maintenance, repairs and capital replacements or capital improvements. A deficiency is curable if it is economically feasible to remove or remediate the deficiency, and is not curable if removal or remediation of the deficiency is not economically feasible.
3.5.4. Special Circumstances – In the event a commercial or industrial facility is shut down on the assessment date, economic and functional obsolescence cannot easily be determined. In these cases the Tax Commissioner shall consider the following.
3.5.4.1. Plant Shut Down Temporarily – An income approach method shall be considered based on the anticipated restart date and discounted back to the assessment date.
3.5.4.2. Plant Shut Down Indefinitely –Personal property should be appraised considering an orderly sale of the property, either piecemeal or as a unit, whichever provides the more accurate valuation, depending on the facts and circumstances of the particular case. Personal property with a discernible market value should be appraised at that value. Other personal property should be appraised at salvage or scrap value.
Series 01Q Appointment of Special Assessors by State Tax Commissioner
W. Va. Code R. § 110-1Q-2 Definitions
Any terms used in this rule have the meanings ascribed to them in the West Virginia Code.
W. Va. Code R. § 110-1Q-3 Notice to Assessor of non-compliance
3.1. For each tax year beginning on or after the assessment date of July 1, 2013, if at any time it is ascertained by the Tax Commissioner that an assessor is failing, neglecting, or refusing to list and assess all property in his or her county at sixty percent of its true and actual value, the Tax Commissioner shall notify, on or before the first day of the following tax year, the assessor and the county commission for the county from which the assessor is elected of that failure in writing, and instruct the assessor to make all necessary corrections.
3.2. If the assessor has failed to make corrections for the following tax year, the Tax Commissioner shall appoint special assessors, in accordance with this rule, unless the assessor can show that substantial progress is being made to meet the criteria for compliance set forth in W. Va. Code §11-3- 1(d).
3.3. If the Tax Commissioner has determined that assessor has not complied, or has failed, neglected or refused to list and assess property at sixty percent of its true and actual value for three consecutive years, the Tax Commissioner shall appoint special assessors, as needed, for the purpose of making assessment and correcting the values of property in the county.
W. Va. Code R. § 110-1Q-4 Determining whether an assessor is in compliance
4.1. The Tax Commissioner shall use the following criteria to determine whether an assessor is in compliance with the Constitutional requirement that all property be assessed at sixty percent of its true and actual value:
4.1.1. Sales validity - Recent sales of property that form the basis for determining current property values in the county are arm's length sales, and accurately reflect current property values in that county.
4.1.2. Appraisal uniformity - The Tax Commissioner will review valid sales from the most current sales ratio analysis. Sales will be selected for review from residential neighborhoods only. This review will be made by comparing the equalization of the sale parcel as it relates to prior years values/listings and comparable properties located in the same neighborhood. The practice of "sales chasing" by an assessor is expressly disapproved.
4.1.3. Appraisal evaluation - The appraisal evaluation shall be based on the ratio of the assessed value of real property to the sale price of that property for all arm's-length sales of real property in a county during any assessment year, as reported to the Tax Commissioner by the assessor of that county, pursuant to his lawful duties. Any sales that are more than plus or minus two standard deviations from the median, or any sales of industrial real property or any sales which include the transfer of a mineral interest or interests, may be eliminated from the ratio study calculations by the State Tax Department.
The median sales ratio will be rounded to the nearest whole percentage using standard rounding rules.
The ratio of the assessed value of valid property sales to the sale price of such property shall be within ten percent, plus or minus, of the constitutionally mandated sixty percent. The determination will be made in January of the tax year, when the property books are submitted for equalization and review.
The Tax Commissioner will use the higher of either the median ratio or the aggregate ratio.
4.1.4. Any other criteria prescribed by the Tax Commissioner - If the criteria in this section are not sufficient to determine whether an assessor is in compliance with Constitution Art. X, §§ 1 and 1b, the Tax Commissioner may use any other criteria that he or she considers relevant and reliable.
W. Va. Code R. § 110-1Q-5 Appointment of Special Assessors
5.1. Special assessors have all of the power and authority vested by law in assessors. The work of special assessors shall be accepted and treated for all purposes by the county boards of review and equalization and the levying bodies as the true and lawful assessment of all property valued by the special assessors for that tax year.
5.2. The county shall provide the special assessors with full access to and complete use of the offices and premises of the assessor, including the use of all equipment and vehicles.
5.3. The county shall pay special assessors salaries commensurate with their duties and reimburse them for all actual expenses incurred in the performance of their duties.
5.4. The expense of employing special assessors, including salaries and expenses, shall be borne by the county in which they are employed, in accordance with the provisions of this section.
5.5. Certificate to clerk of county commission - The Tax Commissioner shall certify all expenses pertaining to the employment of special assessors to the clerk of the county commission for presentation to the county commission.
5.6. Audit of special assessors' expenses by county commission - The county commission shall cause an audit to be performed of all special assessors' expenses to ascertain their correctness. Upon completion and approval of the audit, the county commission shall order all salaries and expenses of special assessors to be paid immediately from the county fund.
5.7. In the event that the county commission refuses to order the necessary disbursement of funds to pay the expenses, the Tax Commissioner shall apply to the circuit court for a writ of mandamus ordering the county commission to release the necessary funds.
5.8. In any county where the Tax Commissioner has appointed special assessors to perform duties otherwise performed by the assessor, the assessor of the county is not eligible to receive the additional compensation authorized in chapter seven, article seven of the West Virginia Code.
Series 02 Electronic Data Processing System Network For Property Tax Administration
W. Va. Code R. § 110-2-1 General
1.1. Scope. -- This rule relates to the electronic data processing system network developed and utilized in the administration of the ad valorem property tax imposed on real and personal property.
1.2. Authority. -- W. Va. Code ''11-1C-4 and 11-1A-21(d).
1.3. Filing Date. -- April 6, 1999.
1.4. Effective Date. -- May 1, 1999. This rule is effective for the fiscal year beginning July 1, 1999.
1.5. Repeal of Former Rule. -- This legislative rule repeals and replaces 110 C.S.R. 2, AElectronic Data Processing System Network For Property Tax Administration,@ filed May 1, 1989 and effective May 1, 1989.
W. Va. Code R. § 110-2-2 Definitions
As used in this rule, the following terms have the meanings ascribed in this section.
2.1. AAccount@ means for each county one entry on the landbooks or one entry on the personal property books.
2.2. AAssessment@ and Aassessed value@ means sixty percent (60%) of the value of the property as determined by law as provided in W. Va. Const. Art. X, ' 1b and W. Va. Code '11-1C-1.
2.3. ACompatibility@ means the ability of computers to run the same computer program without appreciable alterations.
2.4. ACounty Server@ means the server located within the assessor=s office or county courthouse which provides services for computers and devices connected to the local area network and upon which applications of the assessment administration and valuation system reside.
2.5. AData base@ means a collection of information stored and organized in a precise manner so that the information can be used in the performance of various program instructions.
2.6. ADisk storage@ means magnetic storage in which data are stored by magnetic recording on the flat surfaces of one or more disks.
2.7. AFile@ means a collection of data sets that are organized and stored, either on disk or tape as a unit, and are used to read and write information in an orderly fashion.
2.8. AHardware@ means the statewide server itself and peripheral equipment (computers, printers, data storage devices, telecommunications equipment, etc.).
2.9. AStatewide server@ means the server that provides the primary services for devices connected to the statewide network and is located within the Tax Commission or a site designated by the Tax Commission.
2.10. AInformation Services and Communications Division@ or AI S&C@ means the AInformation Services and Communications Division@ (IS&C), Department of Administration, which is an agency within the government of the State of West Virginia.
2.11. ANetwork@, Aelectronic data processing system network@ or Asystem@ means the statewide electronic data processing system network required by W. Va. Code '11-1A-21.
2.12. APassword@ means the unique identification word assigned to each user and which, when entered, allows the user to supply or retrieve information.
2.13. APrintlines@ means the number of lines printed for each document requested by specific users.
2.14. AProperty books@ means the official land and personal property books maintained by the respective county assessors which contain the appropriate information for each account.
2.15. APeriodic valuations@ means the annual periodic valuation of all property in this State required by W.Va. Constitution Art. X, ' 1b and W. Va. Code '11-1C-9.
2.16. ATape storage@ means the computer storage medium similar to magnetic tape used in an ordinary sound tape recorder and upon which are recorded portions of the data base.
2.17. ATax Commissioner@ or ACommissioner@ means the Tax Commissioner of the State of West Virginia or his or her delegate as authorized in W. Va. Code ''11-1-1 and 11-1A-3(d).
W. Va. Code R. § 110-2-3 Network Development Responsibility
3.1. The Tax Commissioner shall devise and maintain an electronic data processing system network to facilitate the administration of the ad valorem property tax imposed on real and personal property. The information contained on the network shall be entered on the network by the respective county assessors and the assessors shall cause the information to be maintained in a current mode through the entry of additional information as changes in the data occurs.
3.2. In developing and maintaining the network, the Tax Commissioner shall assure that all operational activities are thoroughly and completely planned. This includes but is not limited to the following operational activities:
3.2.1. The Commissioner shall determine the most appropriate hardware and associated equipment to be utilized in the network, assuring the hardware and associated equipment is fully tested, functions properly and is compatible within the network;
3.2.2. The Commissioner shall assure that the computer software is properly designed to meet operational standards and that it is fully tested prior to acceptance and utilization;
3.2.3. The Commissioner shall assure the development of necessary and appropriate operational manuals, forms and training programs for state and county personnel;
3.2.4. The Commissioner shall coordinate activities and information with appropriate county officials to assure the availability of facilities suitable to accommodate network equipment; and
3.2.5. The Commissioner shall assure that appropriate maintenance agreements are entered into for continued network operations.
W. Va. Code R. § 110-2-4 County Responsibility
4.1. Equipment. -- Each county shall acquire, at its expense, the data processing equipment which is required by the Commissioner and which is to be located in each county.
4.1.1. A county may acquire the required or recommended equipment on a lease or lease/purchase basis or it may purchase the required or recommended equipment.
4.1.2. If the county does not utilize the equipment recommended and required by the Commissioner, the county assessor shall demonstrate the complete compatibility of any other equipment he or she acquires in lieu of, or in addition to that which is recommended or required for use.
4.1.3. If a county assessor later chooses to utilize other compatible equipment, the county assessor shall first either locate a buyer for the equipment to be replaced, or agree to use the equipment for other purposes and continue to be liable for the monthly payments: Provided, That if a buyer for the equipment is located, the buyer becomes responsible for the payment of any outstanding obligation on the equipment being replaced.
4.2. County personnel and other equipment. -- Each county shall provide, at its expense, the necessary staffing and operating personnel and all other communication equipment, to allow interaction with the statewide server, computer, or other device as the Tax Commissioner may designate.
4.3. County network charges. -- Each county shall be charged by the Tax Commissioner for its proportionate share of the cost for use of the network, statewide server and other related services.
4.3.1. The Tax Commissioner shall provide an estimate of fiscal year network charges by March 15 preceding the start of each fiscal year, for county budgetary purposes.
4.3.2. The Tax Commissioner shall bill each county based on the formulas in this rule: Provided, That no county=s bill may exceed the Tax commissioner=s budget estimate by more than ten percent (10%) unless the county=s usage is more than twelve percent (12%) above the previous fiscal year level and/or unless the county acquires and uses additional computers and/or printer devices after the estimate has been made.
4.3.3. The Tax Commissioner shall cause a statement to be rendered to the respective county commissions. Each county commission shall pay the total amount of the statement to the Tax Commissioner within thirty days (30) after the statement is rendered. The statement shall be composed of the following costs attributable to each county for the period specified on the statement.
4.3.3.a. Communication charges. -- Communication charges are the charges attributable to each county for the communication line connection between the county and the statewide server. The charge shall be based on the actual cost of the communication link for that county as billed to IS&C or the Tax Commissioner by the communication contractor (i.e., Bell Atlantic, AT&T, etc.)
4.3.3.b. Storage charges. -- Storage charges are charges for the amount of space utilized for both disk and tape storage. In effect, the counties rent disk or tape storage space for the respective number of accounts. It is an actual physical measurement. The formula for computing the storage charges for each county is composed of four elements and functions as follows:
TSC = Total Storage Cost TPA = Total Property Tax Accounts, All Counties CPA = County Property Tax Accounts CSC = County Storage Cost (CPA TPA) x TSC = CSC
4.3.3.c. Network charges. -- Network charges include the actual monthly network cost incurred by the Tax Commission to manage and operate the statewide routed network, the statewide server hardware, and the statewide server operating system. The charge to each county is based on the number of accounts in each county. An account is one entry on the land books or one entry on the personal property books. The number of accounts used for the billing is the number of accounts within each county at the time the estimate was made for the annual fiscal year network charges. The formula for computing the network charges for each county is composed of four (4) elements and function as follows:
TNC = Total Network Charges TPA = Total Property Tax Accounts, All Counties CPA = County Property Tax Accounts CNC = County Network Share Charge (CPA TPA) x TNC = CNC
4.3.3.d. System support charges. The system support charges are composed of the following:
4.3.3.d.1. Licensing and support charges. The charge for licensing and support is the amount invoiced to and paid by the Tax Commissioner for licensing and support. The charge is based on the number of devices in the county utilizing the statewide network. The charge to each county is the actual cost and is determined by multiplying the per device charge by the number of devices that use the network in that county. The Tax Commission pays licensing and support charges for those devices used by the Tax Commissioner.
4.3.3.d.2. Reports, training, system testing and valuation guides. -- These costs are for processing reports required of the Tax Commissioner by statute for the determination of market conditions in each county, for system testing, for the training of county personnel, for the cost of acquiring guides for valuation purposes for property such as vehicles, boats, manufactured housing, etc. The formula for computing this charge functions as follows:
TRTTVC = Total Reports, Training, Testing and Valuation Charges TPA = Total Property Tax Accounts CPA = County Property Tax Accounts CRTTVC = County Reports, Training, Testing and Valuation Share Charge (CPA TPA) x TRTTVC = CRTTVC
4.3.3.d.3. Dedicated personnel. -- Each county shall pay a Base Personnel Charge of 10% of the actual total cost of the dedicated State Tax Commission personnel necessary to keep the system operational, with the Base Personnel Charge being equal to each county=s proportionate share of the accounts on the network. In addition to the base charge, each county that chooses to use the statewide server as its primary server and on which its county data and system applications reside and are updated on-line shall be assessed a surcharge above the base charge for additional dedicated personnel costs associated with programming, daily system maintenance and operation. The charge for each county is calculated as follows:
CPA = County Individual Property Tax Accounts TPA = Total Tax Accounts, All Counties TPC = Total State Tax Commission Personnel Charges BPC = Base State Tax Commission Personnel Charges TPW = Total Property Tax Accounts, Counties w/o server CPS = County Personnel Share Surcharge SPC = Surcharge Personnel Charges, Counties w/o server CPC = County Base Personnel Charge TPC x 10% = BPC (CPA TPA) x BPC = CPC TPC - BPC = SPC (CPA TPW) x SPC = CPS CPC + CPS = Total Dedicated Personnel Charges For County Programming changes resulting from changes in the law shall be provided to those counties whose data and applications reside on their county server. However, each county is responsible for further modification and installation and shall be billed for proportionate share costs of dedicated personnel costs to develop the programming changes. The proportionate share costs is to be used to reimburse the County Tax Fund.
4.3.3.e. Printing charges. -- The printing charge is the cost of the printing for each county by IS & C. The actual cost, as determined by IS & C, is passed to each county.
4.3.3.f. Miscellaneous charges. -- The miscellaneous charges are the cost for communication change requests, data processing supplies such as the cost for computer paper used in county assessor=s printers, land book and personal property book sheets, cable and installation, training, and shipping charges, etc. The miscellaneous charge is the amount invoiced to and paid by the Tax Commission.
4.3.4. The payments referred to in paragraph 4.3.3. of this section shall, upon receipt by the State, be deposited in the State Treasury into a revolving fund known as the ACounty Tax Fund.@
W. Va. Code R. § 110-2-5 Network Operations
5.1. State responsibility. -- Responsibilities of the Tax Commissioner in development and operation of the network include:
5.1.1. The assurance that the data accumulated as a result of the periodic evaluations is entered into the system and maintained in a current mode.
5.1.2. The assurance that all appropriate assessment rules, tables, cost lists, modifiers, etc. are entered into the system by the respective county assessors annually.
5.1.3. The State Tax Commission may not change certain county data such as prior assessed values. Data errors detected by the State Tax Commission through edits shall be forwarded to the respective county assessor who in turn shall correct the erroneous information.
5.2. County responsibility. -- Responsibilities of each county in the development and operation of the network include:
5.2.1. Each assessor shall enter all changes in the description, status, classification and value of real property and personal property situated in his or her county. All changes shall be entered no later than the calendar month following the month during which the changes occurred. All changes when entered are to be communicated to the statewide server via the statewide network to the Tax Commissioner on a daily basis. If a county assessor chooses to install in his or her respective county a server upon which the real property and personal property appraisal and assessment data resides, all changes entered shall be communicated to the statewide server via the statewide network on no less than a weekly basis on a day and time designated by the Tax Commissioner.
5.2.1.a. Only county assessors have authority to change information relating to property and accounts in their respective county.
5.2.1.b. No county may change any information considered by the Tax Commissioner to be the domain or property of the State.
5.2.2. Each county shall utilize the procedures and methodologies established by the Property Valuation Training and Procedures Commission. Additionally, each county shall utilize the system for the purpose of valuing all real and personal property in their respective county.
5.2.3. All land books and personal property books shall be produced through the network described in this rule.
W. Va. Code R. § 110-2-6 Network Security and Safeguards
6.1. General. -- The Tax Commissioner shall assure that the network and the data base are at all times safe and secure, and that safeguards are adequate to prevent unauthorized access.
6.1.1. Password. -- A password is required for all users of the network. Each password for each user shall be unique. The password shall be utilized to control the usage of network functions and to assist in the monitoring of each user=s activity in the network.
6.1.2. User name. -- The user name is the name of the individual associated with the password. Each assessment record updated by a user shall also cause an audit record to be written which includes the user name. The user name shall appear on audit reports to indicate the data changed by that user.
6.1.3. Assessors. -- Assessors in one county shall not be able to access information on properties located in another county without the written permission from the assessor of the county in which the property is located. In no event may assessors in one county change information on properties located in another county.
110CSR2
Series 03 Exemption Of property from ad valorem property taxation
W. Va. Code R. § 110-3-1 General
1.1. Scope. -- These legislative regulations provide guidelines to clarify and explain state law as it relates to exemption of property from ad valorem property taxes under W. Va. Code '11-3-9.
1.2. Authority. -- WV Code '11-3-9 and '29A-3-1.
1.3. Filing Date. -- May 1, 1989.
1.4. Effective Date. -- May 1, 1989.
W. Va. Code R. § 110-3-2 Definitions
As used in this rule and unless the context requires a different meaning, the following terms shall have the meanings ascribed herein, and shall apply in the singular or in the plural.
2.1. The term "academy" means a private secondary or college preparatory school, a school for special instruction or a specified society of scholars or artists.
2.2. The term "aged" means over the age of sixty-five (65) years.
2.3. The term "bank deposits" as used in these regulations shall mean a deposit of money with any person engaged in the business of banking. It includes money on deposit in a checking, time, interest or savings account, and certificates of deposit (including money market certificates and All Savers Certificates). The term "person engaged in the business of banking" means and includes banks, building and loan associations, industrial banks, industrial loan companies, supervised lenders, credit unions and all other similar institutions, whether persons, firms or corporations, which are by law under the jurisdiction and supervision of the West Virginia Commissioner of Banking, the Federal Reserve Board or the United States Comptroller of the Currency.
2.4. The term "benevolent association or society" means a society or association having a philanthropic or charitable purpose and intended to confer benefits to the general public or a specific section of the public at large rather than to produce profit or gain.
2.5. The term "blind" means a person whose central visual acuity does not exceed twenty-two hundred in the better eye with correcting lenses, or if his visual acuity is greater than twenty-two hundred but is occasioned by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than twenty degrees.
2.6. The term "bond" means a certificate or evidence of debt on which the issuing church or religious society promises to pay to the bond holders a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. In every case a bond represents a debt. Commonly, bonds are secured by a mortgage or lien on specific property. The term "bonds" includes annuity bonds, bearer bonds, callable bonds, chattel mortgage bonds, collateral trust bonds, convertible bonds, corporate bonds, coupon bonds, debenture bonds, general mortgage bonds, general obligation bonds, guaranteed bonds, improvement bonds, income bonds and supportment bonds.
2.7. The term "cash" as used in these regulations shall mean and include all United States and foreign currency.
2.8. The term "cemetery" as used in these regulations, shall mean a place where the dead bodies of human being are buried; it is a place or area of ground set apart for the burial of the dead, and includes not only lots for depositing the bodies of the dead, but also such avenues, walks, and grounds as may be necessary for its use or for ornamental purposes. In Re Hillcrest Memorial Gardens, Inc., 146 W. Va. 337, 119 S.E.2d 753 (1961).
2.9. The term "charitable" means of, or for, charity.
2.10. The term "charity" means a gift to be applied consistently with the existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works, or otherwise lessening the burdens of government. It is immaterial whether the purpose is called charitable in the gift itself if it is so described as to show that it is charitable. Any gift not inconsistent with existing laws which is promotive of science or tends to the education, enlightenment, benefit or amelioration of the condition of mankind or the diffusion of useful knowledge, or is for the public convenience is a charity.
2.11. The term "child" means any person under eighteen years of age.
2.12. The term "church," as used in the regulations, shall refer to an individual parish, congregation or like subgroup of an organized religion, denomination, sect or religious society which is exempt from federal income taxes under 26 U.S.C. ''501(c)(3) or (c)(4).
2.13. The term "club room" means a place used by a voluntary, incorporated or unincorporated club or association of person which is officially approved by the college or university and which has a membership consisting primarily of students or faculty members or both, and which meets for social, literary, educational, or scientific purposes, or other purposes of like nature.
2.14. The term "college" means and includes any "State college of university" or "community college" as defined in W. Va. Code '18-26-2; and any other institution of higher education which has approval from the West Virginia Board of Regents to award degrees of higher educational status pursuant to W. Va. Code '18-26-13a. The term "higher educational institution" means any institution as defined by section 401(g) or (h) of the Federal Higher Education Facilities Act of 1963, as amended, and includes the private proprietary educational institution operated for profit which offers one or more programs leading to a degree. See W. Va. Code '18-26-3(g).
2.15. The term "dead victuals" means all non-living edible foodstuffs, beverages containing no alcohol and other non-living items commonly thought of as food intended entirely for human consumption, including, by way of illustration and not limitation, cereals and cereal products, meat and meat products, fish and fish products, poultry and poultry products, fresh and salt water animal products, egg and egg products, vegetables and vegetable products, fruit and fruit products, flour and flour products, sugar and sugar products, milk and milk products, cocoa and cocoa products, coffee and coffee substitutes, tea, herbs, spices, salt and salt substitutes, condiments, candy and confections, soft drinks, soft drink mixes and syrups, tenderizers, food coloring, bottled drinking water, sugar substitutes, oleo margarine, shortening, gelatins, baking and cooking ingredients, mushrooms, spreads, relishes, desserts, flavorings, chewing gum, edible seeds, nuts and berries. This term does not include medicines, vitamins and dietary supplements whether in liquid, powered, granular, tablet, capsule, lozenge, or pill form spirituous, malt or venous liquors or beer, or tobacco or tobacco products.
2.16. The term "deaf" means having a hearing impairment of such severity as to substantially interfere with the capacity to learn in a normal traditional classroom setting,or the capacity to obtain gainful employment.
2.17. The term "debenture" means a bond or promissory note backed by the general credit of the issuer usually not secured by a mortgage or lien on any specific property, subject to the following variations:
2.17.1. Convertible debenture. A debenture which may be changed or converted into some other security usually at the option of the holder.
2.17.2. Convertible subordinate debenture. A debenture which is subject or subordinate to prior payment of other indebtedness but which may be converted into another form of security.
2.17.3. Sinking fund debenture. A debenture which is secured by periodic payments into a sinking fund, commonly managed by a trustee for purposes of retiring such debt.
2.17.4. Subordinate debenture. A debenture which is subject to or subordinate to prior payment of other indebtedness.
2.18. The term "dormitory" means a place used by students as sleeping quarters or living quarters.
2.19. The term "dumb" means lacking the power of speech or having such impairment of the power of speech as to substantially interfere with the capacity to learn in a normal traditional classroom setting, or the capacity to obtain gainful employment.
2.20. The term "education" means the process of teaching or developing the knowledge, skill or character of persons, especially by formal schooling. "Education" does not include programs designed to train animals.
2.21. The term "evidence of debt" means a written instrument entered into by two or more parties whereby one party acknowledges in writing a debt of money as owing or payable to another party.
2.22. The term "fraternal association or society" means an association or society of persons, often sharing a similar or the same calling, avocation, or profession, formed for mutual aid and benefit, or a common cause and operated on a not-for-profit basis.
2.23. The term "free school" means a school included in the system of public schools required by W. Va. Const. Art. XII, '1, but does not include higher education.
2.24. The term "friendless" means those persons without workable family or other human support such as to be in need of housing, care or feeding, and unable to obtain or provide such housing, care or feeding for themselves.
2.25. The term "health care corporation" as use in these regulations shall refer to any corporation organized and licensed under the provisions of W. Va. Code '33-25-1 et seq.
2.26. The term "home for children" means an orphan asylum as defined under section 2.42 of these regulations.
2.27. The term "house of refuge" means a place operated for the purpose of providing shelter, protection, safety or escape from danger, distress or persecution.
2.28. The term "household goods," as used in these regulations, shall refer only to tangible personal property commonly found within the house and items used to care for the house and its surrounding property.
2.29. The term "hospital" means an institution which is primarily engaged in providing to in-patients, by or under the supervision of physicians, diagnostic and therapeutic services for medical diagnosis, treatment, and care of injured, disabled or sick persons, or rehabilitation services for the rehabilitation of injured, disabled or sick persons and which is either licensed by the West Virginia Department of Health as a hospital, or operated by the federal government or the state government as a hospital. This term also includes psychiatric and tuberculosis hospitals. See W. Va. Code '16-2D-2(t).
2.30. The terms "hospital service corporation," "medical service corporation," "dental service corporation" and "health service corporation" as used in these regulations shall be defined as they are defined in W. Va. Code '33-24-2.
2.31. The term "immediate use" is use which is direct and not separated in time, relationship or connection.
2.32. The term "infirm" means persons who are so weak, frail, ill, feeble or unstable as to be unable to house, care for or feed themselves or obtain such housing, care or feeding for themselves.
2.33. The term "lease" means to rent out or contractually give the use of a property in return for a monetary or other remuneration.
2.34. The term "library" means a place where books, manuscripts, films, tapes, records, musical scores, or other literary, scientific or artistic writings or materials are kept for use but not for sale.
2.35. The term "literary" means of, relating to, or having the characteristics of letters, humane learning or literature.
2.36. The term "literary hall" means a place regularly used as a library or for reading, writing or instruction in literature or literary subject matter.
2.37. The term "livestock" means farm animals or farm fowl raised for profit. Livestock shall not include cats, rabbits, dogs, rats, mice, raccoons, groundhogs, deer, squirrels, crows, bears, exotic animals, parrots, parakeets, swans, peafowl, tropical or wild or exotic birds or fish or any animal commonly kept as, or thought of as a pet, or any game animal or wild animal, so long as such animal or fowl is not kept or raised for profit.
2.38. The term "lunatic asylum" means an institution for the housing, care, feeding and treatment of the insane on a long-term residential basis.
2.39. The term "money" as used in these regulations shall mean and include cash, personal and business checks, cashiers' checks and express checks, bank credit cards (MasterCard, VISA, etc.) sales drafts or sales slips held by a merchant or other party for deposit with a bank, and other items commonly though of and understood to be money. It does not include notes, bonds, bills and accounts receivable, stock and any other similar intangible personal property. See 48 Op. Att'y Gen. 63 (1959).
2.40. The term "non-profit" and the term "not-for-profit" mean used with a view to producing no profit on total aggregate operations other than that which is used or held for current or planned future use in furtherance of the charitable purposes of the organization. Charities and others operating property not used for profit are not precluded from exacting charges upon beneficiaries for services rendered, nor are they precluded from deriving profits from total aggregate operations or from individual beneficiaries on a case by case basis so long as total aggregate annual operations produce no significant economic benefit or inurement to private individuals or entities apart from those which are necessarily incorporated into the operation of the charitable activity.
2.41. The term "notes" means and includes any writing signed on behalf of a church or religious society, containing an unconditional promise to pay a sum certain in money, on demand or at a definite time. The term "note" does not include money, documents of title or investment securities.
2.42. The term "orphan asylum" means an institution for the housing, care, and feeding of children whose parents are dead, or who are unwanted, rejected, judicially removed from family, abused or otherwise unable to obtain housing, care or feeding in a workable family or adoptive relationship.
2.43. The term "parsonage" means the house, houses or living quarters which are provided by a church for its pastor, or pastors.
2.44. The term "pastor" means a minister, priest, rabbi, clergyman, or other recognized religious leader who has charge of a congregation, parish or like following.
2.45. The term "person" means the State and its political subdivisions, and any individual, firm, partnership, joint venture, joint stock company, the United States and its agencies, public or private corporation, municipal corporation, cooperative, estate, trust, business trust, receiver, executor, administrator, any other fiduciary, any representative appointed by order of any court or otherwise acting on behalf of others, or any other group or combination acting as a unit, and the plural as well as the singular number.
2.46. The term "personal effects" means articles and items of personal property commonly worn on or about the human body, or carried by a person and normally thought to be associated with the person. "Personal effects" includes firearms and ammunition held for personal use and not for profit.
2.47. The term "place of divine worship," as used in these regulations shall refer to a church, synagogue, temple or other meeting place in which any religion, denomination, sect or religious society congregates to engage in the worship of that religion's, denomination's, sect's or religious society's deity or deities.
2.48. The term "primary use" is use which is chief, main or principal.
2.48.1. Whenever property is required to be "used" for stated purposes in order to qualify for exemption under W. Va. Code '11-3-9, the stated purpose must be the primary or immediate use of the property, and not a secondary or remote use. The property may be used for purposes which are ancillary to the stated purpose, but the ancillary use must further the stated, primary use.
2.48.2. Whenever property is required to be "used exclusively" for stated purposes in order to qualify for exemption under West Virginia Code '11-3-9, the stated purposes must be the primary and immediate use, and not a secondary or remote use. The property may not be used for purposes which are ancillary to the stated purpose.
2.49. The term "property belonging exclusively to" shall refer to property in which the stated owner is the person who is possessed of the freehold, whether in fee or for life. A person seized or entitled in fee subject to a mortgage or deed of trust securing a debt or liability shall be deemed the owner until the mortgagee or trustee takes possession, after which such mortgagee or trustee shall be deemed the owner. A person who has an equitable estate of freehold, or is a purchaser of a freehold estate who is in possession before transfer of legal title shall also be deemed to be property belonging exclusively to the beneficial owner.
2.50. The term "property belonging to" shall refer to real property in which the person, association, corporation, or other legal entity entitled to the exemption has the fee interest, or any type of reversionary interest when the present possessory interest is in another, or the current possessor of the property is a lessee of the exempt person, association, corporation or entity. This term shall refer to personal property in which the person, association, corporation or other legal entity entitled to the exemption holds legal title to the property or who is a lessee of the property, or if it has been mortgaged or pledged, the personal property shall be deemed to be the property of the person who has possession.
2.51. The term "property on hand to be used in the subsistence of livestock" means all personal property primarily, actually and directly used for, and reasonably necessary for the care or feeding of livestock. Only personal property is subject to this exemption. Real property is not subject to the exemption authorized by W. Va. Const. Art. X, '1.
2.52. The term "public" means for the use or benefit of the people in general.
2.53. The term "real property" includes lands, tenements and hereditaments, all rights thereto and interest therein except chattel interest, and includes the buildings or structures erected thereon unless such buildings or structures are owned by another. See W. Va. Code '11-4-10 and '2-2-10(p).
2.54. The term "relief society or association" means a society or association of persons typically sharing the same or similar calling or employed in a single industry or by a single employer and formed for the purpose of establishing a worker's relief fund serviced by periodic contributions from members or jointly from members and employers for the purpose of providing relief to members and their families in the event of work related injury or death.
2.55. The term "scientific" means of, relating to, or exhibiting the methods or principles of natural science, or knowledge covering the operation of natural laws, especially as obtained and tested through the scientific method: for example, physics, chemistry, or biology.
2.56. The term "seminary" means an institution of secondary or higher education ordinarily for the training of candidates for the priesthood, ministry, or rabbinate.
2.57. The term "Tax Commissioner" or "Commissioner" shall mean the Tax Commissioner of the State of West Virginia or his delegate.
2.58. The term "tenant" means the one who has the temporary use and occupation of real property owned by another person (called the landlord) the duration and terms of such temporary use or occupation being fixed by an instrument called a lease.
W. Va. Code R. § 110-3-3 Constitutional Authority
3.1. West Virginia Constitution Article X, '1 mandates that ad valorem property taxation shall be equal and uniform throughout this State. It then empowers the Legislature to, by general law, exempt the following property:
3.1.1. Property used for educational, literary, scientific, religious or charitable purposes;
3.1.2. All cemeteries;
3.1.3. Public property;
3.1.4. Personal property, including livestock, employed exclusively in agriculture, including horticulture and grazing; and
3.1.5. Products of agriculture, including horticulture, and grazing, while owned by the producers thereof.
3.2. West Virginia Constitution Article X, '1 exempts household goods to the value of two hundred dollars ($200.00) from ad valorem property taxes.
3.3. West Virginia Constitution Article X, '1a provides the following exemptions from ad valorem property taxation:
3.3.1. Household goods, if not held or used for profit:
3.3.2. Personal effects, if not held or used for profit;
3.3.3. Bank deposits and money; and
3.3.4. Upon implementation of the first statewide reappraisal accomplished in accordance with W. Va. Const. Art. X, '1b, all intangible personal property shall be exempt from ad valorem property taxation unless and until the Legislature subjects by class, group or type such intangible personal property to such taxation.
3.3.4.a. If intangibles are once again subjected to ad valorem property taxation, the applicable levy rate is the Class I levy rate for the county and levying body within whose jurisdiction the intangible has its situs.
3.3.4.b. If after the reappraisal is implemented, the Legislature decides to tax intangible personal property, the intangible personal property subject to ad valorem property taxation shall not include money, bank deposits or other investments determined by the Legislature to be in the nature of deposits in a bank or other financial institution, or upon pensions, monies or investments determined by the Legislature to be in lieu of or otherwise in the nature of pensions.
3.3.5. The value of all tangible and intangible property subject to ad valorem property taxation and which was acquired or created subsequent to any statewide reappraisal shall be allocated and phased-in over a period of years in the same manner as property valued during the statewide reappraisal.
3.4. West Virginia Constitution Article X, '1b provides the following:
3.4.1. Until such time as the statewide reappraisal is implemented, current statutory law governing assessments remain in effect. As a result, the assessed value of utility property is whatever the Board of Public works determines, and the assessed value of all other property cannot be less than sixty percent (60%) nor more than one hundred percent (100%), by class, of the Tax Commissioner's appraised value of property in each county. Upon implementation of the statewide reappraisal, all property subject to ad valorem property taxation shall be assessed at sixty percent (60%) of its appraised value. The Legislature may, by general law agreed to by two-thirds of the members elected to each house, establish a higher percentage but such percentage shall not be more than one hundred percent (100%) of appraised value. Therefore, a maximum of forty percent (40%) of all such property is exempt from ad valorem property taxation.
3.4.2. The first twenty thousand dollars ($20,000.00) of assessed valuation of any real property, or of personal property in the form of a mobile home, used exclusively for residential purposes and occupied by the owner or one of the owners thereof as his residence who is a citizen of this state and who is sixty-five (65) years of age or older or is permanently and totally disabled as that term may be defined by the Legislature, shall be exempt from ad valorem property taxation, subject to such requirements, limitations and conditions as shall be prescribed by general law.
3.5. West Virginia Constitution Article X, '1b permits the Legislature to provide by general law as follows:
3.5.1. "An amount not to exceed twenty thousand dollars ($20,000.00) of value of any real property, or of personal property in the form of a mobile home, used exclusively for residential purposes and occupied by the owner or one of the owners thereof as his residence who is a citizen of this state, and who is under sixty-five (65) years of age and not totally and permanently disabled may by general law be exempted from ad valorem property taxes.
3.5.2. In no event shall any one person and his spouse, or one homestead be entitled to more than one exemption.
3.6. West Virginia Constitution Article X, '1c provides the following:
3.6.1. Tangible personal property which is moving in interstate commerce through or over West Virginia, or which was consigned from a point of origin outside of West Virginia to a public or private warehouse in this State for storage in transit to a final destination outside this State shall be exempt from ad valorem property taxation; Provided, That such out-of-state destination is specified in time to allow for a determination of exempt status in accordance with W. Va. Code '11-3-1 et seq.
3.6.2. The exemption shall be allowed if the property, while in the warehouse, is assembled, bound, joined, processed, disassembled, divided, cut, broken in bulk, relabeled, or repackaged for out-of-state delivery so long as the activity does not result in a new or different article, product, substance or commodity, or one of different utility.
3.6.3. Personal property of inventories of natural resources shall not be exempt from ad valorem property taxation unless such exemption is required by paramount federal law.
W. Va. Code R. § 110-3-4 Statutory Exemptions From Ad Valorem Property Taxes
4.1. Exemptions provided by W. Va. Code '11-3-9. Section '11-3-9 of the West Virginia Code exempts specific property from ad valorem property taxation, pursuant to the grant of authority in W. Va. Const. Art. X, '1. It therefore is necessary that each exemption provided in W. Va. Code '11-3-9 be authorized by the West Virginia Constitution. This list of exemptions includes the following property:
4.1.1. Property belonging to the United States, other than property permitted by the United States to be taxed under state law.
4.1.2. Property belonging exclusively to the State of West Virginia.
4.1.3. Property belonging exclusively to any county, district, city, village or town of the State of West Virginia, and used for public purposes.
4.1.4. Property located in this State belonging to any city, town, village, county or any other political subdivision of another state, and used for public purposes.
4.1.5. Property used exclusively for divine worship.
4.1.6. Parsonages, and the household goods and furniture pertaining thereto.
4.1.7. Mortgages, bonds and other evidences of indebtedness in the hands of bona fide owners and holders and issued and sold by churches and religious societies for the purpose of securing money to be used in the erection of church buildings used exclusively for divine worship, or for the purpose of paying indebtedness thereon.
4.1.8. Cemeteries.
4.1.9. Property belonging to or held in trust for, colleges, seminaries, academies and free schools, if used for educational, literary or scientific purposes, including books, apparatus, annuities and furniture.
4.1.10. Property belonging to, or held in trust for, colleges or universities located in West Virginia, or any public or private nonprofit foundation or corporation which receives contributions exclusively for such college or university, if the property or dividends, interest, rents or royalties derived therefrom are used or devoted to educational purposes of such college or university .
4.1.11. Public and family libraries.
4.1.12. Property used for charitable purposes, and not held or leased out for profit.
4.1.13. Property used for the public purposes of distributing water or providing sewer services by a duly chartered nonprofit corporation when such property is not held, leased out, or used for profit.
4.1.14. Property used for area economic development purposes by nonprofit corporations when such property is not leased or held out for profit.
4.1.15. All real estate not exceeding one half acre in extent, and the buildings thereon, used exclusively by any college or university society as a literary hall, or as a dormitory or club room, if not leased or otherwise used with a view to profit.
4.1.16. All property of benevolent associations, not conducted for private profit.
4.1.17. Property belonging to any public institution for the education of the deaf, dumb or blind.
4.1.18. Property belonging to any hospital not held or leased out for profit.
4.1.19. House or refuge, lunatic or orphan asylum.
4.1.20. Homes for children or for the aged, friendless or infirm, not conducted for private profit.
4.1.21. Fire engines and implements for extinguishing fires, and property used exclusively for the safekeeping thereof, and for the meeting of fire companies.
4.1.22. All property on hand to be used in the subsistence of livestock on hand at the commencement of the assessment year.
4.1.23. Household goods to the value of two hundred dollars ($200.00), whether or not used for profit.
4.1.24. Bank deposits and money.
4.1.25. Household goods, when not held or used for profit.
4.1.26. Personal effects when not held or used for profit.
4.1.27. Dead victuals laid away for family use.
4.1.28. Any other property or security exempted by any other provision of state or federal law.
4.2. Limitations on exemptions. The exemptions listed in subsection (a) of this Section are subject to three limitations:
4.2.1. No property shall be exempt from taxation if it was purchased or procured for the purpose of evading ad valorem property taxes. W. Va. Code '11-3-9.
4.2.2. The language of W. Va. Code '11-3-9 shall not be construed to exempt from taxation any property owned by or held in trust for, educational, literary, scientific, religious or other charitable corporations or organizations, including any public or private nonprofit foundation or corporation existing for the support of any college or university located in West Virginia, unless such property, or the dividends, interest, rents or royalties derived therefrom, is used primarily and immediately for the purposes of such corporations or organizations.
4.2.3. Exemption shall be allowed only in conformity with these regulations which are issued to provide assessors with guidelines to ensure uniform assessment practices statewide to effect the intent of W. Va. Code '11-3-9.
4.3. Split-listing of property.
4.3.1. Split-listing of property, as authorized by W. Va. Code '11-4-2 and '11-4-3, is only applicable in those instances where property is partially used by the owner thereof exclusively for residential purposes and partially used for exempt purposes.
W. Va. Code R. § 110-3-5 Ruling By The County Assessor
5.1. All property, real or personal, exempt or nonexempt must be returned to the assessor and annually assessed. W. Va. Code '11-3-1 and '11-3-2.
5.2. The assessor shall begin the work of assessment on July 1 of each year and by the following January 31 shall complete such work and complete entering all information in the land and personal property books.
5.2.1. The assessor shall obtain from each person in the county who is liable to assessment a full and correct listing of the description of all personal property of which he was the owner or the person in possession on July 1 of the current year. The listing shall include what the taxpayer deems to be the true and correct value of each item of personal property.
5.2.2. The assessor shall also obtain from each person a separate but equally complete listing of all property, real and personal, which is held, possessed or controlled by him as executor, administrator, guardian, trustee, receiver, agent, partner, attorney, president or accounting officer of a corporation, consignee, broker, or in any representative or fiduciary character.
5.3. The list required by the foregoing section 5.2 and by W. Va. Code '11-3-2 shall be made and information furnished by the following:
5.3.1. With respect to property of a minor, by his guardian, if he has one, and if he has none, by his father, if living, or, if not, by his mother, if living, and if neither be living or a resident of this State, by the person having charge of the property;
5.3.2. With respect to the separate property of a married woman, by herself or her husband in her name;
5.3.3. With respect to the property of a husband, who is out of the State or incapable of listing such property, by his wife;
5.3.4. With respect to the property held in trust, by the trustee, if in possession thereof, otherwise by the party for whose benefit it is held;
5.3.5. With respect to personal property of a deceased person, by the personal representative;
5.3.6. With respect to the property of an insane person, or a person sentenced to confinement in the penitentiary, by his committee;
5.3.7. With respect to the property of a company, whether incorporated or not, whose assets are in the hands of an agent, factor or receiver, by such agent, factor or receiver, otherwise by the president or property accounting officer, partner or agent within the State;
5.3.8. With respect to credits or investments, in the possession or under the charge of a receiver or commissioner, by such receiver or commissioner; and,
5.3.9. With respect to shares in a banking institution or national banking association, by the cashier, secretary or principal accounting officer of such banking institution or national banking association.
5.4. All real property, even if exempt, shall be entered upon the assessor's books, together with the true and actual value thereof, but no taxes shall be levied upon such exempt real property or extended upon the assessor's books. Failure to enter real property on the land books may result in forfeiture of such property. W. Va. Const. Art. XIII, '6.
5.5. The assessor shall complete his assessment and make up his official copy of the land and property books in time to submit the same to the Board of Equalization and Review not later than February 1 of the assessment year.
5.6. Any issue relating to the description or value of real or personal property shall be determined by the county commission sitting as a Board of Equalization and Review. W. Va. Code '11-3-24.
5.7. Any time after property has been returned for taxation and up to and including the time the property books are before the county commission for equalization and review, and if a taxpayer disagrees with the classification of property assessed to him, or believes that the property is exempt or not otherwise subject to taxation, he shall file his objections, in writing, with the assessor. W. Va. Code '11-3-24a.
5.8. If the assessor sustains the taxpayer's objections, he must make the necessary corrections in the property books. W. Va. Code '11-3-24a.
5.9. If the assessor does not agree with the taxpayer's objections he must state his reasons for doing so to the taxpayer. If the taxpayer requests, the assessor must put his reasons in writing and furnish them to the taxpayer. W. Va. Code '11-3-24a.
5.10. The assessor may certify the question to the Tax Commissioner. If the taxpayer requests, the assessor must certify the question to the State Tax Commissioner. W. Va. Code '11-3-24a.
5.11. If the Tax Commissioner disagrees with the decision of the assessor as to the assessment of any property on the property books, the Tax Commissioner may appear before the county commission and contest the decision.
W. Va. Code R. § 110-3-6 Tax Commissioner's Ruling
6.1. Information provided by the assessor. The assessor must furnish the following information to the State Tax Commissioner.
6.1.1. The legal description of the property as it is listed in the land books.
6.1.2. A written statement setting forth his reasons why the taxpayer's claim was denied. The reason of the assessor must be particular, e.g., "the property is used for the sale of merchandise," not general; e.g., "the property is not used for charitable purposes."
6.1.3. A statement of all uses of the property of which he is aware. This list of uses shall include all sporadic, temporary, seasonal or part-time uses; any use which involves only a part of the property; and any use by an individual, corporation, association or entity that is not the owner of record.
6.1.4. All information furnished by the assessor must be in the form of an affidavit. W. Va. Code '11-3-24a. Any information not sworn to will be presumed to be false unless substantiated by the taxpayer.
6.2. Information provided by the taxpayer. The taxpayer must furnish the following information to the State Tax Commissioner.
6.2.1. A description of the property which is the subject to the ruling.
6.2.2. The reason why the taxpayer believes the property to be exempt from taxation or erroneously classified. This shall include the particular statutory exemption(s) enumerated in W. Va. Code '11-3-9. a statement such as "religious use" is not sufficient. The statutory exemption must be set forth with particularity, e.g., "property used exclusively for divine worship." See W. Va. Code '11-3-9.
6.2.3. A statement of all uses of the property. This statement shall include any use that is temporary, seasonal, sporadic or part-time; any use that involves only part of the property; and any use by an individual, corporation, association or entity that is not the owner of record.
6.2.3.1. When any use is not a full-time use of the property, the taxpayer must state how often the property is put to that particular use, and must state the method used to determine how that portion of the use was determined.
6.2.3.2. When part of the property is put to one use and part is put to another use, the taxpayer must state what part of the property is put to each use, and must provide the area of the property that is put to each use.
6.2.3.3. When two different individuals, corporations, associations or entities use the property, the taxpayer must state the use to which each is putting the property. The taxpayer must also state what interest each has in the property, i.e., life estate, leasehold, etc.
6.2.4. The taxpayer must provide a copy of the written statement which was filed with the assessor.
6.2.5. All information filed by the taxpayer must be in affidavit form, or incorporated by reference into the affidavit and shall have attached thereto the form provided by the Tax Commissioner, such form being completed in full by the taxpayer. W. Va. Code '11-3-24a. Any information not sworn to will be presumed to be false unless substantiated by the assessor.
6.2.6. The Tax Commissioner if he deems it pertinent, may request additional information in order to render an appropriate determination. For example, in order to determine whether a home for the elderly or handicapped qualified for exemption, the following information should be provided.
6.2.6.1. A copy of the articles of incorporation of the corporation which owns the property and, if different from the owner the same documents from the corporation which operates and manages the property, including any amendments or proposed amendments thereto.
6.2.6.2. A copy of the bylaws of said corporation(s), including any amendments or proposed amendments thereto.
6.2.6.3. A statement evidencing the nonprofit corporation's ties to the community and support from local community groups.
6.2.6.4. A statement as to whether any officer or director does or will receive any compensation from the nonprofit corporation for his or her services. If compensation is or will be received, describe the amount and the basis thereof.
6.2.6.5. A statement as to whether any officer or director has any financial interest in any contract with the nonprofit corporation, or in any firm or corporation which has a contract with the nonprofit corporation. If such exists, it must be fully described.
6.2.6.6. As statement as to when the property was placed in use, the status of the property and the number, if any, of residents as of July 1 of the year during which application for exemption was submitted. Additionally, what will be the total number or residents in the property?
6.2.6.7. Copies of balance sheets and statements of income and expense for each of the last three (3) fiscal years that the nonprofit corporation has been in existence.
6.2.6.8. Copies of balance sheets and statements of income and expense for each of the last three (3) fiscal years, for the parcel(s) or item(s) from which exemption from ad valorem property taxes is requested.
6.2.6.9. A narrative description of how construction and operation of the facility is financed, including for example: (a) whether a federal loan was obtained under 12 U.S.C. '1701; (b) the source of start-up funds; and (c) who will pay for operating deficits.
6.2.6.10. A narrative describing the facilities, including: (a) number and types of structures; (b) number of stories; (c) number of units by size (number of bedrooms); (d) special amenities or features of the units; (e) number of units with such features; (f) dining rooms; (g) health and physical therapy facilities; (h) community rooms or buildings; (i) recreational facilities; (j) workshops; and (k) any other essential service facility.
6.2.6.11. Does the project provide any services to the occupants such as health care, continuing education, welfare information, recreational, homemaker, and counseling services, referral services, and transportation? If yes, please describe each service and indicate whether or not a charge is made for the service, whether it be separately stated or included in the monthly rental charge to the occupants. Additionally, if a charge is made, how is it determined; i.e., on a profit basis, to recover cost or at less than cost, and whether the charge is based on providing the service at the lowest feasible cost to the occupants.
6.2.6.12. A narrative description of the occupancy of the facility (elderly and/or handicapped, including physically handicapped or developmentally disabled, i.e., mentally retarded, cerebral palsy, or epilepsy).
6.2.6.13. What are the criteria, if any, which an eligible tenant must meet?
6.2.6.14. Are the apartments furnished or unfurnished?
6.2.6.15. What is the monthly rental charge for the different apartments? How is it determined and how does it compare to rental charges for similar public apartments in the surrounding community?
6.2.6.16. The number of units for which Section 8 Housing Assistance Payments are made by the Federal government, and the number of units for which no such assistance is received.
6.2.6.17. Do residents separately pay for electricity, cable television, telephone or other utilities?
6.2.6.18. Will any residents be accepted without paying rent and, if so, how many and what are the distinguishing criteria?
6.2.6.19. Will residents be evicted if they are unable to pay their monthly rental or pay for services?
6.2.6.20. Is any portion of the facility leased to another for use in business? If yes, then describe the portion so leased, the annual rental and identify the lessee.
6.3. Information submission date. All information should be mailed in such a manner so as to allow the Tax Commissioner sufficient time to provide a ruling. It is recommended that all information be mailed to the Tax Commissioner by January 31 of the assessment year.
6.4. Tax Commissioner ruling issuance date. The Tax Commissioner shall issue his ruling on or before February 28 of the assessment year. W. Va. Code '11-3-24a.
W. Va. Code R. § 110-3-7 Appeal
7.1. Assessor or taxpayer appeal. The ruling of the Tax Commissioner shall be binding on both the assessor and the taxpayer unless either shall appeal the decision to the circuit court of the county in which the assessment is issued, such appeal to be filed within thirty (30) days after adjournment sine die of the county commission sitting as a Board of Equalization and Review. W. Va. Code '11-3-24a and '11-3-25.
7.2. Tax Commissioner appeal. In any case in which the Tax Commissioner has appeared before the county commission and contested the assessment of any property on the property books in any county and the county commission has upheld the decision of the assessor, the Tax Commissioner may appeal such county commission determination to the circuit court of the county in which the assessment is issued, such appeal to be filed within thirty (30) days after adjournment sine die of the county commission sitting as a board of equalization and review.
7.3. Notice to the State Tax Commissioner. Upon appeal by either the taxpayer or the assessor, the prosecuting attorney of the county who would represent the interest of the state, county and district shall be given at least ten (10) days notice prior to a hearing on the matter. The prosecuting attorney shall provide no less than five (5) days notice to the Tax Commissioner.
W. Va. Code R. § 110-3-8 Property Belonging To The United States
8.1. All real and personal property belonging to the United States of America, other than property permitted by the United States to be taxed under state law, is exempt from ad valorem property taxation.
8.2. This exemption applies to public corporations and other agencies created by the federal government for executing national objects and purposes, so long as exemption is provided in the legislation establishing the federal agency or public corporation.
8.3. This exemption does not extend to a private corporation employed by the government.
8.4. Congress may exempt private corporations from taxation which will prevent or impede services which such private corporations provide but such exemption must be specifically stated by Congress in legislation. Absent such legislation, no exemption may be claimed.
8.5. Federal lands sold to private persons with title retained by the government to secure future payments of the purchase money remain exempt so long as the government's lien remains unsatisfied.
8.6. Property owned by private persons but leased to or used by the federal government is not exempt to the owner.
8.7. The leasehold interest in property belonging to the United States and which is owned by a private or otherwise nonpublic entity is not exempt from ad valorem property taxation.
W. Va. Code R. § 110-3-9 Property Belonging Exclusively To The State
9.1. All real and personal property belonging exclusively to the State of West Virginia is exempt from ad valorem property taxation.
9.2. This exemption does not extend to private persons employed by the State.
W. Va. Code R. § 110-3-10 Property Belonging Exclusively To Any County, District, City, Village Or Town In This State And Used For Public Purposes
10.1. All real and personal property belonging exclusively to any county, district, city, village or town in the State of West Virginia and used for public purposes is exempt from ad valorem property taxation.
10.2. Property belonging exclusively to any county, district, city, village or town in this State which is rented or leased to a private or nonpublic entity is not being used for public purposes and therefore is subject to ad valorem property taxation.
10.3. The exemptions set forth in Section 13-2C-15 of the West Virginia Code relating to bonds issued under the Industrial Development and Commercial Development Bond Act shall apply as set forth in Section 35.16 of these regulations.
W. Va. Code R. § 110-3-11 Property Located In This State Belonging To Any City, Town, Village, County Or Other Political Subdivision Of Another State, And Used For Public Purposes
11.1. Property located in the State of West Virginia belonging to any city, town, village, county or other political subdivision of another State, and used for public purposes is exempt from ad valorem property taxation.
11.2. Property belonging exclusively to any county, district, city, village or town of another state which is rented or leased to a private or nonpublic entity is not being used for public purposes and therefore, is subject to ad valorem property taxation.
W. Va. Code R. § 110-3-12 Places Of Divine Worship
12.1. Section '11-3-9 of the West Virginia Code exempts from ad valorem property tax only that property which is used exclusively for divine worship. Property will not be exempt from ad valorem property tax as "property used exclusively for divine worship" if it is used for any other purpose.
12.2. The term "divine worship" as used in these regulations, shall include the following:
12.2.1. Religious services, e.g., regular periodical worship, weddings, funerals.
12.2.2. Educational activities in furtherance of religious knowledge, e.g., Sunday school or Hebrew school classes.
12.2.3. Meetings in furtherance of the religious activities of the religion, sect, denomination or society, e.g., a meeting to decide on a new minister or choir practice.
12.2.4. Any other activity, the sole purpose of which is the furtherance of the religious activities of the religion, sect, denomination or society.
12.3. The term "divine worship," as used in these regulations, shall not include the following:
12.3.1. Activities designed to raise funds, either for the religion, sect, denomination or society, or for an organization associated therewith, e.g., a ladies club rummage sale or a teen club car wash.
12.3.2. Meetings which are not for the sole purpose of furthering the religious activities of the religion, sect, denomination or society, e.g., an organizational meeting of a church league basketball team.
12.3.3. Educational activities not solely in furtherance of religious activities, e.g., church organized driver's education classes.
12.3.4. All other activities, the purposes of which are not solely the furtherance of religious activities.
12.4. Use of property for religious purposes may be, and typically is, a charitable use.
12.5. Property not used exclusively for divine worship will not qualify for exemption under this Section. However, such property may still be exempt if the other activities are such as to qualify under Section 19 of these regulations.
12.5.1. Where a portion of the property is used exclusively for divine worship and the remainder of the property is used for other purposes which are primary and immediate, and are educational, literary, scientific or charitable in nature, the property will be exempt under W. Va. Code '1-3-9. Example: A church which has the sanctuary on the first floor and a multi-use basement. The fact that the church holds weekly bingo games under the authority of W. Va. Code '47-20-1 et seq. will not destroy the exemption because: (1) only charitable bingo is legally authorized; (2) only charitable or public service organizations may hold a bingo license; and (3) the net proceeds from charitable bingo may only be used for charitable or public service purposes.
12.5.2. Where a portion of the property is used for divine worship and the remainder is not being used primarily and immediately for purposes which may be classified as exempt purposes under W. Va. Code '11-3-8, the property is fully and completely taxable like any other taxable property. Example: A church has its sanctuary on the first floor of the structure and a basement immediately below the sanctuary. As a result of the location and construction of the structure, a portion of the basement is used as a neighborhood coffee shop where food is sold. Due to the fact that the sale of food on a continuing basis and in an on-going business environment is not an exempt purpose, the entire structure is subject to property taxation.
12.6. The trustees of a church, parish or congregation may only own four (4) acres of land in a municipality and sixty (60) acres in a rural area. See W. Va. Code '35-1-8. Only that portion of the property used exclusively for purposes of divine worship shall be exempt under this Section. This exemption is applicable to the structure used for divine worship with any parking area for vehicles. This may not necessarily include the entire four (4) or sixty (60) acres, and nothing herein shall be construed to sanction split-listings. If a portion of a tract of church property is not used for divine worship, it is necessary for the trustees of the church to apply to the county commission of the county wherein the property is situate for the property to be divided in order that the property not used for the exempt purposes will be taxed according to its use. See W. Va. Code '11-4-18. If a church holds title to property in excess of that authorized by W. Va. Code '35-1-8, such title is voidable and only the State may attack such excess holdings.
12.7. Property, a portion of which is used exclusively for divine worship and a portion of which is used for other purposes, is not in total used exclusively for divine worship. In order for that portion used exclusively for divine worship to be exempt from ad valorem property taxation, the owner thereof may by application request the county commission to divide such portion from the remainder of the property: Provided, That the division requested is one which the owner would make for the separate conveyance of portions of the property and in no case may a single structure be divided. See W. Va. Code '11-4-18. The use of the remaining property will determine its classification.
12.8. Property which while owned by a church is used for non-religious purposes during the week is not exempt. For example, if a church leases or rents for private use parking spots on the church's parking lot during the week, the church would lose the exemption which otherwise would be available if the parking lot was only used by worshippers attending church services.
12.9. Even though W. Va. Code '35-1-8 restricts the quantity of property which a church may hold, title to property in excess of the stated amounts is not void but is only voidable until the time the State may attach and take the title.
W. Va. Code R. § 110-3-13 Parsonages, Household Goods And Furniture
13.1. Parsonages, and the household goods and furniture pertaining thereto, are exempt from ad valorem property taxation.
13.2. In order to qualify for exemption from ad valorem property tax, the parsonage must be owned by the trustees of the church, and must be used as a place of residence by the pastor, priest, bishop, minister, clergyman or other similar leader of the said church.
13.3. In order to qualify for exemption from ad valorem property tax the parsonage must be available to a new pastor upon the termination of the services of the old pastor. Thus, the benefit is to the church, not the individual pastor.
13.4. The household goods must be owned by the church and not by the pastor in order to be exempt under this Section. However, household goods owned by the resident of the parsonage would otherwise be exempt under W. Va. Const. Art. X, '1a and W. Va. Code '11-3-9.
13.5. A church, parish or congregation may only own four (4) acres of land in a municipality and sixty (60) acres in a rural area. See W. Va. Code '35-1-8. Only that portion of property used as a parsonage is exempt under this section from taxation. This will not necessarily include the entire four (4) or sixty (60) acres, and nothing herein shall be construed to sanction split-listings.
13.6. Unless there is a position of Assistant Pastor, or a position similarly titled, and the position is regularly occupied by a qualified person, a church shall be allowed only one (1) exemption for a parsonage.
W. Va. Code R. § 110-3-14 Mortgages, Bonds, And Other Evidence Of Indebtedness In The Hands Of Bona Fide Owners And Holders Sold By Churches And Religious Societies For The Purpose Of Securing Money To Be Used In The Erection Of Church Buildings Used Exclusively For Divine Worship
14.1. Mortgages, bonds, and other evidences of indebtedness in the hands of bona fide owners and holders sold by churches and religious societies for the purpose of securing money to be used in the erection of church buildings used exclusively for divine worship, or for the purpose of paying indebtedness thereon, are exempt.
14.2. Upon implementation of the First Statewide Reappraisal of property which is required pursuant to W. Va. Code '11-1A-1 et seq., no intangible personal property shall be subject to ad valorem property taxes unless such taxation is subsequently provided for by an act of the Legislature. Therefore, the question as to whether the intangible personal property addressed under this section is exempt from ad valorem property tax will become moot at that time.
W. Va. Code R. § 110-3-15 Cemeteries
15.1. The Constitution specifically allows the exemption of cemeteries. W. Va. Constitution, Art. X, '1.
15.2. The Legislature has specifically exempted cemeteries from ad valorem property tax. W. Va. Code '11-3-9.
15.3. Land which has been acquired of future use as gravesites is exempt from ad valorem property tax. The exemption is predicated on good faith and the quantity of property must not be disproportionate to the size of the community to be serviced. Mountain View Cemetery v. Massey, 109 W. Va. 473 155 S.E. 547 (1930).
15.4. Property belonging to a cemetery is not a cemetery. Therefore, property belonging to a cemetery is not exempt for ad valorem property tax purposes. In Re Hillcrest Memorial Gardens, Inc., 146 W. Va. 337, 119 S.E.2d 753 (1961). Property belonging to a cemetery shall include, but not be limited to the following:
15.4.1. Office furniture and equipment used for business purposes.
15.4.2. Notes or accounts receivable representing proceeds of the sale of burial lots in such cemetery.
15.4.3. Real estate held by the cemetery which is not being used, or may not reasonably be used, for actual burial plots, except real estate occupied by property specified in paragraph 15.5.
15.4.4. Office buildings, storage buildings, chapels and other buildings, parking lots, and roads owned by the cemetery.
15.5. Property which can be classified as "cemetery" is property wherein a deceased person's remains are permanently buried or otherwise permanently interred, tombstones, and those access roads which directly service such property. Such properties are exempt.
15.6. Family owned cemeteries are exempt from ad valorem property tax. However, when a family cemetery is part of a larger parcel of property, the parcel shall not be exempt from tax unless the primary and immediate use of the parcel, as a whole, is as a cemetery.
W. Va. Code R. § 110-3-16 Property Belonging To, Or Held In Trust For, Colleges, Seminaries, Academies And Free Schools, If Used For Educational, Literary Or Scientific Purposes, Including Books, Apparatus, Annuities And Furniture
16.1. Property used for educational, literary, scientific, religious or charitable purposes under this section must be property in actual direct use, and such use must be primary and immediate and not secondary or remote.
16.1.1. For example: If a college were to purchase a tract and initiate the construction of a building which is to be used for educational, literary or scientific purposes, the property would not be exempt from taxation until the exempt use actually occurred. If, however, those purposes were not to be the end use of the building, the property would not be exempt.
16.2. If a college owning a tract of property with a building on it were to lease the property to a commercial business, reserving a basement room for use as a classroom, the property would not be exempt from taxation. The primary and immediate use of the property would be commercial leasing. The educational use would be secondary and remote.
16.3. If a college, seminary, academy or free school were to lease a tract of property to a commercial user and apply the rents thereby derived for educational purposes, the property would not be exempt from taxation. The primary and immediate use of the property would be commercial leasing. The educational use would be secondary and remote because it would be use of income rather than the property itself.
16.3.1. The term "education" as used in these regulations does not include courses of study not reasonably calculated to develop knowledge or skills resulting in actual gainful employment of students upon completion of training. However, this Subsection should be read in conjunction with Subsection 2.20.
16.3.2. For example: Academies providing traditional formal education or vocational training in bookkeeping, automotive repair, electrical appliance repair, meat cutting, or electrical wiring are "for the purpose of education" within the meaning of this section because such training is reasonably calculated to develop knowledge or skills resulting in actual gainful employment of students upon completion of training.
16.4. A college, seminary, academy or free school offering a program reasonably calculated to develop knowledge or skills resulting in actual gainful employment of students upon completion of training may offer incidental or ancillary courses in subjects not directly related to such programs so long as the predominant course of study is educational as defined in these regulations.
16.4.1. For example: An academy offering a traditional formal educational program of literature, mathematics, art, physical education, composition, languages and similar subjects will not lose its exempt status if it offers ancillary courses in frisbee throwing, hang gliding, horsemanship, or similar nontraditional or nonvocational courses so long as the traditional course of study remains predominant.
16.5. All real property exemptions under this Section apply to individual, discrete tracts. There shall be no split-listings or allocations of use on a pro rata or other basis exempting part of a tract and making the remainder of the tract subject to taxation.
16.5.1. For example: If a college using a building for educational purposes should lease twenty-five percent (25%) of the floor space of the building to a commercial business, no allocation may be made whereby seventy-five percent (75%) of the building is treated as exempt and twenty-five percent (25%) is subject to taxation. A determination must be made as to whether educational use of the property is primary and immediate. Since seventy-five percent (75%) of the property is used for educational purposes, the chief, main or principal use of the property is educational. The property, therefore, in its entirety, would be exempt. If, however, fifty percent (50%) or more of the floor space available for commercial and exempt use is not used for educational, literary or scientific purposes, the property would not be exempt.
16.6. Property used by a commercial (for profit or private gain) college, seminary, academy or free school is exempt if used for educational, literary or scientific purposes.
W. Va. Code R. § 110-3-17 Property Belonging To, Or Held In Trust For Colleges Or Universities Located In West Virginia, Or Any Public Or Private Nonprofit Foundation Or Corporation Which Receives Contributions Exclusively For Such College Or University, If The Property Or Dividends, Interest, Rents Or Royalties Derived Therefrom Are Used Or Devoted To Educational Purposes Of Such College Or University
17.1. In order for this exemption to apply the property in question must:
17.1.1. Belong to or be held in trust for a college or university which is located in West Virginia; or
17.1.2. Belong to or be held in trust for any public or private nonprofit foundation or corporation which receives contributions exclusively for a college or university which is located in West Virginia but only if the property or the dividends, interest, rents or royalties which are derived from the use of such property is used or devoted to the educational purposes of the college or university.
17.2. Property belonging to a college or university must belong exclusively to that institution; otherwise, the entire property value may not be exempt. Likewise, property held in trust for a college or university must be held in trust exclusively for such institution. No proceeds of the trust may inure to the benefit of other person, public or private.
17.3. Property belonging to or held in trust for a public or private nonprofit foundation or a public or private nonprofit corporation must belong exclusively to or be held in trust exclusively for such entity; otherwise, the entire property value may not be exempt.
17.3.1. Partial ownership or beneficiary status shared with any other person will destroy the exemption insofar as it concerns the value of the property not owned or held intrust for such public or private nonprofit foundation or public or private nonprofit corporation.
17.3.2. The public or private foundation or the public or private corporation must be organized and operated on a nonprofit basis in accordance with W. Va. Code '31-1-1 et seq.
17.3.3. The public or private nonprofit foundation or the public or private nonprofit corporation must be a resident of West Virginia.
17.4. Only the value of the property, as determined by the extent to which the property, or the dividends, interest, rents or royalties derived therefrom is used for the educational purposes of the colleges or university, may be exempt from tax.
17.4.1. Example. Property may belong to a university but be leased to a mining company for coal mining purposes. The interest of the mining company is subject to taxation.
17.4.2. Example. Property may belong to a private nonprofit corporation which receives contributions exclusively for a college or university. West Virginia Code '11-3-9 envisions the property will be used in such a manner that the proceeds derived from such use will be devoted to or used for the educational purposes of the college or university. In order to comply with the constitutional requirement that the property be used for educational purposes in order to be exempt, it is necessary to identify and distinguish the purposes in order to be exempt, it is necessary to identify and distinguish the value of the exempt use and the total value of all uses to which the property is subject, with the result that the value of all nonexempt uses will be subject to tax.
17.4.2.1. It is irrelevant to the question of exempting the entire value of the property that the private nonprofit corporation or foundation receives nominal or minimal contributions exclusively for a college or university located in West Virginia, or that such college or university receives such contributions directly from another source. The property value exempt from taxation shall not include the value of the nonexempt uses.
17.4.2.2. It is irrelevant that the private nonprofit corporation or foundation, or the college or university located in West Virginia, is paid nominal or minimal dividends, interest, rents or royalties from the use of the property. Only that portion of the value of the property as represented by the amount the dividends, interest, rents and royalties received and used or devoted to the educational purposes of the college or university bears to the total value of the property may be exempt from ad valorem property taxation.
W. Va. Code R. § 110-3-18 Public And Family Libraries
18.1. A parcel of realty and the buildings thereon are exempt from ad valorem property taxation if the primary and immediate use of the parcel, as a whole, is as a public or family library.
18.2. All books, manuscripts, musical scores, or other literary, scientific or artistic writings or materials and all desks, chairs, tables, cabinets, shelves, bookcases, audio-visual machines, counters, cases, racks and other personal property reasonably necessary to the maintenance or operation of a public or family library are exempt from ad valorem property taxation.
18.3. The exemption applies to a family library only if the materials housed in the physical structure are available for use by the general public.
18.4. A library will not lose its tax exempt status because it offers a book rental service for a nominal fee, makes a charge for overdue books, charges a nominal fee for copies of materials, etc. It is inherent in the tax exempt status that the library not be organized and operated for profit.
W. Va. Code R. § 110-3-19 Property Used For Charitable Purposes, And Not Held Or Leased Out For Profit
19.1. Charities must be operated on a not-for-profit basis, must directly benefit society, must be for the benefit of an indefinite number of people, and must be exempt from federal income taxes under 26 U.S.C. '501(c)(3) or 501(c)(4). Moreover, in order for the property to be exempt, the primary and immediate use of the property must be for one or more exempt purposes.
19.2. The beneficiaries of a charity may be limited to a class of beneficiaries bearing a rational relationship to the purpose of the charity.
19.2.1. For example: A charity for the purpose of assisting persons suffering with cancer may limit the class of beneficiaries to cancer victims and their families. Despite the limitation of the class, beneficiaries constitute an indefinite class, and society is generally benefited by the charity.
19.2.2. Charities for combating heart disease, tuberculosis, or multiple sclerosis may likewise limit the classes of beneficiaries receiving their bounty.
19.3. A purported charity may not, however, limit the class of beneficiaries in such a way as to violate the definition of a charity.
19.3.1. For example: A purported charity may not limit the class of beneficiaries to members of a particular family. Such a classification would not constitute an indefinite number of people and society would not be generally benefited by such an organization.
19.3.2. Property of a non-profit community dramatic corporation or children's theatre is exempt as a charity for the promotion of educational welfare.
19.4. Payment of reasonable salaries or wages to administrative staff and employees of a charitable organization will not constitute disqualifying private gain if such salaries or wages closely approximate typical pay rates for comparable positions and are not for the purpose of siphoning-off earnings of the organization.
19.5. Realization of a surplus, or of positive net earnings, may not constitute a disqualifying private gain. So long as any such surplus or earnings are used in furtherance of the charitable activities of the organization, no disqualifying gain can be said to inure to the benefit of any private person.
W. Va. Code R. § 110-3-20 Property Used For Area Economic Development Purposes By Nonprofit Corporations When Such Property Is Not Leased For Profit
20.1. Property used for area economic development purposes by nonprofit corporations is property used by nonprofit corporations meeting the definition of 42 U.S.C. '9802 of a community development corporation, or property used by nonprofit corporations having as their purpose the development of special programs by which the revenues of urban or rural low income areas may, through self-help and mobilization of the community at large, improve the quality of the economic and social participation in community life in such a way as to contribute to the elimination of poverty and the establishment of permanent, economic and social benefits.
20.2. In order for property used for area economic development purposes by nonprofit corporations to be exempt, it is essential that the use of the property be a use which is exempt under W. Va. Const. Art. X, '1; thus, it must be "property used for educational, literary, scientific, religious or charitable purposes." Therefore, while property may be owned by a public organization and leased to a private party, the leasehold will be subject to tax unless it can be shown that the property is being used for an exempt purpose. Such property may be exempt if used for training, public service and employment programs or related services for unemployed or low-income persons. The foregoing are examples. Because the exemption question is dependent upon whether the leasehold interest is used primarily as a public service or as a private enterprise for profit, each case will be determined on an individual basis, dependent upon the facts thereof.
20.3. Such property, to be exempt from ad valorem property taxation, must conform to one or more of the exemptions set forth in Article X, '1 of the Constitution of West Virginia. For example: Property used for area economic development purposes will typically conform to the criteria defining a charitable use. Such property may, however, sometimes come under the public property exemption or the exemption for educational, literary or scientific use.
20.4. Property used for area economic development purposes by nonprofit corporations and not leased out for profit is exempt from ad valorem property taxation if such property is used for charitable purposes in accordance with Section 9 of these regulations, is an educational, literary or scientific institution in accordance with these regulations, but nonprofit in nature, or in state, county or municipal property or property of the United States or otherwise exempt public property in accordance with these regulations.
20.5. Upon implementation of the statewide reappraisal, this exemption, to the extent it applies to intangible personal property, will be moot because W. Va. Const. Art. X, '1b removes intangible personal property from ad valorem property taxation unless the Legislature thereafter subjects such property to such taxation.
W. Va. Code R. § 110-3-21 Real Estate Not Exceeding One Half Acre In Extent, And The Buildings Thereon, And Used Exclusively By Any College Or University Society As A Literary Hall, Or As A Dormitory Or Club Room If Not Leased Or Otherwise Used With A View To Profit
21.1. All real estate not exceeding one-half acre in extent and the buildings thereon, used exclusively by any college or university society as a literary hall, or as a dormitory or club room and not leased or otherwise used with a view to profit is presumed to be exempt from ad valorem property taxation. If the tract exceeds one-half acre in extent, the owner thereof must demonstrate the use is exempt.
21.2. In order for the property to be exempt, the college or university society must be using the property in the required manner; that is to say, that any revenues generated through the use of the property shall not exceed the cost of maintaining the property and the reasonable operating costs of the society, if the revenues generated through the use of the property are specifically designated for such purposes.
21.3. In order for the property to be exempt, the college or university with which the society is associated must be accredited by the accrediting organization recognized by the State.
21.4. The college or university society may not be organized on a for-profit basis.
21.5. If the college or university society is itself leasing the property in question from another, the lessor may not realize a profit from the lease. If the property is being used for the above stated exempt purpose by the lessee, the leasehold will be exempt from ad valorem property taxation. If the revenue received by the lessor exceeds the actual cost of maintaining the property, exclusive of any interest on any mortgages, notes of indebtedness or similar financial item entered into for the purpose of purchasing the property, the fee interest will be subject to ad valorem property taxation.
21.6. If the college or university society leases or subleases rooms to others, it may not realize a profit from the leases; the question of profit is to be determined over the entire period of the lease.
W. Va. Code R. § 110-3-22 Property Belonging To Benevolent Associations, Not Conducted For Private Profit
22.1. All property which belongs to a fraternal, benevolent, or relief society, or association and which is not used for private profit is exempt from ad valorem property taxes. Therefore, a lodge or meeting hall which is actually used a greater percentage of the time as a place for socializing, dancing, etc., is not being used for charitable purposes.
22.2. Exemptions from ad valorem property taxation in favor of clubhouses, halls, lodges, and similar properties of fraternal, benevolent, or relief societies, or associations shall be extended only where such property is primarily and immediately used for charitable purposes.
22.3. Use of the property of a fraternal, benevolent, or relief society, or association is not exempt if the primary use of the property is for social purposes for the enjoyment of its members or others, rather than for charitable purposes.
22.4. Licensed fraternal benefit societies authorized under Section 33-23-1 et seq. of the W. Va. Code are addressed in Section 35.39 of these regulations.
W. Va. Code R. § 110-3-23 Property Belonging To Any Public Institution For The Education Of The Deaf, Dumb, Or Blind
23.1. Property belonging to any public institution for the education of the deaf, dumb, or blind is exempt from ad valorem property taxation if such property is primarily and immediately used for charitable purposes in accordance with Section 19 of these regulations, or for educational purposes in accordance with Section 16 of these regulations.
W. Va. Code R. § 110-3-24 Charitable Hospitals
24.1. In general.
24.1.1. These regulations as they relate to hospitals shall become effective on July 1, 1990: Provided, That subsection 24.9.4.5 shall become effective six (6) months after passage of the bill authorizing this rule, 110 C.S.R. 3 (1988). Prior to the July 1, 1990 effective date, any exemption currently in existence shall continue for so long as the existing charitable activities of such hospitals continue.
24.1.2. Section 11-3-9 of the West Virginia Code provides:
All property, real and personal, described in this section, and to the extent herein limited, shall be exempt from taxation, that is to say: . . . property belong to any . . .hospital not held or leased out for profit . . .
24.1.3. Except as otherwise provided in these regulations, health care organizations and hospitals will not qualify for exemption from property tax if they are operated, in any way, for the private gain of physicians, officers, or members of the board of a hospital or other private individuals. For purposes of this regulation, private gain is any significant economic benefit accruing to any individual or entity other than the charitable hospital: Provided, That economic benefit does not include payments for the receipt of reasonable goods and services which are furnished to the hospital under valid arms-length contracts, as that phrase is generally defined.
24.1.4. Payment by a hospital of salaries to administrative and medical staff, or the realization of a surplus or positive net earnings does not necessarily constitute such disqualifying private gain. Payment of salaries commensurate with services rendered is simply a cost of operating a charitable organization. As long as any surplus of the organization is used to continue its charitable activities, no disqualifying gain can be said to inure to the benefit of any private individual. For purposes of these regulations, surplus is the excess of the net earnings over the expenditures incurred producing such net earnings.
24.2. Key determinants of charitable use. A hospital to be eligible for ad valorem property tax exemption may attain such exemption by using property owned or leased in a charitable manner. For purposes of this Section 24, charitable use is defined as any one of the following or combination of elements listed below:
24.2.1. The provision of health services on an inpatient or outpatient basis to individuals who cannot afford to pay for such services in a volume and frequency determined by the hospital board of trustees, as articulated in the charity care plan of the hospital.
24.2.2. The provision of activities which promote the health of the community served by the hospital and/or decrease the burdens of state, county and municipal governments, as provided in Section 24.10 of these regulations.
24.3. Restriction of beneficiaries.
24.3.1. Hospital administration policies that discriminate on the basis of race, color, sex, or national origin will disqualify a hospital from tax exempt status.
24.3.2. The effect of other kinds of beneficiary restrictions on a hospital's tax exempt status depends on the particular restriction. Certain types of restrictions on patient admissions are permissible because of the specialized nature of the medical care provided by some hospitals. For example, children's hospital provide care exclusively for children, and the Shriners' Hospital specializes in the care of burn victims. Such restrictions rarely threaten a hospital's tax exempt status, if they are applied in a nondiscriminatory manner, because their purpose is to provide better patient care.
24.3.3. Restrictions that limit admissions to members of a society, religious order, or association that founded the hospital or to paying patients are not acceptable. The West Virginia statute exempts only institutions that are "pure public charity" or those that fulfill "charitable purposes."
24.4. Ownership of property.
24.4.1. Section 11-3-9 of the West Virginia Code requires that property belonging to the hospital not be held or leased out for profit.
24.4.2. In West Virginia, a lease of real estate is a chattel real that is taxed as personal property. If a lease has a separately determinable market value, it is proper to assess the value of the lease to the lessee and the value of the remainder to the lessor.
24.4.3. A leasehold interest held by a charity as the lessee would constitute personal property exempt from ad valorem taxation as to that charity if the leasehold interest were separately assessable.
24.5. Office space for staff physicians.
24.5.1. For purposes of Section 24, "staff physicians" are physicians who may be employed by the hospital on more than a half-time basis, radiologists, pathologist, anesthesiologists and similar positions, or, if the hospital is a teaching hospital, are members of the teaching faculty or administration; i.e., dean of the faculty, department head, etc. Physicians who do not qualify to be classified as a staff physician are classified as "affiliated physicians."
24.5.2. Hospitals may provide space for use by physicians in connection with hospital related responsibilities such as medical staff and committee meetings, medical record keeping and charting, locker room for changing clothes, or similar activities.
24.5.3. A hospital may provide free office space to members of its staff an an enticement to qualified medical personnel. The hospital may not provide free office space to some of its staff members and charge others. Furthermore, if office space is available, a hospital may not deprive some staff physicians of office space when others receive free office space. Such offices may not be so used as to cause the primary and immediate use of the hospital property to be other than charitable. For instance, staff physicians holding office space on an exempt hospital tract may examine and treat paying, for profit patients in such offices, but such use of the property may not be so extensive as to make the primary and immediate use of the tract as a whole a profit making operation rather than a charitable one in accordance with Section 19 of these regulations.
24.5.4. Hospitals frequently make part of their property available for staff physicians's offices. Such office space may be rented to a physician at nominal commercial rates, or provided free, or it may be considered compensation for administrative duties such a physician performs in the hospital.
24.5.5. The private use of hospital office space by affiliated physicians is not viewed favorably. Such offices are primarily for the convenience or profit of the physician. The exclusive use of a hospital office for a physician's own private gain is inconsistent with the charitable use requirement of the Constitution and the exemption statute. Rental of office space to a physician at a market rate is a strong indication that the property is being used for the sole benefit of the physician.
24.6. Recreational facilities.
24.6.1. Use of charitable property for tennis courts, playgrounds, parks and similar facilities may be considered reasonably necessary or incidental to the primary functions of a hospital provided certain conditions are met. Recreation may be recognized for its therapeutic value to patients, the main beneficiary of the hospital's services. Additionally, use of recreational facilities by any person or group of people who has or have been identified as high risk for any disease, condition or malady or recovering from such disease, condition or malady, (e.g., pre or post heart attack, stroke recovery, or weight reduction) will not jeopardize the exempt status of hospitals provided such programs constitute preventative or rehabilitative health care. In such instances, the hospital may charge for the use of such facilities by inpatients and outpatients without danger to its exempt status.
24.6.2. Mere incidental use of such recreational facilities by hospital personnel will not destroy the charitable nature of such instrumentalities.
24.6.3. The primary and repeated use of facilities for mere recreational reasons by the general public, charged for such utilization, is not consistent with charitable use.
24.7. Categories of hospitals.
24.7.1. General. There are three generally recognized categories of hospitals: for profit, governmental, and nonprofit or not-for-profit.
24.7.2. Taxability.
24.7.2.1. For-profit hospital. A hospital held or operated for profit is not exempt from ad valorem property taxes.
24.7.2.2. Government owned hospital.
(a) A hospital owned and operated by the United States (or an agency or instrumentality thereof) is exempt from ad valorem property taxes on its real and personal property unless federal law permits it to be taxed in accordance with Section 8 of those regulations.
(b) A hospital owned and operated by the State of West Virginia (or one of its agencies or institutions) is exempt from ad valorem property taxes on its real and personal property in accordance with Section 9 of these regulations.
(c) A hospital owned and operated by any county, municipality or other political subdivision of this State is exempt from ad valorem property taxes if the hospital is used for public purposes in accordance with Section 10 of these regulations.
(d) A hospital owned by any county, municipality or other political subdivision of the State but operated as a separate corporation pursuant to a lease may be taxable depending upon the nature of the lessor and whether the property is being used for charitable purposes.
24.7.2.3. Nonprofit or not-for-profit hospital. A hospital owned and operated, or leased and operated, by a nonprofit or not-for-profit corporation may be exempt from ad valorem property taxation if the primary and immediate use of the property is for charitable purposes. If in the situation where the hospital is leased to such a corporation and the lease is not a below-market lease, the leaseholder would not be taxable but the fee interest would be taxable to the lessor.
24.8. Hospitals.
24.8.1. The term "hospital," does not include institutions regularly licensed by the West Virginia Department of Human Services (formerly Department of Welfare), such as child caring institutions, day nurseries, child-care centers and foster boarding homes. However, institutions having dual functions, one of which is clearly subject to hospital licensure by the West Virginia Department of Health, are "hospitals" within the meaning of these regulations, if such institutions are so licensed.
24.8.2. The term "hospital" as used in these regulations does not include homes or institutions regularly licensed by the West Virginia Nursing Home Licensing Board.
24.8.3. The term "hospital" as used in these regulations, does not include first aid stations and emergency care facilities or other facilities which do not provide reception and care of persons for a continuous period longer than twenty-four (24) hours, for the purpose of providing room, board, nursing service and hospital facilities for use in diagnosis and treatment of medical conditions or informities: Provided, That such a facility may be included under the term "hospital" if it is actually owned or leased by a hospital, is operated on a charitable basis, and is primarily used for patient care activities such as: Outpatient surgery, physical therapy and rehabilitation, drug and alcohol abuse counseling, and mental health counseling.
24.8.4. Under the Constitution of this State, property used for charitable purposes may be exempted from taxation. Property used for a hospital cannot be exempted from taxation under the Constitution of this State unless it is used or charitable purposes. West Virginia Constitution Article X, '1. Reynolds Memorial Hospital et al. v. County Court of Marshall County 78 W. Va. 685, 90 S.E. 238 (1916); State ex rel. Cook v. Rose, 299 S.E.2d 3 (W.Va. 1982).
24.8.5. Hospital property,in order to be exempt from ad valorem property taxation, must not be held or leased out for profit. W. Va. Code '11-3-9.
24.8.6. Under West Virginia Constitution Article X, '1, the exemption of property from taxation depends on its use. To warrant such exemption, the use must be primary and immediate, not secondary or remote. State ex rel. Farr v. Martin, 105 W. Va. 600, 143 S.E. 356 (1928).
24.8.7. The fact that a hospital is incorporated as a nonstock, nonprofit hospital does not make it charitable, even though some operating funds are derived from private, voluntary contributions; only the nature of its activities can determine if it is operated in a charitable manner.
24.8.8. Any Internal Revenue Service determination as to exemption of a hospital from federal taxation under Section 501(c)(3) or Section 501(c)(4) of the Internal Revenue Code (26 U.S.C. ''501(c)(3) or 501(c)(4)) shall not be determinative of the issue of whether property is exempt for ad valorem property tax purposes.
24.8.9. If the hospital ceases to be used for charitable purposes, it will lose its tax exempt status.
24.9. Admissions and ability to pay.
24.9.1. The charitable purpose of a hospital shall be determined by an examination of several factors. The primary factor is the provision of charity care consistent with the standard contained in Section 24.2 and the definitions contained in Section 24.9.7. Promotion of health, relief of burdens of government, and volunteer and community services, as described in Section 24.10 of these regulations, shall be considered in determining charitable use of hospital property.
24.9.2. The provision of charity care by a charitable hospital on a below cost or free basis to those who are financially unable to pay for those services is limited by the economic health of the institution. It is essential that such hospitals continue to provide quality health care and entirely unrealistic to expect that federal or state governments fill the void which would exist in their absence. In order to so continue, these hospitals must be able to maintain and promote their own financial and economic health. The quantity of free and below cost health care which a hospital can provide, therefore, is necessarily limited to the amount which can reasonably be provided consistent with the maintenance of the economic well-being and fiscal soundness of the hospital.
24.9.3. Each hospital which intends to establish charitable use of its facilities by use of this section shall develop, by July 1, 1990, a charity care plan which must be approved by the hospital board of trustees. Such plan, once approved, must be reviewed by each board of trustees not less than every two (2) years to ascertain its effectiveness and respond to changing financial conditions of the institution and needs of the community.
24.9.4. The charity care plan must reflect the following minimum criteria:
24.9.4.1. The hospital may not arbitrarily restrict the provision of health services to certain individuals or groups.
24.9.4.2. Restriction may be based upon any rationale which reflects a definite benefit to the general public interest, e.g., restricting admission to a general class of indefinite number such as children, burn victims, or heart patients.
24.9.4.3. No hospital may insist that patients provide assurance that all of their bills will be paid as a condition for obtaining emergency medical care or medical care for the treatment of a life threatening condition.
24.9.4.4. A hospital must develop reasonable rules and regulations which may require that those patients who are financially able to do so pay the charges incurred for the care provided. However, emergency medical care may not be withheld until a patient or person seeking such care, demonstrates that charges incurred will be paid. Deliberate failure to provide such emergency medical care due to lack of assured payment may be sufficient cause to deny tax exempt status to the hospital.
24.9.4.5. Governmental or nonprofit hospitals must establish procedures and maintain records which demonstrate compliance with the provisions of this Section 24.9.4.5. Such hospitals shall plainly post in the emergency and admitting areas a notice containing a statement of the existence of their obligation to provide free and below cost care and of the criteria and mechanism for receiving such care. Such hospitals shall provide written notification of the existence, criteria and mechanism for receiving such care, at a minimum, to each person admitted or treated who does not demonstrate payment coverage under governmental programs or private insurance. Such hospitals shall create and maintain records demonstrating that such required criteria and mechanisms are established, that such required policies have been posted and distributed, and which record any and all requests for free or below cost care, the disposition of such request, the rationale for such disposition and the dollar amount of charity care provided: Provided, That in all instances, patient confidentiality shall be protected and maintained. Aggregate data reflecting the number of requests for charity care, the dispositions of such requests and the dollar amount of charity care provided shall be made available to the general public annually. To the extent the specific required information is on file with the West Virginia Health Care Cost Review Authority, it is unnecessary for hospitals to maintain separate records for purposes of the Section 24.9.4.5.
24.9.5. A hospital may also develop reasonable rules and regulations which allow persons (including infants who are referred by a court to a hospital) to be given a priority for receiving hospital services over those hospital services to be provided to indigent or charity patients, based upon criteria articulated in subsection 24.9.8 of these regulations.
24.9.6. A hospital in formulating a charity care plan may take into consideration the overall financial condition of the institution, including but not limited to:
24.9.6.1. Days outstanding of accounts receivable.
24.9.6.2. Cash flow problems encountered by the hospital.
24.9.6.3. Amount of profit or loss on operations in preceding fiscal years.
24.9.6.4. The amount of charity care and bad debts previously generated from operations.
24.9.6.5. Any other financial restraint or limitation, including legislatively mandated assessments, placed on the hospital which would effect a limitation on its ability to provide free or below cost care.
24.9.7. Accounting classification: charity care and bad debts. For purposes of this section 24.9, the following definitions shall govern accounting classifications and the charity care plan:
24.9.7.1. Charity care. That care rendered by a hospital or nonprofit subsidiary or affiliate which is free care to individuals who do not have the ability to pay for such care. Charity care does not include bad debts as that term is defined in subsection 24.9.7.2 of these regulations.
24.9.7.2. Bad debts. Unpaid accounts of any individual who has received medical care or is financially responsible for the payment for medical care, has the ability to pay and refuses to do so.
24.9.8. A hospital, to be charitable under this Section 24, must provide an amount of free and below cost necessary medical services as determined by its board of trustees, consistent with other provisions herein, to those who are unable to pay therefore: Provided, That at the time free or below cost service is sought, in the judgment of the hospital, its medical staff and ancillary health professionals:
24.9.8.1. The hospital routinely provides such medical services.
24.9.8.2. Capability presently exists within the hospital to safely render the service requested.
24.9.8.3. The care requested is medically appropriate.
24.9.8.4. The hospital in providing such care will not be sanctioned or penalized by a professional standards review organization.
24.9.8.5. The rendering of such medical services is consistent with the charity care policy of the hospital.
24.10. Promotion of health and relief of burdens of government. Providing charitable medical care is accepted as assisting in the relief of the burdens of government. In addition to providing charitable medical care, a hospital may provide other volunteer and community services which also assist in relieving the burdens of government. The reasonable value of such volunteer and community services, as well as the short fall between charges for services as approved by the West Virginia Health Care Cost Review Authority and payments received from Medicaid, Public Employees Insurance Agency and similar governmental programs, may be used to demonstrate charitable use of property: Provided, That such volunteer and community services, short falls, or promotion of health shall not occur to the neglect or detriment of the provision of charity care. The volunteer and community services which may be utilized for this purpose include, but are not necessarily limited to, the following:
24.10.1. Public education programs relating to preventive medicine or the public health of the community.
24.10.2. Donations of medical supplies, equipment and manpower to support groups for the promotion of health and the provision of medical care.
24.10.3. Free, at-cost or below-cost health screenings and assessments.
24.10.4. Social services assistance/counseling.
24.10.5. Free or reduced charge medical clinics.
24.10.6. Operation of poison control centers.
24.10.7. Free or below-cost blood banking services.
24.10.8. Free or below-cost assistance, material, equipment and training to EMS and ambulance services.
24.10.9. Disaster planning.
24.10.10. Unreimbursed costs for education and training of medical, nursing and allied health profession students.
24.11. Private gain or benefit.
24.11.1. Unless certain conditions are met, no property or activity of a hospital which is exempt from taxation shall cause any economic benefit to inure to any private individuals or businesses other than the charitable hospital. No economic benefit shall inure to any employee, staff member, trustee, director or other person associated with the hospital: Provided, That economic benefit does not include payments for the receipt of reasonable goods and services, which are provided to the hospital under valid arms-length contracts, as that phrase is generally defined.
24.11.1.1. Provided such an agreement is entered into on an arms length basis, as that phrase is generally defined, a hospital may lease a portion of its space to private business for the purpose of furnishing necessary segments of the normal hospital operation; e.g., leasing space to a third party to operate a for-profit pharmacy. Total leased areas shall not be more than ten percent (10%) of the available floor space of the hospital; available floor space shall be all floor space exclusive of maintenance areas or common areas such as hallways and stairways.
24.11.1.2. A hospital complex may include more than one building or structure. If the primary use of one or more structures is for nonexempt purposes, such structures and the land upon which they are situated must be divided from the remaining structures in order for the remaining structures to continue as exempt property. The division of property shall be accomplished in accordance with W. Va. Code '11-4-18.
24.11.2. A hospital may pay salaries to its employees and staff. The salaries paid may be commensurate with the value of the services rendered. The salaries and benefits paid to employees and staff members must not be excessive when compared with other salaries and benefits for the same services in the community. For the purpose of these regulations and because of the rural nature of West Virginia, "community" may be determined on a state-wide basis: Provided, That when developing salary and benefit comparisons, those salaries and benefits paid at hospitals outside of West Virginia may be used so long as such hospitals are not in excess of one hundred (100) miles from the borders of West Virginia.
24.11.3. A hospital may accumulate and aggregate a surplus of revenue over expenses.
24.11.3.1. A hospital may not pay out any surplus operating funds to any individual or organization. This prohibition applies to payments in the form of dividends and excessive salaries; bonuses and similar employee incentive plans are not necessarily inconsistent with the charitable use basis for the exemption where it is shown that such plans are not merely a device for diverting profits and that they contribute to the charitable purpose of the hospital.
24.11.3.2. Any excess operating funds shall be used for the hospital's exempt purposes. Such purposes must include the hospital's charitable activities and also may include other activities. By way of illustration and not limitation, other activities may include the payment of reasonable salaries, purchase of new or replacement equipment and the cost of capital improvements which carry out those charitable activities. A hospital may enter into other activities which will provide additional revenues so long as such activities are accomplished in accordance with a plan approved by the hospital's board of directors; however, if such other activities are performed on a for-profit basis, such as owning and operating a doctor's office building or a medical laboratory apart from the hospital's own laboratory, it is presumed that a separate corporation will be formed for those purposes and that the hospital will receive a reasonable rate of return on the revenues it provides.
24.11.4. If a hospital is transferred from proprietary ownership to ownership which will operate the hospital as a charitable hospital, no economic benefit shall inure to any of the former owners, directors, trustees, staff members, or any other persons subsequent to the time of transfer as a direct or indirect result of the transfer, unless such benefit is the result of an arms length negotiation for services rendered to the hospital in accordance with another provision contained with subsection 24.11.1.
24.11.5. When a hospital is transferred from proprietary ownership to an ownership for charitable operation, and the former owners are the only members or a substantial number of the members of the medical staff, the hospital may be exempt from ad valorem property tax. However, the hospital will be subject to close scrutiny so as to determine whether or not it is operating in the interest of the former owners.
24.12. Medical staff.
24.12.1. A hospital may restrict access to the use of hospital facilities to qualified physicians and dentists who, in the discretion of the hospital, are competent and qualified to practice: Provided, That such restriction or the question of competency and qualification is determined by the hospital in accordance with published by-laws and policies. A hospital may restrict its medical staff to a limited number of members, based upon the service needs of the hospital.
24.12.2. A hospital may not arbitrarily deny access to use of hospital facilities in order to operate for the private gain of its active medical staff; access may be denied in accordance with subsection 24.12.1.
24.13. Charges and fees.
24.13.1. A hospital may charge reasonable fees for the services that it provides to a patient. These charges may include a reasonable amount above the actual cost of service for the future use of the hospital.
24.13.2. Any revenue that the hospital realizes from its charges shall be used solely for the maintenance and support of the hospital: Provided, That a hospital may accumulate and aggregate a surplus of revenues over expenses in accordance with the procedures authorized in subsection 24.11.3 of these regulations.
24.13.3. If a hospital's expenses exceed its revenue, voluntary contributions may be used to make up the difference.
24.14. Voluntary contributions and other revenue.
24.14.1. Any hospital is permitted to receive donations which are either restricted or nonrestricted. Restricted donations shall be used in such a manner as to respect the wishes of the donor. In appropriate cases, cypress proceedings may be initiated in any court having jurisdiction. Unrestricted gifts may be used for any charitable purpose: Provided, That such purpose is approved by the board of trustees of the hospital and in some way furthers the charitable activity of the hospital. For the purposes of this Section 24.14, and by way of illustration and not limitation, charitable activity may include any of the following:
24.14.1.1. The promotion of health; such as, the acquisition and use of major medical equipment.
24.14.1.2. Improvement of the quality of care of medical services rendered to the community.
24.14.1.3. The provision of free and below cost services.
24.14.1.4. The purchase of real estate for capital expansion.
24.14.1.5. The offset of cost of construction of capital improvements, as that term is generally defined, so long as such improvements are related to the provision of medical services or the promotion of health.
24.14.1.6. Retirement of pre-existing debt of the hospital.
24.15. Ancillary functions.
24.15.1. A hospital may engage in certain non-medical activities, so long as these activities are designed to serve hospital staff, employees, patients and visitors, and are not such as to cause the primary and immediate use of the property to be other than charitable use in accordance with Section 19 of these regulations. These activities include, but are not limited to:
24.15.1.1. The operation of a parking facility,
24.15.1.2. The operation of a pharmacy,
24.15.1.3. The operation of a cafeteria or coffee shop, and
24.15.1.4. The operation of a gift shop.
24.16. Leasing.
24.16.1. A hospital may lease part of a tract out for an legal use and retain the tax exemption described under this section so long as the primary and immediate use of the tract is charitable in accordance with Section 19 of these regulations and other restrictions in these regulations are not violated.
24.17. Vacant land and construction.
24.17.1. When a hospital purchases land which it intends to use for capital improvements, which will be used for charitable purposes, the land shall not be exempt so long as the land is vacant. So long as the land is vacant, it can be sold and used for noncharitable purposes.
24.17.2. Vacant tracts owned by a hospital will remain subject to taxation, even if plans are made which show that the land will be used for tax exempt purposes.
24.17.3. If construction is begun on a tract for the purpose of making improvements to be used for hospital purposes, such property shall not be exempt under this section until it has been put to such actual use as to make the primary and immediate use of the property charitable in accordance with Section 19 of these regulations.
24.17.4. If construction is begun on a tract exempt under this section from ad valorem taxation at the time construction is initiated, such construction shall not void the pre-existing exemption if the proposed use of the improvements so constructed is to be a charitable use consistent with the provisions of this section.
24.17.5. Construction of improvements, the proposed use of which is not charitable, shall not void a pre-existing exemption under this section until such time as the primary and immediate use of the property is not longer charitable in accordance with this section and Section 19 of these regulations.
24.18. Hospital owned housing.
24.18.1. Property which a hospital owns and uses for housing for doctors, nurses, interns, technicians and other hospital personnel may be exempt from ad valorem tax. It is necessary for the housing to be located on or near the same tract of property as the hospital. Also, it is incumbent upon the hospital to show that the housing is being used in a way which directly and immediately relates to the charitable purposes, such as housing medical personnel in an actual "on call" status, as that phrase is generally defined. Otherwise, such housing would be used for purposes which would put it in competition with generally available commercial housing; a commercial use would not be primarily and immediately charitable in such an instance.
24.19. Education facilities on hospital property.
24.19.1. Possession by a hospital of property used as a place of education shall not void the exemption provided under this section so long as the primary and immediate use of the property is for charitable purposes under Section 19 of these regulations. If education is the primary and immediate use of the property, then the exemption provided under this section will typically no longer apply. However, the exemption provided under Section 16 of these regulations may apply.
24.19.2. Any property owned by a hospital which is used as a place of residence for medical or nursing students, or other students who are studying in a medical related field at the hospital shall not be exempt from ad valorem property tax unless such property is exempt under Section 21 of these regulations.
24.19.3. Recreational facilities shall not be considered property used primarily and immediately for charitable purposes unless such facilities are designed for and primarily and immediately used by patients of the hospital.
24.20. Hospital service corporations, medical service corporations, dental service corporations and health service corporations.
24.20.1. Hospital service corporations, medical service corporations, dental service corporations and health service corporations are exempt from ad valorem property taxation. See W. Va. Code '33-24-4. See Section 35.40 of these regulations.
24.21. Health care corporations.
24.21.1. All health care corporations are exempt from ad valorem property tax. See W. Va. Code '33-25-3. See Section 35.41 of these regulations.
W. Va. Code R. § 110-3-25 House Of Refuge And Lunatic And Orphan Asylums
25.1. House of refuge.
25.1.1. A house of refuge is exempt from ad valorem property taxation if such house of refuge is operated for charitable purposes in accordance with Section 19 of these regulations or is exempt state, county or municipal property and property of the United States or otherwise exempt public property in with these regulations.
25.1.2. For example: A community shelter for battered or abused women is a house of refuge within the meaning of this section.
25.1.3. A Salvation Army mission providing food and living quarters to destitute people is a house of refuge within the meaning of this section.
25.2. Lunatic or orphan asylum.
25.2.1. A lunatic asylum is exempt from ad valorem property taxation if such lunatic asylum is operated for charitable purposes in accordance with Section 19 of these regulations or is exempt state, county or municipal property or property of the United States or otherwise exempt public property in accordance with these regulations.
25.2.2. An orphan asylum is exempt from ad valorem property taxation if such orphan asylum is operated for charitable purposes in accordance with Section 19 of these regulations, is an educational institution in accordance with Section 16 of these regulations or is exempt state, county or municipal property or property of the United States or otherwise exempt public property in accordance with these regulations.
W. Va. Code R. § 110-3-26 Homes For Children Or For The Aged, Friendless, Or Infirm, Not Conducted For Private Profit
26.1. A home for children or for the aged, friendless, or infirm not conducted for private profit is exempt from ad valorem property taxation if such home is for charitable purposes in accordance with Section 19 of these regulations, or an educational institution in accordance with Section 16 of these regulations or is exempt state, county or municipal property or property of the United States or otherwise exempt public property in accordance with these regulations.
26.2. A home for the aged will not qualify for this exemption if in order to gain admittance a person must deposit a substantial amount of money which can be equated to the prepayment of rent, must pay an application fee, must pay a damage deposit or must agree to pay a room charge unless the charge is substantially less than market value and the difference is not subsidized through a government program. It is necessary that the exempt activity meet the constitutional requirement of charitable use.
W. Va. Code R. § 110-3-27 Fire Engines And Implements For Extinquishing Fires, And Property Used Exclusively For The Safekeeping Thereof, And For The Meeting Of Fire Companies
27.1. All fire engines, implements for extinquishing fires, all equipment which is used by firemen in conjunction with their job and all real estate upon which fire houses are located is exempt from ad valorem property tax if such property is used exclusively for a charitable purpose in accordance with Section 19 of these regulations or is exempt state, county or municipal property or property of the United States or otherwise exempt public property in accordance with these regulations.
27.2. To the extent that a private corporation maintains at a manufacturing facility, or other facility of business, a separate structure which houses one or more fire engines and to the extent that such structure and only that structure has been divided from the remainder of the business facility, such structure is exempt.
27.3. If a private person, whether an individual, a corporation or otherwise, is in the business of selling, leasing, repairing or servicing equipment used for extinguishing fires, the exemption provided herein shall not apply to any such equipment which is intended to be used by a client or customer of the business.
W. Va. Code R. § 110-3-28 Property On Hand To Be Used In The Subsistence Of Livestock On Hand At The Commencement Of The Assessment Year
28.1. All personal property on hand which is to be used in the subsistence of livestock on hand at the commencement of the assessment year is exempt from ad valorem property taxation.
28.2. For example: Feed troughs and water troughs not permanently affixed to realty, portable coops, horse trailers and portable livestock pens are exempt to the extent that they are actually and directly used for, and reasonably necessary for the care or feeding of livestock on hand at the commencement of the year. Feed troughs and water troughs, coops and livestock pens which are affixed to realty and fences, gates, barns and outbuildings are not subject to the exemption, notwithstanding the fact that they are necessary for the care and feeding of livestock.
28.3. Livestock includes, but is not limited to: cattle, horses, sheep, chickens, domestic ducks, domestic geese, domestic turkeys, catfish, rabbits, buffalo, mink, foxes, otters, pigs, mules, donkeys, domestic goats, ponies and earthworms when raised for profit or consumption or use on the farm.
W. Va. Code R. § 110-3-29 Household Goods And Personal Effects
29.1. Household goods and personal effects if not held or used for profit are exempt from ad valorem property taxation. W. Va. Const. Art. X, '1b.
29.2. Household goods to the value of two hundred dollars ($200.00), if used for profit, are exempt from ad valorem property taxation.
29.3. Household goods, if used for profit, shall be valued at current market value.
29.4. Household goods in excess of the value of two hundred dollars ($200.00), when held or used for profit, shall be valued at current market value.
W. Va. Code R. § 110-3-30 Bank Deposits And Money
30.1. All bank deposits and money (including cash) are exempt from ad valorem property tax. W. Va. Const. Art. X, '1a.
30.2. Individual coin collections are treated as cash and exempt, unless the collection is being held or maintained for the purpose of future profit. In such case, the collection is valued as tangible personal property and only the value in excess of face value of coins which are U.S. Money is subject to taxation.
W. Va. Code R. § 110-3-31 Household Goods Not Held Or Used For Profit
31.1. Household goods not held or used for profit are exempt from ad valorem taxation.
W. Va. Code R. § 110-3-32 Personal Effects Not Held Or Used For Profit
32.1. Personal effects not held or used for profit are exempt from ad valorem taxation.
W. Va. Code R. § 110-3-33 Dead Victuals
33.1. All dead victuals which are owned by individuals and intended for their use and consumption are exempt from taxation.
33.2. Dead victuals which are being, or have been, processed for sale to others are to be considered inventory, and are subject to ad valorem property tax. These shall include, but are not limited to the following:
33.2.1. Foodstuffs which are being processed for distribution to outlets for sale to the ultimate consumer.
33.2.2. The inventory held by retail food outlets.
33.2.3. The inventory of a restaurant and other food service establishments.
W. Va. Code R. § 110-3-34 Property Used For The Public Purposes Of Distributing Water Or Providing Sewer Services By A Duly Chartered Nonprofit Corporation When Such Property Is Not Held, Leased Out, Or Used For Profit
34.1. Property which is used for the public purposes of distributing water or providing sewer services by a duly chartered nonprofit corporation when such property is not held, leased out, or used for profit is exempt.
W. Va. Code R. § 110-3-35 Other Property Exempt By Law
35.1. Bonds for cost of real estate and public buildings and issued under Section 7-3-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '7-3-7.
35.2. Negotiable revenue bonds for acquiring, equipping, operating or otherwise supporting or improving certain medical and long-term care facilities issued under Section 7-3-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '7-3-14.
35.3. Property of any parks and recreation commission created by a county commission in accordance with Section 7-11-1 et seq. of the W. Va. Code is exempt from ad valorem property taxation. Bonds, notes, debentures and other evidences of indebtedness of such parks and recreation commission are exempt from ad valorem property taxation. See W. Va. Code '7-11-2.
35.4. Property of county development authorities established in accordance with Section 7-12-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. Bonds, notes, debentures and other evidence of indebtedness of such authorities are exempt from ad valorem property taxation. See W. Va. Code '7-12-10.
35.5. Property of emergency ambulance authorities created under Section 7-15-1 et seq. of the West Virginia Code is exempt from ad valorem property taxation. Interest on obligations and all evidences of indebtedness of any such authority are exempt from ad valorem property taxation. See W. Va. Code '7-15-13.
35.6. Property of urban mass transportation authorities created under section 8-27-1 et seq. of the West Virginia Code is exempt from ad valorem property taxation. See W. Va. Code '8-27-20.
35.7. All real and personal property acquired, held and used by an adjoining state in this State pursuant to the provisions of Section 8-28-9 of the West Virginia Code for acquisition, establishment, construction, lease, equipment, improvement, maintenance or operation of an airport exclusively for nonprofit public use is exempt from ad valorem property taxation in accordance with Section 11 of these regulations. See W. Va. Code '8-28-9.
35.8. Property of regional airport authorities created under Section 8-29-1 et seq. of the West Virginia code is exempt from ad valorem property taxation. Bonds, notes, debentures and other evidences of indebtedness of such authorities are exempt from ad valorem property taxation. See W. Va. Code '8-29-13.
35.9. Property of county airport authorities created under Section 8-29A-1et seq. of the West Virginia Code is exempt from ad valorem property taxation. Bonds, notes, debentures and other evidences of indebtedness of such authorities are exempt from ad valorem property taxation. See W. Va. Code '8-29A-13.
35.10. Property of municipal building commissions, county building commissions or municipal-county building commissions created under Section 8-33-1 et seq. of the West Virginia Code is exempt from ad valorem property taxation. Bonds, notes, debentures and other evidences of indebtedness of such commissions are exempt from ad valorem property taxation. See W. Va. Code '8-33-7.
35.11. Grants of all classes of welfare assistance received under the provisions of Chapter 9 of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '9-5-1.
35.12. Bonds for payment of costs associated with athletic establishments created or acquired in accordance with Section 10-2A-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '10-2A-10.
35.13. All bonds of the State of West Virginia or any political subdivision thereof issued for original indebtedness and not for payment of current expenses under Section 13-1-1 are exempt from ad valorem property taxation. See W. Va. Code '13-1-33.
35.14. All bonds of the State of West Virginia or of any political subdivision thereof issued under Section '13-2-1 et seq. of the West Virginia Code for the purpose of refunding bonds are exempt from ad valorem property taxation. See W. Va. Code '13-2-8.
35.15. Refunding bonds issued under Section 13-2A-1 et seq. of the West Virginia Code and the income therefrom are exempt from ad valorem property taxation. See W. Va. Code '13-2A-10.
35.16. Industrial development and commercial development bond act.
35.16.1. Revenue bonds for industrial and commercial development issued pursuant to Section 13-2C-1 of the West Virginia Code and the income therefrom are exempt from ad valorem property taxation. See W. Va. Code '13-2C-15.
35.16.2. The real and personal property which a county commission or a municipality may acquire to be leased, sold or otherwise disposed of, according to the provisions of Section '13-2C-1 et seq. of the West Virginia Code is exempt from ad valorem property taxation. See W. Va. Code '13-2C-15.
35.17. Airport Development Bond Act.
35.17.1. Revenue bonds issued pursuant to the Airport Development Bond Act, section 13-2D-1 et seq. of the West Virginia Code, and the income therefrom are exempt from ad valorem property taxation. See W. Va. Code '13-2D-12.
35.17.2. Real and personal property which a county commission may acquire for an airport according to the provisions of Section '13-2D-1 et seq. of the West Virginia Code is exempt from ad valorem property taxation. See W. Va. Code '13-2D-12.
35.18. Refunding bonds issued pursuant to the Revenue Bond Refunding Act, Section 13-2E-1 et seq. of the West Virginia Code, and the income therefrom are exempt from ad valorem property taxation. See W. Va. Code '13-2E-12.
35.19. Armories or any property acquired or used by the State Armory Board under the provisions of Section 15-6-1 et seq. of the West Virginia Code and the bonds issued thereunder and the income therefrom, including any profit made on the sale thereof, are exempt from ad valorem property taxation. See W. Va. Code '15-6-18.
35.20. Any supplies or equipment purchased by the West Virginia Sheriff's Bureau (created under Section 15-8-1 et seq. of the West Virginia Code) through the special fund created under Section 15-8-7 of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '15-8-12.
35.21. Sewerage works.
35.21.1. Revenue bonds issued under Section 16-13-1 et seq. of the West Virginia Code, relating to sewerage works of municipal corporations and sanitary districts, and the interest thereon are exempt from ad valorem property taxation. See W. Va. Code '16-13-22f and '16-13-10.
35.21.2. All properties and facilities of municipalities addressed under Section 16-13-1 et seq. of the West Virginia Code owned or used in connection with sewerage systems are exempt from ad valorem property taxation. See W. Va. Code '16-13-22f.
35.21.3. All monies, revenues, and other income of municipalities addressed under Section 16-13-1 et seq. of the West Virginia Code derived from sewerage systems are exempt from ad valorem property taxation. See W. Va. Code '16-13-22f.
35.22. Public service districts for water and sewerage services.
35.22.1. All property and income of public service districts for water and sewerage services established in accordance with Section 16-13A-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '16-13A-21.
35.22.2. Bonds issued by public service districts for water and sewerage services established under Section 16-13A-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '16-13A-21.
35.23. The property, bonds, notes, debentures and other evidences of indebtedness of a housing authority established under Section 16-15-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '16-15-14.
35.24. Property of urban renewal authorities.
35.24.1. Property of an urban renewal authority created under Section 16-18-1 of the West Virginia Code is exempt from ad valorem property taxation. See W. Va. Code '16-18-15(b).
35.24.2. The ad valorem property tax exemption for urban renewal authority property shall terminate when the authority sells, leases or otherwise disposes of any property used in a redevelopment project to a redeveloper for redevelopment. See W. Va. Code '16-18-15(b).
35.25. Any property acquired or used by the Solid Waste Disposal Authority created under Section 16-26-1 et seq. of the West Virginia Code and the income therefrom and any solid waste disposal project and the bonds and notes issued by such authority and all interest and income thereon are exempt from ad valorem property taxation. See W. Va. Code '16-26-19.
35.26. Property acquired or used by the West Virginia Turnpike Commission under the provisions of Section 17-16A-1 of the West Virginia Code and the income therefrom, and the bonds issued under the provisions of the aforesaid code sections, and the income therefrom are exempt form ad valorem property taxation. See W. Va. Code '17-16A-14.
35.27. Revenue bonds issued for West Virginia University under Section 18-11-1 et seq. of the West Virginia Code and the interest thereon are exempt from ad valorem property taxation. See W. Va. Code '18-11-25.
35.28. Revenue bonds for university capital improvements issued under Section 18-11A-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '18-11A-7.
35.29. Revenue bonds for university facilities, buildings and structures issued under Section 18-11B-1 et seq. of the West Virginia Code and the interest thereon are exempt from ad valorem property taxation. See W. Va. Code '18-11B-11.
35.30. Revenue bonds for Marshall University capital improvements issued under section 18-12A-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '18-12A-7.
35.31. Revenue bonds for state institutions of higher education issued under Section 18-12B-1 et seq. of the West Virginia Code and the interest thereon are exempt from ad valorem property taxation. See W. Va. Code '18-12B-4.
35.32. Monies and property acquired by, retained by or used by the West Virginia Board of Regents or its agents under the provisions of the West Virginia Education Loan Bond Program under Section 18-27-1 et seq. of the West Virginia Code and the income therefrom are exempt from ad valorem property taxation. See W. Va. Code '18-27-22.
35.33. All bonds issued by the Blennerhassett Historical Park Commission under the provisions of Section 29-8-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '29-8-10.
35.34. Any property acquired or used by the West Virginia Railroad Maintenance Authority, established under Section 29-18-1 et seq. of the West Virginia Code, and the income therefrom, and all bonds, notes and all interest and income thereon are exempt from ad valorem property taxation. See W. Va. Code '29-18-19.
35.35. Property of any credit union organized under Section 31-10-1 et seq. of the West Virginia Code, or any other credit union act, except any real property and any tangible personal property owned by any such credit union, is exempt from ad valorem property taxation. Any real property and any tangible personal property owned by any such credit union is subject to taxation to the same extent as other similar property is taxed. See W. Va. Code '31-10-33.
35.36. Any economic development project or any property acquired or used by the West Virginia Economic Development Authority, established under W. Va. Code '31-15-1 et seq., and the income therefrom, and bonds and notes issued under Section 31-15-1 et seq. of the West Virginia Code and all interest and income thereon are exempt from ad valorem property taxation. See W. Va. Code '31-15-20.
35.37. The West Virginia Housing Development Fund.
35.37.1. Property, other than real property, of the West Virginia Housing Development Fund, and obligations for other evidences of indebtedness and any monies, funds, revenues or other income held or received by the said Housing Development Fund, and the notes and bonds of the said Housing Development Fund and the income therefrom are exempt from ad valorem property taxation. See W. Va. Code '31-18-18.
35.37.2. All real property of the West Virginia Housing Development Fund is subject to ad valorem property taxation. See W. Va. Code '31-18-18.
35.38. The West Virginia Community Development Authority.
35.38.1. All property, other than real property, of the West Virginia Community Development Authority, created under Section 31-19-1 et seq. of the West Virginia Code, and its obligations for other evidences of indebtedness issued pursuant to the provisions of Section 31-19-1 et seq. of the West Virginia Code and any monies, funds, revenues or other income held or received by the said community development authority and the income therefrom are exempt from ad valorem property taxation. See W. Va. Code '31-19-20.
35.38.2. All real property of the West Virginia Community Development Authority is subject to ad valorem property taxation. See W. Va. Code '31-19-20.
35.39. Licensed fraternal benefit societies.
35.39.1. Property, except real property and office equipment, of fraternal benefit societies licensed under Section 33-23-1 et seq. of the West Virginia Code is exempt from ad valorem property taxation. See W. Va. Code '33-23-9(b).
35.39.2. All real property and office equipment of fraternal benefit societies licensed under Section 33-23-1 et seq. of the West Virginia Code is subject to ad valorem property taxation. See W. Va. Code '33-23-29(b).
35.40. Property of hospital service corporations, medical service corporations and dental service corporations created in accordance with Section 33-24-1 et seq. of the West Virginia Code are exempt from ad valorem property taxation. See W. Va. Code '33-24-4.
35.41. The property of all health care corporations created in accordance with Section 33-25-1 et seq. of the West Virginia Code is exempt from ad valorem property taxation. See W. Va. Code '33-25-5.
35.42. Although the West Virginia Insurance Guaranty Association, created under Section 33-26-2 et seq. of the W. Va. Code, is exempt from payment of most fees and taxes levied by this State and its subdivisions, real and personal property of the said association is subject to ad valorem property taxation. See W. Va. Code '33-26-15.
35.43. Although the West Virginia Life and Health Insurance Guaranty Association, created under Section 33-26A-1 et seq. of the West Virginia Code, is exempt from most fees and taxes levied by this State and its subdivisions, all real property of the said association is subject to ad valorem property taxation. The personal property of the said association is exempt from ad valorem property taxation. See W. Va. Code '33-26A-16.
110CSR3
Series 03B Procedures For when The tax commission orders A county assessor Or county commission Or both To comp
W. Va. Code R. § 110-3B-1 General
1.1. Scope. -- These procedural regulations provide guidelines and procedures to be followed whenever the Tax Commissioner, pursuant to West Virginia Code '18-9A-11(g), determines that in any year a county assessor or a county commission has failed or refused to comply with the provisions of West Virginia Code '18-9A-11 in setting the valuations of property for assessment purposes in any class or classes of property in the county , and directs the county assessor and the county commission to make such corrections in the valuations as may be necessary so that they shall comply with the requirements of Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11, or the Tax Commissioner enters the county to fix the assessment at the required ratios.
1.2. Authority. -- W. Va. Code ''11-1-2 and 11-1-6.
1.3. Filing Date. -- December 22, 1987
1.4. Effective Date. -- January 21, 1988
W. Va. Code R. § 110-3B-2 Notice From The Tax Commissioner To The County Assessor And The County Commission Of Improper Assessment
2.1. Whenever the Tax Commissioner shall find from all the facts before him that a county has assessed one or more property classes in a manner inconsistent with Chapter 11 of the West Virginia Code or W. Va. Code '18-9A-11, he shall give notice, in writing, to the county assessor and the county commission, specifying the property classes that have been improperly assessed, the nature of the defect or defects and the requirements which the county assessor or the county commission must meet to properly assess for the current tax year.
2.2. If the county's assessment is below the requirements of W. Va. Code '18-9A-11 in one or more classes, the Tax Commissioner shall further give the levying bodies notice that they may revise their levy rates using the procedure found in Section '110-3B-9 of these regulations.
W. Va. Code R. § 110-3B-3 Notice Of Order To Increase Assessments
3.1. Whenever the Tax Commissioner shall, pursuant to W. Va. Code '18-9A-11(g), order the county assessor or the county commission, or both, to make corrections in the assessed valuations for the year to comply with the requirements Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11, he shall give notice to taxpayers by publication of the order by a Class II-0 legal advertisement in compliance with the provisions of W. Va. Code '59-3-1 et seq., and the publication area shall be the county.
W. Va. Code R. § 110-3B-4 Review And Resubmission Of The Property Books By The County Assessor
4.1. Whenever the Tax Commissioner shall, pursuant to W. Va. Code '18-9A-11(g), order the county assessor to make corrections in the assessed valuations for the year to comply with the requirements of Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11, the assessor shall review his work, make the changes necessary to bring his books into compliance with Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11, and resubmit the property books for the current year to the county commission. The assessor and his assistants shall attend the special sessions of the county commission held pursuant to the order and shall render every assistance possible in connection with the value of property assessed by them.
4.2. After the county commission completes the review of the property books, the assessor shall notify each levying body in the county of an increase in revised assessed value for one or more classes of property located within the jurisdiction of the levying body.
W. Va. Code R. § 110-3B-5 Reassessment By Tax Commissioner
5.1. Whenever the Tax Commissioner determines that the county assessor is failing or has refused to comply with the order of the Tax Commissioner, made pursuant to West Virginia Code '18-9A-11(g), to make such corrections in the assessed valuations for the year as may be necessary so that they comply with the requirements of Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11, the Tax Commissioner may, in his discretion, take possession of the property books and fix the assessments so that the totals by class comply with Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11. The Tax Commissioner may remove the property books and any other pertinent information relating to assessed value from the county to any office of the State Tax Department.
5.2. Whenever the Tax Commissioner takes possession of the property books and fixes the assessments so that the totals by class comply with Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11, he shall give the taxpayers the same notice which section '110-3B-6 of these regulations requires the assessor to give.
W. Va. Code R. § 110-3B-6 Notice Of Increased Assessment
6.1. If the assessor, while complying with the order of the Tax Commissioner, determines that the revised assessed valuation of any item of real property is more than ten percent (10%) greater than the valuation assessed for that item in the last tax year and the increase is entered in the property books as provided in W. Va. Code '11-3-19, the assessor shall forthwith give notice of the increase to the owner or the person controlling the property as provided in W. Va. Code '11-3-2.
6.2. The county assessor must give the notice at least five (5) days prior to the special session at which the county commission meets for the purpose of review of the revised assessments for the tax year and advise the person assessed or the person controlling the property of his right to appear and seek an adjustment with respect to classification and taxability of property resulting from a clerical error, or a mistake occasioned by an unintentional or inadvertent act as distinguished from a mistake growing out of negligence or the exercise of poor judgment. The notice shall be made by first class United States postage mailed to the address of the person assessed or the person controlling the property for payment of tax on the item in the previous year.
6.3. Where the valuation in any one or more classes generally increase, then, in lieu of notice by first class mail, the notice shall be by publication by a Class I-0 legal advertisement in compliance with the provisions of W. Va. Code '59-3-1 et seq., and the publication area shall be the county.
W. Va. Code R. § 110-3B-7 Review By County Commission
7.1. Pursuant to W. Va. Code '7-1-5, county commissions have the duty to:
Review and equalize the assessments made by the assessors; to inspect and review the lists of property, both real and personal, made up by the assessor and his deputies for taxable purposes. . . .
7.2. A county commission is authorized by W. Va. Code '7-1-2 to hold special sessions "whenever the public interest may require it." Whenever the Tax Commissioner shall order the county assessor or the county commission to correct the valuation of property pursuant to W. Va. Code '18-9A-11(g), the county commission shall hold a special session to perform their duties in compliance with the order of the Tax Commissioner.
7.3. The clerk of the county commission shall publish notice of the time, place and general purpose of the special session of the county commission meeting as a Class I-0 legal advertisement in compliance with the provisions of W. Va. Code '53-3-1 et seq., and the publication area shall be the county. The expense of publication shall be paid out of the county treasury.
7.4. The county commission shall meet in special session for the purpose of reviewing the revised assessment made by the assessor or the Tax Commissioner. The county commission shall correct all errors with respect to classification and taxability of property resulting from a clerical error, or a mistake occasioned by an unintentional or inadvertent act as distinguished from a mistake growing out of negligence or the exercise of poor judgment, and they shall cause to be done whatever is necessary to make the valuation comply with the provisions of West Virginia Code Chapter 11 and W. Va. Code '18-9A-11.
7.5. Should the county commission fail or refuse to meet in special session to review the revised assessment, the Tax Commissioner shall notify the taxpayers of their rights under W. Va. Code '11-3-27 by publishing as a Class II-0 legal advertisement in compliance with the provisions of W. Va. Code '59-3-1 et seq., and the publication area shall be the county.
7.6. No assessment shall be increased over and above the revised assessments without giving the property owner at least five (5) days' notice, in writing and signed by the president of the commission, of the intention to make such increase. Service shall be sufficient if made upon the property owner, or upon his agent or attorney in person, of if sent by registered mail to such property owner, his agent or attorney, at their respective last known place of abode. If the taxpayer, his agent or attorney, is not found and have no known place of abode, then notice shall be published as a Class I-0 legal advertisement in compliance with the provisions of W. Va. Code '59-3-1 et seq., and the publication area shall be the county. The publication date shall be at least five (5) days prior to final action making the increase.
7.7. When it is desired to increase the entire valuation in any one district by a general increase, notice shall be given by publication thereof as a Class I-0 legal advertisement in compliance with the provisions of W. Va. Code '59-3-1 et seq., and the publication area for such publication shall be the county. The date of the last publication shall be at least five (5) days prior to final action making the increase in valuation. When an increase is made, the same valuation shall not again be changed unless notice is again given as provided in this section.
7.8. After the county commission completes the review of the property books, a majority of the commission shall sign a statement that it is the completed assessment of the county for the year, and that the assessment complies with the provisions of Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11. If the county commission should refuse to sign the statement for any reason, the Tax Commissioner or a person he designates shall, pursuant to W. Va. Code '18-9A-11, perform any act required of the county commission by Chapter 11 of the West Virginia Code. The property books shall then be delivered to the assessor for extension of the levies, or if the levies have already been extended based on the revised assessments, the property books shall then be delivered to the sheriff.
W. Va. Code R. § 110-3B-8 Grounds For Removal From Office
8.1. Failure or refusal of the county assessor or county commission to comply with the provisions of Chapter 11 of the West Virginia Code and W. Va. Code '18-9A-11 constitute grounds for removal from office.
W. Va. Code R. § 110-3B-9 Revision Of Levy Rates
9.1. Each levying body in the county has the power in special session within forty (40) days after the levying body fixed the rates of levy on each class of property on the third Tuesday in April to rescind its levy order because of a material change of fact under the following conditions:
9.1.1. The levying body had based its levy rates for the current tax year on the assessed valuation totals for each class of property which the assessor had furnished to them as required by law; and
9.1.2. An order of the Tax Commissioner, made pursuant to W. Va. Code '18-9A-11(g), required the increase of assessed valuation totals for one or more classes of property located within the jurisdiction of the levying body.
9.2. If a reduction in a levy rate is deemed appropriate, the levying body shall fix its regular or special levy rates, or both, at lesser rates. The lesser rates shall generate the same amount of revenue, within practicable limits, as was originally estimated when it fixed its levy rates on the third Tuesday in April.
9.3. The revised levy rates shall be in the same proportion as the maximums authorized by law under W. Va. Code ''11-8-10a, 11-8-12a and 11-8-14a.
9.4. At least five (5) days prior to any such special session, the levying body shall give notice by a Class I-0 legal advertisement in compliance with the provisions of W. Va. Code '59-3-1 et seq. and the publication area shall be the county.
9.5. Once the levy rates are so revised, the levying bodies shall proceed to amend all documents that the law required be made and filed once the levy rates were fixed on the third Tuesday in April.
W. Va. Code R. § 110-3B-10 Appeal To Circuit Court
10.1. An appeal may be taken to the Circuit Court for the county pursuant to the provisions of West Virginia Code '58-3-1 et seq. within four (4) months after the county commission enters its order under W. Va. Code '11-3-27.
W. Va. Code R. § 110-3B-11 Payment Of Costs
11.1. The county commission shall pay all costs incurred by the Tax Commissioner in directing the county assessor and the county commission to make corrections in the valuations or in entering the county and fixing the assessments so that the totals by class comply with West Virginia Code Chapter 11 and W. Va. Code '18-9A-11.
110-3B
Series 04 Valuation Of Percentage Of Completion Of Improvements And Infrastructure Development In A Recorded Plan Or Plat
W. Va. Code R. § 110-4-1 General
1.1. Scope. -- This rule establishes the valuation methodology for unsold lots contained in a recorded plan or plat or in an area designated for proposed land use by a county or municipal planning authority.
1.2. Authority. -- W. Va. Code '11-3-1b(b).
1.3. Filing Date. -- April 30, 2001.
1.4. Effective Date. -- May 1, 2001.
W. Va. Code R. § 110-4-2 Definitions
When used in this rule and unless the context clearly requires a different meaning, the following terms shall have the meaning ascribed herein.
2.1. AActual use@ means the land use of a recorded plan or plat as of the assessment date, and which will be the basis of valuation for the ensuing tax year.
2.2. "Commercial land" means recorded lots used primarily for commercial or business purposes.
2.3. ACommissioner@ or "Tax Commissioner" means the West Virginia State Tax Commissioner, or his or her delegate.
2.4. AComparable Lots@ means lots contained in a filed plan or plat that are similarly situated and developed to or whose selling price has been adjusted to render them similarly situated and developed, to other lots, the value of which are being estimated for property tax purposes.
2.5. ACost of development of recorded plan or plat@ means the costs of developing a tract or tracts of land to its highest and best use. These costs include but are not limited to (1) raw land; and (2) site development, which include streets, sewers, water service, site preparation, and planning.
2.6. "County assessor@ means the Assessor, or his or her delegate who determines the valuation of lots after the recordation of a plan or plat.
2.7. "Improvements and infrastructure development@ means improvements made to the lots in a recorded plan or plat and includes but is not limited to (1) roads; (2) sewage disposal and water supplies; (3) and electric, telephone and other utilities.
2.8. "Industrial land@ means recorded lots used primarily for industrial or manufacturing purposes.
2.9. APercentage of completion@ is the amount of completed or in-place improvements or infrastructure development made to lots in a recorded plan or plat and expressed in terms of a percentage of the total estimated costs of improvements and infrastructure development, as determined annually by the county assessor.
2.10. "Plan or Plat@ means the recorded instrument indicating the proposed land use of a certain defined tract of land.
2.11. AProposed land use@ means the land use as designated by a county or municipal planning authority for a recorded plan or plat.
2.12. ARaw land@ means the land recorded in a plan or plat that has not been improved or developed with any improvements or infrastructures; but does not include land certified as being eligible for managed timberland valuation treatment or land used as a Class II active farm receiving farm use valuation treatment under provisions of the Tax Department=s legislative rule 110 C.S.R. 1A, Valuation of Farmland and Structures Situated Thereon For Ad Valorem Property Tax Purposes.
2.13. "Residential land@ means recorded lots used for residential purposes.
W. Va. Code R. § 110-4-3 Recordation of a Plan or Plat Not To Be Used As A Basis of Assessments
3.1. The recordation of a plan or plat, or the designation of proposed land use by a county or municipal planning authority, shall not be used by the assessor as a basis of assessment except in accordance with the following requirements.
3.1.1. When a lot or parcel within the recorded plan or plat is sold the assessor or the Tax Commissioner shall revalue the sold lot at market value.
3.1.2. When a lot or parcel contained within the recorded plan or plat is first developed and used for a residential, commercial, or industrial purpose, the assessor or Tax Commissioner shall revalue the lot or parcel based upon its actual use.
3.1.3. The remaining lots within the recorded plan or plat will not in any case be revalued by the assessor or Tax Commissioner based solely on sales of other lots in the recorded plan or plat.
W. Va. Code R. § 110-4-4 Valuation of Remaining Lots
4.1. The assessor or Tax Commissioner shall value the remaining lots in a recorded plan or plat using the valuation procedures described in this Section. The assessor or Tax Commissioner shall determine the percentage of completion of improvements or infrastructure development that is in place as of the assessment date each year. The assessor or Tax Commissioner shall obtain data reflecting the most probable selling price of comparable lots as that term is defined in Section 2 of this rule. The most probable selling price of comparable lots shall then be multiplied by the percentage of completion of improvements and infrastructure development to yield the appraisal value of the remaining lots.
4.2. The raw land shall be valued at the same use as in the preceding year, unless the use has changed as of the assessment date. In the case of a sale of raw land, the assessor may use the purchase price of the raw land, if comparable to other similar raw land sales, for the valuation of the property. If the use, as of the assessment date, has changed to a use other than the use contemplated in the filed plan or plat or the designated proposed land use established by a county or municipal planning authority, the raw land shall be valued based upon it=s use as of the assessment date.
4.3. In the absence of the availability of data reflecting the selling price of comparable lots, the total expended costs or a percentage of expended costs associated with the development of the potential use as designated in the recorded plan or plat shall be added to the raw land value, yielding the value of the remaining lots.
4.4. The assessor shall annually review the percentage of completion of the improvements and infrastructure development. The property owner shall report on a supplement to the property tax return, the supplement being considered as part of the property tax return, the total estimated cost of improvements and the amount of the estimated costs expended and in-place as of the assessment date. The assessor shall determine, from information on the supplement to the property tax return and his or her physical review, the percentage of completion as of the assessment date. This percentage of completion shall be applied to the most probable selling price of comparable lots when available. The value obtained shall be the appraised value of the remaining lots. In the absence of the availability of data reflecting the most probable selling price of comparable lots, the percentage of completion as of the assessment date shall be applied to the total cost of the improvements and infrastructure development. The value obtained shall be added to the value assigned to the raw land and the sum obtained shall be the appraised value of the remaining lots.
4.5. When the assessor does not have the cost of improvements and infrastructure development, the assessor may use comparable recorded plans or plats with property of similar potential use as a guide. The assessor shall determine the percentage of completion in the same manner as if costs were known.
4.6. The assessor shall in no instance value the remaining unsold lots as managed timberland. The classification of recorded lots shall not change from Class III or Class IV to Class II until a developed lot or parcel is used and occupied by the owner thereof exclusively for residential purposes.
W. Va. Code R. § 110-4-5 Proposed Land Use
5.1. Proposed land use may not be used as a basis for valuation until the actual use has changed to correspond with the proposed use. When the actual use changes to the proposed use, the assessor or Tax commissioner may consider for valuation purposes the recorded plan or plat as completed as designated by the county or municipal planning authority.
5.2. Before the property has changed to its proposed land use, the assessor or Tax Commissioner, as the case may be, may consider the factors and valuation process contained in Section 4 of this rule when estimating the value of property designated for a proposed land use.
W. Va. Code R. § 110-4-6 Administrative Remedy
6.1. The owner or owners of property assessed under W. Va. Code '11-3-1 et seq., who claims to be aggrieved by the value of real property as derived by this legislative rule may appeal the assessed value to the county commission under authority of W. Va. Code '11-3-24. If the taxpayer claims to be aggrieved by the tax classification of the property, an appeal may be taken under the authority of W Va. Code '11-3-24a.
W. Va. Code R. § 110-4-7 Effective Date
The valuation methodologies contained in this rule are effective for all recorded plans or plats filed after June 30, 2000. Provisions of this rule shall not apply to any plans or plats recorded before July 1, 2000, and in no event shall the appraised value of those lots, parcels or undeveloped land be less than their appraised value as of July 1, 2000.
110CSR4
Series 06 Pollution Control Facilities
W. Va. Code R. § 110-6-1 General
1.1. Scope. -- This rule establishes general operating procedures for the tax treatment of pollution control facilities.
1.2. Authority. -- W. Va. Code §11-6A-4.
1.3. Filing Date. -- April 4, 2002.
1.4. Effective Date. -- May 1, 2002.
W. Va. Code R. § 110-6-2 Definitions
2.1. "Commissioner" means the State Tax Commissioner, or his or her delegate.
2.2. "Coal waste" means coal waste extracted from a gob pile located in West Virginia.
2.3. "Coal waste disposal power project" means an electrical generation facility designed, constructed or installed to reclaim, burn and dispose of coal wastes in compliance with applicable air and water quality standards and which meets the criteria for financing under W. Va. Code §13-2C-21.
2.4. "Facility" or "Pollution Control Facility" means any personal property designed, constructed, or installed primarily for the purpose of abating or reducing water or air pollution or contamination by removing, altering, disposing, treating, storing, or dispersing the concentration of pollutants, contaminants, wastes or heat in compliance with air or water quality or effluent standards prescribed by or promulgated under the laws of this state or the United States, the design, construction, and installation of which was approved as a pollution control facility by the Office of Water Resources of the Department of Environmental Protection or the Office of Air Quality, as the case may be. The definition of facilities eligible for salvage tax treatment shall be strictly construed so as to include only the equipment and devices that are installed primarily and immediately to abate air or water pollution. These items of personal property which may coincidentally comply with air or water quality or effluent standards prescribed by or promulgated under the laws of this state or the United States, but which are primarily installed for plant operations or are productive, will not be considered eligible for salvage tax treatment.
2.4.1. For purposes of W. Va. Code §11-6A-3, with the exception of intangible personal property, furniture, fixtures, inventories, materials and supplies used in the operation of the facility, all items of personal property installed at a coal waste disposal power project are considered a pollution control facility.
2.5. "Personal Property" means things of value, moveable and tangible, which are the subjects of ownership. This definition is found as a part of W. Va. Code §11-5-3 and applied to all of Chapter 11.
2.6. "Moveable", as used in Section 2.5 of this rule, relates to a device or piece of equipment capable of being moved from one location to another.
2.7. "Salvage Value" means the price for which the facility would sell in place if voluntarily offered for sale by the owner of the facility; that is to say, the scrap value of the material of an eligible facility less the cost of removal of the facility. Administratively, salvage value is five percent (5%) of the original cost.
2.8. “Wind Power Project” means an electrical generation facility designed, constructed or installed to convert wind into electrical energy.
W. Va. Code R. § 110-6-3 Statement of Pollution Control Facilities Tax Treatment
3.1. Pollution control facilities are required for the protection and benefit of the environment and the general welfare of the public. However, pollution control facilities are considered to be nonproductive, to not add to the economic value of a business enterprise, and to have no market value after installation in excess of salvage value.
W. Va. Code R. § 110-6-4 Approval as Pollution Control Facility
4.1. Any owner or taxpayer requesting salvage valuation for a pollution control facility under the authority of W. Va. Code §11-6A-3 must receive approval from the appropriate state agency governing the control of air or water pollution. The approval must state that the pollution control facility subject to salvage value consideration is designed, constructed or installed primarily for the purpose of abating air or water pollution, and does abate or reduce water or air pollution in compliance with air or water quality standards prescribed under the laws of this State or the United States; Provided, That each wind turbine installed at a wind power project and each tower upon which the turbine is affixed shall be considered to be personal property that is a pollution control facility, and all of the value associated with the wind turbine and tower shall be accorded salvage value treatment. All personal property at a wind power project other than a wind turbine and tower shall be valued at it’s then current market value without regard to salvage value treatment.
W. Va. Code R. § 110-6-5 Allocation or Separation of Values
5.1. The value of a pollution control facility first placed in operation subsequent to July 1, 1973 is, for the purpose of ad valorem taxation, considered to be its salvage value.
5.2. When allocating value to a coal waste disposal power project, the salvage value shall be accorded to a portion of the total personal property at the project. That portion shall be equal to the ratio of tons of West Virginia coal waste burned and disposed of at the project to the total tons of coal and coal waste burned and disposed of at the project during the immediately preceding calendar year.
5.2.1. For a project placed in service prior to March 11, 1995 at which the ratio for the calendar year ending December 31, 1994 was less than 70%, the salvage value shall be accorded to 63% of the total personal property at the project for tax years beginning after March 11, 1995, regardless of the actual ratio for any calendar year. The remaining portion of the personal property at the project, but in no event less than 25% of the total personal property at the project, shall be accorded full value, that is value without reference to salvage value.
5.3. A facility will not qualify as a pollution control facility under W. Va. Code § 11-6A-5(b) if it burns coal, coal waste or fuel waste obtained from outside West Virginia after March 11, 1995.
5.4. Where the pollution control facility produces a profitable by-product or where a part of the facility is required for the operation of the business without regard to the requirements of state or federal air or water qualify standards, the tax commissioner shall allocate or separate that portion of value attributable to the pollution control activity. Two (2) methods have been developed whereby the Tax Commissioner may accomplish that activity:
5.4.1. Component Method.
5.4.1.1. The component method shall receive primary consideration as a method of allocation or separation of values of a pollution control facility. The component method of allocation or separation of values requires the identification of the specific item or component of machinery and/or equipment which is used for the purpose of pollution abatement control but which is also an integral part of the production process and the identification of the acquisition cost of the specific item or component. The component thus identified shall be appraised at five percent (5%) of the acquisition cost. (For example, a conveyor belt system is used to transport fuel to a boiler to produce energy. The conveyor belt line, while not a pollution abatement control device, contains water sprays and is totally enclosed to retard dust during the transportation process. While the belt line is not a pollution abatement control device but an integral part of the production process, the dust conveyors and the water sprays are eligible pollution abatement facilities. The acquisition costs of these items eligible for salvage value treatment are readily discernible and shall receive salvage value treatment.)
5.4.1.2. If an item or the cost associated with an item is not discernible, the alternative substitution method shall be used.
5.4.2. Substitution Method.
5.4.2.1. When acquisition costs for eligible pollution abatement control items or components are not discernible or the items' or components' use or purpose are such an integral part of the production process that the specific use or task is not clearly ascertainable, the substitution method shall be applied.
5.4.2.2. The substitution method of allocation or separation of valuation is based on the assumption that the value attributable to pollution control is the difference between the value of a similar facility which has the same utility without the pollution abatement attributes and the value of the subject property being appraised which has pollution abatement attributes. (For example, a double-walled pipe used for the transportation of a product from the manufacturing area of the plant to the loading area. A single-walled pipe or other means of transportation is required for the operation of the business whereas the cost of the double-walled pipe is twenty-five percent (25%) higher than single wall.) The additional cost of the twenty-five percent (25%) would represent the value attributable to pollution abatement control for the purposes of ad valorem taxation.
W. Va. Code R. § 110-6-6 Recommendation of Values to County Assessor
6.1. Each county assessor shall be notified by the tax commissioner before December fifteenth of any eligible facility in his or her county on the preceding July first assessment day together with the salvage value of each facility. The notice shall recommend that the assessor use the salvage value provided as the appraised value of the facility.
W. Va. Code R. § 110-6-7 Annual List of Eligible Facility Items
7.1. The tax commissioner, annually before July tenth, shall prepare a list of apparatus, equipment and components which as of that date are considered to be eligible for salvage treatment under provisions of W. Va. Code §11-6A-1 et seq. and this rule. The list shall be revised annually to include items made eligible by administrative or judicial decision subsequent to the most recent July tenth list date. This list shall be considered to be a listing of items contemplated for pollution control facility treatment as authorized in Section 4.1 of this rule.
W. Va. Code R. § 110-6-8 Administrative Remedy
8.1. The owner of property assessed under W. Va. Code §11-3-1 et seq., properly the subject of a determination of the applicability of Pollution Control Facilities Tax Treatment authorized under W. Va. Code §11-6A-1 et seq., or the Assessor of the county in which the property is assessed, who claims to be aggrieved or damaged by the tax commissioner by the inclusion or exclusion of a facility or any component of a facility, or an allocation of any portion a facility, shall appeal the action to the commissioner under the authority of W. Va. Code §11-3-24a. Disputes concerning whether an item of personal property qualifies as a "facility" or "pollution control facility" as defined in Section 2.4 of this rule shall be considered to be matters of classification or taxability and as such are appealable under the provisions of W. Va. Code §11-3-24a.
110CSR6
110CSR6
110CSR6
110CSR6
Series 06D Alternative-Fuel Motor Vehicle Tax Credit
W. Va. Code R. § 110-6D-1 General
1.1. Scope. -- This legislative rule is intended to explain and clarify the Alternative-Fuel Motor Vehicle Tax Credit as set forth in W. Va. Code §§11-6D-1, et seq. This rule repeals and replaces all prior Alternative-Fuel Motor Vehicle Fuel rules.
The Alternative-Fuel Motor Vehicle Tax Credit became effective July 1, 1997 and expired June 6, 2006. W. Va. Code §§11-6D-1, et seq., was amended in 2011, and the Alternative-Fuel Motor Vehicle Tax Credit was reinstated, effective July 1, 2011. The Tax Credit was most recently amended and became effective April 13, 2013.
W. Va. Code §11-6D-1, et seq. provides a tax credit for qualified alternative-fuel motor vehicles and qualified alternative-fuel vehicle refueling infrastructures. The credit for qualified alternative-fuel vehicle home refueling infrastructures was eliminated.
1.2. Authority. -- W. Va. Code §11-6D-8(b).
1.3. Filing Date. -- February 20, 2014.
1.4. Effective Date. -- March 22, 2014.
1.5. General. -- Repeal and replace.
W. Va. Code R. § 110-6D-2 Definitions
For purposes of this rule, the following terms shall have the meaning ascribed to them in this rule, unless the context in which used clearly requires a different meaning.
2.1. Flex-Fuel means fuel mixtures that contain eighty-five percent or more by volume, when combined with gasoline or other fuels, of the following:
2.1.1. Methanol;
2.1.2. Ethanol; or
2.1.3. Other alcohols;
2.2. “Placed into service” means the date:
2.2.1. A qualified alternative-fuel motor vehicle refueling infrastructure is ready and available to store and dispense alternative fuels into fuel tanks of motor vehicles; or
2.2.2. A qualified alternative-fuel vehicle home refueling infrastructure is ready and available to:
2.2.2.a. Store and dispense alternative fuels into fuel tanks of motor vehicles; or
2.2.2.b. Provide electricity to plug-in hybrid electric vehicles or electric vehicles.
W. Va. Code R. § 110-6D-3 Transition Rules
3.1. Alternative Fuel Vehicles. Alternative fuel motor vehicles capable of running on ethanol, Flex-Fuel, Natural gas hydrocarbons and derivatives, Hydrogen, Coal-derived liquid fuels, and Electricity must have been purchased after December 31, 2010 and prior to April 15, 2013, and are subject to the following rules:
3.1.1. An original bill of sale or some other indicia of purchase must have been issued after December 31, 2010 and prior to April 15, 2013. The bill of sale or other indicia of purchase must contain all information related to the consideration paid for the vehicle, including the amount of any trade-in or rebate claimed by the purchaser.
3.1.2. Payment for the vehicle, which may include any financing arrangement, must be completed after December 31, 2010 and prior to April 15, 2013.
3.1.3. The purchaser of the vehicle must have taken possession of the vehicle after December 31, 2010 and prior to April 15, 2013.
3.2. Qualified Alternative Fuel Vehicle Home Refueling Infrastructure. The purchase and installation of qualified alternative fuel vehicle home refueling infrastructure must have been purchased after December 31, 2010 and prior to April 15, 2013, and is subject to the following rules:
3.2.1. An original bill of sale or some other indicia of purchase must have been issued after December 31, 2010 and prior to April 15, 2013.
3.2.2. Payment for the installation of the infrastructure, which may include any financing arrangements, must be completed after December 31, 2010 and prior to April 15, 2013.
3.2.3. There must be some other overt act or indicia of installation of the infrastructure started after December 31, 2010 and prior to April 15, 2013, which may include:
3.2.3.a. A building permit, where available;
3.2.3.b. The required notification provided in W. Va. Code §11-3-3a.
3.2.3.c. Any other indicia the Tax Commissioner deems acceptable.
3.2.4. Additionally, to claim the credit, the taxpayer must include with an application:
3.2.4.a. A listing of each purchased item including compression equipment, storage tanks, and dispensing units for alternative fuel at the point where the fuel is delivered, together with copies of invoices for each item;
3.2.4.b. A statement, signed by the taxpayer, stating that the property is installed and located in this state; and
3.2.4.4. A statement, signed by the taxpayer, stating that no credit has been previously claimed by any taxpayer on the cost of such property.
3.3. Qualified Alternative Fuel Vehicle Commercial Refueling Infrastructure. The purchase and installation of qualified alternative fuel vehicle commercial refueling infrastructure is subject to different credit qualification and calculation criteria depending on when the infrastructure is placed into service.
3.3.1. When the purchase and installation of qualified alternative fuel vehicle commercial refueling infrastructure is purchased, installed, and placed into service after December 31, 2010 and prior to January 1, 2014, the following rules apply:
3.3.1.a. The amount of credit available will be fifty percent of the total costs, up to a maximum of $250,000, directly associated with the construction or purchase and installation of the alternative fuel vehicle commercial refueling infrastructure.
3.3.1.b. However, if the alternative fuel vehicle commercial refueling infrastructure is generally accessible for public use, the amount of credit available will be fifty percent of the total costs, up to a maximum of $312,500, directly associated with the construction or purchase and installation of the alternative fuel vehicle commercial refueling infrastructure.
3.3.2. When the purchase and installation of qualified alternative fuel vehicle commercial refueling infrastructure is purchased, installed, and placed into service after January 1, 2014 but prior to January 1, 2018, the following rules apply:
3.3.1.a. The amount of credit available will be twenty percent of the total costs, per facility, up to a maximum of $400,000, directly associated with the construction or purchase and installation of the alternative fuel vehicle commercial refueling infrastructure.
3.3.3. When the purchase and installation of qualified alternative fuel vehicle infrastructure begins prior to January 1, 2014, but is not completed and placed into service until after January 1, 2014, the taxpayer may choose to fall under the rules provided in either 3.3.a. or 3.3.b., but no taxpayer shall be eligible to claim a credit under both sections for the same alternative fuel vehicle commercial refueling infrastructure.
3.3.4. For purposes of this rule, the following items will be determinative of when the alternative fuel vehicle commercial refueling infrastructure began:
3.3.4.a. The date of the original bill of sale or some other indicia of purchase;
3.3.4.b. The payment for the installation of the infrastructure, which may include any financing arrangements; and
3.3.4.c. The completion of some other overt act or indicia of installation of the infrastructure, which may include:
3.3.4.c.1. A building permit, where available;
3.2.4.c.2. The required notification provided in W. Va. Code §11-3-3a
3.2.4.c.3. Any other indicia the Tax Commissioner deems acceptable.
110CSR6D
110CSR6D
Series 06F Property Tax Valuation Of Certain Manufacturing Property
W. Va. Code R. § 110-6F-1 General
1.1 Scope. -- This legislative rule explains and clarifies the special property tax valuation provisions set forth in W. Va. Code '11-6F-1 et seq.
1.2. Authority. -- W. Va. Code '11-6F-5.
1.3. Filing Date. -- April 6, 1999.
1.4. Effective Date. -- May 1, 1999.
W. Va. Code R. § 110-6F-2 Definitions
As used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
2.1. "Betterment." -- See Section 2.3.1.1.b.2 of this rule.
2.2. "Certified capital addition property" and "qualified capital addition to a manufacturing facility" -- The terms "certified capital addition property" and "qualified capital addition to a manufacturing facility" are defined in W. Va. Code '11-6F-2. Those definitions incorporate the terms "personal property" and "real property," which are, in turn, in part defined by reference to certain statutory definitions of personal and real property which are broad and expansive in scope. However, W. Va. Code '11-6F-4 of the Act limits the property to which the Act applies to long term capital asset type property, and makes the Act inapplicable to intangibles, inventories or expense items such as work in process, raw materials, or consumable supplies, etc. which are owned or used by the Taxpayer for a comparatively short time and then sold, consumed, used up or disposed of. The Act repeatedly refers to "capital" additions as the qualifying property.
2.2.1. The Act provides special property tax valuation for capital additions, and not for purchases of inventory and other non-capitalized property. Therefore, the definitions of the terms "qualified capital addition to a manufacturing facility" and "certified capital addition property" do not mean or include certain types of property:
2.2.1.1. Exclusions. -- The following property or costs of property (by lease or purchase) for the following are excluded from the definitions of "certified capital addition property" and "qualified capital addition to a manufacturing facility," without regard to whether the costs or investments in the property are capitalized or otherwise: repairs, facility maintenance or other maintenance, airplanes, motor vehicles licensed by the Division of Motor Vehicles, inventories, non-capitalized property, property that does not create additional manufacturing production capacity and replacement property, except that certain replacement property qualifies as specified in this rule. Notwithstanding the fact that pollution abatement equipment typically does not create additional manufacturing capacity, investment in pollution abatement property counts toward the measure of qualified capital addition property. Investment in pollution abatement property shall not mean or include costs of repairs, equipment maintenance or ongoing operating expenses associated with pollution control property.
2.2.1.1.a. For purposes of this definition, the term "non-capitalized property" means property, the cost of which is not required to be capitalized for federal income tax purposes under the Internal Revenue Code or the rules, regulations or policies implemented or promulgated by the United States Internal Revenue Service. Property is capitalized for purposes of the Act when the cost of the property is required to be capitalized for federal income tax purposes under the Internal Revenue Code or the rules, regulations or policies implemented or promulgated by the United States Internal Revenue Service.
2.2.1.1.b. For purposes of this definition, the term "replacement property" means property acquired by purchase or lease for the purpose of replacing other property in a facility, the investment in which would not have been made but for the loss of service, destruction, removal or other loss of the property which the replacement property is intended to replace.
2.2.1.1.b.1. Replacement property shall not typically constitute qualified capital addition property, notwithstanding that the property may be capitalized for federal income tax purposes or a lease of the property may otherwise qualify under this rule and notwithstanding the fact that its construction or installation may result in an increase in productive capacity.
2.2.1.1.b.2. However, significant betterments shall be recognized as qualified capital addition property. Betterments, in combination with other qualified capital addition property which (including the betterment) has an aggregate cost in excess of $50 million, may be treated as a qualified capital addition to a manufacturing facility. The term "betterment" means and is limited to replacement property which enlarges productive capacity, economic efficiency or the quality, efficiency or extent of pollution abatement capabilities of the facility in which the replacement property is installed or placed. A betterment shall be treated as significant if it enlarges productive capacity, economic efficiency or the quality, efficiency or extent of pollution abatement capabilities of the facility by at least twelve percent over the capacities or capabilities measured at their maximum, of the facility at the time the property which the replacement property is intended to replace was in operation.
2.2.1.1.b.3. Replacement property which is installed or constructed to replace property that was destroyed by fire, explosion, flood, storm or other casualty constitutes qualified capital addition property, but the measure of the cost of the replacement property for purposes of the Act shall be reduced by any insurance proceeds or other proceeds received in compensation for the loss.
Example 1:
Company XYZ is a large manufacturing firm. A large boiler used in the manufacturing process is replaced in the facility due to the wear and physical deterioration of the boiler resulting from use in the manufacturing process.
Company XYZ replaces the old boiler with a new boiler which has a higher pressure rating and productivity than the old boiler. XYZ Company capitalizes the purchase for federal income tax purposes.
The new boiler is not qualified for special valuation under the Act. Even though the replacement of the old boiler is a capitalized investment and even though the new boiler shall improve productivity at the facility, the acquisition and installation of the new boiler is essentially a maintenance operation intended mainly to maintain ongoing day to day operations of the plant. The increase in productive capacity and efficiency were incidental to the installation, not significant and not the primary reason for the investment.
Had the old boiler not worn out, the investment would not have been made. The investment in the new boiler was not intended to result in a significant expansion of the operation. It was a mere replacement of existing property for the purpose of keeping operations going. Only significant betterments constitute qualified capital addition property.
Example 2:
The manufacturing facility suffers a casualty where the boiler building catches fire and the old boiler is destroyed. This is an extraordinary and catastrophic fire. The destruction of the boiler is not the result of ordinary wear associated with the fire used to run the boiler in day to day operation.
The old boiler is replaced with a new boiler, and associated construction occurs. The replacement property costs $2,000,000. The insurance proceeds received by the Taxpayer in compensation for the loss amount to $1,500,000. The amount of the cost of the new boiler and structure that shall qualify as qualified capital addition property for purposes of the Act is $500,000. It is assumed that other capital additions to the facility are made at the same time so as to aggregate to more than $50 million, in accordance with the requirements of the Act.
2.2.1.1.c. Occasionally, manufacturers in West Virginia have seen fit to lease, purchase or construct residential dwellings or housing in West Virginia for the purpose of providing long term or temporary housing for certain management personnel or other company personnel or for visiting dignitaries, company officers or guests of the company. The terms "qualified capital addition to a manufacturing facility" and "certified capital addition property" do not mean or include any houses, entertainment facilities, guest accommodations, dwellings or similar facilities, without regard to whether the property is purchased or leased, or whether the cost of the property is capitalized for federal income tax purposes, and without regard to whether a lease of the property might otherwise qualify under this rule.
2.2.1.1.d. The terms "qualified capital addition property," "qualified capital addition to a manufacturing facility" and "certified capital addition property" do not mean or include any property acquired by purchase or lease from or between related entities. The Tax Commissioner may waive this prohibition against related entity acquisitions if the property was acquired from a related entity for its fair market value and there is no manipulation of the cost of, or amount of investment in, qualified capital addition property for the purpose of gaining entitlement to special property valuation under the Act.
2.2.2. Pollution abatement property or specialized manufacturing production property as certified capital addition property and qualified capital additions to a manufacturing facility. -- Qualification of property for special valuation under the pollution control facilities provisions of W. Va. Code '11-6A-1 et seq. or as specialized manufacturing production property under W. Va. Code '11-6E-1 et seq. shall not affect application of the provisions of the Act. The cost of property to be counted toward the $50 million threshold shall be counted notwithstanding the fact that the property may qualify for special property tax valuation under the aforementioned provisions. However, property subject to valuation under W. Va. Code ''11-6A-1 et seq. and 11-6E-1 et seq. shall receive permanent special valuation under those provisions, whereas valuation under the Act applies for a maximum of 10 years.
2.2.3. Leased property as qualified capital addition property, certified capital addition property or qualified capital additions to a manufacturing facility. -- The policies that shall govern treatment of leased property for purposes of determining whether it shall be counted toward the cost of qualified capital addition property shall, to the extent possible, be parallel with the treatment of leased property for purposes of determining whether leased property shall be counted toward the original cost of a preexisting facility, as discussed in the definition of the term "original cost."
2.2.3.1. Leased property shall not typically constitute qualified capital addition property to the lessee because the lessor, and not the lessee, is ordinarily legally responsible for payment of the property tax on leased property.
2.2.3.2. Leased real or tangible personal property which a lessee is required to treat as purchased property for federal income tax purposes may constitute qualified capital addition property to the extent of the amount represented by such property is capitalized for federal income tax purposes if the written lease specifically makes the lessee responsible for payment of property taxes on the leased property.
2.2.3.3. Where the qualified capital addition property in a manufacturing facility incorporates leased tangible personal property under a lease that has a primary term of at least 75% of the useful life of the property, and where the written lease for that property specifically makes the lessee responsible for payment of the property taxes on the leased property, the leased property may constitute qualified capital addition property.
2.2.3.4. Where the qualified capital addition property in a manufacturing facility incorporates leased real property under a lease that has a primary lease term of at least ten years, and where the written lease for that property specifically makes the lessee responsible for payment of the property taxes on the leased property, the leased property may constitute qualified capital addition property.
2.2.3.5. The cost of leased real or tangible personal property for purposes of determining the cost of qualified capital addition property is the discounted present value of the rent reserved for the primary term of the lease, but not to exceed ten years. The discount rate for this computation shall be prescribed by the Tax Commissioner from time to time.
2.2.3.6. The extent to which the cost of leased property may qualify as qualified capital addition property under the Act may be adjusted by the Tax Commissioner, depending on whether the lease payments are reflective of a fair market value lease rate. Only those costs of leased property imposed pursuant to a written lease agreement may qualify to be counted toward the cost of qualified capital addition property.
2.2.3.7. In the case of real or tangible personal property purchased by a Taxpayer and sold to a leasing company or other entity and then leased back to the Taxpayer which originally purchased the property (a so called sale and lease back): Where the lease otherwise qualifies to be counted toward the measure of qualified capital addition property, the cost of the sale/lease back property to be counted toward the measure of cost of qualified capital addition property is the original purchase price cost of the property to the Taxpayer prior to the sale of the property to the leasing company or lessor.
2.3. "Derivative products" -- means manufactured products that are made directly from polymers.
2.4. "Enrolled" or "enrollment" -- "Enrollment" is the act of placing property on the property tax rolls or records of the taxing jurisdiction in the name of the Taxpayer. Property is first "enrolled" and "enrollment" of a given item of property first occurs when the property is first placed on the property books of the taxing jurisdiction in the name of the Taxpayer.
2.5. "Feedstock" -- means raw materials or production inputs which are directly used in the manufacture of polymers.
2.6. "Fifty million dollar threshold" -- Under W. Va. Code ''11-6F-2(d) and 3, a Taxpayer is entitled to the special valuation allowed under the Act when at least $50 million of qualified capital addition property has been enrolled in the name of the Taxpayer. The special valuation shall be granted beginning in the tax year when the aggregate total value of enrolled qualified capital addition property enrolled in the name of the Taxpayer has exceeded $50 million and for allowable succeeding years in accordance with W. Va. Code ''11-6F-3 and 4 of the Act.
2.7. "Intangibles" See Section 6.4.1.3.i.4.1(6) of this rule.
2.8. "Original cost," as that term is used with reference to a preexisting facility, and not to new investment, or the terms "original cost before a capital addition" or "original cost of a preexisting facility." --
2.8.1. Under W. Va. Code '11-6F-2(d), the preexisting manufacturing facility must have a total original cost before the capital addition of at least one hundred million dollars. Manufacturing facilities may in the aggregate carry with them an original cost that is no longer reflective of the current fair market value of the property. It is typical that the fair market value of manufacturing facilities, because of depreciation, inflation, and various market economic forces shall differ in some degree from original cost. It could be that a facility may have an original cost exceeding the $100 million minimum set forth in W. Va. Code '11-6F-2(d), but have a fair market value after physical deterioration and economic obsolescence, that is minimal. It could be that a facility could have a market value well in excess of the original cost due to economic factors that would make the construction of a similar facility far more expensive than original cost.
2.8.2. "Original cost," as that term is used with reference to a preexisting facility, and not to new investment, or the terms "original cost before a capital addition" or "original cost of a preexisting facility" means the total, original, undepreciated cost, unadjusted for inflation or deflation, of capitalized property and certain leased property physically in service at a facility immediately prior to the placement of certified capital addition property in service at the facility, excluding property enumerated as excluded under this rule. As a general rule, original cost is the basis to the Taxpayer of the property for federal income tax purposes (prior to any federal adjustments) at the time of the acquisition by the Taxpayer of the property and adjusted by subsequent capital additions or improvements to the property and partial disposition of the property, by reason of sale, exchange or abandonment, etc. Depreciation is not taken into account in determining the original cost of the property. Original cost shall include installation costs, transportation, sales and excise taxes, planning costs, and other costs associated with the acquisition of a given asset to the extent that the costs are capitalized for federal income tax purposes.
2.8.2.1. Excluded property
2.8.2.1.a. Airplanes, motor vehicles, non-capitalized property and qualified capital addition property. -- There shall be excluded from the determination of "original cost" or "original cost before a capital addition" or "original cost of a preexisting facility" the following property whether purchased or leased: Airplanes; motor vehicles licensed by the Division of Motor Vehicles; inventories and non-capitalized property; qualified capitol addition property to be included as part of the certified capital addition property (including construction in progress); and any property acquired by purchase or lease from a related entity or between related entities. The Tax Commissioner may waive the prohibition against related entity acquisitions if the property was acquired from a related entity for its the fair market value and there is no manipulation of the measure of the cost of, or the amount of investment in, qualified capital addition property for the purpose of gaining entitlement to special property valuation under the Act.
2.8.2.1.b. For purposes of this definition, the term "non-capitalized property" means property, the cost of which is not required to be capitalized for federal income tax purposes under the Internal Revenue Code or the rules, regulations or policies implemented or promulgated by the United States Internal Revenue Service.
2.8.2.2. Property no longer in service. -- There shall be excluded from the determination of "original cost" or "original cost before a capital addition" or "original cost of a preexisting facility" the cost of any property, whether purchased or leased, which has been removed from service, scrapped, or permanently shut down or placed in mothball mode, notwithstanding that the property may remain on the premises, or in the facility or on the facility grounds. Any property sold, no longer owned by the Taxpayer, or removed from the premises or otherwise permanently out of service shall not count toward the measure of original cost.
2.8.2.3. Residential and entertainment property. -- Occasionally, manufacturers in West Virginia have seen fit to lease, purchase or construct residential dwellings or housing in West Virginia for the purpose of providing long term or temporary housing for certain management personnel or other company personnel or for visiting dignitaries, company officers or guests of the company. There shall be excluded from the determination of "original cost" or "original cost before a capital addition" or "original cost of a preexisting facility" the cost of any houses, entertainment facilities, guest accommodations, dwellings or similar facilities, whether leased or purchased (constructed or otherwise), without regard to whether the cost of the property is capitalized for federal income tax purposes and without regard to whether the property is leased under lease terms which would otherwise qualify under this rule.
2.8.3. Original cost and leased property. -- Leased property shall not typically count toward the measure of original cost to the lessee. However, certain types of leased property shall be counted.
2.8.3.1. Leases capitalized for federal income tax purposes. -- Real or tangible personal property still under lease immediately prior to the placement of certified capital addition property in service at the facility may be counted toward the measure of original cost if the lessee is required to treat the leased property as purchased property for federal income tax purposes and the written lease specifically makes the lessee responsible for payment of the property tax on the leased property. The amount of the original cost of the leased property for purposes of the Act is the amount capitalized for federal income tax purposes represented by the property.
2.8.3.2. Leases of Tangible personal property. -- Where the preexisting manufacturing facility incorporates leased tangible personal property under a lease that, at the time the lease was entered into had a primary lease term of at least 75% of the useful life of the leased tangible personal property, and where the written lease for that property specifically makes the lessee responsible for payment of the property taxes on the leased property, the leased tangible personal property still under lease at the time qualified capital addition property is enrolled may be counted toward the measure of original cost of the preexisting facility.
2.8.3.3. Leases of realty. -- In the case of leases of real property which at the time the lease was entered into had a primary lease term of at least ten years, and where the written lease for that property specifically makes the lessee responsible for payment of the property taxes on the leased property, the cost of the leased real property still under lease at the time qualified capital addition property is first enrolled in the name of the Taxpayer may be counted toward the measure of original cost of the preexisting facility.
2.8.3.4. The extent to which the cost of leased real or tangible personal property may qualify may be adjusted by the Tax Commissioner, depending on whether the lease payments are reflective of a fair market value lease rate. Only those costs of leased property imposed pursuant to a written lease agreement may qualify to be counted toward original cost.
2.8.3.5. Except for sale and lease back property, the cost of leased property that qualifies to be counted for purposes of determining original cost under the Act is the rent paid for the property prior to the date when any item of qualified capital addition property is enrolled in the name of the Taxpayer over the primary term of the lease or the bygone portions of the property, and any subsequent lease renewals that have been exercised.
2.8.3.6. Sale and lease back property. -- In the case of property purchased by a Taxpayer and sold to a leasing company or other entity, and then leased back to the Taxpayer which originally purchased the property (a so called sale and lease back): As with other leases, a sale/lease back lease counts toward the original cost of a preexisting facility if the property meets the criteria set forth in this section for qualification (i.e., the lease is capitalized for federal income tax purposes, or a tangible personal property lease having a primary term of 75% of useful life, or a realty lease having a 10 year or more primary term, and the lessee is required by the written terms of the lease to pay the property tax on the leased property).
2.8.3.7. If the sale/lease back lease otherwise qualifies to be counted toward the measure of original cost of the preexisting facility, the measure of original cost of the sale/lease back property to be counted as part of the cost of the preexisting facility is the original purchase price cost of the property to the Taxpayer prior to the sale of the property to the leasing company or lessor.
2.9. "Placed in service" -- Qualified capital addition property becomes a qualified capital addition to a manufacturing facility which is qualified for special valuation under the Act when the property is placed in service, without regard to the point in time when the property is purchased, physically installed or physically placed in operation. Qualified capital addition property enrolled in the name of the Taxpayer before the $50 million threshold has been exceeded shall not be treated as having been placed in service for purposes of the Act until the $50 million threshold has been exceeded and at least $50 million of the qualified capital addition property has been enrolled in the name of the Taxpayer. Qualified capital addition property in excess of $50 million that is enrolled in the name of the Taxpayer on or after the date of enrollment of property representing the $50 million threshold amount shall be treated as having been placed in service when enrolled in the name of the Taxpayer. Property assessed as construction in progress for purposes of this determination shall be treated as placed in service in the same manner as other qualified capital addition property in accordance with this subsection.
2.10. "Preexisting facility" or "preexisting manufacturing facility" -- mean a manufacturing facility, as defined in W. Va. Code '11-6F-2(b), and the attributes thereof at the manufacturing facility (excluding all qualified capital addition property) immediately prior to the enrollment of qualified capital addition property which shall become certified capital addition property when the $50 million threshold is exceeded.
2.11. "Property tax year" or "tax year" -- means the calendar year following the July first assessment day. The term "tax year" for purposes of the property tax is defined in W .Va. Code ' 11-5-3 to mean the calendar year following the July first assessment day, or in the case of a public service business assessed pursuant to W. Va. Code ' 11-6-1 et seq., the calendar year beginning on the January first assessment day.
2.12. "Qualified capital addition property" -- means property not otherwise disqualified or excluded from qualifying as certified capital addition property or as a qualified capital addition to a manufacturing facility under the provisions of the Act or this rule, which may potentially qualify as certified capital addition property and as a qualified capital addition to a manufacturing facility if the $50 million threshold and the other requirements of the Act are ultimately fulfilled by investment in the property and, after the $50 million threshold has been exceeded, qualified capital addition property means certified capital addition property and comprises the qualified capital addition to a manufacturing facility.
2.13. "Related entity" -- The term "related entity" means:
2.13.1. A corporation, partnership association or trust controlled by the Taxpayer;
2.13.2. An individual corporation, partnership, association or trust that is in control of the Taxpayer;
2.13.3. A corporation, partnership, association or trust controlled by an individual, corporation, partnership, association or trust that is in control of the Taxpayer; or
2.13.4. A member of the same controlled group as the Taxpayer.
2.13.5. For purposes of this rule, "control," with respect to a corporation means ownership, directly or indirectly, of stock possessing fifty percent (50%) or more of the total combined voting power of all classes of the stock of the corporation entitled to vote. "Control," with respect to a trust, means ownership, directly or indirectly, of fifty percent (50%) or more of the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in United States Internal Revenue Code ' 267(c), as amended, other than paragraph (3) of that section.
2.14. "Replacement property" is defined in Section 2.3.1.1.b of this rule.
2.15. "Statutory effective date" -- means the effective date of W. Va. Code '11-6F-1 et seq. W. Va. Code '11-6F-6 states that W. Va. Code '11-6F-1 et seq. is effective for tax years beginning on and after July 1, 1997. The term "tax year" for purposes of the property tax is defined in W. Va. Code '11-5-3 to mean the calendar year following the July first assessment day, or in the case of a public service business assessed pursuant to W. Va. Code '11-6-1 et seq., the calendar year beginning on the January first assessment day.
2.15.1. For Taxpayers other than public service businesses, the provisions of W. Va. Code '11-6F-1 et seq. are effective for property assessed on July 1, 1997 for the January 1 to December 31, 1998 tax year, and thereafter. Property assessed prior to July 1, 1997 is not subject to the treatment allowed under W. Va. Code '11-6F-1 et seq. For public service businesses, the provisions of the Act are effective for property assessed on January 1, 1998 for the January 1 to December 31, 1998 tax year and thereafter.
W. Va. Code R. § 110-6F-3 Application for Certification of Capital Addition Property. -- W. Va. Code '11-6F-4 requires that an application for certification of capital addition property be filed with the Tax Commissioner "on or before the date the property is first required to be reported on an annual return for ad valorem property tax purposes."
3.1. Every corporation owning a manufacturing facility located in West Virginia (except public service businesses) is required by W. Va. Code '11-1C-10 to prepare and file an annual property tax return with the Tax Commissioner between July 1st and October 1st each year listing all of its property subject to taxation including, but not limited to, construction in progress.
3.1.1. The year in which the annual return is required to be filed is the calendar year preceding the tax year. The term "tax year" is defined in W. Va. Code '11-5-3 to mean the calendar year following the July first assessment day, or in the case of a public service business assessed pursuant to W. Va. Code '11-6-1 et seq, the calendar year beginning on the January first assessment day.
3.2. Due date. -- Under W. Va. Code '11-6F-4, a person seeking to have property designated as certified capital addition property for purposes of the Act, shall make a sworn application to the State Tax Commissioner, on forms prescribed for that purpose by the Tax Commissioner, on or before the date the property is first required to be reported on an annual return for property tax purposes. Application for certification shall be treated as having been timely filed with the Tax Commissioner for purposes of the Act if the application for certification is filed on or before the first day of October of the year in which the annual return is required to be filed to report the property which the Taxpayer seeks to have certified as certified capital addition property. For public service businesses, application for certification shall be treated as having been timely filed with the Tax Commissioner for purposes of the Act if the application for certification is filed on or before the first day of May of the year in which the annual return is required to be filed to report the property which the Taxpayer seeks to have certified as certified capital addition property. Applications shall not be accepted for capital additions to a manufacturing facility enrolled in the name of the Taxpayer before the statutory effective date, i.e., for property enrolled in the name of the Taxpayer before July 1, 1997.
3.2.1. Applications for certification of multiple party projects located in polymer alliance zones. -- If qualified capital addition property investment is made in a polymer alliance zone, W. Va. Code '11-6F-2d allows one or more persons making the qualified capital addition to join in a multiparty project with a person owning or operating a preexisting manufacturing facility: (1) that is located in the polymer alliance zone where the qualified capital addition property is to be located; and (2) that has property in place in the polymer alliance zone having a total original cost before the capital addition of at least one hundred million dollars.
3.2.1.1. The multiple party project may be certified by the Tax Commissioner if the capital addition creates additional production capacity of existing or related products or feedstock or derivative products respecting the preexisting manufacturing facility and if the qualified capital addition property investment otherwise meets the requirements of the Act and this rule.
3.2.1.2. Applicants for multiple party projects to be located in a polymer alliance zone shall make a sworn application to the Tax Commissioner in accordance with W. Va. Code '11-6F-4 on forms prescribed for that purpose by the Tax Commissioner, on or before the date the property is first required to be reported to the county assessor on an annual return for property tax purposes. Application for certification shall be treated as having been timely filed with the Tax Commissioner for purposes of the Act if the application for certification is filed on or before the first day of October of the year in which the annual return is required to be filed to report the property which the Taxpayers seek to have certified as certified capital addition property.
3.2.1.2.a. An application for a multiple party project for qualified capital addition property investment in a polymer alliance zone shall be executed by all proposed participants. It shall specifically state that the participants seek certification of a multiple party project and certified capital investment to be made in a polymer alliance zone. The application shall specifically identify the particular polymer alliance zone in which the investment is to be made. It shall affirm that all participants are:
3.2.1.2.a.1. Manufacturers of polymers;
3.2.1.2.a.2. Manufacturers of the production inputs (i.e. feedstock) for the manufacture of polymers; or
3.2.1.2.a.3. Manufacturers that use polymers as production inputs in the manufacture of derivative products.
3.2.1.2.a.4. No other Taxpayers or persons shall qualify as participants in a multiple party polymer alliance zone project for purposes of the Act.
3.2.1.2.b. The application for a multiple party project shall specifically state that one of the proposed participants is a person owning or operating a manufacturing facility that predominantly (1) manufactures polymers; (2) manufactures production inputs (feedstock) for the manufacture of polymers; or (3) manufactures a derivative product which is produced from polymers. The facility must predominantly manufacture one or more of the enumerated products, but need not exclusively manufacture those products. The application shall specifically state that the preexisting manufacturing facility is (1) located in the polymer alliance zone where the qualified capital addition property is to be located and (2) has a total original cost before the capital addition of at least one hundred million dollars in place in a polymer manufacturing facility in the polymer alliance zone. The application shall specifically identify the person owning or operating that manufacturing facility and shall be executed by that person or a legal representative of that person along with all other proposed participants.
3.2.1.2.c. The application for certification of a multiple party project shall specifically state that the proposed qualified capital addition property shall create additional production capacity of existing or related polymer products produced by that manufacturing facility or feedstock or derivative products produced by that manufacturing facility.
3.2.1.2.d. The application must describe in detail the investment and business expansion plan, and shall show that the investment shall be integrated with the preexisting manufacturing facility.
3.2.1.2.e. Multiple party investments in a polymer alliance zone that are not integrated with the preexisting facility shall not be certified. In order for an investment to be integrated with a preexisting facility, the qualified capital investment property and its operation shall typically be physically, economically and functionally integrated with the preexisting manufacturing facility in accordance with the criteria set forth in this rule for integrated investments.
3.2.1.2.f. Only persons or entities that directly make substantial investment in qualified capital addition property shall qualify as project participants in a multiple party polymer alliance zone project for purposes of the Act.
W. Va. Code R. § 110-6F-4 Polymer Alliance Zone Investment
4.1. W. Va. Code '11-6F-2(d) defines the term "qualified capital addition to a manufacturing facility," and sets forth the following specifications relating to persons making investment in qualified capital addition property in a polymer alliance zone.
4.1.1. If the capital addition is made in a polymer alliance zone as designated from time-to-time by executive order of the governor, then the person making the capital addition may for purposes of satisfying the requirements of this subsection join in a multiparty project with a person owning or operating a manufacturing facility that has a total original cost before the capital addition of at least one hundred million dollars if the capital addition creates additional production capacity of existing or related products or feedstock or derivative products respecting the manufacturing facility.
4.2. The "polymer alliance zone" provision of the Act applies only to the following entities if they have a facility located in a polymer alliance zone.
4.2.1. Manufacturers of polymers;
4.2.2. Manufacturers of the production inputs (i.e. feedstocks) for the manufacture of polymers; and
4.2.3. Manufacturers that use polymers as production inputs for production of derivative products.
4.3. The provisions of the Act relating to polymer alliance zones do not apply to any other manufacturers or persons that may be located in a polymer alliance zone. However, all West Virginia manufacturers that qualify under the Act are subject to the special property tax valuation provisions of the Act without regard to whether they are located in a polymer alliance zone or elsewhere in West Virginia.
4.4. Applications for certification of multiple party projects must meet specific requirements set forth in Subdivision 3.2.1 of this rule.
W. Va. Code R. § 110-6F-5 The Point in Time When Entitlement to Special Property Tax Valuation Accrues
A Taxpayer is entitled to the special valuation allowed under the Act when at least $50 million of qualified capital addition property has been enrolled in the name of the Taxpayer. The special valuation shall be granted for the tax year when the aggregate total value of enrolled qualified capital addition property enrolled in the name of the Taxpayer has exceeded $50 million and for succeeding years in accordance with W. Va. Code '11-6F-3 and 4.
5.1. Qualified capital addition property enrolled in the name of the Taxpayer before the $50 million threshold has been exceeded shall not be treated as having been placed in service for purposes of the Act. When the first $50 million of the qualified capital addition property has been enrolled in the name of the Taxpayer, that $50 million threshold investment in the property is considered to be placed in service on the date of enrollment of the property. Qualified capital addition property in excess of $50 million that is enrolled in the name of the Taxpayer on or after the date of enrollment of property representing the $50 million threshold amount shall be treated as having been placed in service when enrolled in the name of the Taxpayer.
5.2. The qualified capital addition property as well as the initial $50 million investment in property constitutes a "qualified capital addition to a manufacturing facility" and "certified capital addition property," and shall be valued in accordance with W Va. Code '11-6F-3 beginning in the tax year for which the amount of the original cost of the investment in new qualified capital addition property in place first exceeds $50 million on the July 1 assessment day.
5.3. Example:
Construction of a capital addition to an existing eligible manufacturing facility begins on April 1, 1997. The construction shall be accomplished over a period of 24 months. It shall be completed on April 1, 1999, and the capital addition shall be placed in operation on June 1, 1999.
On July 1, 1997, three months of construction have been completed. On July 1, 1998, 15 months of construction have been completed, and more that $50 million of qualified capital addition property is in place.
Construction is completed April 1, 1999. The plant is placed in operation on June 1, 1999, and as of July 1, 1999 is assessed as a completed qualified capital addition to a manufacturing facility for tax year 2000.
5.3.1. The addition is assessed as follows for the tax years 1998, 1999 and 2000:
5.3.1.1. On July 1, 1997, 3 months of construction in progress is enrolled in the name of the Taxpayer with an appraised value equal to the fair market value of the materials in place in the construction. The $50 million threshold has not yet been reached. Therefore, for purposes of the Act, the property is not treated as having been placed in service, and the construction in progress is valued and taxed for the 1998 tax year without applying the special property tax valuation. The 1998 tax year is the January 1 to December 31 calendar year next succeeding the July 1, 1997 assessment date.
5.3.1.2. The Act does not yet apply because the $50 million threshold has not been reached. For the 1998 tax year, the assessed value is 60% of the appraised value. Typically the appraised value of construction in progress is set at the value of the materials in place without any cost of labor component.
5.3.1.3. On July 1, 1998, fifteen months of construction have been completed, and more than $50 million of construction materials have been incorporated into the construction in progress and are assessed on July 1. The $50 million threshold has now been exceeded. The property having a cost of more than $50 million, even though it has not yet been placed into operation, shall be treated as having been placed in service on July 1, 1998 for purposes of the Act. This is the date when the cost of the property enrolled in the name of the Taxpayer attributable to the project exceeds $50 million.
5.3.1.4. The physical placement of property into operation and the placement of property into service for purposes of the Act are not related concepts, and these events do not typically occur simultaneously. The term "placed in service" is defined in Section 2 of this rule. Property is placed into service for purposes of the Act when the criteria set forth in that definition have been satisfied. W. Va. Code '11-6F-4 states that the certified capital addition property receives special property tax valuation beginning at the point in time when the qualified capital addition property is "placed in service." The Taxpayer's entitlement to special property tax valuation accrues only when qualified capital addition property is "placed in service."
5.3.1.5. For the 1999 tax year (the tax year following July 1, 1998), the assessed value is the appraised value multiplied by 5% multiplied by 60%. Again, for construction in progress, the materials cost is counted in the appraised value, but not the labor cost component.
5.3.1.6. Construction is completed on April 1, 1999. The plant goes into operation on June 1, 1999. The placement of property in service for purposes of the Act bears no relationship to the date when property is placed into operation as a functioning part of the manufacturing facility.
5.3.1.7. On July 1, 1999, the construction has been completed for about 3 months. The qualified capital addition property enrolled for the first time in the name of the Taxpayer on July 1, 1999 shall be treated as having been placed in service immediately upon enrollment because the $50 million threshold was reached on July 1, 1998. New qualified capital addition property enrolled in the name of the Taxpayer after the $50 million threshold has been exceeded is treated as having been placed in service for purposes of the Act when enrolled in the name of the Taxpayer. The plant's appraised value shall now include not only the cost of the materials incorporated into the plant, but also the value of the labor for the construction. Appraised value shall increase significantly for the 2000 tax year (the calendar year after July 1, 1999).
5.3.2. The assessed value is original cost multiplied by 5% multiplied by 60%.
5.3.2.1. The cost layers created by the property enrolled in the name of the Taxpayer on July 1, 1997 and on July 1, 1998 shall have special property tax valuation treatment for the tax years 1999 through 2008 inclusive (ten years).
5.3.2.2. The value of property enrolled in the name of the Taxpayer on July 1, 1997 was below the $50 million threshold. Therefore, the qualified capital addition property enrolled in the name of the Taxpayer in that year is not treated as having been placed in service in the 1998 tax year (the next calendar year after July 1, 1997). The $50 million threshold is exceeded on July 1, 1998. The investment that makes up the $50 million amount is composed of the investment in the property enrolled in the name of the Taxpayer on July 1, 1997, as well as the investment in property enrolled in the name of the Taxpayer on July 1, 1998. Thus, the property enrolled in the name of the Taxpayer as of July 1, 1997 is treated as having been placed in service for purposes of the Act on July 1, 1998, along with the remaining investment in property comprising the $50 million amount that was enrolled in the name of the Taxpayer on July 1, 1998. This is why the property enrolled in the name of the Taxpayer on both assessment days, July 1, 1997 and July 1, 1998, is treated as placed in service on July 1, 1998. The July 1, 1998 assessment day is the assessment day for the tax year beginning on January 1, 1999. This is why the property enrolled in the name of the Taxpayer on July 1, 1997 and the property enrolled in the name of the Taxpayer on July 1, 1998 shall receive special property tax valuation under the Act beginning in tax year 1999 and ending in tax year 2008.
5.3.2.3. The cost layer created by the property enrolled in the name of the Taxpayer on July 1, 1999 shall have special property tax valuation treatment for the tax years 2000 through 2009 (ten years). The special property tax valuation treatment for both layers shall be concurrent for the years 2000 to 2008.
W. Va. Code R. § 110-6F-6 Period of Time Over Which Property is Placed in Service
6.1. W. Va. Code '11-6F-4 requires that an application for certification of capital addition property be filed with the Tax Commissioner "on or before the date the property is first required to be reported on an annual return for ad valorem property tax purposes."
6.2. A Taxpayer may apply for certification of a project investment that is to be placed in service or phased in over a period of years at a total cost of more than $50 million and comply with W. Va. Code '11-6F-4 if the application for certification is filed before the first items of investment property (either as a completed facility or as construction in progress) are required to be reported on a property tax return.
6.3. Certified capital addition property shall be placed in service as part of a defined plan for an integrated capital addition to a manufacturing facility over a definite and limited period of time based upon the Taxpayer's plan for the expansion. It may be that a Taxpayer shall undertake a development where the investment shall be made over a number of years for a single expansion. There is no set maximum time limitation period for the placement of the integrated investment property in service.
6.4. In some cases expansion may take place in phases where one portion of the plant expansion (such as a production line or unit) may be placed in operation, and other phases of the expansion shall then be later placed into operation as they are built. The Tax Commissioner shall certify multi-phase projects if the project phases can be reasonably included as components of a plan for an integrated capital addition to a manufacturing facility. However, if there is a substantial expanse of time or delay (either planned or unplanned) between the placement of one phase into operation, and the commencement of construction or operation of a succeeding phase, the Tax Commissioner may determine that the expansions resulting from those purported phased investments are not part of a plan for integrated capital additions to a manufacturing facility, but instead are a series of discrete non-integrated investments. A time gap or delay of more than 1 year shall be considered substantial.
6.4.1. If investments are determined to be discrete non-integrated investments, the property acquired with the investments shall qualify separately for special property valuation under the Act. Each non-integrated investment shall independently meet the $50 million investment threshold requirement.
6.4.2. In the case of integrated multi-phase investments, the total qualified investment combining all integrated phases of the development shall typically be included in the measure of investment in qualified capital addition property for determining whether it meets the $50 million investment threshold requirement and, once the threshold had been exceeded, toward the amount of the certified capital addition.
6.5. Plan for an integrated capital addition -- Qualified capital addition property shall be placed in service as part of a discrete, defined plan for an integrated capital addition to a manufacturing facility over a definite and limited period of time based upon the Taxpayer's plan for the expansion. The property may be placed in service over a period of less than one year, or more than one year or in phases. Phased investments or phased in investments shall be made pursuant to a plan for an integrated capital addition where one or more portions of the plant expansion (such as a production line or unit) may be placed in operation, and other phases of the expansion shall then be later placed into operation in due course as they are concurrently or consecutively constructed or installed. Although integrated phased investments that take more than one year to complete are multiple year investments, other multiple year investments may not be phased investments in that the investment in non-phased multiple year integrated investments are enrolled in the name of the Taxpayer year by year as construction in progress, and the qualified capital addition property goes into actual operation at one point in time, rather than in phases. A so called "turn key" project, where the entire operation substantially commences upon the completion of construction of the facility, would constitute a capital addition to a manufacturing facility resulting from a multiple year non-phased integrated investment.
6.5.1. Integration between qualified capital addition property and preexisting facilities. -- Although physical integration between the preexisting facility and the qualified capital addition property (to the extent that the qualified capital addition property must be located within two miles of the preexisting facility) is required in W. Va. Code '11-6F-2(d), the extent to which qualified capital addition property must be economically or functionally integrated with the preexisting facility shall vary on a case by case basis.
6.5.1.2. It is possible that qualified capital addition property may consist of an entirely new plant, operation or process which manufactures an entirely new product or product line in such a way that the qualified capital addition property may not be in any way integrated with, or related to, the preexisting facility or its operations, except for the fact that it is owned by the same person that owns the preexisting facility and it is located within two miles of the preexisting facility. In that case, the property may qualify for special property tax valuation under the Act if the property is otherwise qualified, and if the investment plan itself constitutes a discrete, definite plan for an integrated investment in qualified capital addition property.
6.5.1.3. Criteria indicating the existence of a plan for an integrated capital addition to a manufacturing facility. -- The following criteria relating to a proposed capital addition to a manufacturing facility indicate the possible existence of a plan for an integrated capital addition, but no single factor or combination of factors is dispositive of the issue of integration.
6.5.1.3.a. Evidence that an investment is to be made for the accomplishment of a single economic expansion or development, and that the purchase of any major property component or any major service component of the development shall not and would not be made unless investment in the remaining major components are also made;
6.5.1.3.b. The existence, for a substantial time prior to the enrollment of any qualified capital addition property, of a written plan for the capital addition showing: projected amounts of investment to be placed in service, a detailed schedule for construction and commencement of operations (either in phases or otherwise) and a detailed set of technical engineering and construction plans for the expansion;
6.5.1.3.c. The existence, for a substantial time prior to the enrollment of any proposed qualified capital addition property, of minutes of the Board of Directors of the Taxpayer showing the presentation of a proposal for the planned capital addition, deliberations of the Board of Directors regarding the proposed capital addition and approval of the plan by the Board;
6.5.1.3.d. The presentation of a proposal for or demonstration of the plan for the capital addition to the shareholders or owners of the Taxpayer a substantial time prior to the enrollment of any proposed qualified capital addition property;
6.5.1.3.e. Minutes of the Board of Directors showing authorization of expenditures of the Taxpayer for the capital addition;
6.5.1.3.f. idence of the encumbrance of funds in the accounting records of the Taxpayer for the capital addition;
6.5.1.3.g. Submission of filings, applications and documentation relating to the proposed project with Federal and State agencies such as the Federal Energy Regulatory Commission, the Securities Exchange Commission, or with air, water and solid waste permitting agencies and similar governmental agencies a substantial time prior to the enrollment of any proposed qualified capital addition property;
6.5.1.3.h. The preparation and submission of applications for financing with public or private sources of financial resources, the issuance of securities for the financing of the proposed capital addition, and the incurring of debt and other obligations for the financing of the project a substantial time prior to the enrollment of any proposed qualified capital addition property; and
6.5.1.3.i. Phased investments. -- In the case of phased investments, physical, engineering, economic and functional integration of the qualified capital addition property placed in service shall typically be shown for all phases of the investment. The investment phases shall be integrated with each other and typically shall be integrated with the preexisting facility.
6.5.1.3.i.1. Physical integration occurs where the qualified capital addition property is located in or on the premises of a preexisting facility or in near proximity to, or incorporated as part of, a preexisting production unit of the preexisting facility.
6.5.1.3.i.2. Engineering integration occurs where the qualified capital addition property is deliberately designed to operate in coordination with other parts of the preexisting production machinery and apparatus at the facility so as to improve productivity, quality control or overall capacity of the manufacturing operation at the facility.
6.5.1.3.i.3. Economic integration occurs where the capital addition is designed to enhance the overall economic efficiency of the preexisting manufacturing facility by either decreasing costs per unit of production, or increasing net revenues.
6.5.1.3.i.4. Factors indicating functional integration. -- The determination of whether or not the operations resulting from phased investments and preexisting facilities are functionally integrated (both between phases and between the preexisting facility and the property represented by the phased investment) turns on the facts and circumstances of the case. Several factors may evidence that the operations are functionally integrated. A non-exclusive list of these factors is found below. Generally, several functionally integrating factors shall exist in a given business, although functional integration may exist as a result of few factors or even one factor, if the factor or factors involved are particularly significant. In determining whether functional integration exists, factors should not be examined in isolation. Instead, it should be determined whether the factors which are present, in combination, result in functional integration between phased investment property and the preexisting facility. In addition, the presence or absence of any one factor or any particular factors is not necessarily determinative as to whether a functional integration exists, although absence of all of the factors described in this subsection shall generally result in a finding that functional integration does not exist.
6.5.1.3.i.4.1. Factors. -- A non-exclusive listing of factors to be considered in determining whether business segments are functionally integrated include the following:
(1) Functional integration may be indicated where the capital addition, in conjunction with other preexisting assets at the manufacturing facility is operated to send, receive, exchange or transfer products, materials or goods between the qualified capital addition property and production, storage, receiving, or shipping units of the preexisting facility. The greater the quantity of these exchanges as a percentage of overall exchanges, the more significant this factor becomes;
(2) Functional integration is indicated where there is common management of both the qualified capital addition property and the preexisting facility;
(3) Functional integration is indicated where there is a common use or transfer of technical information, know-how or research and development on a significant scale between operations of the preexisting facility and operations engaged in with the qualified capital addition property;
(4) A distribution system common to operations represented by property acquired in investment phases and to one or more production units of the preexisting facility for either production inputs or production outputs is indicative of functional integration;
(5) Evidence of functional integration may be found in use of a common distribution system under which inventory control and accounting, storage, trafficking and transportation are controlled through a common network for both the capital addition and the preexisting facility;
(6) Evidence of functional integration may be indicated by common purchasing or supply of substantial quantities of products, services, intangibles, or the like from the same source for both the preexisting facility and the qualified capital addition property, where the supply results in a significant economy of scale, or where the products, services, intangibles, or the like are not readily available from other sources and are particularly important to each component of the Taxpayer's business, both the preexisting facility and the qualified capital addition property. For purposes of this provision the term "intangibles" means and includes, but is not limited to, patents, copyrights, formulas, processes, trade secrets, trademarks, and similar property;
(7) Centralized management may indicate functional integration and exists when directors, officers or management employees jointly participate in management decisions which significantly affect the operations of the property resulting from phased capital investment and the operations of the preexisting facility. The transfer of officers or management employees between business segments may also provide evidence of centralization of management;
(7a) The mere presence of centralized management is not sufficient to support a finding that the operations relating to the property acquired through phased investment and of the preexisting facility are functionally integrated. Only those centralized management activities which contribute to the integration of the operations under consideration constitute a functionally integrating factor. Centralized efforts to fulfill investment stewardship responsibilities, such as the implementation of a uniform system of internal controls, or regulatory reporting requirements, such as the establishment of centralized information processing, are not determinative for this purpose;
(7b) When operations resulting from the phased investment in qualified capital addition property and operations of the preexisting facility are carried on in the same general line of business or constitute steps in a vertically integrated enterprise, the centralized management is more significant as a factor indicative of functional integration than in other business contexts because of the opportunity the respective operations have in making use through such central management of readily transferable knowledge and expertise between operations, and developing coordination between the operations;
(8) Other factors. -- Functional integration of business segments are generally not be evidenced by such factors (alone or in combination with other factors described by this subparagraph) as common financing, advertising, labor relations, warehousing (in the absence of a central distribution system), pension plans, insurance, and personnel recruitment. However, these factors do not clearly demonstrate that functional integration exists, they may, in combination with the factors described, demonstrate sufficient additional evidence of functional integration to warrant a finding that functional integration exists.
6.5.1.3.i.4.2. Factors accorded little weight. -- Factors such as common legal services, accounting, tax administration, and financial reporting shall generally be accorded little weight in the determination of whether operations relating from property acquired through phased investment and preexisting facilities are functionally integrated.
6.5.1.3.i.4.3. The presence of functional integration shall be presumptively shown by the presence of the following:
(1) Same general line of business: There is a strong presumption that the property acquired through phased investment and the preexisting facility are functionally integrated when the activities engaged in with the qualified capital addition property and the preexisting facility are in the same general line of business.
(2) Steps in a vertical process: The operations resulting from use of the property acquired through phased investments and the operations of the preexisting facility are functionally integrated when the qualified capital addition property and preexisting facility are used in different steps in a vertically structured enterprise. For example, a corporation which explores for and mines copper ores; concentrates, smelts and refines the copper ores and fabricates the refined copper into consumer products and distributes these products and is engaged in a vertically integrated and functionally integrated business, regardless of the fact that the various steps in the process are operated substantially independently of each other with only general supervision from the corporation's executive offices.
6.5.1.3.i.4.4. Phased investments in which qualified capital addition property placed in operation is not used either in the same general line of business as the other property attributable to other phases or in steps in a vertical process, are presumptively non-integrated investments absent a determination that the respective segments are functionally integrated.
6.5.1.3.i.4.5. In the event that one phase of a capital addition is functionally integrated with a second phase, and the second phase is functionally integrated with a third phase, the first, second and third phases constitute functionally integrated phases notwithstanding the fact that the first and third phases are not functionally integrated with each other. The preceding sentence shall not apply where the second phase's functional integration with one phase is not substantial viewed from the perspective of either of the remaining phases. All three phases, in turn, shall be treated as functionally integrated with the preexisting facility if any one of the functionally integrated phases is functionally integrated with the preexisting facility.
6.5.1.3.i.4.6. Where the Taxpayer asserts that property acquired through phased investment and the preexisting facility are functionally integrated, the Taxpayer has the burden of proof. Failure by the Taxpayer to produce requested evidence which lies within the control of the Taxpayer gives rise to a presumption that the evidence would be unfavorable if provided.
W. Va. Code R. § 110-6F-7 Period of Time Over Which Special Property Tax Valuation Applies
W. Va. Code '11-6F-4 states that the certified capital addition property receives special property tax valuation for a period of 10 years subsequent to the placement of the qualified capital addition property in service unless it is sooner removed from service or operations cease.
7.1. Qualified capital addition property enrolled in the name of the Taxpayer before the $50 million threshold has been exceeded shall not be treated as having been placed in service for purposes of the Act until the $50 million threshold has been exceeded. Property represented by the $50 million initial investment amount shall be treated as having been placed in service for purposes of the Act on the next assessment day (July 1) after the $50 million threshold is exceeded without regard to the year when the property may have been enrolled in the name of the Taxpayer, and so shall receive the special property tax valuation beginning with the tax year commencing on the next January 1 after the July 1 assessment date. Qualified capital addition property enrolled in the name of the Taxpayer after enrollment of the first $50 million of qualified capital addition property shall be treated as having been placed in service when enrolled in the name of the Taxpayer. The tax year is the calendar year following the July first assessment day.
7.2. The Taxpayer is entitled to the special property tax valuation allowed under the Act only when more than $50 million of qualified capital addition property has been placed on the property tax books of the taxing jurisdiction. The initial $50 million of qualified capital addition property and all qualified capital addition property placed on the property tax books after the $50 million threshold has been exceeded shall constitute a "qualified capital addition to a manufacturing facility" and "certified capital addition property," and the ten year valuation treatment shall then begin for that property in the tax year for which it is assessed on the next assessment day after the $50 million threshold is exceeded.
7.3. For qualified capital addition property placed in service after the $50 million threshold has been exceeded which takes more than one tax year to construct, and for qualified capital addition property placed in service after the $50 million threshold has been exceeded that is under construction in such a way that it is caught in a so called "straddle" where some of the qualified capital addition property is assessed on July 1 of one year, and the remainder of the qualified capital addition property is assessed on July 1 of the next year, the mandated valuation shall be available for each portion of the qualified capital addition property for ten years beginning in the tax year for which each portion was first assessed. This creates a layered, year by year entitlement to the special valuation under the Act for property represented by each year's investment.
7.4. For example:
7.4.1. The $50 million threshold is exceeded on or before the July 1 assessment day for tax year 1. Part of the remaining qualified capital addition property is placed in service on or before the July 1 assessment day for tax year two, and part on or before the July 1 assessment day for tax year three.
7.4.2. The initial $50 million of qualified capital addition property and the qualified capital addition property in excess of $50 million placed in service for tax year 1 shall have the special valuation under the Act for tax years 1 through 10, inclusive. The property placed in service for tax year 2 shall have the special valuation under the Act for tax years 2 through 11, inclusive. The property placed in service for tax year 3 shall have the special valuation under the Act for tax years 3 through 12, inclusive.
W. Va. Code R. § 110-6F-8 Computation of Tax
8.1. W. Va. Code '11-6F-2(d) defines the term "qualified capital addition to a manufacturing facility" as all real property and personal property, the combined original cost of all of the property which exceeds fifty million dollars to be constructed, located or installed at or within two miles of a manufacturing facility owned or operated by the person making the capital addition that has a total original cost before the capital addition of at least one hundred million dollars.
8.2. The tax is computed by valuing the qualified capital addition to a manufacturing facility at 5% of its total original cost, and then applying the 60% West Virginia assessment ratio, and then multiplying the result by the tax rate for the local taxing jurisdiction.
8.3. Illustration: If a $300 million investment were made in 1997 by a qualified entity with $100 million or more of original cost investment in place in West Virginia, and if the investment in new qualified capital addition property otherwise qualified for special valuation under the Act, the tax liability would be calculated as follows:
Property with an original cost of $300 million would be valued at 5% of original cost for property tax purposes. $300 million X 5% = $15 million salvage value $15 million X 60% assessment ratio = $9 million assessed value The 1997 property tax rate for class three property in the particular local taxing jurisdiction shall be hypothetically assumed to be 2.0732%. $9 million X 2.0732% tax rate = $186,588 Annual Tax on the $300 Million Capital Addition Property 110CSR6F
Series 10 Exceptions To confidentiality Of taxpayer information, disclosure Of certain taxpayer information
W. Va. Code R. § 110-10-1 General
1.1. Scope. -- These legislative regulations explain and clarify W. Va. Code '11-10-5s.
1.2. Authority. -- W. Va. Code '11-10-5.
1.3. Filing Date. -- April 15, 1992.
1.4. Effective Date. -- April 15, 1992.
W. Va. Code R. § 110-10-2 to '110-10-5r. Reserved For Future Use
W. Va. Code R. § 110-10-5s Disclosure Of Certain Taxpayer Information. 5s.1. Exceptions to confidentiality. 5s.1.1. Providing that such disclosure can be made without directly or indirectly revealing the amount of credit available to any particular taxpayer or tax return information as defined in W. Va. Code '11-10-5d, other than the name and address of the taxpayer, the Tax Commissioner shall annually publish in the State Register on or before December 31, 1992 and on or before December 31 of each succeeding year, the name and address of every taxpayer receiving any tax credit allowed under articles 13C, 13D, 13E, 13F, 13G, or 13H of West Virginia Code, Chapter 11, for any tax year beginning on or after July 1, 1991, and under W. Va. Code '5E-1-1 et seq., for any tax year beginning on or after January 1, 1991. See W. Va. Code '5E-1-8(g). The Tax Commissioner shall publish in the State Register, along with the name and address of such taxpayers, the amount of credit asserted on a tax return after July 1, 1991, by amount category, for each such taxpayer. 5s.1.1.1. The categories by dollar amount of credit received, shall be as follows: 5s.1.1.1.a. More than one dollar, but not more than fifty thousand dollars; 5s.1.1.1.b. More than fifty thousand dollars, but not more than one hundred thousand dollars; 5s.1.1.1.c. More than one hundred thousand dollars, but not more than two hundred fifty thousand dollars; 5s.1.1.1.d. More than two hundred fifty thousand dollars, but not more than five hundred thousand dollars; 5s.1.1.1.e. More than five hundred thousand dollars, but not more than one million dollars; 5s.1.1.1.f. More than one million dollars. 5s.1.1.2. Format. - The disclosure mandated by W. Va. Code '11-10-5s and this Section shall be substantially accomplished by constructing separate lists, each based upon the particular provision of the West Virginia Code, as set forth in Section 5s.1.1 of these regulations above, under which credit was allowed, and then setting forth the names and addresses of the taxpayers by amount category as set forth in Section 5s.1.1.1 of these regulations above. 5s.1.1.2.a. Example:
Taxpayers Asserting A Tax Credit Under W. Va. Code '11-13C For A Tax Year Beginning On Or After July 1, 19xx Within The Following Amount Categories:
More than $1.00, but not more than $50,000:
Taxpayer A Address Taxpayer B Address Taxpayer C Address Taxpayer D Address Taxpayer E Address More than $50,000, but not more than $100,000:
Taxpayer F Address Taxpayer G Address Taxpayer H Address Taxpayer I Address More than $100,000, but not more than $250,000:
Taxpayer J Address Taxpayer K Address Taxpayer L Address Taxpayer M Address etc.
A separate list would be drawn up for taxpayers taking a tax credit under W. Va. Code '11-13D. For example:
Taxpayers Asserting A Tax Credit Under W. Va. Code '11-13D For A Tax Year Beginning On Or After July 1, 19xx Within The Following Amount Categories:
More than $1.00, but not more than $50,000:
Taxpayer A Address Taxpayer B Address Taxpayer C Address Taxpayer D Address Taxpayer E Address More than $50,000, but not more than $100,000:
Taxpayer F Address Taxpayer G Address Taxpayer H Address Taxpayer I Address More than $100,000, but not more than $250,000:
Taxpayer J Address Taxpayer K Address Taxpayer L Address Taxpayer M Address etc. 5s.1.1.2.b. Management information services facilities tax credit. - By reason of the provisions of W. Va. Code '11-13D-3c(g), taxpayers receiving the management information services facilities tax credit under W. Va. Code article 13D, chapter 11 will be listed separately from other taxpayers receiving credit under W. Va. Code article 13D, chapter 11 as taxpayers receiving credit under W. Va. Code '11-13D-3c. 5s.2. Compromises of tax disputes. 5s.2.1. The Tax Commissioner shall publish in the State Register the following information regarding any compromise of a pending civil tax case that occurs on or after March 7, 1991 in which the Tax Commissioner is required to seek the written recommendation of the Attorney General and the Attorney General has not recommended acceptance of such compromise or when the Tax Commissioner compromises any civil tax case for an amount that is more than two hundred and fifty thousand dollars less than the assessment of tax owed made by the Tax Commissioner: 5s.2.1.1. The names and addresses of taxpayers that are parties to such compromise; 5s.2.1.2. A summary of such compromise; 5s.2.1.2.a. The summary of compromise shall contain:
(1) The name and address of the taxpayers who are parties to the dispute;
(2) The amount for which the controversy was compromised;
(3) The amount of the tax assessed.
(4) The article and chapter, or articles and chapters, of the West Virginia Code under which the disputed amount purportedly arose;
(5) The taxable periods to which the disputed tax liability purportedly relates.
(6) A basic summary of the legal issues involved in the dispute.
(7) The basis and reasoning for the compromise. 5s.2.1.3. Any written advice or recommendation rendered by the Attorney General regarding such compromise; and 5s.2.1.4. Any written advice or recommendation rendered by the Tax Commissioner's staff. 5s.2.2. The Tax Commissioner may disclose any relevant return information to the prosecuting attorney for the county in which venue lies for a criminal tax offense when there is reasonable cause, based upon and substantiated by such information, to believe that a criminal tax law has been or is being violated. 5s.2.3. The Tax Commissioner may enter into written exchange of information agreements with the Commissioners of Labor, Employment Security and Workers' Compensation to disclose and receive return information. Such agreements shall be published in the State Register and shall only be for the purpose of facilitating premium collection, tax collection and facilitating licensure requirements directly enforced, administered or collected by the respective agencies. The provisions of this Section shall not be construed to preclude or limit disclosure of tax information authorized by any provision of the West Virginia Code. Any confidential return information so disclosed shall remain confidential in the hands of such other division (the Commissioners of Labor, Employment Security and Worker's Compensation) to the extent provided by W. Va. Code '11-10-5d and by other applicable federal or State laws. 5s.3. Federal and State return information confidential. - Notwithstanding any other provisions of this Section, no return information made available to the Tax Commissioner by the Internal Revenue Service or any department or agency of any other state may be disclosed to another person in any manner inconsistent with the provisions of Section 6103 of the Internal Revenue Code of 1986, as amended, or of such other states' confidentiality laws.
Series 10B Payment Of Taxes By Credit Card Or Debit Card
W. Va. Code R. § 110-10B-1 General
1.1. Scope. -- This rule provides necessary direction relative to the payment by credit card or debit card of taxes administered by the State Tax Department.
1.2. Authority. -- W. Va. Code §§11-10-5 and 11-10-5n(e).
1.3. Filing Date. -- April 4, 2002.
1.4. Filing Date. -- May 1, 2002.
W. Va. Code R. § 110-10B-2 Definitions
When used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
2.1. “Code” means the Code of West Virginia of one thousand nine hundred thirty-one, as amended.
2.2. “Commissioner” or “Tax Commissioner” means the West Virginia Tax Commissioner or his or her delegate.
2.3. “Credit card” means any credit card as defined in section 103(k) of the Truth in Lending Act, 15 U.S.C. 1602(k), including any credit card, charge card or other credit device issued for the purpose of obtaining money, property, labor or services on credit.
2.4. “Debit card” means any accepted card or other means of access as defined in section 903(1) of the Electronic Funds Transfer Act, 15 U.S.C. 1693a(1), including any debit card or similar device or means of access to an account issued for the purpose of initiating electronic fund transfers to obtain money, property, labor or services.
2.5. “Department” or “Tax Department” means the West Virginia State Tax Department.
2.6. "Person" includes, but is not limited to, any individual, firm, partnership, limited partnership, copartnership, joint adventure, association, corporation, municipal corporation, organization, receiver, estate, trust, guardian, executor, administrator, and also any officer, employee or member of any of the foregoing persons who, as an officer, employee or member, is under a duty to perform or is responsible for the performance of an act prescribed by the provisions of W. Va. Code §11-10-1 et seq., and the provisions of any of the other articles of this Code which impose taxes administered by the Tax Commissioner.
2.7. "Regulated financial corporation" means:
2.7.1. An institution, the deposits, shares or accounts of which are insured under the Federal Deposit Insurance Act;
2.7.2. An institution that is a member of a federal home loan bank;
2.7.3. Any other bank or thrift institution incorporated or organized under the laws of a state that is engaged in the business of receiving deposits;
2.7.4. A credit union incorporated and organized under the laws of this state;
2.7.5. A production credit association organized under 12 U.S.C. 2071;
2.7.6. A corporation organized under 12 U.S.C. 611 through 631 (an edge act corporation);
2.7.7. A federal or state agency or branch of a foreign bank (as defined in 12 U.S.C. 3101); or
2.7.8. A corporation which derives more than fifty percent of its gross business income from one or more of the following activities:
2.7.8.a. Making, acquiring, selling or servicing loans or extensions of credit which includes: secured or unsecured consumer loans; installment obligations; mortgages or other loans secured by real estate or tangible personal property; credit card loans; secured and unsecured commercial loans of any type; and loans arising in factoring;
2.7.8.b. Leasing or acting as an agent, broker or advisor in connection with leasing real and personal property that is the economic equivalent of an extension of credit;
2.7.8.c. Operating a credit card business; or
2.7.8.d. Receiving, maintaining or otherwise handling deposits.
2.8. "Tax" or "taxes" includes taxes administered under the authority of W. Va. Code §11-10-1 et seq., additions to tax, penalties and interest.
2.9. "Taxpayer" means any person required to file a return for any tax administered under W. Va. Code §11-10-1 et seq., or any person liable for the payment of any tax administered under W. Va. Code §11-10-1 et seq.
W. Va. Code R. § 110-10B-3 Payments by Credit Card and Debit Card
3.1. Taxes administered by the Tax Department may be paid by credit card or debit card. Payment of taxes by credit card or debit card is voluntary on the part of the taxpayer.
3.1.1. Only credit cards or debit cards approved by the Commissioner may be used to pay West Virginia taxes. The Commissioner shall provide a listing of the approved credit cards and debit cards.
3.1.2. Only the tax liabilities specified by the Commissioner may be paid by credit card or debit card.
3.1.3. All payments by credit cards and debit cards shall be made in the manner and in accordance with the forms, instructions and procedures prescribed by the Commissioner.
3.1.4. This rule applies only to payments by credit card and debit card. Payments by electronic funds transfer other than payment by credit card or debit card are not subject to this rule.
3.2. A payment of tax by credit card or debit card shall be considered made on the date when the charge was made; Provided, That the issuer of the credit card or debit card properly authorizes the transaction, the payment is actually received by the Department in the ordinary course of business and the payment is not returned pursuant to section 5 of this rule.
3.2.1. If a taxpayer uses an approved credit card or debit card to pay a tax lien created under the provisions of W. Va. Code §11-10-12, the lien shall not be released until all of the following have occurred:
3.2.1.a. The payment of tax is actually received by the Department;
3.2.1.b. The payment is credited against the taxpayer’s account that is the basis for the tax lien; and
3.2.1.c. The time for error resolution as provided in section 5 of this rule has elapsed.
3.3. Continuing liability for payment of tax.
3.3.1. A taxpayer who tenders payment of taxes by credit card or debit card is not relieved of liability for the taxes until the payment is actually received by the Commissioner and the time for error resolution as provided in section 5 of this rule has elapsed. This continuing liability of the taxpayer is in addition to, and not in lieu of, any liability of the issuer of the credit card or debit card or regulated financial corporation imposed pursuant to subdivision 3.3.2 of this rule.
3.3.2. If a taxpayer has tendered a payment of taxes to the Department by credit card or debit card, and the credit card or debit card transaction has been expressly guaranteed by the issuer of the card or a regulated financial corporation, and the Department is not duly paid, the Department shall have a lien for the guaranteed amount of the transaction upon all the assets of the card issuer or corporation making the guarantee. The unpaid amount shall be paid out of the assets in preference to any other claims whatsoever against the guaranteeing corporation, except the necessary costs and expenses of administration and the reimbursement of the State of West Virginia for the amount expended in the redemption of the circulating notes of the card issuer or regulated financial corporation.
W. Va. Code R. § 110-10B-4 Resolution of Errors Related to Paying Taxes by Credit Card or Debit Card
4.1. To the extent permitted by federal law, any payment of taxes by credit card or debit card are not subject to section 161 of the Truth in Lending Act, 15 U.S.C. 1666, or section 908 of the Electronic Fund Transfer Act, 15 U.S.C. 1693f, or any similar provisions of state law, for the purpose of resolving errors if the error alleged relates to the underlying tax liability.
4.2. To the extent permitted by federal law, any payment of taxes under the authority of W. Va. Code §11-10-1 et seq. is not subject to Section 170 of the Truth in Lending Act, 15 U.S.C. § 1666I, or any similar provisions of state law.
4.3. Payments of taxes by credit card or debit card are subject to section 161 of the Truth in Lending Act, 15 U.S.C. 1666, section 908 of the Electronic Fund Transfer Act, 15 U.S.C. 1693f, or Section 170 of the Truth in Lending Act, 15 U.S.C. § 1666I, or any similar provisions of state laws, for the resolution of errors relating to the credit card or debit card account, but not for the purpose of resolving errors, disputes or adjustments relating to the underlying tax liability. The resolution procedures apply to the following types of errors:
4.3.1. An incorrect amount posted to the taxpayer's account as a result of a computational error, numerical transposition, or similar mistake;
4.3.2. An amount posted to the wrong taxpayer's account;
4.3.3. A transaction posted to the taxpayer's account without the taxpayer's authorization; and
4.3.4. Similar types of errors that would be subject to resolution under these procedures in ordinary commercial transactions.
4.4. Any error in the payment of taxes by credit card or debit card that does not relate to the underlying tax liability is a legal issue only between the taxpayer and the regulated financial corporation or issuer of the credit card or debit card.
4.5. The resolution of any issue relating to the erroneous payment of taxes by credit card or debit card shall not include the resolution of any errors, disputes or adjustments relating to the underlying tax liability.
4.5.1. The resolution of any issue involving any error, dispute or adjustment relating to the underlying tax liability is an issue only between the taxpayer and the Department, and it shall be resolved through the assessment or petition for refund process and administrative procedure authorized in W. Va. Code §11-10-1 et seq.
W. Va. Code R. § 110-10B-5 Return of Funds Pursuant to Error Resolution Procedures
5.1. If a taxpayer is entitled to a return of funds pursuant to the error resolution procedures of section 4 of this rule, the Commissioner may, in the Commissioner's sole discretion, effect the refund by arranging for a credit to the taxpayer's account with the issuer of the credit card or debit card or any other regulated financial corporation or person that participated in the transaction in which the error occurred.
5.2. If as a result of participating in the administrative procedures authorized in W. Va. Code §11-10-1 et seq. a taxpayer is entitled to a refund of taxes paid, the refund shall be paid to the taxpayer absent instructions from the taxpayer to the contrary.
W. Va. Code R. § 110-10B-6 Fees or Charges
6.1. The Department may not impose any fee or charge on taxpayers making payment of taxes by credit card or debit card. This section does not prohibit the imposition of fees or charges by issuers of credit cards or debit cards or by any other regulated financial corporation or person participating in the credit card or debit card transaction. The Department may not receive any part of any fees that may be charged.
W. Va. Code R. § 110-10B-7 Authority to Enter Into Agreements
7.1. The Commissioner may enter into agreements related to receiving payments of tax by credit card or debit card. However, the Commissioner shall use the West Virginia State Treasurer’s contracts and system for receiving payments by credit card or debit card. The Department may not pay any fee or charge or provide any other monetary consideration under the contracts for the payments. The Treasurer is not authorized to pay any fee or provide any consideration for receiving payments of taxes or fees under those contracts.
W. Va. Code R. § 110-10B-8 Use and Disclosure of Information Relating to Payment of Taxes by Credit Card and Debit Card
8.1. Information obtained by any person other than the taxpayer in connection with payment of taxes by a credit card or debit card shall be treated as confidential, and is covered under the confidentiality provisions of W. Va. Code §11-10-5d, regardless whether the information is received from the Department or from any other person, including the taxpayer. No person other than the taxpayer shall use or disclose the information except as follows:
8.1.1. Card issuers, regulated financial corporations, or other persons participating in the credit card or debit card transaction may use or disclose the information for the purpose and in direct furtherance of servicing cardholder accounts, including the resolution of errors in accordance with Section 4 of this rule. This authority includes the following:
8.1.1.a. Processing of the credit card or debit card transaction, in all of its stages through and including the crediting of the amount charged on account of tax to this State;
8.1.1.b. Billing the taxpayer for the amount charged or debited with respect to payment of the tax liability;
8.1.1.c. Collection of the amount charged or debited with respect to payment of the tax liability; and
8.1.1.d. Returning funds to the taxpayer.
8.1.2. Card issuers, regulated financial corporations or other persons participating in the credit card or debit card transaction may use and disclose the information only for the purpose and in direct furtherance of any of the following activities:
8.1.2.a. Assessment of statistical risk and profitability;
8.1.2.b. Transfer of receivables or accounts or any interest therein;
8.1.2.c. Audit of account information;
8.1.2.d. Compliance with Federal, State, or local law; and
8.1.2.e. Cooperation in properly authorized civil, criminal, or regulatory investigations by Federal, State, or local authorities.
8.1.3. Notwithstanding the foregoing, use or disclosure of information relating to credit cardand debit card transactions for purposes related to any of the following is not authorized:
8.1.3.a. Sale or exchange of the information separate from the underlyingreceivable or account;
8.1.3.b. Marketing for any purpose, for example, marketing tax- related products or services, or marketing any product or service that targets those who have used a credit card or debit card to pay taxes; or
8.1.3.c. Furnishing the information to any credit reporting agency or credit bureau, except with respect to the aggregate amount of a cardholder's account, with the amount attributable to payment of taxes not separately identified.
8.2. Credit card and debit card account numbers in the possession of the Commissioner or the State Treasurer that have been submitted in payment of state taxes are confidential and exempt from the provision of W. Va. Code §29b-1-1, et seq. (Freedom of Information Act).
8.3. The Commissioner may disclose to card issuers, regulated financial corporations or other involved persons any information the Commissioner considers necessary in connection with processing credit card and debit card transactions to effectuate payment of taxes, billing or collection of the amounts charged or debited, including resolution of errors relating to the credit card or debit card account.
110CSR10B
110CSR10B
Series 10D Use and Acceptance of Electronic Records
W. Va. Code R. § 110-10D-1 General
1.1. Scope. -- This procedural rule sets forth the practice and procedure established by the West Virginia State Tax Department for the use and acceptance of electronic records and electronic records that require the signature of an authorized person.
1.2. Authority. -- W. Va. Code §§11-10-5, and 11-10-5z(b) and 39A-3-2.
1.3. Filing Date. -- December 23, 2015.
1.4. Effective Date. – January 25, 2016.
W. Va. Code R. § 110-10D-2 Definitions
When used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
2.1. “Accept an electronic signature” means to accept an electronic record which requires the signature of an authorized person when that electronic record contains an electronic signature in lieu of an original signature.
2.2. "Code" means the Code of West Virginia, one thousand nine hundred thirty-one, as amended.
2.3. “Commissioner” means the State Tax Commissioner or his or her delegate.
2.4. “Department” or “Tax Department” means the West Virginia State Tax Department.
2.5. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or any other similar capabilities.
2.6. "Electronic filing" or "e-filing" means filing using electronic technology such as computer modem, magnetic media, optical disk, facsimile machine, telephone or other technology approved by the Tax Commissioner, in such manner as he or she deems acceptable.
2.7. “Electronic record” means a record created, generated, sent, communicated, received or stored by electronic means, but does not include any record transmitted by facsimile.
2.8. “Electronic signature” means an electronic sound, symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record. Electronic signatures include, but are not limited to:
2.8.a. A “digital mark” which consists of a electronic code indicating approval or confirmation which is entered into a protected digital record following access protocols which identify the user and require a password, personal identification number, encrypted card or other security device which restricts access to one or more authorized individuals;
2.8.b. A "digital signature" which consists of a message transformed using an asymmetric cryptosystem so that a person having the initial message and the signer's public key can accurately determine whether the transformed message was created using the private key that corresponds to the signer’s public key and whether the initial message has been altered since the message was transformed; and,
2.8.c. A "digitized signature" which may consist of a handwritten signature entered on a recording device utilizing electronic recording software which simultaneously converts the image created to a digital record and attaches it to the electronic document to which it relates or a graphic image file of a person’s signature and is attached to the electronic document to which it relates may be used for illustrative purposes and shall not be construed as or considered an “electronic signature” in the context of this rule.
2.9. "Income tax preparer" means any person who prepares, in exchange for compensation, or who employs another person to prepare, in exchange for compensation, all or a substantial portion of any return for a taxpayer for the tax imposed by this article and who is identified as the preparer for the taxpayer on the return. A person who only performs those acts described in clauses (i) through (iv) of Section 7701(a)(36)(B) of the Internal Revenue Code with respect to the preparation of a return for a trust or estate for which he or she is a fiduciary or a return for a partnership of which he or she is a partner is not an income tax preparer for purposes of this section.
2.10. "Person" shall mean, but is not limited to, any individual, firm, partnership, limited partnership, copartnership, joint adventure, association, corporation, municipal corporation, organization, receiver, estate, trust, guardian, executor, administrator, and also any officer, employee or member of any of the foregoing who, as such officer, employee or member, is under a duty to perform or is responsible for the performance of an act prescribed by the provisions of Article 10, Chapter 11 of the Code or the provisions of any of the other articles of Chapter 11 that impose taxes administered by the Commissioner, unless the intention to give a more limited or broader meaning is disclosed by the context in which the term is used.
2.11. "Tax" or "taxes" means the taxes specified in W. Va. Code §11-10-3, additions to tax, penalties and interest, unless the intention to give the same a more limited meaning is disclosed by the context.
2.12. "Tax preparation software" means any computer software program intended for accounting or tax return preparation.
2.13. "Taxpayer" means any person required to file a return for any tax administered under Article 10, Chapter 11 of the Code, or any person liable for the payment of any tax administered under that article.
2.14. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form, and includes, but is not limited to, a message, document, tax form, tax return or other instrument that is transmitted electronically from an authorized officer or other person to the Department to meet the requirements of law or to execute an essential transaction. An informal communication will not be considered an electronic record for purposes of this rule.
2.15. “West Virginia Taxpayer Signature PIN” is a personal identification number that is assigned by the Commissioner to a taxpayer electing to file tax returns electronically, that serves to verify the identity of the taxpayer filing the return as the individual authorized so to do, and that satisfies the requirement of a signature on the return.
W. Va. Code R. § 110-10D-3 Electronic Records That May be Filed Electronically
3.1. The Commissioner shall designate those Tax Department forms and applications that will be accepted for filing as electronic records.
3.2. The tax types which have forms that may be filed electronically are listed in Appendix 1 to this rule. The Commissioner may designate additional forms and applications that may be filed electronically.
3.3. Taxpayers will have access to the designated forms and applications through the Department website.
W. Va. Code R. § 110-10D-4 Acceptance of Electronic Signatures
4.1. The Commissioner shall designate the type or types of electronic signature that shall be used when electronically filing Tax Department forms and applications.
4.2. Where the Commissioner has permitted the filing of a return by electronic means, the taxpayer may, in lieu of filing a related document on which a signature is affixed, provide the taxpayer’s name and such other information as the Commissioner may require in order to provide sufficient identification of the taxpayer, or provide both the taxpayer’s name and personal identification information and the taxpayer’s West Virginia Taxpayer Signature PIN.
4.2.a. The West Virginia Taxpayer Signature PIN is a personal identification number that will be assigned by the Department to a person filing an electronic record requiring an authorized signature.
4.2.b. The Department will establish a secure registry of persons authorized to sign filings and records using a West Virginia Taxpayer Signature PIN and will utilize that secure registry for verification of the identity of the signer.
4.2.c. A taxpayer that seeks to become authorized to file with the Department using a West Virginia Taxpayer Signature PIN shall first file with the Department a signed Form WV/EFT-1, Application for West Virginia Taxpayer Signature PIN, stating that the taxpayer:
4.2.c.1. Will not share with any other person the password, code or other security key required for use of the PIN;
4.2.c.2. Agrees that use of the PIN represents confirmation of a record;
4.2.c.3. Agrees to notify the Department immediately upon becoming aware that security has been compromised; and
4.2.c.4. Understands that the provisions of W. Va. Code §61-3C-10 prescribes the penalties for the unauthorized disclosure of a West Virginia Taxpayer Signature PIN or other confidential security information.
4.2.d. Each authorized person shall utilize a unique number or other personal authorization which shall be encrypted and which shall indicate the approval of that person to file electronically.
4.2.e. Upon receipt of the signed Form WV/EFT-1 required in subdivision 4.2.c of this rule, the Department shall issue to an authorized person a West Virginia Taxpayer Signature PIN and shall enter that PIN, name and date of authorization into the secure registry.
4.3. The stating by a person of the taxpayer’s name or the providing of a West Virginia Taxpayer Signature PIN, or both, when that person is requested so to do, shall have the same validity, status and consequences as an actual signature by that person on a paper return that is filed with the Department.
4.4. A return that is filed by electronic means shall be treated as filed on the date the electronic return is transmitted if: 1) the return enters an information processing system that the Commissioner has designated or uses for the purpose of receiving electronic records and from which the Commissioner is able to retrieve the electronic record transmitted; and 2) the return is in a form capable of being processed by that system.
4.4.a. An electronic return will only be deemed as timely filed if it is received by the Department in a retrievable format through a designated information processing system on or before the statutory due date of the return.
4.4.b. Any payment/remittance made to the Department prior to the electronic filing of a return may be made through the use of any commercially acceptable means and shall be deemed to be received on the date the payment is actually received by the Department.
4.4.c. Any payment/remittance made concurrently with the filing of an electronic return shall be paid using electronic funds transfer and shall be deemed to be received by the Commissioner on the date the funds are actually transferred to the Department.
4.4.d. Any payment/remittance made to the Department subsequent to the electronic filing of a return may be made through the use of any commercially acceptable means and shall be deemed to be received on the date the payment is actually received by the Department.
4.5. Where a signature is required to be verified or made under oath, the requirement is satisfied if the electronic signature of the person authorized to sign the return is attached to or logically associated with the return.
4.6. Nothing in this rule shall be construed to require the Department to accept electronic signatures in lieu of written signatures.
4.7. For purposes of electronically filing a State income tax return, nothing in this rule shall prevent a taxpayer from using and the Commissioner from accepting the same personal identification number chosen and used by the taxpayer for the purpose of filing his federal income tax return.
4.8. For purposes of electronically filing all other state tax returns, nothing in this rule shall prevent a taxpayer from using and the Commissioner from accepting the same personal identification number chosen and used by the taxpayer for the purpose of filing his federal income tax return; Provided, that the personal identification number is registered in the Department’s secure registry prior to being used to electronically file such a return with the Department.
W. Va. Code R. § 110-10D-5 Who May Electronically Sign
5.1. Any individual who is authorized by statute to sign a paper return may use an electronic signature to file an electronic record.
5.2. Any authorized person using a third party to prepare and file an electronic record may grant signature authority to that third party.
5.2.a. A grant of signature authority allows a third party to input the taxpayer’s personal identification number when filing electronic records on behalf of the taxpayer.
5.2.b. A grant of signature authority by an authorized person to a third party must be evidenced by a written record.
5.2.c. Prior to filing an electronic record, Form WV/EFT-2, Authorization Granting Electronic Signature Authority to a Third Party, must first be filed with and received by the Department so as to evidence the grant of signature authority to a third party.
5.3. Taxpayers filing joint returns must each register for a separate West Virginia Taxpayer Signature PIN.
5.4. Each taxpayer filing a joint return must sign the electronic return using their assigned West Virginia Taxpayer Signature PIN.
5.5. For a third party to file an electronic return on behalf of joint filers, signature authority must be granted to that third person by each individual taxpayer for whom the third party will file the return.
5.5.a. Prior to electronically filing a joint return, a signed Form WV/EFT-2 must first be filed with the Department by each individual taxpayer granting signature authority to a third party.
5.6. Where a taxpayer has granted signature authority to a third party to electronically file that taxpayer’s federal income tax return and an IRS e-file Signature Authorization form was properly executed by the parties, the taxpayer may forego filing a copy of that IRS e-file Signature Authorization with the Department’s secure registry; provided, that the third party retains the completed copy of the IRS e-file Signature Authorization in their records for three years.
5.7. Any taxpayer granting signature authority to a third party for filing purposes may revoke that authority by filing with the Department a signed statement evidencing such revocation.
5.7.a. A revocation of signature authority shall take effect on the date that such written revocation is actually received by the Department.
5.7.b. Once signature authority is revoked, the third party will no longer be allowed to file on behalf of that taxpayer.
5.7.c. A taxpayer wishing to reassign signature authority to a third party will need to both register for a new West Virginia Taxpayer Signature PIN and file a new Form WV/EFT-2 with the Department.
W. Va. Code R. § 110-10D-6 Restrictions on Electronic Filing
6.1. Any taxpayer or any person filing on behalf of a taxpayer that elects to use the electronic filing and electronic signature procedures as established in this rule shall be presumed to understand and agree that the provisions of W. Va. Code §11-9-1 et seq. prescribes the penalties for the abuse of those procedures.
6.1.a. For example, a taxpayer that knowingly files a false or fraudulent electronic return is subject to the same penalties ascribed in W. Va. Code §11-9-10 as is a taxpayer that knowingly files a false or fraudulent paper return.
6.2. Each abuse of any procedure established herein constitutes a separate and distinct violation of this rule and subjects the taxpayer or person filing on behalf of the taxpayer to a new and separate penalty as prescribed in W. Va. Code §11-9-1 et seq.
6.3. Upon discovery of a second violation of the procedures established herein, the West Virginia Taxpayer Signature PIN assigned that taxpayer shall be deactivated for the current and two immediately succeeding tax years. This deactivation shall occur in addition to the imposition of an appropriate penalty prescribed in W. Va. Code §11-9-1 et seq.
6.4. A taxpayer whose West Virginia Taxpayer Signature PIN has been deactivated shall only be permitted to apply to reactivate the taxpayer’s West Virginia Taxpayer Signature PIN if, after the full penalty period, the taxpayer agrees in writing to desist from further violations of this rule. The Commissioner shall retain discretion when determining whether to reactivate a West Virginia Taxpayer Signature PIN.
6.4.a. If, after having the West Virginia Taxpayer Signature PIN reactivated by the Commissioner, a taxpayer again violates the procedures described herein, that taxpayer in addition to being subject to the appropriate penalty prescribed in W. Va. Code §11-9-1 et seq. shall have their assigned West Virginia Taxpayer Signature PIN revoked.
6.5. Where the abuse of procedures is determined to be the fault of a person acting with authority to file on behalf of a taxpayer but not the fault of the taxpayer, that taxpayer may apply for a new West Virginia Taxpayer Signature PIN so as to facilitate the electronic filing of the taxpayer’s return by either the taxpayer or a person authorized by the taxpayer; provided, that the taxpayer applying for a new PIN must agree not to grant signature authority to a third party that, in previously filing the taxpayer’s return, abused the procedures established herein.
6.5.a. A person that has been granted signature authority to file on behalf of a taxpayer and that is found to have abused the procedures of this rule on more than one occasion shall have its signature authority revoked and shall not be approved by the Commissioner to file any future electronic returns on behalf of any taxpayer.
W. Va. Code R. § 110-10D-7 Implementation
7.1. This rule shall be implemented when the Department has developed and demonstrated the capacity to properly administer the rule.
W. Va. Code R. § 110-10D-8 Contact Information
8.1. For additional information on electronic filings and electronic signatures, contact:
Director, Revenue Division State Tax Department 1001 Lee St., E., Revenue Center Charleston, WV 25301 (304) 558-8500 Taxwvefile@wv.us
W. Va. Code R. § 110-10D-9 Electronic filing required for certain persons
9.1. W. Va. Code §11-10-5z(a) mandates electronic filing for taxes administered under W. Va. Code §11-10-1 et seq. for tax years beginning on or after January 1, 2009, for those Taxpayers that had annual remittance of any single tax equal to or greater than $100,000 during the immediately preceding taxable year: Provided, That for tax years beginning on or after January 1, 2013, electronic filing is mandated for all taxes administered under W. Va. Code §11-10-1 et seq. for those Taxpayers that had annual remittance for any single tax type equal to or greater than $50,000 during the immediately preceding taxable year: Provided however, That for tax years beginning on or after January 1, 2014, electronic filing is mandated for all taxes administered under W. Va. Code §11-10-1 et seq. for those Taxpayers that had annual remittance for any single tax type equal to or greater than $25,000 during the immediately preceding taxable year: Provided further, That for tax years beginning on or after January 1, 2015, for any returns required to be filed prior to January 1, 2016, electronic filing is mandated for all taxes administered under W. Va. Code §11-10-1 et seq. for those Taxpayers that had annual remittance for any single tax type equal to or greater than $10,000 during the immediately preceding taxable year and for any returns required to be filed on or after January 1, 2016, electronic filing is mandated for all taxes administered under W. Va. Code §11-10-1 et seq. for those Taxpayers that had annual remittance for any single tax type equal to or greater than $25,000 during the immediately preceding taxable year: and Provided further, That the Tax Commissioner shall have the authority to determine the tax types for which electronic filing is not required. W. Va. Code §11-10-5z states that “The Tax Commissioner shall implement the provisions of W. Va. Code §11-10-5z using any combination of notices, forms, instructions and rules that he or she determines necessary.” The Tax Commissioner hereby deems it necessary to phase in this W. Va. Code §11-10-5z electronic filing mandate over a time span which aligns with development and implementation by the Tax Department of computer systems and tax administration systems currently in progress.
9.1.a. Implementation of the §11-10-5z electronic filing provision will be phased in over a period of time based on the ability of the Tax Department to accept electronic filings for the taxes administered under W. Va. Code §11-10-1 et seq.
9.2. Unless otherwise specifically required by the Tax Commissioner, and subject to the technical requirements of the Tax Department, taxpayers subject to the requirements of W. Va. Code §11-10-5z, may voluntarily file required returns electronically for tax years beginning January 1, 2009.
9.3. Unless otherwise specifically required by the Tax Commissioner, taxpayers subject to the requirements of W. Va. Code §11-10-5z, that are required to file a return with attached schedules, shall provide the information in the return electronically, and shall retain the attached schedules for their records for a period of no less than three years. The Tax Commissioner may require paper returns or schedules or both to be submitted for specified taxes, in lieu of electronic filings, as the Tax Commissioner may from time to time require.
9.3.a. Unless otherwise specifically required by the Tax Commissioner, for tax years beginning January 1, 2011, taxpayers with a total annual remittance for any single tax equal or greater than $100,000 during the immediately preceding taxable year shall file electronically all returns for taxes administered under W. Va. Code §11-10-1 et seq.: Provided, That for tax years beginning on or after January 1, 2013, electronic filing is mandated for all taxes administered under W. Va. Code §11-10-1 et seq. for those Taxpayers that had annual remittance for any single tax type equal to or greater than $50,000 during the immediately preceding taxable year: Provided however, That for tax years beginning on or after January 1, 2014, electronic filing is mandated for all taxes administered under W. Va. Code §11-10-1 et seq. for those Taxpayers that had annual remittance for any single tax type equal to or greater than $25,000 during the immediately preceding taxable year: Provided further, That for tax years beginning on or after January 1, 2015, for any returns required to be filed prior to January 1, 2016, electronic filing is mandated for all taxes administered under W. Va. Code §11-10-1 et seq. for those Taxpayers that had annual remittance for any single tax type equal to or greater than $10,000 during the immediately preceding taxable year and for any returns required to be filed on or after January 1, 2016, electronic filing is mandated for all taxes administered under W. Va. Code §11-10-1 et seq. for those Taxpayers that had annual remittance for any single tax type equal to or greater than $25,000 during the immediately preceding taxable year: and Provided further, That the Tax Commissioner shall have the authority to determine the tax types for which electronic filing is not required. The Tax Commissioner may require paper returns or schedules or both to be submitted for specified taxes, in lieu of electronic filings, as the Tax Commissioner may from time to time require.
9.4. An income tax preparer that files more than 25 tax returns using tax preparation software is required to file those returns electronically.
9.4.a. Taxpayer election not to file electronically. A taxpayer may elect not to file electronically. To opt-out of filing electronically, the taxpayer shall complete the Taxpayer Opt-out Form which is to be retained by the income tax preparer for a period of three (3) tax years immediately succeeding the tax year for which the Taxpayer Opt-out Form was signed. For tax years beginning on or after January 1, 2011, the income tax preparer shall indicate on the taxpayer’s return that the taxpayer elected to opt-out of the electronic filing requirement. The opt-out form shall be signed under penalty of perjury and be in a form as prescribed by the Tax Commissioner.
9.4.b. Technical inability for income tax preparers (hardship). The Tax Commissioner has the authority to waive the requirements for filing electronically upon finding that the income tax preparer is technically unable to comply. The income tax preparer shall request a waiver in writing and clearly demonstrate the nature of the technical inability. The Tax Commissioner shall respond to the request for a waiver within 45 days of receipt. The Waiver Request Form will be signed under penalty of perjury and be in a form as prescribed by the Tax Commissioner.
APPENDIX 1
Tax Types with Electronic Filing Capabilities Acute Care Hospital Tax Backup Withholding Tax Beer Barrel Tax Business Occupation Tax Business Registration Tax Cemetery Tax Coal Reclamation Tax Coal Severance Tax Corporate Income & Franchise Tax District Excise Tax Factory Built Homes Tax Fiduciary Tax Health Care Provider Broad Base Tax Health Care Provider Severance Tax International Fuel Tax Local Wine & Liquor Tax Motor Carrier Tax Motor Fuel Blender Motor Fuel Distributor Motor Fuel Exporter Motor Fuel Importer Motor Fuel Supplier Motor Fuel Transporter Non Resident Composite Pass Through Entity Tax Personal Income Tax Sales and Use Tax Severance Tax Soft Drinks Tax Solid Waste Assessment Tax Sparkler & Novelties Tax Timber Tax Tobacco Products Tax Waste Coal Severance Tax WC/Additional Severance Tax Wine Liter Tax Withholding Tax Historical Accounts Direct Pay Tax Telecommunications Tax
Series 10F Payment of Taxes by Electronic Funds Transfer
W. Va. Code R. § 110-10F-1 General
1.1. Scope. -- This rule will be used by the West Virginia State Tax Department in the administration of W. Va. Code §11-10-5t, which authorizes the Tax Commissioner to require certain taxpayers to make tax payments by electronic funds transfer, unless prohibited by federal or state law, so that the funds will be immediately available to the State Treasury on the due date of payment. If there is a conflict between this rule and other rules regarding tax payments, this rule governs.
1.2. Authority. -- W. Va. Code §11-10-5t.
1.3. Filing Date. -- May 13, 2025.
1.4. Effective Date. -- May 13, 2025.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2030.
W. Va. Code R. § 110-10F-2 Definitions
For the purposes of this rule, the following terms used in this rule have the meanings set forth in this section, unless a different meaning is clearly indicated by the context in which the term is used.
2.1. "ACH" or "Automated Clearing House" means a nationwide electronic funds transfer system which is governed by the National Automated Clearing House Association (NACHA) operating rules and which provides for the clearing of electronic credit and debit entries between participating financial institutions.
2.2. "ACH Credit" means the electronic funds transfer payment method by which transactions are initiated and generated by the taxpayer and cleared through the ACH system for deposit into the State Treasury.
2.3. "ACH Debit" means the electronic funds transfer payment method by which transactions are initiated by the taxpayer, generated by the Department upon the taxpayer's instruction and cleared through the ACH system for deposit into the State Treasury.
2.4. "ACH Trace Number" means the unique number assigned to an electronic payment transaction by the financial institution originating the transaction.
2.5. “Addenda record" means that information required by the Department in an ACH Credit transaction or Wire Transfer which identifies the taxpayer, the tax type, the period covered, the payment type and the payment amount.
2.6. "CCD+” or “cash concentration or disbursement plus" means the standardized data format approved by the National Automated Clearing House Association for remitting tax payments electronically.
2.7. “Code” means the Code of West Virginia of one thousand nine hundred thirty-one, as amended.
2.8. “Commissioner” or “Tax Commissioner” means the West Virginia Tax Commissioner or his or her delegate.
2.9. “Department” or “Tax Department” means the West Virginia State Tax Department.
2.10. “EFT” or “Electronic Funds Transfer” means any transfer of funds using ACH debit, ACH credit, credit or debit card, intergovernmental transfer or Wire Transfer and any other means recognized by the Tax Commissioner for payment of taxes, (other than a transaction originated by check, draft, or similar paper instrument), that is initiated through an electronic terminal, personal electronic device, computer, or magnetic tape, where the person initiating the transfer orders, instructs, or authorizes a financial institution to debit or credit an account using the methods specified in this rule.
2.11. “Financial institution” means a state or national bank, a trust company, a state or federal savings and loan association, a mutual savings bank, or a state or federal credit union.
2.12. “Immediately available funds” means an ACH credit, an ACH debit, U.S. currency, or wire transfer that has completed the EFT process, and is deposited in the State’s bank for immediate use.
2.13. “Lookback period” means the 12-month fiscal year between July 1 and June 30 immediately preceding the calendar year for which the determination is made that a taxpayer must pay taxes by EFT.
2.14. “NACHA” or “National Automated Clearing House Association” means the trade association which sets automated payments standards that govern the ACH system for financial institutions nationwide.
2.15. “Person” includes, but is not limited to, any individual, firm, partnership, limited partnership, co-partnership, joint venture, association, corporation, municipal corporation, organization, receiver, estate, trust, guardian, executor, administrator, and also any officer, employee or member of any of the foregoing who, as such officer, employee or member, is under a duty to perform or is responsible for the performance of an act prescribed by the provisions of W. Va. Code §11-10-1 et seq., and the provisions of any other article of the Code which imposes a tax administered by the Tax Commissioner.
2.16. “Prenote” or “prenotification” means a zero-dollar or one cent entry that is sent through the ACH system prior to live entries. Prenotes provide a verification function that makes sure any bank information and TXP addenda data required is correct prior to live entries.
2.17. “State” or “this State” means the State of West Virginia.
2.18. "Submission day" means the day on which a taxpayer communicates payment information to the West Virginia State Tax Department.
2.19. “Submission period" means the specified time interval in each submission day during which EFT payment information received by the Tax Department is processed for transactions occurring on the next business day.
2.20. "Tax" or "taxes" means taxes administered under the authority of W. Va. Code §11-10-1 et seq., additions to tax and penalties and interest imposed with respect to those taxes.
2.21. "Taxpayer" means any person required to file a return for, or liable for the payment of, any tax administered under W. Va. Code §11-10-1 et seq.
2.22. “Tax type” means each separate category of tax subject to EFT payment requirements.
2.23. “Treasury” or “State Treasury” means the Treasury of the State of West Virginia.
2.24. “TXP Banking Convention” means the format to be used in the free form field of the National Automated Clearing House Association’s CCD+ entry addenda record.
2.25. “Wire Transfer” means the electronic transfer system developed and maintained by the Federal Reserve in order to enable financial institutions to transfer funds nationwide.
W. Va. Code R. § 110-10F-3 Payments by Electronic Funds Transfer (EFT)
3.1. For taxable years or reporting periods beginning on or after January 1, 2004, designated EFT taxpayers shall remit tax payments to the Department by EFT as required by this rule. A determination of which taxpayers are required to remit tax payments by EFT is made by the Department, on a tax type basis, and is based on the payments made during the lookback period. The threshold amount determines if the taxpayer is subject to the EFT tax payment requirements of this rule. Notwithstanding the requirements of this rule, a taxpayer is not required to remit tax payments to the Department by EFT if making such a payment would violate state or federal law or if such payment is impossible for practical reasons, as determined by the Tax Commissioner.
3.2. The threshold amount is $100,000.00 in tax liability per tax type per taxable year or reporting period beginning on or after January 1, 2004, subject to subdivisions 3.2.a, 3.2.b, 3.2.c, 3.2.d, 3.2.e and 3.2.f of this subsection.
3.2.a. For tax years beginning on or after January 1, 2013, the threshold amount for determining whether a taxpayer shall pay electronically is $50,000 in tax liability paid for a single tax type in the immediately preceding tax year: Provided, That for tax years beginning on or after January 1, 2013, any taxpayer that pays more than $50,000 for any tax type in the immediately preceding tax year shall electronically pay the taxes for all tax returns filed;
3.2.b. For tax years beginning on or after January 1, 2014, the threshold amount for determining whether a taxpayer shall pay electronically is $25,000 in tax liability paid for a single tax type in the immediately preceding tax year: Provided, That for tax years beginning on or after January 1, 2014, any taxpayer that pays more than $25,000 for any tax type in the immediately preceding tax year shall electronically pay the taxes for all tax returns filed;
3.2.c. For tax years beginning on or after January 1, 2015, the threshold amount for determining whether a taxpayer shall pay electronically is $10,000 in tax liability paid for a single tax type in the immediately preceding tax year: Provided, That for tax years beginning on or after January 1, 2015, any taxpayer that pays more than $10,000 for any tax type in the immediately preceding tax year shall electronically pay the taxes for all tax returns filed;
3.2.d. For tax years beginning on or after January 1, 2016, the threshold amount for determining whether a taxpayer shall pay electronically is $25,000 in tax liability paid for a single tax type in the immediately preceding tax year: Provided, That for tax years beginning on or after January 1, 2016, any taxpayer that pays more than $25,000 for any tax type in the immediately preceding tax year shall electronically pay the taxes for all tax returns filed;
3.2.e. Tax Commissioner may determine the tax types for which electronic payment of taxes is not required. For tax years beginning on or after January 1, 2019, the threshold amount for determining whether a taxpayer shall pay electronically is $50,000 in tax liability for a single tax type in the immediately preceding tax year: Provided, That for tax years beginning on or after January 1, 2019, any taxpayer that pays more than $50,000 for any tax type in the immediately preceding tax year shall electronically pay the taxes for all tax returns filed;
3.2.f. Tax Commissioner may determine the tax types for which electronic payment of taxes is not required.
3.3. Once taxpayers are notified by the Department that they are required to make EFT payments for a tax type, they shall comply with this rule unless and until released from that obligation by the Department.
3.4. The Department shall make an annual identification of those taxpayers who are required to make payments in accordance with this rule on a tax type basis. A taxpayer may be required to make payments for one type of tax in accordance with the procedures stated in this rule, yet may not be liable to make payments for another type of tax in accordance with those procedures.
3.4.a. The Department shall notify the identified taxpayers of their requirements to file or pay, pursuant to this rule, at their last known address of record prior to the first payment required by EFT.
3.4.b. The Department shall provide the identified taxpayers with forms, procedures and instructions necessary to register and make payments for the appropriate taxes by EFT and an explanation of the payment options available to the taxpayer.
When taxpayers register to make payment by EFT, they shall select a payment option.
3.4.c. The Department shall provide technical assistance and guidance to identified taxpayers concerning the payment of taxes through EFT. Taxpayers may call Taxpayer Services from 8:00 a.m. through 4:30 p.m. Eastern Time, Monday through Friday, with the exception of State holidays.
W. Va. Code R. § 110-10F-4 Tax types covered
4.1. Payments for the following tax types are subject to the EFT tax payment requirements of this rule:
4.1.a. Business and Occupation Tax;
4.1.b. Business Franchise Tax;
4.1.c. Tobacco Products Excise Tax;
4.1.d. Consumer Sales and Service Tax;
4.1.e. Corporation Net Income Tax;
4.1.f. Gasoline and Special Fuels Excise Tax;
4.1.g. Health Care Provider Tax;
4.1.h. Personal Income Tax, including:
4.1.h.1. Nonresident Composite Income Tax;
4.1.h.2. Fiduciary Income Tax;
4.1.i. Severance Taxes, including:
4.1.i.1. Additional Annual Severance Tax;
4.1.j. Soft Drink Tax;
4.1.k. Solid Waste Tax;
4.1.l. Surface Mining Reclamation Tax;
4.1.m. Telecommunications Tax;
4.1.n. Timber Severance Tax;
4.1.o. Use Tax;
4.1.p. Personal Income Tax Withholding, including:
4.1.p.1. Personal Income Tax Back-Up Withholding;
4.1.q. Beer Barrel Tax;
4.1.r. Wine Liter Tax;
4.1.s. Wine Liquor Excise Tax;
4.1.t. Pass Through Entity Tax;
4.1.u. District Excise Tax;
4.1.v. Taxes paid under IFTA;
4.1.w. Acute Care Hospital Tax;
4.1.x. Motor Carrier Road Tax;
4.1.y. Fireworks Safety Fee Tax; and
4.1.z. Medical Cannabis Tax.
W. Va. Code R. § 110-10F-5 Identification of EFT taxpayers
5.1. On an annual basis, the Department shall review the most recently completed lookback period payment history of each taxpayer on a tax type basis to determine if the payment history requires the taxpayer to make payments through EFT for the succeeding calendar year.
5.2. The Department will determine whether a taxpayer meets the tax liability threshold provided in Subsection 3.2 of this rule that requires payment of taxes by EFT by considering taxes paid for a single tax type, except when two or more tax types are permitted to be paid on a single return. Whenever two or more tax types are permitted to be paid on a single return, the taxes paid for all tax types shall be considered a single payment.
5.3. The Department will determine whether a taxpayer meets the tax liability threshold provided in Subsection 3.2 of this rule that requires payment of taxes by EFT by considering the payments made during a fiscal year for a single tax type.
W. Va. Code R. § 110-10F-6 Notification of Taxpayers Required to Use EFT
6.1. At least 90 days prior to the date the taxpayer is required to make their first tax payment by EFT, the Department shall mail a written notice to all EFT taxpayers newly identified in the annual review of transactions informing them that they are required to make payments for a tax type using EFT. The notice shall be mailed to the last address of record for the taxpayer. The notice shall (1) provide the taxpayer with an explanation of W. Va. Code §11-10-5t; (2) identify the tax types to be paid using EFT; (3) provide an explanation of the payment alternatives available to the taxpayer; and (4) provide the taxpayer with forms and instructions necessary to comply with this rule.
6.2. Within 30 days after the notice is provided to the taxpayer, the taxpayer shall make an election as to which payment method the taxpayer will use or provide a written statement explaining the reason the taxpayer seeks to be exempted from the requirement to make payments for a tax type using EFT. Within 45 days after the taxpayer submits a request for an exemption from the requirement to make payments for a tax type using EFT, the Department shall notify the taxpayer whether the request is granted.
6.3. Within 30 days after receipt of the notice, the taxpayer shall register per the instructions provided by the Department except when utilizing the Credit or Debit card option. The Department shall provide instructions and resources necessary for successful registration and payment.
6.4. If the Department receives no response from the taxpayer within 30 days, the Department shall provide the taxpayer with a second notice, utilizing certified mail. If the taxpayer takes no action in response to the second notice before the first day of the succeeding calendar year, the taxpayer is subject to all applicable penalties, additions to tax, and interest for each payment subject to these rules that is equal to or in excess of the threshold amount.
6.5. Upon a showing by the taxpayer, to the satisfaction of the Commissioner, that the taxpayer will not be making payments for a tax type equal to or in excess of the threshold amount for the period, the Commissioner shall waive the requirement to make payments by EFT. If the taxpayer subsequently makes a non-EFT payment in an amount equal to or in excess of the threshold amount for the period for which the Commissioner waived the requirement to make payments using EFT, the taxpayer may be subject to all applicable penalties, additions to tax, and interest.
W. Va. Code R. § 110-10F-7 Registration of EFT taxpayers
7.1. Taxpayers choosing the ACH Credit method shall properly complete Form WV/EFT-5, Electronic Funds Transfer Application, and return the Form to the Department by the date specified by the Department. The Department shall record pertinent taxpayer information provided with Form WV/EFT-5. Taxpayers choosing the ACH Debit method may register or make payments on the Department’s website. The information required for either ACH method may include:
7.1.a. Taxpayer identification number;
7.1.b. Taxpayer’s name;
7.1.c. Taxpayer’s address;
7.1.d. Tax types;
7.1.e. Primary contact person’s name and title;
7.1.f. Primary contact person’s address;
7.1.g. Primary contact person’s telephone number;
7.1.h. Primary contact person’s e-mail address;
7.1.i. Secondary contact person’s name and title;
7.1.j. Secondary contact person’s address;
7.1.k. Secondary contact person’s telephone number;
7.1.l. Second contact person’s e-mail address;
7.1.m. Financial Institution’s name;
7.1.n. Financial Institution’s contact person;
7.1.o. Financial Institution’s telephone number;
7.1.p. Signature of person authorized to complete the application;
7.1.q. Written verification from the taxpayer's bank confirming the bank routing and transit number and the bank account number of the taxpayer; and
7.1.r. Application status regarding new application, change in financial institution information, change of name or address, and withdrawal.
7.2. A taxpayer shall provide written notice of any change of ACH Credit information required by Form WV/EFT-5 by submitting a revised Form WV/EFT-5 to the Department. A taxpayer shall provide written notice of any change of ACH Debit information required on the Department website by submitting changes on the Department’s website. All changes must be submitted within at least 30 days of the change.
W. Va. Code R. § 110-10F-8 Payment alternatives
8.1. The ACH Credit and Debit methods, including electronic filing and Modernized E-filing options, Credit and Debit Card Payments and Intragovernmental Transfers are the payment methods that taxpayers may use to make payments for a tax type using EFT.
8.2. The Department reserves the right to revoke the EFT payment privilege and require cashier’s check or any other pre-certified payment method deemed acceptable by the Commissioner from any taxpayer for the following reasons:
8.2.a. Failure to consistently transmit error-free payments;
8.2.b. Substantial variation from the requirements and specifications of this rule;
8.2.c. Failure to make timely EFT payments or to provide timely payment information; or
8.2.d. Failure to provide a properly formatted addenda record required by this rule with the EFT payment.
8.2.e. Submission of multiple payments which are rejected or returned by the taxpayer’s financial institution for insufficient funds or any other return reason. In addition to penalties and interest associated with late payment, returned payments may also be subject to penalties as specified by WV Code §11-10-5n.
8.3. Wire Transfer is not an EFT payment method alternative that is available to EFT taxpayers, except on an emergency basis with prior authorization by the Department.
W. Va. Code R. § 110-10F-9 Payment procedures -- general provisions
9.1. Taxpayers required to make payments using EFT shall initiate the transaction so that the amount due is deposited as immediately available funds to the State of West Virginia’s bank account on or before the due date under the applicable tax law. If a tax payment due date falls on a Saturday, Sunday, or bank holiday, payment by EFT shall be made so that the funds are immediately available in the State Treasurer's account on the first business day after that due date. If the date on which the taxpayer is required to initiate either an ACH Debit or an ACH Credit transaction falls on a Saturday, Sunday, or a State or banking holiday, the taxpayer shall initiate the transaction on the preceding business day.
Each year, at least 30 days prior to the beginning of a calendar year, the Department shall provide taxpayers required to pay a tax using EFT with a schedule of holidays they will need to take into consideration when making EFT payments.
9.2. The requirement to make payment to the Department using EFT does not change any current filing requirements for tax returns. If the EFT payment is not timely made or the tax return required is not filed by the due date, penalties, additions to tax and interest shall apply under the provisions of the appropriate section of the Code.
9.3. Any taxpayer required by the Department to use EFT to make payments may apply to the Commissioner to be relieved of that requirement if it appears that taxpayer no longer meets the criteria for mandatory EFT payments. If the Commissioner grants that relief and the taxpayer subsequently makes a non-EFT payment in an amount equal to or in excess of the threshold amount for the period the taxpayer was previously required to make payments using EFT, the taxpayer is subject to all applicable penalties, additions to tax and interest.
9.4. If the taxpayer elects to use the ACH Debit payment method, the taxpayer shall furnish the Department with the information needed to complete the transaction. All transactions shall be initiated by the taxpayer on the Department’s website.
9.5. If the taxpayer elects to use the ACH Credit payment method, the taxpayer is responsible for ensuring that the bank originating the transaction has the information necessary for timely completion of the transaction. Also, the taxpayer is responsible for the correct completion of the transaction. The taxpayer shall provide the information necessary for the bank to complete the NACHA CCD+ entry with the required TXP Banking Convention addenda record.
W. Va. Code R. § 110-10F-10 Procedures for payment -- ACH debit payment method
10.1. Taxpayers who elect to use the ACH Debit payment method of making EFT payments shall use the following procedures in communicating payment information to the Department.
10.2. The taxpayer shall register at the Department’s website. The taxpayer shall provide the following information to the Department and schedule payments appropriately:
10.2.a. Bank routing number;
10.2.b. Bank account number;
10.2.c. Tax payment amount;
10.2.d. Tax period covered;
10.2.e. Tax type; and
10.2.f. Payment type.
10.3. The taxpayer shall report payment information to the Department no later than 12:00 a.m. (midnight) Eastern Time on the business day before the due date of the payment during the submission period as specified in the instructions provided to clear the ACH for deposit in the State Treasury on the due date. The Department shall bear the initial costs of processing ACH Debit payments. Communication by the taxpayer during the submission period is mandatory to ensure the timely posting of the taxpayer's payment by the due date.
10.4. When the Department receives the information provided by the taxpayer, it may provide the taxpayer with a confirmation sheet containing a confirmation code.
10.5. The taxpayer shall retain the confirmation sheet and record the time of submission for an audit trail of the payment.
10.6. Successful completion of the transaction and receipt of the confirmation sheet fulfills the taxpayer's obligation to initiate an ACH Debit transaction.
10.7. The payment of taxes through EFT does not relieve the taxpayer from filing the appropriate tax returns or applicable information returns required by the Department. Returns are filed in the normal manner as noted in subsection 12.2 of this rule.
W. Va. Code R. § 110-10F-11 Procedures for payment -- ACH credit payment method
11.1. Taxpayers who elect to use the ACH Credit payment method of making EFT payments shall use the procedures in this section to communicate payment information to the Department. The Department intends to examine each taxpayer’s compliance with the requirements of this rule.
11.2. If a taxpayer has elected the ACH Credit payment method but repeatedly fails to correctly complete the payment transactions in accordance with this rule, the Department may in its discretion require the taxpayer to make future payments by the ACH Debit payment method.
11.3. To assure the timely receipt of payment, a taxpayer shall ensure that the financial institution originating the transaction does so in sufficient time for the payment to be deposited as immediately available funds to the State Treasury on or before the appropriate due date of the payment.
11.4. All ACH Credit transactions shall use the NACHA CCD+ entry with a TXP Banking Convention addenda record. The TXP Banking Convention addenda record requires the following information:
11.4.a. Taxpayer's identification number;
11.4.b. Tax type code;
11.4.c. Tax period end date;
11.4.d. Payment type; and
11.4.e. Amount of payment.
11.5. If a taxpayer repeatedly fails to provide the Department with a required addenda record that conforms to the requirements of the Department, the taxpayer may be required at the discretion of the Commissioner to use the ACH Debit method.
11.6. A taxpayer electing to use the ACH Credit payment method shall first determine the amount of tax due with respect to the tax type for which the payment is being made. At a time arranged between the taxpayer and the taxpayer's financial institution, the taxpayer shall provide the taxpayer's financial institution with the information necessary to initiate a timely ACH Credit transaction utilizing the NACHA CCD+ entry and the TXP Banking Convention. A timely ACH Credit transaction shall be initiated and posted as immediately available funds to the State of West Virginia’s bank account on or before the due date of the payment.
11.7. Taxpayers electing to use the ACH Credit payment method shall coordinate with their financial institutions to ensure that ACH Credit payments are timely initiated. Taxpayers shall consider the impact of prescribed ACH time frames and nightly cycles as well as the impact of weekends and holidays.
11.8. Taxpayers with a zero tax liability for a reporting period are not required to transmit a zero balance ACH Credit transaction. However, they shall file their tax return as noted in Subsection 12.2 of this rule.
11.9. Taxpayers electing to use the ACH Credit method, prior to receiving final approval to transmit ACH Credit transactions, shall provide prenotification and receive approval of the prenotification from the Department prior to making live transactions. Failure to do so leaves the taxpayer liable for any misallocated payments due to improperly formatted ACH Credit records.
W. Va. Code R. § 110-10F-12 Requirement for filing returns
12.1. The requirement to use EFT to make tax payments does not change any current filing requirements for tax returns. If the EFT payment is not timely made or the tax return required is not filed by the due date, the provisions for penalties, late payment additions to tax, late filing additions to tax and interest apply under the provisions of the appropriate Section of the Code, except as provided in this rule.
12.2. Taxpayers shall file the required returns. Returns are filed in the normal manner and mailed to the address indicated on the paper return. If the taxpayer is required to file electronically, returns are filed via an electronic filing method approved by the Department.
W. Va. Code R. § 110-10F-13 Penalties, etc. for noncompliance
13.1. The provisions of W. Va. Code §11-10-1 et seq., govern the administration of any tax, interest, additions to tax or penalty assessed due to late EFT payments, except as provided in this rule.
13.2. W. Va. Code §11-10-5t imposes, in addition to any other additions to tax or penalties that may be applicable, a civil penalty for failing or refusing to use an appropriate EFT method when required to do so. The amount of the penalty is three percent of the tax liability which is or was to be paid by EFT.
13.3. Failure of a taxpayer to respond to the notification from the Department concerning the required use of EFT to make payments for a tax type or failure to timely or properly make EFT payments in accordance with this rule subjects the taxpayer to applicable penalties, additions to tax and interest, as provided by the Code, for delinquent or underpaid tax payments. If payment is made for a tax type for which a taxpayer was required to make payments using EFT and the payment is made in a method which is not in accordance with the procedures stated in this rule, penalties, interest and additions to tax for late filing and late payment, for that tax type, may be assessed as specified in the Code. In addition to any penalty that may be imposed, interest shall be added to the amount of tax due from the due date of the tax payment to the date that the funds become available to the State Treasury.
13.4. The Department may waive the penalty and additions to tax if the taxpayer can demonstrate that the failure was due to reasonable cause and not due to willful neglect. Errors made by the Department, the State Treasury or the taxpayer’s bank which result in a late payment by the taxpayer do not subject the taxpayer to penalties, additions to tax, or interest.
13.5. When a taxpayer uses the ACH Debit payment method, the State of West Virginia’s bank is the originating bank and is responsible for the accuracy of the transmission. If the taxpayer has timely initiated the ACH Debit transaction, received a confirmation number, and demonstrated that adequate funds were available in the bank account, then the fact that the transaction is not properly completed does not subject the taxpayer to penalties, additions to tax or interest.
13.6. When a taxpayer uses the ACH Credit payment method, the taxpayer's bank is the originating bank and the taxpayer is primarily responsible for the accuracy and proper completion of the transaction. In order to prove timely compliance, the taxpayer shall show timely initiation of the transaction; shall have provided the correct information for the NACHA CCD+ entry and the required TXP Banking Convention addenda record; and shall show that there were sufficient funds in the account and that the financial institution properly completed the transaction in a timely manner. If the taxpayer makes this showing, no penalties, additions to tax or interest apply to the payment if the transaction is not properly completed.
13.7. A taxpayer required to make EFT payments, but unable to make a timely payment because of system failures within the Automated Clearing House system which are beyond the taxpayer's control, is not subject to penalties, additions to tax or interest for late payment.
W. Va. Code R. § 110-10F-14 Voluntary use of EFT to pay taxes
14.1. Taxpayers not required to make EFT payments for a tax type may voluntarily register to make EFT payments for that tax type.
14.2. Taxpayers making voluntary EFT payments for a tax type are subject to the provisions of this rule to the same extent as taxpayers who are required to make EFT payments.
14.3. A taxpayer seeking to make voluntary EFT payments shall file a written application with the Department or register on the Department’s website at least 60 days prior to the due date of the next payment of the tax type for which permission to make EFT payments is sought.
14.3.a. A taxpayer may request permission to terminate voluntary EFT payments for a tax type by filing written application with the Department or closing their account on the Department’s website at least 60 days prior to the due date of the last EFT payment to be made by the taxpayer.
14.3.b. A taxpayer making an application for termination shall continue to make payment by the payment method elected in accordance with the procedures stated in this rule, until the Commissioner in writing releases the taxpayer and approves payment by another method.
14.4. Written or online applications to voluntarily make or to terminate making voluntary ACH Credit payments shall be directed to the West Virginia State Tax Department, RD-EFT, P. O. Box 11895, Charleston, WV 25339-1985 and shall include a properly completed Form WV/EFT-5, Electronic Funds Transfer Application.
W. Va. Code R. § 110-10F-15 Proof of payment
15.1. In the case of an ACH credit transaction or Wire Transfer, the Department shall consider the tax to have been paid on the date the money is received by the State of West Virginia’s bank account. In the case of an ACH debit transaction, the Department shall consider the tax paid on the next business day after the transaction was initiated by the taxpayer. The proof of payment by the taxpayer depends on the payment method used.
15.2. Payment in an ACH Debit transaction may be proven by use of the confirmation code received from the Department when the transaction was initiated, together with a statement from the taxpayer’s bank showing a transfer that decreases the taxpayer’s account balance by the correct amount, the date of the transfer and the identity of the payee as the State of West Virginia.
15.3. Since an ACH Credit transaction is initiated and generated by the taxpayer, the taxpayer has responsibility for the proper and timely completion of the transaction. The taxpayer has the responsibility to ensure that it is provided an ACH trace number by the bank originating the transaction. This trace number; proof of the NACHA CCD+ entry showing the State’s bank routing and transit number and bank account number; and a statement from the taxpayer’s bank showing a transfer that decreased the taxpayer’s account balance by the correct amount, the date of the transfer and the identity of the payee as the State of West Virginia together, constitute proof of payment by the taxpayer.
W. Va. Code R. § 110-10F-16 Correction of errors
16.1. If an error in the EFT payment process results in either an underpayment or an overpayment of the tax, the taxpayer shall promptly contact the Department. An overpayment may be used as a credit against a future tax liability or the taxpayer may apply for a refund. The Department shall make every reasonable effort to expedite a refund requested by the taxpayer to correct an EFT overpayment error.
16.2. When possible, the taxpayer shall attempt to correct errors made in initiating an ACH Debit payment during the period on the same day the transaction was initiated by the taxpayer. Otherwise, the taxpayer shall contact the Department on the next business day after the error is discovered for specific instructions on how to correct the error.
16.3. In the event a taxpayer using the ACH Debit method communicates payment information to the Department after 12:00 a.m. (midnight) Eastern Time on the business day before the due date, the payment shall be posted to the taxpayer's account on the next business day following the due date and constitutes late payment.
16.4. Failure of a taxpayer to make a timely EFT payment because of circumstances under the taxpayer's control, including but not limited to insufficiency of funds in the taxpayer's account or a direct payment to the Department using an unauthorized payment method, subjects the taxpayer to penalties, additions to tax and interest.
W. Va. Code R. § 110-10F-17 Emergency payment
17.1. In the event the Commissioner determines that a taxpayer is unable to affect a timely EFT payment due to extenuating circumstances beyond the taxpayer’s control, the Commissioner may allow the taxpayer to use Wire Transfer.
For example, if on the due date of an EFT payment the taxpayer becomes aware that an error was made in the EFT payment which cannot be corrected on that day, the taxpayer may contact the Department and request authorization to correct the payment with Wire Transfer. The Commissioner may grant authorization to use Wire Transfer for that one payment. The Commissioner shall base that decision upon the taxpayer's payment history as well as the taxpayer's compliance with prescribed rules regarding EFT payments.
17.2. If the Commissioner authorizes the request, he or she shall provide the taxpayer with a Federal ID Number and additional information to be included in the free-form field of the Wire Transfer.
17.3. To request authorization the taxpayer shall contact the EFT Unit at (304) 558-8692. The taxpayer shall present the extenuating circumstances which prevent timely compliance using the approved EFT method, and request authorization to use Wire Transfer to submit the payments in question to the State Treasury.
17.4. The Department shall give taxpayers who are granted authorization to use Wire Transfer specific instructions regarding the payment information that must accompany the transfer.
17.5. All Wire Transfers shall be accompanied by an addenda record, in the format specified by the Department, including the following information:
17.5.a. Taxpayer's identification number;
17.5.b. Tax type code;
17.5.c. Tax period end date;
17.5.d. Payment type; and
17.5.e. Amount of payment.
17.6. The Department shall not bear any costs associated with the Wire Transfer.
17.7. Unauthorized Wire Transfers constitute late payment and are subject to appropriate penalties, additions to tax and interest.
17.8. Authorized Wire Transfers which are not received by the State Treasury on or before the due date of the transmitted payments constitute late payment and are subject to appropriate penalties, additions to tax and interest.
W. Va. Code R. § 110-10F-18 Grace period during implementation
18.1. During the first year of implementation of this rule, the Commissioner may, in his or her discretion, extend a grace period of no more than two business days for a taxpayer to resolve problems arising in financial institutions, Federal Reserve facilities, or the Automated Clearing House system which result in late payment.
18.2. To qualify for a grace period, the taxpayer shall demonstrate that a good faith attempt was made to comply with the provisions of this rule, due diligence was exercised to initiate the payment timely and correctly, and sufficient funds were available in the taxpayer's bank account, but circumstances beyond the taxpayer's control prevented compliance by the required date.
Series 10G Alternative Resolution of Tax Disputes
W. Va. Code R. § 110-10G-1 General
1.1. Scope -- This rule adopts and implements alternative dispute resolution mechanisms in order to encourage taxpayers to resolve tax disputes through voluntary settlements rather than litigation. If there is a conflict between this rule and other rules which have been previously promulgated, this rule governs.
1.2. Authority -- W. Va. Code §11-10-23.
1.3. Filing Date -- May 13, 2025.
1.4. Effective Date -- May 13, 2025.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on August 1, 2035.
W. Va. Code R. § 110-10G-2 Definitions
For the purposes of this rule, the following terms used in this rule have the meanings set forth in this section, unless a different meaning is clearly indicated in the context in which the term is used.
2.1. “Alternative dispute resolution” means an alternative to courtroom litigation or agency adjudication, including conciliation with the Tax Division and hearings before the Office of Tax Appeals.
2.2. “Commissioner” or “Tax Commissioner” means the Tax Commissioner of the State of West Virginia or his or her delegate.
2.3. “Code” or “this Code” means the Code of West Virginia, 1931, as amended.
2.4. “Conciliation” means a method of dispute settlement in which parties clarify issues and narrow differences through the aid of an individual called a “conciliator”.
2.5. “Division” or “Tax Division” means the West Virginia State Tax Division.
2.6. “Financial hardship claim” means a financial inability to pay due to factors including, but not limited to: the amount of the debt; sudden or unforeseen illness or accident; or loss of income or property, beyond control of the taxpayer.
2.7. “Office of Tax Appeals” means the West Virginia Office of Tax Appeals created by W. Va. Code §11-10A-1 et seq. as an independent, quasi-judicial agency that is in the Department of Tax and Revenue for administrative purposes only.
2.8. “Party” means the Tax Division or the taxpayer seeking to resolve a tax dispute through alternative dispute resolution.
2.9. “Tax” means any tax administered by the Tax Division to which the alternative dispute resolution mechanisms set forth in this rule applies, and includes within its meaning any applicable interest, additions to tax and penalties.
2.10. “Taxpayer” means any person liable for payment of, or required to file a return for, any tax administered under W. Va. Code §11-10-1 et. seq.
W. Va. Code R. § 110-10G-3 Jurisdiction and Scope of Alternative Dispute Resolution
3.1. A taxpayer may request alternative dispute resolution prior to issuance of a finalized notice of assessment. A taxpayer for whom alternative dispute resolution has been unsuccessful may appeal to the Office of Tax Appeals upon finalization of their assessment.
3.1.1. Conciliation resulting in a final agreement is conclusive and binding on both parties and unless there is fraud, malfeasance or misrepresentation of a material fact, the agreement precludes any subsequent appeal of the matters agreed to in the final agreement and the matters agreed upon shall not be reopened or the agreement modified.
3.2. A taxpayer may petition the Tax Division for conciliation.
3.2.1. The Tax Division shall promulgate any procedural rules, forms, instructions, and publications necessary or useful to implement the conciliation program adopted in this rule.
3.3. Alternative dispute resolution shall not apply to financial hardship claims, collection cases, disputes already in litigation, constitutional issues, licensing laws administered by the Commissioner, jeopardy assessments or assessments made pursuant to interstate taxing agreements. However, participation in alternative dispute resolution shall not prevent the Commissioner from making jeopardy assessments in accordance with W. Va. Code §11-10-7(b).
3.4. Alternative dispute resolution shall not be available if authoritative resolution of an issue is needed for precedential value, if formal resolution is needed to avoid variation in treatment of taxpayers, or if a formal proceeding before the Office of Tax Appeals is otherwise in the public interest or sound tax administration.
3.5. When alternative dispute resolution is applicable and available, the Division shall send a taxpayer to whom a notice of assessment would otherwise be sent a notice of proposed assessment. A taxpayer must file the request for the alternative dispute resolution prior to issuance of a finalized notice of proposed assessment. If the request is not timely received, the Division shall send the taxpayer a statement of account, and a notice of assessment and the time limitations set forth in the Code for filing a petition for hearing in the Office of Tax Appeals shall commence to run.
3.6. Conciliation shall not suspend the accrual of any amount which may be due for interest, additions to tax and penalties.
W. Va. Code R. § 110-10G-4 Conciliation
4.1. The Tax Commissioner shall appoint a conciliation coordinator, an assistant conciliation coordinator and conciliators from available staff of the Tax Division.
4.1.1. If funds are available, the Tax Commissioner may enter into contracts with individuals and organizations to conduct conciliation.
4.2. A taxpayer who has received a notice of proposed assessment pursuant to a field or internal desk audit may request conciliation by filing a written request with the conciliation coordinator. The notice shall inform the taxpayer of the right to request conciliation and the requirements that must be met by the taxpayer in order to file a request.
4.2.1. The conciliation coordinator or assistant conciliation coordinator shall assign a date, time and place for a conciliation conference when a request for conciliation is approved, and shall notify the parties by written notice at least twenty calendar days in advance of the conference date, which shall be within forty-five calendar days after the request is received, unless continued for good cause.
4.3. A conciliator assigned to a particular case may have no financial or personal conflict of interest with respect to the taxpayer or issue in controversy in that case.
4.4. A conciliator shall conduct conciliation impartially and informally, without regard to the rules of evidence, in a conference where the parties are afforded the opportunity to resolve their disagreements on the facts and issues in dispute. The conciliator’s role is to guide the parties to mutual agreement, rather than imposing an agreement on the parties. The goal of the conciliator shall be, where possible, in whole or in part, to eliminate the need for a hearing at the Office of Tax Appeals or to narrow the scope of the facts and issues in dispute if there is a hearing.
4.5. The Tax Division shall develop a form requesting the following information and any other information considered relevant.
4.5.1. The name and address of the taxpayer;
4.5.2. The name and address of the taxpayer’s representative, if any;
4.5.3. The type and amount of tax in controversy and all applicable taxable periods involved;
4.5.4. The action or decision being protested and the operating unit or division taking that action or making that decision;
4.5.5. A legible copy of the notice of proposed assessment that is at issue; and
4.5.6. An original copy of a power of attorney, if applicable.
4.6. The Tax Division may at any time prior to or during conciliation request that the taxpayer supply additional information in order to process the request for conciliation or resolve the issues in the request.
4.7. Taxpayers requesting conciliation may represent themselves, or may be represented by an attorney, accountant, enrolled agent or any other person.
4.7.1. A partnership may act through one of its general partners without filing a power of attorney, and may act through one of its limited partners or employees if a power of attorney is filed.
4.7.2. A corporation may act through one of its officers without filing a power of attorney, and may act through one of its employees if a power of attorney is filed.
4.7.3. A limited liability company may act through one of its officers or managers without filing a power of attorney, and may act through one of its employees if a power of attorney is filed.
4.7.4. An individual requesting conciliation may be represented by a friend or member of the family who is not an attorney only if a power of attorney is filed, unless the individual is present during conciliation or permission is received by the individual from the conciliation coordinator or assistant conciliation coordinator.
4.8. The conciliation coordinator may reject a request for conciliation that is frivolous or that is filed for the purpose of delaying the collection of tax.
4.9. Because conciliation is a voluntary process, both parties are required to agree in order to reach a settlement or other agreement. Either party may withdraw from conciliation for any reason at any time prior to the termination of conciliation by notifying the conciliator and the other party in writing.
4.10. In order to expedite the prompt resolution of disputes, the Tax Commissioner may delegate to the conciliator in advance of the conciliation conference the right to waive or modify interest, penalties, additions to tax and any other matters the Commissioner considers appropriate, in accordance with the Commissioner’s authority under the Code.
4.11. If the parties reach an agreement, one of the parties or the conciliator shall memorialize the agreement in writing, and the taxpayer shall sign, date and return it.
4.11.1. The agreement shall include a waiver of the right to petition for a hearing before the Office of Tax Appeals.
4.11.2. The agreement shall have no precedential value or estoppel effect in any other proceeding.
4.12. The conciliator may not be called as a witness in any litigation or mediation involving the parties in any way relating to the dispute that is the subject of conciliation.
W. Va. Code R. § 110-10G-5 Confidentiality
5.1. The provisions of W. Va. Code §11-10-5d, concerning confidentiality and disclosure of tax returns and information are applicable to all aspects of conciliation.
5.2. Confidentiality shall not be interpreted to require the exclusion at a subsequent hearing of any information otherwise available or discoverable merely because the information was presented in the course of conciliation.
5.3. All aspects of conciliation are exempt from the requirements of W. Va. Code §§ 6-9A-1 et seq. “Open Government Proceedings” and 29B-1-1 et seq. “Freedom of Information.”
110CSR10G
110CSR10G
Series 10J Abusive Tax Shelters
W. Va. Code R. § 110-10J-1 General
1.1. Scope. -- This rule provides guidance relating to the disclosure and regulation of tax shelters created to avoid paying state income taxes.
1.2. Authority. -- W. Va. Code §§11-10E-2 and 11-10-5.
1.3. Filing Date. -- May 3, 2007.
1.4. Effective Date. -- June 1, 2007.
§11-10J-2. Purpose.
2.1. The Tax Commissioner is required by W. Va. Code §11-10E-2 to establish and administer a tax shelter voluntary compliance program for eligible taxpayers that are subject to either Personal Income Tax imposed under W. Va. Code §11-21-1 et seq., or Corporation Net Income Tax imposed under W. Va. Code §11-24-1 et seq. The voluntary compliance program is to be conducted from August 1, 2006 through November 1, 2006. The voluntary compliance program is to apply to personal income tax and corporation net income tax liabilities attributable to the use of tax avoidance transactions for taxable years beginning before January 1, 2006.
2.2. This rule will provide continuing administrative and regulatory guidance over certain tax shelters used to avoid paying West Virginia income tax.
W. Va. Code R. § 110-10J-3 Definitions
3.1. General rule. Terms used in this rule have the meaning ascribed to them in W. Va. Code §11-10-4, unless the context in which the term is used clearly requires a different meaning, or the term is defined in subsection 3.2 of this rule.
3.2. Terms defined. For purposes of this rule, the additional term:
3.2.1. “Abusive tax schemes” means transactions promoted for the promise of tax benefits with no meaningful change in the taxpayer's control over or benefit from the taxpayer's income or assets. These transactions typically have no economic purpose other than reducing taxes, or may involve the use of multiple layers of domestic and foreign pass-through entities including: partnerships, S corporations, limited liability companies, and trusts.
3.2.2. “Commissioner” or “Tax Commissioner” means the West Virginia State Tax Commissioner or his/her delegate.
3.2.3. “Confidential transactions” means a transaction that is offered to a taxpayer under conditions of confidentiality and for which the taxpayer has paid an advisor a minimum fee.
3.2.4. “Gross valuation overstatement” means any statement as to the value of any property or services if the value stated exceeds 200 percent of the amount determined to be the correct valuation, and the value of the property or services is directly related to the amount of any deduction or credit allowable under 26 U.S.C. §§ 1 et seq. to any participant.
3.2.5. “Investor lists” means any list required to be maintained under I.R.C. § 6112 and Treasury Regulations Section 301.6112-1 with respect to a potentially abusive tax shelter that, at a minimum, includes the following information:
3.2.5.1. The name of each transaction that is a potentially abusive tax shelter and the registration number, if any, obtained under I.R.C. § 6111;
3.2.5.2. The tax identification number, if any, of each transaction;
3.2.5.3. The name, address, and tax identification number of each person required to be on the list;
3.2.5.4. If applicable, the number of units (i.e., percentage of profits, number of shares, etc.) acquired by each person required to be included on the list;
3.2.5.5. The date on which each interest was acquired;
3.2.5.6. The amount invested in each transaction by each person required to be included on the list;
3.2.5.7. A detailed description of each transaction that describes both the structure and its expected tax consequences;
3.2.5.8. A summary or schedule of the tax consequences that each person is intended or expected to derive from participation in each transaction, if known by the material advisor;
3.2.5.9. Copies of any additional written materials, including tax analyses or opinions, relating to each transaction that have been shown or provided to any person who acquired an interest in the transaction, or his or her representatives, tax advisors, or agents, by the material advisor or any related party or agent of the material advisor; and
3.2.5.10. For each person, if the interest in the transaction was not acquired from the material advisor maintaining the list, the name of the person from whom the interest was acquired.
3.2.6. “Listed transaction” means a transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction.
3.2.7. “Loss transactions” mean any transaction resulting in the taxpayer claiming a loss under I.R.C. § 165 of at least:
3.2.7.1. $10,000,000 in any single taxable year or $20,000,000 in any combination of taxable years for corporations;
3.2.7.2. $10,000,000 in any single taxable year or $20,000,000 in any combination of taxable years for partnerships that have only corporations as partners (looking through any partners that are themselves partnerships), whether or not any losses flow through to one or more partners; or $2,000,000 in any single taxable year or $4,000,000 in any combination of taxable years for all other partnerships, whether or not any losses flow through to one or more partners;
3.2.7.3. $2,000,000 in any single taxable year or $4,000,000 in any combination of taxable years for individuals, S corporations, or trusts, whether or not any losses flow through to one or more shareholders or beneficiaries; or
3.2.7.4. $50,000 in any single taxable year for individuals or trusts, whether or not the loss flows through from an S corporation or partnership, if the loss arises with respect to a section 988 transaction (as defined in I.R.C. § 988(c)(1) relating to foreign currency transactions).
3.2.8. “Material Advisor” means any person who:
3.2.8.1. Must register the transaction as a tax shelter under federal law;
3.2.8.2. Receives, or expects to receive, at least a minimum fee in connection with a transaction that is a potentially abusive tax shelter: Provided, That the minimum fee is $250,000 if the acquiring entities are corporations, other than S corporations. For all other transactions, the minimum fee is $50,000. When calculating the minimum fee, each transaction is evaluated separately to determine whether the minimum fee threshold is satisfied; and
3.2.8.3. Makes or provides any oral or written statement to any person about the potential tax consequences of that transaction.
3.2.9. “Noneconomic substance transaction” means the disallowance of any loss, deduction or credit, or addition to income attributable to a determination that the transaction or arrangement lacks economic substance. A transaction lacks economic substance if the taxpayer cannot demonstrate a valid West Virginia business purpose other than tax savings.
3.2.10. “Organizer” means any person who discovers, creates, investigates, or initiates the tax shelter investment, devises the business or financial plans for the investment or carries out those plans through negotiations or transactions with others. This term also includes any other person who participates in the organization or management of the tax shelter.
3.2.11. “Potentially abusive tax shelter” means any tax shelter that is required to be registered under current federal law or is a reportable transaction under present federal law or West Virginia law.
3.2.12. “Promoter” means any person who, directly or indirectly, organizes or assists in the organization of a tax shelter or who participates in the sale of any interests in a shelter.
3.2.13. “Related business entities” and “related parties” are persons who bear a relationship to each other as described in I.R.C. § 267(b) or 707(b).
3.2.14. “Reportable transaction” means any transaction the Internal Revenue Service or this State determines as having a potential for tax avoidance or evasion, and includes the following transactions:
3.2.14.1. Listed transactions;
3.2.14.2. Confidential transactions;
3.2.14.3. Transactions with contractual protection;
3.2.14.4. Loss transactions;
3.2.14.5. Transactions with a significant book-tax difference: Provided, That significant book-tax difference transactions entered into on or after January 6, 2006 that do not also describe any other reportable transaction in Treasury Regulation Section 1.6011-4 will no longer be classified as reportable transactions: Provided, however, That this removal of significant book-tax difference transactions from the categories of reportable transactions does not relieve taxpayers, tax shelter organizers or material advisors of any disclosure, registration or list maintenance obligations for transactions that should have been disclosed or registered, or for transactions for which lists should have been prepared and maintained, prior to January 6, 2006; and
3.2.14.6. Transactions involving a brief asset holding period.
3.2.15. "Reportable transaction understatement" means the product of:
3.2.15.1. The amount of the increase (if any) in taxable income, as determined by reference to the amount of post-apportioned income that results from a difference between the proper tax treatment of an item to which this paragraph applies and the taxpayer's treatment of that item as shown on the taxpayer's return, including an amended return filed prior to the date the taxpayer is first contacted by the Tax Commissioner regarding the examination of the return; and
3.2.15.2. The applicable tax rates.
3.2.16. “Reporting shareholder” means a United States shareholder (as defined in I.R.C. § 551(a)) in a foreign personal holding company (as defined in I.R.C. § 552), a United States shareholder (as defined in I.R.C. § 951(b)) in a controlled foreign corporation (as defined in I.R.C. § 957), or a 10 percent shareholder (by vote or value) of a qualified electing fund (as defined in I.R.C. § 1295).
3.2.17. “Seller” for purposes of the list maintenance requirement, is:
3.2.17.1. Any organizer, underwriter, broker, or dealer (or other similar person) who transfers any interest in a tax shelter;
3.2.17.2. Any agent who negotiates the transfer of any interest in a tax shelter for the tax shelter, an organizer, or other person described in paragraph 3.2.13 of this rule;
3.2.17.3. Any investor (not described in subdivision 3.2.13 of this rule) who transfers any interest in a tax shelter; or
3.2.17.4. Any other person who receives consideration in connection with another person's right to participate in a tax shelter, for services necessary to the organization or structure of the tax shelter (other than services that do not constitute participation in the organization or management of a tax shelter under Treasury Regulation Section 301.6111-1T), or for information that is integral to the participation in the tax shelter.
3.2.18. “Substantially similar” means and includes any transaction that is expected to obtain the same or similar types of tax consequences and that is either factually similar or based on the same or similar tax strategy. Receipt of an opinion regarding the tax consequences of the transaction is not relevant to the determination of whether the transaction is the same as or substantially similar to another transaction. Further, the term substantially similar shall be broadly construed in favor of disclosure.
3.2.19. "Tax avoidance transaction" means a plan or arrangement devised for the principal purpose of avoiding federal or state income tax or both. Tax avoidance transactions include, but are not limited to, "listed transactions" as defined and/or described in Treasury Regulations Section 1.6011-4(b)(2).
3.2.20. “Tax benefit” means and includes deductions, exclusions from gross income, nonrecognition of gain, tax credits, adjustments (or the absence of adjustments) to the basis of property, status as an entity exempt from Federal income taxation, and any other tax consequences that may reduce a taxpayer's West Virginia income tax liability by affecting the amount, timing, character, or source of any item of income, gain, expense, loss, or credit.
3.2.21. “Tax shelter” means a tax avoidance transaction.
3.2.22. “Tax structure” means any fact that may be relevant to understanding the purported or claimed West Virginia Personal Income Tax treatment or West Virginia Corporation Net Income Tax treatment of the transaction.
3.2.23. “Tax treatment” means the tax treatment of a transaction that is the purported or claimed West Virginia Personal Income Tax treatment or West Virginia corporation Net Income Tax treatment of the transaction.
3.2.24. “Transaction” means and includes all of the factual elements relevant to the expected tax treatment of any investment, entity, plan, or arrangement, and includes any series of steps carried out as part of a plan.
3.2.25. “Transactions involving a brief holding period” means any transaction resulting in the taxpayer claiming a tax credit exceeding $ 250,000 (including a foreign tax credit) if the underlying asset giving rise to the credit is held by the taxpayer for 45 days or less. For purposes of determining the holding period, the principles of I.R.C. § 246(c)(3) and (c)(4) apply. Transactions resulting in a foreign tax credit for withholding taxes or other taxes imposed in respect of a dividend that are not disallowed under I.R.C. § 901(k) (including transactions eligible for the exception for securities dealers under I.R.C. § 901(k)(4)) are excluded from this term.
3.2.26. “Transaction with a significant book-tax difference” means a transaction where the amount for tax purposes of any item or items of income, gain, expense, or loss from the transaction differs by more than $ 10 million on a gross basis from the amount of the item or items for book purposes in any taxable year.
3.2.27. “Transaction with contractual protection” means a transaction for which the taxpayer or a related party (as described in I.R.C. § 267(b) or I.R.C. § 707(b)) has the right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained. A transaction with contractual protection also is a transaction for which fees are contingent on the taxpayer's realization of tax benefits from the transaction.
W. Va. Code R. § 110-10J-4 Reportable Transactions
4.1. For each taxable year in which a taxpayer is required to make a disclosure statement under Treasury Regulations Section 1.6011-4 with respect to any reportable transaction in which the taxpayer participated in a taxable year for which a return is required, the taxpayer shall file a copy of the disclosure with the Tax Commissioner: Provided, That this disclosure requirement also applies to any taxpayer that is a member of a consolidated group that is required to make a disclosure.
4.1.1. Disclosure under this subsection is required to be made by any taxpayer that is a member of a unitary business group that includes any person required to make a disclosure statement under Treasury Regulations Section 1.6011-4.
4.1.2. Disclosure under this subsection is required with respect to any reportable transaction entered into after February 28, 2000, that becomes a listed transaction at any time, and shall be made in the manner prescribed in this rule.
4.1.2.1. If a taxpayer fails to disclose a listed transaction on either the taxpayer's state or federal income tax return, an assessment shall be made at any time not later than six years after the due date of the return required under W. Va. Code § 11-21-1 et seq., or W. Va. Code § 11-24-1 et seq., for the same taxable year or after the return was filed, or not later than three years after an amended return is filed, whichever is later.
4.1.3. With respect to reportable transactions in which the taxpayer participated for taxable years ending before December 31, 2004, disclosure shall be made by the due date of the first annual return due after June 8, 2006: Provided, That if the taxpayer has applied for and been granted an extension of time for filing the first annual return that is due after June 8, 2006, the extension of time shall apply in like manner to the disclosure statement required to be filed with the return.
4.1.4. With respect to reportable transactions in which the taxpayer participated for taxable years ending on and after December 31, 2004, disclosure shall be made in the time and manner prescribed in Treasury Regulations Section 1.6011-4(e).
4.1.4.1. The disclosure statement for a reportable transaction must be attached to the taxpayer's tax return for each taxable year for which a taxpayer participates in a reportable transaction. In addition, the disclosure statement for a reportable transaction must be attached to each amended return that reflects a taxpayer's participation in a reportable transaction. If a reportable transaction results in a loss which is carried back to a prior year, the disclosure statement for the reportable transaction must be attached to the taxpayer's application for tentative refund or amended tax return for that prior year. In the case of a taxpayer that is a partnership or S corporation, the disclosure statement for a reportable transaction must be attached to the partnership's or S corporation's tax return for each taxable year in which the partnership or S corporation participates in the transaction under the rules of section 5 of this rule.
4.1.4.2. If a transaction becomes a listed transaction after the filing of a taxpayer's tax return (including an amended return) reflecting either tax consequences or a tax strategy described in guidance published by the Internal Revenue Service listing the transaction (or a tax benefit derived from tax consequences or a tax strategy described in the publication) and before the end of the period of limitations for the final return (whether or not already filed) reflecting the tax consequences, tax strategy, or tax benefit, then a disclosure statement must be filed as an attachment to the taxpayer's tax return next filed after the date the transaction is listed regardless of whether the taxpayer participated in the transaction in that year.
4.1.5. Notwithstanding subdivisions 4.1.1 through 4.1.4 of this rule, no disclosure is required for transactions entered into after the February 28, 2000, and before January 1, 2004:
4.1.5.1. If the taxpayer has filed an amended West Virginia income tax return which reverses the tax benefits of the potential tax avoidance transaction; or
4.1.5.2. As a result of a federal audit the Internal Revenue Service has determined the tax treatment of the transaction and a West Virginia amended return has been filed to reflect the federal treatment.
4.1.6. If as a result of filing a disclosure required by W. Va. Code § 11-10E-5 and this rule a taxpayer’s tax liability for any taxable year for tax imposed by W. Va. Code § 11-21-1 et seq., or W. Va. Code § 11-24-1 et seq. is changed, the appropriate amended tax return or returns for the affected tax year or years are required to be filed.
4.1.7. Any action by the Internal Revenue Service resulting in a reportable transaction being added to, modified or removed from the categories of reportable transactions identified and described in Treasury Regulations Section 1.6011-4, or identified and described in any other Treasury publication, will be treated in like manner by the Tax Department and considered to be incorporated in this section.
4.2. Reportable transaction understatement penalty. -- If a taxpayer has a reportable transaction understatement for any taxable year, there shall be added to the tax an amount equal to 20% of the amount of that understatement. This penalty shall be determined to be assessed upon the assessment of the tax to which the penalty relates and shall be collected and paid on notice and demand in the same manner as the tax.
4.2.1. This subsection 4.2 applies to any item which is attributable to either of the following:
4.2.1.1. Any listed transaction as defined in Treasury Regulations Section 1.6011-4 and section 3 of this rule; and
4.2.1.2. Any other reportable transaction as defined in Treasury Regulations Section 1.6011-4 and section 3 of this rule (other than a listed transaction) if a significant purpose of the transaction is the avoidance or evasion of federal income tax. Subparagraphs 4.2.1.2.a through 4.2.1.2.d of this rule relative to reportable transactions other than listed transactions are provided so as to assist in determining whether certain transactions are actually reportable transactions other than listed transactions.
4.2.1.2.a. Confidential transactions. - For confidential transactions, a transaction is considered to be offered to a taxpayer under conditions of confidentiality if the material advisor who is paid the minimum fee places a limitation on disclosure by the taxpayer of the tax treatment or tax structure of the transaction and the limitation on disclosure protects the confidentiality of that material advisor's tax strategies. A transaction is treated as confidential even if the conditions of confidentiality are not legally binding on the taxpayer. A claim that a transaction is proprietary or exclusive is not treated as a limitation on disclosure if the material advisor confirms to the taxpayer that there is no limitation on disclosure of the tax treatment or tax structure of the transaction.
4.2.1.2.a.1. In order for a transaction to be considered a confidential transaction, the minimum amount of the minimum fee paid to a material advisor is:
4.2.1.2.a.1.A. $ 250,000 for a transaction if the taxpayer is a corporation; or,
4.2.1.2.a.1.B. $ 50,000 for all other transactions unless the taxpayer is a partnership or trust, all of the owners or beneficiaries of which are corporations (looking through any partners or beneficiaries that are themselves partnerships or trusts), in which case the minimum fee is $ 250,000.
4.2.1.2.a.2. A minimum fee includes all fees for a tax strategy, for services for advice (whether or not tax advice), or for the implementation of a transaction. These fees include consideration in whatever form paid, whether in cash or in kind, for services to analyze the transaction (whether or not related to the tax consequences of the transaction), for services to implement the transaction, for services to document the transaction, and for services to prepare tax returns to the extent that the fees exceed the fees customary for return preparation. A taxpayer is treated as paying fees to a material advisor if the taxpayer knows or should know that the amount it pays will be paid indirectly to the material advisor, such as through a referral fee or fee-sharing arrangement. A fee does not include amounts paid to a person, including a material advisor, in that person's capacity as a party to the transaction. For example, a fee does not include reasonable charges for the use of capital or the sale or use of property.
4.2.1.2.b. Transactions with contractual protections. – When determining whether the transaction has contractual protections, all the facts and circumstances relating to the transaction will be considered when determining whether a fee is refundable or contingent, including the right to reimbursements of amounts that the parties to the transaction have not designated as fees or any agreement to provide services without reasonable compensation.
4.2.1.2.b.1. Fees are required to have been paid by or on behalf of the taxpayer or a related party to any person who makes or provides a statement, oral or written, to the taxpayer or related party (or for whose benefit a statement is made or provided to the taxpayer or related party) as to the potential tax consequences that may result from the transaction.
4.2.1.2.b.2. Exceptions
4.2.1.2.b.2.A. Termination of transaction. A transaction is not considered to have contractual protection solely because a party to the transaction has the right to terminate the transaction upon the happening of an event affecting the taxation of one or more parties to the transaction.
4.2.1.2.b.2.B. Previously reported transaction. If a person makes or provides a statement to a taxpayer as to the potential tax consequences that may result from a transaction only after the taxpayer has entered into the transaction and reported the consequences of the transaction on a filed tax return, and the person has not previously received fees from the taxpayer relating to the transaction, then any refundable or contingent fees are not taken into account in determining whether the transaction has contractual protection.
4.2.1.2.c. Loss transactions. - In determining whether a transaction results in a taxpayer claiming a loss that meets the threshold amounts over a combination of taxable years, only losses claimed in the taxable year that the transaction is entered into and the five succeeding taxable years are combined.
4.2.1.2.c.1. Because a loss transaction is a transaction resulting in a loss being claimed under I.R.C. § 165, for purposes of loss transactions, an I.R.C. § 165 loss includes the following:
4.2.1.2.c.1.A. When determining the thresholds as stated in the definition of “loss transaction” in section 2 of this rule, the amount of an I.R.C. § 165 loss is adjusted for any salvage value and for any insurance or other compensation received. However, an I.R.C. § 165 loss does not take into account offsetting gains, or other income or limitations. The full amount of an I.R.C. § 165 loss is taken into account for the year in which the loss is sustained, regardless of whether all or part of the loss enters into the computation of a net operating loss under I.R.C. § 172 or a net capital loss under I.R.C. § 1212 that is a carryback or carryover to another year. An I.R.C. § 165 loss does not include any portion of a loss, attributable to a capital loss carryback or carryover from another year, that is treated as a deemed capital loss under I.R.C. § 1212.
4.2.1.2.c.1.B. An I.R.C. § 165 loss includes an amount deductible pursuant to a provision that treats a transaction as a sale or other disposition, or otherwise results in a deduction under I.R.C. § 165. An I.R.C. § 165 loss includes, for example, a loss resulting from a sale or exchange of a partnership interest under I.R.C. § 741 and a loss resulting from an I.R.C. § 988 transaction.
4.2.1.2.d. Transactions with a significant book-tax difference. – For purposes of determining whether the transaction is a transaction with a significant book-tax difference, offsetting items may not be netted for either tax or book purposes. The amount of an item for book purposes is determined by applying United States generally accepted accounting principles (U.S. GAAP) for worldwide income. However, if a taxpayer, in the ordinary course of its business, keeps books for reporting financial results to shareholders, creditors, or regulators on a basis other than U.S. GAAP, and does not maintain U.S. GAAP books for any purpose, then the taxpayer may determine the amount of a book item by using the books maintained by the taxpayer, provided the books are kept on the same basis consistently from year to year. Adjustments to any reserve for taxes are disregarded for purposes of determining the book-tax difference.
4.2.1.2.d.1. In general, this category of reportable transactions applies only to:
4.2.1.2.d.1.A. (1) Taxpayers that are reporting companies under the Securities Exchange Act of 1934 and are related business; or
4.2.1.2.d.1.B. Business entities that have $ 250 million or more in gross assets for book purposes at the end of any financial accounting period that ends with or within the entity's taxable year in which the transaction occurs (for purposes of this determination, the assets of all related business entities) must be aggregated.
4.2.1.2.d.2. Consolidated returns. For purposes of this category of reportable transactions, in the case of taxpayers that are members of a group of affiliated corporations filing a consolidated return, transactions solely between or among members of the group will not be disregarded. Moreover, where two or more members of the group participate in a transaction that is not solely between or among members of the group, items shall be aggregated (as if the members were a single taxpayer), but any offsetting items shall not be netted.
4.2.1.2.d.3. Foreign persons. In the case of a taxpayer that is a foreign person (other than a foreign corporation that is treated as a domestic corporation for Federal tax purposes under I.R.C. § 269B, 953(d), 1504(d) or any other provision of the Internal Revenue Code), only assets that are U.S. assets under Treasury Regulation § 1.884-1(d) shall be taken into account for purposes of paragraph 4.2.1.2.d.2 of this rule, and only transactions that give rise to income that is effectively connected with the conduct of a trade or business within the United States (or to losses, expenses, or deductions allocated or apportioned to the income) shall be taken into account for purposes of this reportable transaction.
4.2.1.2.d.4. Owners of disregarded entities. In the case of an eligible entity that is disregarded as an entity separate from its owner for Federal tax purposes, items of income, gain, loss, or expense that otherwise are considered items of the entity for book purposes shall be treated as items of its owner, and items arising from transactions between the entity and its owner shall be disregarded, for purposes of this reportable transaction.
4.2.1.2.d.5. Partners of partnerships. In the case of a taxpayer that is a member or a partner of an entity that is treated as a partnership for Federal tax purposes, items of income, gain, loss, or expense that are allocable to the taxpayer for Federal tax purposes, but otherwise are considered items of the entity for book purposes, shall be treated as items of the taxpayer for purposes of this reportable transaction.
W. Va. Code R. § 110-10J-5 Participation in a Reportable Transaction
5.1. A taxpayer is required by W. Va. Code § 11-10E-5 to file each year a disclosure statement with respect to each reportable transaction in which the taxpayer participated.
5.2. The following applies to determining whether a taxpayer participated in a reportable transaction.
5.2.1. Listed transactions. A taxpayer has participated in a listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described in the published guidance that lists the transaction under Treasury Regulations Section 1.6011-4(b)(2). A taxpayer also has participated in a listed transaction if the taxpayer knows or has reason to know that the taxpayer's tax benefits are derived directly or indirectly from tax consequences or a tax strategy described in published guidance that lists a transaction described in Treasury Regulations Section 1.6011-4(b)(2). Published guidance may identify other types or classes of persons that will be treated as participants in a listed transaction.
5.2.2. Confidential transactions. A taxpayer has participated in a confidential transaction if the taxpayer's tax return reflects a tax benefit from the transaction and the taxpayer's disclosure of the tax treatment or tax structure of the transaction is limited in the manner described in Treasury Regulations Section 1.6011-4(b)(3). If a partnership's, S corporation's or trust's disclosure is limited, and the partner's, shareholder's, or beneficiary's disclosure is not limited, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the confidential transaction.
5.2.3. Transactions with contractual protection. A taxpayer has participated in a transaction with contractual protection if the taxpayer's tax return reflects a tax benefit from the transaction and, as described in Treasury Regulations Section 1.6011-4(b)(4), the taxpayer has the right to the full or partial refund of fees or the fees are contingent. If a partnership, S corporation, or trust has the right to a full or partial refund of fees or has a contingent fee arrangement, and the partner, shareholder, or beneficiary does not individually have the right to the refund of fees or a contingent fee arrangement, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the transaction with contractual protection.
5.2.4. Loss transactions. A taxpayer has participated in a loss transaction if the taxpayer's tax return reflects a I.R.C. § 165 loss and the amount of the I.R.C. § 165 loss equals or exceeds the threshold amount applicable to the taxpayer as described in Treasury Regulations Section 1.6011-4(b)(5)(i). If a taxpayer is a partner in a partnership, shareholder in an S corporation, or beneficiary of a trust and a I.R.C. § 165 loss as described in Treasury Regulations Section 1.6011-4(b)(5) flows through the entity to the taxpayer (disregarding netting at the entity level), the taxpayer has participated in a loss transaction if the taxpayer's tax return reflects a I.R.C. § 165 loss and the amount of the I.R.C. § 165 loss that flows through to the taxpayer equals or exceeds the threshold amounts applicable to the taxpayer as described in Treasury Regulations Section 1.6011-4(b)(5)(i). For this purpose, a tax return is considered to reflect the full amount of a I.R.C. § 165 loss described in Treasury Regulations Section 1.6011-4(b)(5) allocable to the taxpayer under this subdivision, regardless of whether all or part of the loss enters into the computation of a net operating loss under I.R.C. § 172 or net capital loss under I.R.C. § 1212 that the taxpayer may carry back or carry over to another year.
5.2.5. Transactions with a significant book-tax difference. A taxpayer has participated in a transaction with a significant book-tax difference if the taxpayer's tax treatment of an item from the transaction differs from the book treatment of that item as described in Treasury Regulations Section 1.6011-4(b)(6). In determining whether a transaction results in a significant book-tax difference for a taxpayer, differences that arise solely because a subsidiary of the taxpayer is consolidated with the taxpayer, in whole or in part, for book purposes, but not for tax purposes, are not taken into account.
5.2.6. Transactions involving a brief asset holding period. A taxpayer has participated in a transaction involving a brief asset holding period if the taxpayer's tax return reflects items giving rise to a tax credit described in Treasury Regulations Section 1.6011-4(b)(7). If a taxpayer is a partner in a partnership, shareholder in an S corporation, or beneficiary of a trust and the items giving rise to a tax credit described in Treasury Regulations Section 1.6011-4(b)(7) flow through the entity to the taxpayer (disregarding netting at the entity level), the taxpayer has participated in a transaction involving a brief asset holding period if the taxpayer's tax return reflects the tax credit and the amount of the tax credit claimed by the taxpayer exceeds $ 250,000.
5.2.7. Shareholders of foreign corporations. -- In general. A reporting shareholder of a foreign corporation participates in a transaction described in Treasury Regulations Section 1.6011-4(b)(2) through (5) and (b)(7) if the foreign corporation would be considered to participate in the transaction under the rules of Treasury Regulations Section 1.6011-4(c)(3) if it were a domestic corporation filing a tax return that reflects the items from the transaction. A reporting shareholder participates in a transaction described in Treasury Regulations Section 1.6011-4(b)(6) only if the foreign corporation would be considered to participate in the transaction under the rules of Treasury Regulations Section 1.6011-4(c)(3) if it were a domestic corporation and the transaction reduces or eliminates an income inclusion that otherwise would be required under I.R.C. § 551, 951, or 1293. A reporting shareholder (and any successor in interest) is considered to participate in a transaction under Treasury Regulations Section 1.6011-4(c)(3)(i)(G) only for its first taxable year with or within which ends the first taxable year of the foreign corporation in which the foreign corporation participates in the transaction, and for the reporting shareholder's five succeeding taxable years.
W. Va. Code R. § 110-10J-6 Registration of Tax Shelters
6.1. Any tax shelter organizer required to register a tax shelter under I.R.C. § 6111 prior to its amendment on October 22, 2004, and any material advisor required under I.R.C. § 6111 after its amendment on October 22, 2004 to register a reportable transaction or listed transaction shall send a duplicate of the federal registration information to the Tax Commissioner not later than the day on which registration is required under federal law. Any person required to register under I.R.C. § 6111 who receives a tax registration number from the Secretary of the Treasury shall, within thirty days after request by the Tax Commissioner, file a statement of that registration number with the Tax Commissioner.
6.2. In addition to the requirements of subsection 6.1 of this rule, any transactions entered into on or after February 28, 2000, that become listed transactions at any time, shall be registered with the Tax Commissioner by the later of:
6.2.1. Sixty days after entering into the transaction;
6.2.2. Sixty days after the transaction becomes a listed transaction; or
6.2.3. July1, 2006.
6.3. The provisions of this section apply to any tax shelter described in this rule in which a person:
6.3.1. Organizes or participates in the sale of an interest in a partnership, entity or other plan or arrangement; and
6.3.2. Which is or was one or more of the following:
6.3.2.1. Organized in this state;
6.3.2.2. Doing business in this state; or
6.3.2.3. Deriving income from sources in this state.
6.4. Any person required to file a return under W. Va. Code § 11-10E-1 et seq., and this rule and required to include on the person's federal income tax return a tax shelter identification number pursuant to I.R.C. § 6111 shall furnish the number when filing the person's West Virginia return.
§101-10J-7. Investor Lists.
7.1. Any person required to maintain a list under I.R.C. § 6112 and Treasury Regulations Section 301.6112-1 with respect to a potentially abusive tax shelter shall furnish the list to the Tax Commissioner not later than the time the list is required to be furnished to the Internal Revenue Service under federal income tax law. The list required under this section shall include the same information required with respect to a potentially abusive tax shelter under Treasury Regulations Section 301.6112-1 and any other information that the Tax Commissioner may require.
7.2. For transactions entered into on or after February 28, 2000, that become listed transactions at any time thereafter, the list shall be furnished to the Tax Commissioner by the later of:
7.2.1. Sixty days after entering into the transaction; or
7.2.2. Sixty days after the transaction becomes a listed transaction.
7.3. The provisions of this section apply to any tax shelter described in this rule in which a person:
7.3.1. Organizes or participates in the sale of an interest in a partnership, entity or other plan or arrangement; and
7.3.2. Which is or was one or more of the following:
7.3.2.1. Organized in this state;
7.3.2.2. Doing business in this state; or
7.3.2.3. Deriving income from sources in this state.
W. Va. Code R. § 110-10J-8 Penalties
8.1. Promoting tax shelters.
8.1.1. Any person:
8.1.1.1. Who organizes (or assists in the organization) of a partnership or other entity, any investment plan or arrangement, or any other plan or arrangement, or
8.1.1.2. Who participates (directly or indirectly) in the sale of any interest in an entity or plan or arrangement referred to in paragraph 8.1.1.1 of this rule, and
8.1.1.3. Who makes or furnishes or causes another person to make or furnish (in connection with the organization or sale) a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person does not know or does not have reason to know is false or fraudulent as to any material matter, or is a gross valuation overstatement as to any material matter, shall pay, with respect to each activity described in paragraph 8.1.1.1 of this rule, a penalty equal to the $ 1,000 or, if the person establishes that it is lesser, 100% of the gross income derived (or to be derived) by the person from the activity.
8.1.1.4. For purposes of the preceding sentence, the activities described paragraph 8.1.1.1 of this rule with respect to each entity or arrangement shall be treated as a separate activity and participation in each sale described in paragraph 8.1.1.2 of this rule shall be treated in the same manner.
8.1.2. Any person:
8.1.2.1. Who organizes (or assists in the organization) of a partnership or other entity, any investment plan or arrangement, or any other plan or arrangement, or
8.1.2.2. Who participates (directly or indirectly) in the sale of any interest in an entity or plan or arrangement referred to in paragraph 8.1.2.1 of this rule, and
8.1.2.3. Who makes or furnishes or causes another person to make or furnish (in connection with the organization or sale) a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or a gross valuation overstatement as to any material matter, shall pay, with respect to each activity described in paragraph 8.1.2.1 of this rule, a penalty equal to the $ 1,000 or, if the person establishes that it is lesser, 100% of the gross income derived (or to be derived) by the person from the activity.
8.1.2.4. For purposes of the preceding paragraph, the activities described in paragraph 8.1.1.1 of this rule with respect to each entity or arrangement shall be treated as a separate activity and participation in each sale described in paragraph 8.1.2.2 of this rule shall also be treated in the same manner.
8.1.2.5. Notwithstanding anything in subdivision 8.1.2 of this rule to the contrary, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph 8.1.2.3 of this rule, the amount of the penalty shall be equal to 50% of the gross income derived (or to be derived) from the activity by the person on which the penalty is imposed.
8.1.3. The Tax Commissioner may waive all or any part of the penalty provided by subdivision 8.1.1 or 8.1.2 of this rule with respect to any gross valuation overstatement on a showing that there was a reasonable basis for the valuation and that the valuation was made in good faith.
8.1.4. The penalty imposed by this subsection shall be in addition to any other penalty provided by law.
8.2. Failure to register tax shelter or maintain list.
8.2.1. Penalty imposed. -- Any person that fails to comply with the requirements of W. Va. Code § 11-10E-8 or W. Va. Code § 11-10E-9 shall incur a penalty as provided in subdivision 8.2.2 of this rule. A person is not in compliance with the requirements of W. Va. Code § 11-10E-8 unless and until the required registration has been filed and contains all of the information required to be included with the registration under W. Va. Code § 11-10E-8 or I.R.C. § 6111: Provided, That a person will be considered to be in compliance with W. Va. Code § 11-10E-8 if that person has filed with the Tax Commissioner all information required to be filed with the Internal Revenue Service. A person shall not be in compliance with the requirements of W. Va. Code §11-10E-9 unless, at the time the required list is made available to the Tax Commissioner, the list contains all of the information required to be maintained under W. Va. §11-10E-9 or I.R.C. § 6112.
8.2.2. Amount of penalty. -- The following penalties apply:
8.2.2.1. In the case of each failure to comply with the requirements of W. Va. Code § 11-10E-8 (a), (b) or (d), the penalty is $10,000;
8.2.2.2. If the failure to comply with the requirements of W. Va. Code § 11-10E-8 (a), (b) or (d) is with respect to a listed transaction described in W. Va. Code § 11-10E-8(c), the penalty is $100,000;
8.2.2.3. In the case of each failure to comply with the requirements of W. Va. Code § 11-10E-9(a) or (b), the penalty is $10,000; and
8.2.2.4. If the failure to comply with the requirements of W. Va. Code §11-10E-9(a) or (b) is with respect to a listed transaction described in W. Va. Code §11-10E-9(c), the penalty is $100,000.
8.2.3. Authority to rescind penalty. -- The Office of Tax Appeals, with the written approval of the Tax Commissioner, may rescind all or any portion of any penalty imposed by W. Va. Code § 11-10E-6 with respect to any violation only if one or more of the following apply:
8.2.3.1. It is determined that failure to comply did not jeopardize the best interests of the state and is not due to any willful neglect or any intent not to comply;
8.2.3.2. It is shown that the violation is due to an unintentional mistake of fact;
8.2.3.3. Rescinding the penalty would promote compliance with the requirements of W. Va. Code §11-10E-1 et seq., and effective tax administration; or
8.2.3.4. The taxpayer can show that there was reasonable cause for the failure to disclose and that the taxpayer acted in good faith.
8.2.4. Coordination with other penalties. -- The penalty imposed by W. Va. Code § 11-10E-6 is in addition to any other penalty imposed by W. Va. Code § 11-10E-1 et seq., or W. Va. Code §11-10- et seq.
8.3. Reportable transaction understatement penalty. -- If a taxpayer has a reportable transaction understatement for any taxable year, there shall be added to the tax an amount equal to 20% of the amount of that understatement. This penalty shall be considered assessed upon the assessment of the tax to which the penalty relates and shall be collected and paid on notice and demand in the same manner as the tax.
8.3.1. This subsection applies to any item which is attributable to either of the following:
8.3.1.1. Any listed transaction as defined in Treasury Regulations Section 1.6011-4 and section 3 of this rule; and
8.3.1.2. Any other reportable transaction as defined in Treasury Regulations Section 1.6011-4 and section 3 of this rule (other than a listed transaction) if a significant purpose of the transaction is the avoidance or evasion of federal income tax.
8.3.2. Failure to comply with this subsection will result in the reportable transaction understatement penalty being increased to 30% of the amount of that understatement.
8.3.3. Reasonable cause exception. -- No penalty shall be imposed under this subsection with respect to any portion of a reportable transaction understatement if it is shown by clear and convincing evidence that there was a reasonable cause for the portion and that the taxpayer acted in good faith with respect to the portion. Reasonable cause for failure to adequately disclose is to be demonstrated by the taxpayer satisfying all of the following:
8.3.3.1. If the penalty for that failure was rescinded;
8.3.3.2. There is or was substantial authority for the treatment; and
8.3.3.3. The taxpayer reasonably believed that the treatment was more likely than not the proper treatment.
8.4. Promoting tax shelters.
8.4.1. The provisions of I.R.C. § 6700 apply for purposes of W. Va. Code § 11-10E-1 et seq., as if the section applied to a West Virginia deduction, credit, exclusion from income, allocation or apportionment rule, or other West Virginia tax benefit: Provided, That if an activity with respect to which a penalty imposed under I.R.C. § 6700(a), as applied for purposes of W. Va. Code § 11-10E-1 et seq., involves a false or fraudulent statement as described in I.R.C. § 6700(a)(2)(A), the amount of the penalty shall be 50% fifty percent of the gross income derived (or to be derived) from the activity by the person upon which the penalty is imposed.
8.5. Failure to disclose listed transactions.
8.5.1. For audits of returns commencing on or after July 1, 2006, when it appears that any part of the deficiency for which an assessment is made is due to failure to disclose a listed transaction or a reportable transaction other than a listed transaction, as the terms are defined in I.R.C. § 6707A, or any subsequent corresponding provision of the Internal Revenue Code as from time to time amended, on the taxpayer's federal income tax return, there shall be imposed a penalty:
8.5.1.1. In the case of a listed transaction the amount of the penalty shall be equal to 70% of the amount of the deficiency; and
8.5.1.2. In the case of other reportable transactions the amount of the penalty shall be equal to 35% of the amount of the deficiency.
110CSR10J
110CSR10J
Series 10K Combined Returns Pursuant To an Investigation By The Tax Commissioner
W. Va. Code R. § 110-10K-1 General
1.1. Scope. -- This rule provides guidance on the order of application of taxes combined pursuant to West Virginia Code §11-10-7d(b).
1.2. Authority. -- W. Va. Code §§11-10-5 and 11-10-7d(b).
1.3. Filing Date. -- June 1, 2009.
1.4. Effective Date. -- June 1, 2009.
W. Va. Code R. § 110-10K-2 Introduction
2.1. The West Virginia State Legislature has granted the Tax Commissioner the discretion to combine the tax returns of taxpayers subsequent to an investigation conducted by the Tax Commissioner or his or her designees; which results in an assessment in each of two or more taxes administered under W. Va. Code §11-10-1 et seq. This legislative rule provides the order of application of taxes remitted under a combined return.
W. Va. Code R. § 110-10K-3 Definitions
As used in this rule, and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section:
3.1. “Combined return” means a tax return in which the Tax Commissioner has combined the returns for taxes that are the subject of an investigation by the Tax Commissioner or his or her designee.
3.2. “Tax” means and includes all taxes, additions to tax, and all interest and penalties levied under any applicable West Virginia statute authorizing these taxes or under W. Va. Code §11-10-1 et seq.
3.3. “Tax Commissioner” means the Commissioner of the West Virginia State Tax Department.
W. Va. Code R. § 110-10K-4 Order of Remittance
4.1. For combined returns of West Virginia Consumers Sales, Service and Use Tax, the taxes combined and remitted shall be applied in the following order:
4.1.a. consumers sales and service tax
4.1.b. consumers use tax
4.1.c. municipal sales and use tax
4.2. For combined returns of West Virginia Corporation Net Income and Business Franchise Tax, the taxes combined and remitted shall be applied in the following order:
4.2.a. business franchise tax
4.2.b. corporation net income
4.3. For combined returns of pass-through entities, for West Virginia personal income tax withholding and Business Franchise Tax, the taxes combined and remitted shall be applied in the following order:
4.3.a. nonresident withholding tax
4.3.b. business franchise tax 110CSR10K 110CSR10K
Series 10L Claiming Tax Refund or Credit
W. Va. Code R. § 110-10L-1 General
1.1. Scope. -- This procedural rule sets forth the practice and procedure established by the West Virginia State Tax Department for filing a claim for a refund or credit as provided in W. Va. Code §11-10-14.
1.2. Authority. -- W. Va. Code §§11-10-5 and 39A-3-2.
1.3. Filing Date. – December 23, 2015.
1.4. Effective Date -- January 25, 2016.
W. Va. Code R. § 110-10L-2 Definitions
For the purposes of this rule, the following terms have the meanings set forth in this section, unless a different meaning is clearly indicated by the context in which the term is used.
2.1. “Code” means the Code of West Virginia of one thousand nine hundred thirty-one, as amended.
2.2. “Commissioner” or “Tax Commissioner” means the West Virginia Tax Commissioner or his or her delegate.
2.3. “Department” or “Tax Department” means the West Virginia State Tax Department.
2.4. “Duplicate” means a claim for refund or credit of any tax administered under any tax administered under chapter eleven, article ten of the West Virginia Code covering the same period or a portion thereof that is also covered by another claim for refund or credit of the same tax, or a portion thereof.
2.5. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or any other similar capabilities or characteristics.
2.6. “Electronic filing” means filing using electronic technology such as computer modem, magnetic media, optical disk, facsimile machine, telephone or other technology approved by the Tax Commissioner, in such manner as he or she deems acceptable.
2.7. “MyTaxes” is the electronic tax system used by the West Virginia State Tax Department to assist certain taxpayers to view, file and pay State taxes online.
2.8. “Person” includes, but is not limited to, any individual, firm, partnership, limited partnership, copartnership, joint adventure, association, corporation, municipal corporation, organization, receiver, estate, trust, guardian, executor, administrator, and also any officer, employee or member of any of the foregoing persons who, as an officer, employee or member, is under a duty to perform or is responsible for the performance of an act prescribed by the provisions of W. Va. Code §11-10-1, et seq., and the provisions of any other article of the Code which imposes a tax administered by the Tax Commissioner.
2.9. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and that retrievable in perceivable form, and includes, but is not limited to, a message, document, tax form, tax return or other instrument that is transmitted electronically from an authorized officer or other person to the Department to meet the requirements of law or to execute an essential transaction. An informal communication will not be considered an electronic record for purposes of this rule.
2.10. “Refund” means any overpayment of State taxes, to be transferred from the State or taxing authority back to the original payer or to the person making the overpayment after the Tax Department makes the appropriate credits for any liabilities for any tax on the part of the person who made the overpayment.
2.11. “State” or “this State” means the State of West Virginia.
2.12. “Tax” or “taxes” means taxes administered under the authority of W. Va. Code §11-10-1, et seq. additions to tax and penalties and interest imposed with respect to those taxes.
2.13. “Tax preparer” means any person who prepares, in exchange for compensation, or who employs another person to prepare, in exchange for compensation, all or a substantial portion of any return or claim for a refund or credit for a taxpayer for any tax administered under the authority of W. Va. Code §11-10-1, et seq.
2.14. “Taxpayer” means any person required to file a return for, or liable for the payment of, any tax administered under W. Va. Code §11-10-1, et seq.
W. Va. Code R. § 110-10L-3 Refunds or Credits of Overpayments
3.1. General. – The Tax Commissioner, subject to the provisions of this rule and the provisions of W. Va. Code §11-10-1, et seq. shall refund or apply as a credit against the taxpayer’s liability for the tax for other periods, any overpayment of any tax (or fee), additions to tax, penalties or interest imposed by W. Va. Code §11-10-1, et seq., or any of the other articles of Chapter 11, or of the Code, to which W. Va. Code §11-10-14 applies.
3.1.a. The refund or credit shall include any interest due the taxpayer under the provisions of W. Va. Code §11-10-17.
W. Va. Code R. § 110-10L-4 Method for Claiming Refunds of Tax, Credit Against Other Taxes
4.1. No refund shall be due and no credit is allowed unless the taxpayer or assignee has timely filed a claim for a refund or a credit with the Commissioner in accordance with W.Va. §11-10-14 and this rule in such form and in such manner as the Commissioner requires.
4.1.a. Any person against whom an assessment or administrative decision has become final is not entitled to file a claim for a refund or credit of those same taxes addressed in such assessment or administrative decision.
4.2. Any claim for a refund, or a credit, must be filed within the time limits specified in W. Va. Code §11-10-1, et seq.
4.2.a. Any claim for a refund or a credit not timely filed does not constitute a moral obligation of the State of West Virginia for payment.
4.3. Filing Claim for Refund. – Any person who has over paid any of the taxes imposed by the laws of this State may file a claim for refund of the applicable tax on such form and in such manner as the Commissioner may require and in accordance with W.Va. §11-10-14 and this rule.
4.4. Filing Claim for Credit – In lieu of filing a claim for a refund of the applicable tax, the taxpayer may, at his or her option and within the time limits specified in W.Va. Code §11-10-1, et seq., file a claim for credit on such form and in such manner as the Commissioner may require and credit the amount of the overpayments against certain payment of other taxes due in accordance with W.Va. Code §11-10-14 and this rule.
4.4.a. This procedure may not be utilized unless the taxpayer has filed a properly completed claim for credit with the Commissioner.
4.4.a.1. A claim for credit is required each time a taxpayer seeks to utilize this procedure.
4.4.a.1.A. Any credit may be disallowed as a result of Department audits of the taxpayer’s records.
4.5. A return signed by a taxpayer which shows on its face that an overpayment of the tax imposed by W. Va. Code §11-21-1, et seq., §11-23-1, et seq. or §11-24-1, et seq. was made constitutes a claim for a refund or a credit.
4.6. The Commissioner and the taxpayer may enter into a written agreement to extend the period within which the taxpayer may file a claim for a refund or a credit. The period of extension shall not exceed two years. The two year period of extension may be extended by additional periods not in excess of two years each by written agreement prior to the expiration of the extension period.
W. Va. Code R. § 110-10L-5 Electronic Filing Required For Certain Claims
5.1. Unless otherwise specifically required by the Commissioner, claims for refunds or credits for taxes (or fees), additions to tax, penalties or interest imposed by W. Va. Code §11-10-1, et seq., or any of the other articles of Chapter 11, or of the Code, to which W. Va. Code §11-10-14 applies shall be filed electronically, in accordance with 110 CSR 10D and this rule. The Commissioner shall determine which claims shall be filed and submitted electronically, based on the following threshold amounts:
5.1.a. Beginning on or after January 1, 2009, any person required to file a return for a tax administered under the provisions of W.Va. Code §11-10-1, et seq. and who had a total annual remittance of any single tax equal to or greater than $100,000 during the immediately preceding taxable year, shall file any claim for a tax refund or credit electronically using MyTaxes available on the Department’s website.
5.1.b. Beginning on or after January 1, 2013, any person required to file a return for a tax administered under the provisions of W.Va. Code §11-10-1, et seq. and who had a total annual remittance of any single tax equal to or greater than $50,000 during the immediately preceding taxable year, shall file any claim for a tax refund or credit electronically using MyTaxes available on the Department’s website;
5.1.c. Beginning on or after January 1, 2014, any person required to file a return for a tax administered under the provisions of W.Va. Code §11-10-1, et seq. and who had a total annual remittance of any single tax equal to or greater than $25,000 during the immediately preceding taxable year, shall file any claim for a tax refund or credit electronically using MyTaxes available on the Department’s website;
5.1.d. Beginning on or after January 1, 2015, any person required to file a return for a tax administered under the provisions of W.Va. Code §11-10-1, et seq. and who had a total annual remittance of any single tax equal to or greater than $10,000 during the immediately preceding taxable year, shall file any claim for a tax refund or credit electronically using MyTaxes available on the Department’s website;
5.1.e. Beginning on or after January 1, 2016, any person required to file a return for a tax administered under the provisions of W.Va. Code §11-10-1, et seq. and who had a total annual remittance of any single tax equal to or greater than $25,000 during the immediately preceding taxable year, shall file any claim for a tax refund or credit electronically using MyTaxes available on the Department’s website;
5.1.f. Any person required to file a return for a tax administered under the provisions of W.Va. Code §11-10-1, et seq. and who had a total annual remittance of any single tax during the immediately preceding taxable year less than the threshold amount listed for that year is not required to, but may, file a claim for a tax refund or credit electronically with the Commissioner.
5.2. The Commissioner shall designate those Department forms for asserting or exercising a claim for a refund or a credit that will be accepted for filing electronically.
5.3. Taxpayers will have access to the designated forms through the Department website.
5.4. The Commissioner has the authority to waive the requirements for filing electronically upon finding that the taxpayer or tax preparer is technically unable to comply. The taxpayer or tax preparer shall request a waiver in writing and clearly demonstrate the nature of the technical inability. The Commissioner shall respond to the request for a waiver within 45 days of receipt. The Waiver Request Form will be signed under penalty of perjury and be in a form as prescribed by the Tax Commissioner.
W. Va. Code R. § 110-10L-6 Documents Supporting Claim for Refund or Credit
6.1 Any person asserting or exercising a claim for a refund or a credit shall file such records or documents as the Commissioner may require proving or verifying the taxpayer’s right and entitlement to such refund or credit. The Commissioner may inspect or examine the records or documents of a taxpayer or any other person to verify the truth and accuracy of any report or return or to ascertain whether the tax has been paid.
6.2. Beginning on or after February 15, 2014, any person filing a claim for refund of Consumers Sales and Service Tax or Use Tax, is required to provide the following information on the applicable form:
Vendor name Invoice date Invoice number Exempt item description Invoice amount West Virginia sales tax paid Municipal sales tax paid Municipality name
6.2.a. Beginning on or after February 15, 2014, any person required to electronically file a claim for refund of Consumers Sales and Service Tax or Use Tax, in accordance with 110 CSR 10D and section 5.1 of this rule, shall do so in electronic spreadsheet format. The spreadsheet must contain all of the information required and listed in section 6.2 of this rule in individual fields.
6.2.a.1. A claim for refund form is not complete if all of the information required to be entered on the applicable form is not provided. Absent specific authorization by the Tax Commissioner for use of a specified sampling process, information provided on the claim for refund form using a sampling process is not acceptable and shall be considered incomplete.
6.2.a.2. A claim for refund form, required to be electronically filed in electronic spreadsheet format, is not complete unless it is submitted in electronic spreadsheet format,
6.2.a.3. A claim for refund that is not complete is deemed not to be filed.
6.3. Under the investigative, and tax administration powers granted to the Tax Commissioner under W. Va. Code §11-10-1 et seq., and the subpoena powers granted to the Tax Commissioner under W. Va. Code §11-10-5b, the Commissioner has the power to examine witnesses under oath. If any witness shall fail or refuse at the request of the Commissioner to grant access to the documents or records requested by the Commissioner, the Commissioner may issue a subpoena or subpoena duces tecum to such party to appear before the Commissioner, at a place designated, on a day fixed. In case of disobedience or neglect of any subpoena or subpoena duces tecum served on any person, or the refusal of any witness to testify to any matter regarding which he may be lawfully interrogated, the subpoena or subpoena duces tecum shall be enforced in accordance with the requirements of W. Va. Code §11-10-5b.
W. Va. Code R. § 110-10L-7 Overlapping, Conflicting, Redundant, Partially Redundant, Duplicate or Incomplete Claims Or Claims Covering the Same Period Or the Same Tax Or the Same Transactions
7.1. Overlapping, conflicting, redundant, partially redundant, incomplete or duplicate claims are invalid.
7.1.a. Initial filings -- The processing of a currently pending claim for refund or credit that has been submitted but not yet approved will cease or not be implemented and will be treated as an incomplete and inaccurate claim not properly filed upon the receipt of a subsequently filed claim for refund or credit for or from the same Taxpayer for the same tax period or part of the same tax period, or for the same transactions as those covered by the subsequently submitted claim or claims.
7.1.b. Subsequent filings -- The processing of one or more claims for refund or credit submitted subsequent to the submission of a currently pending claim for refund or credit will be treated as incomplete and inaccurate claims, not properly filed if the subsequent claim, or claims, for refund or credit are for or from the same Taxpayer for the same tax period or part of the same tax period, or for the same transactions as those covered by the previously submitted claim.
7.1.c. Processing for all overlapping, conflicting, redundant, partially redundant, incomplete or duplicate claims shall cease. Such claims may be denied by the Tax Commissioner as incomplete or inaccurate, or both. The entity or entities submitting such claims, upon such denial, and at the election of the taxpayer, may refile one comprehensive claim covering the periods and transactions to be covered, and resolving and eliminating all overlapping, conflicting, redundant, partially redundant incomplete, inaccurate or duplicate claims. This provision may not be interpreted to allow or authorize any filing, refiling or submission of any claim for refund or credit for any period outside of the statute of limitations, or any filing, refiling or submission of any claim for refund or credit that is otherwise not lawful.
7.1.d. Neither this rule nor this section of this rule shall be interpreted to preclude, abrogate or impede the imposition of interest, penalties, additions to tax and criminal penalties, as applicable, which may be lawfully assessed or imposed in the case of any untimely, overlapping, conflicting, redundant, partially redundant, incomplete, inaccurate or duplicate claim, or any false, fraudulent, or otherwise unlawful claim.
7.2. If any claim has been approved, and a later claim is determined by the Commissioner to cover the same period or a portion thereof that is contained in any claim previously submitted for a refund or credit, the Tax Commissioner may require additional documentation to substantiate claims for refund or credit.
7.3. The ninety-day determination period set forth in W. Va. Code §11-10-14 will not apply to a claim for a refund or credit which has been determined by the Commissioner to duplicate a claim previously submitted, or that is otherwise an overlapping, conflicting, redundant, or partially redundant or incomplete claim.
Series 12B Registration Of Transient Vendors
W. Va. Code R. § 110-12B-1 General
1.1. Scope. -- These regulations establish the procedure to be followed by the Tax Commissioner in instituting forfeiture proceedings against the property of a transient vendor, as that term is defined in W. Va. Code '11-12-2, who fails on demand to exhibit a valid business registration certificate as required by W. Va. '11-12-1 et seq.
1.2. Authority. -- W. Va. Code '29A-3-9 and '11-12-24.
1.3. Filing Date. -- May 13, 1987
1.4. Effective Date. -- May 13, 1987
W. Va. Code R. § 110-12B-2 Definitions
2.1. Business Activity. -- As used in this rule and unless the context clearly requires a different meaning, the following terms shall have the meanings ascribed herein, and shall apply in the singular or in the plural.
2.1.1. Judicial sales directed by law or court order.
2.1.2. Sales for delinquent taxes or real or personal property.
2.1.3. The conduct of charitable bingo by any person licensed under Article twenty (20), Chapter forty-seven (47) of this Code.
2.1.4. The conduct of a charitable raffle by any person.
2.1.5. The conduct of a horse or dog race meeting by any racing association licensed under Article twenty-three (23), Chapter nineteen (19) of this Code.
2.1.6. The operation or maintenance of the pari-mutuel system of wagering during the conduct of a licensed horse or dog race meeting.
2.1.7. The sale of any commodity during the conduct of a licensed horse or dog race meeting.
2.1.8. The services of owners, trainers or jockeys which are essential to the effective conduct of a licensed horse or dog race meeting.
2.1.9. Occasional or casual sales of property or services.
2.2. Business Registration Certificate. -- The term "Business Registration Certificate" shall mean a certificate issued by the Tax Commissioner authorizing a person to conduct business within the State of West Virginia; and when referred to in this regulation as a certificate of registration or a business franchise certificate, it shall mean a business registration certificate.
2.3. Occasional Sale or Casual Sale. -- The terms "Occasional Sale" or "Casual Sale" shall mean a sale of tangible personal property not held or used by a seller in the course of an activity for which a business registration certificate is required, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business: Provided, That such sale or exchange is not one of a series of sales or exchanges sufficient in number, scope and character to constitute a business activity requiring the holding of a business registration certificate.
2.4. Person or Company. -- The terms "Person" or "Company" shall mean and include any individual, firm, copartnership, joint venture, association, corporation, estate, trust, business trust, receiver, syndicate, club, society, or other group or combination acting as a unit, or body politic or political subdivision (whether public or private, or quasi-public) and in the plural thereof as well as the singular, and when used in connection with the officers, directors, trustees, or members of any firm, copartnership, joint venture, association, corporation, trust, business trust, syndicate or any other groups or combinations acting as a unit.
2.5. Registration Year. -- The term "Registration Year" shall mean a period of twelve (12) calendar months beginning the first (1st) day of July and ending the thirtieth (30th) day of the following June.
2.6. Registrant. -- "Registrant" shall mean any person who has been issued a business registration certificate under this Article for the current registration year.
2.7. Tax Commissioner. -- The term "Tax Commissioner" shall mean the Tax Commissioner of the State of West Virginia or his agent.
2.8. Transient Vendor.
2.8.1. "Transient Vendor" means a person who:
(a) Brings into this State, by automobile, truck or other means of transportation or purchases in this State, tangible personal property the sale or use of which is subject to one or more taxes administered by the Tax Commissioner under W. Va. Code '11-10-1 et seq.;
(b) Offers or intends to offer such tangible personal property for sale to consumers in this State; and (c) Does not maintain an established office, distribution house, sales house, warehouse, service enterprise, residence from which business is conducted, or other place of business within this State.
2.8.2. The term "Transient Vendor" shall not include any person who:
(a) Is a commercial traveler or selling agent who sells only to persons who purchase tangible personal property for the purpose of resale to others.
(b) Only sells goods, wares or merchandise by sample catalog or brochure for future delivery.
(c) Only sells or offers for sale crafts or other handmade items that were made by the seller; or (d) Only sells agricultural and farming products, except nursery products and foilage plants.
W. Va. Code R. § 110-12B-3 Registration of Transient Vendors
3.1. Business Registration Certificate Required. -- Prior to conducting any type of business activities in this State, a transient vendor must first obtain a business registration certificate from the Tax Commissioner, pay the tax imposed by W. Va. Code '11-12-1 et seq., and post bond required by W. Va. Code '11-12-21.
3.1.1. The business registration tax levied by W. Va. Code '11-12-4 is fifteen dollars ($15.00) for each business registration certificate.
3.1.2. A transient vendor which sells tangible personal property from or out of one or more vehicles at one or more locations needs a business registration certificate for the business activity. A copy of its business registration certificate shall be carried in each vehicle and publicly displayed while business is conducted from or out of each vehicle or at each location.
3.2. Registration Period. -- The business registration certificate, when issued by the Tax Commissioner, shall be valid for the current registration year, as that term is defined in the preceding subsection 2.5.
W. Va. Code R. § 110-12B-4 Transient Vendor Certificates
4.1. Tax Commissioner Responsibility. -- Upon receipt of an application for a transient vendor certificate but prior to issuing such certificate, the Tax Commissioner shall assure.
4.1.1. The application is correct.
4.1.2. The required bond has been posted; and
4.1.3. The transient vendor is not delinquent in the payment of any taxes imposed by Chapter eleven (11) of the code of West Virginia of 1931, as amended.
4.2. Display of Certificate.
4.2.1. A transient vendor shall keep the business registration, or a true copy thereof, in his possession at all times when conducting business in this State.
4.2.2. The transient vendor shall publicly display the certificate whenever conducting business in this State and shall exhibit the certificate upon the request of an investigator, revenue agent, or other authorized employee of the Tax Commissioner or any law-enforcement officer.
4.3. Renewal of Certificate. -- Upon application for renewal, the Tax Commissioner may issue a new certificate, which shall be valid for the next registration year: Provided, That he is satisfied that:
4.3.1. The transient vendor has complied with the provisions of W. Va. Code '11-12-1 et seq. and these regulations; and
4.3.2. The transient vendor is not delinquent in the payment of any tax imposed by Chapter eleven (11) of the code of West Virginia of 1931, as amended.
4.4. Surrender of Certificate.
4.4.1. A transient vendor may file with the Tax Commissioner a request for voluntary suspension of its business registration certificate.
4.4.2. The Tax Commissioner shall return to the transient vendor the bond posted if he is satisfied that:
(a) The transient vendor has complied with the provisions of W. Va. Code '11-12-1 et seq., and (b) The transient vendors business registration certificate has been returned to the Tax Commissioner.
W. Va. Code R. § 110-12B-5 Notice provided by Certificate
5.1. Notice to the Public. -- The business registration certificate shall constitute notice that the vendor named thereon has registered with the Tax Commissioner. However, possession of a business registration certificate does not validate an otherwise illegal activity.
5.2. Notice to the Vender. -- The business registration certificate shall provide the following notice to the transient vendor.
5.2.1. Prior to entering this State to conduct business, the transient vendor must provide written notice to the Tax Commissioner of all locations in this State where it intends to transact business and the dates on which such business will be conducted.
5.2.2. The Tax Commissioner may suspend or revoke the transient vendor's business registration certificate if the transient vendor fails to provide any required notice or provides any false information.
5.2.3. A transient vendor which conducts business in this State without having a valid business registration certificate or after such certificate has been suspended or revoked may be subject to criminal prosecution, the payment of fines, or subject to other penalties, or any combination of the foregoing.
W. Va. Code R. § 110-12B-6 Bond of Transient Vendors
6.1. When Bond Posted. -- At the time of filing an application for a transient vendor business registration certificate, the transient vendor shall post with the Tax Commissioner a bond in the amount of five hundred ($500.00) dollars. Such bond may be in the form of cash bond, a corporate surety bond, an irrevocable letter of credit, or a negotiable instrument having fair market value of five hundred ($500.00) dollars. The bond shall be subject to approval by the Tax Commissioner.
6.2. Reduction or Elimination of Bond. -- The Tax Commissioner may reduce or eliminate entirely the required bond if he fins that over a period of at least twelve (12) months the transient vendor has demonstrated compliance with W. Va. Code '11-12-1 et seq. In making this determination, the Tax Commissioner shall consider, among other factors.
6.2.1. The timely filing and remittance of all taxes imposed by Chapter eleven (11) of the Code of West Virginia of 1931, as amended.
6.2.2. The maintenance of appropriate records; and
6.2.3. The appropriate displaying of license.
W. Va. Code R. § 110-12B-7 Notification to Tax Commissioner
7.1. When Notification Required. -- Prior to entering this State to conduct business, the transient vendor shall notify the Tax Commissioner, in writing, of:
7.1.1. The location or locations where he intends to conduct business in the State; and
7.1.2. The date or dates when he intends to conduct such business.
7.2. Mailing Address for Notices. -- Notices or changes in notice previously submitted must be mailed to the following address:
Accounting Division State Tax Commissioner, State Capitol Charleston, WV 25305
W. Va. Code R. § 110-12B-8 Revocation or Suspension of Transient Vendor Business Registration Certificate
8.1. Grounds for Suspension or Revocation. -- The Tax Commissioner may suspend or revoke a transient vendor's business registration certificate if it does any of the following:
8.1.1. If the transient vendor fails to provide appropriate notification as required by W. Va. Code '11-12-22.
8.1.2. If the transient vendor provides the Tax Commissioner with false information regarding the conduct of its business within this State.
8.1.3. If the transient vendor fails to collect and timely remit to the Tax Commissioner the consumers sales and service tax or the use tax on the sales of tangible personal property or services that are subject to the taxes imposed by W. Va. Code ''11-15-1 et seq. and 11-15A-1 et seq.
8.1.4. If the transient vendor fails to timely file with the Tax Commissioner any tax return required by law or regulation to be filed for any tax administered by W. Va. Code '11-10-1 et seq., or fails to timely pay the amount of tax shown to be due on any such return.
8.1.5. If the transient vendor fails to comply with the provisions of W. Va. Code '11-5-8 providing for the assessment and payment of as valorem property taxes on any goods or merchandise of a transient vendor which are offered or furnished for sale in this State.
8.2. Appeal from Suspension or Revocation of a Transient Vendor Business Registration Certificate.
8.1. Prior to suspending or revoking a certificate, the Tax Commissioner shall give to the transient vendor written notice which provides the following:
(a) Notice of his intent to suspend or revoke the certificate;
(b) The reason for such suspension or revocation;
(c) The effective date of such suspension or revocation: Provided, That the effective date shall be after the date of the hearing and on the order of the Tax Commissioner; and (d) The date, time and place where the transient vendor may appear and show cause why such business registration certificate should not be suspended or revoked.
8.2.2. This written notice shall be served on the transient vendor either by:
(a) Personal or substituted service; or (b) Certified mail if addressed to and mailed to the address stated on the transient vendor's application for a business registration certificate and accepted by any officer, partner, employee, spouse or child of the transient vendor over the age of eighteen (18): Provided, (c) That any notice addressed and mailed in the above manner, and which is refused or not claimed, may then be served by regular mail if mailed by first class mail, postage prepaid, to the same address, and the date of posting in the United States mail shall be the date of service.
8.2.3. The notice shall be served not less than twenty (20) days prior to the hearing date.
8.2.4. The provisions of W. Va. Code '11-10-1 et seq., shall govern the hearing procedures.
W. Va. Code R. § 110-12B-9 Seizure of Property of Transient Vendors
9.1. Good Cause for Seizure of Property. -- If a transient vendor conducting business within this State fails to exhibit a valid business registration certificate upon demand by an investigator, revenue agent, or other authorized employee of the Tax Commissioner or any law-enforcement officer, such employee or any law-enforcement officer in this State at the request of such employee shall have authority to seize, without warrant, the tangible personal property and automobile, truck or other means of transportation used to transport or carry that property.
9.1.1. The Tax Commissioner's employee making the seizure shall issue a receipt of the transient vendor signed by the representative and the transient vendor.
9.1.2. The receipt shall contain an inventory of the property seized from the transient vendor, and the name and address of the Tax Commissioner's employee making the seizure.
9.1.3. If the transient vendor refuses to sign the receipt, another individual may witness the inventory and sign the receipt.
9.1.4. Property so seized shall be deemed to be contraband and shall be subject to immediate forfeiture proceedings instituted by the Tax Commissioner.
9.2. Release of Property Seized. -- Property seized pursuant to W. Va. Code '11-12-24(a) shall be released to the transient vendor upon the occurrence of any of the following:
9.2.1. The transient vendor presents a valid business registration certificate to an authorized employee of the Tax Commissioner, such certificate having been issued prior to the date the property was seized;; or
9.2.2. The transient vender registers with the Tax Commissioner and post a bond in the amount of five hundred ($500.00) dollars, either immediately or within fifteen (15) days after the property was seized; or
9.2.3. A court with appropriate jurisdiction issues an order directing the release of the seized property.
W. Va. Code R. § 110-12B-10 Forfeiture Proceedings
10.1. Filing Petition. -- In order to institute the proceedings to secure an order of forfeiture of the seized property, the Tax Commissioner must within thirty (30) days after seizure file a petition in the Circuit Court of the county wherein the property was seized.
10.2. Petition Not Timely Filed. -- In the event the petition is not filed within the prescribed time, all tangible personal property shall be returned to the person from whom it was seized or to the owner thereof.
10.3. Procedural Rules. -- All service of process shall be accomplished in accordance with West Virginia rules of Civil Procedure.
10.4. Finding of the Court.
10.4.1. The Circuit Court may docket the petition for a hearing upon ten (10) days notice to the transient vendor, and to the owner of the property seized and any person having a lawful security interest in the property seized, if such person or persons and their mailing address are known. Upon concluding the hearing, the Circuit Court will render a decision which will dispose of all issues in question.
10.4.2. The Circuit Court may proceed in a summary manner and may direct the property seized be forfeited to the Tax Commissioner: Provided, That the security interest in any of the property seized shall be provided the opportunity to appear and be heard by the Circuit Court on a date certain.
10.4.3. Unclaimed Property. -- If the Circuit Court orders property returned to the transient vendor, owner or claimant thereof, and if such person or persons fail to remove the property, the Tax Commissioner will give such person notice of the court order by mailing a copy thereof by certified mail return receipt requested to his last known address. Should such person fail to remove the property within thirty (30) days of the mailing date of the notice, the property shall be considered as abandoned and it shall be disposed of as such under W. Va. Code '36-8-1 et seq.
10.5. Disposition of Forfeited Property. -- Property which has been forfeited to the Tax Commissioner may be disposed of by sale in accordance with procedures provided in W. Va. Code ''11-10-13c through 11-10-13k, as appropriate; however, no person shall have the right to redeem property subsequent to forfeiture but prior to its sale, or at any time subsequent to its sale.
110CSR12B
Series 12D Business Registration Certificate - Suspension For Failure To Pay Personal Property Taxes
W. Va. Code R. § 110-12D-1 General
1.1. Scope. -- This legislative rule explains and clarifies application of W. Va. Code §11-12-5, relating to the suspension, cancellation, or refusal to renew, or issue, a business registration certificate.
1.2. Authority. -- W. Va. Code §§11-10-5 and 11-12-5(b)(3).
1.3. Filing Date. -- April 11, 2006
1.4. Effective Date. -- May 1, 2006.
W. Va. Code R. § 110-12D-2 Application of This Rule
2.1. In general, this rule applies to all persons required to obtain and display a current business registration certificate issued by the Tax Commissioner, as provided in W. Va. Code §11-12-1 et seq., as a condition precedent to engaging in business activity in West Virginia.
2.2. Additionally, this rule applies to county sheriffs and to persons who owe delinquent ad valorem property taxes on personal property held for sale or used in business activity in this State. It provides the ancillary procedures to be followed by county sheriffs and the Tax Commissioner when the county sheriff notifies the Tax Commissioner that a particular business in his or her county owes delinquent property taxes on personal property held for sale or use in business activity that remains delinquent after the lists of delinquent personal property taxes have been published in the newspaper and posted on the courthouse door, as required by law, and after the county commission has certified the list of delinquent personal property taxes.
W. Va. Code R. § 110-12D-3 Definitions
As used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed to them in this section.
3.1. “Ad valorem property taxes” means the taxes on real and personal property that are assessed and collected as provided in the property tax laws of this State.
3.2. “Agriculture and farming” means and includes the production of food, fiber, or woodland products (but not timbering activity) by means of cultivation or tillage of the soil, or by the conduct of animal, livestock, dairy, apiary, equine or poultry husbandry, or by horticulture, or by any other plant or animal production, and all farm practices related (usual or incidental) thereto, including the storage, packing, shipping and marketing thereof, but not including any manufacturing, milling, processing or selling of the products by a person other than the producer of the products.
3.3. “Assess” means the listing and valuing of property for purposes of ad valorem property taxation.
3.4. “Business activity” means and includes all purposeful revenue-generating activity engaged in or caused to be engaged in with the object of gain or economic benefit, either direct or indirect, and all activities of this state and its political subdivisions which involve the sale of tangible personal property or the rendering of service when the service activities compete with or may compete with the activities of another person. “Business activity” does not include:
3.4.1. Judicial sales directed by law or court order;
3.4.2. Sales for delinquent taxes of real or personal property;
3.4.3. The conduct of charitable bingo by any person licensed under West Virginia Code §47-20-1 et seq.;
3.4.4. The conduct of a charitable raffle by any person;
3.4.5. The conduct of a horse or dog race meeting by any racing association licensed under West Virginia Code §19-23-1 et seq.;
3.4.6. The operation or maintenance of the pari-mutuel system of wagering during the conduct of a licensed horse or dog race meeting;
3.4.7. The sale of any commodity during the conduct of a licensed horse or dog race meeting;
3.4.8. The services of owners, trainers or jockeys which are essential to the effective conduct of a licensed horse or dog race meeting; or
3.4.9. Occasional or casual sales of property or services.
3.5. “Business registration certificate” means a certificate issued by the Tax Commissioner in accordance with W. Va. Code §11-12-1 et seq., authorizing the person named in the certificate to conduct the business, activity, or trade for which the certificate is issued at or from the location specified in the business registration certificate.
3.5.1. A business registration certificate is not assignable to any other person, W. Va. Code §11-12-6.
3.6. “Employed exclusively” means that the preponderant and sole gainful use is for the designated purpose.
3.7. “Grazing” means the use of land for pasturage.
3.8. “Horticulture” means plant production of every character except forestry.
3.9. “Includes” and “including” when used in this rule may not be determined to exclude other things otherwise within context of the sentence in which the term is used.
3.10. “Occasional sale” or “casual sale” of tangible personal property means a sale of tangible personal property not held or used by a seller in the course of an activity for which a business registration certificate is required. This includes the bulk sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, when the sale or exchange is not one of a series of sales or exchanges sufficient in number, scope and character to constitute a business activity requiring the holding of a business registration certificate.
3.10.1. “Occasional sale” or “casual sale” of a service means a sale of a service not furnished by a provider in the course of an activity for which a business registration certificate is required: Provided, That the sale is not one of a series of sales sufficient in number, scope and character to constitute a business activity requiring the holding of a business registration certificate.
3.10.2. A sale of tangible personal property or service shall not be designated a casual sale or occasional sale because the species or type of property sold or the service sold is unusual or of a type not typically the subject of a sale by the Taxpayer. If a sale of tangible personal property or service is undertaken in the course of business, other than a bulk sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of the business, and other than the performance of services related to the bulk sale or exchange or reorganization or liquidation, then a sale of tangible personal property or services will be presumed to be neither casual nor occasional within the meaning of this rule.
3.11. “Officer or employee of this State” includes, but is not limited to, any former officer or employee of the state of West Virginia.
3.12. “Office of Tax Appeals” means the West Virginia Office of Tax Appeals created by W. Va. Code §11-10A-3.
3.13. “Person” includes, but is not limited to, any individual, firm, partnership, limited partnership, copartnership, joint venture, association, corporation, organization, estate, trust, guardian, executor, administrator, business trust, receiver, syndicate, club, society, or other group or combination acting as a unit, or body politic or political subdivision (whether public or private, or quasi-public) and in the plural thereof as well as the singular, unless the intention to give a more limited or broader meaning is disclosed by the context of this rule.
3.14. “Personal property,” for purposes of this rule, means personal property used, or held for use, or sale, in the conduct of business activity and includes all fixtures attached to land, if not included in the valuation of the land entered in the proper landbook; all things of value, moveable and tangible, which are the subjects of ownership; and all chattels real and personal. “Personal property” for purposes of this rule does not include real property or personal property owned by an individual unless the property is used in business activity.
3.15. “Products of agriculture” means those things, the existence of which follows directly from the activity of agriculture, horticulture or grazing, including dairy, poultry, bee and any other similar products, whether in the natural form or processed as an incident to the marketing of the raw material.
3.16. “Producer of a product of agriculture” means the person who is actually engaged in the agriculture, horticulture and grazing which gives existence and fruition to products of agriculture as distinguished from the broker or middleman, or third party manufacturer or food processor.
3.17. “Property tax year” or “tax year” when used in reference to property taxes means the calendar year that begins after the July first assessment day for property assessed by the county assessor. That calendar year is also the year for which property taxes are assessed by the Board of Public Works on operating property of public service businesses. For example, if the assessment day is July 1, 2005, the property tax year begins January 1, 2006.
3.18. “Property taxes” means ad valorem taxes assessed or levied on property in accordance with provisions of articles 1A, 1C, 3, 4, 5, 6, 6A, 6B, 6C, 6E, 6F, 6G or 8, chapter 11, of the Code, as may be applicable to the specie or species of property being taxed.
3.19. “Registration period” means a period of twenty-four calendar months beginning the first day of July and ending twenty-four months later on the thirtieth day of June.
3.20. “Registrant,” as used in W. Va. Code §11-12-5 and this rule, means any person who (1) has applied for a business registration certificate under W. Va. Code §11-12-1 et seq., (2) has applied for renewal of a business registration certificate, or (3) has been issued a business registration certificate for the current registration period.
3.21. “Service” means all activities engaged in for other persons for a fee, retainer, commission, or other monetary charge, which involve predominantly the performance of a service as distinguished from selling property.
3.22. “Tax,” “taxes,” “taxable,” and “taxation,” as used in this rule with respect to property taxes, means all levies on personal property made by any of the taxing units named in W. Va. Code §11-8-4. Those tax units are (1) the State, (2) county commissions, (3) county boards of education, and (4) municipalities.
3.23. “Tax Commissioner” or “Commissioner” means the Tax Commissioner of the State of West Virginia, or his or her designee.
3.24. “Taxpayer,” as used in this rule with respect to property taxes, means any person required to file a property return or report for ad valorem property tax purposes with the county assessor or the Board of Public Works, or any person liable for the payment of any ad valorem property tax collected by the county sheriff or the State Auditor under the laws of this State.
3.25. “The Code” means the Code of West Virginia, 1931, as amended.
3.26. “This State” means the State of West Virginia.
3.27. “While owned by the producer of a product of agriculture” means while title is in the producer of a product of agriculture as defined in subsection 3.16 of this section.
W. Va. Code R. § 110-12D-4 When a Business Registration Certificate is Required; Posting
4.1. Registration required. -- Except as otherwise provided in W. Va. Code §11-12-1 et seq. or this rule, no person may engage in or prosecute in the State of West Virginia any business activity without first obtaining a business registration certificate from the Tax Commissioner. In addition to having a current business registration certificate:
4.1.1. A transient vendor shall also comply with the provisions of W. Va. Code §§11-12-20 through 11-12-25;
4.1.2. A person that provides collection agency services shall also comply with the provisions of W. Va. Code §47-16-1 et seq.;
4.1.3. A person that provides employment agency services shall also comply with the provisions of W. Va. Code §21-2-1 et seq.;
4.1.4. A person that sells drug paraphernalia shall also comply with the provisions of W. Va. Code §47-19-1 et seq.; and
4.1.5. A person engaging in or prosecuting other business activities in this State may be subject to other provisions of the West Virginia Code which he or she must satisfy before commencing or while engaging in a business activity in this State.
4.2. Multiple business registration certificates. -- A separate business registration certificate is required for each fixed business location from which property or services are offered for sale or lease to the public as a class, or to a limited portion of the public; or at which customer accounts may be opened, closed or serviced.
Example 1. XYZ Dry Goods has two retail stores in West Virginia. Each store is required to have a business registration certificate.
Example 2. In addition to the two retail stores, XYZ Dry Goods also has a warehouse. No sales are made at the warehouse and customers cannot go there to return or exchange merchandise or to open, close or pay on an account with the store. The warehouse does not need a separate business registration certificate.
Example 3. In addition to the two retail stores and warehouse mentioned in examples one and two, XYZ Dry Goods has a warehouse at which customers may pick up orders or return orders and receive credit against their account for the returned merchandise. A separate business registration certificate is needed for this warehouse.
Example 4. In addition to the two retail stores and the two warehouse, XYZ Dry Goods has its offices at another location. Customers may go to the office to open or close their account or make payments on account balances. The office needs a separate business registration certificate.
4.3. Coin-operated machines. -- A separate business registration certificate is not required for each “coin-operated” machine. A separate certificate is required for each location from which making coin-operated machines available to the public is itself a business activity. As used here, “coin-operated” machine includes any machine or other device into which the customer must insert coins, tokens, United States currency, a credit or debit card or other card pursuant to which the customer pays money or other consideration for use of the machine or other device.
Example 1. ABC Vending Machine Company owns vending machines that are located at various places in the State of West Virginia. The Company maintains an office/warehouse in Charleston. Company employees service these machines and restock them with merchandise. The Company needs one business registration certificate for the office/warehouse. It does not need a separate business registration certificate for each location where a vending machine is physically located and available to consumers.
Example 2. Same facts as in example one, except that the Company also operates at a separate location a self-service laundry facility that has coin-operated washing machines and dryers and vending machines for sale of goods such as laundry detergent, bleach, fabric softener and soft drinks. A separate business registration certificate is needed for this facility.
4.4. Mobile businesses selling to customers. -- A business that sells tangible personal property or services from or out of one or more vehicles must have a separate business registration certificate for each fixed location in this State from or out of which business is conducted. A copy of its business registration certificate must be carried in each vehicle and publicly displayed while business is conducted from or out of the vehicle.
4.5. Exemption from registration. -- Any person engaging in or prosecuting business activity in this State who is not required by law to collect or withhold a tax administered under the West Virginia Tax Procedure and Administration Act, W. Va. Code §11-10-1 et seq., and who does not claim an entity-based or use-based exemption from paying consumers sales and use taxes on its purchases of tangible personal property, taxable services and custom software for use in business including, but not limited to, goods and services purchased for resale, is exempt from the requirement to have a business registration certificate.
4.6. Posting of certificate.
4.6.1. A person to whom a business registration certificate has been issued under W. Va. Code §11-12-1 et seq. shall keep the certificate posted in a conspicuous location in the place where the privilege of engaging in business is exercised so that it can be read by the public. W. Va. Code §11-12-7.
4.6.2. Each registrant who operates at a temporary location, including from a truck, wagon, portable stand, or other merchandising device, shall prominently display the certificate so that it can be readily seen and read by the public. Transient vendors who do not operate from a truck, wagon, portable stand, or other merchandising device shall have their certificates in their possession and shall display them upon request.
4.7. Inspection of certificate. -- The registrant shall produce the certificate of registration for inspection whenever required by the Tax Commissioner or by any law-enforcement officers of this State, including those of a county or municipality in which the privilege to conduct business is being exercised. W. Va. Code §11-12-7.
W. Va. Code R. § 110-12D-5 Engaging in Business Activity Without a Current Business Registration Certificate as Required by Law
5.1. In general, no person may engage in business activity in West Virginia unless the person has a current business registration certificate issued by the Tax Commissioner and the certificate is conspicuously posted as required by W. Va. Code §11-12-1 et seq.
5.1.1. Before the person begins to engage in business activity in this State, he or she shall make application for the certificate as required under subsection 4.1 of this rule.
5.1.2. A separate business registration certificate is needed for each fixed business location in this State from which property or services are offered for sale or lease to the public as a class, or to a limited portion of the public, or at which customer accounts may be opened, closed or serviced, see Section 4.3 of this rule.
5.1.3. Business activity may not be conducted under a business registration certificate after it expires on the June 30th date stated on the certificate, or after the certificate becomes void by operation of law, as specified in Section 7 of this rule.
5.1.4. Business activity may not be conducted under a business registration certificate after it is suspended or cancelled by the Tax Commissioner in accordance with the provisions of W. Va. Code §11-12-5.
5.2. It is a misdemeanor if any person engages in business within the State of West Virginia without obtaining a business registration certificate when required by law, W. Va. Code §11-9-12.
5.3. It is also a misdemeanor for any person to, for more than thirty days, do any of the following (each day or part thereof that any violation continues is a separate offense):
5.3.1. Engage in business without posting a business registration certificate in the place of business in the manner required by law, W. Va. Code §11-9-11(1);
5.3.2. Engage in business without paying the business registration tax when required by law, W. Va. Code §11-9-11(2);
5.2.3. Engage in business after expiration of the period of time for which the certificate was granted without obtaining a new certificate, W. Va. Code §11-9-11(3); or
5.2.4. Engage in business after the business registration certificate has been revoked.
5.2.4.1. A business registration certificate that is suspended is temporarily not in effect.
5.2.4.2. A business registration certificate that is revoked, is taken back by the Tax Commissioner, and is null and void.
W. Va. Code R. § 110-12D-6 Time for Which Business Registration Certificate is Issued
Except for short years resulting from an initial or reestablished registration commencing on a date other than the first day of July, the period for which a business registration certificate is issued begins on the first day of July and expires twenty-four months later on the thirtieth day of June, unless the certificate expires before that day because it is revoked by the Tax Commissioner, for one or more of the reasons set forth in W. Va. Code §11-12-5, or the certificate expires sooner by operation of law for one or more of the reasons set forth in W. Va. Code §11-12-6.
W. Va. Code R. § 110-12D-7 When Business with Current Business Registration Certificate Must Apply for a New Certificate During a Registration Period
7.1. Change in name of business. -- A change in the name of the business voids the current business registration certificate and requires that application be made to the Tax Commissioner for issuance of a new certificate in the new name of the business. W. Va. Code §11-12-6.
7.2. Change in business location. -- A change in the physical location at which or from which business is conducted voids the current business registration certificate and requires that application be made to the Tax Commissioner for issuance of a new certificate showing the new physical location at which or from which business is conducted. W. Va. Code §11-12-6.
7.3. Change in ownership. -- A change in the ownership of the business, or a change in the real parties in interest in the business, voids the current business registration certificate and requires that application be made to the Tax Commissioner for issuance of a new certificate. However, a change in the partners in a partnership, or in the members of a limited liability company or in the composition of any other group of combination acting as a unit does not in and of itself require issuance of a new business registration certificate. A new certificate would be required if in addition to adding a partner or a member (or the withdrawal of a partner or member) the name of the business is changed, or the location changes at or from which the business is conducted. W. Va. Code §11-12-6.
7.3.1. A change in the names of the officers of a corporation does not void the current business registration certificate and does not require that application be made to the Tax Commissioner for issuance of a new certificate. W. Va. Code §11-12-6.
7.4. Change in business activity. -- A change in the business, activity, or trade being conducted at or from the location specified in the business registration certificate may require that the registrant apply to the Tax Commissioner for issuance of a new certificate.
7.4.1. If after a business registration certificate is issued, the business begins to sell cigarettes, other tobacco products, or cigarette wrappers, at wholesale or retail, the business shall apply for a new business registration certificate. W. Va. Code §11-12-4a.
7.4.2. If after a business registration certificate is issued, the business makes a business decision to no longer sell cigarettes, other tobacco products, or cigarette wrappers, at wholesale or retail, the business shall apply for a new business registration certificate. W. Va. Code §11-12-4a.
7.4.3. If after a business registration certificate is issued, the business decides to also conduct business as a collection agency, or as an employment agency, or to sell drug paraphernalia, the registrant shall apply to the Tax Commissioner to engage in those activities before the business begins to (1) furnish collection agency services, (2) furnish employment agency services or (3) sell drug paraphernalia. W. Va. Code §11-12-3(b)(4).
7.4.4. If after a business registration certificate is issued to also conduct business as a collection agency, or as an employment agency, or to sell drug paraphernalia, a business decision is made that the business no longer wants to engage in the particular activity, the registrant shall apply to the Tax Commissioner for a new business registration certificate. W. Va. Code §11-12-3(b)(4).
W. Va. Code R. § 110-12D-8 Cancellation or Suspension of a Business Registration Certificate; Refusal to Issue or Renew Business Registration Certificate When Registrant Owes Delinquent Personal Property Taxes
8.1. Discretionary authority. -- The Tax Commissioner may cancel or suspend a business registration certificate at any time during a registration period if:
8.1.1. The person applying for a business registration certificate filed with the Tax Commissioner an application for business registration that is false or fraudulent;
8.1.2. The person applying for renewal of a business registration certificate files an application for renewal with the Tax Commissioner that is false or fraudulent;
8.1.3. The registrant willfully refused or neglected to file a tax return or to report information required by the Tax Commissioner for any tax imposed pursuant to chapter 11 of the Code;
8.1.4. The registrant willfully refused or neglected to pay any tax, additions to tax, penalties or interest, or any part thereof, when they became due and payable under chapter 11 of the Code, determined by including in the time for payment any authorized extension of time for paying the tax, additions to tax, penalties or interest;
8.1.5. The registrant willfully refused or neglected to pay over to the Tax Commissioner on or before its due date, determined by including any authorized extension of time for paying the tax, any consumers sales or service tax or use tax collected from customers, any employer withholding taxes and any other tax imposed by chapter 11 of the Code that the registrant collects from any person and holds in trust for the State of West Virginia;
8.1.6. The registrant abused the privilege afforded to it in the consumers sales and use tax laws of this State, W. Va. Code §§11-15-1 et seq., 11-15A-1 et seq. and 11-15B-1 et seq., to be exempt from payment of sales and use taxes imposed on some or all of the registrant's purchases for use in business upon issuing to the seller of the good or taxable service a properly executed exemption certificate, by (1) failing to timely pay sales or use tax on taxable purchase for use in business, or (2) failing to give to the seller of the good or taxable service a properly executed exemption certificate, a copy of the registrant’s direct pay permit or a multiple points of use certificate, as provided in or required by the consumers sales and use tax laws of this State; or
8.1.7. The registrant failed to pay in full personal property taxes due and owing for the calendar year immediately preceding the calendar year in which application is made to the Tax Commissioner for a business registration certificate, or for renewal of a business registration certificate.
8.2. Nondiscretionary duty. -- As provided in W. Va. Code §11-12-5(d), the Tax Commissioner may not issue, or renew, a business registration certificate when the county sheriff, informs the Tax Commissioner, by the method designated by the Tax Commissioner, that the applicant for a business registration certificate, or the applicant for renewal of a business registration certificate, owes delinquent ad valorem personal property taxes for the calendar year immediately preceding the calendar year in which the application is filed with the Tax Commissioner, on personal property held for sale or used in business activity in this State.
W. Va. Code R. § 110-12D-9 Property Tax Year and Collection of Property Taxes
9.1. Assessment by county assessor. -- Property assessed by a county assessor is assessed annually, as of the first day of July, for ad valorem property taxes levied for the next property tax year, which is the next ensuing calendar year, e.g., if the assessment day is July 1, 2005, the property tax year is the calendar year beginning January 1, 2006. The county sheriff mails personal property tax tickets or statements to the persons in whose name property taxes are charged on the property books beginning July 15th of the property tax year for which the taxes are assessed. These taxes are payable in two installments. The first installment payment is due September 1st of the property tax year and becomes delinquent if not paid before October 1st of the property tax year. The second installment payment is due March 1st of the next calendar year and becomes delinquent if not paid before April 1st of that calendar year, e.g., property taxes assessed for the 2006 property tax year may be paid in two installments--the first installment is due September 1, 2006, and becomes delinquent on October 1, 2006, if not paid before that date; the second installment is due March 1, 2007, and becomes delinquent on April 1, 2007, if not paid before that date.
9.2. Assessment by Board of Public Works.--The operating property of a public service business is assessed annually by the Board of Public Works. After the county commissions, county boards of education and municipalities meet on the third Tuesday in April of the property tax year, to set their levy rates for that property tax year, and the rates are certified to the State Auditor, the Auditor completes his or her books and makes out a statement of the property taxes and levies, which is mailed to the owner or operator of the public service business. These taxes are payable in two installments. The first installment payment is due September 1st of the property tax year and becomes delinquent if not paid on or before that date. The second installment payment is due March 1st of the next calendar year and becomes delinquent if not paid on or before that date, e.g., property taxes assessed for the 2006 property tax year may be paid in two installments--the first installment is due September 1, 2006, and becomes delinquent on September 2, 2006, if not paid before that date; the second installment is due March 1, 2007, and becomes delinquent on March 2, 2007, if not paid before that date.
9.3. Appendix A of this rule sets forth additional information about the ad valorem property tax cycle.
W. Va. Code R. § 110-12D-10 Property Tax Returns and Reports
10.1. General.--Persons engaged in business activity in this State who own property located in this State are required to file property tax returns or reports with the county assessor in the fall of each calendar year. Appendix B of this rule sets forth additional information about these returns or reports and the date they are due.
10.2. Property appraised by Tax Commissioner.--The appraised value of natural resource property and manufacturing property is determined by the Tax Commissioner. The appraised values of these properties are provided to the county assessor of the county in which the property is located. The county assessor then determines the assessed value of the property based upon the appraised value provided by the Tax Commissioner. Owners of property appraised by the Tax Commissioner are also required to annually file certain returns or reports with the Tax Commissioner. Appendix B of this rule sets forth additional information on these returns and reports and their due dates.
10.3. Public service business - operating property.--Owners and operators of public service businesses are required to file a return with the Board of Public Works by the first day of May each year. If the public service business owns property that is not subject to assessment by the Board of Public Works -- nonoperating property shall be reported the county assessor.
10.4. Penalties for failure to timely report property. -- When property is not returned to the county assessor, the Tax Commissioner or the Board of Public Works, as required by law, the appraised and assessed values of that property are determined using information available to the appraiser or assessor, and the owner forfeits the right to contest the property taxes levied on the property. Additionally, the Tax commissioner may impose and collect money penalties, called forfeiture penalties, as provided in W. Va. Code §11-3-10.
W. Va. Code R. § 110-12D-11 Identification of Delinquent Taxpayers by County Sheriff; Notice to Taxpayer; Notice to Tax Commissioner
11.1. The county sheriff is required, by W. Va. Code §11A-2-11, to annually prepare, by tax district, and alphabetically, by taxpayer name, a list of personal property taxes that are delinquent as of April 30th each calendar year. The sheriff must also separately identify persons that may be subject to the provisions of this rule and, by September 15th, notify those persons, by certified mail of the following:
11.1.1. That the person’s respective personal property taxes are delinquent;
11.1.2. The amount of delinquent personal property taxes due, including separately stated accrued interest, penalties and all fees;
11.1.3. The property tax year for which the delinquent taxes are owed;
11.1.4. The personal property for which the delinquent taxes are owed;
11.1.5. The actions to be taken if the full amount of delinquent personal property taxes are not paid or exonerated by September 30th of the calendar year in which the notice is mailed;
11.1.6. That sheriff may elect to accept only certified funds in payment of the delinquent personal property taxes; and
11.1.7. That current personal property taxes shall not be received by the sheriff until any delinquent ad valorem property taxes for the prior tax year are paid in full.
11.1.8. Additionally, the sheriff's certified letter shall, at a minimum, include the following statement:
“If you fail to pay the full amount of your delinquent personal property taxes, or those delinquent personal property taxes are not exonerated, on or before September 30, 20__, the ______ County Sheriff will notify the West Virginia Tax Commissioner that your West Virginia business registration certificate is to be suspended or not renewed or reissued until the delinquent tax liability is paid in full or exonerated. The conduct of any business activity in West Virginia without having a current business registration certificate, or after a business registration certificate has been suspended or canceled, is illegal and subject to prosecution. If your business registration certificate is suspended, canceled or not renewed or reissued by the West Virginia Tax Commissioner for failure to pay personal property taxes, you will be charged a processing fee of $50 by the Tax Commissioner for reinstatement or renewal of your business registration certificate. This amount is in addition to the delinquent tax owed, as well as any interest and penalties imposed upon your delinquent personal property tax bill by this Office.”
11.2. The sheriff may impose a fee on the delinquent taxpayer not to exceed $10.00 for the preparation and mailing of the certified letter authorized in this section.
11.3. Commencing with ad valorem property tax year 2005, the sheriff shall provide to the Tax Commissioner, in the electronic format prescribed by the Tax Commissioner, a listing by tax year of those persons that may be subject to the procedures provided in this rule because they each have, for the tax year in issue, delinquent personal property taxes in the minimum amount of $100.00. However, if a sheriff does not have a data processing system available that can provide the required listing in the electronic format prescribed by the Tax Commissioner and there are no more than 50 taxpayers with delinquent business personal property taxes, the required listing may be filed on paper in the format specified by the Tax Commissioner. The sheriff shall provide the listing for each tax year, commencing with October 15, 2006, for the 2005 tax year and shall thereafter provide a monthly listing continuing for each succeeding month until the delinquent personal property taxes are paid or exonerated. The procedure provided in this rule shall not apply to any tax year prior to tax year 2005, except that the provisions of W. Va. Code §11A-1-7 apply to delinquent property taxes owed for tax years preceding calendar year 2005.
11.4. The listing shall include for each person listed:
11.4.1. The person’s name;
11.4.2. The person’s last known mailing address;
11.4.3. The person’s federal employer identification number (F.E.I.N.) or other identification number acceptable to the Tax Commissioner;
11.4.4. If different from the mailing address, the business address, or businesses addresses if the person has more than one business location or business address in the county;
11.4.5. The property tax year for which the personal property taxes are delinquent on business personal property;
11.4.6. The amount of delinquent personal property taxes, interest and penalties; and
11.4.7. A listing of the business personal property for which delinquent property taxes are owed.
11.5. The person’s name shall be removed from the list when that person’s delinquent property taxes are paid or exonerated. The sheriff shall notify the Tax Commissioner, by the electronic format prescribed by the Tax Commissioner, except as provided in this subsection, when a person’s delinquent property taxes have been paid or exonerated:
11.5.1. The notification required by subsection 11.3 of this section shall be provided by the sheriff every Friday unless that day is a legal holiday in this State. When Friday is a legal holiday in this State, notification shall be provided on the next day that is not a Saturday, Sunday, or legal holiday in this State.
11.5.2. The notification required by subsection 11.3 of this section shall include the names of each person who paid delinquent personal property taxes or whose delinquent personal property taxes were exonerated during the reporting period ending at the close of business on the immediately preceding Wednesday and any additional information required by the Tax Commissioner.
11.5.3. If a person who owed delinquent personal property taxes has more than one business location in the county, the sheriff shall indicate the location or locations for which the delinquent personal property taxes have been paid or exonerated as well as the location or locations for which delinquent personal property are still owed by that person.
11.5.4. Exception to electronic notification. -- If a sheriff does not have available a data processing system that can provide the required listing in the electronic format prescribed by the Tax Commissioner and there are no more than 50 taxpayers with delinquent business personal property taxes, the required listing may be filed on paper in the format specified by the Tax Commissioner.
W. Va. Code R. § 110-12D-12 Delinquent Taxpayer Pursuing Bankruptcy or Otherwise Out of Business
12.1. Out of business. -- A delinquent taxpayer that has ceased doing business prior to its personal property taxes becoming delinquent may not be subject to actions authorized by this rule. If the Taxpayer applies for a new business registration certificate under his or her name, or under a different business name, but the business activity and business assets are those used in the previous business, the Tax Commissioner may not issue a business registration certificate for the new business until the delinquent personal property taxes from the previous business have been paid or exonerated as provided in this rule.
12.2. Bankruptcy. – If a person who owes delinquent personal property taxes has filed for protection of the United States Bankruptcy Court:
12.2.1. The sheriff, as ex officio treasurer of the county, and charged with collection of ad valorem property taxes assessed against personal property in the county, should file with the bankruptcy court in which the petition for bankruptcy was filed a proof of claim for the delinquent personal property taxes as well as for real and personal property taxes for the current property tax year, in an effort to collect the property taxes from a bankrupt estate; and
12.2.2. Prior to filing the list with the Tax Commissioner, as required by subsections 11.3 or 11.4 of this rule, the sheriff shall determine whether or not the sheriff’s office has received official notification that a person has sought the protection of the United States Bankruptcy Court. Any person determined to be in bankruptcy shall not be included on the list of delinquent taxpayers reported to the Tax Commissioner pursuant to this rule.
W. Va. Code R. § 110-12D-13 Procedure After Tax Commissioner Receives Notification; Notice to Taxpayer
13.1. Upon receipt of the listing required by subsection 11.3 of this rule, the Tax Commissioner shall immediately notify the taxpayer by certified letter:
13.1.1. That the sheriff of the specified county has identified the taxpayer as being delinquent in paying ad valorem taxes on personal property owned by the taxpayer on the specified July 1 assessment date;
13.1.2. That if the Taxpayer can establish that the taxes in issue were in fact paid or exonerated, the taxpayer must contact the sheriff to demonstrate that fact and to then have the sheriff remove taxpayer’s name from the listing;
13.1.2.1. Immediately after the taxpayer demonstrates to the sheriff the payment or exoneration of the applicable personal property taxes, the sheriff shall notify the Tax Commissioner either that the taxpayer has paid the taxes that were reported as being delinquent or that the taxes reported as delinquent were exonerated, as provided in subsection 11.4 of this rule;
13.1.3. That if the taxpayer is not able to establish that the taxes in issue were in fact paid or exonerated, the taxpayer’s business registration certificate will be suspended and the effective date of the suspension; and,
13.1.4. That if taxpayer continues to engage in business subsequent to the day its business registration certificate is suspended, the taxpayer shall in addition to all other penalties provided by law be subject to the penalties provided in W. Va. Code §11-12-9.
13.2. The Tax Commissioner, within five days after sending the required letter to the respective taxpayers, shall send to the sheriff a listing of the persons that have been notified of the pending suspension or cancellation of their business registration certificates. Failure to deliver the letter to the person because it is either unclaimed by the person or undeliverable by the U. S. Postal Service shall not stay or prevent the Tax Commissioner, the sheriff, or both the Tax Commissioner and the sheriff from performing their respective duties as provided in this rule.
13.3. If the sheriff does not notify the Tax Commissioner within the 21 days immediately succeeding the date the Tax Commissioner notified the Taxpayer, as required in this section, that the person’s name has been removed from the list of persons that owe delinquent personal property taxes on business personal property, the Tax Commissioner shall immediately either:
13.3.1. Refuse to renew or issue the person’s business registration certificate; or
13.3.2. Suspend the person’s business registration certificate.
13.4. If the sheriff, within the 21 days immediately succeeding the date the Tax Commissioner notified the taxpayer, as required in this section 13, notifies the Tax Commissioner that the delinquent taxes have been paid or exonerated, the Tax Commissioner shall not suspend or refuse to renew, or issue, the person a business registration certificate. Nothing contained in this subsection or elsewhere in this rule herein may be construed to limit or prevent the Tax Commissioner from exercising his or her power to suspend or refuse to renew, or reissue, a business registration certificate in accordance with one or more other provisions in W. Va. Code §11-12-5.
13.5. If the Tax Commissioner suspends the person’s business registration certificate, the person shall pay to the Tax Commissioner a fee in the amount of $50.00 for each business registration certificate reinstated or issued to the person in response to the sheriff removing the person’s name from the list of persons owning delinquent personal property taxes. The fee collected for reinstatement or issuance of a business registration certificate shall be deposited in the special fund as directed by statute.
W. Va. Code R. § 110-12D-14 Appeals; Hearing on Decision to Suspend, Revoke, Not Renew, or Not Issue Business Registration Certificate for Failure to Pay Delinquent Property Taxes
14.1. A taxpayer may request a hearing before the West Virginia Office of Tax Appeals challenging the Tax Commissioner’s notice of suspension, cancellation, non-issuance or non-renewal of taxpayer’s business registration certificate. The taxpayer may initiate a proceeding before the Office of Tax Appeals by timely filing a written petition with the Office of Tax Appeals, within 60 days after receiving the Tax Commissioner’s notice that succinctly states:
14.1.1. The nature of the case;
14.1.2. The facts on which the appeal is based; and
14.1.3. Each question presented for review by the Office of Tax Appeals.
14.1.4. A petition filed pursuant to subsection 14.1 of this section is timely filed if postmarked or hand delivered to the Office of Tax Appeals within sixty days of the date the taxpayer received written notice of the Tax Commissioner’s suspension, non-issuance or non-renewal of taxpayer’s business registration certificate.
14.2. The taxpayer may not continue to engage in business activities while either the hearing, the administrative decision resulting from the hearing, or any resulting appeal is pending in the courts of this State.
14.3. Because the Tax Commissioner is required by W. Va. Code §11-12-5 to suspend, cancel, or refuse to renew, or issue a business registration certificate when the county sheriff, in writing, notifies the Tax Commissioner that the taxpayer’s personal property taxes are delinquent, the Office of Tax Appeals may only determine whether or not the taxpayer is delinquent in paying personal property taxes on personal property held for sale or use in taxpayer’s business.
14.3.1. Only evidence relevant to the payment or non-payment of the personal property taxes in issue may be considered. The Office of Tax Appeals has no jurisdiction to determine either the value or taxability of the property.
14.3.2. If the Office of Tax Appeals determines the taxpayer was delinquent in payment of personal property taxes for the specified property tax years, the Office of Tax Appeals shall uphold the Tax Commissioner’s action in suspending, canceling, or refusing to renew or issue, taxpayer’s business registration certificate.
14.3.3. If the Office of Tax Appeals determines the sheriff was not correct in stating the taxpayer was delinquent in payment of personal property taxes for the specified property tax year(s), the Office of Tax Appeals shall order the taxpayer’s business registration certificate be reinstated, renewed or issued, as is appropriate under the circumstances of the case.
14.4. When the taxpayer has multiple business registration certificates subject to the Tax Commissioner’s notice, this section of the rule, including the provision for appeal, applies to each business registration certificate the Tax Commissioner intends to suspend, cancel, or not renew, or issue, as the case may be, for failure to pay ad valorem personal property taxes, as stated in the notice served on the taxpayer.
14.5. When the taxpayer receives a separate notice of the Tax Commissioner’s intent to suspend, cancel, or not renew, or issue, as the case may be, for some but not all of the taxpayer’s business registration certificates, the taxpayer shall file a separate petition must be filed with the Office of Tax Appeals for each separate notice.
W. Va. Code R. § 110-12D-15 Application of Tax Commissioners Decision; Multiple Business Locations; Multiple Business Registration Certificates
15.1. One business registration certificate. -- When a taxpayer who owes delinquent personal property taxes has multiple business locations in this State, in different counties, but is required by law to have only one business registration certificate, the Tax Commissioner shall suspend, cancel, not reissue or not issue that certificate until such time as the county sheriff of each county in which delinquent personal property taxes on business personal property is owed notifies the Tax Commissioner that the full amount of delinquent personal property taxes, including any applicable penalties and interest, have been paid in full or exonerated, or partially exonerated and the balances paid. Upon the effective date of the Tax Commissioner’s order of suspension, revocation, non-renewal or non-issuance, as the case may be, the taxpayer may no longer exercise the privilege of doing business in this State and shall immediately cease doing business at all locations of the taxpayer in this State.
15.2. Multiple business registration certificates all in same county. -- When a taxpayer who owes delinquent personal property taxes on business personal property has multiple business locations all in the same county in this State, some of which have separate business registration certificates, the Tax Commissioner’s order of suspension, cancellation, or refusal to renew, or issue, as appropriate, shall apply to all of the taxpayer’s business registration certificates and business activity in this State even though as to any particular location that has a business registration certificate, personal property taxes are not delinquent with respect to business tangible personal property at a particular location. Upon the effective date of the Tax Commissioner’s order of suspension, revocation, non-renewal or non-issuance, as the case may be, the taxpayer may no longer exercise the privilege of doing business in this State and shall immediately cease doing business at all business locations of the taxpayer in this State.
15.3. Multiple business registration certificates, multiple counties, but personal property taxes delinquent in some but not all counties in which business personal property has a tax situs. -- When a taxpayer who owes delinquent personal property taxes on business personal property in one or more counties of this State has multiple business locations in this State some of which have separate business registration certificates, as required by law, but only some locations are in counties where the taxpayer owes delinquent personal property taxes, the Tax Commissioner’s order of suspension, cancellation or refusal to renew, or issue, as appropriate, shall apply to the business registration certificate for registrant’s primary business location in this State and to each separate business registration certificate for locations in counties in which the taxpayer owes delinquent personal property taxes. The affected business registration certificates shall be identified in the Tax Commissioner’s order. Upon the effective date of the Tax Commissioner’s order of suspension, revocation, non-renewal or non-issuance, as the case may be, the taxpayer may no longer exercise the privilege of doing business in this State at those locations and all business activities at those locations shall immediately cease. Application of the Tax Commissioner’s order of suspension, cancellation or refusal to renew, or issue, as appropriate, to the business registration certificate for the registrant’s primary business location in this State shall be effective without regard to whether the primary business location in this State is located inside of, or outside of, a county where the taxpayer owes delinquent personal property taxes.
15.4. Filing petition for appeal does not suspend Tax Commissioner’s order. -- The Tax Commissioner’s order of suspension, cancellation, revocation, non-renewal, or nonissuance of a business registration certificate remains in place until the county sheriff of each county in which delinquent personal property taxes on business personal property notifies the Tax Commissioner that the full amount of the registrant’s delinquent personal property taxes, including any applicable penalties and interest, have been paid in full or exonerated, or partially exonerated and the balances paid, as the case may be or until there is a determination by the Office of Tax Appeals or court of this State that becomes final, holding that the delinquent property taxes are exonerated due to property taxes on the business personal property having been paid in full to all counties to which they were owed.
15.5. Perishable property. -- In the event that immediate cessation of business activity is likely to result in personal property at one or more locations perishing or becoming greatly reduced in price or value, or the property cannot be kept from spoilage without great expense, the taxpayer shall immediately notify the county sheriff of the county in which delinquent personal property taxes are owed and in which the property is located of that fact and identify the property that is likely to spoil and the sheriff shall exercise authority provided in W. Va. Code §11A-2-1 to distrain upon any goods and chattels belonging to the taxpayer in his or her county for payment of the delinquent personal property taxes.
W. Va. Code R. § 110-12D-16 Participation by County Sheriff and Prosecuting Attorney in Event of Appeal
In the event a registrant appeals the Tax Commissioner’s order of the suspension, revocation, non-renewal or non-issuance of a business registration certificate, the Tax Commissioner shall defend his or her actions and the sheriff of each county, and the prosecuting attorney thereof, that notified the Tax Commissioner that the registrant owed delinquent property taxes on business personal property are responsible for defending the county’s notification to the Tax Commissioner that the registrant owed delinquent property tax on business personal property located in that county.
APPENDIX A. Calendar for Assessment and Collection of Property Taxes.
1.1. Tangible personal property assessed by the county assessor is assessed annually, as of the first day of July, for ad valorem property taxes assessed for the next property tax year, which is the next ensuing calendar year after the July 1st assessment day. The county sheriff mails personal property tax tickets or statements to property owners beginning July 15th of the property tax year for which the taxes are levied. These taxes are payable in two installments. The first half installment payment is due September 1st of the property tax year and becomes delinquent if not paid before October 1st of the property tax year. The second installment payment is due March 1st of the next calendar year and becomes delinquent if not paid before April 1st of that calendar year. A discount is allowed when property taxes are paid before the date they become due.
1.2. Operating real and personal property of public service businesses is assessed annually by the Board of Public Works for the next property tax year.
1.3. Illustration of property tax cycle for property assessed by the county assessor or Board of Public Works.
May 1, 2005 On or before May 1st each year, public service businesses must file property tax returns with the Board of Public Works, covering their operations during preceding calendar year.
July 1, 2005 Property assessed as of this day for 2006 property taxes.
August 1, 2005 On or before August 1st, owners of producing and reserve oil and natural gas properties file reports with Tax Commissioner.
September 1, 2005 On or before September 1st, owners of actively mined coal property and owners of actively mined other minerals file reports with Tax Commissioner.
September 15, 2005 On or before September 15th, owners of reserve coal properties and owners of reserve mined minerals file reports with Tax Commissioner.
September 15, 2005 On or before September 15th, owners of other natural resource properties file reports with Tax Commissioner.
September 15, 2005 On or before September 15th each calendar year, the Tax Commissioner must furnish to the Board of Public Works tentative assessed values of the operating property of each public service business.
October 1, 2005 After the July 1st assessment day and before October 1st each year, every incorporated business must file with the county assessor the report required by W. Va. Code ' 11-3-12. This report includes a listing of real and personal property owned by the incorporated business. Public service businesses report only their nonoperating property.
Before October 1st each year, individuals who receive a property tax report form from the county assessor must complete the form and return it to the assessor.
On or before October 1st, owners of industrial real and personal property must file reports with the Tax Commissioner, Board of Public Works begins meeting on or before October 1st to fix the assessed value of the real and personal operating property of each public service business.
November 1, 2005 After the July 1st assessment day and before November 1st each year, sole proprietors and unincorporated businesses must file with the county assessor the report required by W. Va. Code §11-3-15. This report includes a listing of real and personal property owned by the unincorporated business, or by the sole proprietor and used in his or her business.
Unincorporated businesses and sole proprietors engaged in the business of agriculture are not required to file the §11-3-15 report. Corporations engaged in the business of agriculture are required to file the report required by §11-3-12, which is due October 1st.
December 31, 2005 Lien for 2006 property taxes attaches to operating property of public service business.
January 31, 2006 County assessor completes land and personal property tax books and delivers them to the county commission, which begins meeting as a board of equalization and review on February 1, 2006.
February 28, 2006 Boards of equalization and review must complete their work and adjourn sine die.
April 18, 2006 County commissions, county boards of education and municipal governing bodies meet on the third Tuesday in April to set property tax levy rates for the current property tax year. The levy rates are then certified to the county assessor and to the State Auditor.
As soon as possible after the assessment of public service business property is completed, the State Auditor mails to each operator of a public service business a statement of all taxes and levies assessed.
June 7, 2006 After the levy rates are certified to the county assessor, the assessor applies the appropriate levy rates to the assessed values of property entered in the land and personal property books for current property tax year. The completed land and personal property books must be delivered to the county sheriff by June 7th.
July 15, 2006 County sheriff begins collecting 2006 property taxes by mailing property tax tickets or statements to owners of property listed in the land and personal property books for the current property tax year.
September 1, 2006 A discount is allowed if first half 2006 property taxes, or taxes for the full year, are paid before September 1st to the county sheriff, or to the State Auditor in the case of property assessed by the Board of Public Works.
First half installment payments of 2006 property taxes are due September 1st.
For public service businesses, the first half installment payment of 2006 property taxes are delinquent if not paid by September 1, 2006.
October 1, 2006 First half installment payments of 2006 property taxes not paid by the end of September become delinquent on October 1st.
For public service businesses, first half 2006 property taxes are delinquent if not paid by September 1st.
March 1, 2007 Second half installment payments of 2006 property taxes are due March 1st.
March 1, 2007 A discount is allowed if second half 2006 property taxes are paid before March 1st to the county sheriff, or to the State Auditor in the case of property assessed by Board of Public Works.
Second half installment payments of 2006 property taxes are due March 1st.
For public service businesses, the second half installment payment of 2006 property taxes are delinquent if not paid by March 1, 2007.
April 1, 2007 Second half installment payments of 2006 property taxes not paid by the end of March become delinquent on April 1st.
For public service businesses, second half 2006 property taxes are delinquent is not paid by March 1st.
April 2007 Sheriff prepares and publishes a notice stating in effect that unpaid property taxes assessed for the 2006 property tax year (calendar year) have become delinquent and that unless paid by April 30, 2007, will be included for publication as provided in W. Va. Code §11A-2-10a.
May 1, 2007 On or before May 1st, the sheriff prepares a list of delinquent property taxes, on both real and personal property, for the preceding property tax year (calendar year), as provided in W. Va. Code §11A-2-11.
This list must be posted on the front door of the courthouse and published as a Class 1-O legal advertisement at least two weeks before the meeting of the county commission at which the list is presented for examination. W. Va. Code §11-2A-13.
June 15, 2007 On or before June 15th, the sheriff must present the list of delinquent property taxes to the county commission for examination. After review by the county commission, the sheriff may begin using remedies provided in the West Virginia Code to collect delinquent personal property taxes from those who owe the tax. W. Va. Code §11-2A-14.
July 1, 2007 On or before July 1st, the list of delinquent real property taxes must be certified to the State Auditor as provided in W. Va. Code §11A-2-15.
Appendix B. Property Tax Returns and Reports; Listing of Property; Assessments; Exoneration; and Penalties.
1.1. Persons engaged in business activity in this State are required to annually file certain reports with the county assessor. Public service businesses report operating property information to the Board of Public Works and report nonoperating property to county assessors.
1.1.1. Incorporated businesses. -- Except as provided in subdivision 1.1.2 or subdivision 1.1.5 of this subsection, each incorporated company, whether foreign or domestic, having its principal office or chief place of business in this State, is required to annually, between July 1st and October 1st, make a written report to the county assessor, as of the first day of July, verified by the oath of the president or chief accounting officer, to the assessor of the county in which its principal office or chief place of business is situated, or in which its property subject to taxation in this State is located, if the corporation does not have a principle office or chief place of business in this State. W. Va. Code §11-3-12. This report includes, among other things, the kinds, quantities and fair market values of all of its tangible personal property in each tax district in which it is located on the first day of July.
1.1.2. Public service businesses. -- The operating property of a public service business is returned to the West Virginia Board of Public Works for assessment as provided in W. Va. Code §11-6-1 et seq. Nonoperating property of a public service business is reported to the county assessor as provided in subdivision 3.1.1 or 3.1.3 of this section. “Public service business” includes railroads, telegraph and express companies, telephone companies, pipelines, car line companies and other public utilities.
1.1.3. Sole proprietors and other unincorporated businesses. -- Except as provided in subdivision 3.1.4 or 3.1.5 of this subsection, the owner, agent, or chief account of every sole proprietorship or unincorporated trade or business carried on in any county of this State is required to annually, between July 1st and November 1st, make a written report to the county assessor, as of the first day of July, showing the items required by W. Va. Code §11-3-15, including, but not limited to, (a) the amount, fair market value and classification of all tangible personal property, including, but not limited to, chattels real, used in connection with the sole proprietorship or unincorporated trade or business and (b) the amount, fair market value and classification of all goods and property kept for sale and remaining unsold as of the first day of July. Items (a) and (b) are entered in the personal property book of the county, in the tax district, in which these items are kept or located for the greater part of year.
1.1.4. Unincorporated agricultural businesses. -- Individuals and unincorporated business engaged in the business of farming are not required to file the report required by W. Va. Code §11-3-15. Incorporated agricultural businesses are required to file the report required by W. Va. Code §11-3-12.
1.1.5. Special valuation methods.
1.1.5.1. A special method for appraising dealer vehicle inventory is provided in W. Va. Code §11-6C-1 et seq. Returns of this specie of property are filed with the county assessor as provided in W. Va. Code §11-6C-3.
1.1.5.2. A special method for valuing certain manufacturing production property is provided in W. Va. Code §11-6E-1 et seq. Returns of this specie of property are filed with the county assessor in which the specific item of property is located on the first day of July of the assessment year. W. Va. Code §11-6E-4.
1.1.5.3. A special method for valuing qualified capital additions to a manufacturing facility, including the real and personal property associated with the qualified capital addition to a qualified manufacturing facility, as defined in W. Va. Code §11-6F-2(d), is returned to the county assessor of the county in which the manufacturing facility is located, W. Va. Code §11-6F-4, and taxed as provided in W. Va. Code §11-6F-3.
1.1.5.4. A special method for taxing interstate motor vehicles registered under the international proportional registration agreement is provided in W. Va. Code §11-6G-1 et seq.
1.2. Listing and assessment of property.
1.2.1. General rule. -- Except as provided in subdivision 3.2.2 of this subsection, every person required by law to list personal property for ad valorem property taxation must list the tangible personal property in the tax district in which it is located on the first day of July of the assessment year. Chattels real are listed in the tax district wherein the land to which they relate is located. W. Va. Code §11-5-4.
1.2.2. Exception. -- However, the capital (except real estate and chattels real) employed in any trade or business (other than agriculture) belonging to a company whether it is incorporated or not, or to an individual, is listed and assessed for taxation in the county and tax district in which the principal office for the transaction of the financial concerns pertaining to the trade or business is located in this state; or, if there is no such office, then in the county and tax district where the operations are carried on. W. Va. Code §11-5-4.
1.2.3. Catchall. -- Goods and chattels and other tangible personal property not exempt from taxation which may not be assessed for taxation in the county and tax district where the property is located on the first day of July of the assessment year, but which have been removed from that location, are assessed in the tax district where they are on the first day of July of the assessment year. W. Va. Code §11-5-4.
1.5. Exoneration. -- The assessment and payment of ad valorem property taxes on any item of property in any county of this State for any tax year exonerates the owner of the property from assessment and payment of taxes assessed on the same property in any other county of this State for that same property tax year. W. Va. Code §11-5-4.
1.6. Forfeiture penalties.
1.6.1. Refusal to list property. -- Any person, firm or corporation whose duty it is by law to list any real estate or personal property for ad valorem property taxation that refuses to furnish a proper list of the property to the county assessor or Tax Commissioner, within the time required by law, or that refuses to list the property with the county assessor or the Tax Commissioner, within the time required by law, is, at the discretion of the county assessor or Tax Commissioner, subject to a forfeiture penalty of not less than $25 nor more than $100, unless good cause is shown for the refusal. Additionally, the person, firm or corporation is denied all remedy provided by law for correction of any assessment made by the county assessor or Board of Public Works. W. Va. Code §11-3-10.
1.6.2. False statements. -- Any person, firm or corporation whose duty it is by law to list any real estate or personal property for ad valorem property taxation that refuses to answer any question of the county assessor or the Tax Commissioner, or answers falsely any question asked by the county assessor or the Tax Commissioner, or refuses to deliver any statement required by law, at the discretion of the county assessor or Tax Commissioner, is subject to a forfeiture penalty of not less than $25 nor more than $100, unless good cause is shown for the refusal. Additionally, the person, firm or corporation is denied all remedy provided by law for correction of any assessment made by the county assessor or Board of Public Works. W. Va. Code §11-3-10.
1.6.3. Failure to file required return. -- Any person, firm or corporation required by law to make return of property for ad valorem taxation, whether the return is to be made to the county assessor, the Board of Public Works, the Tax Commissioner, or any other assessing officer or body, who fails to return a true list of all property which should be assessed in this State, in addition to all other penalties provided by law, shall forfeit one percent of the value of the property not yet returned and not otherwise taxed in this State. W. Va. Code §11-3-10.
1.6.4. Separate offenses. -- Each failure to make a true return as required by law constitutes a separate offense, and a forfeiture applies to each of them, but all forfeitures, to which the same person, firm or corporation is liable, may not exceed five percent of the value of the property not returned. W. Va. Code §11-3-10.
110CSR12D
110CSR12D
Series 13 Business And Occupational Tax
W. Va. Code R. § 110-13-1 General
1.1. Scope. -- This legislative rule explains and clarifies the West Virginia Business and Occupation Tax, W. Va. Code '11-13-1 et seq. This legislative rule is intended to repeal and reenact Tax Department, Business and Occupation Tax Rule, 110 C.S.R. 13.
1.2. Authority. -- W. Va. Code ''11-10-5 and 29A-3-15.
1.3. Filing Date. -- April 17, 1996.
1.4. Effective Date. -- May 1, 1996.
W. Va. Code R. § 110-13-1a Definitions. 1a.1. For purposes of this rule, terms have the meaning given to them by this Section, unless a different meaning is clearly required by either the context in which the term is used or by specific definition elsewhere in these rules. 1a.2. Terms defined. 1a.2.1. Average four year generation - See Section 2o.1 of this rule. 1a.2.2. "Business" includes all activities engaged in or caused to be engaged in with the object of gain or economic benefit, either direct or indirect. "Business" includes the rendering of gas storage service by any person for the gain or economic benefit of any person, including, but not limited to, the storage operator, whether or not incident to any other business activity. 1a.2.2.1. The business and occupation tax act imposes taxes upon persons engaged in business. The term "Business" includes all activities engaged in or caused to be engaged in with the object of gain or economic benefit, either direct or indirect. 1a.2.2.2. In determining whether a business is engaged in for direct or indirect economic gain or benefit, the lack of profit suffered in the activity is not relevant; nor is it material that the business was engaged without profit as the primary motivation. 1a.1.3. Capacity factor - See Section 2o.1 of this rule. 1a.2.4. "Company use" means that amount of electrical energy, excluding station use and line loss, used to construct, maintain or operate generation, transmission, office or other facilities of the taxpayer in West Virginia, used in the conduct of any electric utility business in West Virginia or any electric energy generation business in West Virginia. 1a.2.5. "Dekatherm" means the thermal energy unit equal to one million British thermal units (BTU's) or the equivalent of one thousand cubic feet of gas having a heating content of one thousand BTU's per cubic foot. 1a.2.5.1. For the purpose of calculating the tax imposed upon any gas storage business, the number of dekatherms of gas injected into or withdrawn from the gas storage reservoir during a tax month shall not include: 1a.2.5.1.a. Any gas consumed by a gas storage operation as fuel for compressors used to pump gas into or out of storage, including gas used in a recycling operation, whether or not that gas was temporarily placed into storage prior to its withdrawal for such use as fuel; or 1a.2.5.1.b. Any gas used in a recycling operation of the storage reservoir. 1a.2.5.2. All other gas injected into or withdrawn from a storage reservoir shall be included in the number of dekatherms constituting the measure of the tax base, and the measure shall not be decreased to reflect any loss of gas from storage or any gas which may escape or otherwise be lost. 1a.2.6. "Ferroalloy" - See Section 2n.2 of this rule. 1a.2.7. "Gas" means either natural gas unmixed, or any mixture of natural and artificial gas or any other gas. 1a.2.8. "Gas storage operator" means any person who operates a storage reservoir or provides a storage service as defined in this Section, either as owner or lessee. 1a.2.9. "Gas storage service" means the injection of gas into a storage reservoir, the storage of gas for any period of time in a storage reservoir, or the withdrawal of gas from a storage reservoir. Such gas may be owned by the storage operator or any other person. 1a.2.10. Generating unit - See Section 2o.1 of this rule. 1a.2.11. "Gross income" means the gross receipts of the taxpayer, received as compensation for personal services and the gross receipts of the taxpayer derived from trade, business, commerce or sales and the value proceeding or accruing from the sale of tangible personal property (real or personal), or service, or both, and all receipts by reason of the investment of the capital of the business engaged in, including rentals, royalties, fees, reimbursed costs or expenses or other emoluments however designated and including all interest, carrying charges, fees or other like income, however denominated, derived by the taxpayer from repetitive carrying of accounts, in the regular course and conduct of his or her business, and extension of credit in connection with the sale of any tangible personal property or service, and without any deductions on account of the cost of property sold, the cost of materials used, labor costs, taxes, royalties paid in cash or in kind or otherwise, interest or discount paid or any other expenses whatsoever. 1a.2.12. "Gross proceeds of sales" means the value, whether in money or other property, actually proceeding from the sale of tangible property or the providing of services without any deduction on account of the cost of property sold or expenses of any kind. 1a.2.13. "Gross West Virginia electric energy generation" means the total amount of electric energy produced by a generating station located in West Virginia without reduction for station use, company use, line loss or any other use, loss or deduction. 1a.2.14. "Inactive reserve." - See Section 2o.1 of this rule. 1a.2.15. "Kilowatt hours of electricity sold to consumers in this State that were not generated or produced in this State" means total kilowatt hours of electricity sold to consumers located in West Virginia less net kilowatt hours generated or produced in West Virginia as defined in Section 1a.2.21 of this rule. 1a.2.16. "Kilowatt hours of net generation available for sale that was generated or produced in this State" means gross West Virginia electric energy generation less station use, as defined in this rule. "Kilowatt hours of net generation available for sale that was generated or produced in this State" shall not be reduced by company use, line loss or any other use, loss or deduction, except station use, as defined in this rule. 1a.2.17. "Line loss" means loss of electrical energy by electrical resistance and electromagnetism occurring from or in electrical transmission lines or apparatus between any two points along the transmission lines or apparatus. 1a.2.18. "Maximum possible annual generation." - See Section 2o.1 of this rule. 1a.2.19. "Month" or "tax month" means the calendar month. 1a.2.20. "Net generation." - See Section 2o.1 of this rule. 1a.2.21. "Net Kilowatt hours generated or produced in West Virginia" means kilowatt hours of net generation available for sale that was generated or produced in this State, as defined in Section 1a.2.16 of this rule. 1a.2.22. "Net number of dekatherms of gas injected" means the sum of the daily injections of dekatherms of gas in excess of the sum of the daily withdrawals of dekatherms of gas during a tax month. 1a.2.23. "Net number of dekatherms of gas withdrawn" means the sum of the daily withdrawals of dekatherms of gas in excess of the sum of the daily injections of dekatherms of gas during a tax month. 1a.2.24. "Official capability." - See Section 2o.1 of this rule. 1a.2.25. "Peaking unit." - See Section 2o.1 of this rule. 1a.2.26. "Person" or the term "company," used interchangeably in this rule, includes any individual, firm, partnership, joint venture, association, corporation, trust or any other group or combination acting as a unit, and the plural as well as the singular number, unless the intention to give a more limited meaning is disclosed by the context. 1a.2.27. "Recycling operation" means the withdrawal of gas from a storage reservoir and the subsequent reinjection of gas into the same reservoir solely for the purpose of regulating the pressure of the storage reservoir or portion of the storage reservoir. 1a.2.28. "Retired from service." - See Section 2o.1 of this rule. 1a.2.29. "Sale," "sales" or "selling" includes any transfer of title to property or electricity, whether for money or in exchange for other property. 1a.2.30. "State" or "this State" means the State of West Virginia. 1a.2.31. "Station" or "generating station" means a station at which electrical generators, dynamos or other equipment or apparatus are used to convert mechanical, chemical, solar, geothermal or nuclear energy into electrical energy. The term includes, but is not limited to, those generating stations producing electrical energy by means of coal fired, gas fired, wood fired, gob fired, coal waste fired, coal refuse fired or waste fired electrical energy generation technology; and also includes, but is not limited to, stations producing electrical energy by means of nuclear fission or fusion, magnetohydrodynamic, fluidized bed combustion, solar, biomass, wind, fuel cell, steam turbine, fluid turbine, gas turbine, hydroelectric or pumped-storage hydroelectric electrical energy generation technology. 1a.2.32. "Station use" or "plant use" means that amount of electric energy used by a generating station in the production of electricity and general operation of the generating station. The term "station use" or "plant use" includes the energy used for pumping water for purposes of providing stored energy at a pumped storage hydroelectric plant. "Station use" or "plant use" does not include company use or line loss. 1a.2.33. "Storage reservoir" means that portion of any subterranean sand or rock stratum or strata into which gas is, was or may have been injected for the purpose of storage prior to March 1, 1989. 1a.2.34. "Storage Utilization Index." - See Section 2e.1 of this rule. 1a.2.35. "Taxable generating capacity." - See Section 2o.1 of this rule. 1a.2.36. "Tax" means the Business and Occupation Tax imposed pursuant to W. Va. Code '11-13-1 et seq. 1a.2.37. "Taxpayer" means any person liable for any tax under this rule. 1a.2.38. "Taxable year" means the calendar year, or the fiscal year ending during the calendar year, upon the basis of which tax liability is computed under W. Va. Code '11-13-1 et seq. "Taxable year" means, in case of a return made for a fractional part of a year under the provisions of W. Va. Code '11-13-1 et seq., or under this rule, the period for which the return is made. 1a.2.39. "Twelve consecutive months." - See Section 2o.1 of this rule
W. Va. Code R. § 110-13-2 Imposition of Privilege Tax
2.1. Until June 1, 1995, for taxable months or taxable years beginning after February 28, 1989, there is levied and shall be collected annual privilege taxes, on account of business and other activities, and in the amount to be determined by the application of rates against values or gross income as set forth in W. Va. Code ''11-13-2d, 11-13-2e, 11-13-2m and 11-13-2n.
2.2. For taxable months or taxable years beginning after May 31, 1995, there is levied and shall be collected annual privilege taxes on account of business and other activities, and in the amount to be determined by the application of rates against the measure of the tax as set forth in Sections 2d, 2e, 2m, 2n and 2o of this rule.
2.3. Sales to affiliates.
2.3.1. In determining value in sales from one to another of affiliated companies or persons, or under other circumstances where the relation between the buyer and seller is such that the gross proceeds from the sale are not indicative of the true value of the subject matter of the sale, the tax shall be levied upon the fair market value of the subject matter sold, corresponding as nearly as possible to the gross proceeds which have been or would be realized from the sale of the same or similar electrical energy, utility service or products of like quality or character where no common interest exists between a buyer and a seller but the circumstances and conditions, including time and place of sale, are otherwise similar. The term "affiliated companies or persons" includes but is not limited to "affiliated groups" as defined by Internal Revenue Code 1504(a) and "parent and subsidiary corporations" as defined by W. Va. Code '11-23-3.
2.3.2. In determining value in regard to sales from one to another of affiliated companies or persons, or under other circumstances where the relation between the seller and buyer is such that gross proceeds from the sale are not indicative of the true value of the subject matter of the sale, the following rules shall be applied in the order stated.
2.3.2.1. Whenever sales are made to affiliates, the value shall correspond to the gross proceeds from the sale of similar electrical energy, utility service or products of like quality and character and in similar quantities between persons of no common interest.
2.3.2.2. If there are no sales between parties of no common interest by which the taxpayer may value his or her sales to affiliates, the value shall correspond to the gross proceeds from sales by the taxpayer to nonrelated purchasers of similar electrical energy, utility service or products of like quality and character and in similar quantities and shall include all subsidies and bonuses.
2.3.2.3. In the absence of sales of similar electrical energy, utility service or products as a guide to value, the value may be determined by a cost basis. In those cases there shall be included every item of cost attributable to the particular matter sold, including direct and indirect overhead, costs. There shall be added to this total cost the average markup realized by the taxpayer on all electrical energy, utility service or products sold. ''110-13-2a through 2c. Reserved for Future Use.
W. Va. Code R. § 110-13-2d Public Service or Utility Business. 2d.1. Persons engaged within this State in certain public service or utility business are taxable on the privilege of engaging in the businesses and shall report the gross income from the business activities under the appropriate classification on the business and occupation tax form. Only gross income derived from the supplying of public services shall be reported under the public service classifications. 2d.2. There are certain persons who are not subject to tax under W. Va. Code '11-13-2d even though they may be subject to the control of this State's Public Service Commission. These statutorily exempt persons are railroads, railroad car companies, express companies, pipeline companies, motor carriers, telephone and telegraph companies and water carriers by steamboat or steamship. Municipally-owned water companies and municipally-owned electric distribution systems are not subject to the tax under W. Va. Code '11-13-2d. 2d.3. Upon any person engaged or continuing within this State in any public service or utility business, except railroad, railroad car, express, pipeline, telephone and telegraph companies, water carriers by steamboat or steamship and motor carriers, the tax due under in W. Va. Code ' 11-13-2d is equal to the gross income of the business derived from the activity or activities multiplied by the respective rates as follows: 2d.3.1. Street and interurban and electric railways, one and four-tenths percent (1.4%); 2d.3.2. Water companies, four and four-tenths percent (4.4%), except as to income received by municipally owned water plants; 2d.3.3. Electric light and power companies: 2d.3.3.1. A person who generates electric power in this State and then sells that power generation in regulated transactions in this State, shall pay tax at the rate of four percent (4%) on sales and demand charges derived from the sale of the power in this State, except as otherwise provided in this rule. 2d.3.3.2. A person who sells electric power in this State in regulated transactions which that person does not generate in this State, shall pay tax at the rate of three percent (3%) on sales and demand charges derived from the sale of the power in this State, except as otherwise provided in this rule. 2d.3.3.3. Notwithstanding the provisions of Sections 2.3.3.1 and 2.3.3.2 of this rule, if electric power is sold in this State:
(1) to a plant location of a customer engaged in manufacturing activity and the contract demand or usage at the plant location exceeds two hundred thousand kilowatts per hour per year or two hundred thousand kilowatts per hour in a year, then the rate of tax on the sales and demand charges derived from the sales is two percent (2%);
(2) to a plant location in this State that consumes the power in an electrolytic process for the manufacture of chlorine, then to the extent the electric power consumed in the electrolytic process is separately metered from all other electric power consumed at that location, the demand charges for the power is exempt from the tax imposed by W. Va. Code ' 1-13-2;
(3) to a plant location in this State that consumes the power in the manufacture of ferroalloy, then to the extent the electric power consumed in manufacturing ferroalloy is separately metered from all other electric power consumed at that location, the sales and demand charges for the power are exempt from the tax imposed by W. Va. Code '11-13-2; or (4) by a municipally owned plant producing or purchasing electricity and distributing the same, the income it receives from the power is exempt from the tax imposed by W. Va. Code '11-13-2. 2d.3.3.4. As used in this Section, the term "ferroalloy" means any of the various alloys of iron and one or more other elements used as a raw material in the production of steel, but does not include the final production of steel. 2d.3.4. Natural gas companies shall pay tax at the rate of four and twenty-nine hundredths percent (4.29%) on the gross income, except (1) that the sale of natural gas under W. Va. Code '11-13-2d is exempt from the tax due under W. Va. Code '11-13-2d to the extent that the natural gas is separately metered and is gas from which the purchaser derives hydrogen and carbon monoxide for use in the manufacture of chemicals in this State, and the full economic benefit of the exception provided in this subdivision to the taxpayer shall be passed on to the purchaser of the natural gas and (2) that there shall be no exemption for the sale of any natural gas from which the purchaser derives carbon monoxide or hydrogen for the purpose of resale; 2d.3.5. Toll bridge companies shall pay tax at the rate of four and twenty-nine hundredths percent (4.29%); and 2d.3.6. Upon all other public service or utility business shall pay tax at the rate of two and eighty-six hundredths percent (2.86%). 2d.4. The measure of this tax shall not include gross income derived from commerce between this State and other states of the United States or between this State and foreign countries. The measure of the tax under this Section shall include only gross income received from the activity of supplying public service. 2d.5. Until June 1, 1995, on and after March 1, 1989, electric light and power companies shall also determine their liability for payment of tax under W. Va. Code ''11-13-2d, 11-13-2m and 11-13-2n. If for taxable months beginning on or after the March 1, 1989 liability for tax under W. Va. Code '11-13-2n is equal to or greater than the sum if the power company's liability for payment of tax under W. Va. Code '' 11-13-2d and 11-13-2m, then the company shall pay the tax due only under W. Va. Code '11-13-2n. But if tax liability under W. Va. Code '11-13-2n is less, then tax shall be paid under W. Va. Code ''11-13-2d and 11-13-2m and the tax under W. Va. Code '11-13-2n shall not be paid. The provisions of this subsection and subdivision 2d.3.3 of this rule shall expire and become null and void for taxable years beginning on or after January 1, 1998. 2d.6. Beginning June 1, 1995, electric light and power companies that actually paid tax based on the provisions of Section 2d.3.3 or Section 2m of this rule for every taxable month in 1994 shall determine their liability for payment of tax in accordance with Section 2d.6.1 of this rule. All other electric light and power companies shall determine their liability for payment of tax exclusively under Section 2o of this rule. 2d.6.1. If for taxable months beginning on or after June 1, 1995, liability for tax under Section 2o of this rule is equal to or greater than the sum of the power company's liability for payment of tax under Section 2d.3.3 and Section 2m of this rule, then the company shall pay the tax due under Section 2o of this rule and not the tax due under 2d.3.3 and Section 2m of this rule. If tax liability under Section 2o of this rule is less, then the tax shall be paid under Section 2d.3.3 and Section 2m of this rule and the tax due under Section 2o of this rule shall not be paid. 2d.6.2. The provisions of Section 2d.3.3 of this rule expire and become null and void for taxable years beginning on or after January 1, 1998, at which time all electric light and power companies shall determine their liability for payment of tax exclusively under Section 2o of this rule.
W. Va. Code R. § 110-13-2e Business of Gas Storage; Effective Date. 2e.1. Rate of tax. - Until July 1, 1995, upon every person engaged or continuing within this State in any gas storage business utilizing one or more gas storage reservoirs located within this State, the tax due under W. Va. Code '11-13-2e is five cents (.05) multiplied by either (1) the net number of dekatherms of gas injected into a gas storage reservoir during a tax month or (2) the net number of dekatherms of gas withdrawn from a gas storage reservoir during a tax month, whichever is applicable for that month, whether or not the gas is owned by, or is injected or withdrawn for, the storage operator or any other person; Provided, That Effective July 1, 1995, the net number of dekatherms of gas injected or the net number of dekatherms withdrawn from a gas storage reservoir shall not exceed the storage utilization index as defined in this Section. For purposes of this Section, storage utilization means the utilization of a storage reservoir, through the operation of existing and functional facilities available for storage use during the five (5) year base period ending December 31, 1994, and the "storage utilization index" is the five year average of taxable dekatherms as determined for each taxable period of the stated base period. 2e.2. Fractional parts of dekatherms. - The number of dekatherms of gas injected or withdrawn from a gas storage reservoir includes fractional parts of dekatherms to be taxed at the following rates: 2e.2.1. From 0 up to but not including .2 dekatherms at one cent; 2e.2.2. From .2 up to but not including .4 dekatherms at two cents; 2e.2.3. From .4 up to but not including .6 dekatherms at three cents; 2e.2.4. From .6 up to but not including .8 dekatherms at four cents; and 2e.2.5. From .8 up to and including 1 dekatherm at five cents. 2e.3. Measurement. - At each point where gas may be injected or withdrawn from gas storage reservoirs located within this State, the taxpayer must install meters or other appropriate means to determine the number of dekatherms of gas injected into and withdrawn from storage. In order for gas consumed as fuel or gas for compressors used to pump gas into or out of storage or used in a recycling operation to be excluded from the gas subject to this tax, the operator of a storage facility must measure the amount of the gas injected into or withdrawn from storage which is used as fuel or in the recycling operation. 2e.4. Administration; installment payments. - The taxpayer shall submit the tax due under W. Va. Code '11-13-2e in accordance with instructions and forms provided by the Tax Commissioner. The tax due shall be administered, collected and enforced as provided in the West Virginia Tax Crimes and Penalties Act, W. Va. Code '11-9-1 et seq; and W. Va. Code '11-13-1 et seq., and this rule promulgated pursuant thereto, and shall be remitted in periodic installment payments as provided in Section 4 of this rule, except that the payments shall be remitted on or before the twentieth (20th) day of the month following the month or quarter in which the tax accrued. 2e.5. Notice of retirement from service. - A taxpayer subject to the tax due under this Section shall provide written notice to the Joint Committee on Government and Finance and the Department of Tax and Revenue eighteen (18) months prior to the retirement from service of a storage reservoir. 2e.5.1. Failure to provide notice may result in liability for tax for months in which notice was required
W. Va. Code R. § 110-13-2m Business Of Generating Or Producing Electric Power; Exception; Rates. 2m.1. Every person engaging within this State in the business of generating electric power when the sale of electric power is not subject to tax under W. Va. Code '11-13-2d, is liable for tax on the gross proceeds from the sale of the electric power at a rate of four percent (4%), except that the rate is two percent (2%) on that portion of the gross proceeds on the sale of electric power to a plant of a customer engaged in a manufacturing activity, if the contract demand at the plant location exceeds two hundred thousand kilowatts per hour per year, or if the usage at the plant location exceeds two hundred thousand kilowatts per hour in a year. 2m.2. The measure of this tax is the value of all electric power generated or produced in this State for sale, profit or commercial use, regardless of the place of sale or the fact that transmission may be to points outside this State: Provided, That the gross income received by municipally owned plants generating or producing electricity is not subject to tax under this rule. 2m.3. Until June 1, 1995, beginning March 1, 1989, every person taxable under this Section shall determine their liability for payment of tax under W. Va. Code ''11-13-2m and 11-13-2d and under W. Va. Code '11-13-2n. If for taxable months beginning on or after March 1, 1989, that person's liability for payment of tax under W. Va. Code ''11-13-2m and 11-13-2d is less than the amount of that person's liability for payment of tax under W. Va. Code '11-13-2n, then that person shall pay the tax under W. Va. Code '11-13-2n and not the sum of the amount of tax due under W. Va. Code ''11-13-2m and 11-13-2d. If the tax due under W. Va. Code '11-13-2n is less, then the amount of tax due under W. Va. Code ''11-13-2m and 11-13-2d is the tax due. The provisions of this Section of this rule expire and become null and void for taxable years beginning on or after January 1, 1998. 2m.4. Beginning June 1, 1995, electric light and power companies that actually paid tax based on the provisions of Section 2d.3.3 of this rule or this Section for every taxable month in 1994 shall determine their liability for payment of tax under this rule in accordance with Section 2m.4.1 of this rule. All other electric light and power companies shall determine their liability for payment of tax under this rule exclusively under Section 2o of this rule. 2m.4.1. If for taxable months beginning on or after June 1, 1995, liability for tax under Section 2o of this rule is equal to or greater than the sum of the power company's liability for payment of tax under Section 2d.3.3 of this rule and this Section, then the company shall pay the tax due under Section 2o of this rule and not the tax due under Section 2d.3.3 of this rule. If tax liability under Section 2o of this rule is less, then the tax shall be paid under Section 2d.3.3 of this rule and this Section and the tax due under Section 2o of this rule shall not be paid. 2m.4.2. The provisions of this Section expire and become null and void for taxable years beginning on or after January 1, 1998, at which time all electric light and power companies shall determine their liability for payment of tax exclusively under Section 2o of this rule. An electric light and power company that generates and produces power in this State shall continue to be considered to be an "industrial taxpayer" for purposes of W. Va. Code '11-13D-2(b)(8), and gross income of an electric light and power company from the generation and production of power in this State and sales and demand charges for electric power sold in this State shall continue to be considered "gross income of the business subject to tax under Article thirteen of this Chapter" for purposes of W. Va. Code '11-23-17(b), all to the extent of and in accordance with the law in effect immediately preceding June 1, 1995
W. Va. Code R. § 110-13-2n Business of Generating or Producing or Selling Electric Power; Exemptions; Rates. 2n.1. Rate of tax. - Until June 1, 1995, upon every person engaging or continuing within this State in the business of generating or producing electricity for sale, profit or commercial use, either directly or indirectly through the activity of others, in whole or in part, or in the business of selling electricity to consumers, or in both businesses, the tax due under W. Va. Code ' 11-13-2n shall be equal to: 2n.1.1. Twenty-six hundredths of one cent ($.0026) times the kilowatt hours of net generation available for sale that was generated in this State by the taxpayer during the taxable year. This rate is five hundredths cents ($.0005) times the kilowatt hours of net generation available for sale that was generated in this State by the taxpayer and sold to a plant of a customer engaged in manufacturing activity if the contract demand at the plant location exceeds two hundred thousand kilowatts per hour per year or if the usage at the plant location exceeds two hundred thousand kilowatts per hour in a year. Tax due under W. Va. Code ' 11-13-2n for any person generating electric power and an alternative form of energy at a facility located within this State substantially from gob or other mine refuse is five hundredths cents ($.0005) times the kilowatt hours of net generation or production available for sale. The measure of tax under this subdivision is total kilowatt hours of net generation available for sale that was generated or produced in this State by the taxpayer during the taxable year regardless of the place of sale or use, or the fact that transmission may be made to points outside this State. 2n.1.2. Nineteen hundredths of one cent ($ .0019) times the kilowatt hours of electricity sold to consumers in this State that were not generated or produced in this State by the taxpayer. The rate is five hundredths cents ($.0005) times the kilowatt hours electricity not generated in this State by the taxpayer which is sold to a plant in this State of a customer engaged in manufacturing activity if the contract demand at the plant location exceeds two hundred thousand kilowatts per hour per year or if the usage at the plant location exceeds two hundred thousand kilowatts per hour in a year. The measure of tax is the total kilowatt hours of electricity sold to consumers in this State during the taxable year, that were not generated or produced in this State by the taxpayer, to be determined by subtracting from the total kilowatt hours of electricity sold to consumers in the State during the taxable year, the net kilowatt hours of electricity generated or produced in the State by the taxpayer during that year. 2n.2. Exemptions. - The provisions of W. Va. Code '11-13-2n shall not apply to: 2n.2.1. Kilowatt hours of electricity generated and sold, or purchased and resold, by a municipally owned plant. 2n.2.2. Kilowatt hours of electric power that are separately metered and consumed in an electrolytic process for the manufacture of chlorine. 2n.2.3. Kilowatt hours of electric power that are separately metered and consumed in the manufacture of ferroalloy. As used in this Section, the term "ferroalloy" means any of the various alloys of iron and one or more other elements used as a raw material in the production of steel but shall not include electric power used in the production of steel. 2n.2.4. The full economic benefits provided to the taxpayer by Sections 2n.2.2 and 2n.2.3 of this rule shall be passed on to the manufacturer of the chlorine or ferroalloy. 2n.3. Credit. - Any person taxable under W. Va. Code '11-13-2n(a)(2) shall be allowed a credit against the amount of tax due under that Section for any electric power generation taxes paid by the taxpayer with respect to the generation of the electric power to the state in which the power was generated or produced. The amount of credit allowed shall not exceed the tax liability arising under W. Va. Code '11-13-2n(a)(2) with respect to the sale of kilowatt hours of the power in a regulated transaction in this State when that same kilowatt hour was taxed by the state of generation. 2n.4. Transition rule. - Until June 1, 1995, beginning March 1, 1989, electric light and power companies shall determine their liability for payment of tax under W. Va. Code ''11-13-2n, 11-13-2d and 11-13-2m. If for taxable months beginning on or after March 1, 1989, liability for tax under W. Va. Code '11-13-2n is equal to or greater than the sum of the power company's liability for payment of tax under W. Va. Code '' 11-13-2d(a)(3) and 11-13-2m, then the company shall pay the tax due under W. Va. Code '11-13-2n and not the tax due under W. Va. Code ''11-13-2d(a)(3) or 11-13-2m. If tax liability under W. Va. Code '11-13-2n is less, then tax shall be paid under W. Va. Code ''11-13-2d(a)(3) and 11-13-2m, as applicable, and the tax due under W. Va. Code '11-13-2n shall not be paid. The provisions of this Subsection of this rule expire and become null and void for taxable years beginning on or after January 1, 1998. 2n.5. Termination Date. - Beginning June 1, 1995 and thereafter, electric light and power companies shall not determine their tax liability under this Section
'11-13-2o. Business of Generating, Producing or Selling Electricity on and After June 1, 1995; Definitions; Rate of Tax. 2o.1. Definitions. - As used in this Section: 2o.1.1. "Average four-year generation" is the amount computed by dividing by four (4) the sum of a generating unit's net generation, expressed in kilowatt hours, for calendar years 1991, 1992, 1993, and 1994. For any generating unit which was newly installed and placed into commercial operation after January 1, 1991 and prior to the effective date of this Section, June 1, 1995, "average four-year generation" is computed by dividing the unit's net generation for the period beginning with the month in which the unit was placed into commercial operation and ending with the month preceding the effective date of this Section by the number of months in the period and multiplying the resulting amount by twelve (12) with the result being a representative twelve-month average of the unit's net generation while in an operational status; 2o.1.2. "Capacity factor" means a fraction, the numerator of which is average four-year generation and the denominator of which is the maximum possible annual generation; 2o.1.3. "Generating unit" means a mechanical apparatus or structure which through the operation of its component parts is capable of generating or producing electricity and is regularly used for this purpose; 2o.1.4. "Inactive reserve" means the removal of a generating unit from commercial service for a period of not less than twelve (12) consecutive months as a result of lack of need for generation from the generating unit or as a result of the requirements of State or federal law or the removal of a generating unit from commercial service for any period as a result of any physical exigency which is beyond the reasonable control of the taxpayer; 2o.1.5. "Maximum possible annual generation" means the product, expressed in kilowatt hours, of official capability times 8760 hours [i.e., the number of hours in a year]; 2o.1.6. "Official capability" means the nameplate capacity rating of a generating unit expressed in kilowatts; 2o.1.7. "Peaking unit" means a generating unit designed for the limited purpose of meeting peak demands for electricity or filling emergency electricity requirements; 2o.1.8. "Retired from service" or "retiring from service" means the removal of a generating unit from commercial service for a period of at least twelve (12) consecutive months with the intent that the unit will not thereafter be returned to active service; 2o.1.9. "Taxable generating capacity" means the product, expressed in kilowatts, of the capacity factor times the official capability of a generating unit, [i.e., average four-year generation in kilowatt hours 8760 hours] subject to the modifications set forth in Sections 2o.3.2 [new generating units] and 2o.3.3 [peaking units] of this rule. Taxable generating capacity is the measure of tax under Section 2o of this rule. In no event shall taxable generating capacity for any unit first placed in service prior to June 1, 1995 be recomputed or adjusted based upon post June 1, 1995 changes in net generation or consumption except insofar as the unit is retired or placed in inactive reserve; 2o.1.10. "Net generation" for a period means the "kilowatt hours of net generation available for sale that was generated or produced in this State" by the generating unit during that period less the following adjustments; 2o.1.10.1. Twenty-one twenty-sixths (21/26 or .8077) of the kilowatt hours of electricity generated at the generating unit and sold during that period to a plant location of a customer engaged in manufacturing activity if the contract demand at that plant location exceeds 200,000 kilowatts per hour in a year or where the usage at that plant location exceeds 200,000 kilowatts per hour in a year; 2o.1.10.2. Twenty-one twenty-sixths (21/26 or .8077) of the kilowatt hours of electricity produced or generated at the generating unit during that period by any person producing electric power and an alternative form of energy at a facility located in this State substantially from gob or other mine refuse; and 2o.1.10.3. The total kilowatt hours of electricity generated at the generating unit exempted from tax during that period by Section 2n.2 of this rule. 2o.1.10.3.1. Taxpayers paying under Section 2o of this rule who received any of the exemptions described in Section 2n.2 of this rule in calendar years 1991 through 1994 receive the exemption under Section 2o of this rule automatically when they calculate their "average four-year generation" values for calendar years 1991 through 1994. Therefore, no additional exemption is allowable for kilowatt hours generated in calendar years after 1994. 2o.1.10.4. "Net generation" for a period shall not be reduced by company use, line loss or any other use or loss or deduction, except station use, as defined in Section 1a of this rule; and 2o.1.11. "Twelve consecutive months" means a period beginning with the day the generating unit in question is removed from commercial service and ending on the day which is 364 days thereafter. 2o.2. Rates of tax. - Upon every person engaging or continuing within this State in the business of generating or producing electricity for sale, profit or commercial use either directly or indirectly through the activity of others, in whole or in part, or in the business of selling electricity to consumers, or in both businesses, the tax imposed by Section 2 of this rule is equal to: 2o.2.1. For taxpayers who generate or produce electricity for sale, profit or commercial use, the product of $22.78 multiplied by the taxable generating capacity of each generating unit in this State owned or leased by the taxpayer, subject to the modifications set forth in Section 2o.3 of this rule: Provided, That with respect to each generating unit in this State which has installed a flue gas desulfurization system, the tax imposed by Section 2 of this rule, on and after January 31, 1996, is equal to the product of $20.70 cents multiplied by the taxable generating capacity of the units, subject to the modifications set forth in Section 2o.3 of this rule:
Provided, However That with respect to kilowatt hours sold to or used by a plant location engaged in manufacturing activity in which the contract demand at that plant location exceeds 200,000 kilowatts per hour per year or if the usage at that plant location exceeds 200,000 kilowatts per hour in a year, in no event shall the tax imposed under W. Va. Code '11-13-1 et seq. and this rule with respect to the sale or use of the electricity exceed five hundredths of one cent (.054) times the kilowatt hours sold to or used by a plant engaged in the manufacturing activity; and, 2o.2.1.1. Taxpayers with a flue gas desulfurization system installed as of January 31, 1996 shall file a separate return at the new rate for that one (1) day, together with their return for January at the old rate reflecting only the previous consecutive thirty (30) days. 2o.2.2. For taxpayers who sell electricity to consumers in this State that is not generated or produced in this State by the taxpayer, nineteen hundredths of one cent (.194) times the kilowatt hours of electricity sold to consumers in this State that were not generated or produced in this State by the taxpayer, except that the rate shall be five hundredths of one cent (.054) times the kilowatt hours of electricity not generated or produced in this State by the taxpayer which is sold to a plant location in this State of a customer engaged in manufacturing activity if the contract demand at that plant location exceeds 200,000 kilowatts per hour per year or if the usage at that plant location exceeds 200,000 kilowatts per hour in a year. The measure of tax under this subdivision is equal to the total kilowatt hours of electricity sold to consumers in the State during the taxable year, that were not generated or produced in this State by the taxpayer, to be determined by subtracting from the total kilowatt hours of electricity sold to consumers in the State the net kilowatt hours of electricity generated or produced in the State by the taxpayer during the taxable year. The provisions of this subdivision shall not apply to those kilowatt hours exempt under Section 2n.2 of this rule. Any person taxable under this subdivision is allowed a credit against the amount of tax due under this subdivision for any electric power generation taxes or a tax similar to the tax imposed by Subsection 2o.2.1 of this rule paid by the taxpayer with respect to that electric power to the state in which the power was generated or produced. The amount of credit allowed shall not exceed the tax liability arising under this subdivision with respect to the sale of that power. 2o.2.3. EXAMPLE 1. Taxpayers subject to two or more rates shall segregate their average four-year generation by tax category. A generating unit's total net generation for calendar years 1991 through 1994 is 5 billion kilowatt-hours, of which 2.2 billion kilowatt-hours were subject to the lower rate for large customers (i.e., 200,000 kilowatts per hour per year) and for power generated from gob or other mine refuse. Taxable generating capacity at the lower rate would be 251,141.55 kilowatts (i.e., 2.2 billion kilowatt-hours 8,760 hours.) Taxable generating capacity at the regular rate ($22.78) would be 319,634.70 kilowatts (i.e., 2.8 billion kilowatt hours 8760 hours.) 2o.2.4. EXAMPLE 2. A taxpayer owns three generating units operating in the State during calendar years 1991 through 1994. The generating units produced gross electric power in billions of kilowatt hours ("B KWH") in accordance with the following table:
*SEE TABLE 1
The "official capability" of generating unit A is 2,100,000 KWH, of generating unit B is 1,500,000 KWH and of generating unit C is 1,000,000 KWH. During each year the taxpayer sold 2 billion KWH of electricity to a large industrial user that qualified for the reduced tax treatment (i.e. consumption of greater than 200,000 kilowatts per hour per year) from unit C in accordance with a binding contract.
*SEE TABLE 2
Average four year generation is 11 billion KWH for unit A, 6 billion KWH for unit B and 1,884,615,385 KWH for unit C (calculated by including 1.5 billion KWH not sold to the large industrial user plus 5/26 of the 2 billion (384,615,385) KWH of electricity sold to the large industrial user each year). The taxpayer's annual gross B&O Tax liability (before credits, and without taking into account other factors described in Section 2o.3) for such units is $49,120,514, assuming that (1) units A, B and C are not retired or placed in inactive reserve, (2) the taxpayer continues to own each of the units, and (3) none of the units have a flue desulfurization system installed and without taking into account the second proviso set forth in Section 2o.2.1 of this Rule (which provides that the tax on electricity sold to large industrial users shall not exceed 0.054 times such KWH sold): 2o.3. The following provisions are applicable to taxpayers subject to tax under Section 2o.2.1 of this rule: 2o.3.1. Retired units; inactive reserve. - If a generating unit is retired from service or placed in inactive reserve, a taxpayer is not liable for tax computed with respect to the taxable generating capacity of the unit for the period that the unit is inactive or retired. The taxpayer shall provide written notice to the Joint Committee on Government and Finance and to the Department of Tax and Revenue, as well as to any other entity as may be otherwise provided by law, eighteen (18) months prior to retiring any generating unit from service in this State; 2o.3.1.1. A generating unit shall be considered to be retired from service on the later of (1) the day specified in the 18 month notice described in subdivision 2o.3.1 of this section or (2) the day the unit is removed from commercial service, provided, that on that day the taxpayer intends that the unit will not thereafter be returned to service and the unit is not in fact returned to service for the next succeeding twelve consecutive months; 2o.3.1.2. A generating unit is considered to be placed in inactive reserve on the day occurring soonest with respect to the following events: (1) the day the unit is removed from commercial service as a result of the lack of need for generation from the generating unit or as a result of State or federal law, provided that on the day the taxpayer intends that the unit will not thereafter be returned to service within the following twelve consecutive month period after the removal and the unit is not in fact returned to service for the next succeeding twelve consecutive months, or (2) the day the unit is removed from commercial service as a result of any physical exigency which is beyond the reasonable control of the taxpayer. If a generating unit is placed in inactive reserve, that status shall continue until the day the unit is restored to commercial service; 2o.3.1.3. Units removed from commercial operation for less than twelve (12) consecutive months are neither retired from service nor in an inactive reserve status, and are taxable without proration or allocation pursuant to Section 2o.3.5 of this rule; 2o.3.1.4. Failure to provide notice may result in liability for tax for months in which notice was required. 2o.3.2. New generating units. - If a new generating unit, other than a peaking unit, is placed in initial service on or after June 1, 1995, the generating unit's taxable generating capacity shall equal forty percent (40%) of the official capability of the unit. 2o.3.3. Peaking units. - If a peaking unit is placed in initial service on or after June 1, 1995, the generating unit's taxable generating capacity shall equal five percent (5%) of the official capability of the unit. 2o.3.4. Transfers of interests in generating units. - If a taxpayer acquires an interest in a generating unit, the taxpayer shall include the computation of taxable generating capacity of that unit in the determination of the taxpayer's tax liability as of the date of the acquisition. Conversely, if a taxpayer transfers an interest in a generating unit, the taxpayer is not for periods thereafter liable for tax computed with respect to the taxable generating capacity of that transferred unit. 2o.3.5. Proration, allocation. - (a) Since the Legislature intended to prohibit multiple taxation of the same taxable generating capacity, taxes shall be equitably (1) prorated for the taxable year in which a generating unit is first placed in service, retired or placed in inactive reserve, or in which a taxpayer acquires or transfers an interest in a generating unit; (2) allocated and reallocated among different generating units of a taxpayer with respect to adjustments to net generation; and (3) allocated among multiple taxpayers with interests in a single generating unit.
(b) To provide for an orderly transition with respect to the rate- making effect of this Section, those electric light and power companies which, as of June 1, 1995, are permitted by the West Virginia Public Service Commission to utilize deferred accounting for purposes of recovery from ratepayers of any portion of Business and Occupation Tax expense under W. Va. Code ' 11-13-1 et seq. and this rule shall be permitted, until such time that action pursuant to a rate application or order of the Commission provides for appropriate alternative rate-making treatment for that expense, to recover by means of deferred accounting the tax expense imposed by this Section to the extent that the tax expense imposed by this Section exceeds the level of Business and Occupation Tax allowed in rates as of March 11, 1995. 2o.3.5.1. When calculating the average four year generation for a generating unit first placed in service after January 1, 1991 and prior to June 1, 1994; retired or placed in inactive reserve; or in which a taxpayer acquires or transfers an interest in the generating unit, net generation (including adjustments) for the month in which that event occurs on a day other than the first day of the month shall be computed by dividing net generation during that month by the number of days in that month in which the generation occurred, and multiplying the resulting amount by the total number of days in that month. 2o.3.5.1.1. A generating unit shall be considered first placed in service on the day when all of the following conditions have been satisfied: (1) all necessary permits and licenses to operate the unit have been approved; (2) critical testing of the unit has been completed and it is reasonably anticipated that the unit will perform in the intended manner; and (3) electricity generated by the unit has been synchronized into the power grid. 2o.3.5.2. The amount of tax liability among multiple taxpayers with interests in a single generating unit shall be allocated between them in direct proportion to the percentage interest owned by each taxpayer. 2o.3.5.3. When a taxpayer acquires an interest in a generating unit on any date other than the first day of the month, the acquiring taxpayer is liable for tax only for those days of the month in which it owns the interest. The tax liability for that month is allocated between acquiring and transferring taxpayers by multiplying taxable generating capacity for the entire month by a fraction, the numerator of which is the number of days during the month the taxpayer owned the interest, and the denominator of which is the total number of days in the month. For tax purposes the interest transferred shall be considered to have been owned for the entire day on which the transfer occurred. 2o.3.5.4. Adjustments to net generation available for sale pursuant to W. Va. Code '11-13-2o(a)(10) and Section 2o.1.10 of this Rule shall be entirely allocated to a unit or units designated specifically by contract for the 1991 through 1994 period to supply a customer whose usage or demand resulted in the adjustment. However, to the extent there is no unit designated by contract during that time or to the extent usage exceeds the total generation from the unit or units, the adjustments to net generation available for sale as set forth in W. Va. Code '11-13-2o(a)(10) and Section 2o.1.10 of this Rule shall be allocated among all West Virginia units owned by the taxpayer pro rata based upon official capability. 2o.3.6. Electricity generated by manufacturer or affiliate for use in manufacturing activity. - When electricity used in a manufacturing activity is generated in this State by the person who owned the manufacturing facility in which the electricity is used and the electricity generating unit or units producing the electricity so used are owned by the manufacturer, or by a member of the manufacturer's controlled group, as defined in Section 267 of the Internal Revenue Code of 1986, as amended, the generation of the electricity is not taxable under W. Va. Code '11-13-1 et seq. and this rule. Any electricity generated or produced at the generating unit or units which is sold or used for purposes other than in the manufacturing activity shall be taxed under this Section and the amount of tax payable shall be adjusted to be equal to an amount which is proportional to the electricity sold for purposes other than the manufacturing activity. 2o.4. Beginning June 1, 1995, electric light and power companies that actually paid tax based on the provisions of Section 2d.3.3 or 2m of this rule as then in effect for every taxable month in 1994 shall determine their liability for payment of tax under W. Va. Code '11-13-1 et seq. and in accordance with Subdivision 2o.4.1 and 2o.4.2 of this Section. All other electric light and power companies shall determine their liability for payment of tax exclusively under this Section beginning June 1, 1995 and thereafter. 2o.4.1. If for taxable months beginning on or after June 1, 1995, liability for tax under this Section is equal to or greater than the sum of the power company's liability for payment of tax under Sections 2d.3.3 and 2m of this rule, then the company shall pay the tax due under this Section and not the tax due under Sections 2d and 2m of this rule. If tax liability under this Section is less, then the tax shall be paid under Sections 2d and 2m and the tax due under this Section shall not be paid. 2o.4.2. Notwithstanding Section 2o.4.1, for taxable years beginning on or after January 1, 1998, all electric light and power companies shall determine their liability for payment of Business and Occupation tax exclusively under this Section.
W. Va. Code R. § 110-13-3 Exemptions
3.1. Monthly exemptions from tax. - Each taxpayer shall be granted an exemption in every case of forty-one dollars and sixty-seven cents ($41.67) per month of business and occupation tax. From the total taxes due the monthly exemption of forty-one dollars and sixty-seven cents ($41.67) per month is deducted. Inasmuch as the law grants each person a monthly exemption of forty-one dollars and sixty-seven cents ($41.67) per month, only one exemption per tax period can be claimed even though that person may conduct more than one business.
3.2. Business exempt by specific statutes.
3.2.1. Public service district for water and sewage services. Public service districts for water and sewage services organized in compliance with the provisions of W. Va. Code '16-3-1 et seq., entitled, "Public Service Districts for Water and Sewage Services," are exempt from the payment of the business and occupation tax. This is an exemption provided by specific statute and is only available to those public service districts that have complied with all the requirements as set forth in W. Va. Code '16-3-1 et seq.
3.2.2. Municipal waterworks. - Waterworks in the State of West Virginia which are organized by a municipal corporation in compliance with the provision of W. Va. Code '8-12-1 et seq., entitled, "Waterworks," are exempt from the payment of the business and occupation tax. This is an exemption provided by specific statute and is only available to those municipal waterworks that have complied with all requirements as set forth in W. Va. Code '8-12-1 et seq.
3.2.3. Municipal combined waterworks and sewage systems. - Waterworks and sewage systems in the State of West Virginia which are organized or operated by a municipal corporation in compliance with the provisions of W. Va. Code '8-13-1 et seq., entitled Combined Waterworks and Sewage Systems, are exempt from the payment of the business and occupation tax. This is an exemption provided by specific statute and is only available to those municipal waterworks and sewage systems that have complied with all the requirements as set forth in W. Va. Code '8-13-1 et seq.
3.2.4. Municipal and sanitary district sewage works. - Sewage works in the State of West Virginia which are organized or operated by any municipal corporation or sanitary district in compliance with the provisions of W. Va. Code '16-13-1 et seq., entitled, "Sewage Works of Municipal Corporations and Sanitary Districts", are exempt from the payment of the business and occupation tax. This is an exemption provided by specific statute and is only available to those sewage works of municipal corporations and sanitary districts that have complied with all the requirements as set forth in the aforecited provisions of the Code.
W. Va. Code R. § 110-13-3a Reserved For Future Use
W. Va. Code R. § 110-13-3b Reserved For Future Use
W. Va. Code R. § 110-13-4 Computation of Tax; Payment
4.1. Except for those amounts due under W. Va. Code '11-13-2e, the taxes levied under W. Va. Code '11-13-1 et seq. are due and payable as follows:
4.1.1. For taxpayers whose estimated tax under W. Va. Code ' 11-13-1 et seq. exceeds one thousand dollars ($1,000) per month, the tax is due and payable in monthly installments on or before the last day of the month following the month in which the tax accrued. The taxpayer shall, on or before the last day of each month, make out an estimate of the tax for which he or she is liable for the preceding month, sign the estimate and mail it together with a remittance of the amount of tax, in the form prescribed by the Tax Commissioner, to the Office of the Commissioner: Provided, That the installment payment otherwise due under this Section on or before June 30th each year shall be remitted to the Tax Commissioner on or before the June 15th each year. In estimating the amount of tax due for each month, the taxpayer may deduct one twelfth (1/12th) of any applicable tax credits allowable for the taxable year and one twelfth (1/12th) of the total exemption allowed for the taxable year.
4.1.2. For taxpayers whose estimated tax under W. Va. Code '11-13-1 et seq. does not exceed one thousand dollars ($1,000) per month, the tax is due and payable in quarterly installments within one (1) month from the expiration of each quarter in which the tax accrued. The taxpayer shall, within one (1) month from the expiration of each quarter, make out an estimate of the tax for which he or she is liable for that quarter, sign the estimate and mail it together with a remittance of the amount of tax, in the form prescribed by the Tax Commissioner, to the Office of the Commissioner. In estimating the amount of tax due for each quarter, the taxpayer may deduct one fourth (1/4th) of any applicable tax credits allowable for the taxable year and one fourth (1/4th) of the total exemption allowed for that year.
4.1.3. When the total tax for which any person is liable under W. Va. Code '11-13-1 et seq. does not exceed two hundred dollars ($200) in any year the taxpayer may pay the same quarterly , or, with the consent in writing of the Tax Commissioner, at the end of the month next following the close of the tax year.
4.1.4. However, the Tax Commissioner, if he or she considers it necessary to ensure payment of the tax, may require the return and payment under this Section for periods of shorter duration than those otherwise prescribed in Subdivision 4.1 of this Section.
4.2. Taxpayers owing taxes on amounts due under W. Va. Code '11-13-2e shall, on or before the twentieth (20th) of each month in which the tax is due and payable, make out an estimate of the tax for which the taxpayer is liable during the period for which the amount is due, sign the estimate and mail it together with a remittance of the amount of tax in the form prescribed by the Tax Commissioner to the Office of the Commissioner.
4.2.1. The amount of tax due under W. Va. Code '11-13-2e is due and payable in monthly installments on or before the twentieth (20th) day of the month following the month in which the tax accrued. Estimated tax due under W. Va. Code '11-13-2e shall be calculated based on the actual number of dekatherms of gas injected or withdrawn from a gas storage reservoir during the month in which the tax accrued: Provided, That for taxable years beginning on or after April 6, 1989, tax due under W. Va. Code '11-13-2e shall be calculated based on the actual net number of dekatherms of gas injected or net number of dekatherms of gas withdrawn from a gas storage reservoir during each month: Provided, however, for the monthly tax periods beginning on or after July 1, 1995, the tax due under W. Va. Code '11-13-2e shall not exceed the tax as determined by the storage utilization index for the month the tax accrues. Estimated tax due under W. Va. Code '11-13-2e may not be arrived at by averaging out an estimated or actual yearly total. In estimating the amount of tax due each month, the taxpayer may deduct one twelfth (1/12th) of any applicable tax credits allowable for the taxable year and one twelfth (1/12th) of the total exemption allowed for that year.
4.2.2. For taxpayers whose estimated tax due as calculated under Section 4.2.1 of this rule is less than one thousand dollars ($1,000) in each month of a quarter, the taxpayer may elect to make a quarterly installment payment in lieu of the monthly installment, due and payable on the twentieth (20th) day of the month following the quarter in which the tax accrued. In estimating the amount of tax due for each quarter, the taxpayer may deduct one fourth (1/4th) of any applicable tax credits allowable for the taxable year and one fourth (1/4th) of the total exemption allowed for that year. Should the taxpayer have a monthly estimated tax due of over one thousand dollars ($1,000) prior to deducting the allowable credit and exemption deductions for that month, then all previous monthly installments are retroactively due and payable at the time they would have otherwise been due and payable under Section 4.2.1 of this rule, subject to interest and additions.
4.2.3. For taxpayers whose total tax due under W. Va. Code '11-13-2e does not exceed two hundred dollars ($200) in any year, the taxpayer may pay the same quarterly or monthly as provided in Subdivisions 4.2.1 or 4.2.2, as appropriate, or with the consent in writing of the Tax Commissioner, on the twentieth (20th) day of the month next following the close of the tax year.
4.2.4. Subdivisions 4.2.1, 4.2.2 and 4.2.3 of this Section notwithstanding, the Tax Commissioner, if he or she considers it necessary to insure payment of the tax, may require the return and payment under this Section for periods of shorter duration than those prescribed above in Subdivisions 4.2.1, 4.2.2, and 4.2.3 of this Section.
W. Va. Code R. § 110-13-5 Return and Remittance by Taxpayer
5.1. Annual return.
5.1.1. Every taxpayer shall, on or before the expiration of one (1) month after the end of the tax year, file a business and occupation tax return for the entire taxable year. The return must show the gross proceeds of sales, gross income of business or other measure of tax in dekatherms, kilowatts or kilowatt hours, as appropriate, and the taxpayer must compute the amount of tax chargeable against him or her. The return must be signed by the taxpayer.
5.1.2. For a taxpayer maintaining records and paying taxes on a calendar year basis, the annual return is due on or before January 31 of the following year. The annual return is filed at the close of the taxable year and replaces the fourth (4th) quarterly estimate. The annual return is a recompilation of the three (3) quarterly estimates and the fourth (4th) quarter's business. It provides a medium for making such adjustments on the quarterly estimates as may be necessary.
5.2. Extension of time.
5.2.1. Any taxpayer desiring an extension of time for filing his or her annual business and occupation tax return must make the request in writing to the Tax Division. The request must be postmarked before the due date of the return and must state the reason for the request and the period of extension required. The taxpayer will then be advised in writing as to whether or not the extension is granted. No extension shall be granted for a period of time longer than ninety (90) days from the due date of the annual return.
5.2.1.1. The written request for an extension of time shall be signed by the taxpayer if made by an individual, or by the president, vice president, secretary or treasurer of a corporation if made on behalf of a corporation. If made on behalf of a partnership, joint venture, association, trust, or any other group or combination acting as a unit, any individual delegated by the firm, copartnership, joint adventure, association, trust or any other group or combination acting as a unit shall sign the written request for an extension of time on behalf of the taxpayer.
5.2.2. No extension of time may be granted for filing of monthly or quarterly estimated returns. ''110-13-6 through 110-13-8. Reserved for Future Use.
W. Va. Code R. § 110-13-9 Tax Year and Method of Accounting
9.1. Taxable year. - For purposes of the B&O tax imposed under W. Va. Code ' 11-13-1 et seq., a taxpayer's taxable year shall be the same as the taxpayer's taxable year for federal income tax purposes.
9.2. Method of accounting. - A taxpayer's method of accounting under this article shall be the same as the taxpayer's method of accounting for federal income tax purposes. In the absence of any method of accounting for federal income tax purposes, the tax under this article shall be computed under such method that in the opinion of the Tax Commissioner clearly reflects the income.
9.3. Adjustments. - In computing a taxpayer's liability for tax for any taxable year under a method of accounting different from the method under which the taxpayer's liability for tax under this article for the previous year was computed, there shall be taken into account those adjustments which are determined by the Tax Commissioner to be necessary solely by reason of the change in order to prevent amounts from being duplicated or omitted. ''110-13-10 through 110-13-26. Reserved for Future Use.
W. Va. Code R. § 110-13-27 General Procedure and Administration
Each and every provision of the "West Virginia Tax Procedure and Administration Act" set forth in W. Va. Code '11-10-1 et seq. applies to the tax imposed by W. Va. Code '11-13-1 et seq. with like effect as if the act were applicable only to the tax imposed by W. Va. Code '11-13-1 et seq. and were set forth in extenso in W. Va. Code '11-13-1 et seq.
TABLE 1:
YEAR UNIT A UNIT B UNIT C
1991 11 B KWH 6 B KWH 3.5 B KWH
1992 11 B KWH 6 B KWH 3.5 B KWH
1993 11 B KWH 6 B KWH 3.5 B KWH
1994 11 B KWH 6 B KWH 3.5 B KWH
TOTAL 44 B KWH 24 B KWH 14.0 B KWH
TABLE 2:
Unit A Unit B Unit C Ave 4-yr generation (KWH) 11,000,000,000 6,000,000,000 1,884,615,385 Official Capability (KW) 2,100,000 1,500,000 1,000,000 Max. Ann. Gen. (Off. Cap. X 8,760) (KWH) 18,396,000,000 13,140,000,000 8,760,000,000 Capacity Factor .598 .457 .215 Taxable Generating Capacity (KW) 1,255,800 685,500 215,000 Tax Rate $22.78 $22.78 $22.78 Gross Tax Liability $28,607,124 $15,615,690 $4,897,700 110CSR13
Series 13A Severance Tax
W. Va. Code R. § 110-13A-1 General
1.1. Scope. -- These legislative regulations explain and clarify the West Virginia Severance Taxes set forth at W. Va. Code '11-13A-1 et seq.
1.2. Authority. -- W. Va. Code ''11-13A-23(b) and 11-10-5.
1.3. Filing date. -- April 15, 1992.
1.4. Effective date. -- April 15, 1992.
W. Va. Code R. § 110-13A-2 Definitions
As used in these regulations and unless the context clearly requires a different meaning, the following terms shall have the meanings ascribed herein, and shall apply in the singular or in the plural.
2.1. Coal. -- The term "coal" means and includes any material composed predominantly of a solid, brittle, stratified, combustible carbonaceous rock formed by the decomposition of vegetation, containing varying quantities of the elements of carbon, hydrogen, oxygen and nitrogen. "Coal" shall include but is not limited to peat, lignite, bituminous, anthracite and various intermediary forms of coal.
2.2. Contract Miner. -- The term "contract miner" means a person engaged as an independent contractor in producing natural resource products which are owned by another or others, as tangible personal property, immediately after they are severed, extracted, reduced to possession and produced.
2.3. Delegate. -- The term "delegate" in the phrase "or his delegate" when used in reference to the Tax Commissioner, means any officer or employee of the Tax Department duly authorized by the Tax Commissioner, directly or indirectly, by one or more redelegations of authority, to perform the function mentioned or described in the Severance Tax Act or these regulations.
2.4. Economic Interest. -- The term "economic interest" for purposes of the Severance Tax Act is synonymous with the economic interest required by 26 U.S.C. 611 and in effect on December 31, 1985 which entitle the taxpayer to a depletion deduction for federal income tax purposes: Provided, That a person who only receives an arm's-length royalty shall not be considered as having an economic interest for purposes of the Severance Tax Act.
2.4.1. An economic interest, for federal income tax purposes, is possessed in every case in which a person has acquired by investment any interest in mineral in place or standing timber and secures, by any form of legal relationship, income derived from the extraction of the mineral or severance of the timber, to which he must look for a return of his capital. A person who has no capital investment in the mineral deposit or standing timber does not possess an economic interest merely because through a contractual relation he possesses a mere economic or pecuniary advantage derived from production. For example, an agreement between the owner of an economic interest and another entitling the latter to purchase or process the product upon production or entitling the latter to compensation for extraction or cutting does not convey a depletable economic interest.
2.5. Extraction of Ores or Minerals From the Ground. -- The phrase "extraction of ores or minerals from the ground" includes extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining.
2.5.1. Extraction of ores or minerals from the ground shall not include the removal of natural gas from underground storage facilities into which the natural gas has been mechanically injected following its initial removal from the earth: Provided, That the appropriate severance tax was reported and paid at the time the natural gas was produced, if such production occurred in West Virginia.
2.5.2. Extraction of ores or minerals from the ground shall not include "landfill gas technology" by which gas or gaseous compounds are extracted from sanitary landfill areas, which gas or compound was generated as a by-product of the materials composing the landfill.
2.5.3. Extraction of ores or minerals from the ground shall not include the production of gas or gaseous compounds by any biomass decomposition technologies.
2.5.4. Extraction of ores or minerals from the ground shall include the production of coalbed methane or coalbed gas.
2.6. Fiduciary. -- The term "fiduciary" means and includes, a guardian, trustee, executor, administrator, receiver, conservator or any person acting in any fiduciary capacity for any person.
2.7. Gross Value. -- The term "gross value" in the case of natural resources means the market value of the natural resource product, in the immediate vicinity, where severed, determined after application of post production processing generally applied by the industry to obtain commercially marketable or usable natural resource products. The value of natural resource products produced shall be determined by the gross proceeds of sales in every instance in which a bona fide sale of such products is made at the point where production ends, and whether sold at wholesale or retail. In determining the value of natural resource products delivered to purchasers there may be deducted from the gross proceeds of sales so much thereof as the taxpayer can prove to be actual outgoing freight charges (paid by him) from the point at which shipment originates in this State to the point of delivery. However, no deduction is permitted for expenses incurred by him through the use of his own equipment in transporting items produced. No deduction is permitted for expenses incurred to transport items from the point of severance to the processing plant (or loading facilities), when treatment processes are considered part of the production or mining taxable as such pursuant to W. Va. Code '11-13A-4. Further, no deduction will be allowed for sales commissions, royalties, or other costs, expenses or fees incurred by a producer and ultimately paid to third parties. For a discussion of "gross value" see Section 3 of these regulations.
2.8. Mining. -- The term "mining" includes not merely the extraction of ores or minerals from the ground but also those treatment processes considered as mining under the Severance Tax Act and those treatment processes necessary or incidental thereto.
2.9. Natural Resource. -- The term "natural resource" means all forms of minerals including, but not limited to, rock, stone, limestone, coal, shale, gravel, sand, clay, natural gas, oil and natural gas liquids which are contained in or on the soils or waters of this State, and includes standing timber.
2.10. Partnership or Partner. -- The term "partnership" includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which natural resources are severed, extracted, reduced to possession and produced or prepared in this State for sale, profit or commercial use. The term "partner" includes a member of such a syndicate, group, pool, joint venture or organization.
2.10.1. An unincorporated organization is a "partnership" under the Severance Tax Act even though, for Federal income tax purposes, the members of the unincorporated organization elect under I.R.C. '761 to be excluded from treatment as a partnership.
2.11. Person or Company. -- The terms "person" or "company" are herein used interchangeably and include any individual, firm, partnership, mining partnership, joint venture, association, corporation, trust or any other group or combination acting as a unit, and the plural as well as the singular number, unless the intention to give a more limited meaning is declared by the content.
2.12. Processed or Processing. -- The terms "processed" or "processing" as applied in the Severance Tax Act, does not include in the case of:
2.12.1. limestone quarried or mined, any activity after the stone is severed and reduced to possession on the surface;
2.12.2. natural gas, any conversion or refining process;
2.12.3. oil, any conversion or refining process;
2.12.4. timber, any cuts after the tree is severed, topped and delimbed. See Burruss v. Hardesty, W. Va. 297 S.E.2d 836 (1981).
2.13. Producers. -- For purposes of these regulations, the word "producer" shall mean and include, but not be limited to, every person who engages in the business of severing, extracting, mining, quarrying, reducing to his possession and producing for his sale, profit or commercial use any natural resource products from his own land or from the land of another under a right or license granted by lease or contract, either directly or by contracting with others for the necessary labor or mechanical services. A person who produces natural resource products for use or consumption in his own business, whether located within or without the State, is a producer for the purposes of the severance tax - and taxed accordingly. A producer must have a direct interest in the minerals in place and look solely to mineral sales proceeds for his income from the production.
2.14. Related Parties. -- The term "related parties" means two or more persons, organizations or businesses owned or controlled directly or indirectly by the same interests. Control exists if a contract or lease, either written or oral, is entered into whereby one party mines or processes natural resources owned or held by another party and the owner or lessor participates in the severing, processing or marketing of the natural resources or receives any value other than an arm's length passive royalty interest. In the case of related parties, the Tax Commissioner may apportion or allocate the receipts between or among such persons, organizations or businesses if he determines that such apportionment or allocation is necessary to more clearly reflect gross value.
2.15. Sale. -- The term "sale" includes any transfer of the ownership or title to property, whether for money or in exchange for other property or services, or any combination thereof.
2.16. Severance Tax Act. -- The term "Severance Tax Act" means the tax imposed by W. Va. Code '11-13A-1 et seq.
2.17. Severing or Severed. -- The terms "severing" or "severed" mean the physical removal of the natural resources from the earth or waters of this State by any means: Provided, That "severing" or "severed" shall not include:
2.17.1. the removal of natural gas from underground storage facilities into which the natural gas has been mechanically injected following its initial removal from the earth;
2.17.2. any separation process for natural gas or oil commonly employed to obtain marketable natural resource products after the gas or oil is produced at the well-head;
2.17.3. any processing of limestone or sandstone that occurs after the privilege of producing stone by quarrying or mining ends;
2.17.4. any processing of timber that occurs after the privilege of producing timber ends.
2.18. Stock. -- "Stock" includes shares in an association, joint-stock, company or corporation.
2.19. Tax Commissioner. -- "Tax Commissioner" means the Tax Commissioner of the State of West Virginia, or his delegate.
2.20. Taxable Year. -- "Taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the severance tax liability is computed, and shall be the same as the taxpayer's taxable year federal income tax purposes. "Taxable year" means, in case of a return made for a fractional part of a year under the provisions of W. Va. Code '11-13A-23, or under regulations promulgated by the Tax Commissioner, the period for which such return is made.
2.21. Taxpayer. -- The term "taxpayer" means and includes any individual, partnership, joint venture, association, corporation, receiver, trustee, guardian, executor, administrator, fiduciary or representative of any kind engaged in the business of severing or processing (or both severing and processing) natural resources in this State for sale or use. In instances where contracts (either oral or written) are entered into whereby persons, organizations or businesses are engaged in the business of severing or processing (or both severing and processing) a natural resource but do not obtain title to or do not have an economic interest therein, the party who owns the natural resource immediately after its severance or has an economic interest therein (except a person who only receives an arms-length royalty) is the taxpayer.
2.22. This Code. -- "This Code" means the Code of West Virginia, one thousand nine hundred thirty-one, as amended.
2.23. This State. -- "This State" means the State of West Virginia.
W. Va. Code R. § 110-13A-2a Determination of Gross Value
For all natural resources, "gross value" is to be reported as follows: 2a.1. Gross Value Amount Received. -- For natural resources severed or processed (or both severed and processed), except natural gas, oil, and limestone or sandstone quarried or mined, and sold during a reporting period, gross value is the amount received or receivable by the taxpayer. 2a.1.1. Example. -- A owns land within West Virginia from which he mines coal. A sells his produced natural resources to B Power Company. A must report the value of such natural resources, as determined by the gross proceeds of sale, on the severance tax form. Therefore, A reports the full amount received from B and computes his tax liability thereon. 2a.1.2. Example. -- A owns land within West Virginia and produces coal therefrom. In 1988, A produced 55,000 tons of which 40,000 tons were sold to B Power Company at ten dollars ($10.00) per ton and 12,000 tons were transported without sale to a coal broker (or selling agent) without the State. The broker does not take title to the natural resource product and consequently has no ownership therein. The remaining 3,000 tons were sold, at the mine, to individuals for home consumption at twelve dollars ($12.00) per ton. The coal broker subsequently, and before the close of the taxable year 1988, makes sale of the coal at thirteen dollars ($13.00) per ton. 2a.1.2.1. A, on the 1988 severance tax return, must report the gross proceeds of the sale to B. (40,000 tons @ $10.00 per ton = $400,000) 2a.1.2.2. A must also report the amount of the sale made by the broker on A's severance tax return. (12,000 tons @ $13.00 per ton = $156,000.) Inasmuch as the fee or commission retained by the broker is an expense of doing business to A, A receives no deduction or exclusion from gross income for the amount retained by the broker. 2a.1.2.3. A must also report the amount of the sales at the mine to individuals for household consumption. (3,000 tons @ $12.00 per ton = $36,000.) 2a.2. Sale at Future Date. -- When natural resources are severed for sale at a future date, payment of the tax with respect to the severed natural resource is delayed until the point in time when the taxpayer recognizes gross income under the taxpayer's method of accounting. 2a.3. Transition rule for change in rate. -- Whenever natural resources are severed prior to the date on which the rate at which production under the appropriate classification is subject to tax changes, but the taxpayer does not recognize gross income under the taxpayer's method of accounting until after the effective date of the new rate, the gross income so reported will be taxed at the rate in effect during the period in which the gross income is recognized and reported and not at the rate in effect at the time the natural resources were severed. 2a.4. No Deduction of Expenses. -- In all instances, the gross value shall not be reduced by any state or federal taxes, including federal black lung tax, federal and state reclamation taxes, royalties, sales commissions or any other expense. Amounts paid to an independent contractor as renumeration for the severing, extracting, producing or processing of natural resource products are not to be deducted from the determination of gross value by the producer. 2a.4.1. Example. -- A, landowner, leases his land to B for the purpose of drilling for oil. The lease provides that B will pay A a one-eighth royalty in cash or in kind. The well is successful and produces 80,000 barrels of oil. B is a producer; therefore, he must pay severance tax under the oil production classification on the gross proceeds of sale or value of the entire production. B receives no deduction for any amount in cash or in kind paid to A as a royalty. A is not liable for severance taxes upon the royalty he receives. 2a.4.2. Example. -- A, the owner of land, leases said land to B who desires to mine the coal therefrom. B agrees to pay A a royalty of $.30 on each ton of coal mined by B. In the year 1988, B extracts 50,000 tons of coal and pays A his royalty of $15,000 (50,000 tons @ $.30 per ton = $15,000). B sells the tonnage to a manufacturer for $450,000. 2a.4.2.1. Inasmuch as B is producing natural resource products under a lease which gives him the exclusive right to sever or mine the mineral deposits and which obligates him to pay the owner of the deposits in place a royalty after severance, B is the producer of the natural resources and is not a contract miner. Therefore, B must report the gross proceeds of sale on his severance tax return ($450,000). B may not deduct the amount of royalty paid to A as it is a cost of doing business. A is not liable for severance taxes upon the amount he receives for royalties. 2a.4.2.2. If at a later date B subleases to C and C agrees to pay B a royalty of $.40 per ton, C becomes the producer and reports accordingly and A and B are royalty recipients not liable under the severance tax. 2a.4.2.3. If, at a later date, C contracts with D whereby D will mine the coal and deliver it to C at a stipulated fee per ton, C remains liable under the severance tax as the producer; A and B remain as royalty recipients and D becomes a contract miner. A, B and D would not be subject to severance tax liability. 2a.5. Processing When Not Severed By Taxpayer. -- When natural resource products are purchased from an unrelated party, or are severed outside this State either by the taxpayer, or by another person from whom the taxpayer purchases such products, for the purpose of processing such products in activities which are deemed to be the exercise of a privilege subject to the severance tax pursuant to Section 4 of these regulations, the taxpayer must report the gross value of such processing according to the following rules: 2a.5.1. When the natural resource products are purchased from an unrelated party to be processed for resale, the gross value subject to tax shall be the amount received by the taxpayer from the sale of the processed natural resource product, reduced by the amount paid or payable to the person actually severing the natural resource. 2a.5.2. When the natural resource product is severed by the taxpayer or a related party outside of the State of West Virginia, to be processed in West Virginia for resale, the gross value subject to the tax shall be the amount received by the taxpayer from the sale of the processed natural resource product, reduced by the gross value of the unprocessed natural resource product as determined under Section 2a.6 of these regulations. 2a.5.3. When the taxpayer purchases natural resource products or severs natural resource products outside of the State of West Virginia and imports those products, to be processed in West Virginia for the purpose of sale to related parties or to be used or consumed in the taxpayers business, the values determined under Section 2a.6 of these regulations shall be substituted for the amount received from the sale of the processed natural resource product under Subsections 2a.5.1 and 2a.5.2. 2a.5.4. In no case may the taxpayer owning natural resource products purchased or brought into the State of West Virginia for processing activities subject to the severance tax pursuant to Section 4 of these regulations take a deduction or allowance from gross value for amounts paid to an independent contractor to perform the processing services. 2a.6. Sales to Related Party or Used or Consumed By Taxpayer. -- In a transaction involving related parties, or in the absence of a sale where the taxpayer produces the natural resource for consumption by the taxpayer in the taxpayer's business, gross value shall not be less than the fair market value for natural resources of similar grade and quality, and the gross value shall be further determined by applying regulations 2a.5.1 through 2a.5.3 in the order as follows: 2a.6.1. The value of the natural resource product sold to a related party or consumed by the taxpayer shall be determined by applying the average prices at which sales of like kind, grade and quality are made by the taxpayer during the taxable year to non-related customers of the producer. 2a.6.2. If there are no sales of similar products by the taxpayer to non-related customers of the taxpayer by which gross value may be determined, the gross value shall be determined according to the selling price at the place of use or consumption of similar products of like quality and character by other taxpayers. Under no circumstances, however, may the value ascertained under either of the two above discussed methods be less than the actual gross proceeds of sale or the actual total cost of producing the natural resources, whichever is greater. 2a.6.3. In the absence of sales of similar natural resource products as a guide to value, such value may be determined by a cost basis. In such cases there shall be included every item of cost attributable to the particular natural resource product produced, including direct and indirect overhead costs. There shall be added to this total production cost the average mark-up realized by the taxpayer on all natural resource products produced and sold. 2a.7. Take or Pay Contracts. -- Under certain purchase contracts, "take or pay" clauses require purchasers of natural resource products to pay for certain quantities of the product whether or not they are actually taken by the purchaser at that time. Amounts paid to producers for such products not taken can be offset against future quantities of the product when actually taken by the purchaser. Producers receiving receipts from such "take or pay" contracts shall not be required to report such income under the severance tax until such natural resource products are delivered to the purchaser and the purchaser's account so credited. This treatment will only be afforded to taxpayers who maintain adequate records to accurately reflect the accounting procedures utilized by the taxpayer. 2a.8. Example. -- Company A, a Maryland Corporation, severs 1,000 tons of coal in Maryland and ships the coal to Company B in West Virginia to be cleaned and tippled for Company A. Company A retains ownership of the coal at all times and pays Company B $5.00 per ton to clean and tipple the coal. Company A makes other sales of unprocessed coal at its mine for $20 per ton to unrelated customers. After the coal is cleaned and tippled by Company B, Company A sells the 1,000 tons of coal to an unrelated purchaser for $30 per ton. Company A would report the sale of the 1,000 tons of coal at the difference between the value of the processed coal and the value of the unprocessed coal or, $30.00/ton - $20.00/ton = $10.00/ton for a total of $10,000, as the gross value of the 1,000 tons of coal on Company A's severance tax form. See Subsections 2a.4 and 4.1.1 of these regulations. Company B would not be subject to the severance tax because it does not have an economic interest in the coal being processed. Company A is not permitted any allowance for the $5,000 paid to Company B to process the coal as it is a cost of doing business to the producer, Company A. 2a.9. Example. -- X, a manufacturer of chemicals, owns land within West Virginia which contains coal deposits. X contracts for the production of such coal with B. The contract between X and B provides that B will produce the coal and deliver the same to X and in payment for such service, X will pay B one dollar ($1.00) per ton. In the year 1988, B mines and delivers to X 750,000 tons of coal of which X consumes 700,000 tons in its manufacturing process. Of the remaining tonnage, X sells 40,000 tons to an unrelated wholesaler at $12.00 per ton and sells 10,000 tons to an affiliated company at $3.00 per ton. X pays B $750,000 for the service performed by B in 1988. 2a.9.1. X is the producer of the natural resource product, and B is a contract miner; for X owns the coal in place and is entitled to immediate possession upon extraction thereof by B, whereas B has no economic interest in the mineral and may only sever for X and deliver the product to X for a stipulated fee. Therefore, X must report the gross income from the sale and use of the coal on the severance tax return. 2a.9.2. Since X is a producer of a natural resource product which he uses or consumes in his business, he must determine the value of said production (700,000 tons) under the applicable rule set forth in Subsection 2a.5 of these regulations and report the same as taxable income on the severance tax form. The provision of Subsection 2a.5 of these regulations which applies to the determination of value of natural resource products used or consumed by the producer provides that such regulations shall be applied in the order stated. Therefore under such circumstances, to determine the value of the 700,000 consumed tons of coal, X would apply regulation 2a.5.1. Said regulation makes use of the average prices at which sales are made to customers during the year. The average price in this instance would be based on the sale of the 40,000 tons made to the wholesaler which was at $12.00 per ton. Therefore, for the used or consumed natural resource products, X must report $8,400,000 ($12.00 X 700,000 = $8,400,000) as the value thereof on the severance tax return. 2a.9.3. The 10,000 tons sold to an affiliate must also be reported on the severance tax return. However, the selling price ($3.00/ton) was not indicative of the true value of the products. Therefore, X must apply the applicable regulation set forth in Subsection 2a.5 of these regulations. Since the selling price to the affiliate was not at true value, this sale was not used in determining the value of the products used or consumed by X. In order to determine the proper value of the products sold to a related party, X will apply regulation 2a.5.1. Said regulation provides that whenever sales are made to related parties, the value shall correspond to the gross proceeds from sales to nonrelated purchasers of similar products of like quality and character. In this example, a sale was made to a nonrelated purchaser (the wholesaler) at $12.00 per ton. Therefore, X must place a value of $12.00/per ton on that tonnage sold to the affiliate and report the resultant amount (10,000 tons @ $12.00/ton = $120,000) on the severance tax return. 2a.9.4. The gross proceeds of sale derived from the sale to the wholesaler (40,000 tons @ $12.00/ton = $480,000) will also be included on the severance tax return. 2a.9.5. For purposes of this example, the 1988 severance tax return of X will reflect taxable income of $9,000,000. This taxable amount ($9,000,000) is a total of the value of consumed products ($8,400,000), the value of the products sold to the affiliate ($120,000) and the gross proceeds of the sale to the wholesaler ($480,000). 2a.9.6. B, who performed services for X, is a contract miner and will not report his fee ($750,000) on the severance tax return. 2a.10. Natural Gas. -- For natural gas, gross value is the value of the natural gas at the well head immediately preceding transportation and transmission. To determine the value of the gas prior to transportation and transmission the producer shall apply Subsection 4.8 of these regulations to calculate his transportation allowance. 2a.10.1. Example. -- A is a producer of natural gas within West Virginia. The entire output of natural gas from A's well is purchased at the well head by a public utility for $25,000. On his severance tax return, A will report $25,000 as gross income. 2a.11. Limestone and Sandstone. -- For limestone or sandstone quarried or mined, gross value is the value of such stone immediately upon severance from the earth.
W. Va. Code R. § 110-13A-3 Imposition of Tax
3.1. Imposition of Tax. -- Upon every person exercising the privilege of engaging or continuing within this State in severing, extracting, reducing to possession and producing for sale, profit or commercial use any natural resource product or products, there is hereby imposed a tax in the amount to be determined by the application of rates against the gross value of the articles produced, as shown by the producer, except as otherwise provided, multiplied by the rates in the classifications and according to the effective dates as follows:
3.1.1. On coal, and including the thirty-five one hundredths (.35) of one percent additional severance tax on such coal for the benefit of counties and municipalities, as provided in W. Va. Code '11-13A-6, on July 1, 1987 - three and eighty-five one hundredths (3.85) percent;
July 1, 1988 - three and eighty-eight one hundredths (3.88) percent; and March 1, 1989 - and thereafter - five (5.0) percent.
3.1.2. On limestone or sandstone quarried or mined, on July 1, 1987 - two and two-tenths (2.2) percent;
July 1, 1988 - two and fifty-six one hundredths (2.56) percent;
July 1, 1989 - two and ninety-two one hundredths (2.92) percent;
July 1, 1990 - three and twenty-eight one hundredth (3.28) percent;
July 1, 1991 - three and sixty-four one hundredths (3.64) percent;
July 1, 1992 - four (4.0) percent;
July 1, 1993 - four and fifty one hundredths (4.5) percent; and July 1, 1994 - and thereafter - five (5.0) percent.
3.1.3. On oil, on July 1, 1987 - four and thirty-four one hundredths (4.34) percent;
July 1, 1988 - four and two hundred seventy-two one thousandths (4.272) percent; and March 1, 1989 - and thereafter - five (5.0) percent.
3.1.4. On natural gas, on July 1, 1987 - six and five-tenths (6.5) percent;
July 1, 1988 - six (6.0) percent;
July 1, 1989 - five and five-tenths (5.5) percent; and July 1, 1990 - and thereafter - five (5.0) percent.
3.1.5. On natural gas produced from new wells drilled and placed in service on and after July 1, 1987, on July 1, 1987 - four (4.0) percent; and March 1, 1989 - and thereafter - five (5.0) percent.
3.1.6. On sand, gravel or other mineral product not quarried or mined, on July 1, 1987 - four and thirty-four one hundredths (4.34) percent;
July 1, 1988 - four and two hundred seventy-two one thousandths (4.272) percent;
March 1, 1989 - and thereafter - five (5.0) percent.
3.1.7. On timber, on July 1, 1987 - two and five-tenths (2.5) percent; and March 1, 1989 - and thereafter - three and twenty-two hundredths (3.22) percent.
3.1.8. On other natural resources, on July 1, 1987 - two and eighty-six one hundredths (2.86) percent;
July 1, 1988 - three and eighty-eight one thousandths (3.088) percent;
July 1, 1989 - three and three hundred sixteen one thousandths (3.316) percent;
July 1, 1990 - three and five hundred forty-four one thousandths (3.544) percent;
July 1, 1991 - three and seven hundred seventy-two one thousandths (3.772) percent; and July 1, 1992 - and thereafter - four (4.0) percent;
July 1, 1993 - four and fifty one hundredths (4.5) percent; and July 1, 1994 - and thereafter - five (5.0) percent.
3.2. Tax in Addition to All Other Taxes. -- The severance taxes apply to all persons severing or processing (or both severing and processing) natural resources in this State and are in addition to all other taxes imposed by law.
3.3. Tax Allocation Agreements Preserved. -- Provisions of any contract entered into prior to July 8, 1985 and which related to the allocation, reimbursement, payment or assessment imposed by W. Va. Code '11-13-2a prior to July 1, 1987, shall apply with full force and effect to the severance tax which is imposed on and after July 1, 1987.
3.4. Producing Natural Resource Products for Others. -- Persons performing under contract, either as prime contractors or subcontractors, the necessary labor or mechanical services for others who are engaged in the business of producing natural resources, are performing a service for the producer and therefore are not taxable as a producer of natural resources for purposes of severance taxes.
3.4.1. The producer of the natural resource products that are extracted by the contract miner is taxable under the severance tax.
3.4.2. Contribution to Capital. -- When the contractor who is drilling the well receives a percentage of the working interest in the gross proceeds from the production from that well, such drilling is treated by the contractor as a contribution of capital to the enterprise and is not considered as income to the contractor derived from severing the natural resource. Once production begins, however, all income, received by the contractor for his working interest in such production, will be included in the gross income subject to the severance tax of the producing well or wells reporting as a joint venture, partnership or group or combination acting as a unit.
3.4.3. Persons engaged in the business of drilling for natural resources, including water, who have no ownership or economic interest in such resources, shall also be treated as "contract miners" and not taxed under the severance tax.
3.4.4. Well Servicing. -- Similarly, persons engaged in the business of shooting, refracturing, and otherwise servicing oil and gas wells for a fee and who do not have an economic interest in the oil or gas are also not required to report their total gross income received from the producer under the severance tax.
3.5. Determination of Producer and Contract Miner. -- Generally, a producer is one who has ownership, title to or an economic interest in mineral deposits or standing timber, and a contract miner is one who does not possess an economic interest but performs services for producers by contract. The contractual form will not necessarily control the status of the parties in regard to severance tax liability. The status of the parties will be determined by the substance of their relationship. Accordingly, although an agreement may be referred to as a lease, where the true substance of the agreement does not convey ownership or the economic interest in the mineral, in place, such agreements will be construed as service contracts.
3.5.1. Economic Interest. -- The concept of critical importance in determining who is the producer is which party has a true economic interest in the mineral. In order to have an economic interest, the taxpayer must have a direct interest in the minerals in place. One must also have a direct interest in the income from the production of the minerals and look solely to mineral sales proceeds for his income. A taxpayer does not have an economic interest simply because a contract entitles him to an economic or monetary advantage in connection with production of the minerals. For example, a person who has no ownership, title in, or leasehold interest in the mineral deposit or standing timber does not possess an economic interest merely because through a contractual relationship he possesses an economic advantage derived from production. The pivotal question involves the ownership of the mineral immediately after it is severed. The owner at that point is the producer.
3.5.2. If a dispute should arise as to which party is the producer and which is the contract miner, the Tax Department shall consider, in addition to the substance of the agreements, other factors which shall include, but not be limited to the following attributes which may indicate the presence of ownership or economic interest subjecting such person to the severance tax.
3.5.2.1. An interest in the mineral in place.
3.5.2.2. An investment which is recoverable through depletion not recoverable through depreciation.
3.5.2.3. Contractual agreements which are not terminable without cause on short notice.
3.5.2.4. Entitlement to claim a depletion allowance for federal income tax purposes.
3.5.2.5. Obligation to pay royalties to another.
3.5.2.6. Exclusive right to sever, mine, cut or extract the natural resource product.
3.5.2.7. Income from the sale of mineral proceeds rather than from other sources.
3.5.2.8. Control over the mineral from the time of extraction to sale.
3.5.3. Interests Not Considered Production.
3.5.3.1. Farm-Out. -- A "farm-out" is an arrangement under which the owner of an operating or working interest (normally considered a "producer") assigns his interest to another person as a means of financing the costs of developing and operating the property. Farm-outs may be structured many different ways; the following is an example: The owner of the operating or economic interest in the mineral transfers (usually by assignment of the lease) his entire operating interest and retains a nonoperating interest in the property. The retained nonoperating interest usually takes the form of an overriding royalty which operates much in the same way as an ordinary royalty, usually designated as a right to receive a specified share of gross income or production from the mineral property. The person who receives the working interest and assumes the entire burden of developing and operating the property should report the entire gross proceeds of sale of the natural resource product under the severance tax without any deduction for the overriding royalty or any other royalty payable to others.
3.5.3.1.a. Example. -- A, a lessee, owns the entire operating interest in property W, an undeveloped lease which provides for 1/8 royalty to be paid to lessor R. In a farm-out arrangement, A transfers the entire operating or working interest in property W to D in exchange for D's obligation to drill a well on the property and 1/16 overriding royalty payment upon production. D drills a successful well and receives $16,000 upon sale of the product.
D is required to report the entire $16,000 under the severance tax (less any allowable transportation deductions).
Both R and A are not required to report under the severance tax.
3.5.3.2. Fractional Interest Retained. -- The owner of the operating interest may choose to transfer a fraction of his interest to another party who agrees to bear a disproportionate share of the development costs. In the event production is obtained, the two parties would report the proceeds in accordance with their respective shares of the operating interest.
3.5.3.2.a. Example. -- F, a lessee, owns the entire operating interest in an undeveloped lease. F retains 25% of the operating interest on a farm-out of the property. G, acquires the remaining 75% of the operating interest from F in exchange for G's agreement to drill and equip a well on the property. The well production derives $10,000 gross proceeds. Although F would receive $2,500 of the income and G $7,500 of the income, the tax for severance tax purpose should be reported and paid under a single account as a group or combination acting as a unit as prescribed in Subsection 6.1 of these regulations.
3.5.4. Royalties Derived From Natural Resources. -- Persons who receive payments, as royalties, from producers of natural resource products are not deemed to be producers thereof and are not required to file a severance tax return. The fact that the payment is called by a name other than royalty shall not alter the taxation of such payment if all the recipient thereof has done is to furnish real property which has a situs in this State and which includes minerals in place, or any interest therein, for hire, loan, lease or otherwise.
Lessees, sublessees or other denominated lessees, including persons to whom an operating interest has been assigned or farmed-out, are producers of all the natural resources produced, regardless of any payment, in kind or otherwise, to lessors, sublessors or other denominated lessors of a part of such natural resources as rent or royalties.
For the purposes of taxation, royalties will include, but not be limited to, ordinary royalties, overriding royalties, lease bonus, delay rental, advance royalty, minimum royalty, shut-in royalty, payment for exploration rights, and the reimbursement by the lessee of lessor's property taxes. In no instance may a producer of natural resources deduct such payments from gross value.
3.6. Partially Producing Coal Within and Without this State. -- In those instances in which the same person partially produces coal within West Virginia and partially produces coal without West Virginia, a portion of the gross proceeds of sale are taxable under the severance tax. The portion of the gross proceeds of the sale that are taxable under the severance tax shall be determined in a reasonable manner based upon the facts and circumstances of the particular situation.
3.6.1. Example 1: Company A, a coal producer, severs coal located in Kentucky. After the coal is mined, it is transported to Company A's processing facility in West Virginia. At the facility in West Virginia, the coal is processed and then loaded for shipment to a purchaser. Company A owes severance tax in West Virginia on the gross value added to the coal by the activities conducted within West Virginia. Guidelines on determining the gross value added to the coal by the activities conducted within West Virginia are set forth in Section 2a of these regulations.
3.6.2. Example 2: Company B, a coal processor, purchases coal from a producer in Kentucky. The processor has the coal delivered to its processing facility located in West Virginia. At the processing facility in West Virginia, the coal is processed and loaded for shipment to a purchaser. Company B owes severance tax in West Virginia on the gross value added to the coal by the processing activities performed in West Virginia. Guidelines on determining the gross value added to the coal by the activities conducted within West Virginia are set forth in Section 2a of these regulations.
3.6.3. Example 3: Company C, a coal producer, severs coal located in West Virginia. After the coal is mined, it is transported to Company C's processing facility located in Kentucky for further processing. Company C owes severance tax in West Virginia on the gross value of the coal attributable to its activities conducted within West Virginia. Guidelines on determining the value added to the coal by the activities conducted within West Virginia are set forth in Section 2a of these regulations.
W. Va. Code R. § 110-13A-4 Treatment Processes as Production
4.1. Treatment Processes Constituting Mining. -- The following treatment processes listed in Subsections 4.1.1 through 4.1.4 (and the treatment processes necessary or incidental thereto) when applied by the mine owner or operator to natural resources mined in this State shall be considered as mining and part of the privilege taxed:
4.1.1. Coal. -- In the case of coal, the term "production of coal" shall include all activities and values arising from the severance or extraction of coal and/or the ordinary processing activities including crushing, working, cleaning, drying, sorting, sizing, dust allaying, loading for shipment and freeze treatment. When any of the activities are performed, the value added to the coal shall be considered gross value attributable to the owner of the coal taxable under the severance tax.
4.1.1.1. Example -- Company A, a coal producer, contracts with Company B to have B extract the coal and deliver it to Company C who crushes, cleans and loads the coal for shipment. In this instance, Company A would report the total gross value, without any deductions for payments made to B and C, under the severance tax.
4.1.1.2. Example -- Company A, a coal producer extracts the coal and sells the coal to Company B for $20.00 a ton who crushes, cleans and sells coal to Company C for $30.00 a ton. C, a coal broker, blends the coal with other purchased coal, loads and freeze treats the coal. The coal is ultimately sold for $35.00 a ton. Company A should report $20.00 a ton under the severance tax. Company B is required to report $10.00 a ton under the severance tax and C would be required to report $5.00 a ton for severance tax purposes.
4.1.1.3. Production of coal will also include the severance, extraction and processing of coal fines, gob piles, sludge ponds or other coal wastes or rejects which, when processed are sold as coal, as if such activities constituted the initial production activity.
4.1.2. Minerals Customarily Sold in Crude Form. -- In the case of other minerals which are customarily sold in crude form, sorting, concentrating, sintering and essentially equivalent processes to bring them to shipping grade and form, and loading for shipment shall be part of the privilege taxed.
4.1.3. Minerals Not Customarily Sold in Crude Form. -- In the case of other minerals which are not customarily sold in the form of the crude mineral products, crushing, grinding and beneficiation by concentration (gravity, flotation, amalgamation or electrostatic or magnetic), cyanidation, leaching, crystallization, precipitation (but not including electrolytic deposition, roasting, thermal or electric smelting or refining), or substantially equivalent processes or combinations of processes used in the separation or extraction of the product or products from the ore or the mineral or minerals from other material from the mine or other natural deposit shall be part of the privilege taxed.
4.1.4. Oil Shale. -- In the case of oil shale, extraction from the ground, crushing, loading into the retort and retorting, but not hydrogenation, refining or any other process subsequent to retorting shall be part of the privilege taxed.
4.2. Treatment Processes Not Part of Mining. -- Except as provided in Subsection 4.1 the following treatment processes listed in Subsections 4.2.1 through 4.2.11 shall not be considered as "mining" and, thus, not part of the privilege taxed under [W. Va. Code '11-13A]:
4.2.1. Electrolytic deposition
4.2.2. Roasting
4.2.3. Calcining
4.2.4. Thermal or electric smelting
4.2.5. Refining
4.2.6. Polishing
4.2.7. Fine Pulverization
4.2.8. Blending with other materials
4.2.9. Treatment effecting a chemical change
4.2.10. Thermal action
4.2.11. Molding or shaping
4.3. Treatment Processes Considered Part of Production of Oil, Natural Gas and Natural Gas Liquids. -- The privileges of severing and producing oil and natural gas shall not include any conversion or refining process. Oil and natural gas will be valued at the well-mouth in conformance with Subsection 4.8.
4.4. Timber Production Privilege. -- The measure of tax under this classification is the gross value of the timber at the point where the production privilege ends. This is an amount equal to the fair market value of the timber production at that point where the tree is severed and delimbed. When a sale occurs at that point, taxable value is gross proceeds of sale. In the absence of such a sale, taxable value is that amount which corresponds as nearly as possible to the gross proceeds from the sale of similar products of like quality or character determined under the following uniform and equitable rules.
4.4.1. In the absence of sales at the point where the timber production privilege ends, gross value must be determined in light of the most reliable and accurate information available. Such factors as the following are to be given due consideration.
4.4.1.1. Character and quality of the timber as determined by species, age, size, condition, etc.;
4.4.1.2. The quantity of timber per acre, the total quantity under consideration, and the location of the timber in question with reference to other timber;
4.4.1.3. Accessibility of the timber (location with reference to distance from a common carrier, the topography and other features of the ground upon which the timber stands and over which it must be transported in the process of exploitation), the probable cost of exploitation and the climate and state of industrial development of the locality; and
4.4.1.4. The freight rates charged by common carriers to important markets.
4.4.1.5. The timber in each particular case will be valued on its own merits. The Tax Commissioner will give weight and consideration to any and all facts and evidence having a bearing on the market value such as cost, actual sales and transfers of similar timber products, the margin between cost of production and the price realized for timber products, and royalties and rentals paid to the owner of the standing timber. The taxpayer bears the burden of keeping such records as may be necessary to prove the fair market value of his timber at the point where production ends. In the absence of such substantiation, fair market value shall be determined under Subsection 5.4.2.
4.4.2. At the election of the taxpayer, or in the absence of books and records to substantiate fair market value determined under Subsection 4.4.1, above, the following rule shall be used to determine the gross value of timber at the point where production ends.
4.4.2.1. A person who produces timber and sells his logs, and by-products of timber production and bucking operations, on the ground, either where the trees were felled in the forest or at a central collection point, shall report seventy-five percent (75%) of the gross proceeds of sale under the severance tax.
4.4.2.2. A person who produces timber, and sells and delivers his timber products, in the same condition as when those products leave the forest, to a saw mill, other manufacturer or consumer, shall report fifty percent (50%) of his gross proceeds of sale under the severance tax.
4.4.2.3. A person who produces timber and further saws, mills or otherwise manufactures the same into lumber, cross ties, timbers, veneer and other products for sale, profit of commercial use shall report twenty-five percent (25%) of his gross proceeds of sale under the severance tax. Where no sale is made, the fair market value of lumber, cross ties, timbers, veneer or other products must nevertheless be determined as provided in Section 2a of these regulations and twenty-five percent (25%) of that amount shall be reported under the severance tax.
4.5. Limestone and Sandstone Quarried or Mined Production Privilege. -- The privilege of severing and producing limestone and sandstone by quarrying or mining shall end once the limestone or sandstone is severed from the earth. In the case of limestone or sandstone mined, the measure shall be the value at the point the product is reduced to possession at the portal of an underground mine. In the case of limestone or sandstone quarried, the measure shall be the value at the point the product is severed from the wall of the open quarry .
4.5.1. All activities from the point the product is first reduced to possession up to the point where it is readied and placed into its mode of transportation to the processing plant, or the first (primary) crusher, are not to be included in the value of the privilege taxed. Related cost or expenses are not to be included in the production value.
4.6. Transportation Allowance. -- A person who produces natural resource products or applies treatment processes deemed to be mining pursuant to W. Va. Code '11-13A-4 (processor) and does not make sale of said natural resource products, but uses or consumes the natural resource products in its business, shall report the value of such resources on the severance tax return. In determining the value of the natural resource products, the taxpayer must adhere to the requirements of Section 2a of these regulations and apply such requirements to make appropriate determinations of value at the point where production or processing ends. When the natural resource product is transported to a distant place for use, consumption or further processing, the cost of transporting the natural resource product to the place of use, consumption or further processing shall not be included in the value of product taxed. However, no adjustment to value will be permitted for the cost of transporting such natural resource from the point of severance to the processing facilities of the producer in the case of natural resources, the processing of which, is included in the privilege subject to the tax imposed by W. Va. Code '11-13A-1 et seq.
4.6.1. Where the relationship between the producer of the natural resource products and the purchaser thereof is such that the gross proceeds derived from the sale are not indicative of the true value of the natural resources, the taxpayer shall determine value by application of Section 2a of these regulations.
4.7. Treatment of Freight Charges Incurred by Producers. -- In certain instances, producers and processors of natural resource products are permitted to deduct freight charges from the gross proceeds of sale or value to arrive at taxable value under the severance tax.
4.7.1. In order to determine the value within the State and at the place where production or processing ends, there may be deducted from gross proceeds of sales certain outgoing freight charges actually incurred by the producer or processor, but no deduction will be allowed for expenses incurred by him through the use of his own equipment in transporting items produced except as provided in Sections 4.7.4, 4.7.6 and 4.7.7 of these regulations.
4.7.2. In all instances where products are used or consumed by the producer at a point distant from the place of production, outgoing freight charges paid by the producer or costs incurred by it will not be allowed as a deduction, unless due consideration has been given to such charges or costs in the method by which the production values were determined. Accordingly, when a natural resource product is consumed (except in a further processing or preparing for sale activity treated as production by an integrated producer/processor), transportation costs incurred by the producer to deliver the product to the location where the products are used or consumed shall not be included in the value of the natural resource product taxed.
4.7.3. Generally, in order to be deductible from gross proceeds of sales, freight charges must be incurred by or paid by the producer or processor for the delivery of natural resources to a bona fide purchaser. To illustrate: Coal, at the place where production or processing ends, has a value or in the case of a processor a value added of ten dollars ($10.00) per ton. If a purchaser buys the coal for said price, the producer or processor will report under the coal production classification the gross value or value added, $10.00. However, if the purchaser buys the same coal delivered at eleven dollars ($11.00) per ton, and the producer or processor pays a common carrier to make such delivery, the producer or processor may deduct such freight charges ($1.00) from the gross proceeds of sale.
4.7.4. If the producer or processor of natural resource products sells its products to a purchaser and agrees to deliver such products in its own equipment the producer or processor may deduct from the gross proceeds of sale in arriving at taxable value for severance tax purposes, the transportation costs to the purchaser, if the costs are separately stated on the invoice to the purchaser or if adequate cost records are maintained to document the transportation deduction.
4.7.5. If a producer transports products to another facility for further processing prior to sale by such producer, no deduction is allowed for such transportation costs incurred by the producer.
4.7.6. If a producer sells natural resource products to a processor freight on board at the processor's facility and transportation charges are incurred by the producer or have been absorbed by the producer, such charges are deductible from the gross proceeds of the sale to arrive at the taxable value. If the producer uses its own equipment in transporting the natural resource products to the processor's facility, it may deduct such transportation costs from the gross proceeds of sale in arriving at the taxable value for severance tax purposes, provided a fee is separately charged on the invoice or adequate cost records are maintained to document the transportation deduction.
4.7.7. If a producer sells natural resources products to a processor to be delivered at the producer's facility and transportation charges are incurred by the processor to its own facility, the processor may deduct such transportation charges from its gross proceeds of sale in arriving at the taxable value for severance tax purposes. If the processor purchases natural resource products from a producer and uses its own equipment in transporting the natural resource products to its facility, it may deduct such transportation costs from the gross proceeds of sales in arriving at the taxable value for severance tax purposes, provided adequate cost records are maintained to document the transportation deduction.
4.8. Transportation and Transmission Allowance for Natural Gas Producers. -- The severance and production of natural gas shall be valued at the well-mouth immediately preceding transportation and transmission. In order to arrive at the well-mouth value of such severance and production, transportation or transmission expenses incurred by producers of natural gas before its sale shall be allowed as a deduction from the gross proceeds of the sale of such gas. For these purposes, subject to the discretion expressly reserved to the Tax Commissioner hereunder one of the following alternative methods shall be selected by the taxpayer for obtaining the well-mouth value of the severance and production of natural gas. No transportation and transmission allowance is permitted for natural gas purchased from the producer at the well-mouth.
4.8.1. From the gross proceeds of the sale of the production of natural gas, there shall be allowed a deduction in the amount of the costs of transportation or transmission of such gas through the system of the producer from the well-mouth point of severance and production to the point of sale. The deduction shall be limited to actual costs of transportation or transmission incurred without reference to items unrelated to such transportation or transmission such as general administration, overhead, or return on investment. Such deduction must be supported by schedules and statements of cost by the producer and will be subject to review and audit, and possible assessment or refund as a result of such audit, by the Tax Department.
4.8.2. As an alternative to the method presented in Subsection 4.8.1 supra, producers who are subject to regulation by the Federal Energy Regulatory Commission (FERC) under the Natural Gas Act of 1978 may determine the well-mouth value of their production which is subject to such regulation by utilizing the first sale ceiling price as determined, adjusted and published by the FERC pursuant to Section 2(21) of the said Natural Gas Policy Act. Producers subject to regulation of the FERC shall report as the value of their gas production which is subject to such regulation an amount equal to their Purchased Gas Adjustment (PGA) as filed bi-annually with the FERC plus any reimbursement of personal property taxes and business and occupation taxes or other severance taxes received upon the sale of affected gas if such reimbursements are made by the purchaser and included in the PGA costs. This method shall only apply to production of natural gas defined as new gas by the Natural Gas Act of 1978.
4.8.3. As an alternative to the method presented at Subsections 3.8.1 and 3.8.2 supra, the well-mouth value of such severance and production may be determined by the average purchase price of natural gas from the same pool or field, or, in the event no gas is purchased from the same pool or field, by the average purchase price of natural gas from the most proximate pool or field and of the same quality and characteristics as that severed and produced; Provided, That in either case such purchase price accurately represents the well-mouth value of the gas severed and produced. This determination shall be supported by a statement of the pool or field from which the gas severed and produced is obtained, and shall be subject to review and audit, and possible assessment or refund as a result of audit, by the Tax Department. The Tax Commissioner reserves the right to disallow the application of this method for valuing the production of natural gas at the well-mouth when it can be established that the "average purchase price" does not accurately represent the current well-mouth value of the gas severed and produced when compared to the ultimate selling price under present market conditions.
In order to facilitate the establishment of a reasonable and accurate current market value, producers utilizing this method will be required to predicate their production value on current market prices negotiated by independent arms-length transaction agreed to and entered into during the subject taxable years.
4.8.4. As an alternative to the methods presented at Subsections 4.8.4 through 4.8.3 supra, the well-mouth value of such severance and production of natural gas not sold at the well-mouth may be determined by a deduction of transportation and transmission costs in the amount of 15% of the gross proceeds of the natural gas severed and produced. This deduction shall be supported by a statement of the gross proceeds of sale of the natural gas severed and produced, and a computation of the deduction therefrom, and shall be subject to review and audit, and possible assessment or refund as a result of audit, by the Tax Department. The Tax Commissioner also reserves the right to disallow the application of this method of valuing the production of natural gas at the well-mouth when it can be established that a 15% transportation deduction does not accurately represent the well-mouth value of the gas severed, produced and sold.
W. Va. Code R. § 110-13A-5 Oil and Gas Operating Unit
5.1. Oil and Gas Operating Unit. -- For purposes of the production of oil classification and the production of natural gas classification, as set forth in the severance tax imposed pursuant to W. Va. Code '11-13A-1 et seq., multiple co-owners of oil or natural gas in place, lessees thereof, or others being vested with title and ownership to part or all of the oil and gas, as personal property, immediately after its severance, extraction, reduction to possession and production (except royalty recipients in kind) shall be deemed to be a "group or combination acting as a unit" and one "person" as defined in Section 2 of these regulations, if not otherwise defined herein, whenever engaged in the producing of oil or natural gas through common use (by joint or separately executed contracts) of the same operator's services or independent contract driller's services, where the independent contract driller acts as the operator (herein after included as an operator); and notwithstanding provisions of private contracts for separate deposit of gross receipts in separate members' accounts or for members of such group or combination to take in kind any proportionate part of such natural resources, the "group or combination acting as a unit" shall report the entire gross value on a single severance tax return. The operator shall file the severance tax return for the "group or combination acting as a unit." The operator shall obtain a business registration certificate for each "group or combination acting as a unit" as provided in W. Va. Code '11-12-1 et seq. The application for business registration certificate must include a list identifying those persons comprising the "group or combination acting as a unit" and those persons shall not be required to obtain a separate business registration certificate unless they are engaging in business in West Virginia in any other capacity than as a participant in that "group or combination acting as a unit:" Provided, That nothing in this section shall relieve an operator from having to obtain a separate business registration certificate to engage in any other business in West Virginia.
For purposes of this section the term "operator" (including a contract driller acting in the capacity of an operator) with respect to a jointly owned oil or gas operating unit means the person charged with consent of non-operating parties with the managerial responsibility for the overall operation of the drilling operation which generally includes the provision and advance payment of all necessary development and maintenance costs and expenses, the keeping of all pertinent records, the billing of non-operating parties for their proportionate share of all costs and expenses respective to their ownership and the dispensing of income to the non-operating owners in their proportionate share upon sale if such income is not directly paid to the non-operating owners by the purchaser.
5.2. Lessees Considered Producers. -- Lessees, sublessees or other denominated lessees are considered to be producers of all of the oil or natural gas produced, regardless of any payment, in kind, to lessors, sublessors or other denominated lessors of a part of such natural resources as rents or royalties.
W. Va. Code R. § 110-13A-6 Additional Tax for Benefit of Counties
6.1. Additional Tax on Production of Coal for Benefit of Counties. -- The additional tax on the severance, extraction and production of coal, dedicated for the benefit of counties and municipalities pursuant to W. Va. Code '11-13A-6 has already been included in the listed rates under W. Va. Code '11-13A-3 and Section 3 of these regulations. The Tax Department will perform all necessary calculations to insure that the thirty-five one hundredths of one percent additional tax imposed pursuant to W. Va. Code '11-13A-6 will be segregated from the overall tax liability calculated in W. Va. Code '11-13A-3 and the revenues distributed according to the provisions of W. Va. Code '11-13A-6.
The fund for the additional tax on production of coal for benefit of counties shall be calculated based upon thirty-five one hundredths of one percent of the overall severance tax liabilities of coal producers prior to application of credits to which the taxpayer is entitled. The shortfall in severance tax collections under W. Va. Code '11-13A-3 attributable to available credits shall be made up out of the State's share of actual severance tax collections after application of all available credits. Thus, the total additional tax on production of coal for benefit of counties will be thirty-five one hundredths of one percent of the coal producers gross proceeds of sale subject to severance tax. Seventy-five percent of the total additional tax on production of coal shall be deposited in the "county coal revenue fund" with the remaining twenty-five percent to be deposited in the "all counties and municipalities fund."
When calculating the distribution of the additional tax on the production of coal for benefit of counties, the credits taken by producers shall not be taken into account. The share a county is entitled to from the "county coal revenue fund" under W. Va. Code '11-13A-6(f) shall be determined by: 1) Dividing the total amount in the "county coal revenue fund" then available for distribution by the total number of tons of coal mined in this State during the preceding quarter; and 2) multiplying the quotient thus obtained by the number of tons of coal removed from the ground in such county during the preceding quarter, without regard to whether the mining of the coal in each county resulted in severance tax collections from such mining.
Pursuant to the Court Order Thirteenth Judicial Circuit in Civil Action No. 88-C-660, producers of coal shall report the number of tons of coal mined in each county based on the location of the coal in place prior to removal. For the purpose of determining the distribution of the "county coal revenue fund" to individual counties pursuant to W. Va. Code '11-13A-6(f) coal shall be deemed to be severed from the seam in which it was embedded, in or under such counties after April 1, 1991, without regard to where said coal is brought to the surface or portaled.
6.2. Errors in Distribution of Additional Tax for Benefit of Counties. -- In those instances where an error occurs in the distribution of the additional tax for the benefit of counties, whether the error is the result of erroneous reporting by the coal producer of the county in which the coal is severed or is the result of a miscalculation in the quarterly distribution of the county coal severance funds, the State Tax Commissioner shall have full and complete authority to require full restitution of any overage erroneously distributed to one county and transfer the amount of overage so erroneously distributed to the county which was entitled to those funds.
In ordering the repayment of funds wrongfully distributed the Tax Commissioner shall allow repayment to occur over the same number of quarters as those in which the error in distribution continued, with the repayment to begin in the quarter next following that in which the county receives written notice of overpayment. Repayment may be made by withholding the amount due from current distributions due the county during each of these quarters, where the distributions are sufficient to meet the repayment schedule.
Nothing in this section shall prevent the counties involved from entering a written agreement to accomplish a mutually agreed upon redistribution of funds to correct the error, as an alternative to the Tax Commissioner's repayment plan.
W. Va. Code R. § 110-13A-7 Accounting
7.1. Accounting Periods. -- For purposes of the severance tax imposed by W. Va. Code '11-13A-1 et seq., a taxpayer's taxable year shall be the same as for federal income tax purposes. If a taxpayer's taxable year is changed for federal income tax purposes, it shall be similarly changed for purposes of the severance tax. The taxpayer shall provide a copy of the authorization for such change from the Internal Revenue Service, with the taxpayer's annual return.
7.2. Method of Accounting. -- A taxpayer's method of accounting under the severance tax shall be the same as taxpayer's method of accounting for federal income tax purposes. In the absence of any method of accounting for federal income tax purposes, the accrual method of accounting shall be used unless the Tax Commissioner, in writing, consents to use of another method. If a taxpayer's method of accounting for purposes of the federal income tax are changed, the severance tax shall similarly be changed. The taxpayer shall provide a copy of the authorization for such change from the Internal Revenue Service, with its annual severance tax return for the taxable year.
W. Va. Code R. § 110-13A-8 Annual Return
8.1. Filing Date for Calendar Year Taxpayers. -- Calendar year taxpayers shall file the annual return with the Tax Commissioner on or before the end of the first month after the end of the taxable year.
8.2. Filing Date for Fiscal Year Taxpayers. -- Fiscal year taxpayers shall file the annual return with the Tax Commissioner on or before the end of the first month after the end of the fiscal year.
8.3. Payment of Tax. -- It shall be the duty of every taxpayer required to pay the severance tax due by the date fixed for filing the return (determined without regard to any extension of time for filing such return).
8.4. Tax Due Without Assessment. -- It is the duty of every taxpayer required to pay severance tax due pursuant to file the return and pay the tax due even though no assessment, notice or demand is received by the taxpayer.
8.5. Credit. -- Every taxpayer subject to the severance tax is allowed an annual credit of five hundred dollars against taxes due to be applied at the rate of forty-one dollars and sixty-seven cents per month for each month the taxpayer was engaged in business in this State.
W. Va. Code R. § 110-13A-9 Estimated Taxes
9.1. Tax of More Than $1,000 Per Month. -- For taxpayers whose estimated severance tax liability exceeds one thousand dollars per month, the tax shall be due and payable in monthly installments on or before the last day of the month following the month in which the tax accrued:
9.1.1. Estimated Tax. -- Each such taxpayer shall, on or before the last day of each month, make out an estimate of the tax for which the taxpayer is liable for the preceding month, sign the same and mail it together with a remittance, in the form prescribed by the Tax Commissioner, of the amount of tax due to the office of the Tax Commissioner.
9.1.2. Deductions From Estimated Tax. -- In estimating the tax due for each month, the taxpayer may deduct one twelfth of any applicable tax credits allowable for the taxable year, and one twelfth of any annual exemption allowed for such year.
9.2. Tax of Less Than $1,000 Per Month. -- For taxpayers whose estimated severance tax liability is one thousand dollars per month or less, the tax shall be due and payable in quarterly installments on or before the last day of the month following the quarter in which the tax accrued:
9.2.1. Estimated Tax. -- Each such taxpayer shall, on or before the last day of the fourth, seventh and tenth months of the taxable year, make out an estimate of the tax for which the taxpayer is liable for the preceding quarter, sign the same and mail it together with a remittance, in the form prescribed by the Tax Commissioner, of the amount of tax due to the office of the Tax Commissioner.
9.2.2. Deductions From Estimated Tax. -- In estimating the amount of tax due for each quarter, the taxpayer may deduct one fourth of any applicable tax credits allowable for the taxable year and one fourth of any annual exemption allowed for such year.
9.3. Exception. -- The Tax Commissioner, if he deems it necessary to insure payment of the tax, may require the return and payment under this Section for periods of shorter duration than those prescribed in Subsections 9.1 and 9.2 of these regulations.
W. Va. Code R. § 110-13A-10a Development Investment Credits. 10a.1. Tax Credit. -- There shall be allowed as a credit against the severance taxes imposed for the taxable year, the amount determined under W. Va. Code ''11-13C-1 et seq., 11-13D-1 et seq., and 11-13E-1 et seq. relating to: 10a.1.1. Tax credit for business investment and jobs expansion; 10a.1.2. Tax credit for industrial expansion and revitalization and eligible research and development projects; 10a.1.3. Tax credit for coal loading facilities. 10a.2. Regulations for Implementing Credit. -- The Tax Commissioner shall prescribe all necessary regulations to carry out the purposes of the tax credits outlined in Subsection 10a.1 of these regulations. No taxpayer may take a credit for a certified project under W. Va. Code '11-13C-1 et seq. without first obtaining certification of eligibility from the Tax Commissioner. 10a.3. Credit for Consumers Sales and Service Tax and Use Tax Paid. -- The severance tax shall be subject to the credits set forth in W. Va. Code ''11-15-9b and 11-15A-3b. 10a.4. Credit for Minimum Severance Tax on Coal. -- There shall be allowed as a credit against the severance taxes imposed for the taxable year on coal by W. Va. Code '11-13A-3 but not including the additional severance tax on coal imposed by W. Va. Code '11-13A-6, the amount of annual minimum severance tax on coal imposed by W. Va. Code '11-12B-3(a). The credit allowed by W. Va. Code '11-12B-3(b) shall not exceed the severance tax liability exclusive of the additional tax on coal after application of all credits to which the taxpayer may be entitled except any credit for installment payments of estimated tax or for overpayment of tax
W. Va. Code R. § 110-13A-1 Filing Extensions
11.1. Time Extension for Filing. -- If the taxpayer can show good cause to the satisfaction of the Tax Commissioner, the Tax Commissioner may, upon written request received on or prior to the due date of the annual or any periodic estimate, grant a reasonable extension of time for filing any return or other document. Such extension shall be granted upon such terms as the Tax Commissioner may by regulation prescribe or by contract require.
11.2. Extension for Filing Not Extension for Payment. -- The granting of a time extension under Subsection 11.1 of these regulations shall not alone be deemed to extend the due date for payment of the tax.
W. Va. Code R. § 110-13A-12 Remittance Extensions
12.1. Extension of Time for Payment of Tax Due on Amount Determined on Return. -- The Tax Commissioner may extend the time for payment of the amount of severance tax shown on any return for a reasonable period not to exceed six months from the date fixed for payment thereof.
12.2. Extension of Time for Payment of Tax Due on Amount Determined as Deficiency. -- The Tax Commissioner may extend the time for payment of the amount determined as a deficiency for a period not to exceed eighteen months from the date fixed for payment of the deficiency (or for a further period of twelve months in exceptional cases) where it is shown to the satisfaction of the Tax Commissioner that payment of a deficiency upon the date fixed for payment thereof will result in undue hardship to the taxpayer.
12.3. No Extension for Certain Deficiencies. -- No extension shall be granted under W. Va. Code '11-13A-12 for any deficiency which is due to negligence, to intentional disregard of regulations, or to fraud with intent to evade tax.
W. Va. Code R. § 110-13A-13 Filing
13.1. Place for Filing Returns and Other Documents. -- Tax returns, statements, or other documents, or copies thereof, shall be filed with the Tax Commissioner by delivery, in person or by mail, to his office in Charleston, West Virginia. The Tax Commissioner may, by regulation, designate any place for filing such returns, statements, or other documents, or copies thereof.
W. Va. Code R. § 110-13A-14 Payment
14.1. Time and Place for Paying Tax Shown on Returns. -- Taxpayers required to make the annual return of severance taxes shall, without assessment or notice or demand from the Tax Commissioner, pay such tax at the time and place fixed for filing the return (determined without regard to any extension of time for filing the return). Any extension of time for payment of such severance taxes may be granted upon such terms as the Tax Commissioner may by regulation prescribe or by contract require.
W. Va. Code R. § 110-13A-15 Signature and Verification
15.1. Signing of Returns. -- Any return, statement or other document required to be made under the provisions of W. Va. Code '11-13A-1 et seq. shall be signed in accordance with instructions or regulations prescribed by the Tax Commissioner.
15.1.1. Signing of Corporation Returns. -- The return of a corporation shall be signed by the president, vice president, treasurer, assistant treasurer, chief accounting officer or any other officer duly authorized so to act. In the case of a return made for a corporation by a fiduciary, such fiduciary shall sign the return. The fact that an individuals name is signed on the return shall be prima facie evidence that such individual is authorized to sign the return on behalf of the corporation.
15.1.2. Signing of Partnership Returns. -- The return of a partnership shall be signed by any one of the partners. The fact that a partner's name is signed on the return shall be prima facie evidence that such partner is authorized to sign the return on behalf of the partnership.
15.2. Signature Presumed Authentic. -- The fact that an individual's name is signed to a return, statement, or other document shall be prima facie evidence for all purposes that the return, statement or other document was actually signed by him.
15.3. Verification. -- Except as otherwise provided by the Tax Commissioner, any return, declaration or other document required to be made under Article thirteen-a, Chapter eleven of the Code, shall contain or be verified by a written declaration that it is made under the penalties of perjury.
W. Va. Code R. § 110-13A-16 Bond
16.1. When Bond Required. -- Whenever it is deemed necessary to ensure compliance with W. Va. Code '11-13A-1 et seq. the Tax Commissioner may require any taxpayer to post a cash or corporate surety bond.
16.2. Amount of Bond. -- The amount of the bond shall be fixed by the Tax Commissioner, but shall not be greater than three times the average quarterly liability of taxpayers filing returns for quarterly periods, five times the average monthly liability of taxpayers required to file returns for monthly periods, or two times the average periodic liability of taxpayers permitted or required to file returns for other than monthly or quarterly reports, provided that notwithstanding the foregoing limitation no bond required under this Section shall be less than five hundred dollars.
16.2.1. Increase or Decrease in Amount of Bond. -- The amount of the bond required pursuant to Subsection 16.2 of these regulations may be increased or decreased by the Tax Commissioner at any time subject to the limitations provided in Subsection 16.2 of these regulations.
16.3. Restraining Order Until Bond Posted. -- The Tax Commissioner may bring an action, in the Circuit Court of Kanawha County or in the circuit court of any county having jurisdiction over the taxpayer, for a restraining order, or a temporary or permanent injunction to restrain or enjoin the operation of a taxpayer's business until the bond is posted and any delinquent tax (including applicable interest and additions to tax) has been paid.
W. Va. Code R. § 110-13A-17 Special Rules for Remittance
17.1. Agreement for Processor to Pay Tax. -- In the case of natural resources (except natural gas) where the Tax Commissioner finds that it would facilitate and expedite the collection of the severance taxes, the Tax Commissioner may authorize the taxpayer processing the natural resource to report and pay the tax which would be due from the taxpayer severing the natural resources. The agreement shall be as the Tax Commissioner may prescribe. The agreement must be signed: by the owners, if the taxpayers are natural persons; in the case of a partnership or association, by a partner or member; in the case of a corporation, by an executive officer or some person specifically authorized by the corporation to sign the application. The agreement may be terminated by any party to the agreement upon giving thirty days written notice to the other parties to the agreement: Provided, That the Tax Commissioner may terminate the agreement immediately upon written notice to the other parties when either the taxpayer processing the natural resource or the taxpayer severing the natural resource fails to comply with the terms of the agreement.
17.2. Collection of Tax on Severance of Natural Gas. -- On or before the last day of the month following each taxable calendar month, each person first purchasing natural gas after it has been severed (or in the event it has been severed and processed, after it has been severed and processed) shall be liable for the tax imposed under W. Va. Code '11-13A-1 et seq. The first purchaser of natural gas shall collect the tax imposed from the person severing (or severing and processing) the natural gas and remit the taxes to the Tax Commissioner. The first purchaser of the natural gas shall report purchases of natural gas during the taxable month, showing the quantities of gas purchased, the price paid, the date of purchase, and any other information deemed necessary by the Tax Commissioner on forms prescribed by the Tax Commissioner.
17.2.1. Report by Person Severing Natural Gas. -- On or before the last day of the month following each taxable calendar month, each person severing (or severing and processing) natural gas, shall report the sales of natural gas, showing the name and address of the person to whom sold, the quantity of gas sold, the date of sale, and the sales price on forms prescribed by the Tax Commissioner.
17.2.2. Exception to Method of Collecting Tax Upon Producing Natural Gas. -- Where the Tax Commissioner determines that the collection of severance taxes due would be accomplished in a more efficient and effective manner, the Tax Commissioner may require the severor to remit the taxes. Notwithstanding the provisions of Subsection 17.2 the severor shall continue to remit the severance tax until further notice from the Tax Commissioner.
17.2.3. Where the person severing (or both severing and processing) the natural gas will sell the gas to the ultimate consumer, the Tax Commissioner shall require the severor (or severor and processor) to remit the taxes.
W. Va. Code R. § 110-13A-18 Records Retention
18.1. Records Required. -- Every taxpayer liable for reporting or paying the severance taxes shall keep such records, receipts, invoices, and other pertinent papers in such forms as the Tax Commissioner may require.
18.2. Record Retention. -- Every taxpayer shall keep such records for not less than three years after the annual severance tax return is filed, unless the Tax Commissioner in writing authorizes their earlier destruction. An extension of time for making an assessment or claim for refund shall automatically extend the time period for keeping the records for all years subject to audit covered in the agreement for extension of time.
W. Va. Code R. § 110-13A-19 Procedure and Administration
19.1. Tax Subject to "West Virginia Tax Procedure and Administration Act". -- Each and every provision of the "West Virginia Tax Procedure And Administration Act" set forth in W. Va. Code '11-10-1 et seq. shall apply to the taxes imposed by W. Va. Code '11-13A-1 et seq. with like effect as if said Act were set forth in extenso in said Article 13A.
W. Va. Code R. § 110-13A-20 Crimes and Penalties
20.1. Tax Subject to "West Virginia Tax Crimes and Penalties Act". -- Each and every provision of the "West Virginia Tax Crimes And Penalties Act" set forth in W. Va. Code '11-9-1 et seq. shall apply to the taxes imposed by W. Va. Code '11-13A-1 et seq. with like effect as if said Act were set forth in extenso in said Article 13A.
W. Va. Code R. § 110-13A-21 Severability
21.1. If any provision of these regulations or the application thereof shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgement shall not affect, impair, or invalidate the remainder of these regulations, but shall be confined in its operation to the provisions thereof directly involved in the controversy in which such judgement shall have been rendered, and the applicability of such provision to other persons or circumstances shall not be affected thereby.
W. Va. Code R. § 110-13A-22 Short Taxable Year
22.1. Short Taxable Year. -- If the taxpayer's taxable year under W. Va. Code '11-13A-1 et seq. is on any basis other than the State's fiscal year, then the taxpayer's first taxable year for the severance taxes shall be a short taxable year and shall cover the period beginning the first day of July, one thousand nine hundred eighty-seven, and ending with the taxpayer's then current fiscal or tax year for federal income tax purposes.
W. Va. Code R. § 110-13A-23 Reserved for future use
W. Va. Code R. § 110-13A-24 Priority of Tax in Distributions of Property and Estates
24.1. In the distribution, voluntary or compulsory, in receivership, bankruptcy or otherwise, of the property or estate of any person, all taxes due and unpaid under W. Va. Code '11-13A-1 et seq. shall be paid from the first money available for distribution in priority to all claims and liens except taxes and debts due the United States which under federal law are given priority over the debts and liens created by W. Va. Code '11-13A-1 et seq. Any person charged with the administration or distribution of any such property or estate who shall violate the provisions of this section shall be personally liable for any taxes accrued and unpaid under this article which are chargeable against the person whose property or estate is in administration or distribution.
24.2. There is a priority for all unpaid severance tax in distributions of the property or estate of any person, and the tax must be paid from the first money available for distribution in priority to all other claims and liens, except taxes and debts due the United States.
24.2.1. The distribution of property subject to federal tax liens is subject to the priority of such liens provided in the Internal Revenue Code.
24.2.2. The distribution of property in federal bankruptcy proceedings is subject to the priorities of debts and liens provided in the United States Bankruptcy Code.
24.2.3. This priority applies to the amount of tax, interest, additions to tax, and penalties.
24.3. The priority applies to all distributions of the property or estate of any person. A "distribution" of property or an estate is the sale or transfer of the property, or the disbursement of money resulting from the sale or transfer of the property or estate of any person. Distributions include, but are not limited to, the transfer of property or disbursement of proceeds of sales of property by any executor, administrator, receiver, trustee, fiduciary, special commissioner, or any public officer under judicial process; and distributions in any proceedings such as bulk sale, liquidation sale, estate sale, assignment for the benefit of creditors, interpleader action, and administrative or judicial proceeding for the dissolution of a partnership or corporation.
24.4. The priority does not apply to transactions that do not constitute distributions of property. These transactions include the sale or transfer of property in the ordinary course of the business of the owner of the property; sales or transfers of any property by the owner or for consideration payable to the owner by the purchaser or transferee.
24.5. This priority applies to the distribution of all property, including but not limited to real property or any interest therein; tangible personal property, including fixtures, equipment, machinery, furniture and vehicles; intangible property, including accounts receivable, contract rights, bank accounts, stocks, bonds; and the proceeds from the sale or liquidation of any such property.
24.6. This priority requires payment of the tax from the first money that is available for distribution to lienors, creditors, beneficiaries, or any other person, after payment of costs, commissions, fees and any other expenses incurred in the preservation, storage, liquidation, or transportation of the property or estate.
24.7. The debt or claim for taxes has priority over all claims and liens, except debts due the United States.
24.7.1. Claims subject to this priority include any debt or obligation, liquidated or unliquidated, that does not constitute a lien upon the property or estate.
24.7.2. Liens subject to this priority include any charge or encumbrance on the property or estate for payment of any claims, debt or obligation, such as a deed of trust, judgment lien, security interest, vendors lien, execution lien, tax lien, mechanics lien, landlords lien and municipal lien.
24.7.3. The priority of the severance tax debt in such distributions is not determined by the presence or absence of a perfected notice of tax lien, by the presence or absence of a perfected lien securing any competing claim or debt, or by the order in which any such competing liens were perfected.
110CSR13A
Series 13AA Information to be Utilized for Calculating the Distribution of Oil and Gas Severance Taxes
W. Va. Code R. § 110-13AA-1 General
1.1. Scope. -- The purpose of this rule is to set forth the procedures to be followed by the West Virginia Department of Tax and Revenue for distributing the municipal and county shares of the oil and gas severance taxes under W. Va. Code §11-13A-5a.
1.2. Authority. -- W. Va. Code §11-13A-5a(c).
1.3. Filing Date. -- June 27, 2014.
1.4. Effective Date. -- July 28, 2014.
W. Va. Code R. § 110-13AA-2 Interpretive Note
This procedural rule shall be read in pari materia with the Severance Tax Legislative Rule (110 C.S.R 13A) previously promulgated by the Tax Commissioner. The definitions, policies and procedures provided in 110 C.S.R. 13A are equally applicable to this procedural rule. Should there be any inconsistency between the promulgated legislative rule and this procedural rule, the legislative rule shall control, except to the extent the legislative rule does not reflect an amendment to the Severance Tax laws which is addressed in this or another procedural rule promulgated by the Tax Commissioner as provided in W. Va. Code §29A-3-1 et seq.
W. Va. Code R. § 110-13AA-3 Definitions
Where applicable, the definitions in 110 C.S.R. 13A are incorporated by reference into this rule.
W. Va. Code R. § 110-13AA-4 Activity For Which Information is Needed
4.1. Effective July 1, 1996, W. Va. Code §11-13A-5a requires that 5% of the Severance Tax imposed upon the severance of oil and gas in West Virginia is to be dedicated to the use and benefit of the counties and municipalities in West Virginia. Effective July 1, 1997, the percentage is increased to 10%.
4.2. W. Va. Code §11-13A-5a requires that the funds be deposited by the West Virginia State Tax Division (hereinafter "Tax Division") from time to time into specified accounts created in the State Treasurer's Office. The Tax Division is required to deposit 75% of the dedicated funds in the "Oil and Gas County Revenue Fund," and 25% is to be deposited in the "All Counties and Municipalities Revenue Fund."
4.2.1. For purposes of this rule, “from time to time” means by October 1 st of each year following the end of a taxable year, unless the Tax Commissioner determines that more data is necessary to ensure that the proper distribution is made.
4.3. In order for the funds to be properly distributed, it is necessary to determine the counties where the oil and gas was severed and the amounts of oil and gas severed in each county.
110CSR13AA
4.4. The Tax Division will treat gas and oil as having been severed in the county in which the wellhead is located where the oil and gas were first brought to the surface of the Earth.
W. Va. Code R. § 110-13AA-5 Information Gathering Process
5.1. Information as to the location of wellheads and the amount of oil and gas severed by county is currently being gathered by the West Virginia Department of Environmental Protection (hereinafter "DEP") under 35 C.S.R. 4-15.1 through reports which are submitted by operators of oil and gas wells.
5.2. Because the information reported to the DEP is the information needed by the Tax Division to carry out the requirements imposed by W. Va. Code §11-13A-5a, the Tax Division will use the most recent reasonably complete oil and gas production data provided to the Tax Division by the DEP for this
purpose.
5.3. The Tax Division and the DEP will mutually agree on the technical procedures to be established to facilitate the information sharing activities.
5.4. The Tax Division will utilize the most recent reasonably complete oil and gas production data provided by the DEP to calculate the share of oil and natural gas severance tax receipts to be distributed.
Oil and gas production data used to calculate county and municipal shares of oil and natural gas severance tax revenues for distribution should, ideally, reflect production data, as near as possible, for the same time period as the time period over which the oil and natural gas severance tax became payable to the State.
However, compilation of DEP production data will lag behind the State’s receipt of oil and natural gas severance tax revenues.
5.5 No adjustment payment, supplemental payment, recapture, refund, credit or other modification may be made to an amount distributed subsequent to payment of a distribution to any county or local distributee, based on DEP production data adjustments occurring subsequent to the distribution. In no case may the Tax Division be held responsible or accountable for any issue arising out of DEP production data, statistics or reports.
W. Va. Code R. § 110-13AA-6 Presumptions
6.1. For those tax returns or other reports wherein the operator fails to report separate amounts as gross proceeds for oil and separate amounts as gross proceeds for natural gas that was severed during the reporting period, the Tax Division will attempt to obtain the correct information from those operators. If the Tax Division is unable to obtain the necessary information after a reasonable effort to do so, the Tax Division will apply the presumption that gross proceeds from oil and gross proceeds from gas, respectively, from each well is consistent with the statewide average proportional production of oil and gas from all reporting wells, and that gross receipts from the production of wells for which the operator fails to report separate amounts as gross proceeds for oil and separate amounts as gross proceeds for natural gas is consistent with the statewide average for proportional gross receipts for oil and gas respectively.
6.2. Example:
6.2.a. A Taxpayer files an annual report with the Tax Division stating that the Taxpayer has $1 million gross receipts from the severance of natural gas and the severance of oil. However, the Taxpayer does not state how much of the gross receipts come from each.
6.2.b. The Tax Division contacts the Taxpayer to seek the missing information. The Taxpayer fails to report the information.
110CSR13AA
6.2.c. The Tax Division determines that the statewide average production of oil and gas based on gross receipts, is proportionally 88% gas and 12% oil for the production year.
6.2.d. The Tax Division will presume that the Taxpayer's gross receipts from gas and oil production are consistent with the statewide average, and will apportion the gross receipts of the Taxpayer accordingly. $1,000,000 X 88% = $880,000 gross receipts from severance of natural gas $1,000,000 X 12% = $120,000 gross receipts from severance of oil The Tax Division will apportion the tax derived from the Taxpayer's remittance of severance tax accordingly.
Series 13AB Reduced Severance Tax Rates For Thin Seams Of Coal
W. Va. Code R. § 110-13AB-1 General
1.1. Scope. -- This interpretive rule explains and clarifies the reduction in Severance Tax rates for coal mined in West Virginia by underground methods for seams of forty-five inches or less, for tax years beginning after April 11, 1997.
1.2. Authority. -- W. Va. Code ' 11-10-5.
1.3. Filing Date. -- September 17, 1997.
1.4. Effective Date. -- October 17, 1997.
W. Va. Code R. § 110-13AB-2 Interpretive Note
This interpretive rule shall be read together with the Severance Tax statutes and legislative rules (110 C.S.R. 13A, ' 1 et. seq.) previously promulgated by the Tax Commissioner. The definitions, policies and procedures provided in 110 C.S.R. 13A, ' 1 et seq. are equally applicable to this interpretive rule. Should there be an inconsistency between the promulgated legislative rules and this interpretive rule, the legislative rules shall control, except to the extent the legislative rules do not reflect an amendment to the Severance Tax laws which is addressed in this or another rule promulgated by the Tax Commissioner as provided in Article 3, Chapter 29A of the West Virginia Code.
W. Va. Code R. § 110-13AB-3 Definitions
Unless a specific definition is provided in this section, terms used in this rule are defined as provided in legislative rule 110 C.S.R. 13A, ' 1, et. seq., unless the context in which the term is used clearly requires a different meaning. The following terms shall have the meaning ascribed herein, and shall apply in the singular as well as in the plural.
3.1. "Existing mine" means an underground mine which produced coal on or before April 11, 1997. An existing mine could be a mine which was closed and not producing coal on April 11, 1997.
3.2. "Isopach map" means a map which shows the thickness of a coal seam by means of lines drawn through points of equal thickness of the coal seam. (Contour lines).
3.2.1 Thickness of the coal seam shall be the actual measurement of coal being mined. Thickness of the coal seam shall be measured from the bottom of the lowest coal split actually being mined, to the top of the highest coal split actually being mined. This measurement from the bottom to the top shall not include the thickness of any rock partings actually being mined.
3.3. "New underground mine" means an underground mine which began producing coal for the first time after April 11, 1997.
3.4 "Professional engineer" means a civil or mining engineer who is registered and licensed as a professional engineer by the West Virginia State Board of Registration for Professional Engineers.
3.5 "Underground mine" means an underground excavation for coal which is not a "surface mine" as defined in W. Va. Code '' 11-13C-3 and 22-3-3, and the area of which is the area for which a current mining permit has been issued.
W. Va. Code R. § 110-13AB-4 Reduction of Severance Tax rates
4.1. Coal mined in compliance with W. Va. Code '11-13A-3(f) and this rule shall be allowed a reduced tax rate according to average coal seam thickness as follows: 37 inches to 45 inches (inclusive) - 2% of gross value of coal produced from the seam less than 37 inches - 1% of gross value of coal produced from the seam
4.1.1. The reduced tax rate includes the .35% Severance Tax for Counties and Municipalities.
4.1.2. If a coal processor purchases coal from a qualified thin seam mine, the additional processing activities associated with such coal would be subject to the same reduced tax rate as applicable to the initial severance activity. However, such processors must maintain a log with records of the following information: mine name, operator's name, mine permit number, dates purchased and sold, and qualified tons and receipts subject to alternative tax rates.
4.2. Average coal seam thickness shall be determined by a professional engineer using isopach maps developed in accordance with generally accepted standards and techniques of the geological and/or engineering profession.
4.2.1. Isopach maps must be of a scale of 1" = 100' to 1' = 400'.
4.2.2. Isopach maps must show actual mine works and mining advance during the Severance Tax reporting year. All coal measurement data points must be posted on the map showing the mine works, in their proper location. Isopach maps must contain 36 inch and 45 inch contour lines if applicable and contour lines at three inch intervals, for all areas mined, unless all coal measurements are less than 37", in which case no contours are required.
4.2.3. Coal measurement data points must be located at intervals of 200 feet or less along the direction of mining advance. Coal measurement data points must show the actual section being mined, including any rock such as: roof rock, 2.5 inches/ coal, 10 inches/ bone, 2 inches/ shale, 3.8 inches/ coal, 26 inches/ floor rock, 2 inches.
4.2.4. Maps must be submitted on paper.
4.2.5. Maps must be certified by a professional engineer.
4.2.6. The following formula will be used for calculating average coal seam thickness:
Ave. Coal Seam = Aa + Bb + Cc . . . + Nn Thickness A + B + C . . . + N, when A, B and C are areas between two contiguous isopach lines (planimeter blocks), and a,b, and c are the corresponding arithmetic average thicknesses (in inches) of the coal seam between two such lines (for instance, isopach line 1 = 42", isopach line 2 = 39", average thickness = 40.5") and N and n are subsequent items (if any) in the series.
For example, where the thicknesses of a seam of coal are a = 28.5 in., b = 31.5 in. and c = 39.5 in., and the corresponding areas are A = 100,000 in2., B = 100,000 in2. and C = 50,000 in2., Ave. coal seam thickness=100,000 in.2 x 28.5 in. + 100,000 in.2 x 31.5 in. + 50,000 in.2 x 34.5 in. 100,000 in.2 + 100,000 in.2 + 50,000 in.2 = 2,850,000 in.3 + 3,150,000 in.3 + 1,725,000 in.3 = 7,725,000 in.3 250,000 in.2 250,000 in.2 = 30.9 in., which is taxable at the 1% rate.
Planimeter blocks should be numbered to correlate with the block numbers provided on the supporting tax schedule.
4.2.7. If an area of coal which is mined terminates less than halfway between two contiguous isopach lines, the average thickness shall be calculated by subtracting the difference between the two contiguous lines, dividing that difference by four, and subtracting that value from the value of the isopach line in the direction from which the mining area proceeded. For instance, if mining from isopach line 1 which is 42 in. and mining toward isopach line 2 which is 39 in., line 1 - line 2 = 42 in. - 39 in. 4 = 4 = 0.75 in.
Ave. coal seam thickness = 42 in. - 0.75 in. = 41.25 in.
4.3. Reduced Severance Tax rates for thin seams of coal are allowed only if the eligible taxpayer submits with its annual Severance Tax return a copy of a signed and dated professional engineer's report stamped with the "registered professional engineer" seal. The report shall certify the accuracy of the average coal seam thickness(es) of the mine from which coal is severed during the tax year of the return, and shall include the figures, the calculations and the isopach map(s) upon which such figures and calculations are based.
4.4. Taxpayers eligible for the reduced Severance Tax rates for thin seams of coal are those producing coal from (1) one or more new underground mines, or (2) from one or more existing mine(s) that did not produce coal from a thin seam of coal between October 14, 1996 and April 11, 1997, inclusive, or from both new underground mines and existing underground mines that did not produce coal from a thin seam of coal during that period of time.
4.5. Taxpayers eligible for the reduced Severance Tax rates are allowed those rates for their Severance Tax years which begin after April 11, 1997.
4.6. Taxpayers eligible for the reduced Severance Tax rates for thin seams of coal are also subject to the Minimum Severance Tax on Coal, and are subject to the regular State Severance Tax on coal for any coal mined which is not eligible for the reduced Severance Tax rates, so these taxpayers must separately account for coal receipts at all of the tax rates which are applicable. Failure to adequately document coal receipts at the lower rate for thin seams of coal will result in all gross receipts from coal being taxed at the regular Severance Tax rate.
110CSR13AB
Series 13AC Reduced Severance Tax Rates for Thermal or Steam Coal
W. Va. Code R. § 110-13AC-6 Records
6.1. Any person having a right or claim to the reduced rate on thermal or steam coal must maintain adequate records to show that the coal was ultimately sold to an electric power company for the purpose of generating or producing electricity. On audit, the taxpayer should be able to provide invoices, sales contracts, and bills of receipt documenting the vendor name, purchaser’s name, the invoice date, and invoice amount. For purposes of determining whether certain coal is “thermal or steam coal” within the meaning of W.Va. Code § 11-13A-3, the taxpayer is not required to submit documentation with its severance tax return regarding sulfur content, ash content, or British thermal unit value, etc., for specific coal sales.
6.1.1. Where coal is sold directly to an electric power company for purposes of generating or producing electricity, the taxpayer must retain in its records the bill of sale or invoice showing the tons sold and the sale price of the coal sold for the purpose of generating electricity.
6.1.2. Where coal is sold to an electric power company for purposes of generating or producing electricity by using the services of a broker or another entity and there has been an intermediary sale, the taxpayer must retain in its records: (1) the bill of sale or invoice showing the tons sold to the broker or intermediary, and the sale price of tons sold to the broker or intermediary; and (2) an attestation from the broker or intermediary stating the number of tons sold to an electric power company or, in the case of successive sales, the number of tons sold to another broker or intermediary. The attestation should state the cost of those specific tons paid by the broker or intermediary to the producer or taxpayer for the purchase of those specific tons for which the reduced severance tax rate is claimed; and (3) an attestation from the broker or end user of the taxpayer’s coal that the specific batch of coal for which the reduced severance rate is claimed was sold to an electric power company and consumed in the generation or production of electricity. In the event the broker or intermediary and coal producer are affiliates, the broker must also provide documentation that the end user is in fact consuming the coal for the purposes of generating or producing electricity.
6.1.3. In the case of successive sales, or multiple successive sales, between one broker or intermediary and another broker or intermediary where the ultimate sale to the consumer of the coal is a sale to an electric power company for purposes of generating or producing electricity, each party in the series of sales must provide the verifications and information described in this subsection. Failure to provide such verifications and information will result in denial of the special tax rate.
6.2. In order that the Tax Department may verify that the taxpayer was eligible for the reduced rate for steam or thermal coal upon audit, a taxpayer claiming a reduced rate must retain the appropriate books and records supporting its claim for at least three (3) years, or for so long as the taxable period remains open for assessment or refund, whichever is greater.
6.3. Taxpayer’s failure, upon request of the Tax Department, to produce records showing that coal upon which the reduced severance tax rate imposed by § 11-13A-3 was used to generate or produce electricity, may result in the coal being taxed at the 5% rate.
W. Va. Code R. § 110-13AC-7 Minimum amount available for dedication under W. Va. Code §11-13A-6a
7.1. Pursuant to W. Va. Code §11-13A-6a, 5% of the tax attributable to the severance tax on coal, including thermal and steam coal, is dedicated and distributed for the use and benefit of the coal producing counties, as set forth in that Code section. Effective July 1, 2019, and thereafter, W. Va. Code §11-13A-6a requires that the portion of the severance tax on coal imposed by §11-13A-3 that is dedicated and distributed for the use and benefit of the coal producing counties under §11-13A-6a shall be not less than the amount distributed for the fiscal year beginning July 1, 2018.
7.2. This provision sets forth a minimum pooled dedication amount, which is to be distributed to eligible coal-producing counties based upon the formula set forth under W. Va. Code §11-13A-6a. While the pooled amount to be dedicated and available for distribution in any year will not fall below a minimum amount, the amount any one county may receive will still be determined based upon the formula under W. Va. Code §11-13A-6a.
7.3. After July 1, 2019, the minimum amount available for distribution will be $11,975,088.09. This amount is based upon the amounts actually distributed on July 24, 2018, which was $3,214,709.89, on October 19, 2018, which was $2,908,186.50, on January 17, 2019, which was $3,461,091.33, and on April 22, 2019, which was $2,391,100.37.
7.4. During the fourth and final quarterly distribution made in each fiscal year, the Tax Department will determine whether the minimum amount for distribution and dedication, as set forth in subsection 7.3, should be used or whether 5% of the tax attributable to the severance tax on coal, including thermal and steam coal, dedicated under W. Va. Code §11-13A-6a to the coal producing counties, has exceeded the minimum dedication and distribution amount:
7.4.1. For each of the first three quarterly distributions made in each fiscal year, the amount allocated to each coal producing county will be determined by dividing the total amount of money in the Coal County Reallocated Severance Tax Fund available for distribution in the quarterly period preceding the distribution by the total number of tons of coal mined in this state during the preceding quarter; and then multiplying that quotient by the number of tons of coal produced and reported for that particular county in the preceding quarter.
7.4.2. For the final quarterly distribution made in each fiscal year, the amount available for distribution to the coal producing counties shall be the greater of:
7.4.2.a. The total amount of tax remitted and placed in the Coal County Reallocated Severance Tax Fund in the preceding quarter divided by the total number of tons of coal mined in this state during the preceding quarter; and then multiplied by the number of tons of coal produced and reported for that particular county in the preceding quarter; or
7.4.2.b. The minimum total amount of distribution, which is $11,975,088.09, less the total amount of each of the three distributions for the three previous quarters, divided by the total number of tons of coal mined in this state during the preceding quarter; and then multiplied by the number of tons of coal produced and reported for that particular county in the preceding quarter.
7.4.3. However, in no fiscal year may the proceeds dedicated to the coal producing counties exceed the sum of $20 million pursuant to W. Va. Code §11-13A-6a.
7.5. This section and the minimum amount of dedication to the coal producing counties set forth under W. Va. Code §11-13A-6a do not apply to the dedication or distribution of the additional tax on coal for the benefit of counties and municipalities under W. Va. Code §11-13A-6.
Series 13DD Farm-To-Food Bank Tax Credit
W. Va. Code R. § 110-13DD-1 General
1.1. Scope. -- This legislative rule sets forth the procedures and requirements for the State Tax Department’s administration of the farm-to-food bank tax credit that is established by W. Va. Code §11-13DD-1, et seq.
1.2. Authority. -- W. Va. Code §11-13DD-5.
1.3. Filing Date. -- April 24, 2023.
1.4. Effective Date. -- April 24, 2023.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on August 1, 2028.
1.6. Applicability. -- The farm-to-food bank tax credit is available to qualified donors who make eligible and certified donations after December 31, 2017.
W. Va. Code R. § 110-13DD-2 Definitions
2.1. “Agriculture Commissioner” means the Commissioner of the West Virginia Department of Agriculture.
2.2. “Agriculture Department” means the West Virginia Department of Agriculture.
2.3. “Credit” means the farm-to-food bank tax credit authorized by W. Va. Code §11-13DD-1, et seq.
2.4. “Donation” means eligible agricultural products provided free of charge to a non-profit food program.
2.5. “Farming taxpayer” means a West Virginia taxpayer responsible for, and deriving income of, at least $1,000 from growing fruits, vegetables or other edible agricultural products or from raising beef, poultry, pork, fish or other edible agricultural products.
2.6. “Nonprofit food program” means a surplus food collection and distribution program operated and established to collect donated food for redistribution to persons in need and is recognized as exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code.
2.7. “Qualified donor” means any donor whose donation(s) has been certified by the West Virginia Department of Agriculture, pursuant to §11-13DD-4, and who is otherwise eligible to claim the farm-to-food bank tax credit.
2.8. “Tax Department” means the West Virginia State Tax Department.
2.9. “Tax Commissioner” means the West Virginia State Tax Commissioner.
W. Va. Code R. § 110-13DD-3 Tax Credit Authorized; Effective Date; Administration
3.1. W. Va. Code §11-13DD-1, et seq., authorizes a tax credit for farming taxpayers making donations of edible agricultural products to nonprofit food programs on or after January 1, 2018.
3.2. The farm-to-food bank tax credit can be applied against taxes imposed by W. Va. Code §11-21-1, et seq. and §11-24-1, et seq.
3.3. The farm-to-food bank tax credit cannot be used to offset any tax that is not named in subsection 3.2.
3.4. The taxes imposed by W. Va. Code §11-21-1, et seq. and §11-24-1, et seq. are administered in accordance with the provisions of W. Va. Code §11-10-1, et seq., pursuant to W. Va. Code §11-10-3. Because the Office of Tax Appeals has jurisdiction to hear and determine appeals from decisions or orders of the Tax Commissioner denying refunds or credits for all taxes administered in accordance with the provisions of W. Va. Code §11-10-1, et seq., the Office of Tax Appeals has jurisdiction to hear and determine appeals from decisions or orders of the Tax Commissioner denying credits with respect to the farm-to-food bank tax credit. The West Virginia Office of Tax Appeals lacks jurisdiction to hear appeals arising from actions of the Department of Agriculture.
W. Va. Code R. § 110-13DD-4 Procedure for Certification
4.1. In addition to the definition set forth in W. Va. Code §11-13DD-2(3), “edible agricultural product” shall include the following:
4.1.a. Fruits and vegetables;
4.1.b. Meats, including fish;
4.1.c. Grains; and
4.1.d. Dairy products.
4.2. A farming taxpayer who wishes to make an eligible donation must take the donated product(s) to a qualifying nonprofit food program and present the receipt form promulgated by the Department of Agriculture, pursuant to W. Va. Code §11-13DD-4, for completion.
4.3. After the receipt form has been completed by the nonprofit food program, the farming taxpayer shall submit the receipt form to the Department of Agriculture for certification.
4.4. After the Department of Agriculture has reviewed the receipt form and chosen to either make certification or deny certification, if certification has been granted, the farming taxpayer shall maintain the certified receipt form with his or her records.
4.5. The donation shall be valued in accordance with the provisions of W. Va. Code §11-13DD-4. If the value of the donation cannot be determined in accordance with the provisions of W. Va. Code §11-13DD-4, the taxpayer shall determine fair market value based upon West Virginia market data.
W. Va. Code R. § 110-13DD-5 Application for and Amount of Tax Credit
5.1. At the conclusion of the tax year during which the farming taxpayer has made eligible donations that have been certified by the Department of Agriculture, the farming taxpayer may apply to the Tax Commissioner to receive the farm-to-food bank tax credit.
5.1.a. The amount of the credit shall be based upon the certification provided by the Department of Agriculture, although the limitations set forth in W. Va. Code §11-13DD-3 shall apply.
5.1.b. The farming taxpayer shall make application for the farm-to-food bank tax credit on a form approved by the Tax Commissioner, which shall be filed at the same time as either the Personal Income Tax return or Corporate Net Income Tax return, depending upon which of these two taxes is the tax for which the credit is being requested.
W. Va. Code R. § 110-13DD-6 Limitations on Tax Credit
6.1. Beginning in the year in which the farm-to-food bank tax credit is claimed, the following rules shall apply:
6.1.a. The farming taxpayer shall use the credit to offset its payment of or liability for either Personal Income Tax or Corporate Net Income Tax for the tax year during which the eligible, certified donation was made.
6.1.b. If any credit remains after application during the first year, the remaining credit may be carried over for each of the next four tax years unless it is sooner used.
6.1.c. The credit is not refundable, it may not be carried back to prior tax years and it may not be transferred.
6.1.d. Electing small business corporations, limited liability companies, partnerships and other unincorporated organizations shall allocate the credit allowed by W. Va. Code §11-13DD-1, et seq. among its members in the same manner as profits and losses are allocated in the taxable year.
6.1.e. If a small business corporation, limited liability company, partnership or other unincorporated organization claims the credit, the cap established by W. Va. Code §11-13DD-3 shall apply at the entity level, and each individual taxpayer claiming the credit must claim it in the manner described in subdivision 6.1.d.
6.2. Forfeiture of Credit. The farm-to-food bank tax credit shall be forfeited by the farming taxpayer in the following circumstances:
6.2.a. If the farming taxpayer becomes no longer subject to the taxing authority of the State of West Virginia. This includes, but is not limited to, a change in the tax attributes of the taxpayer, such as, for example, changing from an S corporation to a C corporation.
6.2.b. If the credit is not depleted in the first tax year and carry-over credit is not completely used during the subsequent four tax years.
6.2.c. If the Tax Commissioner receives notification from the Department of Agriculture that the certification was issued in error, including errors stemming from the limitations imposed by W. Va. Code §11-13DD-3. A tax liability may result for any tax year in which the credit has been claimed if this occurs.
6.2.d. If the Tax Commissioner becomes aware that the limitations imposed by W. Va. Code §§11-13DD-3(b) or (d) have been exceeded. A tax liability may result for any tax year in which the credits claimed exceed the limitations specified in W. Va. Code § 11-13DD-3.
W. Va. Code R. § 110-13DD-7 General Procedure and Administration
7.1. Requirements to Claim the Tax Credit. To claim a tax credit, the farming taxpayer shall comply with the provisions of W. Va. Code §11-13DD-1, et seq. and this rule, and shall timely provide complete and accurate forms, returns, schedules and other information required or requested by the Agriculture Commissioner or Tax Commissioner.
7.2. Applicability of Other Laws. Application of this credit and eligibility for this credit shall not affect or abrogate application of the provisions of any portion of chapter eleven, or any other section, of the West Virginia Code.
7.3. Maintenance of Records. A farming taxpayer shall maintain the records required to verify the validity of its eligibility for the tax credit and the accuracy of the amount of tax credit claimed. The receipt form returned to the farming taxpayer by the Department of Agriculture shall be considered persuasive evidence of eligibility for this credit.
7.4. The farming taxpayer who claims the farm-to-food bank tax credit remains subject to audit by the Tax Commissioner or his or her designee.
110CSR13DD
Series 13FF Tax Credit for Providing Vehicles to Low-Income Workers
W. Va. Code R. § 110-13FF-1 General
1.1. Scope. -- This legislative rule establishes the tax credit for donation of a motor vehicle to, or sale of a vehicle through a program administered by, a charitable organization that provides affordable and reliable transportation to low-income workers.
1.2. Authority. -- W. Va. Code §11-10-5 and §11-13FF-5.
1.3. Filing Date. -- April 28, 2026.
1.4. Effective Date. -- April 28, 2026.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2031.
W. Va. Code R. § 110-13FF-2 Definitions
2.1. General Rule. -- Unless a specific definition is provided in subsection 2.2 of this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §11-10-1 et seq., 11-21-1 et seq. and 11-24-1 et seq.
2.2. Terms defined.
2.2.1. “Automobile dealership,” “dealer,” or “motor vehicle dealer” means a purveyor of new or used passenger vehicles licensed under the provisions of W. Va. Code §17A-6-1, et seq.
2.2.2. “Below-market loan” means a loan issued by a cooperating financial institution to a low-income worker for the purchase of a vehicle, which rate shall be substantially the same as that offered to prime borrowers, lower than the current prevailing state average rate for similar transactions, taking into consideration the credit worthiness of the borrower and the suitability of the vehicle, as determined by a qualified charitable organization, and may not include any origination fee, points, investigation fees, or other similar finance charges requiring prepayment by the purchaser.
2.2.3. “Commissioner” means the Tax Commissioner of the State of West Virginia.
2.2.4. “Consideration” means cash, goods or services given in exchange for tangible personal property.
2.2.5. “Cooperating financial institution” means a bank, West Virginia state chartered bank, West Virginia national bank, bank holding company, federal savings bank, federal savings and loan association, West Virginia state credit union, West Virginia federal credit union, Community Development Financial Institution funded through the Riegle Community Development and Regulatory Improvement Act of 1994, or any supervised lending institution operating under a certificate of authority issued by the West Virginia Board of Banking and Financial Institutions that enters into an agreement with a qualified charitable organization to provide below-market loans to low-income workers to enable them to purchase affordable vehicles suitable for commuting to their employment, but shall not include the financing department of an automobile dealership or manufacturer.
2.2.6. “Division” means the Tax Division of the West Virginia Department of Revenue.
2.2.7. “Federal poverty level” means the amount in the U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal Programs, issued each year in the Federal Register by the Department of Health and Human Services (HHS).
2.2.8. “Low-income worker” means a person engaging in any gainful income generating activity whose aggregate household income is 200 percent of the federal poverty level or less. For purposes of this rule, “low-income worker” may also include part-time workers, seasonal employees, contract workers, persons who are self-employed, or an unemployed person who has been offered and has accepted employment contingent on that person’s obtaining suitable transportation to the place of employment.
2.2.9. “Program” means a systematic procedure administered by a qualified charitable organization for assisting low-income workers in obtaining suitable vehicles for use as transportation to a place of employment, either by providing them with a donated vehicle, or by assisting them in purchasing a vehicle in accordance with the provisions of this rule.
2.2.10. “Program participant” means a low-income worker who has applied for, and been approved to receive, assistance from a qualified charitable organization to obtain a vehicle suitable for use as transportation to a place of employment.
2.2.11. “Program value” of a donated vehicle shall be the fair market value of that vehicle as determined by the qualified charitable organization, based on the retail values shown in a nationally accepted used car guide, and the suitability of the vehicle for the program, taking into consideration the condition of the vehicle, and allowing for the cost of any needed repairs to the vehicle.
2.2.12. “Qualified charitable organization” means an organization which meets all of the following criteria:
2.2.12.a. The organization is recognized by the Internal Revenue Service as exempt from federal income taxation under Title 26, Section 501(c)(3) of the United States Code, as amended;
2.2.12.b. The organization is registered as a soliciting charity with the West Virginia Secretary of State under the West Virginia Solicitation of Charitable Funds Act;
2.2.12.c. The organization operates a program that provides the following services:
2.2.12.c.1. Provides low-income workers with donated vehicles for commuting purposes for no consideration or at a cost affordable to the worker.
2.2.12.c.2. Assists low-income workers in obtaining affordable below-market financing from cooperating financial institutions to purchase vehicles for commuting to their place of employment.
2.2.12.c.3. Provides financial training, counselling and assistance to low-income workers to assist them in obtaining a suitable vehicle for commuting to their employment at no cost, or at a cost that is affordable to the worker.
2.2.13. “Vehicle” or “passenger motor vehicle” means any automobile, truck, van or other motor vehicle that is suitable for use as a means of transporting a worker to his or her place of employment, as determined by a qualified charitable organization under this rule.
W. Va. Code R. § 110-13FF-3 Amount of Credit; limitation on aggregate credit amount
3.1. Credit allowed -- There is a credit allowed against the tax imposed by §11-21-1, et seq., or §11-24-1, et seq., of the West Virginia Code for:
3.1.1. A taxpayer who donates a vehicle to a qualified charitable organization to provide reliable affordable transportation for a low-income worker to commute to his or her employment; or
3.1.2. A dealer in new or used motor vehicles who sells a vehicle at a reduced price to a low-income worker through a program administered by a qualified charitable organization.
3.2. Amount of credit allowed -- The credit allowed under this rule shall be the lesser of $2,000; or
3.2.1. In the case of a vehicle donated by an individual, 50 percent of the program value of the vehicle;
3.2.2. In the case of a vehicle sold by a dealer, 50 percent of the difference between the program value of the vehicle and the reduced sales price.
3.3. The credit allowed under this rule must be applied against the taxpayer’s tax liability for the year in which:
3.3.1. In the case of a donation to a qualified charitable organization, the year the vehicle is donated to the organization;
3.3.2. In the case of a sale by a dealer, the year title to the vehicle is transferred to the new owner.
3.4. If any credit remains after the application of the credit against the taxpayer’s tax liability for any taxable year, that amount shall be forfeited. No carry-over to a future tax year, or carry-back to a prior tax year, is allowed for any unused portion of the credit.
3.5. The credit allowed under this rule is not refundable.
3.6. The credit allowed under this rule may not be transferred.
W. Va. Code R. § 110-13FF-4 Consumers Sales Tax
The consumers sales tax on the donation or sale of a motor vehicle under this rule shall be applied in accordance with the provisions of 91 C.S.R. 9, Collection of Sales Tax on the Sale of a Vehicle.
W. Va. Code R. § 110-13FF-5 Licensing of Motor Vehicle Dealers
5.1. A qualified charitable organization which accepts donations of vehicles for distribution to low-income workers is required to be licensed as a motor vehicle dealer under the provisions of W. Va. Code §17A-6-1, et seq.
5.2. A dealer in new or used motor vehicles claiming a credit under this rule must be licensed in accordance with the provisions of W. Va. Code §17A-6-1, et seq.
W. Va. Code R. § 110-13FF-6 Aggregate Amount of Credits Allowed
6.1. The amount of tax credits which may be issued by the State Tax Division under this rule shall not exceed $300,000 in the aggregate for any fiscal year.
6.2. Credits shall be allocated in the order in which the donation forms are received by the State Tax Division. In the event that multiple applications for the credit are received on the same date, available funds will be allocated first to donations by individuals.
W. Va. Code R. § 110-13FF-7 Claiming the Credit
7.1. Any taxpayer or dealer in new or used vehicles claiming a credit under this rule shall file the following form with the return for the tax against which the credit is being claimed.
7.2. The form shall be completed and the information contained therein verified by the qualified charitable organization at the time the vehicle is donated or sold.
7.3. The following form shall be used: [name of qualified charitable organization] hereby certifies that the taxpayer named herein is eligible for the credit allowed under W. Va. Code §11-13FF-1, et seq., in an amount not to exceed $___________________ for the sale or donation of the vehicle identified below.
Address of qualified charitable organization: _____________________________________________________ Taxpayer Identification Number of qualified charitable organization: _________________________ Vehicle make, model, and year:
Vehicle Identification Number (VIN):
Name of Taxpayer or Seller:
Physical address of Taxpayer or Seller:
Taxpayer identification number:
Program value of vehicle: $_____________________________________________________ Maximum amount of credit authorized: $_____________________________________________________ Donor’s Certification:
By signing below, I certify that I have donated the above-referenced vehicle to the qualified charitable organization identified herein for no consideration.
Seller’s Certification By signing below, the seller of the above vehicle certifies that, having made a diligent search, it finds that the vehicle:
Has passed a West Virginia safety inspection;
Has not been reported as stolen and not recovered;
Has informed the program participant whether the vehicle is subject to any unperformed safety recalls;
Has not been reported as a total loss as the result of an accident;
Has not been flood-damaged;
Has not been junked or salvaged; and that the vehicle is suitable to provide safe and reliable transport for commuting to employment.
Certification of Qualified Charitable Organization:
By signing below, the authorized representative of the qualified charitable organization named above certifies that the organization has given no consideration in exchange for the donated vehicle, or, in the case of a sold vehicle, that the organization has not received any consideration from the seller of the vehicle. The date of donation is ________________.
Signature of donor or seller: _________________________________________________________ Date of signature: _________________________________________________________ Authorized signature of certifying Qualified Charitable Organization: _________________________________________________________ Date of signature: _________________________________________________________
7.4. Dealer Warranty. -- The fair market value of the vehicle and not the sales price shall be used to determine the applicability of §46A-6-107a(a)(3)(A) to any vehicle the sale of which qualifies for a tax credit as provided by this rule.
W. Va. Code R. § 110-13FF-8 Participation in Program
8.1. To participate in a program operated by a qualified charitable organization, a person must submit an application containing the following information:
8.1.1. The applicant’s name;
8.1.2. The applicant’s physical home address;
8.1.3. Verification of applicant’s employment;
8.1.4. Verification that the applicant’s aggregate household income is 200 percent of the federal poverty level or less;
8.1.5. Confirmation that the applicant holds a valid West Virginia driver’s license;
8.1.6. Certification of the applicant’s need for a vehicle for transportation to a place of employment.
8.2. Any of the following items may be used as verification of the applicant’s employment:
8.2.1. A current paystub from the applicant’s employer;
8.2.2. The applicant’s most recent W-2 form, showing the name of the applicant’s employer;
8.2.3. The applicant’s most recent IRS form 1099, showing the name of the payor;
8.2.4. A letter from the applicant’s employer, indicating that the applicant is currently employed;
8.2.5. A copy of the applicant’s federal and state income tax returns, showing that the applicant is self-employed.
8.3. A newly employed person, or a person whose employment is contingent on obtaining suitable transportation, may qualify for participation in a program by providing a letter from that person’s prospective employer, verifying that the applicant has been offered, and has accepted, employment, stating the date that person’s employment will begin.
8.4. To verify the aggregate household income of the applicant, the qualified charitable organization may require the applicant to provide copies of the most recent West Virginia personal income tax returns of the applicant and all members of the applicant’s household.
W. Va. Code R. § 110-13FF-9 Suitability of Vehicles
9.1. The suitability of a vehicle for use in the program shall be determined by the qualified charitable organization, based on the following criteria:
9.1.1. The vehicle must be in good, safe, reliable working condition, as determined by the qualified charitable organization or can be repaired to be so by the qualified charitable organization or its agents;
9.1.2. The vehicle must be determined by the qualified charitable organization to be affordable to the program participant.
W. Va. Code R. § 110-13FF-10 Duties of the Qualified Charitable Organization
10.1. The qualified charitable organization operating a program for distribution of vehicles under this rule shall assist program participants by:
10.1.1. Providing, for no consideration, or at a price below the fair market value and affordable to the program participant, a suitable vehicle from the qualified charitable organization’s stock or inventory of donated vehicles; or
10.1.2. If the participant chooses to purchase a vehicle deemed suitable by the qualified charitable organization through a dealer, the qualified charitable organization shall:
10.1.2.a. Guide the program participant in locating a suitable vehicle for purchase within the statewide new or used car market;
10.1.2.b. Negotiate with and on behalf of the program participant as necessary to obtain a suitable vehicle at a price determined to be affordable to the program participant by the qualified charitable organization;
10.1.2.c. Negotiate with and on behalf of the program participant as necessary to obtain below-market financing from a cooperating financial institution for the purchase of a vehicle determined to be suitable for the program participant by the qualified charitable organization.
10.2. Qualified charitable organizations shall enter into agreements with cooperating financial institutions to provide below-market financing for the purchase of suitable vehicles for program participants.
10.3. A qualified charitable organization, or any of its officers, employees, or volunteers shall neither solicit nor accept any payment, direct or indirect, from a cooperating financial institution or a new or used car dealer for acting as an intermediary in assisting a program participant in obtaining a suitable vehicle, or financing for the purchase thereof.
W. Va. Code R. § 110-13FF-11 Penalties
11.1. Any qualified charitable organization, cooperating financial institution, or new or used car dealer who violates the provisions of this rule shall be barred from all future participation in any program authorized under the provisions of W. Va. Code §11-13FF-1, et seq., or this rule.
11.2. Any attempt to defraud the State of West Virginia by claiming a credit to which the taxpayer is not entitled under W. Va. Code §11-13FF-1, et seq., or this rule, by knowingly falsifying any information or certification required by this rule, may, at the Commissioner’s discretion, be referred to the prosecuting attorney of any county of this State for investigation and possible criminal prosecution.
110CSR13FF
Series 13GG Downstream Natural Gas Manufacturing Investment Tax Credit
W. Va. Code R. § 110-13GG-1 General
1.1. Scope. -- This legislative rule establishes the procedures for applying for and claiming the Downstream Natural Gas Manufacturing Investment Tax Credit of 2020, and sets forth the methodology the State Tax Commissioner will use to administer the Downstream Natural Gas Manufacturing Tax Credit of 2020.
1.2. Authority. -- W. Va. Code §11-10-5 and W. Va. CODE §§11-13GG-5, 9, 16.
1.3. Filing Date. -- April 28, 2026.
1.4. Effective Date. -- April 28, 2026.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2031.
W. Va. Code R. § 110-13GG-2 Definitions
2.1. General Rule. -- Unless a specific definition is provided in section 2.2 of this section heading, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §11-13GG-1, et seq., §11-10-1, et seq., §11-21-1, et seq., and §11-24-1, et seq.
2.2. Terms defined.
2.2.1. “Affiliated group” means any affiliated group within the meaning section 1504(a) of the Internal Revenue Code, or any similar group defined under a similar provision of state, local, or foreign law, except that section 1504 of Internal Revenue Code shall be applied by substituting “more than 50 percent” for “at least 80 percent” each place it appears in that section.
2.2.2. “Business” means a downstream natural gas manufacturing business activity which is engaged in by any person in this state which is taxable under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq.
2.2.3. “Business expansion” means capital investment in a new or expanded downstream natural gas manufacturing facility in this state.
2.2.4. “Commissioner” or “Tax Commissioner” are used interchangeably in this rule and mean the Tax Commissioner of the State of West Virginia, or his or her designee.
2.2.5. “Compensation” means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services.
2.2.6. “Controlled group of corporations” means a controlled group of corporations as defined in section 1563(a) of the Internal Revenue Code.
2.2.7. “Corporation” means any corporation, joint-stock company, association, or other entity treated as a corporation for federal income tax purposes, and any business conducted by a trustee or trustees wherein interest or ownership is evidenced by a certificate of interest or ownership or similar written instrument.
2.2.8. “Designee” in the phrase “or his or her designee,” when used in reference to the Tax Commissioner, means any officer or employee of the State Tax Division duly authorized by the Commissioner directly, or indirectly by one or more redelegations of authority, to perform the functions mentioned or described in this rule.
2.2.9. “Downstream natural gas manufacturing” refers to oil and gas manufacturing operations after the production and processing phases and includes, but is not limited to, facilities that use oil, natural gas, natural gas liquids, or the products produced by ethane crackers, or other post-production processing of oil or natural gas, as raw materials to manufacture industrial and commercial products.
2.2.10. “Downstream natural gas manufacturing business” means a business primarily engaged in this state in downstream natural gas manufacturing.
2.2.11. “Downstream natural gas manufacturing facility” or “downstream manufacturing facility” means any factory, mill, plant, warehouse, building, or complex of buildings located within this state, including the land on which it is located, and all machinery, equipment, and other real and personal property located at or within the facility, used in connection with the operation of the facility, in a business that is taxable in this state, and all site preparation and start-up costs of the taxpayer for the downstream natural gas manufacturing facility that it capitalizes for federal income tax purposes.
2.2.12. “Eligible taxpayer” means any person who makes qualified investment in a new or expanded downstream natural gas manufacturing facility located in this state and creates at least the required number of new jobs and who is subject to any of the taxes imposed by W. Va. Code §11-21-1, et seq., or §11-24-1, et seq.
2.2.13. “Expanded facility” means any downstream natural gas manufacturing facility, other than a new or replacement business facility, resulting from the acquisition, construction, reconstruction, installation, or erection of improvements or additions to existing property if the improvements or additions are purchased on or after July 1, 2020, but only to the extent of the taxpayer’s qualified investment in the improvements or additions.
2.2.14. “Includes” and “including” when used in a definition contained in this rule, shall not be considered to exclude other things otherwise within the meaning of the term defined.
2.2.15. “Leased property” does not include property that the taxpayer is required to show on its books and records as an asset under generally accepted principles of financial accounting. If the taxpayer is prohibited from expensing the lease payments for federal income tax purposes, the property shall be treated as purchased property under this section.
2.2.16. “Natural gas” means a gaseous fossil energy source that formed deep beneath the earth’s surface that is a combustible mixture of methane and other hydrocarbons.
2.2.17. “Natural gas liquids” includes the following separated from raw natural gas: butane, ethane, isobutane, pentane, propane, and similar liquid hydrocarbons and byproducts separated from natural gas.
2.2.18. “Natural resources” means all forms of minerals, including, but not limited to, rock, stone limestone, coal, shale, gravel, sand, clay, natural gas, oil, and natural gas liquids that are contained in or on the soils or waters of this state and includes standing timber.
2.2.19. “New downstream natural gas manufacturing facility” means a business facility which satisfies all the requirements of subdivisions a, b, c, and d of this subsection.
2.2.19.a. The facility is employed by the taxpayer in the conduct of a downstream natural gas manufacturing activity, the net income of which is or would be taxable under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq. The facility is not considered a new downstream natural gas manufacturing facility in the hands of the taxpayer if the taxpayer’s only activity with respect to the facility is to lease it to another person or persons.
2.2.19.b. The facility is purchased by, or leased to, the taxpayer on or after July 1, 2020.
2.2.19.c. The facility was not purchased or leased by the taxpayer from a related person. The Commissioner may waive this requirement if the facility was acquired from a related party for its fair market value and the acquisition was not tax motivated.
2.2.19.d. The facility was not in service or use during the 90 days immediately prior to transfer of the title to the facility, or prior to the commencement of the term of the lease of the facility: Provided, That this 90-day period may be waived by the Commissioner if the Commissioner determines that persons employed at the facility may be treated as “new employees” as that term is defined in this section.
2.2.20. “New employee” --
2.2.20.a. The term “new employee” means an individual hired by the taxpayer to fill a position or a job in this state that previously did not exist in the taxpayer’s downstream natural gas manufacturing activity in this state prior to the date on which the taxpayer’s qualified investment in a new or expanded downstream natural gas manufacturing facility is placed in service or use in this state. In no case may the number of new employees directly attributable to the investment for purposes of this credit exceed the total net increase in the taxpayer’s employment in this state: Provided, That the Tax Commissioner may require that the net increase in the taxpayer’s employment in this state be determined and certified for the taxpayer’s controlled group: Provided, however, That persons filling jobs saved as a direct result of taxpayer’s qualified investment in property purchased or leased for business expansion may be treated as new employees filling new jobs if the taxpayer certifies the material facts to the Commissioner and the Tax Commissioner expressly finds:
2.2.20.a.1. But for the new employer purchasing the assets of a downstream natural gas manufacturing business in bankruptcy under chapter seven or 11 of the United States bankruptcy code and the new employer making qualified investment in property purchased or leased for business expansion, the assets would have been sold by the United States Bankruptcy Court in a liquidation sale and the jobs saved would have been lost; or
2.2.20.a.2. But for the taxpayer’s qualified investment in property purchased or leased for downstream manufacturing business expansion in this state, the taxpayer would have closed its downstream natural gas manufacturing facility in this state and the employees of the taxpayer located at the facility would have lost their jobs: Provided, That the Tax Commissioner may not make this certification unless the Commissioner finds that the taxpayer is insolvent as defined in 11 U.S.C. §101(32) or that the taxpayer’s natural gas manufacturing facility was destroyed, in whole or in significant part, by fire, flood, or other act of God.
2.2.20.b. A person is considered to be a new employee only if the person’s duties in connection with the operation of the downstream natural gas manufacturing facility are on:
2.2.20.b.1. A regular, full-time, and permanent basis:
2.2.20.b.1.A. “Full-time employment” means employment for at least 140 hours per month at a wage not less than the applicable state or federal minimum wage, depending on which minimum wage provision is applicable to the business.
2.2.20.b.1.B. Permanent employment does not include employment that is temporary or seasonal and therefore the wages, salaries, and other compensation paid to the temporary or seasonal employees will not be considered for purposes of the annual credit allowance.
2.2.20.b.2. A regular, part-time, and permanent basis: Provided, That the person is customarily performing the duties at least 20 hours per week for at least six months during the taxable year.
2.2.21. “New job” means a job which did not exist in the downstream natural gas manufacturing business of the taxpayer in this state prior to the taxpayer’s qualified investment being made, and that is filled by a new employee
2.2.22. “New property” means:
2.2.22.a. Property, the construction, reconstruction, or erection of which is completed on or after July 1, 2020, and placed in service or use after that date; and
2.2.22.b. Property leased or acquired by the taxpayer that is placed in service or use in this state on or after July 1, 2020, if the original use of the property commences with the taxpayer and commences after that date.
2.2.23. “Original use” means the first use to which the property is put, whether or not the use corresponds to the use of the property by the taxpayer.
2.2.24. “Partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, which is treated as a partnership for federal income tax purposes, and that is not a trust or estate, a corporation, or a sole proprietorship.
2.2.25. “Partner” includes a member in such a syndicate, group, pool, joint venture, or other organization.
2.2.26. “Person” includes any natural person, corporation, or partnership.
2.2.27. “Property purchased or leased for business expansion” shall be treated as follows for purposes of this credit.
2.2.27.a. Included property. - Except as provided in subdivision 2.2.27.b, the term “property purchased or leased for business expansion” means real property and improvements thereto, and tangible personal property, but only if the real or personal property was constructed, purchased, or leased and placed in service or use by the taxpayer, for use as a component part of a new or expanded downstream natural gas manufacturing facility as defined in this section, which is located within the State of West Virginia. This term includes only:
2.2.27.a.1. Real property and improvements thereto having a useful life of four or more years, placed in service or use on or after July 1, 2020, by the taxpayer.
2.2.27.a.2. Real property and improvements thereto, acquired by written lease having a primary term of 10 or more years and placed in service or use by the taxpayer on or after July 1, 2020.
2.2.27.a.3. Tangible personal property placed in service or use by the taxpayer on or after July 1, 2020, with respect to which depreciation, or amortization in lieu of depreciation, is allowable in determining the personal or corporation net income tax liability of the business taxpayer pursuant to W. Va. Code §11-21-1, et seq., or §11-24-1, et seq., and which has a useful life, at the time the property is placed in service or use in this state, of four or more years.
2.2.27.a.4. Tangible personal property acquired by written lease having a primary term of four years or longer, that commenced and was executed by the parties thereto on or after July 1, 2020, if used as a component part of a new or expanded downstream manufacturing business facility, shall be included within this definition.
2.2.27.a.5. Tangible personal property owned or leased, and used by the taxpayer at a business location outside this state which is moved into the State of West Virginia on or after July 1, 2020, for use as a component part of a new or expanded downstream natural gas manufacturing facility located in this state: Provided, That if the property is owned, it must be depreciable or amortizable personal property for income tax purposes, and have a useful life of four or more years remaining at the time it is placed in service or use in this state, and if the property is leased, the primary term of the lease remaining at the time the leased property is placed in service or use in this state, must be four or more years.
2.2.27.b. Excluded property. -- The term “property purchased or leased for business expansion” does not include:
2.2.27.b.1. Property owned or leased by the taxpayer and for which the taxpayer was previously or is currently being allowed tax credit under W. Va. Code §11-13D-1, et seq., §11-13Q-1, et seq., §11-13S-1, et seq., or §11-13U-1, et seq.
2.2.27.b.2. Property owned or leased by the taxpayer and for which the seller, lessor, or other transferor, was previously or is currently being allowed tax credit under W. Va. Code §11-13D-1, et seq., §11-13Q-1, et seq., §11-13S-1, et seq., or §11-13U-1, et seq.
2.2.27.b.3. Repair costs, including materials used in the repair, unless for federal income tax purposes the cost of the repair must be capitalized and not expensed.
2.2.27.b.4. Airplanes and helicopters.
2.2.27.b.5. Property that is primarily used outside this state, with use being determined based upon the amount of time the property is actually used both within and outside this state.
2.2.27.b.6. Property which is acquired incident to the purchase of the stock or assets of the seller, unless for good cause shown, the Tax Commissioner consents to waiving this requirement.
2.2.27.b.7. Natural resources in place.
2.2.27.b.8. Purchased or leased property, the cost or consideration for which cannot be quantified with any reasonable degree of accuracy at the time the property is placed in service or use: Provided, That when the contract of purchase or lease specifies a minimum purchase price or minimum annual rent the amount thereof shall be used to determine the qualified investment in the property under W. Va. Code §11-13GG-6 if the property otherwise qualifies as property purchased or leased for expansion of a downstream natural gas manufacturing facility.
2.2.28. “Purchase” means any acquisition of property, but only if:
2.2.28.a. The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of deductions under section 267 or 707 (b) of the United States Internal Revenue Code.
2.2.28.b. The property is not acquired by one component member of an affiliated or controlled group from another component member of the same affiliated or controlled group, as applicable. The Tax Commissioner may waive this requirement if the property was acquired from a related party for its then fair market value; and
2.2.28.c. The basis of the property for federal income tax purposes, in the hands of the person acquiring it, is not determined:
2.2.28.c.1. In whole or in part, by reference to the federal adjusted basis of the property in the hands of the person from whom it was acquired; or
2.2.28.c.2. Under Section 1014(e) of the United States Internal Revenue Code.
2.2.29. “Qualified activity” means any downstream natural gas manufacturing business activity subject to any of the taxes imposed by W. Va. Code §11-21-1, et seq., or §11-24-1, et seq., but does not include the activity of severance or production of natural resources.
2.2.30. “Related person” means:
2.2.30.a. A corporation, partnership, association, or trust controlled by the taxpayer;
2.2.30.b. An individual, corporation, partnership, association, or trust that is in control of the taxpayer;
2.2.30.c. A corporation, partnership, association, or trust controlled by an individual, corporation, partnership, association, or trust that is in control of the taxpayer; or
2.2.30.d. A member of the same affiliated or controlled group as the taxpayer.
2.2.30.e. The term “control” means the following.
2.2.30.e.1. For purposes of this subdivision, control, with respect to a corporation, means ownership, directly or indirectly, of stock possessing 50 percent or more of the total combined voting power of all classes of the stock of the corporation entitled to vote.
2.2.30.e.2. Control, with respect to a trust, means ownership, directly or indirectly, of 50 percent or more of the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association, or of a beneficial interest in a trust is determined in accordance with the rules for constructive ownership of stock provided in section 267(c) of the United States Internal Revenue Code, other than paragraph (3) of that section.
2.2.31. “Replacement downstream natural gas manufacturing facility” means any property (other than an expanded downstream natural gas manufacturing facility) that replaces or supersedes any other property located within this state that:
2.2.31.a. The taxpayer or a related person used in or in connection with any downstream natural gas manufacturing facility for more than two years during the period of five consecutive years ending on the date the replacement or superseding property is placed in service by the taxpayer; or
2.2.31.b. Is not used by the taxpayer or a related person in or in connection with any downstream natural gas manufacturing facility for a continuous period of one year or more commencing with the date the replacement or superseding property is placed in service by the taxpayer.
2.2.32. “Taxpayer” means any person subject to any of the taxes imposed by W. Va. Code §11-21-1, et seq., or §11-24-1, et seq.
2.2.33. “The code” means the Code of West Virginia, 1931, as amended.
2.2.34. “This state” means the State of West Virginia.
2.2.35. “United States Internal Revenue Code” or “I.R.C.” means the Internal Revenue Code as defined in W. Va. Code §§11-21-9 or 11-24-3.
2.2.36. “Used property” means property acquired after June 30, 2020, that is not “new property.”
W. Va. Code R. § 110-13GG-3 The Amount of Credit
3.1. Credit allowed. -- Eligible taxpayers are allowed a credit against the portion of taxes imposed by this state that are attributable to and the consequence of the taxpayer’s qualified investment in a new or expanded downstream natural gas manufacturing facility in this state, which results in the creation of new jobs. The amount of this credit is determined and applied as provided in W. Va. Code §11-13GG-1, et seq., and this rule.
3.2. Amount of credit. -- The amount of credit allowable is determined by multiplying the amount of the taxpayer’s qualified investment, determined under W. Va. Code §11-13GG-6, in property purchased or leased for a new, or expansion of an existing “downstream natural gas manufacturing facility,” as defined in W. Va. Code §11-13GG-3, by the taxpayer’s new jobs percentage, determined under W. Va. Code §11-13GG-7. The product of this calculation establishes the maximum amount of credit allowable under W. Va. Code §11-13GG-1, et seq., due to the qualified investment.
3.3. Application of credit over 10 years. -- The amount of credit allowable must be taken over a 10-year period, at the rate of one tenth of the amount thereof per taxable year, beginning with the taxable year in which the taxpayer places the qualified investment into service or use in this state, unless the taxpayer elected to delay the beginning of the 10-year period until the next succeeding taxable year. This election shall be made in the annual income tax return filed under chapter 11 of the West Virginia Code for the taxable year in which qualified investment is first placed into service or use by the taxpayer. Once made, the election cannot be revoked. The annual credit allowance is taken in the manner prescribed in W. Va. Code §11-13GG-5.
3.3.1. Placed in service or use. -- For purposes of the credit allowed by this section, property is considered placed in service or use in the earlier of the following taxable years:
3.3.1.a. The taxable year in which, under the taxpayer’s depreciation practice, the period for depreciation with respect to the property begins; or
3.3.1.b. The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function.
W. Va. Code R. § 110-13GG-4 Application of the Credit
4.1. In general. -- The aggregate annual credit allowance for the current taxable year is an amount equal to the sum of the following:
4.1.1. The one-tenth part allowed under W. Va. Code §11-13GG-4 for qualified investment property placed into service or use during a prior taxable year; plus
4.1.2. The one-tenth part allowed under W. Va. Code §11-13GG-4 for qualified investment property placed into service or use during the current taxable year.
4.2. Application of current year annual credit allowance. -- The amount determined under section 4.1 of this section heading is allowed as a credit against 80 percent of that portion of the taxpayer’s state tax liability which is attributable to and the direct result of the taxpayer’s qualified investment, and applied as provided in sections 4.3 and 4.4, both inclusive, of this section heading, and in that order: Provided, That if the median salary of the new jobs is higher than the statewide average nonfarm payroll wage, as determined annually by Workforce West Virginia, the amount determined under section 4.1 of this section heading is allowed as a credit against 100 percent of that portion of the taxpayer’s state tax liability which is attributable to and the direct result of the taxpayer’s qualified investment, and shall be applied, as provided in sections 4.3 through 4.4, both inclusive, of this section heading, and in that order.
4.3. Corporation net income taxes. --
4.3.1. That portion of the allowable credit attributable to qualified investment in a downstream natural gas manufacturing facility may be applied to reduce the taxes imposed by W. Va. Code §11-24-1, et seq., for the taxable year as determined before application of allowable credits against tax.
4.3.2. If the taxes due under W. Va. Code §11-24-1, et seq., as determined before application of allowable credits against tax, are not solely attributable to and the direct result of the taxpayer’s qualified investment in a downstream natural gas manufacturing business, the amount of the taxes that is attributable is determined by multiplying the amount of taxes due under W. Va. Code §11-24-1, et seq., for the taxable year, as determined before application of allowable credits against tax, by a fraction, the numerator of which is all wages, salaries, and other compensation paid during the taxable year to all employees of the taxpayer employed in this state whose positions are directly attributable to the qualified investment. The denominator of the fraction is the wages, salaries, and other compensation paid during the taxable year to all employees of the taxpayer employed in this state.
4.4. Personal income taxes. --
4.4.1. If the person making the qualified investment in a downstream natural gas manufacturing facility is an electing small business corporation, as defined in section 1361 of the United States Internal Revenue Code, a partnership, a limited liability company that is treated as a partnership for federal income tax purposes, or a sole proprietorship, then any unused credit is allowed as a credit against the taxes imposed by W. Va. Code §11-21-1, et seq., on the income from the downstream natural gas manufacturing facility, or on income of a sole proprietor attributable to the downstream natural gas manufacturing facility.
4.4.2. Electing small business corporations, limited liability companies treated as partnerships for federal income tax purposes, partnerships, and other unincorporated organizations shall allocate the credit allowed by W. Va. Code §11-13GG-1, et seq., among its members in the same manner as profits and losses are allocated for the taxable year.
4.5. If the amount of taxes due under W. Va. Code §11-21-1, et seq., as determined before application of allowable credits against tax, that is attributable to business, is not solely attributable to and the direct result of the qualified investment of the electing small business corporation, limited liability company treated as a partnership for federal income tax purposes, other unincorporated organization, or sole proprietorship, the amount of the taxes that are so attributable is determined by multiplying the amount of taxes due under W. Va. Code §11-21-1, et seq., as determined before application of allowable credits against tax that is attributable to business by a fraction, the numerator of which is all wages, salaries, and other compensation paid during the taxable year to all employees of the electing small business corporation, limited liability company, partnership, other unincorporated organization, or sole proprietorship employed in this state, whose positions are directly attributable to the qualified investment. The denominator of the fraction is the wages, salaries, and other compensation paid during the taxable year to all employees of the taxpayer.
4.6. No credit is allowed under this section against any employer withholding taxes imposed by W. Va. Code §11-21-1, et seq.
4.7. If the wages, salaries, and other compensation fraction formula provisions of sections 4.3 and 4.4 of this section heading, inclusive, do not fairly represent the taxes solely attributable to and the direct result of qualified investment of the taxpayer the Tax Commissioner may require, in respect to all or any part of the taxpayer’s businesses or activities, if reasonable:
4.7.1. Separate accounting or identification;
4.7.2. Adjustment to the wages, salaries, and other compensation fraction formula to reflect all components of the tax liability;
4.7.3. The inclusion of one or more additional factors that will fairly represent the taxes solely attributable to and the direct result of the qualified investment of the taxpayer and all other project participants in the businesses or other activities subject to tax; or
4.7.4. The employment of any other method to effectuate an equitable attribution of the taxes.
4.8. Unused credit. -- If any credit remains after application of section 4.3 of this section heading, the amount thereof is carried forward to each ensuing tax year until used or until the expiration of the tenth taxable year subsequent to the end of the initial 10-year credit application period. Pursuant to W. Va. Code §11-13GG-5(f), if any unused credit remains after the 20th year, the amount thereof is forfeited. No carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.
W. Va. Code R. § 110-13GG-5 Qualified Investment
5.1. General. -- The qualified investment in property purchased or leased for a new, or expansion of an existing, downstream natural gas manufacturing facility is the applicable percentage of the cost of each property purchased or leased for the purpose of the new, or expansion of an existing, downstream natural gas manufacturing facility which is placed in service or use in this state by the taxpayer during the taxable year.
5.1.1. Applicable percentage. -- For the purpose of this section, the applicable percentage of any property is determined under the following table:
5.1.1.a. Table.
If useful life is: The applicable percentage is:
Less than four years 0% Four years or more but less than six years 33 1/3% Six years or more but less than eight years 66 2/3% Eight years or more 100%
5.1.1.b. The useful life of any property, for purposes of this section, is determined as of the date the property is first placed in service or use in this state by the taxpayer, determined in accordance with the provisions of W. Va. Code §11-13GG-4 and subsection 3.3.1 of this rule.
5.2. Cost. -- For purposes of section 5.1 of this section heading, the cost of each property purchased for a new, or expansion of an existing, downstream natural gas manufacturing facility is determined under the following rules:
5.2.1. Trade-ins. -- Cost does not include the value of property given in trade or exchange for the property purchased for a new, or for expansion of an existing, downstream natural gas manufacturing facility.
5.2.2. Damaged, destroyed, or stolen property. -- If property is damaged or destroyed by fire, flood, storm, or other casualty, or is stolen, then the cost of replacement property does not include any insurance proceeds received in compensation for the loss.
5.2.3. Rental property. --
5.2.3.a. The cost of real property acquired by written lease for a primary term of 10 years or longer is 100 percent of the rent reserved for the primary term of the lease, not to exceed 20 years.
5.2.3.b. The cost of tangible personal property acquired by written lease for a primary term of:
5.2.3.b.1. Four years, or longer, is one third of the rent reserved for the primary term of the lease;
5.2.3.b.2. Six years, or longer, is two thirds of the rent reserved for the primary term of the lease; or
5.2.3.b.3. Eight years, or longer, is 100 percent of the rent reserved for the primary term of the lease, not to exceed 20 years: Provided, That in no event may rent reserved include rent for any year subsequent to expiration of the book life of the equipment, determined using the straight-line method of depreciation.
5.2.4. Self-constructed property. -- In the case of self-constructed property, the cost thereof is the amount properly charged to the capital account for depreciation in accordance with federal income tax law.
5.2.5. Transferred property. -- The cost of property used by the taxpayer out-of-state and then brought into this state, is determined based on the remaining useful life of the property at the time it is placed in service or use in this state, and the cost is the original cost of the property to the taxpayer less straight line depreciation allowable for the tax years or portions thereof the taxpayer used the property outside this state. In the case of leased tangible personal property, cost is based on the period remaining in the primary term of the lease after the property is brought into this state for use in a new or expanded business facility of the taxpayer, and is the rent reserved for the remaining period of the primary term of the lease, not to exceed 20 years, or the remaining useful life of the property, as determined as aforesaid, whichever is less.
W. Va. Code R. § 110-13GG-6 New Jobs Percentage
6.1. In general. -- The new jobs percentage is based on the number of new jobs created in this state directly attributable to the qualified investment of the taxpayer.
6.2. When a job is attributable. -- An employee’s position is directly attributable to the qualified investment if:
6.2.1. The employee’s service is performed or his or her base of operations is at the new or expanded downstream natural gas manufacturing facility;
6.2.2. The position did not exist prior to the construction, renovation, expansion, or acquisition of the downstream natural gas manufacturing facility and the making of the qualified investment; and
6.2.3. But for the qualified investment, the position would not have existed.
6.3. Applicable percentage. -- For the purpose of section 6.1 of this section heading, the applicable new jobs percentage is determined under the following table:
If number of new jobs is at least: The applicable percentage is: 5 10% 50 15% 150 20%
6.4. Certification of new jobs. -- With the annual return for the applicable taxes filed for the taxable year in which the qualified investment is first placed in service or use in this state, the taxpayer shall estimate and certify the number of new jobs reasonably projected to be created by it in this state within the period prescribed in section 6.6 of this section heading that are, or will be, directly attributable to the qualified investment of the taxpayer. For purposes of this section heading, applicable taxes means the taxes imposed by W. Va. Code §11-21-1, et seq., or §11-24-1, et seq., against which this credit is applied.
6.5. Equivalency of permanent employees. -- The hours of part-time employees shall be aggregated to determine the number of equivalent full-time employees for the purpose of this section.
6.6. Redetermination of new jobs percentage. -- With the annual return for the applicable taxes imposed, filed for the third taxable year in which the qualified investment is in service or use, the taxpayer shall certify the actual number of new jobs created by it in this state that are directly attributable to the qualified investment of the taxpayer.
6.6.1. If the actual number of jobs created would result in a higher new jobs percentage, the credit allowed under W. Va. Code §11-13GG-1, et seq., shall be redetermined and amended returns shall be filed for the first and second taxable years that the qualified investment was in service or use in this state.
6.6.2. If the actual number of jobs created would result in a lower new jobs percentage, the credit previously allowed under W. Va. Code §11-13GG-1, et seq., shall be redetermined and amended returns shall be filed for the first and second taxable years. In applying the amount of redetermined credit allowable for the two preceding taxable years, the redetermined credit shall first be applied to the extent it was originally applied in the prior two years to personal income taxes, and then to corporation net income taxes. Any additional taxes due under chapter 11 of the West Virginia Code shall be remitted with the amended returns filed with the Tax Commissioner, along with interest, as provided in W. Va. Code §11-10-17, and a 10 percent penalty determined on the amount of taxes due with the amended return, which may be waived by the Commissioner if the taxpayer shows that the overclaimed amount of the new jobs percentage was due to reasonable cause and not due to willful neglect.
6.7. Additional new jobs percentage. -- When the qualified investment is $20 million or more and if the number of full-time construction laborers and mechanics working at the job site of the new or expanded business facility is 50 or more, or if the number of hours of all construction laborers and mechanics working at the job site is equal to or greater than the number of hours 50 full-time construction laborers and mechanics would have worked at the job site during a 12 consecutive month period, a taxpayer that is allowed a new jobs percentage determined under section 6.1 of this section heading shall be allowed a new jobs percentage that is five percentage points higher than the new jobs percentage allowed under section 6.1 of this section heading. In no event may construction laborers and mechanics be used to attain or retain a section 6.1 new jobs percentage. The number of full-time construction laborers and mechanics working at the job site shall be determined by dividing the total number of hours worked by all construction laborers and mechanics on a new or expanded business facility during a 12 consecutive month period by 2,080 hours per year. A taxpayer may not claim the additional new jobs percentage allowed by this section unless the taxpayer includes with the certification filed under section 6.4 of this section heading a certification signed by the general contractor or the construction manager certifying that construction laborers employed at the job site during a consecutive 12 month period aggregated the equivalent of at least 50 full-time employees and the taxpayer has received from the general contractor or construction manager records substantiating the certification, which records shall be retained by the taxpayer for 13 years after the day the expansion to an existing business facility, or the new business facility, is first placed in service or use by the taxpayer. For purposes of section 6.7 of this section heading:
6.7.1. The term “construction laborers and mechanics” means those workers, utilized by a contractor or subcontractor at any tier, whose duties are manual or physical in nature, including those workers who use tools or are performing the work of a trade, as distinguished from mental or managerial and working foremen who devote more than 20 percent of their time during a workweek performing the duties of a laborer or mechanic; and
6.7.2. The term “job site” is limited to the physical place or places where the construction called for in the contract will remain when the work on it is completed and nearby property, as described in subsection 3 of this section, used by the contractor or subcontractor during construction that, because of proximity, can reasonably be included in the site.
6.7.3. Except as provided in subsection 4 of this section, fabrication plants, mobile factories, batch plants, borrow pits, job headquarters, and tool yards are part of the job site provided they are dedicated exclusively, or nearly so, to performance of the contract or project and are located in proximity to the actual construction location so that it would be reasonable to include them.
6.7.4. The term “job site” does not include permanent home offices, branch offices, branch plant establishments, fabrication yards, or tool yards of a contractor or subcontractor whose locations and continuance in operation are determined without regard to the contract or subcontract for construction of a new or expanded business facility.
W. Va. Code R. § 110-13GG-7 Forfeiture of Unused Tax Credits; redetermination of credit allowed
7.1. Disposition of property or cessation of use. -- If during any taxable year, property with respect to which a tax credit has been allowed under W. Va. Code §11-13GG-1, et seq., is treated as follows:
7.1.1. Is disposed of prior to the end of its useful life, as determined under W. Va. Code §11-13GG-6; or
7.1.2. Ceases to be used in a downstream natural gas manufacturing facility of the taxpayer in this state prior to the end of its useful life, as determined under W. Va. Code §11-13GG-6, then the unused portion of the credit allowed for the property is forfeited for the taxable year and all ensuing years. Additionally, except when the property is damaged or destroyed by fire, flood, storm, or other casualty, or is stolen, the taxpayer shall redetermine the amount of credit allowed in all earlier years by reducing the applicable percentage of cost of the property allowed under W. Va. Code §11-13GG-6, to correspond with the percentage of cost allowable for the period of time that the property was actually used in this state in the new or expanded business of the taxpayer. The taxpayer shall then file a reconciliation statement for the year in which the forfeiture occurs and pay any additional taxes owed due to reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties. The reconciliation statement shall be filed with the annual income return for the primary tax for which the taxpayer is liable under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq., whichever is applicable.
7.2. Cessation of operation of downstream manufacturing facility. -- If during any taxable year the taxpayer ceases operation of a downstream natural gas manufacturing facility in this state for which credit was allowed under W. Va. Code §11-13GG-1, et seq., before expiration of the useful life of property with respect to which tax credit has been allowed under W. Va. Code §11-13GG-1, et seq., then the unused portion of the allowed credit is forfeited for the taxable year and for all ensuing years. Additionally, except when the cessation is due to fire, flood, storm, or other casualty, the taxpayer shall redetermine the amount of credit allowed in earlier years by reducing the applicable percentage of cost of the property allowed under W. Va. Code §11-13GG-6, to correspond with the percentage of cost allowable for the period of time that the property was actually used in this state in a downstream manufacturing business of the taxpayer that is taxable under W. Va. Code §11-24-1, et seq., or in the case of a partnership, limited liability company treated as a partnership for federal income tax purposes, electing small business corporation, other unincorporated entity, or sole proprietorship, taxable under W. Va. Code §11-21-1, et seq. The taxpayer shall then file a reconciliation statement with the annual return for the primary tax for which the taxpayer is liable under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq., whichever is applicable, for the year in which the forfeiture occurs, and pay any additional taxes owed due to the reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties.
7.3. Reduction in number of employees. -- If during any taxable year subsequent to the taxable year in which the new jobs percentage is redetermined as provided in W. Va. Code §11-13GG-7, the average number of employees of the taxpayer, for the current taxable year, employed in positions created because of and directly attributable to the qualified investment falls below the minimum number of new jobs created upon which the taxpayer’s annual credit allowance is based, the taxpayer shall calculate what his or her annual credit allowance would have been had his or her new jobs percentage been determined based upon the average number of employees, for the then current taxable year, employed in positions created because of and directly attributable to the qualified investment. The difference between the result of this calculation and the taxpayer’s annual credit allowance for the qualified investment as determined under W. Va. Code §11-13GG-4, is forfeited for the then current taxable year, and for each succeeding taxable year unless for a succeeding taxable year the taxpayer’s average employment in positions directly attributable to the qualified investment once again meets the level required to enable the taxpayer to utilize its full annual credit allowance for that taxable year.
W. Va. Code R. § 110-13GG-8 Recapture of Credit; recapture tax imposed
8.1. When recapture tax applies. --
8.1.1. Any person who places qualified investment property in service or use at a downstream natural gas manufacturing facility and who fails to use the qualified investment property for at least the period of its useful life, as determined as of the time the property was placed in service or use, or the period of time over which tax credits allowed under W. Va. Code §11-13GG-1, et seq., with respect to the property are applied under W. Va. Code §11-13GG-1, et seq., whichever period is less, and who reduces the number of its employees filling new jobs at its downstream natural gas manufacturing facility in this state, which were created and are directly attributable to the qualified investment property, after the third taxable year in which the qualified investment property was placed in service or use, or fails to continue to employ individuals in all the new jobs created as a direct result of the qualified investment property and used to qualify for the credit allowed by W. Va. Code §11-13GG-1, et seq., prior to the end of the tenth taxable year after the qualified investment property was placed in service or use, the person shall pay the recapture tax imposed by section 8.2 of this section heading.
8.1.2. This section does not apply when W. Va. Code §11-13GG-10 or section heading 9 of this rule applies. However, the successor, or the successors, and the person, or persons, who previously claimed credit under W. Va. Code §11-13GG-1, et seq., with respect to the qualified investment property and the new jobs attributable thereto, are jointly and severally liable for payment of any recapture tax subsequently imposed under this section with respect to the qualified investment property and new jobs.
8.2. Recapture tax imposed. -- The recapture tax imposed by this section is the amount determined as follows:
8.2.1. Full recapture. -- If the taxpayer prematurely removes qualified investment property placed in service (when considered as a class) from economic service in the taxpayer’s downstream natural gas manufacturing facility in this state, and the number of employees filling the new jobs created by the person falls below the number of new jobs required to be created in order to qualify for the amount of credit being claimed, the taxpayer shall recapture the amount of credit claimed under W. Va. Code §11-13GG-5 for the taxable year, and all preceding taxable years, on qualified investment property which has been prematurely removed from service. The amount of tax due under this subsection is an amount equal to the amount of credit that is recaptured under this subsection.
8.2.2. Partial recapture. -- If the taxpayer prematurely removes qualified investment property from economic service in the taxpayer’s downstream natural gas manufacturing facility in this state, and the number of employees filling the new jobs created by the person remains 20 or more, but falls below the number necessary to sustain continued application of credit determined by use of the new job percentage upon which the taxpayer’s one-tenth annual credit allowance was determined under W. Va. Code §11-13GG-4, the taxpayer shall recapture an amount of credit equal to the difference between:
8.2.2.a. The amount of credit claimed under W. Va. Code §11-13GG-5 for the taxable year, and all preceding taxable years; and
8.2.2.b. The amount of credit that would have been claimed in those years if the amount of credit allowable under W. Va. Code §11-13GG-4 had been determined based on the qualified investment property that remains in service using the average number of new jobs filled by employees in the taxable year for which recapture occurs. The amount of tax due under this subsection is an amount equal to the amount of credit that is recaptured under this section.
8.2.3. Additional recapture. -- If after a partial recapture under subsection 2 of this section, the taxpayer further reduces the number of employees filling new jobs, the taxpayer shall recapture an additional amount determined as provided under section 8.2 of this section heading. The amount of tax due under this subsection is an amount equal to the amount of credit that is recaptured under this section.
8.3. Payment of recapture tax. -- The amount of tax recaptured under this section is due and payable on the day the person’s annual return is due for the taxable year in which this section applies, under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq. When the employer is a partnership, limited liability company, or S corporation for federal income tax purposes, the recapture tax shall be paid by those persons who are partners in the partnership, members in the company, or shareholders in the S corporation, in the taxable year in which recapture occurs under this section.
W. Va. Code R. § 110-13GG-9 Transfer of Qualified Investment to Successors
9.1. Mere change in form of business. -- Property may not be treated as disposed of under W. Va. Code §11-13GG-8 by reason of a mere change in the form of conducting the business as long as the property is retained in the successor’s downstream natural gas manufacturing facility in this state, and the transferor business retains a controlling interest in the successor business. In this event, the successor business is allowed to claim the amount of credit still available with respect to the business facility or facilities transferred, and the transferor business may not be required to redetermine the amount of credit allowed in earlier years.
9.2. Transfer or sale to successor. -- Property is not treated as disposed of under W. Va. Code §11-13GG-8 by reason of any transfer or sale to a successor business which continues to operate the downstream natural gas manufacturing facility in this state. Upon transfer or sale, the successor shall acquire the amount of credit that remains available under W. Va. Code §11-13GG-1, et seq., for each subsequent taxable year and the transferor business is not required to redetermine the amount of credit allowed in earlier years.
W. Va. Code R. § 110-13GG-10 Identification of Investment Credit Property
10.1. Every taxpayer who claims credit under W. Va. Code §11-13GG-1, et seq., shall maintain sufficient records to establish the following facts for each item of qualified property:
10.1.1. Its identity;
10.1.2. Its actual or reasonably determined cost;
10.1.3. Its straight-line depreciation life;
10.1.4. The month and taxable year in which it was placed in service;
10.1.5. The amount of credit taken; and
10.1.6. The date it was disposed of or otherwise ceased to be used as qualified property in the downstream natural gas manufacturing facility of the taxpayer.
W. Va. Code R. § 110-13GG-11 Failure to Keep Records of Investment Credit Property
11.1. A taxpayer who does not keep the records required for identification of investment credit property is subject to the following rules:
11.1.1. A taxpayer is treated as having disposed of, during the taxable year, any investment credit property that the taxpayer cannot establish was still on hand, in this state, at the end of that year.
11.1.2. If a taxpayer cannot establish when investment credit property reported for purposes of claiming this credit returned during the taxable year was placed in service, the taxpayer is treated as having placed it in service in the most recent prior year in which similar property was placed in service, unless the taxpayer can establish that the property placed in service in the most recent year is still on hand. In that event, the taxpayer will be treated as having placed the returned property in service in the next most recent year.
W. Va. Code R. § 110-13GG-12 Interpretation and Construction
12.1. No inference, implication, or presumption of legislative construction or intent may be drawn or made by reason of the location or grouping of any particular section, provision, or portion of this rule; and no legal effect may be given to any descriptive matter or heading relating to any section heading, section, subsection, subdivision or paragraph of this rule.
12.2. The provisions of this rule shall be reasonably construed in order to effectuate the legislative intent recited in W. Va. Code §11-13GG-2.
W. Va. Code R. § 110-13GG-13 Burden of Proof; application required; failure to make timely application
13.1. Burden of proof. -- The burden of proof is on the taxpayer to establish by clear and convincing evidence that the taxpayer is entitled to the benefits allowed by W. Va. Code §11-13GG-1, et seq.
13.2. Application for credit required. --
13.2.1. Application required. -- Notwithstanding any provision of W. Va. Code §11-13GG-1, et seq., to the contrary, no credit is allowed or may be applied under W. Va. Code §11-13GG-1, et seq., for any qualified investment property placed in service or use until the person asserting a claim for the allowance of credit under W. Va. Code §11-13GG-1, et seq., makes written application to the Commissioner for allowance of credit as provided in this section. An application for credit shall be filed, in the form prescribed by the Tax Commissioner, no later than the last day for filing the tax returns, determined by including any authorized extension of time for filing the return, required under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq., for the taxable year in which the property to which the credit relates is placed in service or use and all information required by the form shall be provided.
13.2.2. Failure to make timely application. -- The failure to timely apply for the credit results in the forfeiture of 50 percent of the annual credit allowance otherwise allowable under W. Va. Code §11-13GG-1, et seq. This penalty applies annually until the application is filed.
W. Va. Code R. § 110-13GG-14 Tax Credit Review and Accountability
14.1. Beginning on February 1, 2025, and every third year thereafter, the Tax Commissioner shall submit to the Governor, the President of the Senate, and the Speaker of the House of Delegates a tax credit review and accountability report evaluating the cost effectiveness of this credit during the most recent three-year period for which information is available. The criteria to be evaluated shall include, but not be limited to, for each year of the three-year period:
14.1.1. The numbers of taxpayers claiming the credit;
14.1.2. The net number of new jobs created by all taxpayers claiming the credit;
14.1.3. The cost of the credit;
14.1.4. The cost of the credit per new job created; and
14.1.5. Comparison of employment trends for an industry and for taxpayers within the industry that claim the credit.
14.2. Taxpayers claiming the credit shall provide any information the Tax Commissioner may require to prepare the report required by this section: Provided, That the information provided is subject to the confidentiality and disclosure provisions of W. Va. Code §11-10-5d.
14.3. On or before February 1, 2025, the Department of Commerce, in consultation with the Tax Commissioner, the Department of Transportation, and the Department of Environmental Protection shall submit to the Governor, the President of the Senate, and the Speaker of the House of Delegates a report of the impact of all the tax credits and other economic incentives provided in W. Va. Code §11-13GG-1, et seq., upon: (1) economic development in this state, including, but not limited to, the creation of jobs in this state; (2) the state’s infrastructure, including, but not limited to, the need for construction or maintenance of the roads and highways of the state; (3) the natural resources of the state; and (4) upon public and private property interests in the state.
W. Va. Code R. § 110-13GG-15 General Procedure and Administration
Each and every provision of the “West Virginia Tax Procedure and Administration Act” set forth in W. Va. Code §11-10-1, et seq., applies to the tax credit allowed under W. Va. Code §11-13GG-1, et seq., except as otherwise expressly provided, with like effect as if that act were applicable only to the tax credit allowed by W. Va. Code §11-13GG-1, et seq., and were set forth in extenso in this rule.
W. Va. Code R. § 110-13GG-16 Crimes and Penalties
Each and every provision of the “West Virginia Tax Crimes and Penalties Act” set forth in W. Va. Code §11-9-1, et seq., applies to the tax credit allowed by W. Va. Code §11-13GG-1, et seq., with like effect as if that act were applicable only to the tax credit allowed by W. Va. Code §11-13GG-1, et seq., and were set forth in extenso in this rule.
W. Va. Code R. § 110-13GG-17 Severability
17.1. If any provision of this rule, or the application thereof, is for any reason adjudged by any court of competent jurisdiction to be invalid, the judgment may not affect, impair, or invalidate the remainder of this rule, but shall be confined in its operation to the provision thereof directly involved in the controversy in which the judgment shall have been rendered, and the applicability of the provision to other persons or circumstances may not be affected thereby.
17.2. If any provision of this rule, or the application thereof, is made invalid or inapplicable by reason of the repeal or any other invalidation of any statute therein addressed or referred to, such invalidation or inapplicability may not affect, impair, or invalidate the remainder of this rule, but shall be confined in its operation to the provision thereof directly involved with, pertaining to, addressing, or referring to the repealed or invalidated statute, and the application of the provision with regard to other portions of this rule or in other instances not affected by any such repealed or invalid statute may not be abrogated or diminished in any way.
110CSR13GG
Series 13II High-Wage Growth Business Tax Credit
W. Va. Code R. § 110-13II-1 General
1.1. Scope. -- This legislative rule explains and implements the Tax Commissioner’s responsibilities under the High-Wage Growth Business Tax Credit enacted in H. B. 4558, which was effective June 5, 2020.
1.2. Authority. -- W. Va. Code § 11-10-5 and § 11-13II-5.
1.3. Filing Date. -- April 28, 2026.
1.4. Effective Date. -- April 28, 2026.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2031.
W. Va. Code R. § 110-13II-2 Definitions
General Rule. -- This rule incorporates by reference the definitions in W. Va. Code § 11-13II-2 (HB 4558). Other terms used in this rule are defined as provided in W. Va. Code § 11-10-1, et seq., § 11-21-1 et seq., and § 11-24-1 et seq.
W. Va. Code R. § 110-13II-3 Applying Approved High-Wage Growth Business Tax Credits
3.1. After the West Virginia Development Office approves a taxpayer’s application for High-Wage Growth Business Tax Credit, the Development Office shall forward the approved application to the Tax Commissioner. The Tax Commissioner shall review the approved application to determine whether the employer applicant has fulfilled its obligations as set forth in the application approved by the Development Office. The Tax Commissioner may request additional information from the applicant employer as may be necessary to determine whether the application is correct and whether the applicant employer is eligible for the annual tax credit for that year. The Tax Commissioner may request that the applicant revise the application approved by the Development Office. If the applicant does not fulfill the obligations set forth in the application, the Tax Commissioner shall deny that portion of the tax credit otherwise allowable that are attributable to the unfulfilled obligations.
3.2. Approved High-Wage Growth Tax Credits may be used when the employer files its tax return for the applicant’s taxable year after the application for the credit was filed with the Development Office.
3.3. Corporation. -- The High-Wage Growth Tax Credit allowed to an eligible taxpayer that pays the West Virginia Corporation Net Income Tax imposed by W. Va. Code § 11-24-4 is applied before any other allowable credits are applied against the tax. The taxpayer that has unused High-Wage Growth Tax Credit may elect to have up to $100,000 refunded as provided in section 3.5 of this rule, or to carry forward unused tax credit to a subsequent taxable year until the earlier of the following:
3.3.1. The full amount of the excess credit is used; or
3.3.2. The expiration of the 10th taxable year after the taxable year in which the annual salaries for the new direct jobs were paid or incurred. Any credit remaining thereafter is forfeited.
3.4. Pass-through entities. -- The High-Wage Growth Tax Credit allowed to an eligible taxpayer that is a pass-through entity for federal and state income tax purposes, shall allocate allowable High-Wage Growth Business Tax Credit to its equity owners in the same manner as profits and losses are allocated for the taxable year. The equity owner may apply the credit against his or her West Virginia personal income tax liability for the taxable year. An equity owner that pays the tax imposed by W. Va. Code § 11-24-4 may apply the credits against its liability for that tax for the taxable year. This credit must be applied before all other tax credits are applied. An equity owner that has unused allocated High-Wage Growth Tax Credit may carry forward unused tax credit to a subsequent taxable year until the earlier of the following:
3.4.1. The full amount of the excess credit is used; or
3.4.2. The expiration of the 10th taxable year after the taxable year in which the annual salaries for the new direct jobs were paid or incurred. Any credit remaining thereafter is forfeited.
3.5. Refund of unused credit. -- Up to $100,000 of unused tax credits may be refunded to a taxpayer when the taxpayer submits to the Tax Commissioner a timely claim for refund. When the taxpayer is a pass-through entity or a corporation that is a member of an affiliated group or combined group of corporations, the $100,000 limitation applies at the entity level. For example, if a pass-through entity has five members that share profits and losses equally, the potential refundable credit for each member is limited to $20,000, and not $100,000. Likewise, the total amount of refundable credit allowed to an affiliated or combined group of corporations is limited to $100,000 for the entire group, and not $100,000 per member of the group. See W. Va. Code § 11-13II-4(m)(8).
3.6. Tax credits provided in W. Va. Code § 11-13II-4 may not be transferred, sold, or assigned. See W. Va. Code § 11-13II-4(m)(9).
3.7. High-Wage Growth Business Tax Credits may not be applied against employer withholding taxes payable under W. Va. Code § 11-21-1 et seq.
W. Va. Code R. § 110-13II-4 False certification
Any person who willfully submits a false, incorrect, or fraudulent certification required for the High-Wage Growth Business Tax Credit is subject to all applicable penalties in the West Virginia Tax Crimes and Penalties Act, § 11-9-1 et seq., and the West Virginia Tax Procedures and Administration Act, § 11-10-1 et seq., of this code, except that the amount on which the penalty is based shall be the total amount of credit requested on the application for approval.
Series 13J Tax Credit For Qualified Agricultural Equipment
W. Va. Code R. § 110-13J-1 General
1.1. Scope. -- This legislative rule implements W. Va. Code ''11-13K-1 et seq. 11-13K-5 requires the Tax Commissioner to propose legislative rules for certification of qualified agricultural equipment and for administration of the tax credit for purchases of the equipment.
1.2. Authority. -- W. Va. Code '11-13K-5.
1.3. Filing Date. -- May 14, 1997.
1.4. Effective Date. -- June 1, 1997.
W. Va. Code R. § 110-13J-2 Definitions
The terms in Subsections 2.1 through 2.12 of this Section are defined in W. Va. Code '11-13K-2, and are applicable to this rule as if set forth in this rule. The terms in Subsections 2.13 and 2.14 of this Section are defined in Subsections 3.1.1 and 3.1.2 of Section 3 of this Rule.
2.1. Qualified agricultural equipment.
2.1.1 Qualified agricultural equipment includes only the items listed in subsections 2.2 through 2.12 of this section, which must be certified as set forth in subdivision 4.3.3 of this rule before this tax credit may be claimed.
2.2. Advance technology pesticide and fertilizer application equipment.
2.3. Conservation tillage equipment.
2.4. Dead poultry composting facility.
2.5. Mortality incinerator.
2.6. Nutrient management system.
2.7. Streambank and shoreline protection system.
2.8. Stream channel stabilization system.
2.9. Stream crossing or access plan.
2.10. Waste management system.
2.11. Waste storage facility.
2.12. Waste treatment lagoon.
2.13. Agricultural operations.
2.14. Commercial production.
W. Va. Code R. § 110-13J-3 Description of the Credit
3.1. The purpose of this credit is to create an incentive for the agricultural industry in this State to protect the environment by purchasing and installing qualified agricultural equipment for use in agricultural operations in this State.
3.1.1. Agricultural operations include only the commercial production of food, fiber, or woodland products (but not timbering activity) by means of cultivation, tillage of the soil or by the conduct of animal, livestock, dairy, apiary, equine or poultry husbandry, aquacultural activity, horticultural activity, or any other plant or animal production activity and all farm practices related, usual or incidental to the operations.
3.1.2. Commercial production consists of annual sales by the producer of at least one thousand dollars ($1,000) of agricultural products, except that for the first twelve (12) months after (1) the occurrence of a catastrophe (such as fire, drought or flood), other than merely mechanical breakdowns, which substantially destroyed the agricultural product being produced or the means for harvesting that product or (2) the commercial producer of an agricultural product has first commenced the production activity, the requirement of annual sales of at least one thousand dollars ($1,000) of agricultural products need not be satisfied in order for the activity to be the commercial production of an agricultural product.
3.2. This credit may be applied against an eligible taxpayer's Personal Income Tax or Corporation Net Income Tax liability for taxable years beginning on or after July 1, 1997.
3.2.1. For calendar year taxpayers, this credit will be available beginning in tax year 1998.
3.2.2. In no event may credit from any purchase be applied against both Personal Income Tax and also Corporation Net Income Tax.
3.3. This credit is available to taxpayers who purchase and install qualified agricultural equipment for use in their agricultural operations in this State and who meet the requirements of W. Va. Code '11-13J-1 et seq. and this rule.
3.3.1. This credit is not available for purchases of agricultural equipment for resale or for any purpose other than for use in the taxpayer's own agricultural operations in this State.
3.4. The total amount of credit available to any taxpayer for purchases during a taxable year is twenty- five percent (25%) of the total purchase price of all certified expenditures for qualified agricultural equipment purchased during the taxable year.
3.4.1. The taxpayer may include only expenditures made in taxable years beginning on or after July 1, 1997 in the amount certified. However, for calendar year taxpayers, the taxpayer may include only expenditures made on or after January 1, 1998 in the amount certified.
3.4.2. The amount of credit which the taxpayer may use in any single taxable year may not exceed the lesser of two thousand five hundred dollars ($2,500), or the amount of the taxpayer's Personal Income Tax or Corporation Net Income Tax liability for the year the qualified agricultural equipment was purchased.
3.4.3. If the amount of credit available exceeds the taxpayer's income tax liability for the taxable year in which the qualified agricultural equipment was purchased, the taxpayer may carry over the amount of the excess credit and use it in any one (1) or more of the next consecutive five (5) taxable years until no excess credit remains or until the time for claiming the credit has expired, after which time any unused credit is forfeited.
3.4.3.1. If a taxpayer does not claim any excess credit in a tax year in which it could be claimed, it is forfeited. However, the unclaimed credit is not forfeited if subsequently claimed for that tax year on a timely filed amended return.
3.4.3.2. The taxpayer must apply any excess credit carried over to subsequent tax years before any new tax credit for qualified agricultural equipment purchased in subsequent years, but after any other type of tax credit except for credit for overpayment of tax.
3.4.3.3. Credit for any purchase of qualified agricultural equipment may be used only by one taxpayer, is limited to the actual amount paid by that taxpayer, and may not be assigned or otherwise transferred to any other taxpayer. However, a husband and wife filing a joint personal income tax return may both claim the credit.
3.4.4. Example.
Farmer Glick is a calendar year taxpayer with a personal income tax liability of eight thousand dollars ($8,000) in tax year 1998. As a calendar year taxpayer, Farmer Glick is able to use the credit for the first time in tax year 1998. He purchased qualified agricultural equipment for his farm for twelve thousand dollars ($12,000) in 1998, and the equipment was properly certified. The total amount of credit he could use in tax years 1998 through 2003 would be twenty-five percent (25%) of twelve thousand dollars ($12,000), or three thousand dollars ($3,000). The maximum amount of the three thousand dollars ($3,000) credit which he could use in tax year 1998 would be the lesser of either two thousand five hundred dollars ($2,500) or eight thousand dollars ($8,000) (his 1996 tax liability), which is two thousand five hundred dollars ($2,500). The remaining five hundred dollars ($500) excess credit may be carried over and used in tax year 1999. Farmer Glick is able to carryover and use the entire $500 excess credit in tax year 1999 and does so, so none of this credit remains to be used in future tax years and none is forfeited.
W. Va. Code R. § 110-13J-4 General Procedure and Administration
4.1. To claim this credit, a taxpayer must comply with the provisions of W. Va. Code ' 11-13K-1 et seq. and this rule, and must timely provide complete and accurate forms, schedules and other information required by the Tax Commissioner.
4.2. When applying for this credit, a taxpayer is also subject to the provisions of W. Va. Code ''11-21-1 et seq. (personal income tax) or 11-24-1 et seq. (corporation net income tax) and rules issued pursuant to those statutes, as well as to the provisions of W. Va. Code '11-10-1 et seq. (Procedure and Administration) which provide for administration of those taxes.
4.3. In order to use this credit, the taxpayer must submit with the appropriate tax return adequate proof of entitlement to the credit for each and every item for which credit is claimed. Adequate proof consists of:
4.3.1. Proof of purchase, which must be legible, complete and sufficiently specific to clearly identify the item as (1) one of the items listed in subsection 2.1 of this rule, and (2) purchased by the taxpayer;
4.3.2. Certification in a notarized statement by the taxpayer that the item meets the two requirements of subdivision 4.3.1 of this section, and was purchased, and will be used exclusively, for the taxpayer's agricultural operations in West Virginia; and
4.3.3. Certification in writing by the Commissioner of Agriculture that each item purchased is in fact qualified agricultural equipment listed in subdivision 2.1.1 of section 2 of this rule, except that
4.3.3.1. Advanced technology pesticide and fertilizer application equipment must instead be certified in writing by the West Virginia Division of Environmental Protection, and
4.3.3.2. Mortality incinerators must instead be certified in writing by the Air Pollution Control Commission.
110CSR13J
Series 13KK West Virginia Tax Credit for Federal Excise Tax Imposed Upon Small Arms and Ammunition Manufacturers
W. Va. Code R. § 110-13KK-1 General
1.1. Scope. -- This legislative rule establishes the procedures for applying for and claiming the West Virginia Tax Credit for Federal Excise Tax Imposed Upon Small Arms and Ammunition Manufacturers, and sets forth the methodology the Tax Commissioner will use to administer the West Virginia Tax Credit for Federal Excise Tax Imposed Upon Small Arms and Ammunition Manufacturers.
1.2. Authority. -- W. Va. Code §11-10-5 and W. Va. Code §11-13KK-13.
1.3. Filing Date. -- July 1, 2022.
1.4. Effective Date. -- July 1, 2022.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on August 1, 2027.
W. Va. Code R. § 110-13KK-2 Definitions
2.1. General Rule. -- Unless a specific definition is provided in section 2.2 of this section heading, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §11-13KK-1, et seq., §11-10-1, et seq., §11-21-1, et seq., and §11-24-1, et seq.
2.2. Terms defined.
2.2.1. “Affiliated group” means any affiliated group within the meaning of section 1504(a) of the Internal Revenue Code, or any similar group defined under a similar provision of state, local, or foreign law, except that section 1504 of the Internal Revenue Code shall be applied by substituting “more than 50 percent” for “at least 80 percent” each place it appears in that section.
2.2.2. “Business” means small arms or ammunition manufacturing business activity, which is or may be classified under the North American Industry Classification System with a six-digit code for a product produced at a facility under code numbers 332992 or 332994 as they are defined on January 1, 2021, which is engaged in by any person in this state that is taxable under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq.
2.2.3. “Business expansion” means capital investment in a new or expanded small arms or ammunition manufacturing facility in this state, which is or may be classified under the North American Industry Classification System with a six-digit code for a product produced at a facility under code numbers 332992 or 332994 as they are defined on January 1, 2021.
2.2.4. “Commissioner” or “Tax Commissioner” are used interchangeably in this rule and mean the Tax Commissioner of the State of West Virginia, or his or her designee.
2.2.5. “Controlled group of corporations” means a controlled group of corporations as defined in section 1563(a) of the Internal Revenue Code.
2.2.6. “Corporation” means any corporation, joint-stock company, association, or other entity treated as a corporation for federal income tax purposes, and any business conducted by a trustee or trustees wherein interest or ownership is evidenced by a certificate of interest or ownership or similar written instrument.
2.2.7. “Designee” in the phrase “his or her designee,” when used in reference to the Tax Commissioner, means any officer or employee of the State Tax Department duly authorized by the Commissioner directly, or indirectly by one or more redelegations of authority, to perform the functions mentioned or described in this rule.
2.2.8. “Eligible taxpayer” means any person who makes a qualified investment in a new or expanded small arms and ammunition manufacturing facility located in this state and who is subject to any of the taxes imposed by W. Va. Code §11-21-1, et seq. or §11-24-1, et seq.
2.2.9. “Expanded facility” means any small arms and ammunition manufacturing facility, other than a new or replacement business facility, resulting from the acquisition, construction, reconstruction, installation, or erection of improvements or additions to existing property if the improvements or additions are purchased on or after July 1, 2021, but only to the extent of the taxpayer’s qualified investment in the improvements or additions.
2.2.10. “Federal excise tax” means all excise taxes paid to the government of the United States under section 4181 of Title 26 of the Internal Revenue Code imposed upon manufacturers, producers, or importers for the sale of pistols, revolvers, firearms (other than pistols and revolvers), shells and cartridges.
2.2.11. “Includes” and “including,” when used in a definition contained in this rule, shall not be considered to exclude other things otherwise within the meaning of the term defined.
2.2.12. “Leased property” does not include property that the taxpayer is required to show on its books and records as an asset under generally accepted principles of financial accounting. If the taxpayer is prohibited from expensing the lease payments for federal income tax purposes, the property shall be treated as purchased property under this section.
2.2.13. “New small arms and ammunition manufacturing facility” means a business facility which satisfies all the following requirements:
2.2.13.a. The facility is employed by the taxpayer in the conduct of a small arms and ammunition manufacturing activity, the net income of which is or would be taxable under W. Va. Code §§11-21-1, et seq., or 11-24-1, et seq. The facility is not considered a new small arms and ammunition manufacturing facility in the hands of the taxpayer if the taxpayer’s only activity with respect to the facility is to lease it to another person or persons; and
2.2.13.b. The facility is purchased by, or leased to, the taxpayer on or after July 1, 2021; and
2.2.13.c. The facility was not purchased or leased by the taxpayer from a related person. The Commissioner may waive this requirement if the facility was acquired from a related party for its fair market value and the acquisition was not tax motivated; and
2.2.13.d. The facility was not in service or use during the 90 days immediately prior to transfer of the title to the facility or prior to the commencement of the term of the lease of the facility.
2.2.14. “New property” means:
2.2.14.a. Property, the construction, reconstruction, or erection of which is completed on or after July 1, 2021, and placed in service or use after that date; and
2.2.14.b. Property leased or acquired by the taxpayer that is placed in service or use in this State on or after July 1, 2021, if the original use of the property commences with the taxpayer and commences after that date.
2.2.15. “Original use” means the first use to which the property is put, whether or not the use corresponds to the use of the property by the taxpayer.
2.2.16. “Partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, which is treated as a partnership for federal income tax purposes, and that is not a trust or estate, a corporation, or a sole proprietorship.
2.2.17. “Partner” includes a member of a partnership as defined in this rule.
2.2.18. “Person” includes any natural person, corporation, or partnership.
2.2.19. “Property purchased or leased for business expansion” shall be treated as follows for purposes of this credit.
2.2.19.a. Included property. -- Except as provided in subdivision b of this subsection, the term “property purchased or leased for business expansion” means real property and improvements thereto, and tangible personal property, but only if the real or personal property was constructed, purchased, or leased and placed in service or use by the taxpayer for use as a component part of a new or expanded small arms and ammunition manufacturing facility as defined in this section heading, which is located within the State of West Virginia. This term includes only:
2.2.19.a.1. Real property and improvements thereto having a useful life of four or more years, placed in service or use on or after July 1, 2021, by the taxpayer.
2.2.19.a.2. Real property and improvements thereto acquired by written lease having a primary term of 10 or more years and placed in service or use by the taxpayer on or after July 1, 2021.
2.2.19.a.3. Tangible personal property placed in service or use by the taxpayer on or after July 1, 2021, with respect to which depreciation, or amortization in lieu of depreciation, is allowable in determining the personal or corporation net income tax liability of the business taxpayer under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq., and which has a useful life, at the time the property is placed in service or use in this state, of four or more years.
2.2.19.a.4. Tangible personal property acquired by written lease having a primary term of 4 (four) years or longer, that commenced and was executed by the parties thereto on or after July 1, 2021, if used as a component part of a new or expanded small arms and ammunition manufacturing business facility, shall be included within this definition.
2.2.19.a.5. Tangible personal property owned or leased and used by the taxpayer at a business location outside this state that is moved into the State of West Virginia on or after July 1, 2021, for use as a component part of a new or expanded small arms and ammunition manufacturing facility located in this state.
2.2.19.a.5.A. If the property is owned, it must be depreciable or amortizable personal property for income tax purposes and have a useful life of four or more years remaining at the time it is placed in service or use in this state.
2.2.19.a.5.B. If the property is leased, the primary term of the lease remaining at the time the leased property is placed in service or use in this state, must be four or more years.
2.2.19.b. Excluded property. -- The term “property purchased or leased for business expansion” does not include:
2.2.19.b.1. Repair costs, including the cost of materials used in the repair, unless for federal income tax purposes the cost of the repair must be capitalized and not expensed.
2.2.19.b.2. Airplanes and helicopters.
2.2.19.b.3. Property that is primarily used outside this state, with use being determined based upon the amount of time the property is actually used both within and outside this state.
2.2.19.b.4. Property which is acquired incident to the purchase of the stock or assets of the seller, unless for good cause shown, the Tax Commissioner consents to waiving this requirement.
2.2.19.b.5. Purchased or leased property, the cost or consideration for which cannot be quantified with any reasonable degree of accuracy at the time the property is placed in service or use.
2.2.19.b.5.A. If the contract of purchase specifies a minimum purchase price or minimum annual rent, the amount thereof shall be used to determine the qualified investment in the property under W. Va. Code §11-13KK-6 and this rule, if the property otherwise qualifies as property purchased or leased for expansion of a small arms and ammunition manufacturing facility.
2.2.19.b.5.B. If the contract of lease specifies a minimum purchase price or minimum annual rent, the amount thereof shall be used to determine the qualified investment in the property under W. Va. Code §11-13KK-6 and this rule, if the property otherwise qualifies as property purchased or leased for expansion of a small arms and ammunition manufacturing facility.
2.2.20. “Purchase” means any acquisition of property, but only if:
2.2.20.a. The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of deductions under section 267 or 707 (b) of the United States Internal Revenue Code.
2.2.20.b. The property is not acquired by one component member of an affiliated or controlled group from another component member of the same affiliated or controlled group, as applicable. The Tax Commissioner may waive this requirement if the property was acquired from a related party for its then fair market value; and
2.2.20.c. The basis of the property for federal income tax purposes, in the hands of the person acquiring it, is not determined:
2.2.20.c.1. In whole or in part, by reference to the federal adjusted basis of the property in the hands of the person from whom it was acquired; or
2.2.20.c.2. Under Section 1014(e) of the United States Internal Revenue Code.
2.2.21. “Qualified activity” means any small arms and ammunition manufacturing business activity subject to any of the taxes imposed by W. Va. Code §11-21-1, et seq., or §11-24-1, et seq., which is or may be classified under the North American Industry Classification System with a six-digit North American Industry Classification System code for a product produced at a facility with code numbers 332992 or 332994 as they are defined on January 1, 2021.
2.2.22. “Related person” means:
2.2.22.a. A corporation, partnership, association, or trust controlled by the taxpayer;
2.2.22.b. An individual, corporation, partnership, association, or trust that is in control of the taxpayer;
2.2.22.c. A corporation, partnership, association, or trust controlled by an individual, corporation, partnership, association, or trust that is in control of the taxpayer; or
2.2.22.d. A member of the same affiliated or controlled group as the taxpayer.
2.2.22.e. The term “control” means the following.
2.2.22.e.1. For purposes of this subsection, “control,” with respect to a corporation, means ownership, directly or indirectly, of stock possessing 50 percent or more of the total combined voting power of all classes of the stock of the corporation entitled to vote.
2.2.22.e.2. “Control,” with respect to a trust, means ownership, directly or indirectly, of 50 percent or more of the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association, or of a beneficial interest in a trust is determined in accordance with the rules for constructive ownership of stock provided in section 267(c) of the United States Internal Revenue Code, other than paragraph (3) of that section.
2.2.23. “Replacement small arms and ammunition manufacturing facility” means any property (other than an expanded small arms and ammunition manufacturing facility) that replaces or supersedes any other property located within this state that:
2.2.23.a. The taxpayer or a related person used in or in connection with any small arms and ammunition manufacturing facility for more than 2 (two) years during the period of 5 consecutive years ending on the date the replacement or superseding property is placed in service by the taxpayer; or
2.2.23.b. Is not used by the taxpayer or a related person in or in connection with any small arms and ammunition manufacturing facility for a continuous period of 1 (one) year or more commencing with the date the replacement or superseding property is placed in service by the taxpayer.
2.2.24. “Small arms and ammunition manufacturing” refers to a facility that is or may be classified under the North American Industry Classification System with a six-digit North American Industry Classification System code for a product produced at a facility with code numbers 332992 or 332994 as they are defined on January 1, 2021.
2.2.25. “Small arms and ammunition manufacturing business” means a business primarily engaged in this state in small arms or ammunition manufacturing that is or may be classified under the North American Industry Classification System with a six-digit North American Industry Classification System code for a product produced at a facility with code numbers 332992 or 332994 as they are defined on January 1, 2021.
2.2.26. “Small arms and ammunition manufacturing facility” means any factory, mill, plant, warehouse, building, or complex of buildings located within this state, including the land on which it is located, and all machinery, equipment, and other real and personal property located at or within the facility, used in connection with the operation of the facility, and all site preparation and start-up costs of the taxpayer for the small arms and ammunition manufacturing facility, which is or may be classified under the North American Industry Classification System with a six-digit North American Industry Classification System code for a product produced at a facility with code numbers 332992 or 332994 as they are defined on January 1, 2021, and that it capitalizes for federal income tax purposes in a business that is taxable in this state.
2.2.27. “Taxpayer” means any person subject to any of the taxes imposed by W. Va. Code §11-21-1, et seq., or §11-24-1, et seq.
2.2.28. “The code” means the Code of West Virginia, 1931, as amended.
2.2.29. “This state” means the State of West Virginia.
2.2.30. “United States Internal Revenue Code” or “I.R.C.” means the Internal Revenue Code 182 as defined in W. Va. Code §11-21-1, et seq. or §11-24-1, et seq.
2.2.31. “Used property” means property acquired after June 30, 2021, that is not “new property.”
W. Va. Code R. § 110-13KK-3 The amount of credit
3.1. Credit allowed. -- Eligible taxpayers are allowed a credit against the portion of taxes imposed by this state that are attributable to and the consequence of the taxpayer’s qualified investment in a new or expanded small arms and ammunition manufacturing facility in this state.
3.1.1. The qualified investment must be equal to or greater than $2 million.
3.1.2. The amount of this credit is determined and applied as provided in W. Va. Code §11-13KK-1, et seq., and this rule.
3.1.3. The amount of this credit claimed for any taxable year cannot exceed the amount of federal excise tax paid or payable to the government of the United States under section 4181 of Title 26 of the Internal Revenue Code, after application of any federal credits that may have been claimed.
3.2. Amount of credit. -- The amount of credit allowable is 100 percent of the amount of federal excise tax paid in a tax year under section 4181, Title 26 of the Internal Revenue Code, which is attributable to and the consequence of the taxpayer’s qualified investment.
3.2.1. Threshold for the credit. -- No credit shall be allowed under W. Va. Code §11-13KK-1, et seq., or this rule unless the taxpayer has invested at least $2 million in property purchased or leased for business expansion during the tax year for which the credit is claimed.
3.2.2. It is the intent of W. Va. Code §11-13KK-1, et seq., that a qualified taxpayer makes and continuously maintains a minimum capital investment in a qualified munitions manufacturing facility of no less than $2 million. The sole purpose of the capital investment portion of W. Va. Code §11-13KK-1, et seq., is to determine whether the $2 million threshold requirement is met in every operational year based on a rolling 10 year time span for creation and extinguishment for measurement of capital investment.
3.2.2.a. If the $2 million capital investment threshold is met or exceeded in any given tax year, then the taxpayer is authorized to apply the annual dollar for dollar W. Va. Code §11-13KK-1, et seq. tax credit against corporation net income tax or personal income tax, as applicable, in the amount of federal excise tax paid pursuant to 26 U.S.C. 4181.
3.2.2.b. If the $2 million threshold has not been met, then the taxpayer may not apply the annual tax credit in the amount of the federal excise tax paid each year.
3.2.2.c. Under §11-13KK-5, the statute contemplates placement of potential qualified investment in service or use in each taxable year. Therefore, the $2 million threshold is an ongoing determination, with each year contributing a new layer of capital investment over a 10 year time span.
Year 1 investment is counted from year 1 to year 10 Year 2 investment is counted from year 2 to year 11 Year 3 investment is counted from year 3 to year 12 etc.
A taxpayer cannot gain entitlement to the credit until at least $2 million of accumulated qualified investment is in place.
3.2.2.c.1. EXAMPLE: If the taxpayer meets the $2 million threshold in year 1, then the taxpayer can apply the credit beginning in year 1. If the qualified investment is made in phases such that the $2 million threshold qualified investment is not in place until a later year, the taxpayer may begin taking the tax credit in the year when the $2 million threshold is met, based on the qualified investment made in the current year, combined with investments placed in service or use in the prior 10 years (under the 10 year rolling measurement system), provided that all other requirements of W. Va. Code §11-13KK-1, et seq., are met, including the filing for of an application for credit.
3.2.2.c.2. The tax credit set forth in W. Va. Code §11-13KK-1, et seq., uses a 10 year rolling measurement of qualified investment to determine that at least $2 million of capital is continuously in place in the facility.
3.2.2.d. If the $2 million threshold is reached or exceeded, then the taxpayer is authorized to take the annual W. Va. Code §11-13KK-1, et seq., tax credit, the amount of which is an annual dollar for dollar offset of West Virginia income taxes, in the amount of federal excise tax paid in each taxable year on manufacture of certain firearms and ammunition, pursuant to 26 U.S.C. §4181.
3.2.3. Nothing in this subsection shall prevent the taxpayer from making a subsequent $2 million investment and claiming an additional credit during a subsequent tax year.
3.3. Application of credit over 10 years. -- The amount of credit allowable shall be taken over a 10 year period, beginning with the taxable year in which the taxpayer places the qualified investment in service or use in this state that is used to reach the $2 million threshold.
3.3.1. The taxpayer may elect to delay the beginning of the 10 year period until the next succeeding taxable year.
3.3.1.a. This election shall be made in the annual income tax return filed for the taxable year in which qualified investment is first placed into service or use by the taxpayer.
3.3.1.b. Once made, the election cannot be revoked.
3.3.2. The annual credit allowance is taken in the manner prescribed in W. Va. Code §11-13KK-4 and this rule.
3.4. Placed in service or use. -- For purposes of the credit allowed by W. Va. Code §11-13KK-1, et seq., and this section heading, property is considered placed in service or use in the earlier of the following taxable years:
3.4.1. The taxable year in which, under the taxpayer’s depreciation practice, the period for depreciation with respect to the property begins; or
3.4.2. The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function.
W. Va. Code R. § 110-13KK-4 Application of the credit
4.1. In general. -- The amount determined under W. Va. Code §11-13KK-3 and this rule is allowed as a credit against 100 percent of that portion of the taxpayer’s state tax liability that is attributable to and the direct result of the taxpayer’s qualified investment and applied as provided in subsections 1 and 2, both inclusive of this section, and in that order.
4.1.1. Corporation net income taxes. --
4.1.1.a. That portion of the allowable credit attributable to qualified investment in a small arms and ammunition manufacturing facility may be applied to reduce the taxes imposed by W. Va. Code §11-24-1, et seq., for the taxable year as determined before application of allowable credits against tax.
4.1.1.b. If the taxes due under W. Va. Code §11-24-1, et seq., as determined before application of allowable credits against tax, are not solely attributable to and the direct result of the taxpayer’s qualified investment in a small arms and ammunition manufacturing business, the amount of the taxes that is attributable is determined by multiplying the amount of taxes due under W. Va. Code §11-24-1, et seq., for the taxable year, as determined before application of allowable credits against tax, by a fraction, the numerator of which is all wages, salaries, and other compensation paid during the taxable year to all employees of the taxpayer employed in this state whose positions are directly attributable to the qualified investment, and the denominator of which is the wages, salaries, and other compensation paid during the taxable year to all employees of the taxpayer employed in this state.
4.1.2 Personal income taxes. --
4.1.2.a. If the person making the qualified investment in a small arms and ammunition manufacturing facility is an electing small business corporation, as defined in section 1361 of the United States Internal Revenue Code, a partnership, a limited liability company that is treated as a partnership for federal income tax purposes, or a sole proprietorship, then any unused credit is allowed as a credit against the taxes imposed by W. Va. Code §11-21-1, et seq., on the income from the small arms and ammunition manufacturing facility, or on income of a sole proprietor attributable to the small arms and ammunition manufacturing facility.
4.1.2.b. Electing small business corporations, limited liability companies treated as partnerships for federal income tax purposes, partnerships, and other unincorporated organizations shall allocate the credit against the income tax imposed by W. Va. Code §11-21-1, et seq., among its members in the same manner as profits and losses are allocated for the taxable year.
4.1.2.c. If the amount of taxes attributable to business activity due under W. Va. Code §11-21-1, et seq., as determined before application of allowable credits against tax, is not solely attributable to and the direct result of the qualified investment of the electing small business corporation, limited liability company treated as a partnership for federal income tax purposes, other unincorporated organization, or sole proprietorship, the amount of the taxes that are so attributable are determined by multiplying the amount of taxes due under W. Va. Code §11-21-1, et seq., as determined before application of allowable credits against tax that are attributable to business activities by a fraction, the numerator of which is all wages, salaries, and other compensation paid during the taxable year to all employees of the electing small business corporation, limited liability company, partnership, other unincorporated organization, or sole proprietorship employed in this state, whose positions are directly attributable to the qualified investment, and the denominator of which is the wages, salaries, and other compensation paid during the taxable year to all employees of the taxpayer.
4.1.2.d. No credit is allowed under this section against any employer withholding taxes imposed by W. Va. Code §11-21-1, et seq.
4.2. If the wages, salaries, and other compensation fraction formula provisions of subsections 1 and 2 of this section, inclusive, do not fairly represent the taxes solely attributable to and the direct result of qualified investment of the taxpayer, then the Tax Commissioner may require, in respect to all or any part of the taxpayer’s businesses or activities, if reasonable:
4.2.1. Separate accounting or identification;
4.2.2. Adjustment to the wages, salaries, and other compensation fraction formula to reflect all components of the tax liability;
4.2.3. The inclusion of one or more additional factors that will fairly represent the taxes solely attributable to and the direct result of the qualified investment of the taxpayer and all other project participants in the businesses or other activities subject to tax; or
4.2.4. The employment of any other method to effectuate an equitable attribution of the taxes.
4.3. Unused credit. -- If any credit remains after application of section 1 of this section heading, the amount thereof is carried forward to each ensuing tax year until used or until the expiration of the tenth taxable year subsequent to the end of the initial 10 year credit application period.
4.3.1. If any unused credit remains after the 20th year, the amount thereof is forfeited.
4.3.2. No carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.
W. Va. Code R. § 110-13KK-5 Qualified investment
5.1. General. -- The qualified investment in property purchased or leased for a new, or expansion of an existing, small arms and ammunition manufacturing facility is the applicable percentage of the cost of each property purchased or leased for the purpose of the new, or expansion of an existing, small arms and ammunition manufacturing facility that is placed in service or use in this state by the taxpayer during the taxable year.
5.1.1. Applicable percentage. -- For the purposes of section 1 of this subject heading, the applicable percentage of any property is determined pursuant to the following table:
5.1.1.a. Table.
If useful life is: The applicable percentage is:
Less than four years 0% Four years or more but less than six years 33 1/3% Six years or more but less than eight years 66 2/3% Eight years or more 100%
5.1.1.b. The useful life of any property, for purposes of this section heading, is determined as of the date the property is first placed in service or use in this state by the taxpayer, determined in accordance with the provisions of W. Va. Code §11-13KK-4 and this rule.
5.2. Cost. -- For purposes of section 1 of this section heading, the cost of each property purchased for a new, or expansion of an existing, small arms and ammunition manufacturing facility is determined under the following rules:
5.2.1. Trade-ins. -- Cost does not include the value of property given in trade or exchange for the property purchased for a new, or expansion of an existing, small arms and ammunition manufacturing facility.
5.2.2. Damaged, destroyed, or stolen property. -- If property is damaged or destroyed by fire, flood, storm, or other casualty, or is stolen, then the cost of replacement property does not include any insurance proceeds received in compensation for the loss.
5.2.3. Rental property. --
5.2.3.a. The cost of real property acquired by written lease for a primary term of 10 years or longer is 100 percent of the rent reserved for the primary term of the lease, not to exceed 20 years.
5.2.3.b. The cost of tangible personal property acquired by written lease for a primary term of:
5.2.3.b.1. Four years, or longer, is one third of the rent reserved for the primary term of the lease;
5.2.3.b.2. Six years, or longer, is two thirds of the rent reserved for the primary term of the lease; or
5.2.3.b.3. Eight years, or longer, is 100 percent of the rent reserved for the primary term of the lease, not to exceed 20 years.
5.2.3.c. In no event may rent reserved include rent for any year subsequent to expiration of the book life of the equipment, determined using the straight-line method of depreciation.
5.2.4. Self-constructed property. -- In the case of self-constructed property, the cost thereof is the amount properly charged to the capital account for depreciation in accordance with federal income tax law.
5.2.5. Transferred property. -- The cost of property used by the taxpayer out-of-state and then brought into this state, is determined based on the remaining useful life of the property at the time it is placed in service or use in this state,
5.2.5.a. The cost is the original cost of the property to the taxpayer less straight-line depreciation allowable for the tax years or portions thereof the taxpayer used the property outside this state.
5.2.5.b. In the case of leased tangible personal property, cost is based on the period remaining in the primary term of the lease after the property is brought into this state for use in a new or expanded business facility of the taxpayer, and is the rent reserved for the remaining period of the primary term of the lease, not to exceed 20 years, or the remaining useful life of the property, as determined as aforesaid, whichever is less.
W. Va. Code R. § 110-13KK-6 Forfeiture of unused tax credits; redetermination of credit allowed
6.1. Disposition of property or cessation of use. -- If, during any taxable year, property with respect to which a tax credit has been allowed under W. Va. Code §11-13KK-1, et seq., and this rule is disposed of or ceases to be used in a small arms and ammunition manufacturing facility of the taxpayer in this state, then the unused portion of the credit allowed for the property is forfeited for the taxable year and all ensuing years, except when the property is damaged or destroyed by fire, flood, storm, or other casualty, or is stolen.
6.2. Cessation of operation of small arms and ammunition manufacturing facility. -- If, during any taxable year, the taxpayer ceases operation of a small arms and ammunition manufacturing facility in this state for which credit was allowed under W. Va. Code §11-13KK-1, et seq., then the unused portion of the allowed credit is forfeited for the taxable year and for all ensuing years, except when the cessation is due to fire, flood, storm, or other casualty.
W. Va. Code R. § 110-13KK-7 Transfer of qualified investment to successors
7.1. Mere change in form of business. -- Property will not be treated as disposed of under W. Va. Code §11-13KK-8 or this rule, by reason of a mere change in the form of conducting the business, as long as the property is retained in the successor’s small arms and ammunition manufacturing facility in this state, and the transferor business retains a controlling interest in the successor business. The successor business may claim the amount of credit still available with respect to the business facility or facilities transferred.
7.2. Transfer or sale to successor. -- Property is not treated as disposed of under W. Va. Code §11-13KK-8 or this rule by reason of any transfer or sale to a successor business that continues to operate the small arms and ammunition manufacturing facility in this state. Upon transfer or sale, the successor shall acquire the amount of credit that remains available under this article for each subsequent taxable year.
W. Va. Code R. § 110-13KK-8 Identification of investment credit property
8.1. Every taxpayer who claims credit under W. Va. Code §11-13KK-1, et seq., and this rule shall maintain sufficient records to establish the following facts for each item of qualified property:
8.1.1. The identity of the qualified property;
8.1.2. The actual or reasonably determined cost of the qualified property;
8.1.3. The straight-line depreciation life of the qualified property;
8.1.4. The month and taxable year in which the qualified property was placed in service;
8.1.5. The amount of credit taken with respect to the qualified property;
8.1.6. The date the qualified property was disposed of or otherwise ceased to be used as qualified property in the small arms and ammunition manufacturing facility of the taxpayer; and
8.1.7. The amounts and dates of federal excise tax paid.
W. Va. Code R. § 110-13KK-9 Failure to keep records of investment credit property
9.1. A taxpayer who does not keep the records required for identification of investment credit property is subject to the following rules:
9.1.1. A taxpayer is treated as having disposed of during the taxable year any investment credit property that the taxpayer cannot establish was still on hand, in this state, at the end of that year.
9.1.2. If a taxpayer cannot establish when investment credit property reported for purposes of claiming this credit during the taxable year was placed in service, the taxpayer is treated as having placed it in service in the most recent prior year in which similar property was placed in service, unless the taxpayer can establish that the property placed in service in the most recent year is still on hand. In that event, the taxpayer will be treated as having placed the returned property in service in the next most recent year.
W. Va. Code R. § 110-13KK-10 Interpretation and construction
10.1. No inference, implication, or presumption of legislative construction or intent may be drawn or made by reason of the location or grouping of any particular section, provision, or portion of this rule; and no legal effect may be given to any descriptive matter or heading relating to any section, subsection, paragraph, part, or item of this rule.
10.2. The provisions of this rule shall be reasonably construed in order to effectuate the legislative intent recited in W. Va. Code §11-13KK-1.
W. Va. Code R. § 110-13KK-11 Burden of proof; application required; failure to make timely application
11.1. Burden of proof. -- The burden of proof is on the taxpayer to establish by clear and convincing evidence that the taxpayer is entitled to the benefits allowed by W. Va. Code §11-13KK-1, et seq., and this rule.
11.2. Application for credit required. --
11.2.1. Application required. -- No credit is allowed or may be applied under W. Va. Code §11-13KK-1, et seq., or this rule for any qualified investment property placed in service or use until the person asserting a claim for the allowance of credit under W. Va. Code §11-13KK-1, et seq., and this rule makes written application to the Tax Commissioner for allowance of credit as provided in this section heading.
11.2.1.a. An application for credit shall be filed, in the form prescribed by the Tax Commissioner, no later than the last day for filing the tax returns, determined by including any authorized extension of time for filing the return, required under W. Va. Code §11-21-1, et seq., or §11-24-1, et seq, for the taxable year in which the property to which the credit relates is placed in service or use. The form to apply for the credit is available online at https://tax.wv.gov.
11.2.1.b. All information required by the form shall be provided, or the application will be rejected.
11.2.2. Failure to make timely application. -- Failure to timely apply for the credit results in forfeiture of 50 percent of the annual credit allowance otherwise allowable under W. Va. Code §11-13KK-1, et seq., and this rule. This penalty applies annually until the application is filed.
W. Va. Code R. § 110-13KK-12 Tax credit review and accountability
12.1. Beginning on February 1, 2026, and every fifth year thereafter, the Tax Commissioner shall submit to the Governor, the President of the Senate, and the Speaker of the House of Delegates a tax credit review and accountability report evaluating the cost effectiveness of this credit during the most recent 5 year period for which information is available. The criteria to be evaluated shall include, but not be limited to, for each year of the 5 year period:
12.1.1. The numbers of taxpayers claiming the credit;
12.1.2. The moneys invested, and net number of new jobs created, by all taxpayers claiming the credit;
12.1.3. The cost of the credit;
12.1.4. The cost of the credit per new job created; and
12.1.5. A comparison of employment trends for the industry and for taxpayers within the industry that claim the credit.
12.2. Taxpayers claiming the credit shall provide any information the Tax Commissioner may require to prepare the report required by this section; the information provided is subject to the confidentiality and disclosure provisions of W. Va. Codea§11-10-5d.
12.3. On or before February 1, 2026, the Department of Commerce, in consultation with the Tax Commissioner, the Department of Transportation, and the Department of Environmental Protection, shall submit to the Governor, the President of the Senate, and the Speaker of the House of Delegates a report of the impact of all the tax credits and other economic incentives provided in W. Va. Code §11-13KK-1, et seq., upon;
12.3.1. Economic development in this state, including, but not limited to, the moneys invested and jobs created in this state;
12.3.2. The state’s infrastructure, including, but not limited to, the need for construction or maintenance of the roads and highways of the state;
12.3.3. The natural resources of the state; and
12.3.4. Public and private property interests in the state.
W. Va. Code R. § 110-13KK-13 General procedure and administration
13.1. Each provision of the “West Virginia Tax Procedure and Administration Act” set forth in W. Va. Code §11-10-1, et seq., applies to the tax credit allowed under W. Va. Code §11-13KK-1, et seq., except as otherwise expressly provided in W. Va. Code §11-13KK-1, et seq., and this rule with like effect as if that act were applicable only to the tax credit allowed by W. Va. Code §11-13KK-1, et seq., and this rule and were set forth in extenso in W. Va. Code §11-13KK-1, et seq., and this rule.
13.2. The provisions of W. Va. Code §11-10-5EE shall not be interpreted in such a way as to prevent any otherwise eligible taxpayer from claiming both the credit set forth by W. Va. Code §11-13KK-1, et seq., and this rule, and any credit available against the federal excise tax paid to the government of the United States under section 4181 of Title 26 of the Internal Revenue Code.
13.3. Although the $2 million qualified investment threshold measurement of this credit is similar to the measure of qualified investment used for the manufacturing investment and other tax credits, calculation and amount of the W. Va. Code §11-13KK-1, et seq., tax credit is not based on the amount of qualified investment. The W. Va. Code §11-13KK-1, et seq., tax credit is based on the dollar amount of annual federal excise tax paid. Therefore, the prohibition of W. Va. Code §11-10-5ee (SB 532 (2021 Regular Legislative Session)) does preclude simultaneous application of the W. Va. Code §11-13S-1, et seq., manufacturing investment tax credit or W. Va. Code §11-13Q-1, et seq., economic opportunity tax credit, and the W. Va. Code §11-13KK-1, et seq., tax credit.
W. Va. Code R. § 110-13KK-14 Crimes and penalties
Each provision of the “West Virginia Tax Crimes and Penalties Act” set forth in W. Va. Code §11-9-1, et seq., applies to the tax credit allowed by §11-13KK-1, et seq., and this rule with like effect as if that act were applicable only to the tax credit set forth in W. Va. Code §11-13KK-1, et seq., and this rule and were set forth in extenso in W. Va. Code §11-13KK-1, et seq., and this rule.
W. Va. Code R. § 110-13KK-15 Severability
15.1. If any provision of W. Va. Code §11-13KK-1, et seq. or this rule, or the application thereof, is for any reason adjudged by any court of competent jurisdiction to be invalid, the judgment may not affect, impair, or invalidate the remainder of W. Va. Code §11-13KK-1, et seq. or this rule, but shall be confined in its operation to the provision thereof directly involved in the controversy in which the judgment shall have been rendered, and the applicability of the provision to other persons or circumstances may not be affected thereby.
15.2. If any provision of W. Va. Code §11-13KK-1, et seq. or this rule, or the application thereof, is made invalid or inapplicable by reason of the repeal or any other invalidation of any statute, section, or portion therein addressed or referred to, such invalidation or inapplicability may not affect, impair, or invalidate the remainder of W. Va. Code §11-13KK-1, et seq. or this rule, but shall be confined in its operation to the provision thereof directly involved with, pertaining to, addressing, or referring to the statute, section, or portion, and the application of the provision with regard to other statutes, sections, or portions or in other instances not affected by any such repealed or invalid statute, section, or portion may not be abrogated or diminished in any way.
W. Va. Code R. § 110-13KK-16 Effective date
The credit allowed by W. Va. Code §11-13KK-1, et seq., and this rule is allowable for qualified investment property placed in service or use on or after July 1, 2021.
110CSR13KK
Series 13X West Virginia Film Industry Investment Act
W. Va. Code R. § 110-13X-1 General
1.1. Scope. -- This Legislative Rule is promulgated to provide for the general administration of the West Virginia Film Industry Investment Act, W. Va. Code §11-13X-1, et seq. This Rule carries out the policy and purposes of the Statute, provides necessary clarification of the provisions of the Statute, and provides for the general administration of the Statute.
1.2. Authority. -- W. Va. Code §§11-13X-9, 11-10-5 and 11-10-5d(f).
1.3. Filing Date. -- April 24, 2023.
1.4. Effective Date. -- April 24, 2023.
1.5. Sunset Provision. ‑‑ This rule shall terminate and have no further force or effect upon August 1, 2028.
W. Va. Code R. § 110-13X-2 Definitions
2.1. “Commercial” (not a “qualified project”) means television advertising, movie theater advertising, or computer advertising produced and paid for by a promoter, underwriter or sponsor, for the purpose of promoting, or marketing a product or service, including public service programming.
2.2. "Commercial exploitation” means reasonable intent for public viewing for the delivery medium used.
2.3. “Controlled group” means one or more chains of corporations connected through stock ownership with a common parent corporation, if stock possessing at least fifty percent of the voting power of all classes of stock of each of the corporations is owned directly or indirectly by one or more of the corporations; and the common parent owns directly stock possessing at least fifty percent of the voting power of all classes of stock at least of the other corporations.
2.4. "Direct production expenditure" means a transaction that occurs in the state of West Virginia or with a West Virginia vendor, and includes:
2.4.1. Payment of wages, fees and costs for related fringe benefits provided for talent, management or labor that are subject to West Virginia income tax;
2.4.2. Payment to a personal services corporation for the services of a performing artist if:
2.4.2.a. The personal services corporation is subject to West Virginia income tax on those payments; and
2.4.2.b. The performing artist receiving the payments from the personal services corporation is subject to West Virginia income tax; and
2.4.3. Any of the following provided by a West Virginia vendor:
2.4.3.a. The story and scenario (script) to be used by a qualified project;
2.4.3.b. Set construction and operations, wardrobe, accessories and related services;
2.4.3.c. Photography, sound synchronization, lighting and related services;
2.4.3.d. Editing and related services;
2.4.3.e. Rental of facilities and equipment;
2.4.3.f. Leasing of vehicles;
2.4.3.g. Food or lodging;
2.4.3.h. Airfare if purchased through a West Virginia-based travel agency or travel company;
2.4.3.i. Insurance coverage and bonding if purchased through a West Virginia-based insurance agent; and
2.4.3.j. Other direct costs of producing a qualified project in accordance with generally accepted entertainment industry practices. “Direct production expenditure” shall not include depreciation of any item that has less than one full year of depreciable life, either a full year original depreciable life or a full year remaining depreciable life out of a partially depreciated asset, as determined for federal income tax purposes.
2.5. "Eligible company" means a person or business entity engaged in the business of producing film industry productions. The term excludes state agencies.
2.6. "Feature length" means in excess of forty minutes.
2.7. "Film industry production" means a qualified project intended for reasonable national or international commercial exploitation.
2.8. “Investor” means and includes any person or entity seeking to establish entitlement to the tax credit addressed in this rule, or any person or entity making expenditures, investments or purchases for which the purchaser, investor or taxpayer purports to directly or indirectly establish entitlement to the tax credit established in this rule.
2.9. "Loan-out corporation" means a company owned by one or more artists that provide the services of a performing artist to a payroll service company or a third-party production company, i.e., an eligible company for purposes of W. Va. Code §11-13X-1, et seq.
2.10. “Multi-state distribution” means reaching at least one other state besides West Virginia.
2.11. "Payroll service company" means a business engaged in outsourcing solutions for human resources, payroll, tax and benefits administration.
2.12. “Performing artist” means a person hired to perform services associated with the artist's particular craft in any department associated with a qualified project.
2.13. "Personal services corporation" means a company that performs services in the field of performing arts, among other fields, and meets ownership and service tests as determined by the Internal Revenue Service.
2.14. "Post-production expenditure" means a transaction that occurs in West Virginia or with a West Virginia vendor after the completion of principal photography, including editing and negative cutting, Foley recording and sound effects, automatic dialogue replacement (also known as ADR or dubbing), special effects or visual effects, including computer-generated imagery or other effects, scoring and music editing, sound editing, beginning and end credits, soundtrack production, subtitling or addition of sound or visual effects; but not including expenditure for advertising, marketing, distribution or expense payments.
2.15. “Purchaser” means and includes any person or entity seeking to establish entitlement to the tax credit addressed in this rule, or any person or entity making expenditures, investments or purchases for which the purchaser, investor or taxpayer purports to directly or indirectly establish entitlement to the tax credit established in this rule.
2.16. “Qualified project” means a feature length theatrical or direct-to-video motion picture, a made-for-television motion picture, a music video, commercial still photography, a television pilot program, a television series and a television mini-series that incurs a cumulative amount of $50,000 in a calendar year in direct production expenditures and post-production expenditures, as defined by this subsection, in West Virginia or any combination of projects not previously claimed that would qualify for the credit except for cost, and that combined meets or exceeds the cumulative amount of $50,000 in a calendar year. The term excludes news or current affairs programming, a weather or market program, a talk show, a sporting event or show, an awards show, a gala, a production that solicits funds, a home shopping program, a program that primarily markets a product or service, political advertising or a concert production.
2.16.1. A qualified project may be produced on any single media or multimedia program that:
2.16.1.a. Is fixed on film, digital medium, videotape, computer disk, laser disc or other similar delivery medium;
2.16.1.b. Can be viewed or reproduced;
2.16.1.c. Is not intended to and does not violate a provision of W. Va. Code §61-8C-1, et seq.;
2.16.1.d. Does not contain obscene matter or sexually explicit conduct, as defined by W. Va. Code §61-8A-1, et seq.;
2.16.1.e. Is intended for reasonable commercial exploitation for the delivery medium used whether delivery is in-state or multi-state distribution; and
2.16.1.f. Does not contain content that negatively portrays the State of West Virginia, as determined in the sole discretion of the Department of Economic Development.
2.17. “Related person” means a corporation, partnership, association or trust controlled by the taxpayer; or an individual, corporation, partnership, association or trust that is in control of the taxpayer.
2.18. "Tax Commissioner" means the West Virginia State Tax Commissioner or his or her designee.
2.19. “Taxpayer” means and includes any person or entity seeking to establish entitlement to the tax credit addressed in this rule, or any person or entity making expenditures, investments or purchases for which the purchaser, investor or taxpayer purports to directly or indirectly establish entitlement to the tax credit established in this rule.
2.20. "Television series" means a group of programs created or adapted for television broadcast with a common series title, usually related to one another in subject.
W. Va. Code R. § 110-13X-3 Amount of Tax Credit
3.1. Tax credit allowed. -- The amount of tax credit allowed to an eligible company is the amount specified under W. Va. Code §11-13X-1, et seq.
W. Va. Code R. § 110-13X-4 Requirements for Tax Credit; Application for Tax Credit
4.1. In order for any company to take a credit under W. Va. Code §11-13X-1, et seq., it shall comply with the following requirements:
4.1.1. Each qualified project must incur the cumulative amount, specified in the definition of “qualified project” set forth in W. Va. §11-13X-3, in expenditures in West Virginia or with a West Virginia vendor, or any combination of projects not previously claimed that would qualify for the credit except for cost, and that combined meets or exceeds the cumulative amount in a calendar year.
4.1.2. If the qualified project contains production credits, the eligible company shall agree, upon request by the Department of Economic Development, to recognize the State of West Virginia with the following acknowledgement in the end credit roll: "Filmed in West Virginia with assistance of the West Virginia Film Industry Investment Act";
4.1.3. Apply to the Department of Economic Development on forms and in the manner the Department of Economic Development may prescribe.
4.1.3.a. A company shall submit to the Department of Economic Development one (1) completed West Virginia Film Industry Investment Act eligibility application, with original signatures and attachments. The eligible company should submit an eligibility application as far in advance as possible prior to the first expenditure in West Virginia. However, an eligible company may submit an application at any time during production or after production. The Department of Economic Development may deny the application if it does not meet all eligibility requirements. Qualified costs incurred prior to the approval of an application are eligible for the incentive if approved.
4.1.3.b. The application shall include, but not be limited to:
4.1.3.b.1. A completed West Virginia Film Industry Investment Act eligibility application;
4.1.3.b.2. A copy of the script, or, for music videos or commercial still photography, a copy of the storyboards or shot lists;
4.1.3.b.3. Proof or status of financing or distribution arrangements;
4.1.3.b.4. A copy of the budget top sheet, which contains a dedicated column that identifies estimated direct production expenditures and post-production expenditures that will be incurred in West Virginia;
4.1.3.b.5. A signature and verification by the applicant or by a duly authorized representative of the applicant;
4.1.3.b.6. The full legal name and tax identification number of the applicant;
4.1.3.b.7. The applicant's physical address, mailing address and telephone number; and
4.1.3.b.8. A certified copy of the applicant’s certificate of incorporation, articles of organization, or other similar documents that verify the applicant is in good standing and registered to do business in the state of West Virginia.
4.1.3.c. Application forms may be obtained from the West Virginia Department of Economic Development.
4.1.4. Upon approval of an eligibility application, the eligible company shall begin production within one hundred twenty (120) days of approval, or shall otherwise forfeit the right to claim any tax credit for the approved qualified project. The forfeiture does not preclude the eligible company from resubmitting an eligibility application for the same project at a future date. Upon written request by the eligible company, and prior to the expiration of the one hundred twenty (120) day deadline, the Department of Economic Development may extend the deadline at its discretion.
4.2. The applicant shall submit to the Department of Economic Development information required by the Department of Economic Development to demonstrate conformity with the requirements of this section and shall agree in writing:
4.2.1. To pay all obligations the eligible company has incurred or will in future incur in West Virginia;
4.2.2. To delay filing a claim for the tax credit authorized by W. Va. Code §11-13X-1, et seq. until the Department of Economic Development delivers written notification to the Tax Commissioner that the eligible company has fulfilled all requirements for the credit.
4.2.3. Each allocation year stands on its own. It is necessary for an eligible company to file a new application for each year in order to be considered for credit allocation in each specific year. Projects are approved on a first come, first served basis. The maximum amount of project tax credit for any taxable year is the amount allocated by the Department of Economic Development through the project review and certification process.
4.2.4. Any television series that has been approved and issued an approval letter, shall be placed at the top of the queue for an open allocation period on each subsequent year in the life of that series whenever credits are assigned within a fiscal year. Queue placement in subsequent years will be based on the year of original application and original queue number assigned for that series. Each television series must submit a new application for each season prior to any open application period.
4.3. Upon completion of a qualified project:
4.3.1. An eligible company shall have filed all required West Virginia tax reports and returns and paid any balance of West Virginia tax due on those returns;
4.3.2. All claims for the tax credit shall be filed with an expense verification report prepared by an independent certified public accountant licensed to practice in the United States, using “Agreed Upon Procedures” which are prescribed by the Department of Economic Development in accordance with generally accepted auditing standards in the United States. The certified public accountant shall render a report as to the qualification of the credits, consistent with guidelines to be determined by the Department of Economic Development and approved by the Tax Commissioner; and
4.3.3. An eligible company claiming an extra allowance for employing local workers shall submit to the Department of Economic Development documentation verifying West Virginia residency for all individuals claimed to qualify for the extra allowance. The documentation shall include the name, home address and telephone number for all individuals used to qualify for the extra allowance.
4.4. Disqualification. The Department of Economic Development may disqualify in whole or in part any investment or expenditure from eligibility for the tax credit if it appears that the economic substance of an expenditure is not for services substantially rendered in West Virginia, or is for the purchase or lease of tangible personal property not used or operated in West Virginia or is for purchases or leases of realty not located in West Virginia.
4.4.1. The Department of Economic Development may disqualify in whole or in part any investment or expenditure from eligibility for the tax credit if it appears that the economic substance of an expenditure or transaction constitutes self dealing or an expenditure or investment primarily directed to or received by the purchaser or investor, or by an alter ego of the purchaser or investor or by a related person related to the purchaser or investor or by a member of the same controlled group as the controlled group to which the purchaser or investor belongs.
4.4.2. For purposes of this rule, an entity or person is presumed to be an alter ego, nominee or instrumentality of another person, entity or business if:
4.4.2.a. More than twenty percent of the real assets or more than twenty percent of the operating assets or more than twenty percent of the tangible personal property of one person, entity or business are or have been transferred to the other person, entity or business, or are or have been used in the operations of the other person, entity or business, or more than twenty percent of the real assets or more than twenty percent of the operating assets or more than twenty percent of the tangible personal property of one business are or have been used to collateralize or secure debts or obligations of the other person, entity or business;
4.4.2.b. Ownership of the persons, entities or businesses is so configured that the attribution rules of either Internal Revenue Code section 267 or Internal Revenue Code section 318 would apply to cause ownership of the persons, entities or businesses to be attributed to the same person, entity or business; or
4.4.2.c. Substantive control of the persons, entities or businesses is held or retained by the same person, entity or business, directly or indirectly, or through attribution under paragraph 4.4.2.b of this rule.
4.5. If the requirements of this section have been complied with as determined by the Department of Economic Development, the Department of Economic Development shall approve the tax credit and issue a document granting the appropriate tax credit to the eligible company and shall report this information to the Tax Commissioner.
W. Va. Code R. § 110-13X-5 Application Receipt and Review
5.1. The Department of Economic Development shall determine and report to the Tax Commissioner in a manner and at times the Department of Economic Development and the Tax Commissioner agree upon:
5.1.1. The eligibility of the company and a proposed project; and
5.1.2. The maximum amount of the tax credit available to the eligible company based on estimated "direct production expenditures" and "post-production expenditures."
5.2. The Department of Economic Development shall approve tax credits for an eligible company by:
5.2.1. Approving the credits to eligible companies in accordance with Department of Economic Development procedure;
5.2.2. Assigning a unique tax credit identification number to each approved project:
5.2.2.a. Multiple approved projects of the same eligible company will each receive a separate and unique tax credit identification number;
5.2.2.b. All tax returns, reports, or other correspondence must include the unique tax credit identification number assigned by the Department of Economic Development.
5.2.2.c. Notifying the eligible company, in writing, of the amount of credits that have been reserved for the eligible company and providing copies of the notification to the Tax Commissioner.
5.3. The Department of Economic Development shall receive eligibility applications and record the time and date of receipt of an eligibility application.
5.4. The Department of Economic Development shall review all eligibility applications to determine if each application is complete. When it is determined that an eligibility application is complete, the Department of Economic Development shall review the applications to determine if the applicant and the proposed project meet the eligibility requirements to apply for the tax credit.
5.5. In the event the Department of Economic Development determines an eligibility application to be incomplete, the Department of Economic Development shall notify the applicant, in writing, of the reasons for that determination and shall return the incomplete application to the applicant. The applicant may resubmit the eligibility application after correcting the deficiencies stated in the notice, but the resubmitted eligibility application must be received by the Department of Economic Development within twenty (20) days after the Department of Economic Development sends the notice. Any resubmitted application that is received by the Department of Economic Development more than twenty (20) days after the Department of Economic Development sends the notice may, within the sole discretion of the Department of Economic Development, be denied further consideration.
5.6. Requests for Increase in Tax Credit Allocation. -- If an eligible company seeks an increase in the amount of tax credits for an approved qualified project, the eligible company shall submit an application for modification to the Department of Economic Development, which shall be submitted by and bear the same signature as the person who submitted the original eligibility application, or the successor of that person, or a duly authorized representative. The Department of Economic Development shall assign each request a new application number and review each request separately from the original eligibility application. The Department of Economic Development shall consider the application and may request additional information from the applicant to assist in its evaluation of the request. The Department of Economic Development shall notify the eligible company in writing of the Department of Economic Development's decision.
5.7. Other Revisions to Application. -- If an eligible company seeks to revise its original eligibility application for a qualified project for reasons other than those identified in subsection 5.6 of this rule, the eligible company shall submit an application for modification to the Department of Economic Development, which shall be submitted by and bear the same signature as the person who submitted the original eligibility application, or the successor of that person, or a duly authorized representative. The Department of Economic Development shall consider the application within thirty (30) days of receipt, and may request additional information from the applicant to assist in its evaluation of the request. The Department of Economic Development shall determine the approval using the same criteria of the review process. The Department of Economic Development shall notify the eligible company in writing of the Department of Economic Development's decision.
5.8. False Information. -- Upon the submittal of any false or misleading information by an applicant, the Department of Economic Development may reject the application and deny further consideration of the applicant for qualification in current and subsequent fiscal years.
5.9. Complete Application. -- Upon a determination by the Department of Economic Development that an eligibility application is complete, the Department of Economic Development may consider the application for approval.
5.10. Action of Department of Economic Development. -- The allocation of all tax credits under this Rule must be approved by the Department of Economic Development. The Department of Economic Development shall consider all completed applications. Once an applicant and a project described in an eligibility application have been determined by the Department of Economic Development to meet the eligibility requirements of W. Va. Code §11-13X-1, et seq., and this rule, the Department of Economic Development shall notify the Tax Commissioner in writing of the eligibility of the company and the project and the maximum amount of the tax credit to be reserved for the eligible company.
5.11 If an eligible company submits a proposal to perform a qualified project for a state agency, the eligible company shall indicate its intention to claim the tax credit provided by West Virginia Code §11-13X-1, et seq.
W. Va. Code R. § 110-13X-6 Forfeiture of credit
6.1. If an eligible company fails to begin production within the time specified in the application or in this rule, the eligible company forfeits the right to claim any tax credit for the approved qualified project. The forfeiture does not preclude the eligible company from resubmitting an application for the same project at a future date.
W. Va. Code R. § 110-13X-7 Uses of credit; transferability
7.1. The tax credit may be applied to reduce taxes imposed by articles twenty-four (corporate net income tax) and twenty-one (personal income tax) of Chapter 11 of the West Virginia Code in the tax year the investment is placed in service after approval of the project by the Department of Economic Development (with potential carry forward for an additional 2 years). The credit may be taken into account in computing estimated payments.
7.2. The tax credit is to first be taken against corporate net income taxes imposed by article twenty-four for the taxable year, determined before application of allowable credits against tax.
7.3 If the eligible taxpayer is an electing small business corporation (as defined in Section 1361 of the United States Internal Revenue Code of 1986, as amended), a partnership, a limited liability company that is treated as a partnership for federal income tax purposes or a sole proprietorship, then any unused credit is allowed as a credit against the personal income taxes imposed by article twenty-one or on income of a personal income tax payer against tax attributable to income directly derived from the qualified project, or in the case of owners, partners, members or interest holders that are C corporations, then any unused credit is allowed as a credit against the corporation net income tax against tax attributable to conduit income directly derived from the qualified project.
7.4. Electing small business corporations, limited liability companies, partnerships and other unincorporated organizations shall allocate the credit allowed by this article among its members in the same manner as profits and losses are allocated for the taxable year.
7.5. After approval by the Department of Economic Development of any transfer, sale or assignment of the tax credit, pursuant to W. Va. Code §11-13X-1, et seq., the transferee shall acquire the amount of credit that remains available under that section. The transferor and the transferee or transferees may apply the credit against tax in the year of the transfer, and succeeding years in accordance with the amount of credit to which each is entitled, but the dollar amount of credit available to each shall not be exceeded or duplicated.
7.6. All requests for transfer, sale, or assignment of tax credits must include the original approved tax credit identification number; state the timeline as to the number of years of tax credit being transferred; and, clearly identify the tax credit’s termination date.
W. Va. Code R. § 110-13X-8 Confidentiality
8.1. All information submitted to the Tax Commissioner and the Department of Economic Development is confidential and not subject to public disclosure when filed with the Department of Economic Development or Tax Commissioner except as otherwise provided in this rule or the West Virginia Code.
8.2. All information submitted to the Department of Economic Development pursuant to an eligibility application for designation as an eligible company and documents related to the application, is confidential and not subject to public disclosure, except the following in accordance with W. Va. Code §11-13X-1, et seq.:
8.2.1. The full legal name of the applicant;
8.2.2. The mailing and office addresses and telephone number of the applicant; and
8.2.3. The name of a person to contact for the applicant.
8.3. All records and documentation relating to application, evaluation or qualification of a company or a project for the tax credit authorized under W. Va. Code §11-13X-1, et seq. is tax information subject to the confidentiality restrictions of the West Virginia Tax Procedure and Administration Act, W. Va. Code §11-10-1, et seq., including, but not limited to, the provisions of W. Va. Code §11-10-5d.
8.4. The Tax Commissioner hereby determines the Department of Economic Development to be a “person having a material interest” in the information in accordance with the provisions of W. Va. Code §11-10-5d(f).
8.5. The confidential information, relating to application, evaluation or qualification of a company or a project, including general correspondence to or from the Department of Economic Development, or to or from the West Virginia Tax Department, including information generated internally by the Department of Economic Development or Tax Department, including but not limited to, internal memoranda and reports, is confidential and not subject to public disclosure, unless otherwise provided by statute or rule.
8.6. All tax returns and tax return information subject to the non-disclosure restrictions of W. Va. Code §11-10-5d are confidential, except for the information subject to disclosures authorized, mandated or permitted pursuant to the West Virginia Tax Procedure and Administration Act, or W. Va. Code §§11-10-5s or §11-13X-1, et seq.
W. Va. Code R. § 110-13X-9 General Procedure and Administration
9.1. Requirements to Claim the Tax Credit. -- To claim a tax credit, the eligible company shall comply with W. Va. Code §11-13X-1, et seq. and this rule and shall timely provide complete and accurate forms, returns, schedules and other information required by the Tax Commissioner or Department of Economic Development.
9.2. Applicability of Various Tax Laws. -- Application of this credit and eligibility for this credit shall not abrogate application of the provisions of W. Va. Code §11-23-1, et seq. (Business Franchise Tax), W. Va. Code §11-24-1, et seq. (Corporation Net Income Tax) and W. Va. Code §11-21-1, et seq. (Personal Income Tax), and rules issued pursuant to those statutes, with respect to any eligible taxpayer or owner of any eligible taxpayer to the extent that they may be subject to the provisions of those laws, and shall not abrogate application of the provisions of W. Va. Code §11-10-1, et seq. (Procedure and Administration) which provides for administration of those taxes.
9.3. Maintenance of Records. -- An eligible company shall maintain the records required to verify the validity of its eligibility for the tax credit and the accuracy of the amount of the tax credit claimed. Failure to do so may result in denial of the tax credit.
W. Va. Code R. § 110-13X-10 Effective date, elimination of film tax credits, preservation of film tax credits earned prior to the sunset date
10.1 The amendments to this article enacted in the year 2022 shall apply to all taxable years beginning on or after July 1, 2022: Provided, That, unless sooner terminated by law, the film investment tax credit will terminate on the date specified in West Virginia Code §11-13X-1, et seq. No entitlement to any tax credit authorized by this article may result from, and no credit is available to any person for, expenditures incurred subsequent to the termination date specified in West Virginia Code §11-13X-1, et seq. Film tax credits to which a taxpayer has gained lawful entitlement on or after July 1, 2022, and on or before the termination date specified in West Virginia Code §11-13X-1, et seq., may continue to be applied against tax liabilities, subject to the conditions, limitations, and constraints applicable to such credit under West Virginia Code §11-13X-1, et seq., until exhausted or otherwise terminated in accordance with the terms of West Virginia Code §11-13X-1, et seq., or any other applicable provision of the West Virginia Code. Film tax credits to which a taxpayer has gained lawful entitlement on or after July 1, 2022, and on or before the termination date specified in West Virginia Code §11-13X-1, et seq., may be transferred in accordance with W. Va. Code §11-13X-1, et seq., subject to the conditions, limitations, and constraints applicable to such credit under W. Va. Code §11-13X-1, et seq., until exhausted or otherwise terminated in accordance with the terms of West Virginia Code §11-13X-1, et seq., or any other applicable provision of the West Virginia Code.
Series 14B International Fuel Tax Agreement
W. Va. Code R. § 110-14B-1 General
1.1. Scope. -- This legislative rule sets forth and clarifies the procedures and requirements which apply in the State of West Virginia for administration of the International Fuel Tax Agreement (IFTA) pursuant to W. Va. Code '11-14B-1 et. seq., and for administration of the West Virginia Motor Carrier Road Tax set forth in W. Va. Code '11-14A-1 et. seq. upon implementation of the provisions of the International Fuel Tax Agreement.
1.1.1. Controlling effect over West Virginia Code '11-14A-1 et. seq., and rules issued pursuant thereto.
This legislative rule applies to administration of the International Fuel Tax Agreement in the State of West Virginia pursuant to W. Va. Code '11-14B-1 et. seq., and to administration of the West Virginia Motor Carrier Road Tax set forth in W. Va. Code '11-14A-1 et. seq. Where any matter addressed in W. Va. Code '11-14A-1 et. seq. or Department of Tax and Revenue Motor Carrier Road Tax rule 110 C.S.R. 14A (1990) address the same subject matter, and where there is a clear conflict between the provisions of this rule and any provision of West Virginia Code '11-14A-1 et. seq. or Department of Tax and Revenue Motor Carrier Road Tax rule 110 C.S.R. 14A (1990), this rule, pursuant to the mandates of W. Va. Code '11-14B-6, takes precedence and supersedes the provisions of West Virginia Code '11-14A-1 et. seq. and Department of Tax and Revenue Motor Carrier Road Tax rule 110 C.S.R. 14A (1990).
1.2. Authority. -- W. Va. Code ''11-10-5 and 11-14B-12.
1.3. Filing Date. -- April 17, 1996.
1.4. Effective Date. -- May 1, 1996.
W. Va. Code R. § 110-14B-2 Definitions
As used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
2.1. "Highway" means every way or place of whatever nature open to the use of the public as a matter of right for the purpose of vehicular travel, which is maintained by this State or any subdivision or unit of this State or the federal government or any agency of the federal government.
2.2. "Identification marker" means the decal issued under W. Va. Code '11-14A-7 by the Department of Tax and Revenue or the Division of Motor Vehicles for display upon a particular motor carrier and authorizing a person to operate or cause to be operated a motor carrier upon any highway of the State of West Virginia.
2.3. "Motor carrier":
2.3.1. West Virginia intrastate IFTA nonregistrant carriers -For taxpayers which operate solely in the State of West Virginia and which have no interstate operations and which are not members of the International Fuel Tax Agreement, the term "motor carrier" means:
2.3.1.1. Any passenger vehicle which has seats for more than nine (9) passengers in addition to the driver, or
2.3.1.2. Any road tractor, or
2.3.1.3. Any tractor truck, or
2.3.1.4. Any truck having more than two (2) axles
2.3.1.5. which is operated or caused to be operated by any person on any highway in this State;
2.3.1.6. Pickup trucks and 5th wheel trailers - For taxpayers which operate solely in the State of West Virginia and which have no interstate operations and which are not members of the International Fuel Tax Agreement, fifth (5th) wheel trailers when towed by a pick-up truck with the bed of the truck intact are not motor carriers; however, if the bed is removed and a fifth (5th) wheel trailer is attached, the vehicle becomes a tractor truck as defined in Section 2.3.1.8 of this rule;
2.3.1.7. Road tractors - For taxpayers which operate solely in the State of West Virginia and which have no interstate operations and which are not members of the International Fuel Tax Agreement, the term "road tractor" means every motor carrier designed and used for drawing other vehicles and not so constructed as to carry any load thereon either independently or any part of the weight of a vehicle or load so drawn; and
2.3.1.8. Tractor trucks - For taxpayers which operate solely in the State of West Virginia and which have no interstate operations and which are not members of the International Fuel Tax Agreement, the term "tractor truck" means every motor carrier designed and used primarily for drawing other vehicles, and not so constructed as to carry a load other than a part of the weight of the vehicle and load so drawn; and
2.3.1.9. Trucks - For taxpayers which operate solely in the State of West Virginia and which have no interstate operations and which are not members of the International Fuel Tax Agreement, the term "truck" means every motor carrier designed, used or maintained primarily for the transportation of property and having more than two (2) axles; and
2.3.2. Interstate carriers and IFTA registrants - For taxpayers which operate in interstate commerce or which are International Fuel Tax Agreement registrants, the term "Motor Carrier" has the same definition as the definition for that term set forth in the International Fuel Tax Agreement.
2.4. "Operation" means any operation of any motor carrier, whether loaded or empty, whether for compensation or not, and whether owned by or leased to the person who operates or causes the motor carrier to be operated.
2.5. "Person" means and includes any individual, firm partnership, limited partnership, joint adventure, association, company, corporation, organization, syndicate, receiver, trust or nay other group or combination acting as a unit, in the plural as well as the singular number, and means and includes the officers, directors, trustees or members of any firm, partnership, limited partnership, joint adventure, association, company, corporation, organization, syndicate, receiver, trust or any other group or combination acting as a unit, in the plural as well as the singular number, and includes any governmental department, division, agency, office or subdivision thereof, unless the intention to give a more limited meaning is disclosed by the context.
2.6. "Tax" includes, within its meaning, interest, additions to tax and penalties, unless the intention to give a more limited meaning is disclosed by the context.
2.7. "Taxpayer" means any person liable for any tax, interest, additions to tax or penalty under the provision of W. Va. Code '11-14A-1 et seq. and this rule.
W. Va. Code R. § 110-14B-3 Registration of Motor Carriers
3.1. Under the provisions of W. Va. Code '11-14B-3, the powers, duties and responsibilities of the Tax Commissioner under W. Va. Code '11-14A-7, relating to the Motor Carrier Road Tax, are transferred to the Commissioner of the Division of Motor Vehicles effective with the registration year that begins on July 1, 1995.
3.2. The Department of Tax and Revenue under an agreement with the Division of Motor Vehicles will temporarily perform certain processing and administrative functions after July 1, 1995 on behalf of the Division of Motor Vehicles for the Motor Carrier Road Tax imposed by W. Va. Code '11-14A-1 et. seq. until the Department of Tax and Revenue can effect the transfer of those functions to the Division of Motor Vehicles. The Division of Motor Vehicles will make appropriate interdepartmental reimbursements of costs for the performance of these functions.
W. Va. Code R. § 110-14B-4 Change of Issuance Dates for Identification Markers (Decals) and Transition Rules for Identification Markers Issued During the Period of July 1, 1994 to December 31, 1995
4.1. Identification markers issued under W. Va. Code '11-14A-7 during the eighteen month period of July 1, 1994 to December 31, 1995 are valid for the period ending on December 31, 1995. The effect of this change is to extend the period of effectiveness of identification markers issued on July 1, 1994 from 12 months to 18 months. There is no additional charge or fee imposed upon identification marker holders or applicants as a result of the extension. However, the $5.00 statutory fee imposed by W. Va. Code '11-14A-7 for each identification marker remains in effect for identification markers issued during the 18 month period of July 1, 1994 to December 31, 1995.
4.2. Identification markers issued under W. Va. Code '11-14A-7 for periods subsequent to December 31, 1995 are valid for one (1) year ending on December 31 of each year.
4.3. The change in issuance dates and transition rules set forth in this Section and the subsections thereof are applicable to all identification markers issued under W. Va. Code '11-14A-7, without regard to whether the identification markers are issued to interstate motor carriers or intrastate motor carriers or to motor carriers registered through the International Fuel Tax Agreement or to motor carriers not registered through that agreement.
W. Va. Code R. § 110-14B-5 Exchange of Information
5.1. In order for the State of West Virginia, the Department of Tax and Revenue, the Division of Motor Vehicles and the West Virginia State Police to effectively implement the requirements of the Intermodal Surface Transportation Efficiency Act of 1991, the International Registration Plan, and the International Fuel Tax Agreement, it is necessary that there be a free exchange of certain information between the Department of Tax and Revenue, the Division of Motor Vehicles and the West Virginia State Police.
5.1.1. It may be necessary for the Department of Tax and Revenue to disclose to the Division of Motor Vehicles or the West Virginia State Police, or both, certain information relating to the registration and ownership of motor vehicles, and the tax reports filed by or for the owners or operators of those motor vehicles in order for the Division of Motor Vehicles and the State Police to carry out their duties and responsibilities under the Intermodal Surface Transportation Efficiency Act of 1991, the International Registration Plan, and the International Fuel Tax Agreement.
5.1.2. Use of such information for the administration and enforcement of the Intermodal Surface Transportation Efficiency Act of 1991, the International Registration Plan, or the International Fuel Tax Agreement, for registration and enforcement purposes constitutes use thereof directly and solely related to tax administration, as required by W. Va. Code '11-14B-9(c).
5.1.3. Therefore, pursuant to the requirements of W. Va. Code '11-14B-9(c), the Department of Tax and Revenue and Tax Commissioner will, within the Tax Commissioner's discretion, disclose to the Division of Motor Vehicles of the West Virginia Department of Transportation or the West Virginia State Police or both, as appropriate:
5.1.3.1. Motor Carrier Road Tax returns and Motor Carrier Road Tax return information of any person filing a West Virginia Motor Carrier Road Tax return or paying the West Virginia Motor Carrier Road Tax, and
5.1.3.2. The motor fuel tax returns of other IFTA member states, which are filed with the State of West Virginia by any person:
5.1.3.2.a. Who is registered under the International Fuel Tax Agreement, and
5.1.3.2.b. Who files reports with the State of West Virginia pursuant to such registration, and
5.1.3.2.c. Who uses the highways of the State of West Virginia; and
5.1.3.3. Motor fuel tax return information of other IFTA member states filed with the State of West Virginia by any person:
5.1.3.3.a. Who is registered under the International Fuel Tax Agreement, and
5.1.3.3.b. Who files reports with the State of West Virginia pursuant to such registration, and
5.1.3.3.c. Who uses the highways of the State of West Virginia.
5.1.4. The Tax Commissioner may disclose to the Division of Motor Vehicles and the State Police only Motor Carrier Road Tax returns and Motor Carrier Road Tax return information, and motor fuel tax returns and return information, as aforesaid, for implementation, administration or enforcement of the Intermodal Surface Transportation Efficiency Act of 1991, the International Registration Plan, or the International Fuel Tax Agreement, only if the information is to be directly used for the purpose of tax administration.
5.2. This information disclosure section applies only to information filed directly by or for the taxpayer, filer or registrant with the Tax Commissioner. No information derived from the Internal Revenue Service, from the federal government or from any federal agency or subdivision will be disclosed.
5.3. Disclosure of tax returns or tax information pursuant to this rule is within the sole discretion of the Tax Commissioner, and the Tax Commissioner may refuse disclosure of any return or return information.
5.4. The Tax Commissioner may disclose tax returns and tax information to states which are not members of the International Fuel Tax Agreement or to any department, division, agency, office or other subdivision thereof only in accordance with the requirements of W. Va. Code ''11-10-5d and 11-14B-9 and other applicable provisions of West Virginia law.
W. Va. Code R. § 110-14B-6 All Interstate Motor Carriers Doing Business In West Virginia Required to Join the International Fuel Tax Agreement
6.1. Pursuant to the requirements of W. Va. Code '11-14B-1 et. seq., and pursuant to the participation of the State of West Virginia in the International Fuel Tax Agreement, all West Virginia domestic Motor Carriers which are registered with the West Virginia Division of Motor Vehicles as commercial motor carriers and which operate in interstate commerce in any other state which is a member of the International Fuel Tax Agreement are hereby required to join the International Fuel Tax Agreement.
110CSR14B
Series 14C Motor Fuel Excise Tax
W. Va. Code R. § 110-14C-1 General
1.1. Scope. -- This interpretive rule explains and clarifies the Motor Fuel Excise Tax, set forth in W. Va. Code §§11-14C-1 et seq., 11-15-18b and 11-15A-13a. The rule sets forth the method to calculate the variable component of the Motor Fuel Excise Tax for conventional and alternative motor fuels. This rule addresses licensure and bonding requirements, reports and payment of the tax, floorstock reporting, and refunds.
1.2. Authority. -- W. Va. Code §11-10-5.
1.3. Filing Date. -- August 25, 2015.
1.4. Effective Date. -- October 1, 2015.
W. Va. Code R. § 110-14C-2 Definitions
Unless the context in which a term is used clearly requires a different meaning, the definitions contained in W. Va. Code §11-14C-1 et seq. (acts 2013) apply to this rule.
W. Va. Code R. § 110-14C-3 Motor Fuel Excise Tax
3.1. The motor fuel excise tax is composed of a flat rate of $.205 per invoiced gallon plus the variable component.
3.1.a. The variable component of the motor fuel excise tax is determined by multiplying the average wholesale price by 5.0 percent (5%).
3.1.b. The average wholesale price is determined using the formula set forth in §110-14C-4.
3.2. The Tax Commissioner determines the gasoline gallon equivalent for alternative fuel used as motor fuel.
3.2.a. The gasoline gallon equivalent is published in the State Register and as an Administrative Notice on the Tax Department’s website.
3.2.b. The Tax Commissioner has discretion to redetermine the gasoline gallon equivalent of alternative fuels. Any future redetermination will be published in the State Register and as an Administrative Notice 30 days prior to January 1st.
W. Va. Code R. § 110-14C-4 Determination of the average wholesale price of motor fuel
4.1. An average wholesale price is determined for each of the following type of motor fuel: conventional motor fuel (gasoline, diesel, and kerosene), compressed natural gas (CNG); liquefied natural gas (LNG); liquefied petroleum gas (LPG - propane) and field gas.
4.1.a. The average wholesale price is rounded to the third decimal (thousandth of a cent) and does not include federal or state excise taxes.
4.1.b. The average wholesale price is applicable to each calendar year and is based on data from the preceding July 1 through October 31 review period.
4.1.c. Where price or consumption information for some portion of the July 1 through October 31 review period is not timely available, an average for the three previous years is used for the missing portion. If no relevant consumption information is available, then a unit value of one is used.
4.1.d. The wholesale price of each type of motor fuel is weighted by the consumption of each type of motor fuel.
4.1.e. The average wholesale price of motor fuel for the next calendar year will be published in the State Register and as an Administrative Notice on the Tax Department’s website 30 days prior to January 1.
4.1.f. The determination of the wholesale price of motor fuel by the Tax Commissioner is presumed to be correct in any administrative proceeding.
4.2. Sources of information used in determining the average wholesale price are at the discretion of the Tax Commissioner.
4.2.a. Price information used in the determination of the average wholesale price is at the discretion of the Tax Commissioner. The source of the price will be published in the Administrative Notice which sets the average wholesale price.
4.2.b. Consumption information, where available, is obtained from motor fuel excise tax returns or other sources at the discretion of the Tax Commissioner.
4.2.b.1. Gasoline consumption information by grade (regular, midgrade, and premium) is obtained from the U.S. Energy Information Administration (EIA).
4.3. Average wholesale price calculation.
4.3.a. The consumption of motor fuel is calculated as follows:
4.3.a.1. This paragraph applies only to gasoline. The consumption of gasoline by month is calculated for each grade of gasoline by multiplying monthly gasoline consumption from motor fuel excise tax returns by the gasoline grade ratio obtained from EIA information. Algebraically, GGRgg,m = EIAgg,m / (EIARm + EIAMm + EIAPm)
Cgg,m = MFTGm X GGRgg,m gg = gasoline grade (regular, midgrade, premium)
GGRgg,m = Gasoline Ratio for gasoline grade (gg) and month (m)
EIAgg,m = Energy Information Administration consumption for gasoline grade (gg) and month (m)
EIARm = Energy Information Administration consumption for regular gasoline EIAMm = Energy Information Administration consumption for midgrade gasoline EIAPm = Energy Information Administration consumption for premium gasoline Cgg,m = Consumption of gasoline by gasoline grade (gg) and month (m)
MFTGm = Gasoline consumption from motor fuel excise tax return by month (m)
4.3.a.2. The consumption of motor fuels other than gasoline by month is determined from motor fuel excise tax returns, if available, or from other sources, if applicable. Algebraically, Comf,m = MFTOMFm omf = other motor fuel (other conventional motor fuels, compressed natural gas, liquefied natural gas, liquefied petroleum gas, field gas)
Comf,m = Consumption of other motor fuel (omf) and month (m)
MFTOMFm = Reported consumption of other motor fuels by month (m) from motor fuel excise tax returns, or other sources.
4.3.b. The value of consumed motor fuel by motor fuel type and month is the product of the consumed motor fuel by type and month (as in §4.3.a.) and the price of the motor fuel by type and month. Algebraically, Vmft,m = Cmft,m X Pmft,m mft = motor fuel type (conventional motor fuel, compressed natural gas, liquefied natural gas, liquefied petroleum gas, field gas)
V = Value of motor fuel C = Motor fuel consumed P = Price of motor fuel
4.3.c. The total motor fuel consumed in the July through October review period by motor fuel type (as in §4.1) is the sum of the consumed motor fuel of included motor fuel types by month (as in §4.3.a.). Algebraically, TCmft = ∑ Cmft,m mft = motor fuel type (conventional motor fuel, compressed natural gas, liquefied natural gas, liquefied petroleum gas, field gas)
TC = Total motor fuel consumed C = Motor fuel consumed Σ = The sum of what follows
4.3.d. The total value of consumed motor fuel in the July through October review period by motor fuel type (as in §4.1) is the sum of the value of consumed motor fuel of included motor fuel types by month (as in §4.3.b.). Algebraically, TVmft = ∑ Vmft,m mft = motor fuel type (conventional motor fuel, compressed natural gas, liquefied natural gas, liquefied petroleum gas, natural gas)
TV = Total value of motor fuel consumed V = Value of motor fuel Σ = The sum of what follows
4.3.e. For each type of motor fuel (as in §4.1.), the average wholesale price is calculated as total value of consumed motor fuel (as in §4.3.d.) divided by the total motor fuel consumed (as in §4.3.c.). Algebraically, AWPmft = TVmft / TCmft mft = motor fuel type (conventional motor fuel, compressed natural gas, liquefied natural gas, liquefied petroleum gas, field gas)
AWP = Average wholesale price TV = Total value of motor fuel consumed TC = Total motor fuel consumed
W. Va. Code R. § 110-14C-5 Licensure; Bond
5.1. Licensure is required for a producer or manufacturer, an alternative-fuel bulk end user, a provider of alternative fuel, a retailer of alternative fuel as well as a supplier including a refiner, a permissive supplier, an importer, an exporter, a terminal operator, a blender, a motor fuel transporter, or a distributor.
5.1.a. A person must have the applicable license for each of the above activities prior to beginning the activity in this state.
5.1.b. A person engaged in more than one of the above activities, must have a separate license for each activity, unless determined otherwise by the Tax Commissioner.
5.2. The requirements for cash bonds, continuous surety bonds and proof of financial responsibility acceptable to the Tax Commissioner are set forth in W. Va. Code §11-14C-13.
5.2.a. The Tax Commissioner may require a taxpayer to file an additional amount where a bond is initially required or to file a bond where no initial bond is required. The taxpayer must comply within 30 days of the Tax Commissioner’s notice.
5.2.b. Bond is not initially required in order to obtain a license as a producer or manufacturer, an alternative-fuel bulk end user, a provider of alternative fuel or a retailer of alternative fuel. If a taxpayer fails to file a return, fails to timely remit all the tax due, or fails to comply with W. Va. Code '11-14C-1 et seq. the Tax Commissioner may require a bond in an amount to be determined by the Tax Commissioner. The taxpayer has 30 days to comply with the Tax Commissioner’s notification.
§11-14C-6. Reports and Payment of Tax.
6.1. All tax payments due to this state which are received by a motor fuel taxpayer shall be held by the taxpayer as trustee in trust for this state. The taxpayer has a fiduciary duty to remit to the Tax Commissioner the total amount of tax received. A motor fuel taxpayer is liable for all taxes collected.
6.2. Returns and payment are due on the same date.
6.2.a. Where no tax is due, the return must be timely filed, complete and signed. Where a tax is due, payment is to accompany the timely filed, complete and signed return.
6.2.b. The Tax Commissioner may require all or certain taxpayers to file tax returns and payments electronically.
6.2.c. The Tax Commissioner may, upon notice, require more information from a taxpayer, require more frequent filing or both. The taxpayer has 30 days from the receipt of notice to comply with the Tax Commissioner’s request.
6.3. Monthly returns are filed on or before the last day of a calendar month for the previous month by those persons liable for the motor fuel excise tax levied at the point of imposition prescribed in W. Va. Code §11-14C-6 including the following:
6.3.1. A terminal operator,
6.3.2. A supplier or refiner,
6.3.3. An importer,
6.3.4. A blender,
6.3.5. A person incurring liability for the backup tax,
6.3.6. A permissive supplier,
6.3.7. A motor fuel transporter, and
6.3.8. An exporter and
6.3.9. A producer/manufacturer.
6.3.a. The Tax Commissioner will accept the Federal ExSTARS terminal operator report provided to the Internal Revenue Service in lieu of the state terminal operator report.
6.4. A monthly report is required by the Tax Commissioner for those licensees whose average monthly tax liability is $10,000 or more a month.
6.5. Alternative fuel that is not required to report monthly, as in §'6.3. and 6.4 above, must file an annual return. This includes reports by an alternative-fuel bulk end user, a provider of alternative fuel, a retailer of alternative fuel and by those persons liable for the motor fuel excise tax levied at the point of imposition prescribed in W. Va. Code §11-14C-6a.
6.5.a. Beginning January 1, 2014, and continuing thereafter, an annual return and payment is due on or before January 31 for the previous calendar year. For example, the return and payment for calendar year 2014 is due on or before January 31, 2015. Field gas reporting is addressed in a separate rule.
W. Va. Code R. § 110-14C-7 Floorstocks
7.1. On the effective date of any motor fuel rate change, every licensee, who has in inventory motor fuel upon which the tax has been previously paid, shall take a physical inventory.
7.2. The licensee must file a report within 30 days of the effective date of the rate change.
7.2.a. In addition to the physical inventory, the report will include evidence of the last floorstocks report made and evidence of the tax actually paid.
7.3. In the case of a motor fuel tax increase, the additional tax due under the rate increase shall be submitted with the report.
7.4. In the case of a motor fuel tax decrease, a supplier, distributor or producer, retail dealer, exporter or importer may receive a refund of the flat rate under W. Va. Code §11-14C-30(d).
7.4.a. The refund is upon the motor fuel on hand and in inventory on the effective date of the rate change.
7.4.b. The taxpayer must show that the motor fuel has been included in the previous floorstocks or other applicable report.
W. Va. Code R. § 110-14C-8 Refunds
8.1. Any refund amount cannot exceed the amount of the tax actually paid.
8.2. A request for a refund must be filed timely, with the form properly completed, include evidence of the tax paid, and be signed by the taxpayer.
110CSR14C
110CSR14C
Series 15 Consumer Sales And Service Tax And Use Tax
W. Va. Code R. § 110-15-1 General
1.1. Scope. -- These legislative regulations explain and clarify both the West Virginia consumers sales and service tax, in W. Va. Code '11-15-1 et seq., and the West Virginia Use Tax, in W. Va. Code '11-15A-1 et seq. in light of the legislative intent that such tax laws be construed and applied, whenever possible, as complementary laws.
1.2. Authority. -- W. Va. Code '11-10-5.
1.3. Filing Date. -- July 13, 1993.
1.4. Effective Date. -- July 15, 1993.
W. Va. Code R. § 110-15-2 Definitions
As used in these regulations and unless the context clearly requires a different meaning, the following terms shall have the meaning ascribed herein, and shall apply in the singular or in the plural.
2.1. "Air pollution" - See Section 2.27.1.13.c of these regulations.
2.2. "Aircraft," for purposes of the tax on gasoline and special fuel, means and includes any airplane or helicopter that lands in this State on a regular or routine basis, and transports passengers or freight.
2.3. "Aircraft fuel," for purposes of the tax on gasoline and special fuel, means gasoline and special fuel suitable for use in any aircraft engine.
2.4. "Alteration" - See Section 2.24.3.1 of these regulations.
2.5. "Another state" means any state, as defined in Section 2.86 of this rule except the State of West Virginia.
2.6. "Aquaculture" means the raising of fish or the growing of plants in water for commercial purposes.
2.7. "Auxiliary personnel" - See Section 2.81.2 of these regulations.
2.8. "Bona fide dues or membership fees" - See Section 2.48 of these regulations.
2.9. "Business" or "doing business" includes any purposeful revenue generating activity in this State and includes all activities engaged in or caused to be engaged in with the object of gain or economic benefit, direct or indirect, and all activities of the State and its political subdivisions which involve sales of tangible personal property or the rendering of services when those service activities compete with or may compete with the activities of other persons.
2.10. "Capital improvement" - See Section 2.24.3.2 of these regulations.
2.11. "Casual and occasional sales not conducted in a repeated manner or in the ordinary course of repetitive and successive transactions of like character" means sales of tangible personal property or services ("fund raisers"), when such fund raisers are of limited duration and are held no more than six (6) times during any twelve (12) month period. For purposes of this definition, the term "limited duration" means that a fund raiser may last no longer than eighty-four (84) consecutive hours.
2.11.1. Any person qualifying for an exemption from or relating to casual and occasional sales shall have the exemption available for up to a total of six (6) fund raisers in a twelve (12) month period. The seventh (7th) fund raiser and any purported sale or fund raiser thereafter in any twelve (12) month period shall not constitute a casual and occasional sale or fund raiser for purposes of these regulations. Any purported fund raiser having a duration longer than eighty-four (84) hours shall be treated as two (2) or more successive fund raisers. If the number of total aggregate fund raisers is greater than six (6) for any twelve (12) month period, any purported fund raiser beyond six (6) is taxable activity.
2.12. "Charitable contribution" means a contribution or gift to or for the use of a corporation or organization, described in Section 170(c)(2) of the Internal Revenue Code of 1986, as amended.
2.13. "Charitable organization" means and includes any corporation or organization which is organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the providing of athletic facilities or equipment), or for the prevention of cruelty to children or animals, provided that no part of the net earnings of the organization inures to the benefit of any private shareholder or individual, that no substantial part of the activities of the organization is carrying on propaganda or otherwise attempting to influence legislation and that it does not participate in any political campaign on behalf of any candidate for public office. For purposes of this Section, such participation would include publishing or distribution of political statements.
2.14. "Church" means an individual parish, congregation or like subgroup of an organized religion, denomination, sect or religious society, or a convention or association of churches as defined in Section 170 of the Internal Revenue Code of 1986, as amended, which is exempt from federal income tax under Section 501(c)(3) or Section 501(c)(4) of the Internal Revenue Code of 1986, as amended; but the term "church" shall not include an affiliated religious school.
2.15. "Civic organization" means a nonprofit organization or corporation that is operated exclusively for the promotion of social welfare.
2.16. "Commercial production of an agricultural product" means the production of food, fiber, or woodland products (but not timbering activity) by means of cultivation, tillage of the soil or by the conduct of animal, livestock, dairy, apiary, equine or poultry husbandry, aquacultural activity, horticultural activity, or any other plant or animal production activity and all farm practices related, usual or incidental thereto, including the storage, packing, shipping and marketing of agricultural or farm products, but not including any manufacturing, milling or processing of such products by persons other than the producer thereof, such production being measured by annual sales of at least one thousand dollars ($1,000) of such agricultural products: Provided, That for the first twelve (12) months after the occurrence of a catastrophe, such as fire, drought or flood, which substantially destroyed the agricultural product being produced or the means for harvesting such product other than merely mechanical breakdowns, or for the first twelve (12) months after the commercial producer of an agricultural product has first commenced such production activity, the requirement of annual sales of at least one thousand dollars ($1,000) of agricultural products need not be satisfied in order for the activity to be the commercial production of an agricultural product.
2.17. "Communication" means all telephone, radio, light, light wave, radio-telephone, telegraph and other communication or means of communication, whether used for voice communication, computer data transmission or other encoded symbolic information transfers and shall include commercial broadcast radio, commercial broadcast television, cable television and motion picture theaters.
2.18. "Conditional sale" means an agreement for the sale of tangible personal property pursuant to which possession is delivered to the buyer, but title is retained by the seller until the performance of some condition, usually the payment of the purchase price, has occurred.
2.19. "Consumer" or "ultimate consumer" means any person who uses or consumes taxable services or tangible personal property.
2.20. "Consumers sales and service tax," "consumers sales tax" and "sales tax" mean the tax imposed by W. Va. Code '11-15-1 et seq.
2.21. "Contract" or "contracts" means, for purposes of the transition rules set forth in W. Va. Code '11-15-8a for contracting activities, written agreements reciting or setting forth a fixed price consideration, or a consideration based upon cost plus a stated percentage or a stated monetary increment. This term does not mean or include ongoing sales contracts, contracts whereby any element of the consideration or the property or services sold or to be rendered in performance of the contract are undefined, or determined, as to either nature or quantity, subsequent to the making of the contract, or any open-ended contract.
2.21.1. The term "contract" or "contracts" does not include for purposes of the transition rules set forth in W. Va. Code ''11-15-8a and 11-15-8c, change orders wherein the scope of work contained in the original contract is exceeded to a degree sufficiently significant to require additional charges to the customer. Purchases by a contractor for use in contracting activities performed under such change orders may be subject to the consumer sales and service tax.
2.22. "Contract basis" means, for purposes of determining the exemption of certain charges for room and meals, the circumstance where a fixed price is paid for consumption of food products during a specific period of time without regard to the amount of food product actually consumed by the particular student contracting for the purchase and no money is paid at the time the food product is served or consumed. The term "specific period of time" means a fixed time period of not less than thirty (30) consecutive days.
2.23. "Contract renewal" or "renewal" means, for purposes of contracting activities, a covenant or agreement entered into or assumed by parties which have a current contractual relation or which have had a past contractual relation, whereby the parties agree to incur obligations beyond those which they were, or would have been, required, at the minimum, to carry out under their current or past contractual relation.
2.24. "Contracting" or "contracting activity" means and includes the furnishing of work, or both materials and work, for another (by a sole contractor, general contractor, prime contractor or subcontractor) in fulfillment of a contract for the construction, alteration, repair, decoration or improvement of a new or existing building or structure, or any part thereof, or for removal or demolition of a building or structure, or any part thereof, or for the alteration, improvement or development of real property.
2.24.1. Contracting does not include the furnishing of work, or both materials and work, in the nature of hook-up, connection, installation or other services if such service is incidental to the retail sale of tangible personal property from the service provider's inventory: Provided, That such hook-up, connection or installation of the foregoing is incidental to the sale of the same when performed by the seller thereof or performed in accordance with arrangements made by the seller thereof.
2.24.1.1. Examples of transactions that are excluded from the definition of contracting pursuant hereto include, but are not limited to, the sale of wall-to-wall carpeting and the installation of wall-to-wall carpeting, the sale, hook-up and connection of mobile homes, window air conditioning units, dishwashers, clothing washing machines or dryers, other household appliances, drapery rods, window shades, venetian blinds, canvas awnings, free-standing industrial or commercial equipment and other similar items of tangible personal property.
2.24.2. Form of Contract Not Controlling. - Any activity that falls within the definition of contracting under this Section 2.24 of these regulations shall constitute contracting regardless of whether the contract governing the activity is written or oral and regardless of whether it is in substance or form a lump sum contract, a cost-plus contract, a time and materials contract (whether or not open-ended), or any other kind of construction contract.
2.24.3. Special Rules. - For purposes of this definition:
2.24.3.1. The term "alteration" means and is limited to alterations which are capital improvements to a building or structure or to real property.
2.24.3.2. The term "capital improvement" means improvements that are affixed to or attached to and become a part of a building or structure or the real property or which add utility to real property or any part thereof and that last, or are intended to be relatively permanent.
2.24.3.2.a. The term "relatively permanent" means lasting at least a year or longer in duration without the necessity for regularly scheduled recurring service to maintain such capital improvement.
2.24.3.2.b. The term "regular recurring service" means regularly scheduled service intervals of less than one year.
2.24.3.3. The term "decoration" means and is limited to decorations which are capital improvements to a building or structure or to real property.
2.24.3.4. The term "improvement" means and is limited to improvements which are capital improvements to a building or structure or to real property.
2.24.3.5. The term "repair" means and is limited to repairs which are capital improvements to a building or structure or to real property. "Repairs" does not include ordinary maintenance and repairs which tend to restore and repair the effects of normal wear and tear which occurred in the past or ordinary repairs which do not materially add to the economic value of the asset.
2.24.3.6. The term "structure" includes, but is not limited to, everything built up or composed of parts joined together in some definite manner and attached or affixed to real property, or which adds utility to real property or any part thereof, or which adds utility to a particular parcel of property and is intended to remain there for an indefinite period of time.
2.25. "Day care center" or "licensed or registered day care center" means a facility licensed in accordance with W. Va. Code '49-2B-1 et seq. and operated by a child welfare agency for the care of seven (7) or more children on a non-residential basis or registered in accordance with W. Va. Code '49-2B-1 et seq. and operated to care for four (4) to six (6) children, including those living in the household, who are under six (6) years of age: Provided, That the term does not include:
2.25.1. a kindergarten, pre-school or school education program which is operated by a public school or which is accredited by the State Department of Education, or any other kindergartens, pre-school or school programs which operate with sessions not exceeding four (4) hours per day for any child;
2.25.2. summer recreation camps or educational summer camps operated for children attending sessions for periods not exceeding thirty (30) days;
2.25.3. See Section 9.2.8 of these regulations for additional information.
2.26. "Decoration" - See Section 2.24.3.3 of these regulations.
2.27. "Directly used or consumed" in manufacturing, transportation, transmission, communication or the production of natural resources shall mean used or consumed in those activities or operations which constitute an integral and essential part of such activities, as contrasted with and distinguished from those activities or operations which are simply incidental, convenient or remote to such activities.
2.27.1. Uses of property or consumption of services which constitute direct use or consumption in the activities of manufacturing, transportation, transmission, communication or the production of natural resources shall include only:
2.27.1.1. In the case of tangible personal property, physical incorporation of property into a finished product resulting from manufacturing production or the production of natural resources;
2.27.1.2. Causing a direct physical, chemical or other change upon property undergoing manufacturing production or production of natural resources;
2.27.1.3. Transporting or storing property undergoing transportation, communication, transmission, manufacturing production, or production of natural resources;
2.27.1.4. Measuring or verifying a change in property directly used in transportation, communication, transmission, manufacturing production or production of natural resources;
2.27.1.5. Physically controlling or directing the physical movement or operation of property directly used in transportation, communication, transmission, manufacturing production or production of natural resources;
2.27.1.6. Directly and physically recording the flow of property undergoing transportation, communication, transmission, manufacturing production or production of natural resources;
2.27.1.7. Producing energy for property directly used in transportation, communication, transmission, manufacturing production or production of natural resources;
2.27.1.8. Facilitating the transmission of gas, water, steam or electricity from the point of its diversion to property directly used in transportation, communication, transmission, manufacturing production or production of natural resources;
2.27.1.9. Controlling or otherwise regulating atmospheric conditions required for transportation, communication, transmission, manufacturing production or production of natural resources;
2.27.1.10. Serving as an operating supply for property undergoing transmission, manufacturing production or production of natural resources or for property directly used in transportation, communication, transmission, manufacturing production or production of natural resources;
2.27.1.11. Maintaining or repairing property directly used in transportation, communication, transmission, manufacturing production or production of natural resources;
2.27.1.12. Storing, removing or transporting economic waste directly resulting from the activities of transportation, communication, transmission, manufacturing or production of natural resources;
2.27.1.13. Pollution control or environmental quality or protection activity directly relating to the activities of manufacturing, transportation, communication, transmission or the production of natural resources.
2.27.1.13.a. "Pollution control" means any service, system, method, construction, device or appliance appurtenant thereto used or intended for the primary purpose of eliminating, preventing, or reducing air, noise or water pollution, or for the primary purpose of treating, pretreating, modifying or disposing of any potential solid, liquid or gaseous pollutant which, if released without such treatment, pretreatment, modification or disposal, might be harmful, detrimental or offensive to the public and the public interest.
2.27.1.13.b. "Environmental quality or protection activity or facility" means services, devices (including identifiable parts of devices), systems or facilities used or intended for use primarily for the protection of the public and the public interest through the control, reduction or elimination of air, water or noise pollution immediately caused by and directly related to the activities of manufacturing, transportation, communication, transmission or the production of natural resources.
2.27.1.13.c. "Air pollution" means the presence in the outdoor atmosphere of one or more air contaminants or combinations thereof in such quantities and of such characteristics, location and duration as to be injurious to the public and the public interest, or to unreasonably interfere with the comfortable enjoyment of life or property or the conduct of business within such areas of the State as shall be affected thereby.
2.27.1.13.d. "Water pollution" means the discharge or deposit of sewage, industrial wastes, or other wastes of such condition, in such manner, or in such quantity as to cause ground or surface water to be contaminated, unclean, or impure to such an extent to make said waters detrimental to the public and the public interest.
2.27.1.13.e. "Noise pollution" means sound which has intensity, duration or character which exceeds standards developed by the State environmental protection agency.
2.27.1.14. Personnel, plant, product or community safety or security activity directly relating to the activities of transportation, communication, transmission, manufacturing production or production of natural resources; or
2.27.1.15. Property or services otherwise used as an integral and essential part of transportation, communication, transmission, manufacturing production or production of natural resources.
2.27.2. Uses of property or services which would not constitute direct use or consumption in the activities of manufacturing, transportation, transmission, communication or the production of natural resources shall include, but is not limited to:
2.27.2.1. Heating and illumination of office buildings;
2.27.2.2. Janitorial or general cleaning activities;
2.27.2.3. Personal comfort of personnel;
2.27.2.4. Production planning, scheduling of work, or inventory control;
2.27.2.5. Marketing, general management, supervision, finance, training, accounting and administration; or
2.27.2.6. An activity or function incidental or convenient to transportation, communication, transmission, manufacturing production or production of natural resources, rather than an integral and essential part of such activity.
2.27.3. For a more detailed discussion of the direct use concept, See Section 123 of these regulations.
2.28. "Distributor" means and includes, for purposes of the tax on gasoline and special fuel, every person:
2.28.1. Who produces, manufactures, processes or otherwise alters gasoline or special fuel in this State for use or for sale; or
2.28.2. Who engages in this State in the sale of gasoline or special fuel for the purpose of resale or for distribution; or
2.28.3. Who receives gasoline or special fuel into the cargo tank of a tank wagon in this State for use or sale by such person.
2.29. "Drugs" includes all drugs or appliances, which cannot otherwise be acquired over-the-counter but must be dispensed upon written prescription of a physician, dentist and any other professional person licensed to prescribe.
2.30. "Educational summer camp" means a program and facility providing courses of instruction in activities such as art,science, music, computers, foreign languages, forestry, religious study, etc., such courses of instruction occupying a substantial amount of time during which participants are in attendance at the camp.
2.30.1. For the purpose of this regulation, the term "educational" means: dedicated to providing instruction or learning for the intellectual, physical and moral development and betterment of the recipient thereof, and the improvement of his knowledge, skill and character. For purposes of these regulations, those courses of study traditionally provided through formal schooling may be presumed to be educational.
2.30.2. Training in athletics, sports training, or physical conditioning shall not be considered "educational" for purposes of these regulations unless the primary scope or purpose of the summer camp is not training in athletics, sports training, or physical conditioning.
2.30.3. Specifically excluded from the definition of educational summer camps are those programs and facilities primarily related to paramilitary training, nudist camping or those related to animal training.
2.30.4. For purposes of this regulation, the term "summer" means that portion of the year during which West Virginia elementary and secondary public schools have summer recess. This period shall begin with the earliest cessation of the regular school year occurring for any such West Virginia public school among all such schools in all counties of the State of West Virginia, and shall end with the latest beginning of the next regular school year occurring for any such West Virginia public school among all such schools in all counties of the State of West Virginia.
2.31. "Environmental quality or protection activity or facility" - See Section 2.27.1.13.b of these regulations.
2.32. "Farm products" means products grown on a farm, generally for consumption, and includes, but is not necessarily limited to, apples, cherries, strawberries, natural honey and corn; however, farm products do not include that which is made or pressed on a farm such as, but not limited to, jams, preserves, apple cider or quilts.
2.33. "Food" and "food for meals" means and includes edible foodstuffs intended for human consumption and items commonly thought of as food, including, by way of illustration and not by limitation, cereals and cereal products, meat and meat products, fish and fish products, poultry and poultry products, fresh and salt water animal products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, flour and flour products, sugar and sugar products, milk and milk products, cocoa and cocoa products, coffee and coffee substitutes, tea, herbs, spices, salt and salt substitutes, condiments, candy and confections, soft drinks, soft drink mixes and syrups, tenderizers, food coloring, bottled drinking water, sugar substitutes, oleomargarine, shortening, gelatins, baking and cooking ingredients, mushrooms, spreads, relishes, desserts, flavorings, edible seeds, nuts and berries: Provided, That the term "food" and "food for meals" does not include medicines, vitamins and dietary supplements whether in liquid, powdered, granular, tablet, capsule, lozenge, or pill form; spirituous, malt or vinous liquors or beer; ice; tobacco or tobacco products; chewing gum; cake letters; breath mints; or food sold through a vending machine.
2.33.1. Tests for Determining Whether "Food is Intended for Human Consumption". - Occasionally a question may arise concerning whether a particular food or food product is intended for human consumption. This question is to be answered by application of the following two tests. If either question is answered in the negative (no), the item may not be considered as "food intended for human consumption," and consumers sales and service tax must be collected.
2.33.1.1. Test One. - Is the product generally regarded by the public as being food intended for human consumption?
2.33.1.2. Test Two. - Do the words or statements on the label or package, if any, suggest that the product is food intended for human consumption?
2.33.2. The burden of proving that a particular food or product is purchased as "food intended for human consumption" rests on the vendor. In case of any doubt as to whether the product is intended for human consumption, the tax shall be collected. Any person claiming to be aggrieved by having to pay the consumers sales and service tax shall pay the amount of tax to the retail merchant (vendor) and file a claim for refund with the Tax Commissioner.
2.33.3. See Appendix 1 of these regulations, "Condiments considered to be food" which is an illustrative list of items which are included in the definition of "food."
2.34. "Gasoline" means and includes, for purposes of the tax on gasoline and special fuel, any product commonly or commercially known as gasoline, regardless of classification, suitable for use as fuel in an internal combustion engine, except special fuel as defined in Section 2.85 of these regulations, including any product obtained by blending together any one or more products, with or without other products, if the resultant product is capable of the same use.
2.35. "Gross proceeds" means the amount received in money, credits, property or other consideration from sales and services within this State, without deduction on account of the cost of property sold, amounts paid for interest or discounts or any other expenses whatsoever. Gross proceeds shall be reduced by the value of an item of tangible personal property which is traded-in for the purpose of reducing the purchase price of the item purchased or the amount of a discount allowed by the vendor for the item at the time the item is purchased. Losses shall not be deducted, but any credit or refund made for goods returned may be deducted.
2.35.1. Gross proceeds shall include the amount of any excise tax or other tax imposed upon the tangible personal property or taxable service sold or used, or the sale thereof, prior to the imposition of the West Virginia consumers sales and service tax or use tax on such property or taxable service.
2.35.2. Gross proceeds shall include any increase in the amount paid by the ultimate consumer or end user of tangible personal property or a taxable service by reason of shipping charges, postage, handling charges, costs of travel or transportation or any similar cost or charge.
2.35.3. For purposes of these regulations the terms "charge," "gross sales price," "sales price," "purchase price," "monetary consideration" and "gross receipts" shall be synonymous with the term "gross proceeds."
2.35.4. Gross proceeds shall not include the amount of federal, state or local tax simultaneously imposed upon the tangible personal property or service purchased.
2.36. "Importer" means and includes, for purposes of the tax on gasoline and special fuel, every person, resident or nonresident, other than a distributor, who receives gasoline or special fuel outside this State for use, sale or consumption within this State, but shall not include the fuel in the supply tank of a motor vehicle that is not a motor carrier. See definition of motor carrier in Section 2.52 of these regulations.
2.37. "Improvement" - See Section 2.24.3.4 of these regulations.
2.38. "Intangible personal property" means chattel interests, real and personal, money, credits, investments and the evidences thereof.
2.39. "Isolated transaction" means a transaction or event in which tangible personal property or a taxable service is sold, transferred, offered for sale or delivered by the owner thereof or by his representative. In order to qualify as an isolated transaction, the seller may not be in the business of selling the type of tangible personal property or rendering the service which is the subject of the transaction. The isolated transaction may be in the form of a single transaction, or a series of individual transactions which would be an event. An example of a single transaction would be the sale of a boat. An example of a series of transactions comprising an event would be a yard sale. An event may not be longer than forty-eight (48) hours in duration. A person qualifying for the exemption shall have the isolated transaction exemption available for up to a total of four (4) "isolated transactions" (whether they be "transactions" or "events," as herein described,) in any twelve (12) month period. The fifth (5th) transaction or event and any transaction or event thereafter in any such twelve (12) month period is taxable. Any purported "event" having a duration longer than forty-eight (48) hours shall be treated as two (2) or more successive "events." If the number of total aggregate events is greater than four (4) for any twelve (12) month period, any purported event beyond four (4) is a taxable activity.
2.39.1. The isolated transaction exemption shall be available for persons selling their tangible personal property through an auctioneer, if the requirements of this definition are met with relation to the person whose property is being sold. For sales by an auctioneer, See Section 86 of these regulations.
2.41. "Lease" includes rental, hire and license.
2.42. "Livestock" means farm animals raised for profit but does not include cats, rabbits, dogs, rats, mice, raccoons, groundhogs, deer, squirrels, crows, bears, exotic animals, parrots, parakeets, swans, peafowl, tropical or wild or exotic birds or fish or any animal commonly kept as, or thought of as a pet, or any game animal or wild animal unless raised for profit: Provided, That such profit is not obtained through the sale of such animal, fowl or fish being sold as a pet.
2.43. "Management information services facility" means a building, or any part thereof, or a complex of buildings, or any part thereof, including the machinery and equipment located therein, that is exclusively dedicated to providing management information services to the owner or operator thereof or to another person.
2.44. "Management information services" means, and is limited to, data processing, data storage, data recovery and backup, programming recovery and backup, telecommunications, computation and computer processing, computer programming, electronic information, and data management activities, or any combination of such activities, when such activity, or activities, is not subject to regulation by the West Virginia public service commission and such activity, or activities, is for the purpose of managing, planning for, organizing, or operating, any industrial or commercial business, or any enterprise, facility or facilities of an industrial or commercial business, whether such industrial or commercial business or enterprise, facility or facilities of an industrial or commercial business is located within or without this state and without regard to whether such industrial or commercial business, or enterprise, facility or facilities of an industrial or commercial business is owned by the provider of the management information services or by a "related person," as defined in Section 267(b) of the Internal Revenue Code of 1986, as amended.
2.45. "Manufactured home" means a structure, transportable in one (1) or more sections, which in the traveling mode is eight (8) body feet or more in width or forty (40) body feet or more in length or, when erected on site, is three hundred twenty (320) or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning and electrical systems contained therein; except that such term includes any structure which meets all the requirements of this definition except the size requirements and with respect to which the manufacturer voluntarily files a certificate which complies with the applicable federal standard as set forth in the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. 5401, et seq.) and the federal manufactured home construction and safety standards and regulations promulgated by the Secretary of the United States Department of Housing and Urban Development to implement such act. Calculations used to determine the number of square feet in a structure will be based on the structure's exterior dimensions measured at the largest horizontal projections when entered on site. The term "manufactured home" includes:
2.45.1. units containing parts that may be folded, collapsed or telescoped when being towed and that may be expanded to provide additional cubic capacity.
2.45.2. units composed of two (2) or more separately towable components designed to be joined into one (1) integral unit capable of being separated again into the components for repeated towing.
2.45.3. units designed to be used for residential, commercial, educational or industrial purposes, excluding, however, recreational vehicles, as defined in Section 2.71 of these regulations.
2.46. "Manufacturing" means a systematic operation or integrated series of systematic operations engaged in as a business or segment of a business which transforms or converts tangible personal property by physical, chemical or other means into a different form, composition or character from that in which it originally existed. Manufacturing production begins with the arrival of raw materials and ends when the property has reached that point where no further chemical, physical or other changes are to be made to the resultant property in the production process.
2.46.1. A person may be engaged in a manufacturing activity although such person does not have legal title to or any economic interest in the tangible personal property so transformed or converted.
2.47. "Member of the producer's immediate family" means the producer's spouse, son, step-son, daughter, step-daughter and any other person related by blood or marriage residing with the producer.
2.48. "Membership fees or bona fide dues" mean those amounts paid by members which entitle such persons to continued membership in a corporation, organization or association. Membership fees or bona fide dues do not include any amounts paid for tangible personal property or specific services rendered to members by a corporation, organization or association. For related material See Sections 52.4 and 70.3 of these regulations.
2.49. "Mobile home" means a "manufactured home" as defined in Section 2.45 of these regulations.
2.50. "Modular home" means a "manufactured home" as defined in Section 2.45 of these regulations.
2.51. "Monetary consideration" means the actual cost to the purchaser of tangible personal property or a service purchased after deduction for the value of any item traded-in as part of the consideration paid for the tangible personal property or service purchased. Monetary consideration shall not include the amount of federal, state or local tax simultaneously imposed upon the tangible personal property or service purchased.
2.52. "Motor carrier" means and includes, for purposes of the tax on gasoline and special fuel, (A) any passenger vehicle which has seats for more than nine passengers in addition to the driver, any road tractor, tractor truck or any truck having more than two axles, which is operated or caused to be operated, by any person on any highway in this State using gasoline or special fuel; and (B) any aircraft, barge or other watercraft, or locomotive transporting passengers or freight in or through this State.
2.53. "Motor vehicle" means and includes, for purposes of the tax on gasoline and special fuel, automobiles, motor carriers, motor trucks, motorcycles and all other vehicles or equipment, engines or machines which are operated or propelled by combustion of gasoline or special fuel. See this Section 2 for the definition of "vehicle."
2.54. "Natural Resources." - See Section 123 of these regulations.
2.55. "Nonprofit organization" means a corporation or organization no part of the income or profit of which is distributed to its shareholders, members, directors or officers.
2.56. "Noise pollution" - See Section 2.27.1.113.e of these regulations.
2.57. "Occasional sale of food" means a casual and occasional sale, as defined in Section 2.11 of these regulations, of food, as defined in Section 2.33 of these regulations.
2.58. "Person" includes any state, and its political subdivisions or an agency of either, the State of West Virginia and its political subdivisions or an agency of either, and any individual, firm, partnership, joint venture, joint stock company, the government of the United States and its agencies, any public or private corporation, municipal corporation, cooperative, estate, trust, business trust, receiver, executor, administrator, any other fiduciary, any representative appointed by order of any court or otherwise acting on behalf of others, or any other group or combination acting as a unit, and the plural as well as the singular number of the entities here enumerated.
2.59. "Personal service" includes those services:
2.59.1. Compensated by the payment of wages in the ordinary course of employment;
2.59.2. Rendered to the person of an individual without, at the same time, selling tangible personal property, such as nursing, barbering, shoe shining, manicuring and similar services. See Section 8.1.2 of these regulations.
2.60. "Pollution control" - See Section 2.27.1.13.a of these regulations.
2.61. "Poultry" means domestic fowl raised for meat or eggs and includes, but is not necessarily limited to, chickens, turkeys, ducks and geese; not included in this definition are crows, parrots, parakeets, swans, peafowl, exotic or wild birds not raised for meat or eggs.
2.62. "Poultry house" means a structure used solely for the purpose of sheltering domesticated birds which are kept for the production of meat or eggs, and not used for sheltering any other animals or humans.
2.63. "Private school" means an institution of learning, providing elementary or secondary educational instruction and falling within Exemption A or K of W. Va. Code '18-8-1 as a State approved alternative to compulsory public school attendance. Such schools may include parochial schools, church schools, schools operated by a religious order or other nonpublic schools.
2.64. "Production of natural resources" means the performance, by either the owner of the natural resources or another, of the act or process of exploring, developing, severing, extracting, reducing to possession and loading for shipment for sale, profit or commercial use of any natural resource products and any reclamation, waste disposal or environmental activities associated therewith.
2.64.1. Persons engaged in the construction, alteration, repair or improvement of facilities to be used by others to produce natural resources are engaged in the business of contracting and are not considered to be exploring, developing, severing, extracting, reducing to possession and loading natural resources as required by the definition of "production of natural resources" set forth in Section 2 of these regulations. See Section 107 of these regulations for information concerning the taxation of contractors.
2.65. "Professional service" means and includes an activity recognized as professional under common law, its natural and logical derivatives, an activity determined by the State Tax Division to be professional, and any activity determined by the West Virginia Legislature in W. Va. Code '11-15-1 et seq. to be professional. See Section 8.1.1 of these regulations.
2.66. "Public school" means an institution of learning established, maintained and funded by the State of West Virginia which is operated by a governmental unit of this State for the purpose of providing free elementary or secondary educational instruction to children residing in West Virginia.
2.67. "Purchase" means any transfer, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property or a taxable service, for a consideration.
2.68. "Purchase price" means the total amount for which tangible personal property or a taxable service is sold, valued in money, whether paid in money or otherwise: Provided, That cash discounts allowed and taken on sales shall not be included. However, the purchase price includes the amount of any term discount allowed by the vendor, such discount being the reduction in the purchase price if the total amount of the purchase price is paid within a specified period of time. The value of business stimulants, gifts or promotions given to induce consumers to patronize a particular establishment are not considered cash discounts. Purchase price shall not include the amount of federal, state or local tax simultaneously imposed upon the tangible personal property or service purchased.
2.69. "Purchaser" means a person who purchases tangible personal property or a taxable service.
2.70. "Real property" means lands, tenements and hereditaments, all rights thereto and interest therein except chattel interests. See W. Va. Code '2-2-10(p) (1973).
2.71. "Recreational vehicles" - See Section 2.105 of these regulations.
2.72. "Regular recurring service" - See Section 2.24.3.2b of these regulations.
2.73. "Relatively permanent" - See Section 2.24.3.2a of these regulations.
2.74. "Religious organization" means any organization whose major activity is the furtherance of religious ideals and whose real and personal property is exempt from ad valorem property taxation under W. Va. Code '11-3-9 and Article X, Section 1 of the West Virginia Constitution.
2.75. "Repair" - See Section 2.24.3.5 of these regulations.
2.76. "Retail dealer of gasoline or special fuel" means and includes, for purposes of the tax on gasoline and special fuel, any person not a distributor who sells gasoline or special fuel from a fixed location in this State to users.
2.77. "Retailer" means and includes every person engaging in the business of selling, leasing or renting tangible personal property or dispensing taxable services for use within the meaning of the use tax statute, regardless of whether the purchaser is a member of the general public or a person engaged in business, and every person engaging in the business of selling, at auction, tangible personal property owned by the person or others for use in this State: Provided, That when in the opinion of the Tax Commissioner it is necessary for the efficient administration of the use tax to regard any salesmen, representatives, truckers, peddlers or canvassers as the agents of the dealers, distributors, supervisors, employers or persons under whom they operate or from whom they obtain the tangible personal property sold by them, irrespective of whether they are making sales on their own behalf or on behalf of such dealers, distributors, supervisors, employers or persons, the Tax Commissioner may so regard them and may regard the dealers, distributors, supervisors, employers, or persons as retailers.
2.78. "Retailer engaging in business in this State" or any like term, unless otherwise limited by federal statute, means and includes but is not limited to any of the following:
2.78.1. Any retailer having or maintaining, occupying or using, within this State, directly or by a subsidiary, an office, distribution house, sales house, warehouse, or other place of business, or any agent (by whatever name called) operating within this State under the authority of the retailer or its subsidiary, irrespective of whether such place of business or agent is located here permanently or temporarily, or whether such retailer or subsidiary is admitted to do business within this State pursuant to W. Va. Code '31-1-49.
2.78.2. Any retailer soliciting orders from persons located in this State for the sale of tangible personal property or taxable services by means of a telecommunication or television shopping system which utilizes a telephone or mail ordering system, including toll free telephone numbers, reverse charge telephone systems or other telephone ordering systems and which is intended by the retailer to be broadcast by cable television or other means of broadcasting, to consumers located in this State.
2.78.3. Any retailer who solicits orders from persons located in this State for the sale of tangible personal property or taxable services by means of advertising that is broadcast from, printed at, or distributed from, a location in this State if the advertising is primarily intended to be disseminated to consumers located in this State and is only secondarily or incidentally disseminated to bordering jurisdictions. For purposes of this paragraph, advertising which is broadcast from a radio or television station located in this State or is printed in or distributed by a newspaper published in this State is rebuttably presumed to be primarily intended for dissemination to consumers located in this State.
2.78.4. Any retailer soliciting orders from persons located in this State for the sale of tangible personal property or taxable services by mail if the solicitations are substantial and recurring and if the retailer economically benefits from any banking, financing, debt collection, telecommunication or marketing activities occurring in this State or economically benefits from the location in this State of an authorized installation, servicing or repair facility, regardless of whether such facility is owned or operated by such retailer or by a related or unrelated person.
2.78.5. Any retailer having a franchisee or licensee operating in this State under the retailer's trade name, if the franchisee or licensee is required to collect the tax imposed by W. Va. Code '11-15-1 et seq. or W. Va. Code '11-15A-1 et seq.
2.78.6. Any retailer who, pursuant to a contract with a cable television operator located in this State, solicits from persons located in this State orders for the sale of tangible personal property or taxable services by means of advertising which is transmitted or distributed over a cable television system in this State.
2.78.7. A retailer without the necessary minimum contacts for a constitutionally sufficient nexus for West Virginia to require such retailer to collect and remit use tax shall not be considered a "retailer engaging in business in this State."
2.79. "Sale," "sales" or "selling" means for purposes of the use tax any transaction resulting in the purchase of tangible personal property or taxable services from a retailer or vendor, and for purposes of the consumers sales and service tax includes any transfer of the possession or ownership of tangible personal property for a consideration, including a lease or rental, when the transfer or delivery is made in the ordinary course of the transferor's business and is made to the transferee or his agent for consumption or use or any other purpose. This term embraces renting or leasing, conditional sales contracts, leases with options to purchase, and contracts under which possession of property is given to the purchaser but title is retained by the vendor or retailer as security for payment of purchase price.
2.80. "Sales tax" - See Section 2.20 of these regulations.
2.81. "School employee" means and includes all personnel employed by a school or by a county board of education whether employed on a regular full-time basis, an hourly basis or otherwise. This includes all teachers, auxiliary personnel and service personnel defined as follows:
2.81.1. "Teacher" means any teacher, supervisor, principal, superintendent, school librarian or any other person who meets the educational and other requirements set by the State for the issuance of certification to teach in a public school and who holds such certification and who is regularly employed for instructional purposes in a school in this State.
2.81.2. "Auxiliary personnel" means those persons selected and trained as a monitor aide, clerical aide, classroom aide, or general aide and who act in or assist in instructional activity, but who do not hold certifications to teach in a public school in this State.
2.81.3. "Service personnel" means those persons who serve the school in a nonprofessional or noninstructional capacity. This includes secretarial personnel, custodial personnel, maintenance personnel, transportation personnel, school lunch workers, etc.
2.82. "Seller" means a retailer and vendor and includes every person selling or leasing tangible personal property or dispensing taxable services.
2.83. "Service" or "selected service" includes all activities engaged in for other persons for a consideration, which involve the rendering of a service as distinguished from the sale of tangible personal property, but does not include contracting services, personal services, professional services, the services rendered by an employee to his employer, services furnished by corporations subject to the control of the West Virginia Public Service Commission or any service rendered for resale.
2.84. "Service personnel" - See Section 2.81.3 of these regulations.
2.85. "Special fuel" means and includes, for purposes of the tax on gasoline and special fuel, any gas or liquid, other than gasoline, used or suitable for use as fuel in an internal combustion engine. The term "special fuel" includes products commonly known as natural or casing-head gasoline and includes special fuel for heating any private residential dwelling, building or other premises; but does not include any petroleum product or chemical compound such as alcohol, industrial solvent, heavy furnace oil, lubricant, etc., not commonly used nor practicably suited for use as fuel in an internal combustion engine.
2.86. "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the United States.
2.87. "Subject to the control of the Public Service Commission" means a person which is subjected to regulation by such Commission, regardless of whether said Commission actually regulates such person.
2.88. "Successor" or "successor in business" means any person who directly or indirectly purchases, acquires, or succeeds to the business or the stock of goods of any person quitting, selling or otherwise disposing of a business or stock of goods.
2.89. "Structure" - See Section 2.24.3.6 of these regulations.
2.90. "Support," for purposes of determining whether an organization or corporation is exempt on its purchases, means and includes, but is not limited to:
2.90.1. Gifts, grants, contributions or membership fees;
2.90.2. Gross receipts from fund raisers which include receipts from admissions, sales of merchandise, performance of services or furnishing of facilities in any activity which is not an unrelated trade or business (within the meaning of Section 513 of the Internal Revenue Code of 1986, as amended);
2.90.3. Net income from unrelated business activities, whether or not such activities are carried on regularly as a trade or business;
2.90.4. Gross investment income as defined in Section 509(e) of the Internal Revenue Code of 1986, as amended;
2.90.5. Tax revenues levied for the benefit of a corporation or organization either paid to or expended on behalf of such organization; and
2.90.6. The value of services or facilities (exclusive of services or facilities generally furnished to the public without charge) furnished by a governmental unit referred to in Section 170(c)(1) of the Internal Revenue Code of 1986, as amended, to an organization without charge. This term does not include any gain from the sale or other disposition of property which would be considered as gain from the sale or exchange of a capital asset, or the value of an exemption from any federal, state or local tax or any similar benefit.
2.91. "Supply tank" means, for purposes of the tax on gasoline and special fuel, any receptacle on a motor vehicle from which gasoline or special fuel is supplied for the propulsion of the vehicle or equipment located thereon, exclusive of a cargo tank. A supply tank includes a separate compartment of a cargo tank used as a supply tank, and any auxiliary tank or receptacle of any kind or cargo tank, from which gasoline or special fuel is supplied for the propulsion of the vehicle, whether or not such tank or receptacle is directly connected to the fuel supply line of the vehicle.
2.92. "Tangible personal property" means personal property which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses, and includes tangible goods, wares and merchandise.
2.92.1. Wherever the words "tangible personal property" or "property" appear, the same shall include the words "or taxable services," where the context so requires, in accordance with W. Va. Code '11-15A-2(a).
2.93. "Tank wagon" means and includes, for purposes of the tax on gasoline and special fuel any motor vehicle or vessel with a cargo tank or cargo tanks ordinarily used for making deliveries of gasoline or special fuel, or both, for sale or use.
2.94. "Tax" includes the consumers sales and service tax imposed by W. Va. Code '11-15-1 et seq., the use tax imposed by W. Va. Code '11-15A-1 et seq., and additions to tax, interest and penalties imposed by W. Va. Code '11-10-1 et seq.
2.95. "Tax Commissioner" or "Commissioner" means the State Tax Commissioner of West Virginia or his delegate.
2.96. "Taxable services" means all services other than those services which are subject to the per se exemptions provided in Section 9.2 of these regulations, or which are otherwise exempted by law.
2.97. "Taxpayer" includes any person who is liable for the consumers sales and service tax imposed by W. Va. Code '11-15-1 et seq., or who is subject to the use tax imposed by W. Va. Code '11-15A-1 et seq., whether acting for himself or as an agent or fiduciary.
2.98. "Teacher" - See Section 2.81.1 of these regulations.
2.99. "Textbook" means a book or manual of instruction containing a presentation of the principles of a subject and which is used as a basis of instruction.
2.100. "This State" means the State of West Virginia.
2.101. "Transportation" means the act or process of conveying for consideration, as a commercial enterprise, passengers or goods from one place or geographical location to another place or geographical location.
2.102. "Transmission" means the act or process of causing liquid, natural gas or electricity to pass or be conveyed for consideration from one place or geographical location to another place or geographical location through a pipeline or other medium for commercial purposes. For purposes of this definition, the word "medium" refers to the stationary mode by which liquid, natural gas or electricity moves from one location to another; the term includes such modes as pipelines and wires, but it specifically excludes such modes of transportation as tank trucks and barges.
2.103. "Use" means and includes the exercise by any person of any right or power over tangible personal property or taxable services which is incident to the ownership, possession or enjoyment of such property or services, or by any transaction in which possession of or the exercise of any right or power over tangible personal property or taxable services is acquired for a consideration, including any lease, rental or conditional sale of tangible personal property. As used in this definition, "enjoyment" includes a purchaser's right to direct the disposition of the property or services, whether or not the purchaser has possession of the property. The term "use" does not include the keeping, retaining or exercising of any right or power over tangible personal property solely for the purpose of subsequently transporting it outside the State for use thereafter solely outside this State.
2.104. "Use tax" means the tax imposed by W. Va. Code '11-15A-1 et seq.
2.105. "Vehicle" means every device in, upon or by which any person or property is or may be transported or drawn upon a highway, excepting devices moved by human power or used exclusively upon stationary rails or tracks and includes recreational vehicles. For purposes of these regulations, "recreational vehicle" means a motorboat, motorboat trailer, all-terrain vehicle, travel trailer, fold down camping trailer, motor home, snowmobile or any other vehicle included within the definition of recreational vehicle as defined in W. Va. Code '17A-1-1.
2.106. "Vendor" means any person, whether selling at retail to the general public or otherwise selling to a person engaged in any business, who is engaged in this State in furnishing or rendering services or making sales of tangible personal property.
2.107. "Water pollution" - See Section 2.27.1.13.d of these regulations.
2.108. "Weight loss program" means and includes the various activities engaged in for the purpose of assisting, directing or guiding an individual in losing weight primarily through diet regulation, but may include a physical exercise regimen. A weight loss program may occur totally at a weight loss center or it may include activities occurring elsewhere. See Section 75 of these regulations for further information.
2.109. "Weight loss center" means a primary location where weight loss programs occur.
W. Va. Code R. § 110-15-3 Imposition of Tax; Rates; Tax Base
3.1. Consumers Sales and Service Tax. - The consumers sales and service tax is levied and imposed upon sales of tangible personal property and upon the dispensing of certain selected services. The amount of consumers sales and service tax shall be computed as follows:
3.1.1. On each sale where the monetary consideration is five cents or less, no tax.
3.1.2. On each sale where the monetary consideration is from six cents to sixteen cents, both inclusive, one cent.
3.1.3. On each sale where the monetary consideration is from seventeen cents to thirty-three cents, both inclusive, two cents.
3.1.4. On each sale where the monetary consideration is from thirty-four cents to fifty cents, both inclusive, three cents.
3.1.5. On each sale where the monetary consideration is from fifty-one cents to sixty-seven cents, both inclusive, four cents.
3.1.6. On each sale where the monetary consideration is from sixty-eight cents to eighty-four cents both inclusive, five cents.
3.1.7. On each sale where the monetary consideration is from eighty-five cents to one dollar, both inclusive, six cents.
3.1.8. If the monetary consideration on a sale is in excess of one dollar, six cents on each whole dollar of sale price, and upon any fractional part of a dollar in excess of whole dollars, as follows: one cent on the fractional part of the dollar if less than seventeen cents; two cents on the fractional part of the dollar if in excess of sixteen cents but less than thirty-four cents; three cents on the fractional part of the dollar if in excess of thirty-three cents but less than fifty-one cents; four cents on the fractional part of the dollar if in excess of fifty cents but less than sixty-eight cents; and five cents on the fractional part of the dollar if in excess of sixty-seven cents but less than eighty-five cents; and six cents on the fractional part of the dollar if in excess of eighty-four cents. For example, the tax on sales from one dollar and one cent to one dollar and sixteen cents, both inclusive, seven cents; on sales from one dollar and seventeen cents to one dollar and thirty-four cents, both inclusive, eight cents; on sales from one dollar and thirty-four cents to one dollar and fifty cents, both inclusive, nine cents; on sales from one dollar and fifty-one cents to one dollar and sixty-seven cents, both inclusive, ten cents; on sales from one dollar and sixty-eight cents to one dollar and eighty-four cents, both inclusive, eleven cents; and on sales from one dollar and eighty-five cents to two dollars, both inclusive, twelve cents.
3.2. Separate Sales. - Separate sales, such as daily or weekly deliveries, shall not be aggregated for the purpose of computation of the consumers sales and service tax even though such sales are aggregated in the billing or payment therefor. However, when several items are purchased by the same vendee simultaneously, the consumers sales and service tax may be computed upon the total monetary consideration of the items so purchased. Notwithstanding any other provision of these regulations, coin-operated amusement and vending machine sales shall be aggregated for the purpose of computation of the consumers sales and service tax.
3.2.1. Example: If merchandise is purchased at a West Virginia department store's cosmetic counter, delivered to the purchaser and monetary consideration of sixty cents is paid, this is a complete sale and four cents tax must be collected. If the same purchaser goes to the candy counter and makes a ten-cent purchase, there is a new sale and one cent tax must be collected thereon. The cosmetic sale and the candy sale may not be aggregated so as to decrease the amount of tax otherwise due. However, if the cosmetic item and candy were purchased simultaneously by the same purchaser at the same counter, the consumers sales and service tax may be computed upon the aggregate monetary consideration of both items.
3.3. Use Tax. - The use tax is levied and imposed upon the use in this State of tangible personal property or taxable services at a rate of six percent (6%) of the purchase price of such tangible personal property and taxable services. The amount of use tax imposed is reduced, but not below zero with respect to a particular item, by the amount (if any) of sales tax lawfully paid to another state for the acquisition of that particular item of property or service.
3.4. Tax Base.
3.4.1. In General. - The consumers sales and service tax is based upon "monetary consideration" and the use tax is based upon "purchase price." See Section 2 of these regulations for definitions. In certain circumstances where a natural resource producer or manufacturer uses or consumes natural resources produced or items manufactured, the tax is based upon the gross value of the product used or consumed. The following provisions in this Section 3.4 illustrate the application of these terms.
3.4.1.1. Apportionment of sales price. - In instances where a transaction involves the sale of taxable personal property or taxable services, and the sale of nontaxable property or services, and the method of billing does not delineate what portion of the sales price is taxable, the Tax Commissioner may establish safe harbors which will assist in the development of uniform apportionment calculations for similarly situated taxpayers. The Tax Commissioner must file appropriate administrative filed in the State Register at least thirty (30) days prior to the effective date of the subject matter of the safe harbor being established.
3.4.2. Finance and Carrying Charges. - Monetary consideration or purchase price upon which the consumers sales and service tax or use tax is imposed shall not include carrying charges, late payment charges, finance charges or similar items. Example: a sewing machine priced at $80.00 is sold under a conditional sales contract which provides for deferred monthly payments. A separate charge of $5.00 is added to the sale price to cover finance charges, thus making the total cost to the purchaser $85.00. The tax is to be computed upon $80.00.
3.4.3. Discounts. - Any cash discount allowed at the time of delivery which establishes the final selling price for the article at that time shall not be included in arriving at the monetary consideration or purchase price subject to the tax. Discounts which are allowed after delivery or upon conditions or events happening at some future time, such as a certain percentage discount being allowed if paid within a specified period, are not deductible in determining the tax base for the consumers sales and service tax or use tax liability.
3.4.4. Exchanged Merchandise. - When merchandise, the sale of which has been taxed under the consumers sales and service tax or use tax, is exchanged, the purchase price plus applicable tax paid for the merchandise exchanged shall not be included in determining monetary consideration or purchase price of the article purchased in exchange.
3.4.5. Rebates and Trade-ins. - When merchandise is taken as a trade-in for the purpose of reducing the price the purchaser must pay, the value of the trade-in shall not be included in the monetary consideration or purchase price. However, the amount of any manufacturer's rebate available to entice the purchase of the item shall not decrease or otherwise affect monetary consideration or purchase price. In other words, the monetary consideration or purchase price shall not include the value of any item traded-in but monetary consideration or purchase price shall not be reduced by the amount of any manufacturer's rebate.
3.4.5.1. Example 1: A person owns a diamond ring with a value of $2,500.00, and seeks to purchase a second diamond ring which will sell for $10,000.00. The $2,500.00 value of the trade-in may be applied to reduce the amount of the monetary consideration upon which consumers sales and service tax is based. Therefore, $7,500.00 will be subject to tax.
3.4.5.2. Example 2. - In order to increase sales, a manufacturer offers a $10.00 rebate on the purchase of a $50.00 power saw. Customer purchases a saw and applies for the rebate. The entire $50.00 will be subject to tax. However, a rebate offered by a retailer to his customer is treated as a cash discount under Section 3.4.3 of these regulations.
3.4.6. Sales of Products Produced by Persons Producing Natural Resources, Products or Manufactured Products. - Commercial producers of natural resources, products or manufactured products who sell such resources or products in circumstances where no exception or exemption from the consumers sales and service tax or use tax applies, shall constitute sellers or vendors of such products, and shall collect the tax and make returns of such tax on the basis of the gross proceeds of such sales. Upon failure of the seller to collect or remit such tax, the seller shall be liable, in accordance with W. Va. Code '11-15-7 and '11-15A-2a, for payment of such tax and any applicable interest, additions to tax and penalties and shall be subject to applicable criminal sanctions for such failure to collect or remit such tax in accordance with the provisions of W. Va. Code ''11-9-1 et seq., 11-10-1 et seq., 11-15-1 et seq. and 11-15A-1 et seq. and these regulations, and as otherwise provided by law.
3.4.7. Use of Products Produced by Persons Producing Natural Resources, Products or Manufactured Products. - Effective May 1, 1989, commercial producers of natural resources, products or manufactured products who use or consume such natural resources, products or manufactured products, in circumstances where no exception or exemption from the consumers sales and service tax or use tax applies, shall pay and make returns of such tax as applicable based upon the gross value of the natural resource product or manufactured product so used or consumed in accordance with W. Va. Code '11-15-7 or 11-15A-2a. Upon failure of the natural resource producer or manufacturer to pay or remit such tax, the natural resource producer or manufacturer shall be liable for payment of such tax and any applicable interest, additions to tax and penalties and shall be subject to applicable criminal sanctions for such failure to pay or remit tax, interest, additions or penalties in accordance with the provisions of W. Va. Code ''11-9-1 et seq., 11-10-1 et seq., 11-15-1 et seq. and 11-15A-1 et seq. and these regulations, and as otherwise provided by law.
3.4.7.1. Gross Value of Natural Resources, Products or Manufactured Products Used or Consumed by the Producer Thereof.
3.4.7.1.a. General Rule. - Gross value shall correspond as nearly as possible to the gross proceeds which would have been received from the sale of such natural resources, products or manufactured products to another person in an arms-length transaction, as that term is generally defined. There shall not be allowed a deduction or credit for production expenses when determining such gross proceeds.
3.4.7.1.b. Natural Resource Products. - Whenever natural resource products produced within or without this State are used or consumed by the producer in his business, within this State, the value of such products shall be determined by the following rules in the order stated. In all instances where natural resources are consumed by the producer at a point distant from the place of production, no freight charges paid by the producer will be allowed as a deduction in determining value under these rules, unless due consideration has been given such charges in the method by which the values were determined.
3.4.7.1.b.1. The value of the natural resource product consumed or used shall be equal to the selling price at the place of use or consumption of similar products of like quality and character offered for sale in similar quantities by persons unrelated to the taxpayer.
3.4.7.1.b.2. In the absence of sales of similar natural resource products by other persons as a guide to value, value shall be equal to the average price at which sales of the same or a similar product are made during the taxable year to customers of the producer.
3.4.7.1.b.3. In the absence of sales to customers of the taxpayer as a guide to value, such value may be determined upon cost basis, in which case there shall be included every item of cost attributable to that particular natural resource product, including all direct or indirect overhead costs and by adding thereto the average markup realized by the producer on his natural resource products.
3.4.7.1.c. Manufactured Products. - In those cases where a person partially or wholly consumes or makes use of his final completed manufactured, compounded or prepared products, a value must be placed on such products, in accordance with the following rules in the order stated. In all instances where products or articles are consumed by the manufacturer and are consumed at a point distant from the place of manufacturing, no freight charges paid by the manufacturer will be allowed as a deduction in determining value under these rules, unless consideration has been given such charges in the method by which the values were determined.
3.4.7.1.c.1. The value of the article consumed or used shall be equal to the selling price at the place of use or consumption of similar products of like quality or character offered for sale in similar quantities by persons unrelated to the taxpayer.
3.4.7.1.c.2. In absence of sales of similar products by other persons as a guide to value, value shall be equal to the average price at which sales of the same or a similar product are made during the taxable year to customers of the manufacturer.
3.4.7.1.c.3. In the absence of sales to customers of the taxpayer as a guide to value, such value may be determined upon a cost basis, in which case there shall be included every item of cost attributable to that particular article, including all direct and indirect overhead costs and by adding thereto the average markup realized by the manufacturer on his products.
W. Va. Code R. § 110-15-4 Collection of Tax; Accrual; Liabilities
4.1. Collection by Vendor. - Each vendor shall collect from the purchaser the consumers sales and service tax levied and imposed upon each sale of tangible personal property and service in West Virginia before or at the time such tax accrues. Such tax shall be added to and constitute a part of the sales price. The vendor shall keep the amount of tax collected separate from the proceeds of sale exclusive of the tax unless authorized in writing by the Tax Commissioner to keep such amount of tax in a different manner. Where such authorization is given, the State's claim shall be enforceable against and shall take precedence over all other claims against the moneys commingled.
4.1.1. Persistent failure by any vendor to keep the amount of tax collected separate from the proceeds of sale exclusive of the tax shall be reason for, and good cause for, the Tax Commissioner at his discretion to revoke the business registration certificate of such vendor issued under W. Va. Code '11-12-1 et seq. or to refuse to renew the said business registration certificate, or both.
4.2. Collection by Retailer. - Every retailer engaging in business in this State and making sales of tangible personal property or taxable services for delivery into this State, or with knowledge, directly or indirectly, that the property or services are intended for use in this State, shall at the time of making such sales, whether within or without the State, collect the use tax before or at the time such tax accrues from the purchaser and give to the purchaser a receipt therefor with the tax separately stated thereon.
4.2.1. Foreign Retailers. - The Tax Commissioner may, in his discretion and upon application, authorize the collection of the use tax by any retailer not engaging in business within this State, who, to the satisfaction of the Tax Commissioner, furnishes adequate security to insure collection and payment of the tax. Such retailer may then be issued, without charge, a permit to collect the tax in the manner prescribed by the Tax Commissioner. When so authorized, it shall be the duty of such retailer to collect the use tax upon all tangible personal property or taxable service sold to his knowledge for use within this State, in the same manner and subject to the same requirements as a retailer engaging in business within this State. Such authority and permit may be canceled when, at any time, the Tax Commissioner considers the security inadequate, or that such tax can more effectively be collected from the person using such property in this State.
4.3. Exceptions to Collection Requirements. - Notwithstanding Sections 4.1 and 4.2 of these regulations, no consumers sales and service tax and no use tax need be collected by the vendor or retailer with respect to a transaction if any one of the following conditions is satisfied:
4.3.1. The transaction is exempt per se from tax pursuant to Section 9.2 of these regulations.
4.3.2. The purchaser signs and presents to the vendor or retailer a current and complete exemption certificate or material purchase certificate issued by the Tax Commissioner and the vendor or retailer accepts such certificate in good faith.
4.3.3. The purchaser gives to the vendor or retailer a current direct pay permit number: Provided, That the transaction is not a sale of food.
4.4. Accrual of Tax Liability Respecting Certain Sales and Services. - This Section specifies the time at which the consumers sales and service tax and use tax liability with respect to the sale of tangible personal property or rendering taxable services becomes a legal liability of the vendee.
4.4.1. Cash, Credit, Conditional Sales. - On cash sales, the tax accrues at the consummation of the sale. On credit sales, the tax accrues upon transfer of possession of the property sold, but is payable by the vendee on or before the thirtieth (30th) day subsequent thereto. On conditional sales, where possession is delivered to the purchaser and title is retained by the seller, the tax accrues upon transfer of possession of the property sold, but is payable by the vendee on or before the thirtieth (30th) day subsequent thereto. When tangible personal property is held or laid away by the vendor or retailer pending payment of all or part of the purchase price, the tax accrues upon delivery of the property sold to the purchaser or, if an unpaid balance remains at such time, the sale shall be treated as a credit sale.
4.4.2. Leases. - Notwithstanding Section 4.4.1 of these regulations, if the sale is a lease, each rental payment is the "monetary consideration" or "purchase price" and constitutes a separate sale transaction upon which the tax is imposed. The tax upon such payment accrues on the date such rental payment is actually received. Where the lessee exercises an option to purchase the leased tangible personal property, the tax accrues at the time of the payment of the remaining portion of the purchase price.
4.4.3. Services. - The tax on sales of taxable services accrues upon the payment of the consideration for performance of the service, without regard to the actual time of such performance.
4.5. Liability of Seller. - The amount of consumers sales and service tax and use tax required to be collected by any vendor or retailer is deemed to be held in trust for the State of West Virginia, and any such tax required to be collected shall constitute a debt owed to this State. If any vendor or retailer fails to collect the consumers sales and service tax or use tax required to be collected, such vendor or retailer shall be personally liable for the amount it failed to collect. If any vendor or retailer fails to remit to the Tax Commissioner any consumers sales and service tax or use tax collected in accordance with Section 5 of these regulations, such vendor or retailer shall be personally liable for the amount it so failed to remit and applicable interest, additions to tax and penalties, and shall be subject to applicable criminal sanctions as provided by law.
4.6. Absorbing Tax; Criminal Penalty. - It shall be unlawful for any vendor or retailer engaging in business in this State to advertise, hold out or state to the public or to any purchaser, consumer or user, directly or indirectly, that the consumers sales and service tax or the use tax or any part thereof will be assumed or absorbed by the vendor or retailer or that it will not be added to the selling price of the property sold, or if added that it or any part thereof will be refunded. Any person violating any of the provisions of this Section within this State shall be guilty of a misdemeanor and subject to the penalties provided in W. Va. Code '11-9-7.
4.6.1. There are transactions where the sales price includes the consumers sales and service tax: such as movie tickets, admission fees or food at a ball game. The following rules apply in such situations.
4.6.1.1. The ticket must have printed on it either the sales price, with the amount of tax indicated, or the phrase "West Virginia consumers sales and service tax included in the price of this ticket," or a substantively similar phrase. Tickets may be sold under Section 4.6.1.2 of these regulations with permission of the Tax Department.
4.6.1.2. In those instances where food or other items are sold, a sign of sufficient size to allow a person of normal vision to read it from a distance of twenty (20) feet must be posted in plain view, such sign to have printed upon it the following phrase: "West Virginia consumers sales and service tax is included in the sales price of these goods and services," or a substantively similar phrase.
4.6.2. In those instances where the sales price includes the consumers sales and service tax, the vendor or retailer must use the following formula when calculating the amount of consumers sales and service tax due on each sale, and he must then remit the amount so calculated.
4.6.2.1. The method for determining the amount of consumers sales and service tax to be collected is to divide the total amount received by 1.06 and multiply that amount by .06 with the resulting amount rounded to the next higher cent being the amount collected on the sale.
4.6.2.2. Example: A hot dog sells for $1.00 at the ballpark.
Total amount purchase price received ($1.00) = ($.94)
1.06 Purchase price sales tax ($.056 ($.94) X .06 = carried to the next higher number - $.06)
4.7. Accrual of Tax Respecting Certain Uses. - This section specifies the time at which tax "accrues" with respect to the use of tangible personal property or taxable services in West Virginia in situations where the tax did not accrue pursuant to Section 4.4 of these regulations.
4.7.1. Out-of-State Purchase. - Where a person uses in this State tangible personal property or taxable services purchased outside this State and the tax has not yet accrued, the use tax accrues when the purchaser first uses such property or service in this State when such use or consumption is not exempt from tax pursuant to Section 9 of these regulations.
4.7.2. Integrated Manufacturer or Natural Resources Producer. - Where a person exercising the privilege of producing for sale, profit or commercial use, any natural resources, product or manufactured product and engages in a business or activity in which such natural resource, product or manufactured product is used or consumed by such person and such use or consumption is not exempt from tax under Section 9 of these regulations, the use tax accrues when such person first uses or consumes such product in this State in such a manner that is not exempt from tax under said Section 9.
4.8. Liability of Purchaser or User. - Every purchaser is and remains personally liable for the consumers sales and service tax levied and imposed and every person using tangible personal property or taxable services in West Virginia is and remains personally liable for use tax levied, imposed and accrued until and unless any one of the following conditions is satisfied:
4.8.1. The purchaser pays the full amount of tax to the vendor or retailer at the time the liability accrues.
4.8.2. The transaction pursuant to which the tax accrued is exempt per se from tax pursuant to Section 9.2 of these regulations.
4.8.3. The purchaser signs and presents to the vendor or retailer a current and complete exemption certificate or material purchase certificate issued by the Tax Commissioner and the purchaser uses the tangible personal property or services in a manner consistent with the exemption asserted on such certificate and such exemption is found in Section 9.3 of these regulations.
4.8.4. The purchaser or user holds a current direct pay permit number issued by the Tax Commissioner to the purchaser or user and the purchaser or user complies with Section 9c of these regulations by timely and accurately filing, reporting and remitting the amount of tax accrued for such purchase or use after taking into account exemptions from tax specified in Section 9 of these regulations.
4.8.5. The person using tangible personal property or taxable services in West Virginia complies with Section 5 by timely and accurately filing, reporting and remitting the amount of tax accrued for such use after taking into account exemptions from tax specified in Section 9 of these regulations.
4.9. Liability of Successor. - If any person sells out his or its business or stock of goods, or ceases doing business, any tax, additions to tax, penalties and interest shall become due and payable immediately and such person shall, within thirty days after selling out his or its business or stock of goods or ceasing to do business, make a final return or returns and pay any tax or taxes which may be due; and, the unpaid amount of any such tax shall be a lien upon the property of such person. The successor in business of any person who sells out a business or stock of goods, or ceases doing business, shall be personally liable for the payment of tax, additions to tax, penalties and interest unpaid after expiration of the thirty (30) day period allowed for payment by the predecessor.
4.9.1. The term "successor" is defined in Section 2 of these regulations to mean any person who directly or indirectly purchases, acquires, or succeeds to the business or the stock of goods of any person quitting, selling, or otherwise disposing of a business or stock of goods. The purchase or acquisition of a business may give rise to successor liability whether the consideration is money, property, assumption of liabilities or cancellation of indebtedness.
4.9.2. The liability of a successor arises from any sale, transfer, assignment or other acquisition of a business or stock of goods. A person who purchases or acquires a portion of a business or stock of goods may become liable as a successor where he purchases or acquires substantially all of the business assets or stock of goods of such business. If two or more persons purchase or acquire a business or stock of goods, their liability as successor is in proportion to the value of the business assets or stock of goods acquired by each person.
4.9.3. The business assets include all assets of a business pertaining directly to the conduct of the business. Business assets include real property or any interest therein; tangible personal property, including fixtures, equipment, machinery, furniture and vehicles; and intangible property, including accounts receivable, contracts, business name, business goodwill, customer lists, delivery routes, patents, trademarks or copyrights. Any asset owned by a corporation is a business asset. "Stock of goods" means the inventory or merchandise that the taxpayer is in the business of selling, but does not include fixtures, equipment, machinery or vehicles used in connection with such business.
4.9.4. If any taxpayer operates more than one business, each at separate locations, and each location being required to have a separate business registration certificate, each business location is a separate business and has a separate stock of goods and separate business assets for purposes of determining successor liability. The cessation of business at any one location, or the sale of the business assets or stock of goods of any one location, may result in successor liability. A successor of the business or stock of goods of any business location is subject to liability as a successor with respect to the tax attributable to that location even if he does not purchase the business or stock of goods of all the locations.
4.9.5. The change in the form of a business will generally give rise to successor liability. A change in the form of a business would include changes such as the incorporation of a sole proprietorship or partnership, the voluntary or involuntary dissolution of a corporation, the merger or consolidation of two or more corporations, the formation of a partnership from one or more sole proprietorships or corporations.
4.9.6. Successor liability does not arise in connection with sales or transfers pursuant to: assignments for the benefit of creditors, deeds of trust, security interests, conditional sales, statutory liens, or judgment liens; or sales or transfers by personal representatives, executors, administrators, receivers, trustees, or any public officer in the course of his official duties, unless the previous owner receives purchase money from the transfer or sale. Any business operated under Title 11 of the United States Code, which is purchased or acquired by another person, shall not give rise to successor liability.
4.9.6.1. If a business or stock of goods is voluntarily sold or transferred to a creditor, and the creditor operates the business, the creditor is a successor. If the creditor does not operate the business or operates the business in liquidation with the sole purpose to recover its debt, the creditor is not a successor.
4.9.7. The purchaser of the business or stock of goods in an arms-length transaction will be released from liability if he withholds from the purchase price an amount sufficient to cover the tax liability of the seller or former owner, and pays such liability in full, including all applicable penalties, additions to tax and interest or if the seller obtains a certificate from the Tax Department stating that no taxes are due from the seller or former owner. Purchase price is not limited to cash transferred to the seller, but includes any consideration flowing directly or indirectly to a seller.
4.9.7.1. The requirement to withhold does not necessarily mean to retain or hold physical assets, but means dealing with the purchase consideration in such a manner as to deny the seller the benefit of the purchase consideration and to make it available to the State for the satisfaction of the tax liability.
4.9.8. The liability of a successor extends to taxes incurred in the course of operation of the business by the former owner and any successor liability of the former owner. The liability may include any liability of the former owner for tax, interest, additions to tax, and penalties that is due and payable, and any such liability that is not due and payable because the former owner has not filed tax returns at the time required by law. The liability includes all taxes, penalties, interest, and additions to tax, whether assessed or unassessed against the former owner, without regard to whether a tax lien has been issued or perfected against the former owner. If any former owner is given a certificate from the Tax Department stating that no taxes are due from his former owner, then the successor shall only be liable for the tax liability of the successors' former owner not covered by the said certificate.
4.9.8.1. The liability of a successor includes taxes that are required by law to be paid prior to the sale or transfer of the business or stock of goods, even if the liability of the former owner is not determined at the time of the sale or transfer. If an audit conducted after the sale or transfer shows a deficiency for periods prior to the sale or transfer, the deficiency is a liability of the former owner and a liability of the successor.
4.9.9. The liability of a successor in business is not limited to the amount of purchase money, or consideration received by the former owner, unless the successor avoids liability or limits liability by one or more of the following methods. If the purchase of a business or stock of goods is an arms-length transaction, the purchaser may avoid any successor liability by requiring the seller to produce a receipt from the Tax Commissioner showing all taxes of the seller have been paid. If the purchase of a business is an arms-length transaction, the purchaser may limit successor liability by withholding enough of the purchase money to satisfy the tax liability of the seller. If the purchase or transfer of a business or stock of goods is not an arms-length transaction, the purchaser or transferee may avoid any successor liability by requiring the seller or transferor to produce a receipt from the Tax Commissioner showing all taxes of the seller or transferor have been paid.
4.9.10. The liability of a successor is determined by law and cannot be avoided or altered by contracts or agreements between the former owner and successor. Thus, a contract or other agreement, providing that the purchaser, transferee, seller, or transferor is or is not responsible for the tax liability of the former owner, or that the former owner has no tax liability, does not alter the liability of the successor.
4.9.11. The liability of a successor may be determined or estimated and an assessment made against such successor. An assessment against a successor is considered to be a proceeding for the collection of the tax liability of the former owner. If the liability of the former owner is determined to be due by an assessment which has become final, an assessment against a successor must be made within five years after the date on which the former owner filed its annual return, or if no annual return is required, five years after the latest periodical return required to be filed in any year is filed.
W. Va. Code R. § 110-15-4a Liability of Officers of Corporation. 4a.1. If the taxpayer is an association or corporation, the officers thereof shall be personally liable, jointly and severally, for any default on the part of the association or corporation, and payment of the consumers sales and service tax and any additions to tax, penalties and interest thereon imposed by W. Va. Code '11-10-1 et seq. may be enforced against them as against the association or corporation which they represent. 4a.2. A corporation, the officers of which are liable for payment of the tax, is any corporation incorporated under the laws of this State, and any foreign corporation authorized to do business in this State or doing business in this State without such authorization. 4a.2.1. A corporation whose charter has been forfeited by decree of court for nonpayment of corporate charter license tax ceases to exist as a legal entity and has no power to engage in business after such forfeiture. The tax liability of a corporation incurred prior to such forfeiture is a debt of the corporation and a liability of its officers. The tax liability incurred after such forfeiture is not incurred by the corporation but by the individuals doing business, and such liability may be assessed against and collected from the individuals, directly and not as officers of the corporation, even if the charter of the corporation is subsequently reinstated. 4a.3. An association is any two or more persons who have voluntarily joined together to transact or engage in business activity, and who are not a corporation or partnership, whether or not the association is authorized or qualified to do business in this State and whether for profit or not for profit. An association includes but is not limited to any business, charitable, fraternal, beneficial, historic, veterans, or labor organization, society, foundation, federation, lodge, club or order, or any subordinate association or auxiliary thereof, that is not incorporated. 4a.4. There is a default by the corporation or association resulting in officer liability when: (a) the tax is shown on a tax return and the corporation or association neglects or fails to pay the tax within 15 days after notice and demand for payment; (b) the liability of the corporation is determined by an assessment and such assessment is final and not subject to administrative or judicial review and the corporation neglects or fails to pay the tax within 15 days after notice and demand for payment; or (c) when an assessment has not been made against the corporation or association and the corporation or association has not filed any return at the time required by law and has failed to file such return after notice of such failure. 4a.4.1. A default occurs whether or not a notice of tax lien has been filed against the corporation or association and whether or not the State has attempted to collect or failed to collect the tax from the corporation or association, and whether or not the corporation or association is defunct, dissolved, or insolvent. 4a.4.2. The filing of a petition in bankruptcy by a corporation does not stay or preclude the assessment of officers of the corporation, since the tax is not dischargeable in bankruptcy. 4a.5. The officers of a corporation or association that are personally liable for consumer sales tax include any president, vice-president, secretary, or treasurer, and any other officers provided in the charter or by-laws of the corporation or association, and any person who is elected or appointed to any position with the authority of an officer, and who performs duties or responsibilities in the management of the corporation. The officers of an association include all members of its governing board and its trustees. A person such as an incorporator, shareholder, member or employee of a corporation or association is not considered to be an officer subject to personal liability. 4a.5.1. A person who acts as an officer or assumes the character, duties or responsibilities of an officer, is presumed to be an officer, and such person cannot avoid personal liability by alleging he was not properly elected. A person who is elected or appointed as an officer without his knowledge or consent, or who does not act as an officer and does not assume the character, duties, or responsibilities of an officer, is not liable as an officer. 4a.5.2. An officer may be liable whether or not the officer was under a duty to pay the tax or was responsible for the payment of the tax, for or on behalf of the corporation or association, and whether or not the officer acted willfully, or with the intent to evade the tax or payment thereof. 4a.5.3. The liability of a corporation, that is owned or controlled by a parent or other corporation, may be imposed on an officer of the other corporation, if such officer performs duties or responsibilities in the management of the taxpayer corporation. 4a.6. An officer is liable for the tax, interest, additions to tax, and penalties for which the corporation or association is liable. 4a.6.1. An officer is liable for all amounts which were required to be paid or which became due and payable during the time the person was an officer. An officer is also liable for all amounts which were required to be paid or which became due and payable prior to the time the person became an officer, if the officer had the ability and authority to pay the amount due from the available unencumbered funds of the corporation or association after such person became an officer. 4a.6.2. If the amount of tax due for the corporation or association has been determined by tax returns or determined by an assessment which was the subject of a petition for reassessment, the officer shall be liable for such amount. 4a.6.3. The liability of officers of a corporation or association is joint and several, so that more than one officer may be liable for the entire amount of tax for the same period. The total amount of tax collected from all officers shall not be greater than the total liability of the corporation or association. 4a.6.4. In determining the consumer sales and service tax liability of a corporation or association, the application of payments or partial payments against the multiple tax debts may be in issue. Any voluntary payment, made by or on behalf of the corporation, that the taxpayer has directed to be applied in a particular manner should be applied in the manner directed by the taxpayer, i.e., specific tax, period, interest, etc. Any involuntary payment, when the taxpayer has no immediate control over the source, such as would result from a levy or offset, and any voluntary payment for which the taxpayer has not directed the application, may be applied in such a manner as to attain the maximum benefit for the State
EXAMPLE: A corporation owes $5,000 consumer sales tax and $5,000 corporation net income tax. The corporation remits a check for $1,000 and does not direct that it be applied in a particular manner. The corporation remits a second check for $3,000 and directs, on the check or in a letter, that it be applied to consumers sales tax. A bank levy results in payment of $2,000. The State may apply the $2,000 and $1,000 to the corporation net income tax, and must apply the $3,000 to the consumer sales and service tax, and may assess the officers for $2,000 consumer sales tax. 4a.7. The liability of an officer may be determined or estimated and an assessment made against such officer or officers. The assessment may include any liability of the corporation or association for tax, interest, additions to tax, and penalties that is due and payable, and any such liability that is not due and payable because the corporation or association has not filed tax returns at the time required by law. 4a.7.1. An assessment against officers is considered to be a proceeding for the collection of the tax liability of the corporation or association. If the liability of the corporation or association is determined to be due by an assessment which has become final, an assessment against an officer must be made within five years after the assessment against the corporation or association has become final. If the liability of the corporation is determined to be due by methods provided by law other than an assessment, an assessment against an officer must be made within five years after the date on which the corporation or association filed its annual return, or if no annual return is required, five years after the latest periodical return required to be filed in any year is filed.
W. Va. Code R. § 110-15-4b Priority of Tax in Distributions of Property and Estates. 4b.1. In the distribution, voluntary or compulsory, in receivership, bankruptcy or otherwise, of the property or estate of any person, all taxes due and unpaid under W. Va. Code '11-15-1 et seq. shall be paid from the first money available for distribution in priority to all claims and liens except taxes and debts due the United States which under federal law are given priority over the debts and liens created by this article. Any person charged with the administration or distribution of any such property or estate who shall violate the provisions of this section shall be personally liable for any taxes accrued and unpaid under this article which are chargeable against the person whose property or estate is in administration or distribution. 4b.2. There is a priority for all unpaid consumers sales and service tax in distributions of the property or estate of any person, and the tax must be paid from the first money available for distribution in priority to all other claims and liens, except taxes and debts due the United States. 4b.2.1. The distribution of property subject to federal tax liens is subject to the priority of such liens provided in the Internal Revenue Code. 4b.2.2. The distribution of property in federal bankruptcy proceedings is subject to the priorities of debts and liens provided in the United States Bankruptcy Code (11 U.S.C. '101 et seq.). 4b.2.3. This priority applies to the amount of tax, interest, additions to tax, and penalties. 4b.3. The priority applies to all distributions of the property or estate of any person. A "distribution" of property or an estate is the sale or transfer of the property, or the disbursement of money resulting from the sale or transfer of the property or estate of any person. Distributions include, but are not limited to, the transfer of property or disbursement of proceeds of sales of property by any executor, administrator, receiver, trustee, fiduciary, special commissioner, or any public officer under judicial process; and distributions in any proceedings such as bulk sale, liquidation sale, estate sale, assignment for the benefit of creditors, interpleader action, and administrative or judicial proceeding for the dissolution of a partnership or corporation. 4b.4. The priority does not apply to transactions that do not constitute distributions of property. These transactions include the sale or transfer of property in the ordinary course of the business of the owner of the property; sales or transfers of any property by the owner or for consideration payable to the owner by the purchaser or transferee. 4b.5. This priority applies to the distribution of all property, including but not limited to real property or any interest therein; tangible personal property, including fixtures, equipment, machinery, furniture and vehicles; intangible property, including accounts receivable, contract rights, bank accounts, stocks, bonds; and the proceeds from the sale or liquidation of any such property. 4b.6. This priority requires payment of the tax from the first money that is available for distribution to lienors, creditors, beneficiaries, or any other person, after payment of costs, commissions, fees and reasonable expenses incurred in the preservation, storage, liquidation, or transportation of the property or estate. 4b.7. The debt or claim for taxes has priority over all claims and liens, except debts due the United States. 4b.7.1. Claims subject to this priority include any debt or obligation, liquidated or unliquidated, that does not constitute a lien upon the property or estate. 4b.7.2. Liens subject to this priority include any charge or encumbrance on the property or estate for payment of any claim, debt or obligation, such as a deed of trust, judgment lien, security interest, vendors lien, execution lien, tax lien, mechanics lien, landlords lien and municipal lien. 4b.7.3. The priority of the consumer sales and service tax debt in such distributions is determined by W. Va. Code '11-15-18a, and is not determined by the presence or absence of a perfected notice of tax lien, by the presence or absence of a perfected lien securing any competing claim or debt, or by the order in which any such competing liens were perfected
W. Va. Code R. § 110-15-5 Remittance of Tax
5.1. No profit shall accrue to any person as a result of the collection of the consumers sales and service tax regardless of the fact that the total amount of such taxes collected may be in excess of the amount for which such person would be liable by the application of the levy of six percent (6%) to the gross proceeds of his sales. The total of all consumers sales and service taxes collected by any such person shall be returned and remitted to the Tax Commissioner.
5.2. Any person who is required to collect and remit the consumers sales and service tax or the use tax and who was also required to pay such taxes on purchases of tangible personal property or services for use or consumption in his business may utilize one of the following procedures when paying the tax collected to the Tax Commissioner.
5.2.1. Such person may separately remit the amount collected and pay the amount due and owing on his purchases made using the direct pay permit procedure.
5.2.2. Such person may credit the amount of tax paid on his purchases for which an exemption is claimed against the amount of tax collected and:
5.2.2.1. if the amount collected is greater than the amount of tax paid on his exempt purchases, he shall remit the difference to the Tax Commissioner; or
5.2.2.2. if the amount of tax paid on his exempt purchases is greater than the amount collected, he may seek a refund or credit for the difference as provided in Section 9a of these regulations.
5.3. Sales and Service Tax Return and Payment; Exception. - Except as otherwise required under Sections 5.3.2, 5.3.3, 9c.7, and 11.6 of these regulations, the consumers sales and service taxes levied shall be due and payable in monthly installments, on or before the fifteenth (15th) day of the month next succeeding the month in which the tax accrued. The taxpayer shall, on or before the fifteenth (15th) day of each month, complete and mail to the Tax Commissioner the prescribed return, WV/CST-200, for the preceding month showing: (a) The total gross proceeds of business for that month; (b) the gross proceeds of business upon which the tax is based; (c) the amount of the tax for which he is liable; and (d) any further information necessary in the computation and collection of the tax which the Tax Commissioner may require. Remittance of the amount of tax due, if any, shall accompany the return: Provided, That notwithstanding the provisions of W. Va. Code '11-15-30, any such tax collected by the Alcohol Beverage Control Commissioner from persons or organizations licensed under authority of W. Va. Code '60-7-1 et seq., shall be paid into a revolving fund account in the State Treasury, designated the "Drunk Driving Prevention Fund."
A monthly or quarterly return shall be signed by the taxpayer or his duly authorized agent. An unsigned return will be deemed incomplete and may be returned to the taxpayer as improperly filed.
5.3.1. Other Times for Filing Returns. - The Tax Commissioner may, upon written request, authorize a taxpayer whose books and records are not kept on a monthly basis to file returns at times other than those specified in the foregoing Section 5.3, but in no event shall a taxpayer make less than one return a calendar month, except as provided in the following Section 5.3.2 or as may be authorized in writing by the Tax Commissioner. In order to receive such permission or authorization, the taxpayer must show that the monthly filing otherwise required will impose an undue hardship.
5.3.2. Quarterly Return. - Except as otherwise required under Sections 5.3.3, 9c.7, and 11.6 of these regulations, when the total tax for which a person is liable does not exceed $50.00 for any month, he may make a quarterly return on or before the fifteenth (15th) day of the first month in the next succeeding quarter in lieu of monthly returns on the return WV/CST-200. Quarterly returns are due on or before April 15, July 15, and October 15.
5.3.3. Annual Return; Extension of Time. - On or before the end of the calendar year, each person liable for the payment of consumers sales and service tax shall file an annual return. The annual return shall consist of the final monthly or quarterly return for the year and is due on or before January 31. The form of such return shall be as follows:
5.3.3.1. For taxpayers filing on a monthly basis, such annual return shall show the total gross proceeds of business and the gross proceeds of business upon which the tax is based for the month of December together with any other information which the Tax Commissioner may require.
5.3.3.2. For taxpayers filing on a quarterly basis, such annual return shall show the total gross proceeds of business and the gross proceeds of business upon which the tax is based for the calendar quarter ending December 31st together with any other information which the Tax Commissioner may require.
5.3.3.3. A person operating two or more places of business of like character from which are made or dispensed sales or services which are subject to the consumers sales and service tax may file returns covering all such sales or services.
5.3.3.4. Payment. - The taxpayer shall forward the annual return along with payment of any remaining consumers sales and service tax, due for the preceding tax year, to the Tax Commissioner. The taxpayer or his duly authorized agent shall verify the return under oath.
5.3.3.5. Extension of Time. - The Tax Commissioner for good cause shown and on written application of a taxpayer, may extend the time for making any return required by the provisions of W. Va. Code '11-15-1 et seq., but no extension of time may be granted for payment of tax.
5.3.3.5.a. Requests for extensions of time will not be considered if received after the due date of the return. No extension will be granted for a period in excess of thirty (30) days.
5.3.4. Accelerated payment. - For calendar years beginning after December 31, 1990, taxpayers whose average monthly installments for the previous calendar year exceeds $100,000.00, shall remit the tax attributable to the first fifteen days of June each year on or before the twenty-third day of said month of June.
5.3.4.1. For the foregoing purpose, the taxpayer shall remit an amount equal to the amount of tax imposed by W. Va. Code '11-15-1 et seq. on actual taxable sales of tangible personal property and sales of taxable services during the first fifteen days of June or, at the taxpayer's election, the taxpayer may remit an amount equal to fifty percent of taxpayer's liability for sales and service tax on taxable sales of tangible personal property and sales of taxable services made during the preceding month of May.
5.3.4.2. For a business which has not been in existence for a full calendar year, the total tax due from the business during such prior calendar year shall be divided by the number of months, including fractions of a month, that it was in business during such prior calendar year; and if that amount exceeds one hundred thousand dollars, the tax attributable to the first fifteen days of June each year shall be remitted on or before the twenty-third day of said month of June.
5.3.4.3. When a taxpayer required to make an advanced payment of tax the foregoing subsection 5.3.4 makes out its return for the month of June, which is due on the fifteenth day of July, such taxpayer may claim as a credit against its sales and service tax for the month of June, the amount of the advanced payment of tax made under subsection 5.3.4.
5.5. Retailer's Use Tax Return and Payment; Exception. - Except as otherwise required under Sections 9c.7 and 11.6 of these regulations, each retailer required or authorized by W. Va. Code ''11-15A-6, 11-15A-6a or 11-15A-7 to collect the use tax, shall be required to pay to the Tax Commissioner the amount of such tax collected, with that amount being due and payable on or before the fifteenth (15th) day of the month next succeeding the end of each quarterly period. At such time, each retailer shall file with the Tax Commissioner a return, WV/CST-220, for the preceding quarterly period in such form as may be prescribed by the Tax Commissioner. The form shall show the sales price of any or all tangible personal property and taxable services sold by the retailer during such preceding quarterly period, the use of which is subject to the use tax, and such other information as the Tax Commissioner may deem necessary. The return shall be accompanied by a remittance of the amount of such tax for the period covered by the return: Provided, That where tangible personal property is sold under a conditional sales contract, or under any other form of sale wherein the payment of the principal sum, or a part thereof is extended over a period longer than sixty (60) days from the date of the sale, the retailer shall collect and remit the use tax in accordance with the requirements of Section 4 of these regulations. The Tax Commissioner, if he deems it necessary in order to insure payment to the State of the amount of such use tax, may in any or all cases require returns and payments of such amount to be made for other than quarterly periods. The Tax Commissioner may, upon request and a proper showing of the necessity therefor, grant an extension of time not to exceed thirty (30) days for making any return and payment: Provided, such request is received by the Tax Department prior to the due date of the return. Returns shall be signed by the retailer or his duly authorized agent, and must be certified by him to be correct. An unsigned return will be deemed incomplete, and may be returned to the taxpayer as improperly filed.
5.5.1. User's or Purchaser's Use Tax Return and Payment; Exception. - Except as otherwise required under Sections 9c.7 and 11.6 of these regulations, any person who uses any tangible personal property or taxable services upon which the West Virginia use tax has not been paid either to a retailer or directly to the Tax Commissioner shall be liable therefor, and shall on or before the fifteenth (15th) day of the month next succeeding each quarterly period pay the use tax imposed upon all such property or taxable services used by him during the preceding quarterly period and shall file with his remittance of such tax a return, Form WV/CST-220, properly setting forth the information required thereon and signed by the taxpayer or his agent. The form must be certified by the taxpayer as correct. An unsigned return will be deemed incomplete, and may be returned to the taxpayer as improperly filed.
5.5.2. Special Annual User's or Purchaser's Use Tax Return and Payment; Exception. - Except as otherwise required under Sections 9c.7 and 11.6 of these regulations, any natural person who does not hold a West Virginia business registration certificate, who uses any tangible personal property or taxable service upon which the West Virginia use tax has not been paid either to a retailer or directly to the Tax Commissioner shall be liable for the West Virginia use tax upon such property or taxable services, and shall as the Tax Commissioner may authorize or require on or before the fifteenth (15th) day of April of the taxpayer's next succeeding tax year for federal income tax purposes, pay the use tax imposed upon all such property or taxable services used by him during the taxpayer's preceding federal taxable year. The taxpayer shall file with his remittance of such use tax a return, form WV/CST-220A, properly setting forth the information required thereon and signed by the taxpayer or his agent. The form must be certified by the taxpayer as correct. An unsigned return will be deemed incomplete, and may be returned to the taxpayer as improperly filed.
W. Va. Code R. § 110-15-6 Taking Exemption Certificate, Material Purchase Certificate Number or Direct Pay Permit Number
6.1. Vendor Must Show Sale or Service Exempt; Presumption. - In the case of sales subject to Section 8a or 9.3.4.4 of these regulations or Section 9.3 of these regulations, the burden of proving that a sale or service was exempt from the tax shall be upon the vendor, unless he in good faith takes from the purchaser his direct pay permit number, a properly completed material purchase certificate number or a properly completed exemption certificate signed by and bearing the address of the purchaser and setting forth the reason for the exemption: Provided, That effective July 1, 1990, a contractor or subcontractor may only claim the exemption authorized by Section 9.3.4.4 of these regulations by issuing his material purchase certificate number to his vendor. In order to assure maintenance of appropriate records, the vendor should take during his taxable year one completed exemption certificate from each of his purchasers who are authorized to issue an exemption certificate for exempt purchases. However, for purposes of the contracting exemption provided under Section 9.3.4.4.a of these regulations, the vendor should take one completed material purchase certificate number for each exempt contracting project or direct pay permit number. The completed exemption certificate, material purchase certificate number or direct pay permit number may be used for the exempt purchases by the respective purchaser. Except as otherwise provided in this Section or Section 9.3.4.4 of these regulations, the direct pay permit, or the material purchase certificate issued by the Tax Commissioner for the specific contracting activity, may be used for exempt purchases of tangible personal property to be incorporated in the exempt contracting activity. If a contractor decides to use a material purchase certificate when claiming an exemption, he must obtain the application from the entity which awarded the contract. As of October 1, 1990, the contracting exemption provided in Section 9.3.4.4.a was generally repealed and use of the material purchase certificates became very limited. The material purchase certificate may only be used in the manner specified in Section 9.3.4.4.a and Section 109 of these regulations. See Section 109 of these regulations for additional information on the taxation of materials for use in governmental contracts. To prevent evasion of the consumers sales and service tax, it shall be presumed that all sales and services are subject to tax until the contrary is clearly established.
6.1.1. Liability of Purchaser for Failure to Pay the Sales or Use Tax or Provide Appropriate Indicia of Tax Exemption. - Except for sales exempt per se under Section 9.2 of these regulations, if any purchaser unlawfully refuses to pay to the vendor the consumers sales and service tax or, where appropriate, the use tax, or in the case of a sale subject to Section 9.3 of these regulations a purchaser unlawfully refuses to sign and present to the vendor a proper exemption certificate or a lawful material purchase certificate number indicating that the sale is not subject to either the consumers sales and service tax or the use tax, or presents to the vendor a false exemption certificate or a false, cancelled, expired or otherwise ineffective or unlawful material purchase certificate number, or, after presenting an exemption certificate or material purchase certificate number, uses the property or services purchased in such manner that would cause the sale to be subject to the sales or use tax, or presents a direct pay permit number which is false, cancelled, expired or otherwise ineffective or unlawful or uses such direct pay permit in a manner not authorized by the Tax Commissioner, such purchaser shall be personally liable for the amount of tax applicable to the transaction or transactions.
6.1.1.1. In such case, the Tax Commissioner has authority to make an assessment against such purchaser, based upon any information within his possession or that may come into this possession. The assessment and notice thereof shall be made and given in accordance with W. Va. Code '11-10-1 et seq.
6.1.1.2. Sections 6.1.1 and 6.1.1.1 of these regulations shall not be construed as relieving the vendor from liability for the tax; Provided, That the vendor shall be relieved from liability for the purchaser's refusal to pay the tax or provide appropriate indicia of tax exemption if the vendor notifies the Tax Commissioner in writing of such refusal; and the vendor shall be relieved from liability for the purchaser's presentation of false, expired, cancelled, or otherwise ineffective or unlawful indicia of tax exemption unless the vendor has accepted such indicia in bad faith, or accepted such indicia in complicity with the purchaser or others for the purpose of allowing the purchaser, the vendor or others to unlawfully evade the payment of tax or has otherwise conspired or contrived to cause or assist in unlawful tax evasion. The information provided to the Tax Commissioner must include the name and, if known, address of the purchaser, the date of the purchase and the description of the item or service purchased, the purchase price thereof, and the amount of tax not collected.
6.1.2. Because of the nature of the transactions, purchasers of tangible personal property or taxable services which are specified in Section 9.2 of these regulations are exempt per se and are not required to complete an exemption certificate in order to qualify for the exemption. However, an exemption certificate, material purchase certificate where appropriate, or a direct pay permit number is required for an exemption claimed under Section 9.3 of these regulations.
6.2. Retailer Must Show Sale or Service Exempt; Presumption. - The burden of proving that a sale otherwise subject to the use tax was not taxable shall be upon the seller, unless he, in good faith and under the authority provided in W. Va. Code '11-15A-3c, takes from the purchaser his direct pay permit number, a properly completed material purchase certificate or a properly completed exemption certificate signed by and bearing the address of the purchaser setting forth the reason for exemption of the sale from imposition of the tax. The exemption certificate shall be substantially in the form prescribed by the Tax Commissioner. Such retailer may take from the purchaser the purchaser's direct pay permit number or material purchase certificate number, noting same on the invoice, sales slip or other record of the sale. To prevent evasion, it shall be presumed that all proceeds are subject to the tax until the contrary is clearly established.
6.3. Acceptance of Exemption Certificate or Material Purchase Certificate. - The acceptance of a properly executed exemption certificate or material purchase certificate relieves the vendor and the retailer from the burden of proof only if accepted in good faith so long as the transaction is one for which an exemption certificate or material purchase certificate may be issued. Any person who gives an exemption certificate or material purchase certificate to a vendor or retailer and knows, at the time of purchase, that the article will be used in a manner other than expressed in the exemption certificate, shall be subject to criminal sanctions as provided in W. Va. Code '11-9-1 et seq.
6.3.1. A vendor who makes sales to a non-resident purchaser may, under certain circumstances, accept the exemption certificate utilized in the state in which the non-resident is located. Even though an out-of-state exemption certificate is used, the transaction must be one which is exempt in this State. In order for such an exemption certificate to be acceptable, it must provide the same information as that required on the exemption certificate or, where appropriate, the material purchase certificate used in this State: name and address of the purchaser, basis for the claim of exemptions; and the signature of the person authorized to sign such an exemption certificate or use the material purchase certificate for the purchaser.
6.4. Retention of Exemption Certificate and Material Purchase Certificate. - In order that the Tax Department may verify a vendor's or a retailer's taxable and nontaxable sales upon audit, it is necessary that such persons retain executed exemption certificates, material purchase certificates and other appropriate books and records for at least three (3) years or so long as the taxable period remains open for assessment or refund whichever is greater. An exemption certificate or material purchase certificate, to be valid, must be given by the vendee and accepted by the vendor at the time of the sale and not thereafter. If a vendor lists nontaxable sales or services for which he has no exemption certificates or material purchase certificate, the Tax Department will presume such sales were taxable and make an assessment of tax against the vendor. Of course, the preceding sentence is not applicable to sales of articles and types of services enumerated in Section 9.2 of this regulation. A sample exemption certificate will be furnished by the Tax Department to any vendor, retailer or organization upon request, in order that the certificate may be reproduced for the convenience of its customers.
W. Va. Code R. § 110-15-7 Tax Computed on Gross Proceeds or Gross Value of Tangible Personal Property Sold to Consumers, or Consumed or Used, by the Manufacturer or Producer Thereof
7.1. Sales by Producers and Manufacturers. - A person exercising the privilege of producing for sale, profit or commercial use, any natural resource product or manufactured product and engaged in the business of selling the same at wholesale or retail shall collect consumers sales and service tax on the gross proceeds from such sales unless the transaction is exempt per se from the consumers sales and service tax, or the vendor, in good faith, takes from the purchaser a property executed exemption certificate or the purchaser's direct pay permit number.
7.2. Use by Producer or Manufacturer. - A person exercising the privilege of producing for sale, profit or commercial use, any natural resource product or manufactured product which he then uses or consumes in a manner which would be taxable had such person purchased the product from another person, such person shall pay consumers sales or use tax on the gross value of such product or products at the time they are first used or consumed by him in this State. "Gross value" shall be determined as provided in Section 7.3 of these regulations.
7.3. Determination of "Gross Value". - Whenever a person partially or wholly consumes or uses tangible personal property in this State which he produced or manufactured in this State or in another state, the gross value thereof for consumers sales and use tax purposes shall correspond as nearly as possible to the gross proceeds which such person would have received from the sale of such natural resource product or manufactured product to another person in an arms-length transaction, as that term is defined for federal income tax purposes. Such value shall be determined by application of the following rules in the order stated:
7.3.1. The value of the natural resource product or the manufactured product consumed or used shall be equal to the selling price, at the place of use or consumption, of similar products of like quality and character offered for sale in similar quantities by persons unrelated to the taxpayer.
7.3.2. In the absence of sales of similar natural resource products or similar manufactured products by other persons as a guide to value, gross value shall be equal to the average price at which sales of the same or a similar product are made during the taxable year to customers of the producer or manufacturer.
7.3.3. In the absence of sales to customers of the taxpayer as a guide to value, gross value shall be determined by first determining the cost of the product and adding thereto the average markup realized by the producer or manufacturer of the product being valued. The cost of the product shall include every item of cost attributable to that particular product, including all direct and indirect overhead costs.
7.4. Examples.
7.4.1. Example 1. - ABC Company is an integrated manufacturer of asphalt and a road contractor. Some of the asphalt ABC Company manufactures is sold to other contractors. ABC Company is exempt from paying consumers sales and use taxes on tangible personal property directly used or consumed in the manufacture of asphalt. Until March 1, 1989, ABC Company was also exempt from paying consumers sales and use taxes on tangible personal property directly used or consumed in his contracting activity. ABC Company must now pay consumers sales and use taxes on all tangible personal property and/or taxable services purchased for use or consumption in his contracting activity unless a specific exemption applies. As a road contractor, ABC Company may be engaged in building or resurfacing roads under contracts with the State of West Virginia or a political subdivision thereof, or with the United States government, or with other persons such as commercial and industrial business and residential property owners. The asphalt which ABC Company manufactures and sells or uses or consumes will be taxed as follows:
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Consumers sales and service tax must be collected on sales of asphalt to other contractors and persons unless ABC Company accepts in good faith an exemption certificate or a valid direct pay permit number.
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As of October 1, 1990, asphalt which ABC Company manufactures and uses or consumes in building or resurfacing roads under a single government contract for materials and labor is subject to consumers sales and use tax. See Section 109 of these regulations for transition rules concerning the taxing of materials for use in governmental contracts.
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Asphalt which ABC Company manufactures and uses or consumes in building or resurfacing roads, parking lots and driveways, etc. in this State for other persons is subject to consumers sales and service tax based on the gross value of the asphalt so used or consumed.
W. Va. Code R. § 110-15-8 Furnishing of Services Included; Exceptions
The consumers sales and service tax and the use tax shall apply not only to selling tangible personal property, but also to the furnishing of all services, except professional services, personal services, those services furnished by corporations subject to the control of the Public Service Commission, contracting services, and services rendered by an employee to his employer.
8.1. Sales of the following services are excepted from the imposition of the consumers sales and service tax and the use tax.
8.1.1. Professional Services.
8.1.1.1. Professional services, as defined in Section 2 of these regulations, are rendered by physicians, dentists, lawyers, certified public accountants, public accountants, optometrists, architects, professional engineers, registered professional nurses, veterinarians, licensed physical therapists, ophthalmologists, chiropractors, podiatrists, embalmers, osteopathic physicians and surgeons, registered sanitarians, pharmacists, psychiatrists, psychoanalysts, psychologists, landscape architects, registered professional court reporters, licensed social workers, enrolled agents, professional foresters, licensed real estate appraisers and certified real estate appraisers licensed in accordance with W. Va. Code '37-14-1 et seq., nursing home administrators, licensed professional counselors and licensed real estate brokers. Persons who provide services classified as nonprofessional for consumers sales and service tax purposes include interior decorators, private detectives/investigators, security guards, bookkeepers, forestors, truck driving schools, hearing aid dealers/fitters, contractors, electricians, musicians, and hospital administrators; the foregoing listing is not all-inclusive but intended as containing examples of trades and occupations. The determination as to whether other activities are "professional" in nature will be determined by the State Tax Division on a case-by-case basis unless the Legislature amends W. Va. Code '11-15-1 et seq. to provide that a specified activity is "professional." When making a determination as to whether other activities fall within the "professional" classification, the Tax Department will consider such things as the level of education required for the activity, the nature and extent of nationally recognized standards for performance, licensing requirements on the State and national level, and the extent of continuing education requirements.
8.1.1.2. Services for which a professional license is required and which are provided by corporations, regardless of whether such corporations are professional or business, are not subject to the consumers sales and service tax. Likewise, non-professional services provided by a professional corporation are subject to the tax.
8.1.1.3. Professional persons who make sales of tangible personal property or who engage in activities which are not professional services shall collect consumers sales and service tax on such sales or services. For example, kennel services provided by a veterinarian are subject to tax.
8.1.1.4. Professional services shall not be related to the quality of performance or expertise of the person performing the service. Professional, when used in these regulations, is not synonymous with excellence. It is the type of service which must be professional, not the quality or manner in which the service is performed. To illustrate: A doctor's services to his patients are professional services whether or not his patients are satisfied with his performance; or, an individual may excel at repairing television sets, but his type of service (repair of television sets) is not considered professional under these regulations even though the manner in which he performs is considered "professional" by his customers or by other television repairmen.
8.1.2. Personal Services.
8.1.2.1. Personal services shall include those services done to or performed on the person of an individual, and such services must be directly from one person to another. Personal services include barbering, massaging, nursing, manicuring, hair setting, hair washing and dyeing, services of dental hygienists, shoe-shining while the shoes are worn by the customer, and similar services. The determination as to whether other services are personal in nature will be determined on a case-by-case basis. For further information See Section 35 of these regulations.
8.1.2.2. As provided in Section 2 of these regulations, personal services are services rendered to the person of an individual without, at the same time, selling tangible personal property: Provided, That the sale of tangible personal property used and consumed in the rendering of the personal service shall be subject to tax only if stated as a separate charge. In order for the service to be personal in nature, it is necessary for there to be physical contact of a continuing nature by the provider of the service to the recipient of such service. Additionally, it is necessary for such contact to directly touch the person or the clothing worn by such person.
8.1.2.3. Many personal physical fitness programs do not qualify as personal services. The issue as to whether a program qualifies as a personal service will be determined by the nature of physical contact, the degree and level of individual supervision, and the degree to which the program is tailored to the requirements of the individual participant. Mere monitoring of performance, especially if by computer or other such impersonal means, is insufficient to qualify; however, individual instruction and close personal performance monitoring in conjunction with an individualized program specifically designed to meet the needs of the particular individual would fall within the category of activity which would be considered as personal service. This activity should not be confused with courses of instruction in the martial arts, boxing, aerobic dancing, etc., which, while being physical in nature are not personal in nature, and are therefore not personal services.
8.1.2.4. Those services performed by a professional which are neither personal services nor professional services are subject to the consumers sales and service tax.
8.1.3. Services Rendered by Corporations Subject to West Virginia Public Service Commission Control.
8.1.3.1. Regulated services rendered by corporations which are subject to the control of the West Virginia Public Service Commission are not subject to the consumers sales and service tax.
8.1.3.2. To illustrate: Services rendered by taxi companies and bus companies (carrying of passengers) holding a certificate of convenience and necessity issued by the West Virginia Public Service Commission are not subject to the consumers sales and service tax.
8.1.3.3. Any person who performs services which are subject to the control of the West Virginia Public Service Commission may perform such services without charging and collecting consumers sales and service tax.
8.2. On those services which are excepted from the imposition of the sales and services tax, enumerated in Sections 8.1.1 through 8.1.3 above, the Tax Department does not deem it necessary for the vendor to require an exemption certificate from the purchaser of such services. However, the burden of proving that a service is exempt rests upon the vendor. See Section 9.2 of these regulations.
8.3. The purveyors of those services which are excepted from the imposition of the consumers sales and service tax, enumerated in Sections 8.1.1 through 8.1.3 above, are not required to collect the consumers sales and service tax on the sale of services to consumers. As a result, the purveyors of such services are required to pay the consumers sales and service tax on all purchases of tangible personal property and services which are used or consumed in their business: Provided, That purchases which qualify under Sections 9.4.1 or 9.4.4 of these regulations shall be exempt from the sales and service tax.
W. Va. Code R. § 110-15-8a Contracting Services. 8a.1. Persons engaged in the business of providing contracting services to other persons are providing a service that is generally not subject to the consumers sales and service tax. Such persons are generally considered to be the user or consumer of all tangible personal property and all services which they purchase. Consequently consumers sales and use taxes must be paid on all purchases of tangible personal property or taxable services except as otherwise provided in these regulations. 8a.2. The terms "contracting services" and "contracting" are synonymous. Thus, the term "contracting services" means the furnishing of work or both materials and work, for another in fulfillment of a contract for the construction, alteration, repair, decoration or improvement of a new or existing building or structure or any part thereof or for the removal or demolition of a building or structure or any part thereof or for the alteration, improvement or development of real property. Beginning July 1, 1989, the form of the contract no longer controls whether a person is providing a tax exempt contracting service or is providing a taxable service. The question in every case will be what is being done, not how is it being billed. 8a.3. Additionally, the definition of "contracting" is narrowed beginning July 1, 1989. For contracts entered into on or after July 1st, the work must result in a capital improvement to a building or other structure or to real property for the work to be contracting. If this condition is not met, the work provided is a taxable service, not contracting. When a taxable service is provided, consumers sales and service tax must be charged to and collected from the customer, but the vendor may purchase materials that will be used or consumed in making the taxable service free from consumers sales and use taxes by presenting a resale exemption certificate to the vendor. 8a.4. Not all activity of a contractor is treated as contracting for consumers sales and use tax purposes. For example: 8a.4.1. Contract miners and other persons engaged by the producer of natural resources (as defined for severance tax purposes) to perform any reclamation, waste disposal or environmental activities associated with the production of natural resources are treated as engaging in the activity of producing natural resources with respect to such activities for consumers sales and service tax and use tax purposes. Purchases directly used or consumed in the production of natural resources are exempt from tax as provided in Section 9.4.1 of these regulations. However, persons engaged in construction, alteration, repair or improvement of facilities to be used by others to produce natural resources are engaged in the activity of contracting and are not considered to be producing natural resources. See Section 107 of these regulations for additional information concerning the taxation of contractors. 8a.4.2. Merchants who sell certain types of tangible personal property and perform incidental installation services with respect thereto are by statute not engaged in contracting. They are selling tangible personal property and rendering taxable services. 8a.4.3. When a contractor sells tangible personal property without installing the property or arranging for its installation, the transaction is a sale of tangible personal property and not contracting. 8a.4.4. When the work which a contractor does pursuant to a contract with another does not result in a capital improvement to a building or other structure or to real property, the work is not contracting. It is the rendering of a taxable service. 8a.5. A capital improvement is an alteration, repair, decoration or improvement of a building or structure or the alteration, improvement or development of real property: 8a.5.1. Which adds utility to the building, structure or real property or any part thereof by substantially adding to the value of the building or structure or real property, or appreciably prolonging or extending the original useful life of the building or structure or real property; and 8a.5.2. Which becomes part of the building or structure or real property or is permanently affixed to or attached to the building or structure or real property so that its removal would cause material damage to the item being removed or to the building or structure or real property to which it is attached or affixed; and 8a.5.3. Which is intended to become a permanent installation or to be relatively permanent. 8a.6. A "retailer dealer" merchant who agrees to sell from the inventory of his general or special store certain types of tangible personal property and to install the same, or to arrange for its installation, is not a contractor with respect to such sale and installation when the installation is merely incidental to the sale of the tangible personal property. See Section 114 of these regulations for detailed information on sales of certain tangible personal property with incidental installation by "retail dealers." 8a.6.1. A "general or special store" as used in these regulations means any store or mercantile establishment having regular business hours during which goods, wares, or merchandise of any kind is offered for sale to consumers or users. 8a.6.2. Installation of the following tangible personal property is always incidental to the sale thereof by a general or special store, regardless of whether the installation is done by the merchant, or his employees, or the merchant arranges for a third party to do the installation:
Wall-to-wall carpeting Mobile homes Window air conditioning units Dishwashers (residential)
Clothing washing machines or dryers (residential)
Drapery rods Window shades Venetian blinds Canvas awnings Free standing commercial equipment Free standing industrial equipment 8a.7. For additional information about the tax liability of contractors see Sections 107 through 122 of these regulations.
W. Va. Code R. § 110-15-8b Nonresident Contractors - Registration, Bond, etc. Required. 8b.1. Every person who engages in this State in any contracting business or contracting activity is required to obtain a business registration certificate from the Tax Commissioner prior to starting work in this State and to have a copy of that certificate available at every construction site in this State until the contractor's work at that site is completed. These requirements apply to resident as well as nonresident contractors. The business registration certificate is good for a one year period which begins July 1st and ends June 30th of the next calendar year. Civil penalties may be imposed under W. Va. Code ''11-12-1 et seq. and 11-10-1 et seq. for failure to satisfy these requirements. Additionally, criminal penalties may be imposed under W. Va. Code '11-9-1 et seq. for noncompliance. 8b.2. Beginning July 1, 1989, every nonresident contractor must also register with the Tax Commissioner under the consumers sales and use tax laws prior to engaging in the performance of a contract in this State. At the time of this registration, the contractor must satisfy one of the following requirements: 8b.2.1. Cash Bond - At the time each contract is registered, the nonresident contractor must deposit with the Tax Commissioner six percent (6%) of the gross value of the contract. The Tax Commissioner will deposit this money into the Contractor's Use Tax Fund where it will remain until after: (1) the contract is completed, (2) the amount of consumers sales and use taxes due this State with respect to such contract are ascertained, and (3) the amount of tax due has been paid directly to the Tax Commissioner, or the contractor submits proof that the amount of tax due but not paid directly to the Tax Commissioner was paid to vendors required to collect this State's consumers sales or use taxes or to out-of-state vendors who voluntarily collect our use tax. Upon submission of proof satisfactory to the Tax Commissioner that these three (3) events have occurred, the Tax Commissioner will promptly refund the nonresident contractor's deposit with respect to such contract. 8b.2.2. Corporate Surety Bond. - In lieu of posting a cash bond for each contract, the nonresident contractor may provide a corporate surety bond for each contract which guarantees payment of consumers sales and use taxes due this State with respect to that contract. The corporate surety must be qualified to do business in this State; and the corporate surety bond must be approved by the Tax Commissioner as to form, sufficiency, value, amount, stability, and other features necessary to guarantee payment of the consumers sales and use taxes due this State with respect to such contract for contracting activity. 8b.2.2.1. Amount of Bond. - The amount of a corporate surety bond will depend upon the gross value of contract or contracts, the ratio which the value of the materials component of the contract bears to the entire gross value of the contract, the extent to which the materials component of the contract is taxable and taxpayer's record with this Department concerning the timely payment of tax liabilities. 8b.2.2.2. Umbrella Corporate Surety Bond. - In lieu of posting a cash bond or a corporate surety bond for each contract, a nonresident contractor may elect to file a corporate surety bond guaranteeing payment of consumers sales and use taxes due this State with respect to several contracts or all contracts executed within a specified period, whether such contracts be present or future contracts. The corporate surety must be qualified to do business in this State; and the corporate surety bond must be approved by the Tax Commissioner as to form, sufficiency, value, amount, stability and other features necessary to guarantee payment of the consumers sales and use taxes due this State with respect to such contracts. If the taxpayer has no tax payment history or record with this Department, an umbrella bond will not be accepted. 8b.3. The nonresident contractor may not begin performance of any contract until after the nonresident contractor posts with the Tax Commissioner a cash bond or corporate surety bond which is accepted and approved by the Tax Commissioner. 8b.4. Within thirty (30) days after complying with the registration requirements of W. Va. Code '11-15-8b and Section 8b of these regulations, the contractor shall file with the Tax Commissioner a statement itemizing the machinery, materials, supplies and equipment that he has or will have on hand in this State for performance of the contract. The itemized statement shall include the location outside this State from which such tangible personal property was or will be brought, shipped or transported: Provided, That the itemized statement shall include only the machinery, materials, supplies and equipment upon which neither the West Virginia consumers sales and service tax nor the West Virginia use tax has been paid. The tax due thereon shall be paid at the time of filing the above statement. 8b.5. See Section 110 of these regulations for additional information regarding nonresident contractors
W. Va. Code R. § 110-15-8c Transition rules for elimination of exemption for materials and supplies incorporated in real property owned by governmental entities. 8c.1. General rule. - The expired provisions in W. Va. Code '11-15-9(j), which previously exempted sales of tangible personal property to persons engaging in the activity of contracting, pursuant to a written contract with the United States, this State, or with a political subdivision thereof, or with a public corporation created by the Legislature or by another governmental entity pursuant to an act of the Legislature, for a building or structure, or improvement thereto, or other improvement to real property that is or will be owned and used by the governmental entity for a governmental or proprietary purpose, shall continue in force for: 8c.1.1. Tangible personal property purchased by a contractor on or after October 1, 1990, in fulfillment of a written contract for contracting, as defined in W. Va. Code '11-15-2, that was executed and legally binding on the parties thereto on or before September 15, 1990; or in fulfillment of a written contract entered into after said September 15, 1990, pursuant to a written bid for contracting that was made on or before said September 15, 1990, that was binding on the contractor, but only to the extent that the bid is subsequently incorporated into a written contract; and 8c.1.2. Tangible personal property purchased by a contractor on or after October 1, 1990, for consumption or use in fulfillment of a written contract for the construction of a new improvement to real property, the construction or operation of which was approved by a federal or state regulatory body prior to September 15, 1990, or pursuant to a federal grant awarded prior to September 15, 1990. 8c.2. Renewals and extensions. - A renewal of any contract shall constitute a new contract for purposes of this Section 8c, and the date of entry into a contract renewal by the parties, the date or dates of tender of consideration and the time of performance of any contractual obligations under a renewed contract shall be treated as the dates for determining application of this section to the renewed contract. Extensions of time granted or agreed upon by the parties to a contract for performance of the contract or for tender of consideration under the contract shall not be treated as contract renewals. Contracts to which such extensions apply shall be treated under these transition rules as if the original contractual provisions for performance and tender of consideration remain in effect. For purposes of this section, the terms "contract" or "contracts," and "contract renewal" or "renewal" shall have the same meaning as defined in W. Va. Code '11-15-8a(d)
W. Va. Code R. § 110-15-8d Limitations on Right to Assert Exemptions
Persons who perform "contracting" as defined in W. Va. Code '11-15-2 or persons acting in an agency capacity, may not assert any exemption to which the purchaser of such contracting services or the principal is entitled. Any statutory exemption to which a taxpayer may be entitled shall be invalid unless the tangible personal property or taxable service is actually purchased by such taxpayer and is directly invoiced to and paid by such taxpayer: Provided, That this section shall not apply to purchases by an employee for his or her employer; purchases by a partner for his or her partnership; or purchases by a duly authorized officer of a corporation, or unincorporated organization, for his or her corporation or unincorporated organization so long as the purchase is invoiced to and paid by such employer, partnership, corporation or unincorporated organization.
Transition rule. - This section shall not apply to purchases of tangible personal property or taxable services in fulfillment of a purchasing agent or procurement agent contract executed and legally binding on the parties thereto prior to September 15, 1990: Provided, That this transition rule shall not apply to any purchases of tangible personal property or taxable services made under such a contract after August 31, 1991; and this transition rule shall not apply if the primary purpose of the purchasing agent or procurement agent contract was to avoid payment of consumers sales and use taxes.
W. Va. Code R. § 110-15-9 Exemptions
9.1. General. - Certain types of transactions are exempt from the consumers sales and service tax and the use tax. The question of whether an exemption is applicable is determined by the nature of the tangible personal property or service being sold, purchased or used; how the property or service is being used; or the status of the vendor, purchaser or user. The exemptions allowed by law are classified in Sections 9.2, 9.3, 9.4 and 9.5 of these regulations; and the words "gasoline and special fuel" are defined in Section 2 of these regulations.
9.2. Per Se Exemptions. - The following sales and purchases of tangible personal property or services are exempt per se from the consumers sales and service tax and the use tax, meaning that no exemption certificate, material purchase certificate or direct pay permit is required to claim any of the following exemptions:
9.2.1. Sales of gas, steam and water when delivered to consumers through mains or pipes. Therefore, sales of bottled gas, bottled water, etc., do not qualify for this exemption.
9.2.2. Sales of electricity.
9.2.3. Sales of other public services which are subject to regulation by the West Virginia Public Service Commission.
9.2.4. Sales of textbooks required to be used in any of the schools of the State, public or private, or in any institution in this State which qualifies as a nonprofit or educational institution subject to the West Virginia Department of Education or West Virginia Board of Regents, regardless of whether such textbooks are sold directly to such schools or to a student enrolled in such schools: Provided, That the vendor must retain proof that the book is a required textbook and that the purchaser is currently enrolled as a student at the school where the textbook is required.
9.2.5. An isolated transaction (as defined in Section 2) in which any taxable service or tangible personal property is sold, transferred, offered for sale, or delivered by the owner thereof or by his representative for the owner's account, such sale, transfer, offer for sale or delivery not being made in the ordinary course of repeated and successive transactions of like character by such owner or on his account by such representative: Provided, That an owner who sells, transfers or offers for sale tangible personal property in an isolated transaction through an auctioneer need not collect the tax from either the auctioneer or the purchaser. To illustrate: A person who is not engaged in the business of selling furniture sells his used household furniture. Since such person is not regularly engaged in selling to the public, his sale of used furniture is an isolated transaction upon which no consumers sales and service tax or use tax is imposed. For sales by an auctioneer, See Section 86 of these regulations.
9.2.6. Sales of newspapers when delivered to consumers by route carriers. All other sales of newspapers are taxable, unless the transaction is exempt under some other provision of this Section.
9.2.7. Sales of drugs dispensed upon prescription and sales of insulin to consumers for medical purposes. See Section 92 of these regulations.
9.2.8. Sales of services performed by licensed day care centers or registered day care centers as that phrase is defined in Section 2 of these regulations. This exemption does not include sales of tangible personal property and services to a day care center; such sales are taxable unless exempt under some other provision of this Section. Even though the organizations and activities referenced in subsections 2.25.1, 2.25.2, 2.25.3 and 2.25.4 of these regulations are not classified as "day care centers, the services provided by such organizations may be exempt under another exemption. For example, sales of babysitting services may be exempt as casual and occasional sales or isolated transactions.
9.2.9. Sales of West Virginia lottery tickets and materials by licensed lottery sales agents and lottery retailers authorized by the West Virginia Lottery Commission, under the provisions of W. Va. Code '29-22-1 et seq., provided the materials sold relate directly to the lottery. Tangible personal property and services sold by a licensed lottery sales agent or a lottery retailer which are not directly related to the operation of the lottery are taxable unless exempt from tax under some other provision of this Section.
9.2.10. Leases of motor vehicles titled pursuant to the provisions of W. Va. Code '17A-3-1 et seq. to lessees for a period of thirty (30) or more consecutive days. This exemption shall apply to leases executed on or after July 1, 1987, and to payments under long-term leases executed before July 1, 1987, for months beginning on or after such date.
9.2.11. Sales of food intended for human consumption when sold by the following organizations in the manner indicated are exempt:
9.2.11.1. Food sold by public or private schools, school sponsored student organizations, or school sponsored parent-teacher associations to students enrolled in such school or to employees of such school during normal school hours; but not those sales of food made to the general public. See Section 126 of these regulations.
9.2.11.2. Food sold by a public or private college or university or by a student organization officially recognized by such college or university to students enrolled at such college or university when such sales are made on a contract basis so that a fixed price is paid for consumption of food products for a specific period of time without respect to the amount of food product actually consumed by the particular individual contracting for the sale and no money is paid at the time the food product is served or consumed. See Section 70 of these regulations.
9.2.11.3. Food sold by a nonprofit organization or a governmental agency under a program to provide food to low-income persons at or below cost. For further information, See Section 126 of these regulations.
9.2.11.4. Food sold in an occasional sale by a charitable or nonprofit organization, including volunteer fire departments and rescue squads, if the purpose of the sale is to obtain revenue for the functions and activities of the organization and the revenue so obtained is actually expended for that purpose.
9.2.11.5. Food sold by any religious organization at a social or other gathering conducted by it or under its auspices, if the purpose in selling the food is to obtain revenue for the functions and activities of the organization and the revenue obtained from selling the food is actually used in carrying on such functions and activities: Provided, That purchases made by such organizations shall not be exempt as a purchase for resale.
9.2.11.6. Sales of food by little leagues, midget football leagues, youth football or soccer leagues and similar types of organizations including scouting groups and church youth groups if the purpose in selling the food is to obtain revenue for the functions and activities of the organization and the revenues obtained from selling the food is actually used in supporting or carrying on functions and activities of the groups: Provided, That such purchases made by such organizations shall not be exempt as a purchase for resale.
9.2.11.6.1. This exemption is effective whether the sale of food occurs at the sporting event or through a separate fund-raising event.
9.2.12. Sales of tangible personal property or services purchased after September 30, 1987, and lawfully paid for with food stamps pursuant to the Federal Food Stamp Program codified in 7 U.S.C. 2011, et seq., as amended, or with drafts issued through the West Virginia special supplemental food program for women, infants and children (WIC) as codified in 42 U.S.C. 1786. Such tangible personal property or services include, but are not necessarily limited to the following:
9.2.12.1. "Food" as defined in Section 2 of these regulations.
9.2.12.2. Seeds and plants for growing in gardens to produce food for personal consumption by eligible households.
9.2.12.3. Deposits on returnable bottles or other returnable containers which are part of the cost of the food contained therein.
9.2.12.4. Distilled water and ice unless specifically labeled for nonfood use.
9.2.13. Sales of tickets for activities sponsored by elementary and secondary schools located within this State. This exemption does not include activities sponsored by other organizations, which merely occur on school property and are not sponsored directly by such school.
9.2.14. Sales of radio or television broadcasting time, and sales of advertisements of goods and services in preprinted advertising circulars, and magazines, newspapers and outdoor advertising space: Provided, That pre-printed advertising circulars shall include purchase of direct-mailing advertising services, and space in home shoppers guides, and newspaper supplements and inserts, but does not include wholesale and retail catalogs through which tangible personal property and services may be directly ordered.
9.2.15. Personal services, as defined in Section 2.
9.2.16. Professional services, as defined in Section 8.
9.2.17. Contracting services, as defined in Section 2.
9.2.18. Services rendered by an employee to his or her employer. See Section 60 of these regulations, Employee or Independent Contractor.
9.2.19. Sales of tangible personal property or taxable services in this State, or the use in this State of tangible personal property or services, which this State is prohibited from taxing under its consumers sales and service tax and use tax laws by the United States Constitution, controlling federal law, the Constitution of this State or some controlling provision of West Virginia law not found in the consumers sales and service tax and use tax laws, such as, for example, sales by credit unions under W. Va. Code '31-10-33, the sale of services by owners, trainers or jockeys which are essential to the effective conduct of a horse or dog racing meeting under W. Va. Code '19-23-12, or the commission of an auctioneer licensed under W. Va. Code '19-2C-1 et seq.: Provided, That the vendor shall maintain adequate documentation to show the sale is not subject to the consumers sales and service tax and use tax.
9.2.20. Charges for room and meals by fraternities and sororities to their members: Provided, That purchases of food for meals made by a fraternity or sorority shall not be exempt as a purchase for resale. See Section 70 of these regulations for further clarification.
9.2.21. Sales of or charges for the transportation of passengers in interstate commerce.
9.2.22. Casual and occasional sales (as defined in Section 2) of property or services not conducted in a repeated manner or in the ordinary course of repetitive and successive transactions of like character by corporations or organizations which are exempt from the payment of tax under W. Va. Code '11-15-9(f) and Section 9.3.10 of these regulations on its purchases of tangible personal property or services.
9.2.23. Tuition charged for attending an educational summer camp (as defined in Section 2 of these regulations).
9.2.23.1. Even though the tuition charged for attending an educational summer camp is exempt, that exemption does not extend to charges for services or tangible personal property which is provided by the summer camp.
9.2.23.2. In order for the exemption to be claimed, the tuition charge must be separately identifiable and it may not include other charges for services or tangible personal property provided by the summer camp.
9.2.23.3. For further information, See Section 125 of these regulations.
9.2.24. Sales of vehicles which are titled with the West Virginia Department of Motor Vehicles and which are subject to the vehicle title privilege tax imposed by W. Va. Code '17A-3-4 or a similar tax imposed by another state. All sales of vehicles are subject to the consumers sales and service tax and the use tax unless two conditions are met: (1) it is titled by the West Virginia Department of Motor Vehicles or a similar agency of another state; and (2) it is subject to the vehicle title privilege tax or a similar tax imposed by another state; or unless the transaction is exempt under some other provision of this Section.
9.2.24.1. Any vehicle which is licensed or titled by the West Virginia Department of Motor Vehicles but which is not subject to the West Virginia vehicle title privilege tax, is subject to the consumers sales and service tax or the use tax.
9.2.24.2. Any vehicle which is licensed or titled by the West Virginia Department of Motor Vehicles, such as a travel trailer or a camping trailer, which is purchased from a person who is not engaged in the business of selling such vehicles or related property is considered to have been the subject of an isolated sale and is exempt from consumers sales and service tax and the use tax.
9.2.24.3. In order to establish the applicability of the consumers sales and service tax or use tax, the Tax Commissioner may require proof that the motor vehicle privilege tax has been paid.
9.2.24.4. Any vehicle which is purchased and delivered in West Virginia and immediately removed from this State is exempt from the consumers sales and service tax and use tax if the vehicle is then titled and registered in another state and is subject to a tax similar to the tax imposed by W. Va. Code '17A-3-4.
9.2.25. Charges for the services of opening and closing a burial lot or burial vault for the ultimate disposition of human remains.
9.2.26. Sales of livestock, poultry, or other farm products in their original state by the producer thereof (or a member of the producer's immediate family) who is not otherwise engaged in making retail sales of similar tangible personal property. See Section 2 of these regulations for additional information.
9.2.26.1. This section applies whether the retail sales transaction occurs at a roadside stand or elsewhere; however, such retail sales will not be affected by the normal wholesale sale of the producer's products. For example, if a producer grows apples, such apples may be sold exempt from tax so long as the producer does not operate a retail business in which apples are sold. However, if that same producer operates a commercial produce market and sells the apples he raises as well as other apples and produce grown by others, the sale of all apples is subject to consumers sales and service tax.
9.2.26.2. Neither the producer nor a member of the producer's immediate family claiming entitlement to this exemption may be engaged as an employee, independent contractor, owner or partner of a retail business which sells tangible personal property similar to that being sold by the producer.
9.2.27. Sales of livestock at public sales sponsored by breeder's or registry associations or at livestock auction markets.
9.3. Exemptions for Which Exemption Certificate or Material Purchase Certificate Required. - The following sales of tangible personal property and taxable services shall be exempt from tax but only if the purchaser presents to, and the vendor thereof accepts, in good faith, a properly executed exemption certificate or material purchase certificate, or the purchaser presents his direct pay permit number issued by the Tax Commissioner under W. Va. Code ''11-15-9d and 11-15A-3a:
9.3.1. Sales of tangible personal property or taxable services to this State, its institutions or subdivisions, governmental units, institutions or subdivisions of other states: Provided, That the law of such other state provides the same exemption to governmental units or subdivisions of the state, and to the government of the United States, including agencies of federal, State or local governments for distribution in public welfare or relief work.
9.3.1.1. It is necessary that the vendor acquire a properly executed exemption certificate from all purchasers claiming exemption from tax under this provision. Frequently, governmental entities fail to present such a certificate. In such event, the books and records of the vendor must show that the purchase was billed to and paid by the government agency.
9.3.1.2. Sales to individuals who are employees of this State, its institutions and subdivisions, or of the United States government, are not exempt from tax unless the sale is billed directly to the appropriate government agency or the purchase is by means of a properly completed government purchase order.
9.3.2. Reserved for future use.
9.3.3. Sales of property or services to churches which make no charge whatsoever for the services they render: Provided, That this exemption shall apply only to services, equipment, supplies, food for meals and materials directly used or consumed by these organizations, and shall not apply to purchases of gasoline or special fuel. For example, the purchase of pamphlets relating to drug abuse are not subject to tax if the church makes no charge in rendering services to persons with drug problems. For those purchases which qualify for exemption, the church may issue to the vendor a properly completed exemption certificate.
9.3.4. Sales of tangible personal property for the purpose of resale in the form of tangible personal property: Provided, That sales of gasoline and special fuel by distributors and importers shall be taxable except when the sale is to another distributor for resale.
9.3.4.1. Tangible personal property purchased for resale is taxable when it is withdrawn from inventory for use or consumption by the purchaser unless that consumption or use is exempt under some other provision of this Section. The value subject to tax is the purchase price paid by the purchaser at the time the item was purchased for inclusion in inventory.
9.3.4.1.a. Example. - A wholesale office supply company may purchase office supplies from the manufacturer without paying the consumers sales and service tax or the use tax on such purchases. The wholesaler then resells such supplies to a vendor who purchases them for sale to consumers. That vendor purchases supplies from the wholesaler without imposition of the tax, inasmuch as he purchased them for the purpose of resale. When this vendor withdraws office supplies from his inventory held for resale, whether for use or consumption in his office supply business or for his personal use or consumption, he becomes liable for payment of use tax.
9.3.4.2. The exemption allowed by this Section permits vendors of tangible personal property, whether they be wholesalers, distributors, jobbers, retailers, providers of taxable services (but not providers of services excepted from tax under W. Va. Code '11-15-8) or others to purchase tangible personal property for the purpose of resale in the form of tangible personal property without paying the consumers sales and service tax or the use tax. However, when such vendors purchase tangible personal property or services for use or consumption in their business of selling tangible personal property, they must pay the consumers sales and service tax or the use tax on such purchases. Therefore, purchases of janitorial services, equipment repairs, adding machines, etc., are taxable. In other words, vendors of tangible personal property are exempt from tax only on purchases of tangible personal property which are purchased for the purpose of resale in the form of tangible personal property, unless the purchases are exempt under some other provision of this Section. For application of this exemption for personal services providers, see Section 35 of these regulations.
9.3.4.3. For providers of taxable services and sellers of tangible personal property subject to the consumers sales and service tax or use tax, property purchased is presumed to be purchased for resale if the final consumer or end user of the property sold will obtain possession of the property upon consummation of the final sale of the property or service sold.
9.3.4.3.a. Example: Property sold for resale relating to sales of taxable services would include: sales of plastic dry cleaning bags and hangers to persons in the business of dry cleaning, sales of television picture tubes, solder and wire to television and electronics repair businesses and sales of primers and paint to persons in the automobile body repair business.
9.3.4.3.b. Example: Property not sold for resale to such service providers would include: sales of dry cleaning fluid, cash registers or other office equipment or dry cleaning equipment to persons in the business of dry cleaning, and sales of soldering irons, electronic test equipment, office or shop furniture or electronics manuals and technical books to television or electronics repair businesses.
9.3.4.3.c. Sales of carpet shampoo to persons in the carpet cleaning business would not constitute sales for resale because, although the shampoo is applied to the customer's carpet in the cleaning process, it is extracted from the carpet, allowed to evaporate or otherwise effectively used up in the process rather than being the subject of a transfer of possession.
9.3.4.3.d. Regulations relating to containers can be found in Section 32 of these regulations.
9.3.4.4. Except as otherwise provided in this Section, the exemption allowed by Section 9.3.4 of these rules does not apply to sales of building materials or building supplies or other property to any person engaging in the activity of contracting when the materials, supplies or property are to be installed in, affixed to or incorporated by such person or his agent into any real property, building or structure.
9.3.4.4.a. Prior to October 1, 1990, the exemption allowed by Section 9.3.4 of these rules does apply to sales of tangible personal property to a person engaging in the activity of contracting when the contracting activity meets the following requirements. Effective October 1, 1990 and subject to the provisions in W. Va. Code '11-15-8c and Section 8c of these regulations, the exemption for the purchase of materials for use in government contracts was generally repealed. See Section 109 of these regulations for additional information on the transition rules relating to the taxation of materials for use in governmental contracts.
9.3.4.4.a.1. The contracting activity must occur pursuant to a written contract with the government of the United States, the State of West Virginia, or a political subdivision thereof, or with a public corporation created by the Legislature, or by another government entity pursuant to an act of the Legislature, or with an agency or instrumentality of the government of the United States.
9.3.4.4.a.2. The written contract must be for the construction or improvement of a building or structure or for the improvement of other real property. The building or structure or improved real property must be or will be owned by the governmental entity and it must be used for a governmental or proprietary purpose.
9.3.4.4.a.3. With the exception of construction waste, the tangible personal property purchased by the person engaging in the contracting activity must be totally incorporated into the building, structure or improved property which is the subject of the written contract. Construction waste shall mean the discarded materials and refuse resulting from the contracting activity.
9.3.4.4.a.4. The person who purchases tangible personal property which is exempt in accordance with Section 9.3.4.4.a of these regulations shall, for the purposes of such purchases, be deemed to be the vendor of such property to the governmental entity.
9.3.4.4.a.5. A subcontractor who, pursuant to a written subcontract with a contractor who qualifies for this exception, provides equipment, or materials, and labor to such a prime contractor shall be treated in the same manner as the contractor is treated with respect to the prime contract under the exemption provided by Section 9.3.4.4.a of these regulations.
9.3.4.4.b. In order to claim the exemption allowed by Section 9.3.4.4.a of these regulations, a contractor or subcontractor who has a current Business Registration Certificate issued in accordance with W. Va. Code '11-12-1 et seq., may, prior to July 1, 1990, use his direct payment permit as issued by the Tax Commissioner or subsequent to June 30, 1990, apply for and obtain a material purchase certificate from the Tax Commissioner: Provided, That effective July 1, 1990, this exemption may only be claimed by the contractor or subcontractor issuing his material purchase certificate number to the vendor. The entity awarding the contract will provide the contractor with the application for the material purchase certificate if the contractor is to use that method for claiming exemptions. The material purchase certificate will entitle the contractor or subcontractor to purchase materials that are to become a component part of the building, structure or other property which is to be constructed or improved and for which Section 9.3.4.4.a of these regulations authorizes exemption. The material purchase certificate shall expire upon completion of the contract named thereon. As of October 1, 1990, the exemption provided in Section 9.3.4.4.a of these regulations was generally repealed and use of the material purchase certificate became very limited. See Section 109 of these regulations for additional information on the transition rules relating to the taxation of materials for use in governmental contracts.
9.3.4.4.b.1. Component materials are considered to be all materials which become an integral part of the structure being erected.
9.3.4.4.b.2. When applying for the material purchase certificate, the contractor must provide the Tax Commissioner with a list of all work subcontracted to others, indicating the amount of work to be performed, and the names and addresses of each subcontractor.
9.3.4.4.b.3. The contractor, or subcontractor, shall provide his vendor with his material purchase certificate number whenever he purchases tangible personal property which is to become a component part of a structure or improvement to realty pursuant to an exempt contracting activity. So long as the vendor in good faith takes the material purchase certificate number and notes it on the invoice, sales slip or other record of sale, the vendor shall be absolved of all duties and responsibilities imposed for the collection of consumers sales and service tax and use tax with respect to such sales. Failure to take the material purchase certificate number or to collect the amount of tax due shall result in the vendor being liable for the amount of tax not collected.
9.3.4.4.b.4. Any vendor who takes the material purchase certificate number in lieu of the consumers sales and service tax or use tax due and who has received notice in writing that such material purchase certificate has been canceled or surrendered or has expired shall be liable for any such tax he failed to collect.
9.3.4.4.b.5. Upon the expiration, cancellation or surrender of a material purchase certificate, the provisions of W. Va. Code '11-15-1 et seq. and W. Va. Code '11-15A-1 et seq., without regard to a material purchase certificate, shall apply to the person who previously held such a certificate. Such person shall promptly notify in writing all vendors from whom he purchases tangible personal property with the use of the material purchase certificate that such certificate has expired, was cancelled or surrendered. The notice required by this Section shall be made within ten (10) days after the certificate has been cancelled or surrendered or expired. Upon receipt of such notice, the vendor shall be required to collect the consumers sales and service tax and the use tax on all sales or leases of tangible personal property and sales of taxable services, thereafter made to or for such person for the contract covered by the invalid material purchase certificate.
9.3.4.5. Liquors or wines purchased by persons or organizations licensed under the authority of W. Va. Code article 60-7 from retail liquor stores operated in accordance with W. Va. Code article 60-3 or from retail liquor stores licensed under the authority of W. Va. Code article 60-3A are not exempt as purchases for resale.
9.3.5. Sales of property or services to a school which has approval from the Board of Trustees of the University System of West Virginia or the Board of Directors of the State College System to award degrees, which has its principal campus in this State, and which is exempt from federal and state income taxes under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended: Provided, That sales of gasoline and special fuel to such entities shall be taxable.
9.3.6. Sales of mobile homes that will be utilized by the purchasers as their principal year-round residence and dwelling: Provided, That these mobile homes shall be subject to the consumers sales and service tax and the use tax at the three percent (3%) rate. See Section 122 of these regulations for further information.
9.3.7. Sales of propane to consumers for poultry house heating purposes. Any person selling to such consumer who paid the consumers sales and service tax on special fuel in his price, shall not pass it on to the consumer, but may make application and receive refund of such tax from the Tax Commissioner, notwithstanding any provision of W. Va. Code '11-15-1 et seq. to the contrary.
9.3.7.1. A seller who paid the consumers sales and service tax or the use tax when purchasing the propane for resale is not authorized to pass such tax on to the consumer who purchases such propane for the sole purpose of heating a poultry house. In that instance, it is necessary for the seller to reduce the sales price of the propane sold for the exempt purpose by the amount of the sales or use tax on special fuel included in the consideration he paid for that quantity of propane and claim a refund of such tax from the Tax Commissioner.
9.3.8. Sales of tangible personal property or taxable services purchased for use or consumption in connection with the commercial production of an agricultural product, the ultimate sale of which will be subject to the consumers sales and service tax: Provided, That sales of tangible personal property and services to be used or consumed in the construction of or permanent improvement to real property and sales of gasoline and special fuel shall not be exempt.
9.3.8.1. This exemption applies to purchases for use in the commercial production of agricultural products as a business and not to purchases for use or consumption for any other purpose. Therefore, a person in the business of farming may purchase feed, seed, fertilizer, repairs to a tractor, etc., without payment of the consumers sales and service tax.
9.3.8.2. Sales of tangible personal property or services to a farmer to be used or consumed in the construction or improvement of real property are not exempt from the consumers sales and service tax and the use tax. For example, sales to farmers of building materials to construct barns, sheds or fences are taxable. If, at the time fencing materials are purchased, the purchaser intends to install the fencing at a specific location for a period of time in excess of sixty (60) days, the fence will be considered a permanent improvement to real property and the purchase of the materials will be taxable; however, if the time period for installation is intended to be sixty (60) days or less, the fence will not be considered a permanent improvement to real property and the purchase may be exempt.
9.3.8.3. Prior to July 1, 1989, a farmer or person in an agricultural business was not required to hold a business registration certificate in order to issue an exemption certificate. Effective July 1, 1989, in order to claim this exemption, the purchaser, whether a farmer or person in an agricultural business, may either present the vendor with a properly completed exemption certificate, or pay the tax due and claim a refund or credit from the Tax Department. Furthermore, such purchaser must hold a valid business registration certificate issued under the authority of W. Va. Code '11-12-1 et seq. in order to issue an exemption certificate.
9.3.9. Sales of building materials for use in remodeling, rehabilitation, or new construction in an enterprise zone, and the sale of new or used equipment and machinery when purchased by a qualified business for use in an enterprise zone: Provided, That the terms "qualified business" and "enterprise zone" are determined and designated in accordance with W. Va. Code '5B-2B-1 et seq. In order to claim this exemption when purchasing building materials for use in remodeling, rehabilitation, or new construction in an enterprise zone, the purchaser must provide the vendor with his material purchase certificate number. For purposes of these regulations, the materials purchase certificate is to be the exemption certificate required to obtain the exemption set forth in W. Va. Code '5B-2B-1.
9.3.9.1. The owner of such facility, or a lessee making leasehold improvements in the facility which inure to the benefit of the owner of the facility, shall obtain from the Tax Commissioner and furnish to the contractor a material purchase certificate for the project involved, and the contractor may purchase materials, machinery and equipment for incorporation in such project.
9.3.9.2. The contractor shall furnish the number on such certificate to all suppliers from whom such purchases are made, and such suppliers shall execute invoices covering the same and bearing the number of such certificate.
9.3.9.3. Upon completion of the project, the contractor shall furnish to the owner of the qualified business facility a sworn statement, on a form to be prescribed by the Tax Commissioner, that all purchases so made were entitled to exemption. All invoices shall be retained by the contractor for a period of five (5) years and shall be subject to audit by the Tax Commissioner.
9.3.9.4. Any contractor or any agent, employee or subcontractor thereof, who shall use or otherwise dispose of any materials, machinery or equipment purchased under such a material purchase certificate for any purpose other than that for which the certificate is issued without paying the tax imposed by W. Va. Code '11-15-1 et seq. or W. Va. Code '11-15A-1 et seq. shall be liable for payment of such taxes including interest, any applicable additions to tax plus any penalty and applicable criminal sanctions.
9.3.10. Sales of tangible personal property or taxable services to a corporation or organization which has a current Business Registration Certificate issued under W. Va. Code '11-12-1 et seq., which is exempt from federal income taxes under Section 501(c)(3) or (c)(4) of the Internal Revenue Code of 1986, as amended, and which satisfies one of the following requirements:
9.3.10.1. The corporation or organization is a church or a convention or association of churches as defined in Section 170 of the Internal Revenue Code of 1986, as amended.
9.3.10.2. The corporation or organization is an elementary or secondary school, whether public or private, which maintains a regular faculty and curriculum and has a regularly enrolled body of pupils or students in attendance at the place in this State where its educational activities are regularly carried on.
9.3.10.3. A corporation or organization which annually receives more than one half of its support from any combination of gifts, grants, direct or indirect charitable contributions, or membership fees as defined in Section 2 of these regulations.
9.3.10.4. An organization which has no paid employees and its gross income from fund raisers, less reasonable and necessary expenses incurred to raise such gross income (or the tangible personal property or services purchased with such net income), is donated to an organization which is exempt from income taxes under Section 501(c)(3) or (c)(4) of the Internal Revenue Code of 1986, as amended.
9.3.10.5. A youth organization, such as the Girl Scouts of the United States of America, or the Boy Scouts of America, or the YMCA Indian Guide/Princess Program, and the local affiliates thereof, which is organized and operated exclusively for charitable purposes and has as its primary purpose the nonsectarian character development and citizenship training of its members.
9.3.10.6. The exemption allowed by W. Va. Code '11-15-9(f) and this Section 9.3.10 does not apply to sales of gasoline or special fuel or to sales of tangible personal property or services to be used or consumed in the generation of unrelated business income as defined in Section 513 of the Internal Revenue Code of 1986, as amended.
9.3.10.7. The exemption authorized by W. Va. Code '11-15-9(f) and this Section 9.3.10 shall apply only to services, equipment, supplies and materials used or consumed in the activities for which such organizations qualify as tax exempt organizations under the Internal Revenue Code by these organizations and shall not apply to purchases of gasoline or special fuel.
9.3.10.8. A corporation or organization which fails to satisfy the requirements in the foregoing Section 9.3.10, such requirements being necessary to claim an exemption, must pay the tax but may not claim a refund unless some other exemption is available.
9.3.11. Sales of electronic data processing services and related software: Provided, That for the purposes of this Section, "electronic data processing services" means (1) the processing of another's data, including all processes incident to processing of data such as keypunching, keystroke verification, rearranging, or sorting of previously documented data for the purpose of data entry or automatic processing, and changing the medium on which data is sorted, whether these processes are done by the same person or several persons; and (2) providing access to computer equipment for the purpose of processing data or examining or acquiring data stored in or accessible to such computer equipment. So long as the electronic data processing service is performed for another person who is in no manner a part of the entity performing the service, and provided that the charge is actually and only for the sale of electronic data processing services and does not include any charges for other activities, the exemption will apply.
9.3.11.1. This exemption does not apply to the sale of computer software, whether of canned or custom design, if such software is not to be used for the processing another's data. In other words, the purchase of software for a person's own computer is not exempt unless that person is in the business of processing data for others and the software is to be utilized for that purpose.
9.3.11.2. This exemption does not apply to any purchase of computer hardware.
9.3.12. Dispensing of services performed by one corporation for another corporation when both corporations are members of the same controlled group. Control means ownership, directly or indirectly, of stock possessing fifty percent or more of the total combined voting power of all classes of the stock of a corporation entitled to vote or ownership, directly or indirectly, of stock possessing fifty percent or more of the value of the corporation. Purchases of taxable services from an entity outside the controlled group by a member of the controlled group for use by other members of the controlled group are not exempt from consumers sales and service tax or use tax as a purchase for resale under W. Va. Code '11-15-9(j) or Section 9.3.4.2 of these regulations.
9.3.13. Food, as defined in Section 2.30 of these regulations, when purchased by the following organizations shall be exempt:
9.3.13.1. Food purchased by public or private schools, school sponsored student organizations, or school sponsored parent-teacher associations and sold to students enrolled in such school or to employees of such school during normal school hours, but not those sales of food made to the general public. For further information about this exemption, See Section 126 of these regulations.
9.3.13.2. Food purchased by a public or private college or university or by a student organization officially recognized by such college or university to students enrolled at such college or university when such sales are made on a contract basis so that a fixed price is paid for consumption of food products for a specific period of time without respect to the amount of food product actually consumed by the particular individual contracting for the sales and no money is paid at the time the food product is serviced or consumed. For additional information about this exemption, See Section 126 of these regulations.
9.3.13.3. Food purchased by a charitable or private nonprofit organization, a nonprofit organization or a governmental agency under a program to provide food to low-income persons at or below cost.
9.3.13.3.a. For additional information about this exemption, See Section 126 of these regulations.
9.3.14. Sales of motion picture films to motion picture exhibitors for exhibition if the sale of tickets or the charge for admission to the exhibition of the film is subject to the sales and service tax.
9.3.15. Sales of coin-operated video arcade machines, or video arcade games to a person engaged in the business of providing such machines or games to the public for a charge upon which the sales and service tax is imposed and which is remitted to the Commissioner.
9.4. Refundable Exemptions. - The vendor liable for collection of the consumers sales and service tax or use tax shall collect such taxes when making the following sales of tangible personal property or taxable services (unless the purchaser presents his direct pay permit number issued by the Tax Commissioner under W. Va. Code ''11-15-9d and 11-15A-3d and provided that the sales are not exempt under paragraph 9.2 of these regulations); and such taxes, after payment, shall, upon proper application therefor, be refunded or credited to the purchaser as provided in W. Va. Code ''11-15-9b and 11-15A-3b:
9.4.1. Sales of property or services to persons engaged in this State in the business of manufacturing, transportation, transmission, communication or in the production of natural resources (as such terms are defined in Section 2): Provided, That the exemption provided in this Section shall only apply to services, machinery, supplies and materials directly used or consumed in the activities of manufacturing, transportation, transmission, communication or the production of natural resources in the businesses or organizations named above and shall not apply to purchases of gasoline or special fuel. For further information See Section 123 of these regulations.
9.4.1.1. For example:
9.4.1.1.a. Sales of janitorial services and supplies to a person who manufactures chemicals are not exempt but the sale of raw materials utilized in a chemical manufacturing process would be exempt.
9.4.1.1.b. Sales of telephone poles and wires to a telephone or telegraph company are generally exempt; however, purchases of telephone poles and wires or other goods and services used in activities not subject to the Telecommunications Tax, W. Va. Code '11-13B-1 et seq., are not exempt unless directly used in communications activities as defined in Section 2.16 of these regulations.
9.4.1.1.c. Charges for the transportation of a product between different locations of the same manufacturer where subsequent steps in the manufacturing process occur are exempt.
9.4.1.1.d. Sales to contract miners to be directly used in the extraction of natural resources would be exempt while those purchases not directly used in that activity would be taxable. However, if a contract miner is subject to the Severance Tax, W. Va. Code '11-13A-1 et seq., all purchases whether directly or not directly used in the conduct of privileges which are subject to the Severance Tax are exempt. See Section 9.4.4 of these regulations for additional information.
9.4.1.2. The sale, to be exempt, must be of tangible personal property or taxable services directly used or consumed (as defined in Section 2 of these regulations) in the business activity of manufacturing, transportation, transmission, communication or in the production of natural resources.
9.4.2. Sales of tangible personal property or services to nationally chartered fraternal or social organizations when such property or services are purchased for the sole purpose of free distribution in public welfare or relief work: Provided, That sales of gasoline and special fuel shall be taxable. This exemption is applicable to only those purchases of property or services which will be distributed free in public welfare or relief work. All other purchases will be subject to the consumers sales and service tax or the use tax unless such purchases are exempt under some other provision of these regulations.
9.4.3. Sales and services of fire fighting or station house equipment, including construction and automotive equipment, made to any volunteer fire department organized and incorporated under the laws of the State of West Virginia: Provided, That sales of gasoline and special fuel shall be taxable.
9.4.4. Sales of property and services to persons subject to the Business and Occupation Tax, W. Va. Code '11-13-1 et seq., the Severance Tax or the Telecommunications Tax after June 30, 1987: Provided, That this exemption shall apply only to tangible personal property or services used or consumed in the conduct of privileges which are subject to one of the above-referenced taxes and shall not apply to purchases of gasoline or special fuel.
9.4.4.2. It should be noted that some entities may be engaged in many activities, some of which are subject to the B & O, severance or telecommunications tax and some of which are not subject to such taxes. If a purchaser will use the purchase in more than one activity, the purchaser must apportion the purchase price in accordance with Section 9d of these regulations.
9.4.5. Sales of building materials or building supplies or other property to an organization qualified under Section 501(c)(3) or (c)(4) of the Internal Revenue Code of 1986, as amended, which are to be installed in, affixed to or incorporated by such organization or its agent into real property, or into a building or structure which is or will be used as permanent low-income housing, transitional housing, emergency homeless shelter, domestic violence shelter or emergency children and youth shelter if such shelter is owned, managed, developed or operated by an organization qualified under Section 501(c)(3) or (c)(4) of the Internal Revenue Code of 1986, as amended.
9.4.5.1. The qualified organization must purchase the materials or property in order to claim this exemption.
9.4.5.2. The materials or property must be installed in, affixed to or incorporated into real property or a structure which will be used for the purposes stated in Section 9.4.5 of these regulations.
9.4.5.2.a. Either the qualified organization or its agent must install, affix or incorporate the property or materials into the qualified structure or real property.
9.4.5.2.b. For purposes of this exemption, agent is defined as being a person employed by the qualified organization for the purpose of installing, affixing or incorporating the materials or property into the qualified real property, building or structure.
9.4.6. Sales of property or services to bona fide charitable organizations which make no charge whatsoever for the services they render: Provided, That this exemption shall apply only to services, equipment, supplies, food for meals and materials directly used or consumed by those organizations, and shall not apply to purchases of gasoline or special fuel.
9.4.6.1. For purposes of this exemption, a bona fide charitable organization is an organization which qualifies or is qualified under I.R.C. 501(c)(3) or under Section 2.12 of these regulations.
9.4.7. Sales of aircraft repair, remodeling and maintenance services when such services are to an aircraft operated by a certificated or licensed carrier of persons or property, or by a governmental entity or to an engine or other component part of an aircraft operated by a certificated or licensed carrier of persons or property, or by a governmental entity.
9.4.7.1. Sales of tangible personal property that is permanently attached as a component part of an aircraft owned or operated by a certificated or licensed carrier of persons or property, or by a governmental entity, as part of the repair, remodeling or maintenance service.
9.4.7.2. Sales of machinery, tools, or equipment, directly used or consumed exclusively in the repair, remodeling, or maintenance of aircraft, aircraft engines, or aircraft component parts, for a certificated or licensed carrier of persons or property, or for a governmental entity.
9.4.8. Sales of tangible personal property and services to a person entitled to claim the tax credit for investment in certain management information services facilities allowed under W. Va. Code '11-13D-3c, pursuant to the issuance of a management information services tax credit certification by the Tax Commissioner in accordance with W. Va. Code '11-13D-3c(e), when such property or services are directly used or consumed by the purchaser in the operation of the management information services facility, as defined in Section 2 of these regulations for which credit is allowed under W. Va. Code '11-13D-3c. Tangible personal property, or services, directly used or consumed in the operation of a management information services facility includes only: (1) computer processing and telecommunications equipment; (2) data storage and input/output devices; (3) disaster recovery services; (4) supplies; (5) application, telecommunication and operating system software; (6) repair and maintenance of any of the aforesaid items; and (7) other tangible personal property or services directly used or consumed in the operation of a management information services facility: Provided, That the property is purchased or leased after March 31, 1991. This exemption shall not apply to tangible personal property, or services, that are not directly used or consumed in the operation of a management information services facility, or to gasoline or special fuel: Provided, however, that nothing in this paragraph shall be construed to limit, exclude or preclude the application or availability of any other exemption set forth in this W. Va. Code '11-15-9, elsewhere in the Code or in these regulations, which might otherwise apply to any sale of tangible personal property or services.
9.5. Specific Use Tax Exemptions. - The use in this State of the following tangible personal property and taxable services is specifically exempted from the use tax:
9.5.1. All articles of tangible personal property brought into the State of West Virginia by a nonresident individual thereof for his or her use or enjoyment while temporarily within this State or while passing through this State, except gasoline and special fuel: Provided, That fuel contained in the supply tank of a motor vehicle that is not a motor carrier shall not be taxable. In other words, vacationers, visitors or other nonresident individuals may bring tangible personal property, including gasoline in their personal vehicles, into this State for their own use without imposition of use tax.
9.5.1.1. All tangible personal property brought into this State for use or consumption in this State by a nonresident contractor is subject to W. Va. Code '11-15-8b and Section 8b of these regulations. See Section 110 of these regulations for further information.
9.5.2. Tangible personal property or services, the gross receipts from the sale of which in this State are exempt from the consumers sales and service tax by the terms of W. Va. Code '11-15-1 et seq. and provided that the property or services are being used for the purpose for which it was exempted.
9.5.3. Tangible personal property or services, the gross receipts from the sale of which in this State are required to be included in the measure of the consumers sales and service tax, and upon which such tax has been paid. It is necessary for the purchaser to provide a receipt showing that the consumers sales and service tax has been paid.
9.5.4. Tangible personal property or services, the sale of which in this State is not subject to the consumers sales and service tax. The exemption contained herein is related directly to the purchase or use of a taxable service or a particular item of tangible personal property and not to the status of the vendee. In other words, it is use or sale of the particular article or property or service which is exempt. For example, X, a resident of West Virginia, has his federal and state income tax returns prepared by an Ohio certified public accountant. X will pay no use tax thereon because the purchase within West Virginia of professional services is not subject to consumers sales and use tax.
9.6. Exemptions; Exception for Liquors and Wines Purchased for Resale. - The exemption provided for sales of tangible personal property purchased for resale does not apply to purchases of alcoholic liquor, wines or fortified wines, as defined in Chapter 60 of the Code, from the Alcohol Beverage Control Commissioner or retail liquor licenses licensed under the authority of W. Va. Code '60-3A-1 et seq. for resale by persons or organizations licensed under authority of W. Va. Code '60-7-1 et seq.
9.7. Moving Residence or Business Into State. - The use tax shall not apply to tangible personal property purchased outside this State for use outside this State by a person who at that time was a nonresident natural person, or a business entity not actually doing business within this State, who or which later brings such tangible personal property into this State in connection with his establishment of a permanent residence or business in this State: Provided, That such property was purchased more than six (6) months prior to the date it was first brought into this State, or six (6) months prior to the establishment of such residence or business, whichever first occurs.
9.7.1. Tangible personal property used out-of-state for six (6) or more months by a nonresident individual, or a business entity not actually doing business in this State, that is brought into this State for use by such individual or business in this State in connection with moving the person's residence or business into this State is exempt regardless of how it was brought into this State.
9.7.2. Property purchased and used out-of-state for less than six (6) months by a nonresident individual, or by a business not actually doing business in this State, will be subject to use tax when such property is relocated in this State in connection with moving the person's residence or business into this State unless:
9.7.2.1. One of the exemptions in this Section 9 specifically applies; or
9.7.2.2. If the amount of sales or use taxes lawfully paid to another State with respect to such property is equal to or greater than the amount of this State's use tax otherwise due on the original purchase price of the property at the time it is brought into this State, then no West Virginia use tax is due. However, if the amount of West Virginia use tax exceeds the amount of tax lawfully paid in another state, the difference must be remitted to the Tax Commissioner.
W. Va. Code R. § 110-15-9a Method for Claiming Exemptions, Refunds of Tax, Credit Against Other Taxes. 9a.1. General. - Any person having a right or claim to an exemption from the consumers sales and service tax or the use tax by reason of any of the foregoing exemptions in Section 9 of these regulations, except those exemptions set forth in Sections 9.2, 9.3, 9.5, 9.6 and 9.7 of these regulations, and who is not utilizing the direct pay permit procedure authorized in Section 9c of these regulations, shall pay to the vendor the consumers sales and service tax and use tax imposed and may exercise or assert such exemption only in accordance with the following Section 9a.2 or Section 9a.3 of these regulations. 9a.2. No refund shall be due and no credit shall be allowed unless the taxpayer or assignee shall have filed a claim for refund or a claim for credit, as appropriate, with the Tax Commissioner in accordance with this Section. 9a.3. Any claim for a refund of consumers sales and service tax or use tax overpayments or a tax credit for consumers sales and service tax or use tax overpayments which is not timely filed or not filed in proper form or in accordance with the requirements of this Section shall not be construed to constitute an obligation of the State of West Virginia for payment. No overpayment of consumers sales and service tax or use tax shall be subject to either W. Va. Code ''11-10-17(d) or 11-10-17(e)(1). 9a.4. Filing Claim for Refund. - Any person who has paid the consumers sales and service tax or the use tax imposed and who may lawfully claim any exemption set forth under Section 9.1 of these regulations which is not enumerated in the foregoing Section 9a.1 of these regulations, may exercise or assert such claim by filing a claim for refund of the consumers sales and service tax or the use tax overpayments on such form and in such manner as the Tax Commissioner may require and in accordance with the requirements of this Section. 9a.5. Filing Claim for Credit. - In lieu of filing a claim for refund of consumers sales and service tax and use tax overpayments, the taxpayer may, at his option and within one year from the date of payment of the tax, file a claim for credit on such form and in such manner as the Tax Commissioner may require and credit the amount of consumers sales and service tax and use tax overpayments against certain payments of other taxes due, so long as such credit is applied in accordance with the requirements in Sections 9a.3.1 through 9a.3.10 of these regulations. 9a.5.1. This procedure may not be utilized unless the purchaser has submitted a properly completed application for credit to the Tax Commissioner. 9a.5.1.1. An application for credit is required each time a purchaser seeks to utilize this procedure. 9a.5.1.2. Any credit may be disallowed as a result of Tax Department audits of the taxpayer's records. 9a.5.2. Method of Applying Credit. 9a.5.2.1. If the taxpayer is a vendor who is subject to consumers sales and service tax on certain purchases, he may credit the amount of consumers sales and service tax and use tax overpayments made against the consumers sales and service tax liability accrued through the use of his direct pay permit and apply any remaining tax liability against his quarterly or monthly remittance of the consumers sales and service tax imposed and otherwise due; or 9a.5.2.2. If the taxpayer is a vendor who is subject to the use tax on certain purchases, he may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Section 9a.3.2.1 of these regulations against the use tax liability accrued through the use of his direct pay permit and apply the remaining tax liability against his monthly remittance of the use tax imposed and otherwise due; or 9a.5.2.3. If the taxpayer is subject to the consumers sales and service tax, he may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Section 9a.3.2.1 and 9a.3.2.2 of these regulations against his quarterly or monthly remittance of the consumers sales and service tax imposed and otherwise due; or 9a.5.2.4. If the taxpayer is subject to the use tax, he may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.3 of these regulations against his quarterly remittance of the use tax imposed and otherwise due; or 9a.5.2.5. If the taxpayer is subject to the business and occupation tax, W. Va. Code '11-13-1 et seq., he may credit the amount of consumers sales and service tax and use tax overpayments after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.4 of these regulations against his quarterly or monthly remittance of the Business and Occupation Tax imposed and otherwise due; or 9a.5.2.6. If the taxpayer is subject to the Annual Tax On Incomes Of Certain Carriers imposed by W. Va. Code '11-12A-1 et seq., he may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.5 of these regulations against his annual or semiannual remittance of the tax imposed under W. Va. Code '11-12A-1 et seq. and otherwise due; or 9a.5.2.7. If the taxpayer is subject to the Severance Tax imposed under W. Va. Code '11-13A-1 et seq., the taxpayer may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.6 of these regulations against the taxpayer's quarterly or monthly remittance of the Severance Tax imposed and otherwise due; or 9a.5.2.8. If the taxpayer is subject to the Telecommunications Tax imposed under W. Va. Code '11-13B-1 et seq., the taxpayer may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.7 of these regulations against the taxpayer's quarterly or monthly remittance of the Telecommunications Tax imposed and otherwise due; or 9a.5.2.9. If the taxpayer is subject to the Corporation Net Income Tax imposed under W. Va. Code '11-24-1 et seq., the taxpayer may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.8 of these regulations against the taxpayer's installment of estimated tax for the Corporation Net Income Tax imposed and otherwise due under W. Va. Code '11-24-17; or 9a.5.2.10. If the taxpayer is subject to the Personal Income Tax imposed under W. Va. Code '11-21-1 et seq., the taxpayer may credit the amount of use tax overpayments remaining after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.9 of these regulations against the taxpayer's installment of estimated tax for the Personal Income Tax imposed and otherwise due under W. Va. Code '11-21-56; or 9a.5.2.11. If the taxpayer is subject to the Business Franchise Tax imposed under W. Va. Code '11-23-1 et seq., the taxpayer may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.10 of these regulations against the taxpayer's annual remittance of the Business Franchise Tax imposed and otherwise due; or 9a.5.2.12. If the taxpayer is required to deduct and withhold personal income tax under W. Va. Code '11-21-1 et seq., the taxpayer may credit the amount of consumers sales and service tax and use tax overpayments remaining after application of the foregoing Sections 9a.3.2.1 through 9a.3.2.11 of these regulations against the taxpayer's monthly remittance of the personal income tax withheld under said W. Va. Code '11-21-1 et seq. and otherwise due. 9a.6. Documents Supporting Claim for Exemption. - Any person asserting or exercising a claim of exemption from the consumers sales and service tax and use tax under the foregoing Sections 9a.2 or 9a.3 of these regulations shall file with the Tax Commissioner an application for exemption and shall file such affidavits, invoices, sales slips, records or documents as the Tax Commissioner may require to prove or verify the taxpayer's right and entitlement to such exemption. The Tax Commissioner may inspect or examine the records, books, papers, documents, affidavits, sales slips and invoices of a taxpayer or any other person to verify the truth and accuracy of any report or return or to ascertain whether the consumers sales and service tax or the use tax has been paid. 9a.6.1. In addition to the powers of the Tax Commissioner set forth in W. Va. Code '11-10-1 et seq., as a further means of obtaining the records, books, papers, documents, affidavits, sales slips or invoices of a taxpayer or any other person and ascertaining the amount of sales and services taxes or use taxes paid or due under W. Va. Code '11-15-1 et seq. or W. Va. Code '11-15A-1 et seq. or under any report, form, document or affidavit required, the Tax Commissioner shall have the power to examine witnesses under oath; and if any witness shall fail or refuse at the request of the Tax Commissioner to grant access to the books, records, papers, documents, affidavits, sales slips or invoices requested by the Tax Commissioner, the Tax Commissioner shall certify the facts and the names to the circuit court of the county having jurisdiction over the party, and such court shall thereupon issue a subpoena duces tecum to such party to appear before the Tax Commissioner, at a place designated within the jurisdiction of such court, on a day fixed. 9a.7. Time Limit for Filing Claim for Refund. - All claims for refund of consumers sales and service tax or use tax overpayments, including applications from vendors for authorizations to apply the amounts of consumers sales and service tax and use tax paid for business purchases against the amounts of such consumers sales and service tax collected from consumers, under Section 9a.2 of these regulations shall be filed within the time limitation for filing claims for refund set forth in W. Va. Code '11-10-14. Any claim for such refund or claim of entitlement to such refund made or asserted after the said time limitation shall be null and void, and if the consumers sales and service tax or use tax overpayment has not otherwise been credited against tax remittances in accordance with this Section, such claims shall be forfeited. 9a.8. Time Limit for Filing Claim for Credit. - Any credit of consumers sales and service tax or use tax overpayments against taxes under Section 9a.3 of these regulations shall be taken within one (1) year after the payment of the tax by the taxpayer to the vendor. Any such credit or claim of entitlement to such credit made or asserted more than one year after the payment of such tax by the taxpayer to the vendor shall be null and void, and such tax overpayments shall be forfeited. 9a.9. Assignment of Right to Refund or Credit. - Any assignment of the right or entitlement to a refund or credit arising under either W. Va. Code '11-15-9b or W. Va. Code '11-15A-3b shall be subject to strict proof. Any assignee claiming a right or entitlement to an assigned refund or credit shall submit to the Tax Commissioner and in the form prescribed or approved by him, an affidavit signed by the assignor and acknowledging the assignment. The assignee shall attest to the assignment and the terms thereof in his signed application for refund or credit. The assignee will be subject to the penalties provided under West Virginia law for perjury for any falsehood set forth in his signed application. The assignee also will be subject to the penalties set forth in W. Va. Code '11-9-1 et seq. Except as provided in Section 9a.8 of these regulations, no payment of a refund arising under this Section shall be made to any person other than the taxpayer or assignee of the taxpayer making the original overpayment of consumers sales and service tax or use tax
W. Va. Code R. § 110-15-9b Reserved for Future Use
W. Va. Code R. § 110-15-9c Direct Pay Permits. 9c.1. Eligibility for Permit. - A person may apply for a direct pay permit if such person (i) has a current business registration certificate and (ii) is not delinquent on the payment of any taxes imposed by Chapter 11 of the West Virginia Code and (iii) satisfies any one of the following conditions: 9c.1.1. Is engaged in the business of manufacturing, transportation, transmission, communication or the production of natural resources. 9c.1.2. Is subject to tax under W. Va. Code '11-13-1 et seq. (Business and Occupation Tax), W. Va. Code '11-13A-1 et seq. (Severance Tax) or W. Va. Code '11-13B-1 et seq. (Telecommunications Tax). 9c.1.3. Is a bona fide charitable organization that makes no charge whatsoever for services it renders. 9c.1.4. Is a nationally chartered fraternal or social organization, the purchases of which are used for the sole purpose of free distribution in public welfare or relief work. 9c.1.5. Is a volunteer fire department organized and incorporated under the laws of the State of West Virginia. 9c.1.6. Makes purchases of tangible personal property or services, the use of which is unknown to him at the time of the purchase and one of the reasonably foreseeable uses would render the purchase exempt from consumers sales and service tax and use tax. 9c.1.7. Makes purchases of tangible personal property or services which are used in both exempt and taxable manners and who must pay tax on an apportionment basis. 9c.2. Applying for a Permit, Form. - A person seeking a direct pay permit must file a properly completed Application for Direct Pay Permit (Form WV/CST-250) with the West Virginia State Tax Department, Accounting Division, P. O. Drawer 425, Charleston, West Virginia 25322-0425. Applications may be obtained by mail from the West Virginia Tax Department, P.O. Drawer 2389, Charleston, West Virginia 25328, or may be picked up during regular business hours at the West Virginia State Revenue Center, 1001 Lee Street, East, Charleston, West Virginia, at the Taxpayer Services Division of the State Tax Department, Room W-417, State Capitol Building, Charleston, West Virginia or at any State Tax Department local field office. 9c.3. Issuance. - The Tax Commissioner, upon review of the application filed, has the sole discretion to issue a direct pay permit. If the application is approved, a numbered direct pay permit will be mailed to the applicant. Should the application be disapproved or rejected, the applicant will be so notified in writing. 9c.4. Validity; Renewal of Permit. - A direct pay permit shall continue to be valid until (i) surrendered by the holder or (ii) cancelled for cause or (iii) the expiration of the business' registration year under W. Va. Code '11-12-1 et seq. A direct pay permit that expires by reason of the expiration of the business' registration year shall be renewed automatically when the business' business registration certificate is issued for the next succeeding fiscal year unless cancelled for cause or surrendered by the holder thereof. 9c.5. Cancellation of Permit. 9c.5.1. Cause. - A direct pay permit may be cancelled or not renewed for cause. Cause shall include any one of the following: 9c.5.1.1. The direct pay permit holder is delinquent by more than thirty (30) days in the payment of any tax imposed by Chapter 11 of the West Virginia Code. 9c.5.1.2. The direct pay permit holder utilizes the permit in any unauthorized manner, including but not limited to making purchases of items for personal use or consumption of an individual officer, employee or proprietor of a business or organization when the permit is issued to the business or organization. 9c.5.1.3. The direct pay permit holder fails to file a direct pay return for any period in accordance with Section 9c.7 of these regulations within five (5) days after the due date thereof. 9c.5.1.4. Effective July 1, 1990, an applicant for a direct pay permit or an applicant for renewal of a direct pay permit shall not be issued a direct pay permit or direct pay permit renewal if the applicant is not, or is no longer, authorized to receive or use a direct pay permit under Section 9c.1 of these regulations, or under any other provision of these regulations, or under any provision of the West Virginia Code. 9c.5.2. Procedure. - The Tax Commissioner shall give the direct pay permit holder written notice of the Tax Commissioner's intent to cancel or not renew a direct pay permit. 9c.5.2.1. The notice shall contain the reason for the cancellation or nonrenewal, the date when the cancellation or nonrenewal becomes effective, and the date, time and place where the taxpayer may appear and show cause why the intended action should not occur. 9c.5.2.2. The written notice shall be served upon the taxpayer in the same manner as a notice of assessment is served under W. Va. Code '11-10-5e and the notice shall be served not less than twenty (20) days prior to the date of the informal show cause hearing. 9c.5.2.3. Failure to appear at a show cause hearing shall result in the direct pay permit holder's forfeiture of its right to such hearing and shall render the cancellation or nonrenewal final and not subject to administrative or judicial review. Should the direct pay permit holder be dissatisfied with the administrative decision resulting from the show cause hearing, an appeal may be taken to circuit court in accordance with the appeal procedure provided in W. Va. Code '11-10-10. 9c.5.2.4. The cancellation or nonrenewal of a direct pay permit shall not be stayed unless directed by a circuit court or the Tax Commissioner. 9c.5.3. Effect. - Upon the expiration, non-renewal, cancellation or surrender of a direct pay permit, the provisions of W. Va. Code '11-15-1 et seq. and W. Va. Code '11-15A-1 et seq., without regard to direct pay permits, shall apply to the person who previously held such permit. Each person who held a direct pay permit that has expired, not been renewed, been cancelled or surrendered shall promptly notify in writing all vendors from whom he purchases or leases tangible personal property or purchases taxable services with the use of direct pay permits that such permit was cancelled or surrendered. The notice required by this Section shall be made within ten (10) days after the permit has been cancelled or surrendered. Upon receipt of such notice, the vendor or retailer shall not be relieved pursuant to Section 4.3.3 (relating to acceptance of direct pay number in lieu of collecting tax) of these regulations from its requirement to collect the consumers sales and service tax and the use tax on all sales or leases of tangible personal property and sales of taxable services thereafter made to or for such person. 9c.6. Use of Direct Pay Permit. 9c.6.1. In General. - A direct pay permit may be used when the holder thereof notifies a vendor or retailer of his direct pay permit number in accordance with Section 9c.6.2 of these regulations. Upon receipt of such notice, the vendor or retailer shall be absolved from its responsibility to collect and remit consumers sales and service tax and use tax with respect to the transaction governed by the notice and such direct pay permit holder shall report the taxes to the Tax Commissioner in accordance with Section 9c.7 of these regulations. 9c.6.2. Notice. - The notice by the direct pay permit holder to the vendor or retailer may relate to a particular transaction or may apply such to present and future transactions as specified in such notice. 9c.6.3. Notwithstanding anything to the contrary, a direct pay permit may not be used in the following situations: 9c.6.3.1. If the direct pay permit has been cancelled, surrendered or has expired. 9c.6.3.2. For the purchase of food. 9c.6.3.3. Effective on and after July 1, 1990, as a device to defer payment of consumers sales and service tax or use tax. 9c.6.3.4. Effective on and after July 1, 1990, as a substitute for an exemption certificate or material purchase certificate. 9c.6.3.5. For the purchase of gasoline or special fuel. See Section 11.8 of these regulations. 9c.7. Reporting and Payment of Tax by Permit Holder. 9c.7.1. Determination of Taxable Status. - Each direct pay permit holder is required to determine the taxable status of each purchase and report it on the return covering the period in which the purchase occurred. If the holder cannot at the time of the purchase reasonably determine whether the use of the tangible personal property or services so purchased will be exempt from tax, the holder may report the purchase as exempt on the return covering the period in which the purchase occurred: Provided, That if the holder later uses the property in a manner that is not exempt from use tax, the holder must report such use and pay tax thereon on a quarterly use tax return Form WV/CST-220. 9c.7.2. Return. - A direct pay return shall show for the reporting period the value (monetary consideration or purchase price) of the direct pay permit holder's total purchases of tangible personal property and services for which a direct pay permit was used, the amount of purchases exempt from tax, and the amount of tax due from the permit holder, which amount shall accompany the return. 9c.7.3. Due Dates of Returns. 9c.7.3.1. On or before the fifteenth (15th) day of each month, every direct pay permit holder shall make and file with the Tax Commissioner a direct pay permit tax return for the preceding month on the Form WV/CST-210 or WV/CST-230. 9c.7.3.2. Returns Made on or After July 1, 1990. 9c.7.3.2.1. After June 30, 1990, if the amount of consumers sales and service tax and use tax in total due from the taxpayer averages less than $100 per month for the taxable year or for the taxpayer's immediately preceding taxable year, the taxpayer may file a combined consumers sales and service tax and use tax direct pay permit return quarterly, in lieu of monthly returns. The tax shown thereon to be due shall be remitted on or before the fifteenth (15th) day following the close of the calendar quarter. 9c.7.3.2.2. After June 30, 1990, if the amount of consumers sales and service tax and use tax in total due from the taxpayer averages less than $50 per calendar quarter or averaged less than $50 per calendar quarter during the taxpayer's immediately preceding taxable year, the taxpayer may file a combined consumers sales and service tax and use tax annual direct pay permit return. The amount of tax shown thereon to be due shall be remitted on or before the last day of January of the next succeeding calendar year after the calendar year during which the tax accrued. 9c.7.4. The Tax Department, upon written request by a direct pay permit holder, may grant a reasonable extension of time for the making and filing of direct pay permit returns, and paying the tax due. Interest on such tax shall be chargeable on every extended payment at the rate specified in W. Va. Code '11-10-17. 9c.8. Recordkeeping Requirements. 9c.8.1. If the direct payment permit holder does not timely file the appropriate return for tangible personal property or taxable services purchased through the use of the direct payment permit, the permit holder has not claimed exemption for such purchases; in this situation, "timely filing" means to claim the exemption for the purchase on the next return required to be filed after the purchase transaction is completed. Failure to properly claim the exemption on the direct pay permit return will result in loss of the exemption on the transaction with tax therefore due on the purchase. 9c.8.2. Failure to pay the tax at the time of the sale and failure to properly claim the exemption will result in the taxpayer being classified as being delinquent in the payment of the consumers sales and service tax or use tax. As a result, the taxpayer will be subject to the payment of the delinquent tax, interest, additions to tax and penalties as authorized by W. Va. Code '11-9-1 et seq. and W. Va. Code '11-10-1 et seq
W. Va. Code R. § 110-15-9d Apportionment of Purchase Price. 9d.1. Whenever a purchaser will use tangible personal property or a service or the results of a service for both exempt and nonexempt purposes, the gross proceeds paid to the vendor of such property or service shall be apportioned between the exempt and nonexempt uses in a reasonable manner acceptable to the Tax Commissioner. In the absence of books and records documenting how gross proceeds were apportioned and how the property or service or the results of a service were actually used by the purchaser, that portion of the gross proceeds for which exemption is claimed shall be disallowed and the tax due thereon shall be paid by the purchaser. In those instances where apportionment of the purchase price is difficult to calculate and therefore assure taxpayer compliance, the Tax Commissioner may establish safe harbors which will assist in the development of uniform apportionment calculations for similarly situated taxpayers. Appropriate administrative notice must be filed in the State Register at least thirty (30) days prior to the effective date of the subject matter of the safe harbor being established. 9d.1.1. Persons engaged in multiple business activities will pay tax on their purchases for use in their overall business operation on an apportionment basis. 9d.1.1.1. A person engaged in the business of selling tangible personal property is subject to tax on all purchases except purchases for resale in the form of tangible personal property. A person engaged in the business of manufacturing is subject to tax on all purchases except purchases of tangible personal property and services directly used in the manufacturing activity. Therefore, a person engaged in both business activities who purchases equipment which is used in the sale of such property and directly used in the manufacturing activity may exempt from tax the amount of the purchase price apportioned to manufacturing activity use. 9d.1.1.2. If purchases for use in business can be identified as being used exclusively in one or the other business activities, the purchase price may be totally taxable or totally exempt. Any method of apportionment may be used as long as it is appropriate and reasonable for the situation. 9d.1.2. Persons who must pay tax on their purchases on an apportionment basis must either pay the total tax on the purchase (and claim a refund or credit) or use a direct pay permit under rules set forth in Section 9c of these rules. A direct pay permit may be used to purchase goods for resale without imposition of the tax, at the time of sale. By the fifteenth (15th) of each month, or as otherwise provided in Section 9c.7 of these regulations, a direct pay permit consumers sales and service tax and use tax return must be filed by the direct pay permit user, together with the tax due on taxable purchases made using the direct pay permit during the previous month. 9d.2. Whenever the vendor and purchaser are related persons or the sale is under other circumstances where the relation between the vendor and purchaser is such that the gross proceeds may not be indicative of the true value of the tangible personal property or services purchased, the Tax Commissioner shall revalue the transaction whenever he believes that the gross proceeds thereof are not indicative of the true value of the transaction. Adjusted gross proceeds shall correspond as nearly as possible to the gross proceeds derived in this State from the sale of similar tangible personal property or services of like quality or character where no common interest exists between the vendor and purchaser but the circumstances and conditions are otherwise similar
W. Va. Code R. § 110-15-10 Material Purchase Certificate
10.1. Material Purchase Certificates are issued only by the State Tax Department.
10.1.1. Only entities specifically designated by these regulations may apply to the Tax Commissioner for a Material Purchase Certificate for a specified construction project. As of October 1, 1990, the exemption for materials purchased by contractors for use in governmental contracts was generally repealed and except for those contracts subject to the transition rules in Section 109 of these regulations, the use of the material purchase certificate was repealed. See Section 109 of these regulations for additional information concerning the taxation of materials for use in governmental contracts. Upon approval by the Tax Commissioner, each Material Purchase Certificate shall be issued directly to the governmental entity instead of the contractor, and the governmental entity shall give the contractor the Material Purchase Certificate.
10.2. Each contractor or subcontractor may use a Material Purchase Certificate to purchase exempt from tax material which will be annexed to, incorporated in or become part of a qualifying project. Each vendor selling materials to contractors under this exemption shall execute invoices bearing the Material Purchase Certificate number. Each Material Purchase Certificate shall be valid from the date of issuance by the Department. A Material Purchase Certificate may not be used for any project other than the project noted on the certificate.
10.3. If an entity qualifies for a material purchase certificate, but fails to secure a Materials Purchase Certificate from the Tax Commissioner, all contractors or subcontractors purchasing materials for use in a construction project for that entity shall pay consumers sales and service and use tax on the total cost of the materials even though the entity for whom the project is being performed could directly purchase the same materials without consumers sales and service tax.
10.4. Leases of construction equipment by a contractor and the purchase of fuel, form lumber, and other material used in an exempt construction project, but not incorporated into the project, shall be taxable.
10.5. Each contractor or subcontractor must issue a copy of the Material Purchase Certificate or the Material Purchase Certificate number to each supplier. If a Material Purchase Certificate has not been secured by the entity for whom the project is being performed the contractor shall pay consumers sales and service tax on the purchase of materials even though the entity for whom the project is being performed could directly purchase the same items without consumers sales and service and use tax liability.
10.6. Material Purchase Certificates shall be prospective in nature. A Material Purchase Certificate shall not be granted after the construction project is completed to secure a deduction, exclusion, credit or refund of consumers sales and service tax previously paid on the purchase of materials used by the contractor in the construction project.
10.7. Upon completion of an exempt project with a governmental entity, each contractor shall furnish a sworn statement to the exempt entity on forms supplied by the Tax Commissioner that all purchases made under the certificate were entitled to exemption from consumers sales and service and use taxes.
10.8. Any material purchased under a Material Purchase Certificate which has not been incorporated into, annexed to or become part of the exempt project, or which has not been returned to the supplier for credit, shall be subject to tax. Each contractor shall remit consumers sales and service tax on the material directly to the Tax Commissioner.
W. Va. Code R. § 110-15-11 Imposition of Tax on Gasoline and Special Fuels
11.1. General. - All sales of gasoline or special fuel by distributors or importers, except when to another distributor for resale in this State or when it is a bulk sale qualified under Section 11.5 of these regulations, and all gasoline or special fuel furnished or delivered within this State to consumers or users shall be subject to the consumers sales and service tax and use tax. Sales of gasoline or special fuel by a person who paid the consumers sales and service tax or use tax on his purchases of fuel, shall not thereafter again be subject to such tax. This Section shall be construed so that all gallons of gasoline or special fuel sold and delivered, or delivered, in this State shall be subject to the consumers sales and service tax or the use tax, and tax on such gallonage shall be imposed only once.
11.1.1. On Purchase Out-Of-State. - An excise tax is imposed on the use or consumption in this State of gasoline or special fuel which was purchased outside this State. The rate of this tax is five percent (5%) of the average wholesale price of such gasoline or special fuel, as such wholesale price is defined and determined under Section 11.4 of these regulations, notwithstanding any provision of W. Va. Code '11-15A-1 et seq. to the contrary. The gasoline or special fuel contained in the supply tank of a motor vehicle that is not a motor carrier shall not be subject to this tax; however, the gasoline or special fuel which is in the supply tank or auxiliary tank of construction equipment, mining equipment, track maintenance equipment or other similar equipment, when such equipment is brought into this State, shall be taxed in the same manner as the gasoline or special fuel which is in the supply tank of a motor carrier.
11.1.2. Upon Whom Tax Imposed. - The consumers sales and service tax and use tax imposed on the sale or use of gasoline and special fuel within this State shall be collected on the actual metered gallons delivered at the first point of delivery within this State to a person not excepted from tax under the sale for resale exception set forth in Section 11.1 of these regulations. For periods beginning on or after October 1, 1987, the quantity delivered shall be either the actual metered gallons delivered or the quantity delivered being calculated by converting to 60 Fahrenheit the quantity transferred by means of either temperature compensating meters approved by the West Virginia Department of Labor, Weights and Measures Division, or by mathematical conversion using American Petroleum Institute (API) ASTM-IP Petroleum Measurement Tables for specific gravity and temperature. This measure shall be the same as that required for calculation of the Gasoline and Special Fuel Excise Tax imposed by W. Va. Code ''11-14-1 et seq. and 11-14A-1 et seq. If the metered quantity delivered is not determined by temperature compensating meter, as aforesaid, and the taxpayer does not convert said gallons delivered to temperature adjusted gallons or, after making a mathematical conversion fails to keep and maintain records to support and substantiate the conversion, then the amount of tax due shall be determined by the number of metered gallons of gasoline or special fuel delivered without adjustment for temperature. Use of the conversion method for determining the quantity of gasoline or special fuel delivered necessitates that the conversion adjustment be made on each invoice and must continue to use that method for the entire tax year for the consumers sales and service tax and the use tax.
Example. - What is the volume at 60F of 10,000 U.S. gallons of oil measured at 34F when the gravity of the oil is 64.80 API at 60F?
Enter the table in the column "API Gravity at 60F," headed 64 API, and note that against an "Observed Temperature of 34F" the factor is . . . 1.0168 Likewise, from the column headed 65F API, note that for the observed temperature of 34F the factor is . . . 1.0170 This represents an increase of 0.0002 in the factor for an increase of 1.0 API. Therefore, by simple proportion and increase in gravity from 64.0 to 64.80 API increases the factor by 0.8 x 0.0002 or . . . 0.0002 Then, one U.S. gallon of oil having a gravity of 64.80 API at 60F and measured at 34F occupies at 60F a volume of 1.0168 + 0.0002 or . . . 1.0170 U.S. Gallons Therefore, 10,000 U.S. gallons measured at 34F occupy at 60F a volume of 10,000 x 1.0170 or . . . 10,170 U.S. Gallons
11.2. Measure of Tax. - The measure of tax on sales of gasoline or special fuel by distributors or importers shall be the average wholesale price as defined and determined in Section 11.3 of these regulations. It is recognized that the consumers sales and service tax and use tax is generally imposed on gross proceeds from sales to ultimate consumers, while the consumers sales and service tax and use tax on gasoline and special fuel is imposed on the average wholesale price of such gasoline and special fuel; as a result, for the purposes of either the consumers sales and service tax or the use tax, the average wholesale price shall not be less than ninety-seven cents per gallon of gasoline or special fuel for all gallons of gasoline and special fuel sold during the reporting period.
11.3. Determination of Average Wholesale Price.
11.3.1. To simplify determining the average wholesale price of all gasoline and special fuel, the Tax Commissioner shall, effective with the period beginning April 1, 1983 and annually on each January first thereafter, determine the average wholesale price of gasoline and special fuel for each annual period. The basis for determining the average wholesale price shall be sales data gathered for the immediately preceding period of July 1 through October 31. The Tax Commissioner shall provide the annual notification of the average wholesale price of gasoline and special fuel at least thirty (30) days in advance of each annual period which commences on the first day of January. Such notification shall be accomplished by filing notice of the average wholesale price in the State Register, and by such other means as the Tax Commissioner deems reasonable.
11.3.2. The "average wholesale price" means the single, statewide average per gallon wholesale price, rounded to the third decimal (thousandth of a cent), exclusive of state and federal excise taxes on each gallon of gasoline or diesel fuel, as determined by the Tax Commissioner from information furnished by distributors of gasoline or special fuel in this State, or such other information regarding wholesale selling prices as the Tax Commissioner may gather, or a combination of such information. The Tax Commissioner shall make his determination of average wholesale price by random sample survey: Provided, That in no event shall the average wholesale price be determined to be less than ninety-seven cents per gallon of gasoline or special fuel.
11.3.3. All actions of the Tax Commissioner in acquiring data necessary to establish and determine the average wholesale price of gasoline and special fuel, in providing notification of his determination prior to the effective date of any change in rate, and in establishing and determining the average wholesale price of gasoline and special fuel, may be made by the Tax Commissioner without compliance with the provisions of W. Va. Code '29A-3-1 et seq.
11.3.4. In any administrative or court proceeding brought to challenge the average wholesale price of gasoline and special fuel as determined by the Tax Commissioner, his determination shall be presumed to be correct and shall not be set aside unless it is clearly erroneous.
11.4. Computation of Tax Due From Motor Carriers. - Every person who operates or causes to be operated a motor carrier in this State shall pay the consumers sales and service tax and use tax on the average wholesale price of all gallons of gasoline or special fuel used in the operation of any such motor carrier within this State, under the following rules:
11.4.1. The total amount of gasoline or special fuel used in the operation of the motor carrier within this State shall be that proportion of the total amount of gasoline and special fuel used in any motor carrier's operations within and without this State (whether loaded or not), that the total number of miles traveled within this State bears to the total number of miles traveled within and without this State. Ton miles are not acceptable for mileage calculations. Separate miles must be computed for any motor carrier operated in tandem or in series. Locomotive unit miles shall be used by railroads for calculations. Air carrier operations may be calculated and determined by the use of an hour meter. If the motor carrier(s) are leased thirty (30) days or more, the lessee must report operations of the motor carrier(s). If the lease is for less than thirty (30) days, the lessor or owner is responsible for reports.
11.4.2. A motor carrier shall first determine the gross amount of tax due under this Section on the average wholesale value, determined under Section 11.3 of these regulations, of all gasoline and special fuel used in the operation of the motor carrier within this State during the preceding quarter, as if all gasoline and special fuel had been purchased outside this State.
11.4.3. Next, the taxpayer shall determine the total tax paid under W. Va. Code '11-15-1 et seq. on all gasoline and special fuel purchased in this State for use in the operation of the motor carrier.
11.4.4. The difference between amounts determined under the foregoing Section 11.4.2 and Section 11.4.3 is the amount of use tax due when Section 11.4.2 is greater than Section 11.4.3, or the amount to be refunded or credited to the motor carrier when Section 11.4.3 is greater than Section 11.4.2, which refund or credit shall be allowed in the same manner and under the same conditions as a refund or credit is allowed for the tax imposed by W. Va. Code '11-14A-1 et seq.
11.5. Exemption for Bulk Sales to Interstate Motor Carriers. Effective April 1, 1989.
11.5.1. In general. - Effective on and after April 1, 1989, there shall be exempt from the tax imposed by W. Va. Code '11-15-1 et seq. all gallons of gasoline or special fuel sold by a distributor to an interstate motor carrier having fuel storage tanks in this State which are used solely for the purpose of fueling motor carriers owned, leased or operated by the motor carrier, when the purchase is delivered at one time in bulk quantities of one thousand gallons or more into such fuel storage tanks and is purchased for the motor carrier's exclusive use in motor vehicles registered with the State Tax Department: Provided, That this exemption shall not relieve the person owning or operating a motor carrier from payment of any taxes imposed by W. Va. Code '11-14A-1 et seq. or W. Va. Code '11-15A-1 et seq. on gasoline or special fuel used or consumed in this state by the motor carrier.
11.5.1.1. For all qualifying sales, whether cash or otherwise, the supplier shall stamp the invoice for each sale with the following statement - "Bulk Sale - Tax Exempt To Interstate Carriers."
11.5.1.2. The supplier shall provide for each qualifying sale a serially numbered invoice showing the name and address of the seller and the purchaser, point of delivery, the date of delivery, the number of gallons delivered, the kind of fuel delivered and the price of the fuel delivered.
11.5.2. Surety Bond; Release of Surety; New Bond. - The Commissioner may in his discretion require an interstate motor carrier having fuel storage tanks in this state to file a continuous surety bond in an amount to be fixed by the Commissioner, except that the amount thereof shall not be less than one thousand dollars ($1,000.00). Upon completion of the filing of such surety bond, an annual notice of renewal only shall be required thereafter. The surety must be authorized to engage in business within this State. This bond shall be conditioned upon the motor carrier's faithful compliance with the provisions of W. Va. Code '11-14A-1 et seq., W. Va. Code '11-15-1 et seq., and W. Va. Code '11-15A-1 et seq. with respect to such gasoline or special fuel, including the filing of the returns and payment of all tax due with respect to such gasoline or special fuel. Such bond shall be approved by the Commissioner as to sufficiency and by the Attorney General as to form, and shall indemnify the State against any loss arising from the failure of the taxpayer for whatever reason to pay any tax imposed by W. Va. Code '11-14A-1 et seq. or W. Va. Code '11-15A-1 et seq. on gasoline or special fuel purchased as provided in this Section 5a which was used or consumed in operation of the motor carrier in this State: Provided, That a noninterest bearing cash deposit may be accepted by the Commissioner in lieu of such bond. The cash deposit shall be in an amount to be fixed by the Tax Commissioner, except the amount thereof may not be less than one thousand dollars.
11.5.3. Revocation or suspension of exemption.
11.5.3.1. The Tax Commissioner may revoke or suspend application of this exemption to a motor carrier if:
11.5.3.1.a. The motor carrier filed a false or fraudulent return for the tax or willfully failed to report information required by the Tax Commissioner, concerning gasoline or special fuel which it used or consumed in this State, on or before the date specified for filing the return or report.
11.5.3.1.b. The motor carrier willfully refused or willfully neglected to file a tax return or willfully failed to report information required by the Tax Commissioner, concerning gasoline or special fuel which it used or consumed in this State, on or before the date specified for filing the return or report.
11.5.3.1.c. The motor carrier willfully refused or willfully neglected to pay any tax, additions to tax, penalties or interest, or any part thereof, with respect to gasoline or special fuel used or consumed in this State when they became due and payable, determined with regard to any authorized extension of time for payment.
11.5.3.2. Before cancelling or suspending this exemption, the Tax Commissioner shall give written notice to the motor carrier of his intent to suspend or cancel this exemption, the reason for the suspension or cancellation, the effective date of the suspension or cancellation, and the date, time and place where the taxpayer may appear at an informal hearing and show cause why this exemption should not be suspended or canceled. This written notice shall be served on the taxpayer in the same manner as a notice of assessment is served under W. Va. Code '11-10-1 et seq., not less than twenty (20) days prior to the date of such informal hearing. The taxpayer may appeal suspension or cancellation of its exemption under this Section in the same manner as a notice of assessment is appealed under W. Va. Code '11-10-1 et seq.: Provided, That the filing of a petition for appeal shall not stay the effective date of the suspension or cancellation. A stay may be granted only after a hearing is held on a motion to stay filed by the motor carrier, upon finding that state revenues will not be jeopardized by the granting of the stay. The Tax Commissioner may, in his discretion and upon such terms as he may specify, agree to stay the effective date of the suspension or cancellation until another date certain.
11.5.3.3. The Tax Commissioner shall promptly give notice to distributors in this State of the name and mailing address of every motor carrier whose exemption under this Section is suspended or cancelled. The effective date of such suspension or cancellation shall be included, and if this exemption is suspended, the date the suspension expires shall also be provided. The affected motor carrier shall promptly give similar written notice to all distributors from whom he purchases gasoline or special fuel exempt from tax as provided in Section 11.5.1 of these regulations.
11.5.3.4. A motor carrier whose exemption under this Section is cancelled may, after the cancellation has been in effect for twelve (12) months, petition the Tax Commissioner for reinstatement of exemption under this Section. The Tax Commissioner may, in his discretion, and upon such terms as he may require, reinstate this exemption, but only if he reasonably believes that the motor carrier will fully and timely comply with W. Va. Code '11-15-1 et seq. and the provisions of W. Va. Code '11-14A-1 et seq. and W. Va. Code '11-15A-1 et seq. Upon reinstatement, the motor carrier shall provide his distributor with a true copy of the Tax Commissioner's order reinstating the exemption.
11.6. Return and Payment of Tax. - The consumers sales and service tax imposed on the sales of gasoline and special fuel and the use tax imposed on the use or consumption in this State of gasoline or special fuel shall be paid by each taxpayer on or before the twenty-fifth (25th) day of January, April, July and October of each year except that for distributors and importers the tax shall be due on the twenty-fifth (25th) day of each month. Payment shall be by check, bank draft, certified check or money order, payable to the Tax Commissioner, and it shall be for the amount of tax due for the preceding quarter or month, whichever is applicable. Every taxpayer shall make and file a properly completed return as the Tax Commissioner may require and with such return, remit such tax as shown thereon, if any.
11.7. Compliance. - To facilitate ease of administration and compliance by taxpayers, the Tax Commissioner requires distributors, importers and other persons liable for the consumers sales and service tax imposed on sales of gasoline or special fuel and on the Gasoline and Special Fuel Excise Tax imposed by W. Va. Code '11-14-1 et seq., or motor carriers liable for the use tax imposed on the use of gasoline or special fuel in the operation of motor carriers within this State and on the tax imposed by W. Va. Code '11-14A-1 et seq. on such gallons of gasoline or special fuel, to file a combined return and make a combined payment of the consumers sales and service tax due and the above-referenced excise tax, or the use tax due and the motor carrier road tax on such fuel. In order to facilitate the use of a combined return and the making of a single payment, the due date for the gasoline and special fuel excise tax and its return and the due date for the motor carrier road tax with its return is changed to the 25th day of January, April, July and October for motor carriers and the twenty-fifth (25th) day of each month for distributors and importers.
11.8. Direct Pay Permits. - A direct pay permit issued under Section 9c of these regulations cannot be used to purchase gasoline and special fuel. See Section 9c.6.3.5 of these regulations.
11.9. Credit Against Use Tax. - A credit will be allowed against a taxpayer's use tax liability for consumers sales and service tax lawfully paid to another state. To show entitlement to this credit, a taxpayer must show that consumers sales and service tax was actually paid to another state and that gallonage on which said consumers sales and service tax was paid was consumed within this State. For fuel subjected to consumers sales and service tax in another state, the First-in, First-out (FIFO) method of accounting shall be employed. In claiming a credit under this Section, a true, certified copy of all invoices shall be required.
11.10. Construction. - The consumers sales and service tax and the use tax imposed on the sale or use of gasoline or special fuel in this State shall not be construed as taxing any gasoline or special fuel which the State is prohibited from taxing under the Constitution of this State or the Constitution or laws of the United States.
W. Va. Code R. § 110-15-12 Reserved for Future Use
W. Va. Code R. § 110-15-13 Reserved for Future Use
W. Va. Code R. § 110-15-14 Maintenance of Records
14.1. Sales and Service Tax Records.
14.1.1. Keeping and Preserving Records. - Each person shall keep complete and accurate records of taxable sales and of charges, together with a record of the tax collected thereon, and shall keep all invoices, bills of lading and such other pertinent documents in such form as the Tax Commissioner may require. Such records and other documents shall be preserved for a period of time not less than three years, unless the Tax Commissioner shall consent in writing to their destruction within that period or by order require that they be kept longer. Records must be kept so long as the period is open to assessment or refund. Any person who fails to maintain appropriate records shall be subject to the provisions of W. Va. Code '11-9-1 et seq.
14.1.1.1. For those transactions in which the purchaser provides to the vendor the direct payment permit number or material purchase certificate number, the vendor shall retain a record copy of the invoice with the direct payment permit number or material purchase certificate number, as applicable, printed thereon.
14.1.2. When Separate Records of Sales Required. - Any vendor engaged in a business subject to the consumers sales and service tax, who is at the same time engaged in some other kind of business, occupation or profession, not subject to such tax, shall keep records to show separately the transactions used in determining the tax base for the sales and services taxed. In the event such person fails to keep such separate records there shall be levied upon him a tax based upon the entire gross proceeds of both or all of his businesses.
14.1.3. Sales to Affiliated Companies or Persons. - In determining gross proceeds of sales of tangible personal property or services other than services exempt under Section 9.3.12 of these regulations from one to another of affiliated companies or persons, or under other circumstances where the relation between the buyer and seller is such that the gross proceeds from a sale are not indicative of the true value of the subject matter of the sale, the tax shall be based upon the fair market value as if in a transaction involving a willing buyer and a willing seller, with neither buyer nor seller being required to act.
14.1.3.1. In those instances where fair market value is not available, determining value in regard to sales from one to another of affiliated companies or persons, or under other circumstances where the relation between the vendor and vendee is such that gross proceeds from the sale are not indicative of the true value of the subject matter of the sale, the following rules shall be applied in the order stated.
14.1.3.1.a. Whenever sales are made to affiliates, the value shall correspond to the gross proceeds from the sale of similar products or services of like quality and character and in similar quantities between persons of no common interest.
14.1.3.1.b. If there are no sales between parties of no common interest by which the taxpayer may value his sales to affiliates, the value shall correspond to the gross proceeds from sales by the taxpayer to nonrelated purchasers of similar products or services of like quality and character and in similar quantities and shall include all subsidies and bonuses.
14.1.3.1.c. In the absence of sales as a guide to value, such value may be determined by a cost basis. In such cases there shall be included every item of cost attributable to the particular article manufactured, including direct and indirect overhead costs. There shall be added to this total manufacturing cost the average markup realized by the taxpayer on all products manufactured, compounded or prepared for sale.
14.1.4. Records of Nonresidents Doing Business in State. - A nonresident person or foreign corporation engaged in a business within this State in the conduct of which the consumers sales and service tax levied becomes due, shall keep within this State adequate records concerning the operation of the business, and all consumers sales and service taxes collected in the course of the business. The amount of the consumers sales and service tax collected shall not be transmitted outside of this State without the written consent of, and in accordance with the conditions prescribed by, the Tax Commissioner.
14.2. Use Tax Records.
14.2.1. Keeping and Preserving Records. - Every retailer required or authorized to collect use taxes and every person using in this State tangible personal property or taxable services shall keep such records, receipts, invoices, and other pertinent papers as the Tax Commissioner shall require and in such form as the Tax Commissioner shall require. For those transactions in which the retailer provides to the vendor the direct payment permit number or material purchase certificate number, the vendor shall retain a record copy of the invoice with the direct payment permit number or material purchase certificate number, as applicable, entered thereon. Any person who fails to maintain appropriate records shall be subject to the provisions of W. Va. Code '11-9-1 et seq.
14.2.2. Examination of Records. - In addition to the Tax Commissioner's powers set forth in W. Va. Code '11-10-1 et seq., the Tax Commissioner is hereby authorized to examine the books, papers, records and equipment of any person who either:
14.2.2.1. Is selling tangible personal property or taxable services; or
14.2.2.2. Is liable for the use tax. The Tax Commissioner may investigate the character of the business of any such person in order to verify the accuracy of any return made, or if no return was made by such person, to ascertain and determine the amount of use tax due. Any such books, papers and records shall be made available within this State for such examination upon reasonable notice. However, where the taxpayer's records must be kept out-of-state, the taxpayer may upon being notified by the Tax Commissioner that an examination is to be made, elect to do one of the following: (1) forthwith transport the required records to a convenient point in West Virginia and notify the Tax Commissioner of the location where such records are available; or (2) pay the reasonable traveling expenses of the Tax Commissioner's representatives from Charleston, West Virginia, to the out-of-state place where the records are kept, and the return of such representative to Charleston, West Virginia, and reasonable living expenses of such representatives while engaged in the examination of such records.
W. Va. Code R. § 110-15-14a Record Keeping of Transactions. 14a.1. Every person doing business in the State of West Virginia or storing, using, or otherwise consuming tangible personal property purchased from a vendor, and every lessor and lessee of tangible personal property used in this State shall keep complete and accurate records as are necessary for the Tax Commissioner to determine the liability of each vendor or vendee for consumer sales and use tax purposes. Unless the Tax Commissioner authorizes, in writing, an alternative method of record keeping, these records shall show: 14a.1.1. Receipts from sales and leases of tangible personal property and from sales in this State of services, regardless of whether the vendor believes the receipts to be taxable or non-taxable; 14a.1.2. All deductions allowed by law and claimed in filing returns; 14a.1.3. Total purchase price of all tangible personal property purchased for sale, consumption or lease in this State, and the total price of all services purchased for sale or consumption in this State; 14a.1.4. All exemption certificates; 14a.1.5. All direct pay permit numbers and all material purchase certificate numbers; 14a.1.6. A true and complete inventory taken at least once a year. 14a.2. Each record shall consist of the normal books of account ordinarily maintained by the average prudent person engaged in the activity in question, including bills, receipts, invoices, cash register tapes, or other documents of original entry supporting the entries in the books of account, and all schedules or working papers used in connection with the preparation of tax returns. 14a.3. Each record may be microfilmed or microfiched, as long as the microfilm or microfiche records are authentic, accessible, and readable and the following requirements are fully satisfied: 14a.3.1. Each taxpayer shall provide transcriptions of any information concerning consumers sales or use tax liability on microfilm or microfiche which may be required to verify liability. The taxpayer shall also provide appropriate facilities for preservation of the microfilm or microfiche for the periods required. 14a.3.2. All microfilmed and microfiched data shall be indexed, cross-referenced and labeled to show beginning and ending alphabetical listing of documents, and beginning and ending numbers. All microfilm and microfiched data shall be systemically filed to permit reasonable access. 14a.3.3. Each taxpayer shall make available upon request of the Tax Commissioner or the Tax Commissioner's authorized agent, a reader-printer in good working order, at the examination site, for reading, locating and reproducing any record concerning consumers sales or use tax liability maintained on microfilm or microfiche. 14a.3.4. Each taxpayer shall set forth in writing the procedures governing the microfilm or microfiche system and the individual or individuals responsible for maintaining and operating the system. 14a.3.5. Each taxpayer shall maintain a complete microfilm or microfiche system and shall consistently use the system in the regular course of business. 14a.3.6. Each taxpayer shall establish appropriate documentation of procedures so that the original document can be followed through the microfilm or microfiche system. 14a.3.7. Each taxpayer shall establish internal procedures for microfilm or microfiche inspection and quality assurance. 14a.3.8. Each taxpayer shall be responsible for the effective identification, processing, storage, and preservation of microfilm or microfiche for a period of at least three (3) years from the last day of the calendar year during which the transaction occurred. 14a.3.9. Each taxpayer shall keep a record identifying the person or business entity that produced the microfilm or microfiche records. 14a.3.10. When displayed on a microfilm or microfiche reader or viewer, or reproduced on paper, the material shall exhibit a high degree of legibility. For this purpose, legibility is defined as the quality of a letter or numeral that enables the observer to identify it positively and quickly to the exclusion of all other letters or numerals being recognizable as words or complete numbers. 14a.3.11. All production of microfilm or microfiche and processing duplication, quality control, storage, identification, and inspection shall meet industry standards. 14a.4. An automated data processing tax accounting system may be used by the taxpayer to preserve consumers sales and use tax records required for the verification of tax liability. An automated data processing system shall include a method of producing legible records which will provide the necessary information for verifying tax liability. Each taxpayer maintaining records on an automated data processing system shall satisfy the following requirements: 14a.4.1. Automated data processing records shall provide an opportunity to trace any transaction back to the original source or forward to a final total. If detailed printouts are not made of transactions at the time they are processed, the systems shall have the ability to reconstruct these transactions. 14a.4.2. A general ledger, with source references, shall be written out to coincide with financial reports for tax reporting periods. When subsidiary ledgers are used to support the general ledger accounts, the subsidiary ledgers shall also be written out periodically. 14a.4.3. An audit trail shall be designed so that the details underlying the summary accounting data may be identified and made available to the Tax Commissioner or the Tax Commissioner's authorized agent. The system shall be designed so that supporting documents, such as sales invoices, purchase invoices, and credit memoranda are readily available. 14a.4.4. Each taxpayer shall make available a description of the automated data processing portion of the accounting system. The statements and illustrations as to the scope of operations shall be sufficiently detailed to indicate: 14a.4.4.1. The application being performed; 14a.4.4.2. The procedures employed in each application, such as flowcharts or block diagrams; and 14a.4.4.3. The controls used to ensure accurate and reliable processing. Important changes, together with their effective dates, shall be noted in order to preserve an accurate chronological record. 14a.4.5. Adequate record retention facilities shall be available for storing tapes and printouts, as well as all supporting documents as may be required by the consumers sales and use tax laws and these regulations. 14a.5. All records of a vendor or consumer pertaining to transactions involving consumers sales or use tax liability shall be preserved for a period of at least three years from the last day of the calendar year during which the transaction occurred. 14a.6. The foregoing records shall be available for and subject to inspection by the Tax Commissioner or the Tax Commissioner's authorized agents and employees, at all times during business hours of the day. 14a.7. If any taxpayer fails to substantially comply with the requirements of this regulation, the Tax Commissioner shall impose the penalty provided for in W. Va. Code ''11-10-18(c) or (d), as appropriate
W. Va. Code R. § 110-15-14b Auditing Taxpayer Records. 14b.1. Taxpayer records may be audited by authorized representatives of the Tax Commissioner at any time during regular business hours of the taxpayer at the discretion of the Tax Commissioner or his authorized agent or representative. Any person who maintains such records outside this State shall make such records available for audit where the general records of the taxpayer are kept. 14b.2. The Tax Commissioner may use a detailed auditing procedure or a sample and projection auditing method to determine tax liability. 14b.3. A sample and projection auditing method is appropriate if: 14b.3.1. the taxpayer's records are so detailed, complex, or voluminous that an audit of all detailed records would be impractical or unreasonable; 14b.3.2. the taxpayer's records are inadequate or insufficient, so that a competent audit for the period in question is not otherwise possible; or 14b.3.3. the cost of an audit of all detailed records to the taxpayer or the State will be unreasonable in relation to the benefits derived, and sampling procedures will produce a reasonable result. 14b.4. If records are inadequate to accurately reflect the business operations of the taxpayer, the auditor will determine the best information available and will base the audit report on that information. 14b.5. Exemption certificates and material purchase certificates. 14b.5.1. Exemption certificates and material purchase certificates should be available at the time of the audit. Certificates acquired by the taxpayer after the audit begins are subject to independent verification of issuance by the purchaser before the deductions will be allowed in an audit. 14b.5.2. If the taxpayer is not in possession of the certificates within sixty (60) days from the date written notice is given by the Tax Commissioner that certificates pertaining to periods or transactions specified in the notice are required, any deductions claimed which require exemption or material purchase certificates will be disallowed. Exemptions claimed by those certificates acquired during this sixty (60) day period will be subject to independent verification of issuance by the purchaser before the deductions will be allowed. Certificates presented after the sixty (60) day period will not be accepted. 14b.6. Both vendors and vendees are subject to audit and to assessment. 14b.6.1. Vendors will be assessed for any consumers sales or use taxes which that they should have collected but failed to collect from the vendee. A vendor is relieved from this liability only if the vendor has in good faith taken the vendee's direct pay permit number, an exemption certificate or a material purchase certificate number or has notified the Tax Commissioner of a refusal to pay tax or provide indicia of tax exemption in accordance with Section 6.1.1.2 of these regulations. 14b.6.2. Vendees will be assessed consumers sales or use taxes which they should have paid to their vendors or remitted directly to the Tax Commissioner. A vendee is relieved from this liability only if he paid the consumers sales or use tax due on the transaction to the vendor or directly to the Tax Commissioner. If exemption from tax was claimed, the vendee must be able to verify that the tangible personal property or service purchased without paying tax to the vendor or directly to the Tax Commissioner was in fact used for an exempt purpose or used in an exempt manner. 14b.7. The Tax Commissioner may proceed against either the vendor or the vendee, or against both for delinquent tax until the amount of the tax, additions to tax, penalties and interest have been paid
W. Va. Code R. § 110-15-15 Bond to Secure Payment
The Tax Commissioner may, when in his judgment it is necessary and advisable in order to secure the collection of the use tax, authorize any person subject to such tax and any retailer required or authorized to collect such tax to file with him a bond issued by a surety company authorized to transact business in this State and approved by the Insurance Commissioner of this State as to solvency and responsibility, in such amount as the Tax Commissioner may fix, to secure the payment of any tax, additions to tax, penalties and interest due or which may become due from such person. In lieu of such bond, securities approved by the Tax Commissioner, in such amount as he may prescribe, may be deposited with him, which securities shall be kept in the custody of the State Treasurer of West Virginia and may be sold by him at public or private sale, after notice to the depositor thereof, if it becomes necessary in order to recover any tax, additions to tax, penalties and interest due. Upon any such sale, the surplus, if any, above the amounts due under W. Va. Code '11-15A-1 et seq. and W. Va. Code '11-10-1 et seq., shall be returned to the person who deposited the securities.
W. Va. Code R. § 110-15-16 Canceling or Revoking Permits to Collect Use Tax
Whenever any retailer engaging in business in this State, or any retailer authorized to collect the use tax, fails to comply with any of the provisions of W. Va. Code '11-15A-1 et seq. or any orders or regulations of the Tax Commissioner which are properly prescribed and adopted, the Tax Commissioner may, upon notice, hearing, and issuance of an appropriate order, cancel the business registration certificate, if any, issued to either of such retailers under W. Va. Code '11-12-1 et seq. If either of such retailers is a corporation authorized to do business in this State under W. Va. Code '39-1-49, the Tax Commissioner may certify to the Secretary of State a copy of an order finding that such retailer has failed to comply with certain specified provisions, orders or regulations. The Secretary of State shall, upon receipt of such certified copy, revoke the permit authorizing said corporation to do business in this State, and shall issue a new permit only after such corporation has obtained from the Tax Commissioner an order finding that the corporation has complied with its obligations under W. Va. Code '11-15A-1 et seq. No order authorized in this Section shall be made until such retailer is given an opportunity to be heard and to show cause why such order should not be made, and he shall be given twenty days notice of the time, place and purpose of such hearing, which shall be heard as provided in W. Va. Code '11-10-9. The Tax Commissioner shall have the power in his discretion to issue a new business registration certificate after such cancellation.
W. Va. Code R. § 110-15-17 Liability and Penalties
17.1. Liability of Officers of Corporation. - If the taxpayer or vendor is an association or corporation, the officers thereof shall be personally liable, jointly and severally, for any default in the reporting or payment of taxes on the part of the association or corporation. Payment of the consumers sales and service tax and any additions to tax, penalties and interest thereon imposed by W. Va. Code '11-10-1 et seq. may be enforced against such officers as against the association or corporation which they represent.
17.2. Penalties; Jurisdiction. - Any person who is required to file any return or report or to pay any tax, and willfully fails to file such return or report or to pay such tax, or who is required or authorized to collect, account for and pay over any tax and who willfully fails to so collect, account for and pay over such tax, or who knowingly files or delivers a false or fraudulent return, report or other document, or who willfully attempts in any other manner to evade any tax shall be subject to the provisions of W. Va. Code '11-9-1 et seq.
W. Va. Code R. § 110-15-18 Transition Rules for Amendments to Statute or Regulations
Except for those transactions addressed under transition rules set forth in W. Va. Code '11-15-8a and Section 108 of these regulations, (1) all transactions involving sales or leases of tangible personal property or rendering of taxable services which were not subject to the consumers sales and service tax or the use tax prior to the effective date of any amendment to any provision of the Consumers Sales and Service Tax Act or any amendment to any provision of Series 15, Title 110 of these regulations, but which became subject to such tax on that date by reason of such amendment, and (2) all transactions involving sales or leases of tangible personal property or rendering of taxable services which were subject to the consumers sales and service tax or the use tax prior to the effective date of any amendment to any provision of the Consumers Sales and Service Tax Act, or any amendment to any provision of Series 15, Title 110 of these regulations, but which became exempt or excepted from such tax on that date by reason of such amendment, shall be subject to the following transition rules:
18.1. Transactions Which Become Taxable.
18.1.1. For transactions which have been completed before the effective date of such amendment, except for billing or payment, or both, of the sale price, such transactions will not be subject to the consumers sales and service tax or the use tax.
18.1.2. For transactions under binding executory contracts which require one payment at commencement of the contract with the contract commencing before and extending beyond the effective date of such amendment, such transactions will not be subject to the consumers sales and service tax or the use tax.
18.1.3. For transactions under contracts which require multiple payments over the length of the contract for sales, leases or services which occur over the length of the contract, such contract performance commencing before and extending beyond the effective date of such amendment, those sales which are completed before the effective date of such amendment, except for billing and payment will not be subject to the consumers sales and service tax or the use tax; moreover, performance under such contracts which is completed on or after the effective date of such amendment, will also not be subject to such tax.
18.1.4. For transactions under contracts with contract performance commencing before and extending beyond the effective date of such amendment, and which require installment type payments over the length of the contract, no payments under the contract shall be subject to the consumers sales and service tax or the use tax.
18.1.5. For transactions which are leases under contracts with contract performance commencing before and extending beyond the effective date of such amendment, and which require monthly, quarterly or annual payments over the length of the contract, those payments made on and after the effective date of such amendment, will not be subject to the consumers sales and service tax and use tax.
18.1.6. For transactions under binding executory contracts, where offer and acceptance have occurred prior to the effective date of such amendment, but where delivery, billing, or payment of the sale price will not occur until subsequent to the effective date of such amendment, such transactions shall not be subject to the consumers sales and service tax or the use tax if delivery, billing, and payment of the sale price occur within sixty (60) days subsequent to the effective date of such amendment.
18.2. Transactions Which Become Exempted or Excepted.
18.2.1. For transactions which have been completed before the effective date of such amendment, except for billing or payment, or both, of the sale price, such transactions will be subject to the consumers sales and service tax or the use tax.
18.2.2. For transactions under binding executory contracts which require one payment at commencement of the contract with the contract commencing before and extending beyond the effective date of such amendment, such transactions will be subject to the consumers sales and service tax or the use tax.
18.2.3. For transactions under contracts which require multiple payments over the length of the contract for sales, leases or services which occur over the length of the contract, such contract performance commencing before and extending beyond the effective date of such amendment, those sales which are completed before the effective date of such amendment, except for billing and payment will be subject to the consumers sales and service tax or the use tax; moreover, performance under such contracts which is completed on or after the effective date of such amendment will also be subject to such tax.
18.2.4. For transactions under contracts with contract performance commencing before and extending beyond the effective date of such amendment, and which require installment type payments over the length of the contract, all payments made subsequent to such amendment under the contract shall be subject to the consumers sales and service tax or the use tax.
18.2.5. For transactions which are leases under contracts with contract performance commencing before and extending beyond the effective date of such amendment, and which require monthly, quarterly or annual payments over the length of the contract, those payments made on and after the effective date of such amendment, will be subject to the consumers sales and service tax and use tax.
18.2.6. For transactions under binding executory contracts, where offer and acceptance have occurred prior to the effective date of such amendment, but where delivery, billing or payment of the sale price will not occur until subsequent to the effective date of such amendment, such transactions shall be subject to the consumers sales and service tax or the use tax if delivery, billing, and payment of the sale price occur within sixty (60) days subsequent to the effective date of such amendment.
W. Va. Code R. § 110-15-19 Agency Relationships; Direct Purchases
19.1. Effective August 31, 1990, persons who perform contracting or who are acting in an agency capacity are prohibited from asserting any exemption to which the purchaser of such contracting services or the principal is entitled. Any statutory exemption to which a taxpayer is entitled shall be invalid unless the tangible personal property or service is actually purchased directly by the taxpayer and is directly invoiced to and paid by the taxpayer. Any contractual arrangement or understanding between an agent, employee, or other representative and a principal or employer shall not be recognized by the Tax Commissioner. Each vendor shall charge and collect consumers sales and service tax on the total selling price of tangible personal property or service even though the agent, employee, or other representative:
19.1.1. Is on official business on behalf of the principal or employer; or
19.1.2. Is on a per diem from the principal or employer; or
19.1.3. Is on an expense account or will otherwise be reimbursed by the principal or employer; or
19.1.4. Has or will receive monies, credits or other assets from the principal or employer to pay for the transaction.
19.2. Section 19.1 does not apply to purchases made by an employee for his or her employer, a partner for his or her partnership, or a duly authorized officer of a corporation, or unincorporated organization, for his or her corporation or unincorporated organization, as long as the purchase is invoiced to and paid by such employer, partnership, corporation or unincorporated organization.
19.3. Section 19.1 does not apply to purchases of tangible personal property or taxable services made in fulfillment of a purchasing agent or procurement agent contract executed and legally binding on the parties prior to September 15, 1990, as long as the purchases are made before September 1, 1991. This transition rule does not apply if the primary purpose of the purchasing agent or procurement agent contract was to avoid payment of consumer sales and use taxes.
19.3.1. Purchases of tangible personal property or taxable services made prior to September 1, 1991, in fulfillment of a purchasing agent or procurement agent contract executed and legally binding on the parties prior to September 15, 1990, are taxable unless the bill, invoice, contract, or other evidence of the transaction is made out in the name of the principal which qualifies for an exemption under the consumer sales and use tax laws and the payment is made on that principal's check, warrant or voucher, or on a check drawn on a trust account set up by the agent for the principal. This rule applies even though the same purchase would have been exempt from consumers sales and use taxes had the principal or employer directly purchased the tangible personal property or service in accordance with Section 9 of these regulations. ''110-15-20 through 110-15-27. Reserved for Future Use.
W. Va. Code R. § 110-15-28 General Procedure and Administration
Each and every provision of the "West Virginia Tax Procedure and Administration Act" set forth in W. Va. Code '11-10-1 et seq. shall apply to the consumers sales and service tax imposed by W. Va. Code '11-15-1 et seq. and these regulations and the use tax imposed by W. Va. Code '11-15A-1 et seq. and these regulations with like effect as if said Act were applicable only to the taxes imposed by and set forth in extenso in such Articles and these regulations.
W. Va. Code R. § 110-15-29 Criminal Penalties
Each and every provision of the "West Virginia Tax Crimes and Penalties Act" set forth in W. Va. Code '11-9-1 et seq., shall apply to the taxes imposed by W. Va. Code '11-15-1 et seq. and these regulations and the use tax imposed by W. Va. Code '11-15A-1 et seq. and these regulations with like effect as if said Act were applicable only to the taxes imposed by and set forth in extenso in such Articles and these regulations.
W. Va. Code R. § 110-15-30 Sales to and Purchases by Nonresident Individuals
30.1. Any person who makes sales within this State of tangible personal property or services to nonresident individuals must charge and collect the consumers sales and service tax from such individuals. If the purchaser takes possession of the property at the time of the sale, it is considered prima facie evidence that such sale was consummated within this State and is subject to the consumers sales and service tax. The burden to prove the contrary shall rest upon the vendor. Sales otherwise taxable are not exempt because such are made to nonresidents, except sales of tangible personal property or services that are completed outside this State.
30.2. Any sale of tangible personal property within this State to a nonresident which is delivered by the vendor to such purchaser outside this State shall not relieve the vendor from the responsibility of collecting the consumers sales and service tax unless the vendor's books, records and other evidence show that such delivery was indispensable to the sale and that the sale was consummated outside this State. The fact that a purchaser has an out-of-state address and the property was mailed or delivered to such address is not sufficient to relieve imposition of the consumers sales and service tax; nor does such fact establish consummation of sale outside this State.
30.3. Vendors who complete sales of tangible personal property outside this State to nonresidents of this State are not required to collect West Virginia consumers sales and service tax but may subject themselves to consumers sales and service tax liability to the state of which the purchaser is a resident. Of course, the purchaser may be subjected to use tax in his home state.
30.4. Services performed within West Virginia for nonresidents are subject to the consumers sales and service tax. If a West Virginia serviceman or repairman performs a service outside this State, said person is not required to collect the tax.
30.5. Examples.
Example 1. X, a resident of Ohio, visits a West Virginia furniture store and purchases furniture for $500. X makes payment, and the vendor delivers the goods to the purchaser in Ohio. Said sale is taxable for the consumers sales and service tax and the vendor must collect that tax in the amount of $30.00, unless the vendor can show (via a written sales contract, etc.) that the delivery was not incidental to the sale and was, in fact, indispensable and that the sale was consummated in Ohio.
Example 2. A resident of Virginia takes a toaster into West Virginia and has the same repaired by a serviceman. The person performing the service must collect the consumers sales and service tax. However, if the person performing the services goes to the purchaser's home in Virginia to repair the appliance, no such tax is applicable.
Example 3. A repairman travels to Virginia and takes possession of an appliance which he takes to his shop in West Virginia. After making the repairs at his place of business, the serviceman then delivers the appliance to the owner's residence in Virginia. The serviceman must charge and collect West Virginia consumers sales and service tax on his services, inasmuch as such services were performed within this State, unless delivery out-of-state was indispensable, not incidental to consummation of the service provided.
W. Va. Code R. § 110-15-31 Banking Business
31.1. Generally, banks, state and national, are not exempt from the imposition of the consumers sales and service tax or use tax on their purchases, inasmuch as banks are the ultimate consumers of such purchases. Banks are only exempt on purchases of property and services that are resold, subject to tax, to consumers.
31.1.1. For purposes of this regulation, "banking business" includes any bank, banking association, trust company, industrial loan company, small loan company or licensee, building and loan association, savings and loan association, finance company and any other similar business organization at least ninety percent (90%) of the assets of which consist of intangible personal property and at least ninety percent (90%) of the gross receipts of which consist of dividends, interest and other charges derived from the use of money or credit.
31.2. Any purchases by banks of tangible personal property or services which are used in providing a taxable service are subject to the consumers sales and service tax or use tax; however, purchases of tangible personal property for resale as tangible personal property are exempt.
31.3. Generally, the services rendered to consumers by banks, state and national, are exempt from the consumers sales and service tax because such services constitute professional services, consideration for the extension of credit, charges related to the transfer of intangible property, or electronic data processing services for others. Purchases by banks of tangible personal property or taxable services for use or consumption in providing these exempt services are subject to the consumers sales and service tax and use tax.
31.4. Nevertheless, the sale of some bank services and bank related tangible personal property are taxable. The following constitutes a complete list of items or services on which banks must charge and collect consumers sales and service tax unless the purchaser or transaction is exempt:
31.4.1. Charges made for real estate management unless the service is provided by a licensed real estate broker,
31.4.2. Any payment received for rental of safety deposit boxes regardless of the fact that a rental or lease agreement may have been executed prior to July 1, 1987,
31.4.3. Fees received for collection of notes and accounts of others,
31.4.4. Sales to consumers of promotional items, such as glassware, silverware, appliances, etc.,
31.4.5. Sales to consumers of checks, checkbooks and money bags, and similar items, and
31.4.6. Charges for research and copying.
W. Va. Code R. § 110-15-32 Containers, Wrapping, Packing and Shipping Materials
32.1. In General.
32.1.1. The sale to a vendor of boxes, cartons, containers, and wrapping and packaging materials and supplies, and components thereof, for use or consumption by that vendor in packaging or packing tangible personal property for sale, and actually transferred by that vendor to the purchaser, is exempt from consumers sales and service tax and use tax as a purchase for resale.
Example 1. A manufacturer sells goods in bulk and ships them in corrugated cardboard cartons to a retailer. The retailer after using the cartons as temporary storage containers removes the goods and discards the cartons. The manufacturer's purchase of the cartons is exempt from consumers sales and use taxes as a purchase for resale.
Example 2. Wax tissue paper is sold to a bakery which uses it to pick cookies from a tray. The cookies and paper are then placed in bags or boxes. The wax paper and the bags and boxes are exempt from consumers sales and service tax and use tax as a purchase for resale.
Example 3. Purchases of egg cartons by persons engaged in the business of selling eggs are exempt from tax when such cartons become a part of the sale of the eggs to the customer.
32.1.2. The sale to a vendor of boxes, cartons, containers, and wrapping and packaging material and supplies, and components thereof, to a vendor which are actually transferred to a customer in conjunction with the performance of a taxable service are exempt from consumers sales and service tax and use tax as a purchase for resale.
Example 1. A watch repairman packs a watch in a box, with cushioning material, to return it to his customer. His purchase of the box and packing material is exempt as a purchase for resale.
Example 2. Purchases of packaging and packing materials by warehousemen and movers for use in the performance of storage or moving services are exempt if such materials are actually transferred to the customer in conjunction with the service being furnished.
32.1.3. The sale to a vendor of boxes, cartons, containers, and wrapping and packaging materials and supplies, and components thereof, which are not purchased for resale are taxable unless some other exemption applies.
32.2. Definitions.
32.2.1. The term "Packaging materials" includes, but is not limited to: bags, barrels, baskets, bindings, bottles, boxes, cans, carboys, cartons, cellophane, coating and preservative materials, cores, crates, cylinders, drums, excelsior, glue, gummed labels, gummed tape, kegs, lumber used for blocking, pails, pallets, reels, sacks, spools, staples, strapping, string, tape, time, wax paper, and wrapping paper actually transferred with the product to the purchaser.
32.2.2. "Purchaser" in this section refers to any person who purchases tangible personal property from a vendor, whether or not the purchaser is the ultimate consumer.
32.2.3. "Actually transferred" means that the packaging material is physically transferred to the purchaser, for whatever disposition the purchaser wishes.
Example 1. Returnable soda bottles may be returned for refund of deposits or disposed of otherwise. Such bottle is actually transferred to the purchaser and is a purchase for resale except when sold to the ultimate consumer.
Example 2. If a beer keg is required to be returned to the vendor after its contents are used, ownership of this keg is not actually transferred to the purchaser-consumer of the beer. Kegs purchased by a vendor of kegged beer are taxable.
32.3. Returnable Containers. - Sales of returnable containers, such as drums, barrels, or acid carboys, to a purchaser/vendor who does not transfer ownership of the container, are taxable. Title to the container remains with the purchaser/vendor when possession of the container is transferred to one who purchases commodities contained therein and then returns the container to the seller for refilling.
32.3.1. Returnable Containers; Deposits.
32.3.1.1. Deposits charged by vendors for reusable containers are subject to tax when the purchasers of the property contained therein can, during the period the containers are in their possession, exercise such control over the containers as is ordinarily associated with ownership. Such amounts are a part of the sales price even though designated as a deposit for the containers.
32.3.1.2. When the vendor retains title to such containers and the vendor retains the right to control the use which vendee makes of the containers, the containers are not considered to be a part of the sale of the property. In such cases, amounts charged to the customers as security for the return of the containers are not subject to tax if such charges are shown separately from the sales price of the property on the customers' invoices and the security deposit is refunded to the customer when the container is returned. If such amounts are not separately stated, the total charge is subject to the tax.
32.3.2. Returnable Containers; Demurrage. - When a vendor sells tangible personal property in returnable containers without a charge being made for the use of the containers for a specified time but, at the expiration of the specified time, the containers enter a demurrage period and a penalty charge is made as an inducement for the return of the containers, such charges are not subject to the tax unless the penalty is computed on an hourly, daily or some other periodic basis, or payment of the penalty results in title to the container passing to the customer. When a vendor sells tangible personal property in returnable containers and a stated charge is made for the use of the containers throughout the period of retention by the customer, such charges are deemed to be rentals and are taxable.
32.4. Other Containers. - Racks, trays or similar devices used to facilitate delivery of the vendor's product, if title to them is not transferred to the purchaser, are taxable.
Example 1. A baking company delivers bread to a grocer in plastic trays. After unloading the trays, the delivery person takes the trays with him. Sale of the trays to the baking company is taxable.
Example 2. A baking company delivers hamburger buns to a restaurant in stackable plastic trays. The filled trays are placed in the kitchen. The next time that buns are delivered, the empty trays are picked up and returned to the bakery. Sale of the trays to the baking company is taxable.
32.5. Gift Wrapping. - When a vendor gift wraps an item which he sells, the paper, ribbon, and bow become a part of the sale of the item notwithstanding that the wrapping of the item may take place at the point of delivery thereof to the vendee or at one of the vendor's wrapping stations or that the vendor may make a charge for gift wrapping the item. The vendor's purchases of paper, ribbon and bows are purchases for resale and exempt from tax. If a separate charge is made for wrapping, it is deemed to be for services performed in wrapping the item rather than a separate sale of wrapping material, and consumers sales and service tax and use tax will be due on the wrapping charge. In this instance, the vendor's purchases of paper, ribbon and bows are exempt because they are used and consumed by the vendor in providing a taxable service.
32.5.1. In a case where an organization, as a means of raising funds, offers to wrap gift items the customer purchased from others, the organization is considered to be performing a wrapping service; and its purchases of paper, ribbon, and bows for use in the performance of the service are exempt from tax as provided in Section 9 of these regulations. Tax is due on the service charges unless the providing of the services is a "casual and occasional sale" or "isolated transaction" as defined in Section 2 and exempt under Section 9 of these regulations.
32.6. Restaurants - Containers. - Containers of paper cups, plates and other nonreturnable containers purchased by restaurants and other food service establishments, for use as containers for food sold to customers are exempt from consumers sales and use taxes as a purchase for resale when the container is actually transferred to the customer in connection with the customer's purchase of food or drink. This includes, but is not limited to, cups, plates and containers for hot or cold drinks or food purchased for resale as a container of food or drink.
W. Va. Code R. § 110-15-33 Persons Rendering Services
33.1. Persons engaged in this State in the business of dispensing, rendering or providing taxable services are required to collect consumers sales and service tax from their customers on the gross proceeds which they derive from dispensing, rendering or providing such services.
33.1.1. When the service is physically dispensed, rendered or provided in this State, that service is provided by a person engaging in business in this State regardless of whether such person does or does not have a permanent place of business in this State.
33.2. Persons not physically engaged in business in this State who dispense, render or provide taxable services to West Virginia customers are required to collect the use tax imposed by this State when such out of state persons have sufficient nexus with this State. See regulation Section 128 for when out-of-state vendors are required to collect use tax.
33.3. The phrase "persons engaged in business" as used herein means persons who offer a service to the public or to others for a consideration whether such person offers the service continuously, part-time, seasonally or for short periods. The consumer sales and use tax laws apply to all services except those that are exempt from tax.
33.4. Enumerated Services Excepted. - Consumers sales and service tax shall not apply to any of the following services:
33.4.1. Contracting services.
33.4.2. Professional services.
33.4.3. Services rendered by an employee to his employer that fall within the scope of the employee's employment contract.
33.4.4. Public utility services.
Example. ABC Company is engaged in this State in manufacturing silver coffee and tea sets, silverware, silver trays and silver bowls. It will also resilver these items. A customer located in the State of Ohio mails her silver tray to ABC Company for it to be resilvered. As an indispensable part of the transaction, the silver tray is to be returned after the work is done to the customer by mail. The charge for this service is charged to the customer's bank card account number. No West Virginia consumers sales and service tax will be charged to the Ohio customer. If the Ohio customer had taken delivery of the resilvered tray in this State, then the charge to this customer would include West Virginia's consumers sales and service tax.
33.4.5. A service which is purchased for resale. A service is purchased for resale when it is subcontracted by the person who is contracted to perform the service, for example:
Example 1. X is a printer and enters into a contract with Y to print 500 bulletins. X subcontracts the job to Z. Z prints the 500 bulletins for X. There is no tax on the contract between X and Z since X is purchasing the printing service from Z for resale to Y. In this transaction Y provides the paper upon which the bulletins are printed.
Example 2. B owns a used car lot. E purchases an automobile from B. As a condition of such sale B agrees to make repairs to the automobile. However, B subcontracts such repair work to C. E has agreed to pay B for the repair services and for the sale price of the automobile. Under these circumstances, the repair services furnished by C to B constitute a sale of such service to B for resale to E who is the consumer of the services.
Example 3. B owns an auto repair shop and C brings an automobile in to have the air conditioning fixed. B is unable to fix the unit so the car is sent to G who is an air conditioning specialist. The sale of G's service to B is a sale for resale by B to C.
33.5. Persons engaged in any of the activities set out below or any similar or analogous activities are rendering a service subject to the consumers sales and service tax and use tax unless the transaction is subject to an express exemption:
Alterations of tangible personal property Motor repair Armored car service Motorcycle repair Automobile repair Painting Billboards Photography Billiards, pool Planing mills Bowling alleys Printing Boat repair Recapping Business machine Repairing tangible repair personal property Cleaning, pressing, dyeing Sewing Creosoting Shoe repair Dance schools Storage warehouse Delivering and storage lockers Engraving Termite and pest Foundries control Furniture repair Tin and sheet metal Hotels, motels, repair shops homes, rooming houses Warehouses House moving Washing cars Jewelry repair Watch repair Laundries Weighing Machine operators Welding Meat cutting Wrapping merchandise This does not constitute a complete list. Other activities not appearing on the foregoing list are subject to the consumers sales and service tax and use tax unless specifically exempted or excepted by these regulations.
33.6. Repairs: Contracting Service or Taxable Repair.
33.6.1. The tax on services is basically a tax on labor. When such services result in a capital improvement to a building, structure, or real property or are performed "on or connected with" new construction, reconstruction, alteration, expansion or remodeling of real property or structures which work results in a capital improvement thereto, such services are exempt from tax as contracting services. This would not include, however, the repair of the contractor's machinery or equipment on the job site or any other service that does not fall within the definition of contracting.
33.6.2. Repairs that result in a capital improvement to a building or other structure or to real property are tax exempt contracting services. All other repairs are services subject to consumers sales and service tax. The difference between a repair which is not a capital improvement to a building or other structure or to real property (which is a repair subject to the consumers sales and service tax) and a repair which constitutes an improvement to a building or other structure or real property (which is a tax exempt contracting service) can often times be difficult. Therefore, the intent of the parties and the scope of the project may become the factors which determine whether the services are taxable or exempt. See Section 115 of these regulations for detailed information on determining whether repair of tangible personal property constitutes a taxable service or contracting. See Section 116 of these regulations for detailed information on determining whether repair of a structure, building or real property constitutes a taxable service or contracting.
33.6.3. "Repair" is synonymous with mend, restore, maintain, replace and service. A repair contemplates an existing building or structure or thing which has become imperfect and constitutes restoration of the original property which has been lost or destroyed. A repair is generally not a capital improvement when it does not materially add to the value or substantially prolong the original useful life of the property.
33.6.4. A person who makes repairs to a building or entire other structure or to real property that are not capital improvements thereto and also sells tangible personal property in connection with such taxable services must collect and remit consumers sales and service tax on the entire gross receipts from the entire transaction. A person making taxable repairs may purchase tangible personal property for resale when the property used in the repair job is resold to the customer. Non-exclusive examples of taxable repair situations include the following:
Repair of broken or defective glass.
Replacement of broken windowpanes.
Replacing individual or damaged roof shingles.
Replacing or repairing a portion of worn out or broken kitchen cabinets.
Replacement of garage door hinges.
Replacing or repairing a portion of a broken or worn tub, shower, or faucets.
Replacing or repairing a portion of a broken water heater, furnace or central air conditioning compressor.
33.6.5. The following are examples of repairs which constitute capital improvements to a building or other structure or to real property. This list is non-exclusive:
The building of a garage or adding a garage to an existing building is considered a capital improvement.
Adding a redwood deck to an existing structure is considered a capital improvement.
Replacing the entire roof on an existing structure is considered a capital improvement.
Adding a new room to an existing building is considered a capital improvement.
Adding a new room by building interior walls is considered a capital improvement.
Replacing kitchen cabinets with some other modifications is considered a capital improvement.
Paneling existing walls is considered a capital improvement.
Laying a new floor over an existing floor is considered a capital improvement. (See special rules for carpeting and other floor coverings sold and installed by retailers.)
Rebuilding a structure damaged by flood, fire or other uncontrollable disaster or casualty is considered to be a capital improvement.
Building a new wing to an existing building is considered a capital improvement.
Rearranging the interior structure of a building is considered a capital improvement.
In all of these examples, the contractor is responsible for paying consumers sales and service tax to any vendor of the materials.
33.6.6. The term "on or connected with" as used in Section 33.6.1 of these regulations is broad and conveys its generally accepted meaning. Therefore, in a specific situation, the facts relating thereto are controlling in determining whether the service is contracting or is a taxable service. "On or connected with" does not connote that things connected have to be primary or subsidiary to the construction, reconstruction, alteration, expansion or remodeling of the building or other structure or real property. An incidental relationship can qualify the activity as contracting if the relationship forms an immediate connection with the construction activity.
33.6.7. Other Factors.
33.6.7.1. The presence of a time relationship can also be a factor in determining the applicability of the contracting exemption. To illustrate, a repair which ordinarily would be a taxable service is tax exempt contracting when the vendor makes the repair as part of a contract for a capital improvement.
33.6.7.2. The motive behind the activity and the course of events that could reasonably be expected to occur would be another consideration in determining if an exempt contracting service is involved.
33.6.7.3. A physical relationship is also a factor that should be evaluated. If a building is constructed to house machinery, any enumerated services relating to the installation of that machinery would be an exempt contracting service. For example, piping joining two pieces of equipment housed in separate buildings would be treated as tax exempt contracting if the equipment in either building was installed while such new construction, reconstruction, alternation, expansion or remodeling of the structure resulting in a capital improvement was also taking place to house the equipment.
W. Va. Code R. § 110-15-34 Sales by the State, Counties and Municipalities
34.1. Governmental units which render services which are or may be subject to competition from other persons are required to collect consumers sales and service tax upon rendering such services to consumers. For example, the operation of a municipal parking facility which competes with a parking facility operated by others is providing a service subject to consumers sales and service tax. See Section 69 of these regulations for additional information. Fees received by a municipality from on-street parking meters are not subject to consumers sales and service tax.
34.1.1. Taxable Services Include, but are not Limited to:
Admissions to swimming pools, recreation centers, fitness centers, golf courses, etc.
Catering services for parties, wedding receptions, banquets, etc.
Charges for attending summer camps unless educational summer camps as defined in Section 2 of these regulations.
Charges for classes such as tennis, swimming, golf, aerobics, crafts, etc.
Coin operated amusement devices.
Room rentals, e.g., hotel rooms, ballrooms, meeting rooms.
34.1.2. Nontaxable services include, but are not limited to:
Fire service fees Inspection fees (other than motor vehicle inspection fees)
License fees Marriage licenses Recording fees Sewage fees Notary fees
34.2. Governmental units which sell tangible personal property to consumers must collect tax thereon. For example, sales of city maps, sales of gifts and souvenirs, vending machine sales, pro shop sales, sales of food from city operated concessions at stadiums, ballparks, auditoriums, etc., are subject to tax.
34.3. The term "governmental unit" includes, but is not limited to this State, county commissions, county school boards, municipalities and local government authorities, boards and commissions created by or pursuant to an Act of the West Virginia Legislature. The term "governmental unit" does not include the federal government and sales by the federal government of taxable services and tangible personal property are not subject to the sales and service tax unless the federal government consents to collect and remit such tax. Examples of governmental units include, but are not limited to:
County Airport Authorities County Building Commissions County Development Authorities County or Regional Airport Authorities County owned and operated hospitals, clinics, long-term care facilities and related facilities County Parks and Recreation Commissions County Solid Waste Authorities Emergency Ambulance Service Authorities Historic Landmark Commission Municipal Building Commissions Municipal Electric Power Systems Municipal Park and Recreation Boards Municipal Waterworks Museum Commissions Notaries Public Planning Commissions Regional Airport Authorities Regional Planning Councils Urban Mass Transit Authorities
W. Va. Code R. § 110-15-35 Personal Services and Sales to Persons Rendering Such Services
35.1. The consumers sales and service tax does not apply to the charge for personal services rendered by barbers, beauticians, manicurists, etc. Personal services include only those rendered to the person of an individual. If, apart from their personal services, such individuals also are engaged in selling to the public such articles as hair tonic, soap, hair nets, and the like, they are vendors of tangible personal property and must collect the consumers sales and service tax on all such sales.
35.2. Barbers, beauticians, manicurists, etc., are the consumers of the various items of tangible personal property and services which they use in the rendition of their personal services, and the consumers sales and service tax and use tax will apply upon their purchases of all such services and property, including equipment. However, articles purchased for resale to consumers may be purchased without imposition of tax by barbers, beauticians, etc. For further information, See Section 8.1.2 of these regulations.
W. Va. Code R. § 110-15-36 Hospitals
36.1. The serving of meals, rental of rooms, sale of drugs, blood, oxygen, dressings, appliances and other tangible personal property to patients is a part of the services rendered by hospitals. These sales and services are so interrelated with professional and personal services, that such sales and services rendered to patients by hospitals are not subject to the consumers sales and service tax.
36.2. If hospitals operate cafeterias or restaurants through which meals are sold for cash or credit to nurses, doctors, visitors and others, such sales are subject to the consumers sales and service tax.
36.3. If meals are included in the wage agreement and are not deducted from the earnings of employees, the consumers sales and service tax is not charged to the employee.
36.4. Hospitals are engaged in the business of providing a professional service not subject to the consumers sales and service tax. Therefore, they are taxable on purchases of property and services for use in the conduct of their professional services, and are not considered to be making purchases for resale. See Section 9.3.1 of these regulations for rules governing sales to hospitals owned by state, county or municipal governments.
36.5. Purchases of tangible personal property and services to be used or consumed in the construction of or permanent improvement of real property by hospitals shall be subject to the consumers sales and service tax and use tax.
W. Va. Code R. § 110-15-37 Nursing and Convalescent Homes
37.1. Persons who operate nursing or convalescent homes may be rendering personal services which are not subject to consumers sales and service tax. If such persons make sales of tangible personal property unrelated to their personal services and are strictly for the convenience of the patients, such as, toilet articles, etc., such sales are subject to tax. Also, meals served to residents of the home, if separately billed or invoiced, are subject to tax. A nursing or convalescent home may provide other services which are subject to tax; such services are other than personal services and should be separately billed or invoiced. See Section 8.1.2 of these regulations.
37.2. Purchases of tangible personal property and services for use or consumption in the operation of such homes are subject to the consumers sales and service tax and use tax. However, any item purchased for resale, on which tax is collected on the sale to the patient, may be purchased by such homes without imposition of tax. Purchases by a nursing or convalescent home of tangible personal property or taxable services which are used or consumed in dispensing a taxable service are taxable.
W. Va. Code R. § 110-15-38 Hotels, Motels, Tourist Homes and Rooming Houses
38.1. Persons engaged in renting rooms in hotels, motels, tourist homes and rooming houses on a daily basis shall compute the consumers sales and service tax upon the daily charge. Notwithstanding the fact that persons engaged in the rendering of a service are required to pay tax on their purchases for use and/or consumption in rendering such services, the purchase by hotels, motels, tourist homes and rooming houses of complimentary items such as shampoos, coffee and newspapers given to guests by such hotels, motels, tourist homes and rooming houses are not taxable. The monetary consideration subject to the consumers sales and service tax shall not include any local hotel or motel tax. See "monetary consideration" in Section 2 of these regulations.
38.2. Persons engaged in the business of renting rooms and collecting tax thereon are subject to the consumers sales and service tax and use tax on their purchases of tangible personal property and services for use in the conduct of their business.
38.3. Motels, hotels and rooming houses which rent rooms or apartments on a permanent basis to persons who make such rooms or apartments their permanent place of abode need not collect the consumers sales and service tax on such rentals. However, the lessor of such rooms or apartments must pay consumers sales and service tax on all purchases and services relative to such rooms and apartments.
38.4. For application of the purchase for resale exemption for hotels and motels See Section 9.3.4 of these regulations.
38.5. The term "rooming house," as used in this regulation, means any establishment furnishing rooms to three (3) or more individuals by the day, week or month at a specified rate.
38.6. The term "permanent place of abode," as used in this regulation, means the lessee of such room or apartment shall occupy the premise in excess of thirty (30) consecutive days.
W. Va. Code R. § 110-15-39 Camp Grounds and Non-Educational Camps
39.1. The amounts charged for attending a non-educational camp, and for the services rendered and tangible personal property sold to campers, whether at such a camp or at a camp ground or similar place, are subject to the consumers sales and service tax.
39.1.1. The operator of such a camp, camp ground or similar place may claim exemption for those purchases of tangible personal property or taxable services which are purchased for resale.
39.1.2. Tangible personal property and taxable services purchased for use or consumption in selling tangible personal property or dispensing a taxable service are subject to the consumers sales and service tax and use tax.
39.2. The temporary leasing of space upon which to park a trailer or camper is an activity which is subject to the consumers sales and service tax. If the lessor renders services for the lessees of such space, the tax applies to such services. If a total charge is made which includes the charge for services, the consumers sales and service tax must be computed on such total charge. Persons who provide services to campers must collect consumers sales and service tax on charges made for such services. Examples of services which may be provided by such persons are electrical hookups, temporary renting of space, etc.
39.3. Persons who lease space in excess of thirty (30) consecutive days, to situate mobile homes, are leasing real estate and are not required to collect consumers sales and service tax on such leases. However, any services rendered by the lessor to the lessee for which a separate charge is made is subject to tax.
39.4. For educational summer camps, See Section 125 of these regulations.
W. Va. Code R. § 110-15-40 Elementary and Secondary Schools
40.1. All public and private elementary and secondary schools shall collect and pay sales and service and use tax in accordance with this regulation.
40.2. Public Schools.
40.2.1. Purchases by Public Schools.
40.2.1.1. All purchases of tangible personal property and services by public schools are exempt from the consumers sales and service tax and use tax so long as a properly completed exemption certificate is issued to the vendor.
40.2.1.2. For information about purchases of food by public schools, See Section 126 of these regulations.
40.2.2. Sales by Public Schools.
40.2.2.1. Sales of textbooks, workbooks, instructional aids, and standardized examination material which are required to be used in any public elementary or secondary school in this State are exempt from the consumers sales and service tax and use tax. However, sales of other school materials, supplies, books which are not textbooks and textbooks which are not required to be used are taxable.
40.2.2.2. For information about sales of food by public schools, See Section 126 of these regulations.
40.2.2.3. School papers and yearbooks, compiled and edited by students of the school, are taxable when sold to the public. However, such sales to students or employees of the school are exempt. Additionally, the sale of advertisements to be placed in such publications are exempt.
40.2.2.4. Sales of tickets for activities sponsored by elementary and secondary public schools located within this State are exempt.
40.2.2.5. Rentals of locks, lockers, storage space, clothing and other materials and equipment owned by public schools and furnished solely to students of the school are exempt.
40.2.2.6. Class dues and library fines are exempt.
40.2.2.7. Casual and occasional sales as defined in Section 2 of these regulations by a parent-teacher association, or similar organization, are taxable unless the organization has a current registration certificate issued in accordance with W. Va. Code '11-12-1 et seq., is exempt from federal income taxes as an organization qualified under I.R.C. '501(c)(3) or '501(c)(4), is an organization with no paid employees, and the organization's gross income from fund raisers, less reasonable and necessary expenses to raise such gross income (or the tangible personal property or services purchased with such net income), is donated to the public school.
40.3. Private Schools.
40.3.1. Private schools which are recognized by the State of West Virginia as providing a child with an elementary or secondary school education which substitutes for the requirement of compulsory public school attendance under W. Va. Code '18-8-1 et seq. are, to the extent of the instruction provided, engaged in the rendering of a professional service. Those entities providing State approved kindergarten programs are likewise treated as rendering professional education services.
40.3.1.1. As professional services are excepted from the consumers sales and service tax and the use tax, private schools which satisfy the requirements of the immediately preceding Section 40.3.1 are not required to collect the consumers sales and service tax on the tuition payments they charge for the provision of their professional education services.
40.3.1.2. Unless the private school also satisfies the requirements of the succeeding Section 40.3.2.1 or another exemption, it must pay the consumers sales and service tax or use tax on all purchases of tangible personal property or taxable services which are used or consumed in the provision of their professional education service.
40.3.2. Purchases by Private Schools.
40.3.2.1. In order for purchases by a private school to be exempt from the consumers sales and service tax and the use tax, it must be:
40.3.2.1.a. a corporation or organization which has a current Business Registration Certificate issued in accordance with W. Va. Code '11-12-1 et seq.;
40.3.2.1.b. exempt from federal income taxes under the authority of I.R.C. '501(c)(3) or '501(c)(4); and;
40.3.2.1.c. an elementary or secondary school which maintains a regular faculty or curriculum and has a regularly enrolled body of pupils or students in attendance at the place in this State where its educational activities are regularly carried on and otherwise satisfies the requirements of the preceding Section 40.3.1.
40.3.2.2. This exemption applies only to services, equipment, supplies and materials used or consumed in the activities which qualify the private school for exemption from federal income taxes under I.R.C. '501(c)(3) or '501(c)(4). This exemption does not apply to purchases of gasoline or special fuel or to purchases of tangible personal property or services to be used or consumed in the generation of unrelated business income as defined in I.R.C. '513. Following are applications of this exemption and other relevant exemptions.
40.3.2.3. Purchases of textbooks, workbooks, instructional aids and standardized examination material required to be used in any school of this State are per se exempt.
40.3.2.4. Purchases of library books, newspapers and magazines are exempt.
40.3.2.5. Tangible personal property and taxable services which are purchased for resale by the school are exempt.
40.3.2.6. Long-term leases of motor vehicles are exempt.
40.3.2.7. Purchases of office or administrative materials, supplies, equipment or services are exempt if used or consumed in activities which qualify the private school as exempt under I.R.C. '501(c)(3) or '501(c)(4) are exempt.
40.3.2.8. Purchases of educational supplies and equipment are exempt.
40.3.2.9. Purchases of building materials, supplies or equipment, including janitorial materials, supplies, equipment and services are exempt: Provided, That the building materials, supplies and equipment are to be installed in, affixed to or incorporated into the real property used by the private school for its educational activities.
40.3.2.10. Purchases of repair parts or repair services for tangible personal property are exempt if such tangible personal property is used or consumed in the activities which qualify the private school as exempt under I.R.C. '501(c)(3) or '501(c)(4).
40.3.2.11. Purchases of athletic equipment and supplies are exempt.
40.3.2.12. In order to claim the exemption, private schools may issue a properly completed exemption certificate to the vendor.
40.3.3. Sales by Private Schools.
40.3.3.1. Casual and occasional sales of property or services not conducted in a repeated manner or in the ordinary course of repetitive and successive transactions of like character by a private school which is exempt on its purchases under W. Va. Code '11-15-9(f) and to the extent provided in the foregoing Section 40.3.2 are exempt. Other exemptions may also be applicable to sales by private schools. Following are applications of relevant exemptions.
40.3.3.2. Sales of textbooks, workbooks, instructional aids, and standardized examination material required to be used in any private elementary or secondary school in this State are per se exempt. However, sales of other school materials, supplies, books which are not textbooks and textbooks which are not required to be used are taxable.
40.3.3.3. For information about sales of food by private schools, See Section 126 of these regulations.
40.3.3.4. School papers and yearbooks, compiled and edited by students of the school, are taxable when sold to the public. However, such sales to students or employees of the school are exempt. Additionally, the sale of advertisements to be placed in such publications are exempt.
40.3.3.5. Sales of tickets for activities sponsored by elementary and secondary private schools located in this State are exempt.
40.3.3.6. Rentals of locks, lockers, storage space, clothing and other materials and equipment owned by private schools and furnished solely to students of the school are exempt.
40.3.3.7. Class dues and library fines are exempt.
40.3.3.8. Casual and occasional sales as defined in Section 2 of these regulations by a parent-teacher association, or similar organization, are taxable unless the organization has a current registration certificate issued in accordance with W. Va. Code '11-12-1 et seq., is exempt from federal income taxes as an organization qualified under I.R.C. '501(c)(3) or '501(c)(4), and is an organization with no paid employees, and the organization's gross income from fund raisers, less reasonable and necessary expenses to raise such gross income (or the tangible personal property or services purchased with such net income) is donated to the private school.
W. Va. Code R. § 110-15-41 Churches and Religious Groups
41.1. Sales to Churches and Religious Groups.
41.1.1. Sales of tangible personal property or services to a "church," as defined in Section 2 of these regulations, which makes no charge whatsoever for the services it renders are exempt from the consumers sales and service tax and the use tax.
41.1.1.1. This exemption applies only to purchases by a church of services, equipment, supplies, food for meals and materials which are directly used or consumed by such church and which are paid from the church treasury.
41.1.1.2. So long as a religious group falls within the definition of a church and otherwise falls within the requirements of the exemption, the exemption applies. (See Section 72 of these regulations for Bona Fide Charitable Organizations).
41.1.1.3. This exemption does not apply to purchases of gasoline and special fuels.
41.1.2. If a church, as defined in Section 2 of these regulations, makes a charge for any of the services which it renders, it must have a current Business Registration Certificate issued under the authority of W. Va. Code '11-12-1 et seq. and it must be exempt from federal income taxes under I.R.C. '501(c)(3) or '501(c)(4) in order to claim an exemption on its purchases of tangible personal property or services.
41.1.2.1. In order to be exempt, the purchase price must be paid from the church treasury.
41.1.2.2. This exemption applies only to services, equipment, supplies and materials which are used or consumed in the activities which qualify the church for exemption under the Internal Revenue Code of 1986, as amended.
41.1.2.3. This exemption does not apply to sales of gasoline or special fuels or to sales of tangible personal property or taxable services to be used or consumed in the generation of unrelated business income as that term is defined in Section 513 of the Internal Revenue Code of 1986, as amended.
41.1.3. In order to claim the above exemptions, the church or religious group shall issue to the vendor a properly completed exemption certificate.
41.2. Sales by Churches and Religious Groups.
41.2.1. A church, as defined in Section 2 of these regulations, may make exempt casual and occasional sales of property or services which are not conducted in a repeated manner or in the ordinary course of repetitive and successive transactions of like character, as that phrase is defined in Section 2 of these regulations, if the church has a current registration certificate issued under the authority of W. Va. Code '11-12-1 et seq. and is exempt from federal income taxes under I.R.C. '501(c)(3) or '501(c)(4) in order to claim exemption on its purchases of tangible personal property or services.
41.2.2. To the extent a religious group qualifies as a church and meets the requirements set forth in the immediately preceding Section 41.2.1, its sales also are exempt.
41.2.3. Sales by churches and religious groups which are exempt are per se exempt.
W. Va. Code R. § 110-15-42 Nonprofit Organizations
42.1. Nonprofit organizations and institutions are not, by reason of their nonprofit status alone, exempt from the consumers sales and service tax or use tax unless otherwise exempt. They are required to comply with the provisions of the laws pertaining to the filing of returns and making payments of the taxes due on sales or on purchases. See Section 72 for information on certain specific nonprofit organizations.
W. Va. Code R. § 110-15-43 Out-Of-State Purchases
43.1. Purchases of tangible personal property and services out of this State for use in this State are subject to the West Virginia use tax. In the computation of the use tax, credit may be taken for sales or use taxes paid in another state up to the amount of tax due this State. The use tax is due even though sales or use tax has been paid on the purchase or use of the same property in another state if the tax paid is less than the use tax due this State.
43.2. The use tax shall be computed on the sale price of tangible personal property or taxable services, which sale price shall not include any consumers sales and service tax or use tax which may have been added to the cost of such tangible personal property or taxable services.
W. Va. Code R. § 110-15-44 Leased Departments
44.1. Persons making sales of tangible personal property through the facilities of leased departments are required to collect and remit consumers sales and service tax due on such sales. The lessor of such leased departments is not responsible for collecting the tax on such sales and may not file returns on behalf of his lessee.
44.2. Persons making sales of tangible personal property through the facilities of leased departments can issue an exemption certificate for purchases of property for resale, but must pay tax on other purchases for use in their business.
44.3. Persons who lease departments on a permanent basis are not required to pay consumers sales and service tax on the rental fee. However, should they make any improvements to the real property being leased, they are required to pay the tax on property purchased to make such improvements.
W. Va. Code R. § 110-15-45 Rentals, Licenses and Leases of Tangible Personal Property; Generally
45.1. The definition of "sale" includes the transfer of possession of tangible personal property for a consideration and includes a lease, or rental or license to use. Thus, renting, leasing, or licensing to use tangible personal property is an activity subject to consumers sales and service tax and use tax. The tax applies, if the rental occurs in West Virginia, irrespective of where the lessee or licensee makes use of the property, unless the rental qualifies under Section 45.5 of this regulation. For example, the rental of an automobile from a lessor within this State is taxable in its entirety even though the lessee may use the vehicle for travel outside this State and regardless of where payment is made.
45.2. When there is an agreement of lease or rental of tangible personal property which grants to the lessee or licensee an option to purchase the property, the tax shall be computed upon each payment. If, at any time during the agreement, the lessee or licensee exercises the option on either a cash or charge basis, the tax must be collected on the remaining portion of the sale price at the time the option is exercised or within thirty (30) days after the option is exercised.
45.2.1. An exception to the preceding is a lease-purchase agreement of an automobile. When the lessee exercises his option to purchase the vehicle, the remaining balance or sale price is not subject to the consumers sales and service tax but the lessee will be subject to the motor vehicle privilege tax pursuant to W. Va. Code '17A-3-4.
45.3. The consumers sales and service tax and use tax are not applicable to the rental of apartments, houses, offices or other real estate when such rental exceeds thirty (30) consecutive days. See Section 69 of these regulations for information relative to the rental of parking spaces.
45.4. The renting, leasing or licensing to use of tangible personal property is considered to be a sale of tangible personal property. Thus, purchases for use in the business are taxable, except for purchases for resale, for which an exemption certificate may be issued.
45.5. Leases of motor vehicles for a period of thirty (30) or more consecutive days are exempt from tax.
45.6. For in-depth analysis of leases of tangible personal property, see Section 129 of these regulations.
W. Va. Code R. § 110-15-46 Money-Operated Machines and Devices, Vending Machines, etc
46.1. Sales of tangible personal property or services through the use of money-operated machines and devices are subject to the consumers sales and service tax. Machines and devices included in this regulation are vending machines, storage lockers, toilet lockers, telescopes, radios, television sets, automatic washers, photographic machines, music machines, amusement machines, and any other coin-operated machines or devices. Machines used in the conduct of a business subject to the control of the Public Service Commission or machines used for the vending of United States postage stamps are not included in the classification of machines which are subject to the consumers sales and service tax.
46.2. The person who has control of the machine, i.e., the one who has the key, fills the machine, etc., is responsible for returning and remitting the consumers sales and service tax. See Section 4.6.2 of these regulations for calculation of tax from money operated machines.
46.3. Merchandise-vending-machine operators are required to maintain accurate records of all of their purchases of merchandise for resale. All persons doing business through money-operated machines are required to maintain accurate records of any commission or percentage paid in connection with the operation of such machines.
46.4. Purchases of parts and machines dispensing tangible personal property are subject to consumers sales and service tax when purchased.
46.5. Purchases of parts and machines dispensing taxable services are subject to consumers sales and service tax at the time of purchase, i.e., washing and drying machines at a laundromat, money or token-operated amusement machines.
W. Va. Code R. § 110-15-47 Reserved for Future Use
W. Va. Code R. § 110-15-48 Radio and Television Broadcasting Stations
48.1. Radio and television broadcasting stations who render advertising services, such as layouts or artwork, which are sold and delivered to customers but not associated with or an integral part of broadcast time at the station providing such services, are for the purpose of such sales engaged in rendering a service subject to the consumers sales and service tax and use tax. However, such transactions which occur in conjunction with the sale of broadcast time at the station rendering such service are exempt. Sales of radio and television broadcasting time are exempt from the consumers sales and service tax and use tax.
48.1.1. "Retailer engaging in business in this State," as defined in Section 2 of these regulations, is sufficiently broad to allow a radio and television broadcasting station, when it receives orders for a retailer or performs necessary recordkeeping, or accepts or receives payment for merchandise which has been ordered, to be considered a retailer's office, distribution house, sales house, warehouse, or other place of business in this State, or as an agent (by whatever named called) operating within this State under the authority of the retailer or its subsidiary. In such a situation, the retailer engaging in business in this State will be required to collect a use tax from the purchaser and remit the use tax collected to the Tax Commissioner.
48.2. Radio and television broadcasting stations are primarily engaged in a communications business. Purchases for direct use in a communications business are exempt from consumers sales and service tax and use tax. Other items which are not integral or essential to the communications activity, but which are instead considered to be incidental, convenient or remote to the communications activity, are taxable. Guidelines for determining what is considered to be "directly used" are given in Sections 2 and 123 of these regulations.
48.3. Persons engaged in a communications activity must either pay the tax and request a refund or credit or use a direct pay permit to obtain exemption on the purchase of goods and services directly used in their communications activity. An exemption certificate, as well as a direct pay permit, may be used to obtain an exemption on purchases of goods and services for resale.
48.4. If a direct pay permit is presented to the vendor, no tax is charged on the sale of tangible personal property or service rendered to the purchaser. The person using the direct pay permit must keep a record of the purchases made using the direct pay permit and whether the items purchased were used in an exempt or taxable manner.
48.5. Radio and television broadcasting stations who also render taxable services such as layouts or artwork are engaged in multiple business activities. Persons engaged in multiple business activities will pay tax on their purchases for use in their overall business operation on an apportionment basis. Some items may be used in both the activities of rendering a taxable service and communications. These items may be totally taxable or exempt or partially taxable or exempt depending on their use. If an item is used in the activity of rendering a taxable service and is also directly used in the communications activity, such items would be partially exempt. However, items which are used in the activity of rendering a taxable service and indirectly used in the communications activity, such as office furniture or supplies, would be totally taxable. To determine how much tax should be remitted, the purchase price must be apportioned between taxable and nontaxable activities. Any reasonable method of apportionment, such as gross receipts from activities, will be acceptable. Documentation as to the apportionment method used should be retained for audit purposes.
48.6. Pursuant to Section 9c.7 of these regulations, a direct pay permit consumers sales and service tax return and a direct pay use tax return must be filed on a monthly basis by the direct pay permit user, together with the tax due on taxable purchases made using the direct pay permit.
W. Va. Code R. § 110-15-49 Printers
49.1. Persons engaged in the business of printing, who provide materials and labor to produce printed products are considered to be manufacturers and must collect and remit consumers sales and service tax and use tax on sales of such products, or in lieu of the tax, receive a valid exemption certificate or direct pay number. Persons who provide printing services on materials owned by their customers are considered to be rendering a taxable service and must also collect and remit the tax, or in lieu of the tax, receive a valid exemption certificate or direct pay permit number.
49.2. Persons engaged in the business of printing who provide materials and labor to produce printed products are considered to be manufacturers and must pay consumers sales and service tax on their purchases, except those purchases of goods and services directly used in the manufacturing activity. Other items which are not integral or essential to the manufacturing activity, but which are instead considered to be incidental, convenient or remote to the manufacturing activity, are taxable. Guidelines for determining what is considered to be "directly used" are given in Sections 2 and 123 of these regulations.
49.3. Persons engaged in a manufacturing activity must either pay the tax and request a refund or credit or use a direct pay permit to obtain exemption on goods and services directly used in their manufacturing activity. An exemption certificate, as well as a direct pay permit, may be used to obtain an exemption on purchases of goods and services for resale.
49.4. If a direct pay permit is presented to the vendor, no tax is charged on the sale of tangible personal property or service rendered to the purchaser. The purchaser using the direct pay permit must keep a record of the purchases made using the direct pay permit and whether the items purchased were used in an exempt or taxable manner.
49.5. Pursuant to Section 9c.7 of these regulations, a direct pay permit consumers sales and service tax return and a direct pay use tax return must be filed on a monthly basis by the direct pay permit user, together with the tax due on taxable purchases made using the direct pay permit.
49.6. Persons who provide printing services on materials owned by their customers are considered to be engaged in a service activity. Purchases of tangible personal property and taxable services for use or consumption in rendering a taxable service are taxable.
49.7. Printers who engage in manufacturing and who also render taxable services are engaged in multiple business activities. Persons engaged in multiple business activities will pay tax on their purchases for use in their overall business operation on an apportionment basis. Some items may be used in both the activities of rendering a taxable service and manufacturing. These items may be totally taxable or partially taxable depending on their use. Any reasonable method of apportionment, such as gross receipts from activities, will be acceptable. Documentation as to the apportionment method used should be retained for audit purposes. If an item is used in the activity of rendering a taxable service and is also directly used in the manufacturing activity, such item would be exempt to the extent it is directly used in the manufacturing activity. Items which are used in the activity of rendering a taxable service and indirectly used in the manufacturing activity, such as office furniture or supplies, would be taxable in full. To determine how much tax should be remitted when an item has a dual use, one of which is direct use in the manufacturing activity, the purchase price must be apportioned between taxable and nontaxable activities.
W. Va. Code R. § 110-15-50 Newspapers and Magazines
50.1. Persons engaged in this State in the printing and sale of newspapers or magazines must collect and remit consumers sales and service tax on the sale of such newspapers and magazines made to ultimate consumers, such as over the counter sales, sales made through vending boxes and subscription sales made to customers located in West Virginia. Sales made to news dealers for resale or to government agencies such as libraries are also taxable unless a valid exemption certificate is obtained. Sales of newspapers to consumers delivered by route carriers are specifically exempted from the tax. The sale of advertising space by newspapers and magazines is also specifically exempt.
50.1.1. Where the person is engaged in business in another state with the newspapers or magazines being sold in this State on a subscription basis, such person may be classified as a retailer engaging in business in this State and, therefore, be required to collect and remit the use tax. See Section 2 of these regulations for the definition of "retailer engaging in business in this State."
50.2. Persons engaged in the printing and sale of newspapers and magazines are considered to be manufacturers and must pay the tax on purchases for use in their business, except for those purchases of goods and services directly used in the activity of printing or preparing the newspaper or magazine. Other items which are not integral or essential to the manufacturing activity, but which are instead considered to be incidental, convenient or remote to the manufacturing activity, are taxable. Guidelines for determining what is considered to be "directly used" are given in Sections 2 and 123 of these regulations.
50.3. Persons engaged in a manufacturing activity must either pay the tax and request a refund or credit or use a direct pay permit to obtain exemption on goods and services directly used in their manufacturing activity. An exemption certificate, as well as a direct pay permit, may be used to obtain an exemption on purchases of goods and services for resale.
50.4. If a direct pay permit is presented to the vendor, no tax is charged on the sale of tangible personal property or service rendered to the purchaser. The person using the direct pay permit must keep a record of the purchases made using the direct pay permit and whether the items purchased were used in an exempt or taxable manner.
50.5. Pursuant to Section 9c.7 of these regulations, a direct pay permit consumers sales and service tax return and a direct pay use tax return must be filed on a monthly basis by the direct pay permit user, together with the tax due on taxable purchases made using the direct pay permit.
W. Va. Code R. § 110-15-51 Florists
51.1. Florists are required to collect and remit consumers sales and service tax and use tax upon their gross receipts from sales of flowers, wreaths, soil, etc., and services. Those florists who participate in Florists Telegraph Delivery Association or a similar arrangement shall be governed by the following rules:
51.1.1. The West Virginia florist who takes orders for flowers, etc., shall collect consumers sales and service tax or use tax irrespective of the fact that the flowers may be delivered in another state.
51.1.2. A West Virginia florist who receives an order transmitted from another florist has no consumers sales and service tax or use tax liability on such sale irrespective of the fact that the order may be transmitted from a florist in another state.
51.2. Florists are engaged in the business of selling tangible personal property. Thus, the purchases of items for use in their business are taxable, except for purchases for resale, for which they may issue an exemption certificate.
W. Va. Code R. § 110-15-52 Amusement Services and Places of Amusement
52.1. All sales of tangible personal property, amusement services and other services rendered in the operation of a place of amusement or entertainment are subject to the consumers sales and service tax, such tax to be collected and remitted by the provider or operator of the place of amusement or entertainment. Such sales include, but are not limited to, receipts from hat-check services, video machines, sales of popcorn, candies, cold drinks, programs, souvenirs and novelties, as well as admission tickets.
52.2. Amusement services and places offering amusement services include, but are not limited to, the following:
52.2.1. Live or Recorded Performances, Whether by Individual Ticket or by Season Ticket: ballet performances circuses ice skating shows motion pictures musical concerts opera performances outdoor theatres theatres (movies and plays)
52.2.2. Exhibitions or Displays: animal shows (contests, exhibitions) antique shows aquatic shows arts and crafts, and art shows or fairs auto shows museums (displaying art objects, wax figures, antique autos, etc.) zoos
52.2.3. Spectator Sports: dragstrips and drag racing horse shows (horse riding exhibitions) motorcycle races automobile races rodeos sporting events such as football, baseball, basketball, hockey, and soccer games wrestling, boxing, or arm wrestling
52.2.4. Participatory Sports or Games: athletic clubs bowling games court fees - tennis, racketball, handball, etc. dart games domino games go-cart raceways golf courses health clubs or spas (admissions and memberships) miniature golf courses pool (billiards) games (by the game or by the hour) skate board "tracks" skating rinks (roller skating and ice skating) swimming pools water slides physical fitness centers
52.2.5. Fairs or Carnivals: amusement parks carnivals fairs games of skill (at a circus, carnival, etc.) shooting galleries or ranges side shows
52.2.6. Others: hot tub concessions parties (such as New Year's Eve) sponsored by radio stations, hotels, etc., where the ticket price includes meal, setups, entertainment, party favors, etc. rides for pleasure (in hot-air balloons, helicopters, trains, ships, boats, etc.) as opposed to regular transportation tour trains and buses, whose primary purpose is to show tourists sights along a route as opposed to regular transportation tours of tourist attractions such as boats, buildings, monuments and natural wonders such as caves and caverns palm reading, fortune telling, and astrological chart preparation cover charges for admission to night clubs, dance halls, discos, etc., providing dancing, music or other entertainment closed circuit televised events
52.2.7. Country clubs and other private clubs and organizations that provide entertainment, recreation, sports, dining, or social facilities to members, but only to the extent charges are not considered "bona fide dues" as defined in Section 2 of these regulations. See the following Sections 52.5 and 52.5.1 for further clarification.
52.3. Nonamusement Services. - Activities which are primarily professional services or personal services are not taxable unless a separate charge is made for any taxable service provided. Services not subject to tax include, but are not limited to: daycare services tuition for educational summer camps
52.4. Nonprofit, charitable and religious organizations which sell amusement events, entertainment events, athletic events, lectures, etc., are making sales which may be exempt provided they qualify as "casual and occasional sales" as defined in Section 2 of these regulations. However, merely sponsoring an entertainment event will not make the sales exempt from tax. For example, if a local nonprofit organization sponsors a traveling circus which provides rides and other entertainment for one week, the sale of tickets to such rides and other events would be taxable. Likewise, the sale of food items and novelties at such an event also would be taxable.
52.5. The consumers sales and service tax applies to the receipts from the sale of admissions, by tickets or fixed-fee donations whether by a season subscription or by single ticket purchases, to places at which amusements, entertainment, sports events, seasonal and exhibition games or recreation are provided. The term "admissions" does not include bona fide dues paid solely for the privilege of maintaining membership in a club or other organization. "Bona fide dues," as defined in Section 2 of these regulations, mean only those amounts periodically paid by members which entitle such persons to continued membership in a club, other organization or association and shall not include any amounts paid for goods or specific services rendered to members by the club or other organization. In order to be exempt, bona fide dues must be separately identified and may not include any charge for services, tangible personal property or for any benefits provided to the members other than membership. The inclusion of such charges in membership dues may render the entire amount of such charge subject to tax.
52.5.1. For example, if persons paying a membership fee to a country club must also pay fees to use the facilities, such as golf courses, tennis courts and swimming pool, then the fee for membership would be bona fide dues and exempt from consumers sales and service tax. If payment of the membership fee entitles the member to utilize such facilities of the club, then the entire fee, is subject to consumers sales and service tax.
52.5.2. Fees paid on an annual basis entitling members of an organization, association or club to services such as the use of swimming pools, tennis courts and other services or facilities, are specifically excluded from the definition of "bona fide dues."
52.5.3. Initiation fees and stock purchased from an organization, association or club as a prerequisite for membership, are not subject to tax so long as they do not entitle members to use such services and facilities without charge.
52.6. Sales of tickets for activities sponsored by elementary and secondary schools located within this State are exempt from consumers sales and service tax. All other receipts from admissions to places of amusement or entertainment conducted by the State of West Virginia or any political subdivision, which are in competition with others, are taxable.
52.6.1. Sales of tickets or admissions to events or amusements by colleges and universities, public or private shall be taxable. This provision shall apply to sales of basketball, football, baseball, track or other tickets or admissions.
52.7. The person who has legal rights or ownership over or the legal right to provide, present, or offer an amusement, entertainment, or recreation that is rendered on a regular basis at a fixed location and for which admissions are sold, such as the owner of the wax figure displays at a wax museum, is classified as the provider or operator of a place of amusement or entertainment. Such an individual is also the person who has legal rights of ownership to an amusement, entertainment, or recreation that will not be rendered on a regular basis at a fixed location and for which amusement service admissions will be sold, such as the provider of a one-night live performance by a singer. A provider or operator of an amusement service may be, but is not always, the owner of the facility.
52.8. Purchases for use in the business of selling tangible personal property or dispensing a taxable service are subject to the consumers sales and service tax. For example, the purchase of a popcorn machine for use in business is taxable.
W. Va. Code R. § 110-15-53 Employees' Meals
53.1. Meals served by employers as part of the employee's wages are not taxable sales. If, however, a separate charge is made for the meals by the employer, which is paid by the employee or deducted from his wages, the transaction is a sale and subject to consumers sales and service tax.
W. Va. Code R. § 110-15-54 Reserved for Future Use
W. Va. Code R. § 110-15-55 Reserved for Future Use
W. Va. Code R. § 110-15-56 Trading Stamps, Coupons and Meal Tickets
56.1. The exchange of merchandise or prizes for trading stamps, coupons, etc., shall be considered a sale of those goods. The vendor shall collect the consumers sales and service tax based upon the value of the merchandise or prize, and the tax shall be collected from the recipient of the merchandise or prize at the time of receipt.
56.2. A person who sells meal tickets does not charge consumers sales and service tax on such sale since the sale relates to intangible personal property. However, when such person redeems the meal ticket or portion thereof, the vendor shall charge and collect tax on that particular sale. To illustrate: X purchases a meal ticket with a face value of ten dollars ($10.00) from Y for eight dollars and fifty cents ($8.50). Y charges no tax on the sale of the meal ticket. X purchases a two dollar ($2.00) meal with a portion of his ticket. On this two dollar ($2.00) purchase, Y will collect consumers sales and service tax. If the next day, X purchases an eight dollar ($8.00) meal with the remainder of the ticket, Y will collect tax on the eight dollar ($8.00) sale. Therefore, tax is eventually collected on the full face value or redemption value of the ticket, if and when redeemed.
W. Va. Code R. § 110-15-57 Public Assistance
57.1. Persons who are the recipients of funds distributed by federal, state or local governments in public welfare or relief work are not exempt from consumers sales and service tax. However, where the purchases are made by the federal, state and local government agencies for a person or persons in need of public assistance, or lawfully paid for with food stamps pursuant to the Federal Food Stamp Program codified in 7 U.S.C. 2011 et seq., or lawfully paid for with drafts issued through the West Virginia special supplemental food program for women, infants and children (WIC) as codified in 42 U.S.C. 1786, the sales are exempt. For further information on food stamps and WIC purchases, See Section 9.2.12 of these regulations.
W. Va. Code R. § 110-15-58 Collection Agencies
58.1. Collection agencies are required to collect consumers sales and service tax on the commissions, fees or other consideration they receive for services rendered on collection transactions which originated within this State. The measure of this tax shall be the amount of consideration received by the agency without deducting any amount paid by the collection agency to other collection agencies which may be involved in the collection process. For example: A doctor who resides and practices medicine in Clarksburg, West Virginia, is owed two hundred dollars ($200.00) by a patient who refuses to pay. The doctor refers the matter to a West Virginia collection agency to collect the debt. They agree that the fee will be fifty percent (50%) of the amount collected. The agency is successful in its efforts and collects the full two hundred dollars ($200.00); therefore, it must bill the doctor its fee of one hundred dollars ($100.00) plus the consumers sales and service tax on such fee. Thus, the agency will retain or the doctor will pay to the agency one hundred and six dollars ($106.00), and the agency will remit six dollars ($6.00) of that amount to the State Tax Department as consumers sales and service tax. Six dollars ($6.00) would be the amount collected and remitted even if the agency paid another collection agency to assist it in collecting the doctor's fee.
58.2. Any collection transaction originating outside this State will not be taxable even though a West Virginia collection agency may be involved in the collection process, and even though such local agency may receive some consideration for work which it does in the collection of a particular debt. For example, if the doctor in the example above resided in and practiced medicine in Columbus, Ohio instead of Clarksburg, West Virginia, the agency would not collect and remit any tax for its services to the doctor.
W. Va. Code R. § 110-15-59 Funeral Directors
59.1. Taxable Sales. - The following sales of tangible personal property or services by funeral directors or embalmers are subject to the West Virginia consumers sales and service tax because they are not sufficiently related to or do not constitute exempt professional services:
Sales of caskets Sales of burial vaults or boxes Sales of clothing for dressing the deceased Sales or rentals of folding chairs to be used at funerals or other services Sales or rentals of tarpaulins for use at funerals or services Sales or rentals of candelabra for use at funerals or services Sales or rentals of candles for use at funerals or services Sales of wreaths or door sprays Sales or rentals of funeral cars or the providing of funeral car services Sales or rentals of limousines or the service of providing limousines for transportation to the cemetery or to other memorial or similar services Sales or rentals of flower cars or the providing of flower car services Sales of the service of procuring burial permits Sales of the service of procuring, obtaining or providing certified copies of death certificates Sales of chapel service or the service of procuring such service Sales of flowers or the service of providing, procuring or handling of flowers Rental of tents for use at the funeral or at other memorial or similar services Rentals of temporary vaults Rentals of, or sales of the service of providing, lowering devices for use at the grave Sales of the service of arranging or providing the services of clergymen, singers, organists or other similar services Billings for reimbursement of out-of-town funeral director's charges Sales of the service of placing of death notices in newspapers or in other media
59.2. Exempt Sales. - The following sales of tangible personal property or services by funeral directors or embalmers are not subject to the West Virginia consumers sales and service tax either because they are part of or directly related to, or themselves constitute professional services or constitute alterations to realty:
Sales of the service of embalming bodies Sales of the service of dressing bodies Sales of the service of providing automobiles for transportation of the deceased to railroads, air carriers or other carriers Sales of the service of taking the remains to or getting remains from railroads, air carriers or other carriers or transporters of the body Sales of the service of attendance at coroner's inquests Removal charges Sales of the service of cremation Reimbursement for air, railroad or truck transportation of bodies or reimbursement for tickets for travel by the funeral director or embalmer directly related to and a part of the professional service Telegram, telephone, cable or radio charge reimbursements to the funeral director or embalmer directly related to and a part of the professional service Sales of pall bearer service Sales of the service of opening or closing of graves or tombs Sales of the service of lining graves Sales on perpetual care trust fund deposits
W. Va. Code R. § 110-15-60 Employee or Independent Contractor
60.1. Services rendered by an employee to his or her employer are exempt from the consumers sales and service tax and use tax. On the other hand, services rendered by an employee to his or her employer which do not fall within the scope of the employee-employer relationship or the contract of employment, and services rendered by independent contractors are subject to the consumers sales and service tax and use tax unless some other exemption provision in Section 9 of these regulations applies.
60.2. There may be situations where the issue is whether a person is an employee or an independent contractor. Generally, the relationship is that of employer-employee if the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work, but also as to the details and means by which the result is accomplished.
60.3. Following are factors to be considered when determining the nature of the relationship. The factors are designed to be only guidelines and where appropriate, the Tax Department will look beyond the formal aspects of the relationship to determine its substance.
60.3.1. Instructions. - A worker who is required to comply with other persons' instructions about when, where, and how he or she is to work is ordinarily an employee.
60.3.2. Training. - Requiring a worker to receive training shows that the person or persons for whom the services are performed want the services performed in a particular way.
60.3.3. Integration. - Integrating the worker's services into the business operations generally shows that the worker is subject to direction and control.
60.3.4. Services Rendered Personally. - This shows the person for whom the services are performed is interested in the methods used to accomplish the work as well as the results, and indicates the person exercises control.
60.3.5. Hiring, Supervising, and Paying Assistants. - If a person for whom services are performed hires, supervises, and pays assistants, this generally shows control over the workers on the job. But if one worker hires, supervises, and pays the other assistants pursuant to a contract under which the worker agrees to provide materials and labor and under which the worker is responsible only for the attainment of a result, then this indicates an independent contractor status.
60.3.6. Continuing Relationship. - This indicates an employer-employee relationship. It may exist where work is performed at frequently recurring although irregular intervals.
60.3.7. Set Hours of Work. - This is a factor indicating control.
60.3.8. Full Time Required. - Shows control over the amount of time the worker spends working and impliedly restricts the worker from doing other gainful work. An independent contractor, on the other hand, is free to work when and for whom he or she chooses.
60.3.9. Doing Work on Employer's Premises. - Control over the place of work is indicated when the person or persons for whom the services are performed have the right to compel the worker to travel a designated route, to canvass a territory within a certain time, or to work at specific places as required.
60.3.10. Order or Sequence Set. - If the person for whom the services are performed has the right to establish the routines and schedules to be followed, that right is a factor indicating control.
60.3.11. Oral or Written Reports. - A requirement that the worker submit regular or written reports to the person for whom services are rendered indicates a degree of control.
60.3.12. Payment by Hour, Week, Month. - This indicates an employer-employee relationship provided it's not just a convenient way of paying a lump sum agreed upon as the cost of a job. Payment made by the job or on a straight commission generally indicates that the worker is an independent contractor.
60.3.13. Payment of Business and Traveling Expenses. - An employer, to be able to control expenses, generally retains the right to regulate and direct the worker's business activities.
60.3.14. Furnishing Tools and Materials. - Tends to show an employer-employee relationship.
60.3.15. Significant Investment. - If a worker invests in facilities that he uses in a performing service and that are not typically maintained by employees (such as maintaining an office rented at fair market value from an unrelated party), that factor tends to indicate that the worker is an independent contractor. Special scrutiny is required for certain types of facilities, such as home offices.
60.3.16. Realization of Profit or Loss. - For example, if the worker is subject to a real risk of economic loss due to significant investments or a bona fide liability for expenses, such as salary payments to unrelated employees, that factor indicates that the worker is an independent contractor.
60.3.17. Working for More Than One Firm at a Time. - This generally indicates an independent contractor status. However, a worker who performs services for more than one person may be an employee of each of the persons, especially where such persons are part of the same service arrangement.
60.3.18. Making Service Available to General Public. - Doing so on a regular and consistent basis indicates an independent contractor relationship.
60.3.19. Right to Discharge. - This is a factor indicating that the worker is an employee and the person possessing the right to discharge is an employer. An independent contractor cannot be fired so long as he produces a result that meets the contract specifications.
60.3.20. Right to Terminate. - If a worker has the right to quit at any time without incurring liability, this indicates an employer-employee relationship.
60.4. Temporary Employment Agencies. - Persons hired by employers through temporary employment agencies are not considered to be employees within the scope of the exemption. Instead, the temporary employment agency is considered to be rendering services to the employer which are subject to consumers sales and service tax unless some other provision in Section 9 of these regulations applies.
W. Va. Code R. § 110-15-61 Pawn Brokers
61.1. Pawnbrokers are primarily engaged in the business of lending money, for the payment of which they accept personal property as security. If the pledgor redeems the merchandise within the allotted amount of time, the charge made by the pawnbroker is considered to be interest and is not subject to sales tax.
61.2. In case the pledgor does not redeem the property pledged or pawned, such property is forfeited to the pawnbroker, to whom the title passes.
61.3. When pawnbrokers thereafter sell such articles, they are making sales subject to the sales and service tax.
W. Va. Code R. § 110-15-62 Dentists, Dental Laboratories, Optometrists, Opticians
62.1. Dentists, optometrists and similar professionals, when rendering professional services are engaged in business which is excepted from the imposition of consumers sales and service tax and use tax.
62.2. Purchases for use in the business of rendering a professional service are subject to the consumers sales and service tax and use tax.
62.3. Dentists, optometrists and similar professionals who engage in a manufacturing activity, such as dentists who operate their own dental lab and make their own dentures, crowns, bridges, etc., or optometrists who operate their own optical shop and grind their own lenses, generally are not considered to be engaging in a professional activity. Such persons will be subject to the following rules when engaging in manufacturing activities.
62.3.1. A dentist who operates his own dental lab is exempt from paying tax when he purchases materials to be directly used in manufacturing dentures, crowns, bridges, etc. Those products which are manufactured for another dentist will be subject to the consumers sales and service tax because the other dentist must pay that tax on all materials and services used or consumed in rendering a professional service. The fair market value of the manufactured products which the dentist utilizes in rendering professional services to his own patients will be subject to the imposition of the use tax.
62.3.2. An optometrist who operates his own optical shop is exempt from paying tax when he purchases materials to be directly used in manufacturing eyeglasses. Those products which are manufactured for another optometrist will be subject to the consumers sales and service tax because the other optometrist must pay that tax on all materials and services used or consumed in rendering a professional service. The fair market value of the manufactured products which the optometrist utilizes in rendering professional services to his own patients will be subject to the imposition of the sales and service tax and use tax.
62.3.3. If an outside patient comes to the optometrist's optical shop with a prescription from another optometrist, then the eyeglasses, including frames, are not subject to the sales and service and use tax upon sale because they are dispensed pursuant to a prescription. In this case, the owner of the optical shop, even though he is an optometrist, need not remit use tax on the fair market value of the eyeglasses because he is not using these glasses in the rendition of his professional service.
62.3.4. Persons engaged in a manufacturing activity must either pay the tax and request a refund or credit or use a direct pay permit to obtain exemption on goods and services directly used in their manufacturing activity. Other items which are not integral or essential to the manufacturing activity, but which are instead considered to be incidental, convenient or remote to the manufacturing activity, are taxable. Guidelines for determining what is considered to be "directly used" are given in Sections 2 and 123 of these regulations.
62.3.5. If a direct pay permit is presented to the vendor, no tax is charged on the sale of tangible personal property or service rendered to the purchaser. The person using the direct pay permit must keep a record of the purchases made using the direct pay permit and whether the items purchased were used in an exempt or taxable manner.
62.3.6. Pursuant to Section 9c.7 of these regulations, a direct pay permit, consumers sales and service tax return and a direct pay use tax return must be filed on a monthly basis by the direct pay permit holder, together with the tax due on taxable purchases made using the direct pay permit.
W. Va. Code R. § 110-15-63 Warranties
63.1. Warranties offered with the sale of tangible personal property where no separate charge is made for the warranty are not subject to consumers sales and service tax or use tax.
63.2. Where a charge is made for the sale of a warranty, whether it is a manufacturer's warranty, an extended warranty or any other type of warranty or service or maintenance contract except a warranty upon which the premium tax is imposed under W. Va. Code Chapter 33 or the title privilege tax imposed under W. Va. Code Chapter 17A, the sale of the warranty is subject to consumers sales and service tax or use tax as the sale of a taxable service.
63.3. Consumers sales and service tax is not required to be collected by a vendor or retailer from a warrantor for repairs, including parts and labor, performed pursuant to a warranty. A warranty represents a prepayment for future services and when services are performed under the warranty, the warrantor is eligible to claim the resale exemption.
63.4. To the extent that the owner of the property upon which repairs were performed under any type of warranty is required to pay a portion of the repair costs (i.e., a deductible), the amount so charged to such owner is taxable unless said owner is eligible to issue and does in fact issue a properly executed exemption certificate or gives to the vendor his direct pay permit number.
W. Va. Code R. § 110-15-64 Boat and Aircraft Dealers
64.1. The sales and use of boats which are not subject to the tax imposed by W. Va. Code '17A-3-4 (motor vehicle title privilege tax) and sales of aircraft are not exempt from the consumers sales and service tax and use tax.
64.2. Sales of parts and services to customers are subject to consumers sales and service tax and use tax. Any trade-in value of parts is credited against the price paid.
64.3. Any proceeds derived from storing or docking of a boat is subject to consumers sales and service tax and use tax.
64.4. Repairs of boats and airplanes performed under warranties are taxable in accordance with Section 63 of these regulations.
64.5. When a boat or aircraft dealer repairs boats or planes for individuals, he is engaged in the business of selling tangible personal property and rendering taxable services.
64.6. Purchases of tangible personal property or services (not for resale) that are used in the business of selling tangible personal property or a taxable service are subject to the consumers sales and service tax.
W. Va. Code R. § 110-15-65 Motor Vehicle Dealers
65.1. Sales of motor vehicles which are titled by the Department of Motor Vehicles and which are subject to the tax imposed by W. Va. Code '17A-3-4 or a similar tax imposed by another state are exempt from consumers sales and service tax. The term "motor vehicle" includes recreational vehicle.
65.1.1. Any motor vehicle which is purchased and delivered in West Virginia and immediately removed from this State is exempt from the consumers sales and service tax and use tax if the vehicle is then titled and registered in another state and subjected to a tax on the value of the vehicle by such other state.
65.2. Accessories which are purchased from the dealer after the title and possession of the motor vehicle have been transferred to the purchaser are subject to the consumers sales and service tax and use tax.
65.2.1. As a practical application of this rule, the dealer's sales invoice will be accepted as the basis for determining the amount of tax.
65.2.2. Sales of parts and services to customers are subject to consumers sales and service tax and use tax. Any trade-in value of parts is credited against the price paid.
65.3. When a licensed motor vehicle dealer repairs vehicles for individuals, he is engaged in the business of selling tangible personal property and rendering a taxable service.
65.4. A person engaged in the business of selling a taxable service and taxable tangible personal property is taxable on all of his purchases except purchases for resale.
65.5. When a licensed dealer in motor vehicles make purchases of parts and materials to repair or recondition vehicles held in his inventory for sale, the purchases are considered to be purchases for resale and exempt from tax. For example, a used motor vehicle dealer purchases tires and a battery to repair a car that he will later sell. These items are considered to be purchases for resale and are exempt from tax.
65.6. Repairs of motor vehicles performed under warranties are taxable in accordance with Section 63 of these regulations.
65.7. Towing charges, if regulated by the Public Service Commission, are exempt from consumers sales and service tax.
W. Va. Code R. § 110-15-66 Well Servicing
66.1. Persons engaged in the business of well servicing are performing a service subject to the consumers sales and service tax and use tax. Tangible personal property consumed in this activity is not considered to be a sale of tangible property, but is deemed to be consumed in the rendition of the well service and is part of the service activity. Sales of tangible personal property apart from the rendering of well services are also subject to the consumers sales and service tax and use tax.
66.2. Purchases of tangible personal property or services for use in the business of selling tangible personal property or a taxable service are taxable.
W. Va. Code R. § 110-15-67 Laundries, Laundromats and Dry Cleaning
67.1. Persons engaged in the operation of laundries, dry cleaning, and related activities, are rendering a service subject to the consumers sales and service tax and use tax. Sales of tangible personal property or services through the use of money-operated machines and devices are subject to the consumers sales and service tax.
67.2. Purchases of money-operated devices which dispense tangible personal property are subject to the consumers sales and service tax and use tax.
67.3. Purchases of tangible personal property or services not for resale that are used exclusively in the business of selling tangible personal property or taxable services are subject to the consumer tax.
67.4. See Section 46 of these regulations regarding money operated machines.
W. Va. Code R. § 110-15-68 Photographers, Film Developers
68.1. Persons engaged in the business of taking photographs, who do not develop the film are performing a service subject to the consumers sales and service tax and use tax. Tax must be collected unless the purchaser properly executes an exemption certificate or presents a direct pay permit number.
68.2. Purchases of tangible personal property or services for use or consumption in the business of selling tangible personal property or a taxable service are taxable.
68.3. Persons engaged in the business of taking photographs and who also develop the film are engaged in a manufacturing activity to the extent they develop film. For purposes of this regulation, the activity of developing film includes the making of prints.
68.4. Persons engaged in a manufacturing activity are taxable on their purchases except for items directly used in the manufacturing activity. Other items which are not integral or essential to the manufacturing activity, but which are instead considered to be incidental, convenient or remote to the manufacturing activity, are taxable. Guidelines for determining what is considered to be "directly used" are given in Sections 2 and 123 of these regulations.
68.5. Persons engaged in a manufacturing activity must either pay the tax and request a refund or credit or use a direct pay permit to obtain exemption on goods and services directly used in their manufacturing activity. An exemption certificate, as well as a direct pay permit, may be used to obtain an exemption on purchases of goods and services for resale. A person who takes photographs and develops film of others is considered to be engaged in multiple business activities. Such persons may need to apportion purchases between taxable activities and those which are exempt. See Section 9d of these regulations for further information regarding apportionment.
68.6. If a direct pay permit is presented to the vendor, no tax is charged on the sale of tangible personal property or service rendered to the purchaser. The person using the direct pay permit must keep a record of the purchases made using the direct pay permit and whether the items purchased were used in an exempt or taxable manner.
68.7. Pursuant to Section 9c.7 of these regulations, a direct pay permit consumers sales and service tax return and a direct pay use tax return must be filed on a monthly basis by the direct pay permit holder, together with the tax due on taxable purchases made using the direct pay permit.
W. Va. Code R. § 110-15-69 Parking
69.1. Persons engaged in the business of offering parking spaces to the public for a fee are performing a service subject to the consumers sales and service tax and use tax. Tax must be collected unless the purchaser presents a properly executed exemption certificate or direct pay permit number. Government-owned and operated parking facilities which compete with private businesses are also rendering a service subject to the consumers sales and service tax and use tax. The fee charged for parking spaces which are rented for a period in excess of thirty (30) consecutive days are not subject to the consumers sales and service tax or use tax.
69.2. Purchases of tangible personal property or taxable services for use or consumption in the business of selling a taxable service are taxable.
W. Va. Code R. § 110-15-70 Fraternity and Sorority Houses
70.1. Food sold by and rooms rented by student fraternities and sororities that are officially recognized by the college or university at which they are located, to a student enrolled at the college or university are exempt if the food is sold or a room is rented on a "contract basis." Food or meals sold to the general public or on any other basis other than a "contract basis" are subject to consumers sales and service tax. For further information, See Section 9.2.11 of these regulations.
Food is sold on a "contract basis" only when a fixed price is paid for consumption of food products during a specific period of time without regard to the amount of food product actually consumed by the particular individual contracting for the purchase and no money is paid at the time the food product is served or consumed. The term "specific period of time" means a time period of not less than thirty (30) consecutive days.
70.2. Charges made by a fraternity or sorority to its members for room rental are exempt from consumers sales and service tax if the rental is for no less than thirty (30) consecutive days.
70.3. "Bona fide dues" paid by members of a fraternity or sorority solely for the privilege of obtaining and maintaining membership in a fraternity or sorority are not subject to the consumers sales and service tax. "Bona fide dues" within the context of this regulation mean only those amounts periodically paid by members which entitle such persons to membership in a fraternity or sorority. "Bona fide dues" do not include any amounts paid for goods, or specific services rendered to members of a fraternity or a sorority. Amounts paid for goods or specific services rendered to members of a fraternity or a sorority are subject to the consumers sales and service tax, unless they are exempted under other provisions of the law or these regulations. The inclusion in bona fide dues of charges for services, tangible personal property or other benefits provided to members may cause the entire charge to be taxable.
70.4. Purchases of tangible personal property or services that are used or consumed in the business of selling tangible personal property or taxable services are subject to the consumers sales and service tax and use tax except for purchases for resale. Purchases by a fraternity or sorority of food for meals is not considered to be a purchase for resale.
W. Va. Code R. § 110-15-71 Advertising Agencies
71.1. Advertising agencies render services, such as layout and artwork services, which are subject to the consumers sales and service tax and use tax and, in some instances, also engage in the selling of tangible personal property.
71.2. Advertising agencies who purchase items on behalf of their clients, and receive a fee or commission for such services, must collect consumers sales and service tax or use tax on such fee or commission unless the client may issue an exemption certificate or direct pay permit.
71.3. Purchases made by advertising agencies on behalf of a client may or may not be subject to consumers sales and service tax and use tax. Purchases of radio and television broadcasting time, preprinted advertising circulars, newspaper and outdoor advertising space for the advertisement of goods or services are exempt from the consumers sales and service tax and use tax. However, the purchase of other items such as posterboards and signs may be taxable unless the client can issue an exemption certificate or direct pay permit.
W. Va. Code R. § 110-15-72 Organizations Which Qualify or are Qualified Under I.R.C. '501(c)(3) and '501(c)(4) of the Internal Revenue Code
72.1. Sales to Section 501(c)(3) or 501(c)(4) Organizations.
72.1.1. Sales of tangible personal property or services to a bona fide charitable organization which makes no charges for the services it renders are exempt from the consumers sales and service tax and use tax.
72.1.1.1. This exemption applies only to services, equipment, supplies, food for meals and materials which are directly used or consumed by the organization.
72.1.1.2. This exemption does not apply to purchases of gasoline and special fuels.
72.1.1.3. With the exception of purchases of food, this exemption may be claimed by the organization providing its direct payment permit number to the vendor or by the organization paying the tax and claiming a refund from the Tax Department.
72.1.2. Sales of tangible personal property or services to a corporation which charges for its services may be exempt from the consumers sales and service tax and use tax if it has a current registration certificate issued under the authority of W. Va. Code '11-12-1 et seq., it is exempt from federal income taxation as a corporation qualified under I.R.C. '501(c)(3) or '501(c)(4), and it satisfies the requirements of either the following Section 71.1.2.1 or Section 72.1.2.2.
72.1.2.1. A corporation or organization which receives more than one-half of its support from any combination of gifts, grants, direct or indirect "charitable contributions" (as defined in Section 2 of these regulations), or "membership fees" (as defined in Section 2 of these regulations). The other items included in the term "support," as defined in Section 2 of these regulations, regardless of how they may be combined must total less than 50% of all support provided to the corporation or organization in order for its purchases to be exempt.
72.1.2.2. An organization which has no paid employees and its gross income from fund raisers, less reasonable and necessary expenses incurred to raise such gross income (or the tangible personal property or services purchased with such net income) is donated to an organization which is exempt from income taxes under I.R.C. '501(c)(3) or '501(c)(4).
72.1.3. No corporation or organization may avail itself of the exemption in Sections 9.3.10 and 72.1.2 of these regulations unless it has in fact been qualified as a Section 501(c)(3) or Section '501(c)(4) corporation or organization by the Internal Revenue Service however, a corporation which has not been qualified under Section 501(c)(3) or Section '501(c)(4) but which seeks to avail itself of the exemption in Sections 9.4.6 and 72.1.1 of these regulations may seek a written ruling from the Tax Commissioner as provided in Section 72.1.3.1 of these regulations.
72.1.3.1. If the taxpayer seeking to avail itself of the exemption in Sections 9.4.6 and 72.1.1 of these regulations is not, in fact, qualified by the Internal Revenue Service, but does, in fact, meet the requirements for qualification, then such corporation or organization shall file with the State Tax Commissioner a statement, in writing, verified under oath setting forth such information as the Tax Commissioner shall need to make a determination. Such written statement shall be supported by a copy of the corporation's articles of incorporation and by-laws or similar documents in the case of a non-incorporated organization. If the Tax Commissioner believes such proof to be sufficient, he will at his discretion, issue a written ruling granting exemption to such corporation or organization.
72.1.3.2. Where the taxpayer has received a determination or ruling from the Internal Revenue Service that it is exempt from tax under either Section 501(c)(3) or Section '501(c)(4) of the Internal Revenue Code of 1986, as amended, it shall file a copy of such ruling or determination with the West Virginia State Tax Commissioner.
72.1.4. The exemption provided in the foregoing Section 72.1.2 applies only to services, equipment, supplies and materials used or consumed in the activities for which such corporation or organization qualifies as tax exempt under the Internal Revenue Code.
72.1.4.1. This exemption does not apply to sales of gasoline or special fuels.
72.1.4.2. This exemption does not apply to sales of tangible personal property or services to be used or consumed in the generation of unrelated business income as defined in I.R.C. '513.
72.1.5. The corporation or organization may claim the exemption provided in Section 72.1.2 of these regulations by issuing to the vendor a properly completed exemption certificate as provided in Section 6 of these regulations.
72.2. Sales by Section 501(c)(3) or 501(c)(4) Organizations.
72.2.1. A corporation or organization which is exempt under the authority of W. Va. Code '11-15-9(f) from the payment of consumers sales and service tax and use tax on its purchases of tangible personal property or taxable services is per se exempt from the collection and remittance of the consumers sales and service tax and use tax on its "casual and occasional sales" as defined in Section 2 of these regulations.
W. Va. Code R. § 110-15-73 Distributors of Gasoline and/or Special Fuel
73.1. Persons engaged in the business of distributing gasoline and/or special fuel must collect consumers sales and service tax and use tax upon the sale of such products unless they receive an exemption certificate from the purchaser or the purchaser is a purchaser of a bulk sale qualified under Section 11.5 of these regulations; however, if the purchaser is a government entity or is another purchaser purchasing for resale, no exemption certificate is required. Direct pay permits may not be used by a purchaser to obtain an exemption from consumers sales and service tax or use tax on gasoline and/or special fuel.
73.2. Purchases for use in business by a distributor of gasoline or special fuel are taxable except for purchases for resale, for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-74 Reserved for Future Use
W. Va. Code R. § 110-15-75 Weight Loss Programs
75.1. Depending upon the nature of activities which comprise a weight loss program, such program, in whole or in part, may be exempt from the sales and service tax. In general, however, the cost of an individual's participation in a weight reduction program that is not for the purpose of curing any specific ailment or disease, but for the purpose of improving the individual's appearance, general health and sense of well being, is not exempt from the sales and service tax. To the extent that some of the activities incorporated into such a program may be classified as either professional or personal services, the charge for such services will be excepted from the tax if separately stated; those charges not separately stated may be subject to tax.
75.2. The charges by a physician for performing a physical examination on a customer, for interpreting the results of different tests performed on a customer and for otherwise using his professional judgment or knowledge for the purpose of monitoring the progress of a customer are not subject to the sales and service tax. Additionally, the charges rendered for the use of a registered professional nurse in monitoring the customers blood pressure, weight, pulse, etc., are excepted from the tax. However, charges made for counseling customers to continue in the program, sales of dietary products or other tangible personal property are subject to the sales and service tax.
75.3. Charges for performing tests when such tests are performed in a medical laboratory operated under the specific direction of one or more professional physicians are excepted from the sales and service tax; however, charges rendered by any other medical laboratory are subject to the tax. The location of the medical laboratory is irrelevant so long as the laboratory meets the criteria established in this subsection 75.3.
75.4. Only those purchases by a customer of dietary products and other tangible personal property which are classified as medicine and which qualify under Internal Revenue Code '213 as medicine for purposes of inclusion in medical expenses when calculating itemized deductions for federal income tax are exempt from the sales and service tax. All other sales to customers of tangible personal property are subject to the tax.
75.5. All other charges rendered for some aspect of a weight loss program are subject to the sales and service tax unless exempted by another section of these regulations.
W. Va. Code R. § 110-15-76 Electronic Data Processing Services and Related Software
76.1. Sales of electronic data processing services and related software to others are exempt from consumers sales and service tax and/or use tax. For purposes of this exemption, electronic data processing services means (1) the processing of another's data, including all processing such as key punching, keystroke verification, rearranging, or sorting of previously documented data for the purpose of data entry or automatic processing, and changing the medium on which data is sorted; and (2) providing access to computer equipment for the purpose of processing data or examining or acquiring data stored in or accessible to such computer equipment.
76.1.1. It is necessary to determine the nature of what is being purchased by the customer. For example, where a completely computerized billing service actually prints and mails the bills based on information provided by the client, receives collectibles and records the payments received, the service is taxable. The fact that a computer is utilized does not result in the service being exempt.
76.1.2. The purchase by customers of specialized computer software which allows the customers terminals to communicate directly with a central processing unit of another is exempt if that is the only use of such software.
76.1.3. The purchase of other software which merely provides information to assist the customer in making business decisions is taxable.
76.2. Purchases for use in rendering electronic data processing services for others and the purchase of related software are taxable, except for purchases for resale, for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-77 Sales of Data Processing Equipment
77.1. Sales of electronic data processing equipment, accessories, related materials, and/or supplies are considered to be sales of tangible personal property and thereby are subject to the consumers sales and service tax and use tax laws, unless the purchaser presents a direct pay permit number or a properly executed exemption certificate.
77.2. A seller of tangible personal property is exempt from consumers sales and service tax and/or use tax only on items purchased for resale for which an exemption certificate may be issued. All other purchases for use in business are taxable unless otherwise exempt.
W. Va. Code R. § 110-15-78 Physical Fitness Centers
78.1. Physical fitness centers, gymnasiums, and other such programs are engaged in the business of rendering personal services exempt from tax only if they meet all of the requirements set forth in Section 8.1.2.3 of these regulations.
78.2. Even if physical fitness programs are exempt as personal services, they are exempt only for the sale of the personal services. Sales of any other services which are not personal services, as well as sales of any tangible personal property such as sweatshirts, lotions, cassettes or any other items, are taxable.
78.3. Persons who are engaged in providing personal services are taxable on their purchases for use in the personal service portion of their business. Except for items purchased for resale, purchases for use in any portion of the business related to selling taxable services or tangible personal property are also taxable. An exemption certificate may be issued for items purchased for resale.
W. Va. Code R. § 110-15-79 Tanning Salons
79.1. Persons engaged in the business of selling tanning sessions are licensing for use, tangible personal property. Licenses for use of tangible personal property are considered to be sales of tangible personal property and are subject to the consumers sales and service tax and use tax.
79.2. A tanning session, as commonly performed within the industry, is not a personal service. A tan is provided solely by the tanning bed with no direct physical contact required from the attendant. The actual service is performed by the machine. A service performed solely by a machine is not rendered from one person to another, and, thus is not a personal service.
79.3. Persons engaged in the selling of tanning sessions are taxable on their purchases for use in business, except for any purchases for resale, for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-80 Masseuses and Masseurs
80.1. Massaging is considered to be a personal service. Therefore, the consumers sales and service tax should not be collected on the activities of kneading, rubbing or manipulating to condition the body. However, should the masseuse or masseur in the course of his or her business sell tangible personal property, such as oils, towels, or sheets to his or her clients, these sales would be subject to consumers sales and service tax.
80.2. Persons engaged in providing massage services are taxable on their purchases for use in the personal service portion of their business. Purchases for use in the portion of the business related to the selling of tangible personal property are also taxable, except for purchases for resale, for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-81 Travel Agencies
81.1. Charges for services provided by travel agencies (such as arranging for motel accommodations, meal accommodations, reservation of rental cars, booking cruises, reserving airline tickets, arranging bus tours or selling passage on international tours for their clients) are subject to tax. However, sales of or charges for the transportation of passengers in interstate commerce are exempt from the consumers sales and service tax and use tax. This is to be distinguished from charges for intrastate commerce which remains taxable unless otherwise exempt. For example, if a travel agency sells a roundtrip ticket from Charleston, West Virginia to Washington, D.C. and back, that sale would be exempt as a sale of transportation in interstate commerce, but any commission earned by the agency for that sale would not be exempt. But if the agency sells a roundtrip ticket from Charleston, West Virginia to Morgantown, West Virginia, then both the ticket sale and the commission would be taxable, because the transportation was in intrastate commerce.
81.2. A travel agency that arranges group tours should pay tax on items purchased on behalf of their clients at the time of purchase and should collect and remit consumers sales and service tax on any gross profit realized on the package deal. For example, tax should be paid on the purchase of hotel rooms on behalf of clients at the time of purchase, and tax should be collected on the gross profit from the sale of the package deal, including hotel room costs. "Gross profit" in this situation is the gross receipts from the sale, exclusive of the actual direct costs to the agency of the items in the package deal, but not exclusive of overhead costs and other ordinary costs of doing business.
81.3. Commissions earned by the travel agency from services provided to various businesses such as hotels, airlines, and bus lines are subject to sales and service or use tax. These persons should either collect and remit the tax due on these commissions or obtain a direct pay permit number from the entity for whom the service was rendered.
81.4. Persons engaged in rendering travel agency services are taxable on their purchases for use in their business.
W. Va. Code R. § 110-15-82 Barber and Beauty Shops
82.1. Barber and beauty shop operators are engaged primarily in a personal service occupation, and thus, are not required to collect consumers sales and service tax on such services. However, barbers, beauticians, manicurists, etc., consume various items of tangible personal property and services, in the rendition of their personal services. The purchases of all such services and property, including equipment, are subject to the consumers sales and service tax.
82.2. If, apart from rendering personal services, barbers, beauticians, manicurists, etc., are engaged in selling to the public such articles as shampoos, conditioners, styling aids and accessories, and the like, they are vendors and must collect the consumers sales and service tax on all such sales. Barbers, beauticians, manicurists, etc., can issue an exemption certificate for purchases of property for resale to customers.
W. Va. Code R. § 110-15-83 Reserved For Future Use
W. Va. Code R. § 110-15-84 Interior Decorating
84.1. Persons engaged in the performance of interior decorating are considered to be rendering a service subject to the consumers sales and service tax and use tax and must collect and remit tax on these services. Interior decorators are taxable on their purchases of tangible personal property and services for use in the conduct of their business unless such purchases of tangible personal property qualify as purchases for resale. See Section 9.3.4 of these regulations regarding purchases for resale.
W. Va. Code R. § 110-15-85 Bookkeeping
85.1. A person who performs general bookkeeping and accounting services for businesses or other individuals, who is neither a certified public accountant or licensed public accountant, is considered to be rendering a service subject to the consumers sales and service tax and use tax.
85.2. Bookkeepers are taxable on their purchases of tangible personal property and services for use in the conduct of their businesses.
W. Va. Code R. § 110-15-86 Auctioneers, Auction Sales, Auctions
86.1. An auctioneer licensed under W. Va. Code '19-2C-1 et seq. when commissioned to sell property on behalf of another is not providing a service which is subject to the consumers sales and service tax.
86.2. Auctioneers who, in the conduct of their business, hold repeated auction sales at their place of business are responsible for collection and remittance of consumers sales and service tax on the full price of the sales, irrespective of whether the merchandise sold belongs to them or to another person unless the isolated transactions exemption set forth in Section 9.2.5 of these regulations applies.
86.3. In those instances in which a person hires an auctioneer to auction the furnishings from the owner's farm or home, the sales are exempt if they are an "isolated transaction" as defined in Section 2 of these regulations. (The same is true of sheriffs' sales and sales under chattel deeds of trust.) For example: a person may sell items of tangible personal property on four separate occasions (four isolated transactions) during the year through an auctioneer, notwithstanding the fact that the auctioneer may have made numerous sales for his other clients during the year far in excess of the number allowable under this definition. However, although no consumers sales and service tax would be imposed on the monetary consideration received for the sale of furnishings by an auctioneer in an isolated transaction, consumers sales and service tax would be imposed on the fees or commissions charged for the sale of auctioneering services by an auctioneer not licensed in accordance with W. Va. Code '19-2C-1 et seq. to the owner of the furnishings sold: Provided, That the auctioneer licensed in accordance with W. Va. Code '19-2C-1 et seq. is not required to collect sales tax on such fees or commissions.
86.4. An auctioneer is taxable in all of his or her purchases except purchases for resale. See Section 9.3.4 of these regulations regarding purchases for resale.
W. Va. Code R. § 110-15-87 Real Estate Brokers and Real Estate Salesmen
87.1. Any real estate broker or real estate salesman who is licensed by the West Virginia Real Estate Commission is providing professional services excepted from the imposition of the consumers sales and service tax and use tax when rendering services which require such a license.
87.2. Those persons engaged in the business of appraising real estate who do not hold a valid West Virginia real estate license and cannot therefore render certified appraisals are not providing a professional service. As a result, such persons will continue to be required to collect consumers sales and service tax and use tax on the sale of their services.
87.3. Purchases for use in business made by a person rendering taxable services, regardless of whether such person holds a valid West Virginia Licensed Real Estate Appraiser license or a Certified Real Estate Appraiser license issued in accordance with W. Va. Code '37-14-1 et seq., are taxable, except for purchases for resale for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-88 Commodity Brokers
88.1. Fees or commissions earned from transacting business as a commodity broker are services which are subject to the consumers sales and service tax and use tax. The fact that these fees may be computed as a percentage of sales has no bearing on their taxability. These fees or commissions are not considered to be "directly used or consumed" (as defined in Section 2 of these regulations) in the businesses of transportation, production of natural resources, transmission, communication, and manufacturing.
W. Va. Code R. § 110-15-89 Delivery Charges
89.1. Separately stated delivery charges are subject to the consumers sales and service tax, unless the delivery service is provided by a common carrier subject to regulation by the Public Service Commission and the customer pays the delivery charge directly to the common carrier. However, where the vendor purchases delivery or shipping service from the common carrier and the customer pays to the vendor the cost for shipping and handling, the total amount of all such shipping and handling charges is taxable to the customer because the customer is purchasing such services from the vendor.
W. Va. Code R. § 110-15-90 Jewelry, Furniture, Hardware, Dry Goods, Apparel Stores
90.1. Jewelry, furniture, hardware, dry goods and apparel stores make sales of tangible personal property that are subject to consumers sales and service tax and use tax.
90.2. Any trade-in given by the customer must be credited against the price paid. To illustrate: The purchase price of a sofa is $800 and the purchaser has a sofa with a trade-in value of $50. The consumers sales and service tax would be computed on $750.
90.3. Purchases for use solely in the business of selling tangible personal property or taxable services are taxable except for purchases for resale, for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-91 Restaurants and Bars
91.1. All sales of food and beverages, and cover charges made by a restaurant or bar are subject to consumers sales and service tax. Banquet gratuities, which are fully distributed to employees, are not subject to consumers sales and service tax.
91.2. Persons engaged in the business of operating a restaurant or bar are considered to be retailers, and, thus, their purchases for use in business are subject to consumers sales and service tax, except for purchases for resale, for which an exemption certificate may be issued. Purchases for resale include food as defined in Section 2.30 of these regulations as well as items which are primarily intended to be transferred to the customer as part of the sale, such as paper bags, food containers, paper cups, straws, disposable napkins, and plastic forks, knives, and spoons. Purchases for resale exempt from the sales and service tax do not include purchases of alcoholic liquors, wines and fortified wines as defined in Chapter 60 of the Code which are purchased from either the Alcoholic Beverage Control Commissioner or a retail liquor licensee. Items which are reusable such as cloth napkins, ceramic plates and metal silverware are subject to tax. See Section 32.6 of these regulations.
W. Va. Code R. § 110-15-92 Drugs
92.1. Sales of drugs dispensed upon written prescription and sales of insulin to consumers for medical purposes are exempt from consumers sales and service tax. The term "drug" shall include all sales of drugs or appliances to a purchaser, upon written prescription of a physician or dentist and any other professional person licensed to prescribe. This is a per se exemption and no exemption certificate or direct pay permit is needed to obtain the exemption.
92.2. Drugs sold to hospitals, licensed physicians, nursing homes, etc., which are to be consumed in the performance of a professional service are subject to consumers sales and service tax.
92.3. Sales to consumers of non-prescription drugs are subject to consumers sales and service tax.
W. Va. Code R. § 110-15-93 Farm Equipment
93.1. Sales of farm equipment (tractors, tractor implements, combines, seeders, thrashing machines, etc.) to persons engaged in the commercial production of an agricultural product are exempt from consumers sales and service tax. An exemption certificate can be issued by a commercial producer to obtain this exemption.
93.2. The phrase "commercial production of an agricultural product" means a farming operation undertaken for profit by raising crops or livestock. Production of agricultural products begins with the cultivation of land previously cleared for planting of crops or with the purchase or breeding of livestock or domesticated fowl. The production of agricultural products ceases when an agricultural product has been transported to the point where it will be sold by the farmer or processed.
93.3. This exemption does not apply to purchases for use or consumption in the construction of or permanent improvement to real property or to purchases of gasoline or special fuel.
W. Va. Code R. § 110-15-94 Service Stations
94.1. Persons engaged in the business of operating a gasoline service station and making automotive repairs are making sales of tangible personal property and rendering services subject to consumers sales and service tax and use tax.
94.2. Automotive repairs which include parts and installation labor are subject to tax. Parts sold without installation or labor are also subject to tax. Tax must be collected unless an exemption certificate or direct pay permit is given by the customer.
94.3. A person engaged in the business of selling a taxable service and taxable tangible personal property is taxable on all of his purchases except purchases for resale.
W. Va. Code R. § 110-15-95 Grocery Store Coupons
95.1. Since a store is reimbursed by the manufacturer for the amount of a manufacturer's coupon, the consumers sales and service tax is computed on the gross sales price without any deduction for the coupon. To illustrate: a box of laundry detergent sells for $2.50 and the purchaser has a manufacturer's coupon worth $.50. The consumers sales and service tax is computed on the gross sales price of $2.50.
95.2. In the case of coupons issued by a grocery-type store for its own product, the amount of the coupon is not subject to consumers sales and service tax. To illustrate: a box of laundry detergent sells for $2.50 and the purchaser has a coupon issued by that store worth $.50. The consumers sales and service tax is computed on the net sales amount of $2.00. This is considered to be a discount given by the store.
W. Va. Code R. § 110-15-96 Mineral Royalties
96.1. Owners of minerals in place who lease the right to another party to mine the minerals are receiving a royalty, which is payment for intangible personal property and is not subject to the consumers sales and service tax or use tax.
W. Va. Code R. § 110-15-97 Trailer Parks
97.1. Persons operating trailer parks who lease space on a temporary basis must collect and remit consumers sales and service tax on such rental fees. However, fees charged for the leasing of space on a permanent basis are not subject to the tax. For purposes of this regulation, leasing on a permanent basis is defined as a leasing of space for a period exceeding thirty (30) consecutive days. Where a person leasing space provides other services to the lessees, that person must collect and remit consumers sales and service tax on charges for such services regardless of whether the space is being leased on a temporary or permanent basis.
W. Va. Code R. § 110-15-98 Medical Laboratories
98.1. Medical laboratories operated under the direction of professional physicians, are deemed to be providing professional services and thus are not required to collect and remit consumers sales and service tax on their fees. However, medical laboratories are required to pay consumers sales and service tax and use tax on purchases for use in their business, except for purchases for resale for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-99 Professionals - Lawyers, Doctors, Etc
99.1. Persons who are engaged in a business and are deemed to be professionals, such as lawyers, doctors, and any other person considered to be a professional pursuant to Section 8.1.1 of these regulations, are not required to collect and remit consumers sales and service tax on their services rendered or on any sales of tangible personal property incidental to such services. However, such professionals must pay consumers sales and service tax on all purchases for use in their business, except for purchases for resale when the resale is a nonprofessional sale subject to the consumers sales and service tax, for which an exemption certificate may be issued.
99.2. Persons who provide continuing professional education and self-study courses leading to satisfactory fulfillment of continuing professional education requirements may be considered to be professionals.
99.2.1. A professional nonprofit organization or other person providing continuing professional education courses to members of a recognized profession is itself engaged in the provision of professional services which are excepted from the consumers sales and service tax. However, the nonprofit professional organization rendering professional services must pay consumers sales and service tax on all sales to it of tangible personal property (including leases thereof) or taxable services unless the transactions are otherwise exempt.
99.2.2. Meals, food and beverages and written materials, provided as an incidental component of a course of continuing professional education the cost of which is included in the registration fee charged the participant or purchaser of the continuing professional education, are excepted from the consumers sales and service tax as an integral part of the professional services.
99.2.3. Written course materials, purchased separately from the professional nonprofit organization, which qualify for continuing professional education credits, also constitute the provision of professional services and are exempt from consumers sales and service tax when the purchaser obtains continuing professional educational credit in conjunction with such purchase through the use of such written materials. If written materials are purchased by a professional primarily for reference, and no professional education credit is provided, such purchase of written materials is subject to consumers sales and service taxes.
99.2.4. If a sale of tangible personal property or taxable services by a West Virginia vendor is exempt from consumers sales and service tax, a sale of the same nature is exempt from West Virginia use taxes when the sale is made by an out-of-state vendor. If the sale by a West Virginia vendor is taxable for consumers sales and service tax purposes, then the sale of the same or similar property or services by an out-of-state vendor will be subject to West Virginia use taxes, with credit being allowed for consumers sales and service taxes lawfully paid on the transaction to another state. Whether the vendee pays use tax to the vendor or remits it directly to the Tax Commissioner depends on: (1) whether the out-of-state vendor is authorized or required to collect West Virginia use taxes; (2) whether the exemption is a refundable exemption or one for which an exemption certificate may be given; and (3) whether the vendee has and uses its West Virginia direct pay permit number.
W. Va. Code R. § 110-15-100 Flight Instruction
100.1. Instructing students to fly is a service which is exempted from the consumers sales and service tax as a professional service. Sales of textbooks required for the course and furnished by the instructor are incidental to the providing of the course are exempt. However, charges for sales of instructional aids are taxable. Examples of taxable charges are sales of textbooks not required to be used in the course of instruction and sales of navigation plotters, calculators, etc.
100.2. All purchases of property or services including exempt textbooks for use in the conduct of this type of business are taxable, except for purchases for resale (upon which tax is collected from the ultimate consumer), for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-101 Dance Instruction
101.1. Income received for instruction in dancing is a service subject to the consumers sales and service tax.
101.2. Sales and service tax must be paid on all purchases of tangible personal property and services which are used in this type of business, except for purchases for resale subject to tax upon sale to the ultimate consumer for which an exemption certificate may be issued.
W. Va. Code R. § 110-15-102 Consultants
102.1. Persons engaged in the business of providing consulting services, who are considered professionals in their fields, such as doctors, lawyers or any other activity deemed to be professional pursuant to Section 8.1.1 of these regulations, are not required to collect and remit consumers sales and service tax on their fees charged for professional consulting services. Consultants not rendering professional services are responsible for collecting and remitting the tax on their services. Services provided by consultants who are deemed professional in accordance with Section 8.1.1 of these regulations, which do not fall within the scope of the consultant's professional expertise, are subject to the tax.
102.2. For example, the service of making copies or conducting survey polls would not require a professional expertise, and would, therefore, be subject to tax.
102.3. Consultants, whether classified as professionals or nonprofessionals, are required to pay consumers sales and service tax and use tax on all purchases of tangible personal property and taxable services for use in their business.
W. Va. Code R. § 110-15-103 Exterminators
103.1. Persons engaged in the business of exterminating insects, rodents, or other pests are engaged in rendering a service subject to consumers sales and service tax and use tax. When tangible personal property is transferred to the customer in the rendition of such services, the tax must be computed upon the total price or charge.
103.2. Persons engaged in repairing or replacing real property damaged by insects, rodents, etc., may be engaging in contracting activity exempt from the consumers sales and service tax and use tax. Purchases of tangible personal property and taxable services for use or consumption in the contracting activity. See Section 107 of these regulations.
103.3. Purchases of tangible personal property or services used in the business of dispensing a service subject to the consumers sales and service tax are taxable.
103.4. Purchases for use in business made by exterminators, who also engage in an exempt activity such as contracting, may be totally taxable or partially taxable, depending on their use. To determine how much tax should be remitted, the purchase price must be apportioned between taxable and nontaxable activities, as described in Section 9d of these regulations.
W. Va. Code R. § 110-15-104 Plane and Boat Rides
104.1. Fees charged for the transportation of individuals on excursions, sight-seeing trips, business trips and the like by persons, who are not subject to regulation by the West Virginia Public Service Commission, are subject to the consumers sales and service tax: Provided, That sales for the transportation of passengers in interstate commerce are per se exempt.
104.2. Purchases of tangible personal property or services for use in the business of selling a service subject to the consumers sales and service tax are taxable.
W. Va. Code R. § 110-15-105 Insurance Agencies
105.1. Sales tax does not apply to sales of insurance by insurance agencies. The sale of insurance is a sale of an intangible and, thus, is not subject to the consumers sales and service tax and use tax.
105.2. All purchases for use in business made by insurance agencies are subject to consumers sales and service tax and use tax unless specifically exempt.
W. Va. Code R. § 110-15-106 Natural Resource Brokers
106.1. Fees or commissions earned from transacting business as a natural resource broker are subject to the consumers sales and service tax and use tax.
106.2. Tax must be collected on these fees unless an exemption certificate or a direct pay permit is presented by the purchaser.
W. Va. Code R. § 110-15-107 Contracting: General Rules
107.1. Application. - This regulation prescribes the rules which persons engaged in the business of contracting must follow to comply with this State's consumers sales and use tax laws, W. Va. Code ''11-15 and 11-15A. The word "contracting" as used herein is a word of art. It is important for the taxpayer to first determine whether he is engaged in contracting activity as outlined in these regulations before applying these rules to his activities. A person who provides contracting services does not collect consumers sales or use tax from his customer on the gross proceeds he derives from providing the contracting service. Such persons are generally taxable on all of their purchases of tangible personal property or taxable services for use or consumption in providing the tax exempt contracting service. Leases of tangible personal property are also taxed. For a person engaged solely in the business of contracting, these rules are not difficult. Frequently, however, persons engaged in the business of contracting are also engaged in other business activities which are subject to different rules. A person engaged in two or more business activities or in different types of contracting must learn what the different rules are and when they apply. Otherwise, such person may find that he has overpaid or underpaid his consumers sales and use tax liability. For example, a person engaging in tax exempt contracting activity may also provide taxable repair services or sell tangible personal property. While a person engaging in tax exempt contracting must generally pay consumers sales and use taxes on his purchases of tangible personal property for use or consumption in that activity, a person providing taxable services or selling tangible personal property may purchase tangible personal property for resale and give the supplier an exemption certificate in lieu of paying the tax thereon. Special rules exist for persons who engage in the following activities:
107.1.1. Contractors who are subject to the transition rules. See Section 108 of these regulations for a detailed explanation of these rules.
107.1.2. Contracting for governmental entities. See Section 109 of these regulations for a detailed explanation of these rules.
107.1.3. Installation of certain tangible personal property where the installation thereof is incidental to the sale thereof by a retail dealer. See Section 114 of these regulations for a detailed explanation of these rules.
107.1.4. Contractors who produce or manufacture tangible personal property which is used or consumed in their contracting activity. See Section 112 of these regulations for a detailed explanation of these rules.
107.1.5. Installation of tangible personal property. See Section 111 of these regulations for a detailed explanation of these rules.
107.1.6. Maintaining, servicing or repairing tangible personal property. See Section 115 of these regulations for a detailed explanation of these rules.
107.1.7. Maintaining, servicing, repairing, altering, improving, or decorating of buildings, structures or real property. See Section 116 of these regulations for a detailed explanation of these rules.
107.1.8. Contracting by nonresident persons. See Section 110 of these regulations for a detailed explanation of these rules.
107.1.9. Contractors who engage in producing natural resources or in reclamation, waste disposal or environmental activities associated with the production of natural resources. See Section 123 of these regulations for a detailed explanation of these rules.
107.2. Basic Rules Relating to Contracting.
107.2.1. "Contracting" Defined. - Effective July 1, 1989, "Contracting" means the furnishing of work, or both material and work, for another by a contractor in fulfillment of a contract for the construction, alteration, repair, decoration or improvement of a new or existing building or structure (or any part of a building or structure), or for the removal or demolition of a building or structure (or any part of a building or structure), or for the alteration, improvement or development of real property, but only when such activity results in a capital improvement to a building or structure or to real property. When such activity does not result in a capital improvement, the activity is a taxable service.
107.2.1.1. By statute, merchants who sell certain types of tangible personal property from their inventory and as part of the sale agree to install the property or to arrange for its installation are not engaged in contracting. See Section 114 of these regulations for further discussion of this rule.
107.2.1.2. Generally, subcontractors who furnish services to prime contractors in fulfillment of the prime contractors contract resulting in a capital improvement to a building or other structure or to real property are treated as contractors. See Section 107.2.7.2. However, subcontractors who are "retail dealers" within the guidelines set forth in Section 114 of these regulations, who furnish tangible personal property with incidental installation, remain retailers and must charge the sales and service tax on these types of sales to prime contractors.
107.2.1.3. Other Definitions. - The definitions of other terms relevant to this regulation may be found in Section 107.3 of these regulations.
107.2.2. "Contractor" Defined. - A contractor is any person who is engaged in the business of contracting. The phrase "person who is engaged in the business of contracting" as used herein means any person who offers contracting service to the public or to others for a consideration, whether such person offers the contracting service continuously, part-time, seasonally or for short periods. A contractor may be a prime contractor, subcontractor, general contractor or specialty contractor.
107.2.2.1. Persons who provide taxable services to contractors in fulfillment of contracts resulting in a capital improvement to a building or structure or to real property are treated as contractors. See Section 107.2.7.2.
107.2.3. Form of Contract Not Controlling. - Beginning July 1, 1989, the form of the contract is no longer controlling. Any activity that falls within the scope of contracting constitutes contracting for purposes of the West Virginia consumers sales and use tax laws regardless of whether the contract governing such activity is written or oral and regardless of whether the contract is in substance or form a lump sum contract, a cost-plus contract, a time and materials contract (whether or not open ended), or any other kind of contract.
107.2.3.1. Transition Rule for Open-Ended Time and Material Contracts. - Prior to July 1, 1989, certain time and material contracts for contracting type activity were not treated as contracting. The materials component of such a contract was treated as a sale of tangible personal property; and the labor component of the contract was treated as the providing of a taxable service. Prior law continues to apply to contracts entered into prior to July 1, 1989. This transition rule is discussed further in Section 108.1.1.1 of these regulations.
107.2.4. Imposition of Tax. - Unless otherwise noted, the consumers sales and use tax laws treat every contractor as the user or consumer of all tangible personal property or taxable services furnished to him or by him in connection with contracting activity. Since March 1, 1989, a contractor must pay consumers sales and use taxes on his purchases of tangible personal property or taxable services that are or will be directly used or consumed in the activity of contracting unless such purchases fall under one of the transition rules or are of materials used or consumed in contracting for a governmental entity. Contractors have been required, since July 1, 1987, to pay consumers sales and use taxes on all purchases of tangible personal property or taxable services not directly used in contracting unless such purchases fall under one of the transition rules. Contractors who produce or manufacture tangible personal property which they use or consume in their contracting activity must pay consumers sales or use taxes on the gross value of such produced or manufactured tangible personal property. See Section 111 for a detailed explanation of rules pertaining to contractors who produce or manufacture tangible personal property which they use or consume in their contracting activity.
107.2.5. Purchase of Materials and Supplies by Contractors. - For purposes of the consumers sales and use taxes, sales of materials or supplies to contractors for use or consumption in contracting activity are taxable. Except as provided elsewhere in these regulations, contractors purchasing materials or supplies must pay consumers sales and service tax at the time of the purchase. Special rules exist for purchases of materials for use in governmental contracting. See Section 109 for a detailed explanation of these rules.
107.2.6. Purchase or Lease of Tools or Equipment. - A contractor is considered the final user or consumer of all tools, equipment or machinery purchased to perform contracting services. Therefore, sales of tools, equipment or machinery to contractors to perform contracting services are subject to consumers sales and use taxes unless the sale is grandfathered under pre-March 1, 1989 rules contained in Section 108. Leases of tools, machinery or equipment by a contractor to perform contracting services are treated as purchases for consumers sales or use taxes.
107.2.6.1. Leases of tools, equipment or machinery by a contractor are not exempt from consumers sales and use taxes on the theory that the leased tangible personal property is an ingredient or component part of the services performed by the contractor. This result applies regardless of whether the services are taxable or are exempt from the consumers sales and use taxes because the service is contracting.
107.2.6.2. Nor are leases of tools, equipment or machinery by a contractor exempt from consumers sales and use taxes on the theory that the leased tangible personal property is consumed in the production of the service performed by the contractor, regardless of whether the services are taxable or are exempt from the consumers sales and use taxes because the service is contracting.
107.2.7. Purchases of Taxable Services.
107.2.7.1. Taxable services purchased by a contractor are subject to consumers sales or use taxes, unless such services are purchased by a contractor exclusively for use in fulfilling a contract which is grandfathered under pre-March 1, 1989 rules. Tangible personal property or services that were purchased exempt for use in fulfilling a contract which is grandfathered under pre-March 1, 1989 rules, that are later used in a contract other than a grandfathered contract may be partially taxable. See Section 108.5.2.
107.2.7.2. Generally, taxable services purchased by a contractor from a subcontractor in fulfillment of the prime contractors contract resulting in a capital improvement to a building or other structure or to real property are not subject to consumers sales or use tax. Subcontractors providing such services to a prime contractor are treated as contractors and are subject to consumers sales and use tax on their purchases for use in fulfilling the subcontract. However, subcontractors who are "retail dealers" within the guidelines set forth in Section 114 of these regulations, who furnish tangible personal property with incidental installation, remain retailers and must collect sales tax on these types of sales to prime contractors.
107.2.7.3. Taxable services include, but are not limited to, the following:
107.2.7.3.1. The fabrication of tangible personal property owned by the contractor for incorporation into a building or other structure or other improvement of real property.
107.2.7.3.2. Installation of wall-to-wall carpeting or other floor covering by a retail dealer of the carpeting or other floor covering as part of the sale thereof to the contractor.
107.2.7.3.3. Installing tangible personal property except where such installation is part of a capital improvement to a building or other structure or to real property.
107.2.7.3.4. Maintaining, servicing, or repairing real or tangible personal property owned or leased by the contractor, except when such activity results in a capital improvement to a building or structure or to real property.
107.2.7.3.5. Rental of equipment with an operator.
107.2.7.4. Examples.
Example 1. Homeowner hires ABC Construction to build an addition to his house. As part of the contract, ABC Construction is to paint not only the new addition to the home, but also to repaint existing adjoining rooms. ABC Construction subcontracts the painting to Rainbow Painting Co. Repainting of existing painted walls is normally a taxable service, while initial painting of new walls or structures is contracting because it constitutes a capital improvement. (See Section 117.16 of these regulations for a detailed explanation of the rules pertaining to painting and papering.) Although ABC Construction is a contractor, it does not pay tax on any of the painting services rendered by Rainbow Painting Co. Although the service provided by Rainbow Painting Co. of painting the existing rooms would by itself normally be a taxable service, it will not be taxable because it is performed as part of the prime contract for new construction, reconstruction, alteration, expansion, or remodeling which itself resulted in a capital improvement. Rainbow Painting Co. would be treated as a contractor and must pay tax on its purchase of paint and other tangible personal property used on the job. Rainbow Painting Co. may wish to obtain a prime contractor's certificate of capital improvement from ABC Construction to document why tax was not charged.
Example 2. Homeowner hires Rainbow Painting Co. to return to paint his upstairs rooms. Rainbow Painting Co. is providing a taxable service and should charge the Homeowner tax on both the paint and the labor. Rainbow Painting Co. may purchase the paint exempt from tax as a purchase for resale. The repainting of the upstairs rooms is a taxable service because it is not a capital improvement nor is it performed on or with new construction, alteration, expansion or remodeling which itself resulted in a capital improvement.
Example 3. Homeowner hires ABC Construction to build an addition to his house. During the construction, ABC Construction's truck breaks down. ABC Construction will pay tax to the repairman on the service work to the truck. The purchase of the service work from the repairman is not exempt from sales and use tax, because it is not a purchase of services from a subcontractor in fulfillment of a prime contract resulting in a capital improvement to a building, structure or real property.
107.2.8. Out-of-State Purchases.
107.2.8.1. The use in West Virginia of any materials or other tangible personal property or services purchased outside of West Virginia is taxable, subject to the credit allowed by W. Va. Code '11-15A-10a for sales or taxes lawfully paid to another state.
107.2.8.2. Nonresident Contractors should See regulation Section 110 of these regulations.
107.2.9. Purchase of Materials for Use in Performance of Contracts Out-of-State.
107.2.9.1. The purchase of materials in this State for use in erecting a building or other structure or improving real property of others located in another state are subject to West Virginia consumers sales and service taxes when such materials are picked up by the contractor in West Virginia.
107.2.9.2. Such purchases of materials are not subject to this State's consumers sales and service tax when they are delivered to an out-of-state job site by:
107.2.9.2.a. The supplier;
107.2.9.2.b. A common carrier; or
107.2.9.2.c. An unregulated carrier hired by the supplier.
107.2.10. Subcontractor's purchases and services. - Where a contractor (subcontractor) enters into a contract to perform specified operations for a second contractor (prime contractor):
107.2.10.1. The purchases of the subcontractor shall be treated in the same manner as purchases of a prime contractor.
107.2.10.1.a. Taxable services purchased by a subcontractor are subject to the consumers sales and use taxes.
107.2.10.1.b. Purchases of materials by subcontractors for use in fulfilling contracts with prime contractors are taxable unless the purchases are exclusively used in fulfilling contracts with a prime contractor fulfilling a contract with a governmental entity, who has authority to issue a government contractor's Materials Purchase exemption certificate or with a prime contractor fulfilling a contract grandfathered under pre-March 1, 1989 rules contained in Section 108. Tangible personal property or services that were purchased exempt for use in fulfilling a contract that is grandfathered under pre-March 1, 1989 rules, that are later used in a contract other than a grandfathered contract may be partially taxable. See Section 108.5.2.
107.2.10.1.b.1. Example. - Owner and Contractor entered into a written contract on February 10, 1989 to construct a building. On June 1, 1989, Contractor enters into a written contract with Subcontractor to complete a portion of the building. Purchases of tangible personal property and taxable services directly used by Subcontractor to complete his work on the building would be exempt from payment of consumers sales and service tax and use tax because such purchases are in fulfillment of the contract for contracting executed on February 10, 1989.
107.2.10.3. Services performed by a subcontractor for a prime contractor in fulfillment of the prime contractor's contract resulting in a capital improvement to a building or other structure or to real property are not subject to consumers sale and use taxes. The subcontractor should maintain adequate records or may obtain a certificate of capital improvement from the prime contractor to document that tax was not collected because the services were performed as part of a prime contract resulting in a capital improvement. (See Section 107.2.11 for information on certificates of capital improvement.) In situations where the subcontractor is providing services to a prime contractor in fulfillment of the prime contractor's contract resulting in a capital improvement to a building, structure or real property, the subcontractor will be treated as a contractor in relation to his purchases. The subcontractor must then pay tax on his purchases for use in providing the service to the prime contractor in a manner similar to other contractors.
107.2.11. Prime Contractor's Certificate of Capital Improvement. - Services performed by a subcontractor for a prime contractor in fulfillment of the prime contractor's contract resulting in a capital improvement to a building or other structure or to real property are not subject to consumers sales and use taxes.
107.2.11.1. However, sometimes a subcontractor doing work for a prime contractor may not know whether the prime contractor's obligation under the contract with his customer is for the providing of a tax exempt contracting service or a service which is taxable. To provide greater certainty for a subcontractors, a subcontractor may obtain a certificate of capital improvement from the contractor.
107.2.11.2. In general, a subcontractor who accepts a certificate of capital improvement in "good faith" is relieved of liability for collection or payment of tax upon transactions covered by the certificate. The question of "good faith" is one of fact and depends upon a consideration of all the conditions surrounding the transaction. Both the prime contractor and the subcontractor are presumed to be familiar with the law and regulations pertinent to the business in which he deals. In order for "good faith" to be established, the following conditions must be met:
107.2.11.2.a. The certificate must contain no statement or entry which the subcontractor knows, or has reason to know, if false or misleading.
107.2.11.2.b. The certificate must be an officially promulgated certificate form or a substantial and proper reproduction thereof.
107.2.11.2.c. The certificate must be dated and executed in accordance with the published instructions, and must be complete and regular in every respect.
107.2.11.3. A subcontractor may under these circumstances, accept this "good faith" certificate of capital improvement as a basis for not collecting consumers sales and service tax with respect to the transaction from the prime contractor.
107.2.12. Customer-Provided Materials. - If the contract calls for the customer to provide the materials, the contractor is not liable for tax on the materials. The customer should pay the consumers sales and use taxes to the supplier at the time the materials are purchased.
107.3. Definitions. - The following words and terms, when used in these regulations, have the following meaning unless the content in which the term is used clearly indicates that a different meaning is intended:
107.3.1. Alteration. - The term "alteration" means and is limited to an alteration which is a capital improvement to a building or structure or to real property.
107.3.2. Building Materials.
107.3.2.1. The term "building materials" means all tangible personal property, including any device or appliance used by builders, contractors, or landowners in making improvements, additions, alterations or repairs to a building or other structure or to real property in such a way that such tangible personal property becomes a part of the building or other structure or the realty.
107.3.2.2. A device or appliance becomes a fixture and a part of the building or other structure or the real property to which it is connected when it is built into or is attached to the property in such a way that its removal would substantially damage or deface such property.
107.3.2.3. Where the removal of the device or appliance would not substantially damage or deface the structure to which it is connected the following factors shall be considered:
107.3.2.3.a. Actual Connection with or Attachment. - To become a part of a building or structure or real property, the device the tangible personal property must have some physical connections such as: by bolts, screws, nails, cement, piping, or cable; by contact, where the tangible personal property is necessary to make complete or useable something which is a building or structure or real property; or by attachment to other tangible personal property which has become a part of a building or structure or real property.
107.3.2.3.b. Appropriateness to the Use or Purpose of the Building or Structure or Real Property to Which Connected. - The use or purpose of the tangible personal property must become an element of the use or purpose of the building or structure or real property to which it is connected.
107.3.2.4. This rule is not intended to apply to cook stoves, refrigerators, washing machines, and portable heaters, acquired for the personal use of householders or tenants which may be removed without material damage to the buildings in which they are used.
107.3.3. Capital Improvement.
107.3.3.1. The term "capital improvement" means an improvement that is affixed to or attached to and becomes a part of a building or structure or the real property or which adds utility to real property or any part thereof and that lasts, or is intended to be relatively permanent. As used herein, the term "relatively permanent" means lasting at least twelve (12) months or longer in duration without the necessity for regularly scheduled recurring service to maintain such capital improvement. "Regular recurring service" means regularly scheduled intervals of less than one (1) year. As used herein, the term "adds utility" means substantially adding to the value of the building or structure or real property or appreciably prolonging or extending the useful life of the building, or structure or real property.
107.3.3.2. The term "capital improvement" includes the construction, alteration, repair, decoration or improvement of a new or existing building or structure, or any part thereof, and the alteration, improvement or development of real property, which:
107.3.3.2.a. adds utility to the building or structure or real property or any part thereof by substantially adding to the value of the building or structure or real property or appreciably prolonging or extending the useful life of the building or structure or real property, and
107.3.3.2.b. becomes part of the building or structure or real property or is permanently affixed to or attached to the building or structure or real property so that its removal would cause material damage to the article being removed or to the building or structure or real property itself, and
107.3.3.2.c. is intended to become a permanent installation or to remain for an indefinite period of time.
107.3.3.3. The following examples illustrate the rule outlined in Section 107.3.3.2:
Example 1. A homeowner enters into a contract with Roofing Company to replace the roof on his house with a new roof guaranteed to last twenty years. This is a capital improvement because the new roof appreciably extends the useful life of the house and once attached, the new roof becomes part of the house.
Example 2. A homeowner entered into a contract with Construction Company to build a new garage on the homeowner's property. This is a capital improvement because the new garage substantially adds to the value of the real property, is permanently attached to the real property, adds utility to the real property and is intended to be a permanent installation.
Example 3. A homeowner enters into a contract with Pools R Fun Construction Company to construct an in-ground pool complete with a deck around the pool and appropriate fencing. This is a capital improvement because it adds utility to the real property and is intended to be a permanent installation.
107.3.3.4. The term "capital improvement" does not include:
107.3.3.4.a. A contract for the sale and installation of tangible personal property which, when installed, remains tangible personal property, or which, when installed, does not add utility to the building or structure or the real property; or which, when installed, adds utility to the building or structure or to real property but is not intended to remain there for an indefinite period of time; or
107.3.3.4.b. The sale of tangible personal property to a customer if under the contract the contractor who sells the tangible personal property is not responsible for the installation of the tangible personal property furnished and does not arrange for its installation.
107.3.3.5. Example: John Doe enters into an agreement with a supplier to supply all materials necessary for the framing of a home. He enters into a separate and distinct agreement with a contractor for installation of all the materials purchased from the supplier. John Doe must pay consumers sales and service tax on all materials purchased from the supplier because the purchase is of tangible personal property and not of a capital improvement. The installation of the materials results in a capital improvement to real property. However, the installation service is contracting which is exempt from consumers sales and service tax.
107.3.3.6. Example: John Doe hires ACE Roofing Company to replace 10 asphalt shingles on the roof of his home. This is not a capital improvement to a building or structure or to real property.
107.3.4. Contract.
107.3.4.1. The term "contract" means and includes any agreement (written or oral), whether on a lump sum, time and material, cost plus, or other basis, to:
107.3.4.1.a. Erect, construct, alter, repair, decorate or improve any building or other structure that results in a capital improvement thereto, or project, development, or
107.3.4.1.b. Alter, improve or develop real property that results in a capital improvement thereto, or
107.3.4.1.c. Erect, construct, alter, repair, decorate or improve any fixed works such as waterways, electric generating plants, electrical transmission or distribution lines, telephone or telegraph lines, railroads, highways, airports, sewers, sewage disposal plants or systems, waterworks or water distribution systems, gas transmission or distribution systems, pipelines and other systems for the transmission of any other liquid or gas.
107.3.4.1.d. Pave surfaces separately or in connection with any other capital improvement to building or structure or other improvement to real property.
107.3.4.1.e. Furnish and install the property becoming a part of a central heating, air conditioning, or electrical system of a building or other structure, and furnish and install wires, ducts, pipes, vents, and other conduit imbedded in or securely affixed to the land or a structure thereof.
107.3.4.1.f. Demolish an existing building or structure or improvement to real property.
107.3.4.2. The term "contract" does not include:
107.3.4.2.a. A contract solely for the sale or for the sale and installation of tangible personal property such as free standing industrial or commercial machinery and equipment which remains tangible personal property after its installation; or
107.3.4.2.b. The furnishing of tangible personal property under what is otherwise a construction contract if the person furnishing the property is not responsible under the contract for the final affixation or installation of the property furnished.
107.3.5. Contracting.
107.3.5.1. Beginning July 1, 1989, "contracting" is defined to mean the furnishing of work, or both materials and work, for another by a contractor in fulfillment of a contract for the construction, alteration, repair, decoration or improvement of a new or existing building or structure (or any part of a building or structure), or for the removal or demolition of a building or structure (or any part of a building or structure), or for the alteration, improvement, or development of real property, but only to the extent such activity results in a capital improvement to the building, structure or real property, as defined in Section 107.3.3 of these regulations.
107.3.5.2. Beginning July 1, 1989, "contracting" does not include the furnishing of work, or both materials and work in the nature of hookup, connection, installation or other services if such service is incidental to the retail sale of tangible personal property from the service provider's inventory. In addition, the hookup, connection or installation must be performed by the seller or performed in accordance with arrangements made by the seller. Examples of transactions that are excluded from the definition of contracting pursuant hereto include, but are not limited to:
107.3.5.2.a. The sale and installation of wall-to-wall carpeting.
107.3.5.2.b. The sale, hookup, and the connection of: mobile homes window air conditioning units dishwashers (residential) clothing washing machines or dryers (residential) other household appliances drapery rods window shades venetian blinds canvas awnings free standing industrial equipment free standing commercial equipment
107.3.6. Contractor. - The term contractor means any individual partnership, corporation or other person engaged in the business of contracting for others. The phrase "person engaged in business" as used herein means persons who offer a contracting service to the public or to others for a consideration, whether such person offers the contracting service continuously, part-time, seasonally or for short periods. A contractor may be a prime contractor, subcontractor, general contractor or specialty contractor.
107.3.7. Construction Equipment. - The term "construction equipment" means any vehicle, machine, tool, implement or other device used by a contractor in erecting buildings or structures for others, or building on, or otherwise improving, altering, or repairing property for others, which does not become a physical component part of the property upon which such work is performed, and which is not necessarily consumed in the performance of such work. Construction equipment includes, but is not limited to, grading, lifting and excavating vehicles, compressors, scaffolds, forms, hand tools and ladders.
107.3.8. Construction Manager. - The term "construction manager" means a person who enters into an agreement on a fee basis to act between the owner of the project and the various contractors who are hired and paid directly by the owner. As to such project, a construction manager is neither a prime contractor, a general contractor, a specialty contractor, a subcontractor nor any other kind of contractor.
107.3.9. Construction Materials. - The term "construction materials" means items of tangible personal property purchased by a contractor for incorporation into property as a physical component part of such property. A non-exclusive list of construction materials includes:
Asphalt Bricks Builder's hardware Caulking Material Cement Conduit Doors Ducts Electric wiring and connections Flooring Glass Gravel Insulation Lath Lead Lime Linoleum Lumber Macadam Millwork Mortar Oil Paint Paper Piping, valves, and pipe fittings Plaster Power poles, towers, and lines Putty Reinforcing mesh Roofing Sand Sheetmetal Steel Stone Stucco Tile Wall coping Wallboard Wallpaper Wall-to-wall carpeting (when affixed to the floor)
Weather stripping Windows Window Screens Wire netting and screen Wood preserver
107.3.10. Construction Supplies. - The term "construction supplies" means items of tangible personal property consumed in the fulfillment of a contract, which items do not become a physical component part of the building or structure or real property upon which work is performed. Supplies include, but are not limited to, lubricants, cleaning compounds, polyethylene covers, rock salt and rope.
107.3.11. Decoration. - The term "decoration" means and is limited to a decoration which is a capital improvement to a building or structure or to real property.
107.3.12. Equipment. - The term "equipment" as used in this rule means any vehicle, machine, tool, implement or other device used by a contractor in erecting structures for others or reconstructing, altering, expanding or remodeling property of others which does not become a physical component part of the property upon which work is performed, and which is not necessarily consumed in the performance of such work. "Equipment" includes, but is not limited to items such as:
Compressors Drill presses Electric generators Forms Hand tools Lathes Replacement parts for equipment Scaffolds Tools Grading, lifting and excavating vehicles
107.3.13. Fabricator. - The term "fabricator" means any person engaged in any business or activity involving manufacturing, processing or assembling property for sale or commercial use which when installed ordinarily becomes a physical component of a building or other structure or real property.
107.3.14. Fixtures. - The term "fixtures" means and includes items which are accessories to a building or other structure which do not lose their identity as accessories when installed.
107.3.14.1. For an item to be a fixture, the items must be attached in some way to the real property; it must be adapted to the use to which the real property is being put at the time the item is attached thereto; and it must be the intention of the party placing it there to make it a permanent part of the real property or to leave it there for an indefinite period of time.
107.3.14.2. A nonexclusive list of typical items regarded as fixtures includes:
Air conditioning units Awnings Burglar alarm and fire alarm fixtures Cabinets, counters, and lockers (prefabricated)
Electric generators (affixed to and accessory to a building, structure or fixed works Elevators, hoists, and conveying Furnaces, boilers, and heating units Lighting fixtures Plumbing fixtures Refrigeration units Signs Telephone switchboards and instruments Television antennas Transformers and switchgear Vault doors and equipment Venetian blinds
107.3.15. Freestanding Industrial or Commercial Equipment. - The term "freestanding industrial or commercial equipment" means equipment which is suitable for and is in fact used for commercial or industrial purposes and which is not connected or attached to a building or structure or real property; can easily be removed without doing substantial damage to the building or structure or real property; and is not essential to the basic use or purpose of the building or structure or real property.
107.3.15.1. Actual Connection with or Attachment to. - To become a part of a building or structure or real property, the equipment must have some physical connection such as by bolts, screws, nails, cement, piping, or cable; by contact, where the equipment is necessary to make complete or usable a building or structure or real property; or by attachment to another item of machinery or equipment which has become a part of a building or structure or real property.
107.3.15.2. A refrigerator sold to a restaurant for use in its kitchen is delivered by the seller and installed by plugging it into an existing electrical outlet or by wiring it directly into the existing electrical system. Under these facts, the refrigerator is freestanding commercial equipment.
107.3.16. General Contractor. - The term "general contractor" means a person who enters into an agreement, either written or oral, with the owner of a project to perform contracting services. A natural person may not contract with himself or a partnership in which he is a partner.
107.3.17. Improvement.- The term "improvement" means and is limited to improvements which are capital improvements to a building or structure or to real property. This term includes, but is not limited to, the following:
107.3.17.1. The erection, construction, alteration, repair, decoration or improvement of a building or other structure, project, or development or other permanent improvement on, under or to real property that results in a capital improvement.
107.3.17.2. Furnishing and installing property becoming a part of any building or other structure, project, or development or other capital improvement on or to the realty, including tangible personal property that after installation becomes a structure or becomes real property because it is embedded in a permanently affixed to the land or to a structure constituting realty; or
107.3.17.3. Altering the land surface of real property by creating roads, earthen dams or stock lands. (Mining and timbering operations or reclamation, waste disposal and environmental activities associated with the production of natural resources are treated as the production of natural resources rather than as contracting for purposes of the consumers sales and use taxes.)
107.3.17.4. The intention of the purchaser determines whether a "portable" building other than a mobile home constitutes improvement to realty as a fixture or is tangible personal property. The primary criterion is the mode of annexation. If the building is plumbed, electrified, anchored, or attached to an existing structure in connection with the sale, it is an improvement to realty. If none of these conditions exist, the building is personal property, even though it might be placed on a particular foundation.
107.3.17.5. A contract for the improvement to realty does not include:
107.3.17.5.a. A contract solely for the sale and installation of freestanding tangible personal property, including a contract to furnish and install freestanding machinery and equipment or other tangible personal property not essential to the building or structure nor intended to become a part of the realty, and if temporarily or incidentally attached, is readily removable without substantial damage to the tangible personal property or to the building or structure or real property.
107.3.17.5.b. The furnishing of tangible personal property if the person furnishing the property is not responsible for the final affixation or installation of the property; or
107.3.17.5.c. The furnishing of tangible personal property if the person furnishing the property is responsible only for supervision or warranty of installation and does not have the contractual responsibilities of installation.
107.3.18. Lump Sum Contract. - The term "lump sum contract" means a contract under which the contractor for a stated lump sum agrees to furnish and install materials or fixtures, or both. A lump sum contract does not become a time and materials contract when the amounts attributable to materials, fixtures, labor, or tax are separately stated in the invoice.
107.3.19. Machinery and Equipment. - The term "machinery and equipment" means and includes property intended to be used in the production, manufacturing or processing of tangible personal property, the performance of services or for other purposes (e.g., research, testing, experimentation) not essential to the fixed works, building, or structure itself, but which property incidentally may, on account of its nature, be attached to the realty without losing its identity as a particular piece of machinery or equipment and, if attached, is readily removable without damage to the unit or to the realty. "Machinery and equipment" does not include junction boxes, switches, conduit, wiring, or valves, pipes, and tubing incorporated into fixed works, buildings, or other structures, whether or not such items are used solely or partially in connection with the operation of machinery and equipment, nor does it include items of tangible personal property such as power shovels, cranes, trucks, and hand or power tools used to perform the construction contract.
107.3.20. Materials. - The term "materials" means and includes building and construction materials and components, machinery and equipment, supplies and other tangible personal property which are directly used or consumed by a contractor in fulfilling a contract for the provision of a contracting service, regardless of whether such property is incorporated into, attached to, affixed to or set upon a building or structure or real property by a contractor in the performance of a contract.
107.3.21. Nonresident Contractor. - The term "nonresident contractor" means any contractor who is not a resident contractor as defined in Section 107.3.24.
107.3.22. Prime Contractor. - The term "prime contractor" means a person who enters into an agreement, either written or oral, with the owner of a project to perform contracting services. A natural person may not contract with himself or a partnership in which he is a partner.
107.3.23. Repair. - The term "repair" means and is limited to repairs which are capital improvements to a building or structure or to real property. See Sections 115 and 116 for a detailed explanation of rules relating to repairs on tangible personal property, buildings, structures, or real property.
107.3.23.1. A repair which adds utility by substantially adding to the value of a building or structure or real property or by appreciably prolonging the original useful life of a building, structure or real property is a capital improvement if:
107.3.23.1.a. it becomes a part of the building or structure or real property, or
107.3.23.1.b. it is permanently affixed to or attached to a building or structure or real property so that removal of the repair would cause material damage to the materials being removed or to the building or structure or real property itself, or
107.3.23.1.c. it is intended to become a permanent installation or to remain for an indefinite period of time.
107.3.23.2. A repair which neither adds to the value of a building or structure or real property nor appreciably prolongs its original life is not a capital improvement. A repair which is not a capital improvement is subject to consumers sales and service tax and tax must be collected from the customer.
107.3.24. Resident Contractor. - A "resident contractor" means any contractor who has a bona fide place of business within the State of West Virginia or is engaged in any manner in carrying on any employment, trade, business, or profession in this State regardless of whether incorporated in this State or in another state or whether the resident contractor may have a place of business or conduct any employment, trade, business or profession outside this State.
107.3.25. Specialty Contractor. - The term "specialty contractor" means a person whose business of contracting is limited to specialty areas such as heating, air conditioning, plumbing and electric wiring, etc.
107.3.26. Structure.- The term "structure" includes, but is not limited to everything built up or composed of parts joined together in some definite manner and attached or affixed to real property, or which adds utility to real property or to any part thereof, or which adds utility to a particular parcel of property and is intended to remain there for an indefinite period of time. Nonexclusive examples of structures include: buildings; roads, whether paved or otherwise; dikes; drainage ditches; ponds; fences; and sidewalks, etc.
107.3.27. Subcontractor. - The term "subcontractor" means a person who enters into an agreement with a prime contractor, a general contractor, or with another subcontractor to perform work, or provide both materials and work in fulfillment of a contract for contracting services.
107.3.28. Supplies. - The term "supplies" means items of tangible personal property consumed in the fulfillment of a contract, which items do not become a physical component part of the property upon which the work is performed. Supplies include, but are not limited to, lubricants, cleaning compounds, polyethylene covers and ropes.
107.3.29. Tangible Personal Property. - The term "tangible personal property" means personal property which may be seen, weighed, measured, felt or touched, or is in any other manner perceptible to the senses, and includes tangible goods, wares and merchandise.
107.3.30. Time and Materials Contract. - The term "time and materials contract" means a contract under which the contractor agrees to furnish and install materials or fixtures, or both, and which sets forth separately a charge for the materials or fixtures and a charge for their installation or fabrication.
107.4. Tax on Contractor Not to be Passed on as Tax.
107.4.1. A contractor is not allowed to pass the consumers sales or use tax on to his customer as a tax. A contractor may take the amount of these taxes into consideration when preparing his bid.
107.4.2. A contractor, when bidding on a contract, should anticipate that consumers sales or use taxes will increase the cost of materials and taxable services by the amount of the tax. Necessary allowance should be made in figuring the bid, because the contractor will be held responsible for paying the tax on tangible personal property and the results of taxable services used or consumed in the business of contracting regardless. The tax may not be identified as a separate item in the formal bid because the contractor cannot charge consumers sales and service tax.
107.5. Contractor's Records.
107.5.1. Each contractor shall maintain adequate records to support the use of materials purchased with a Material Purchase certificate and to show the disposition of all materials purchased with such a certificate.
107.5.2. In the case of an audit, the auditor will examine a copy of the agreement between the contractor and his customer for a description of the work performed. Because the law presumes that all transactions are taxable, the contractor must maintain adequate records to justify why consumers sales and service tax was not collected from his customer.
107.6. Contractor's Liability.
107.6.1. Generally a contractor must pay consumers sales or use tax on the following:
107.6.1.1. All of the materials, equipment, tools, and supplies which he uses or consumes in the operation of his business; and
107.6.1.2. All materials consumed by him in the fulfillment of a contract for a capital improvement to a building or other structure or to real property except such property as falls within one of the specific exemptions explained in Section 107.6.2.
107.6.2. Prior to October 1, 1990, contractors could claim immunity or exemption from the consumers sales and service tax or use taxes on materials purchased and used or consumed in connection with contracts with the federal government, or with the State of West Virginia, its political subdivisions and corporate entities created by the West Virginia Legislature, provided they have applied for and been granted authority to use a Material Purchase Certificate. As of October 1, 1990, the exemption for materials purchased by contractors for use in governmental contracts was generally repealed and the use of material purchase certificates became very limited. See Section 109 of these regulations for detailed explanation of the transition rules pertaining to governmental contracting. Contractors may claim immunity or exemption from the sales or use taxes on account of purchases directly used in pre-March 1, 1989 contracts. Transition rules for contracts grandfathered under pre-March 1, 1989 rules are contained in Section 108 of these regulations. Tangible personal property or services that were purchased exempt for use in fulfilling a contract which is grandfathered under pre-March 1, 1989 rules that are later used in a contract other than a grandfathered contract may be partially taxable. See Section 108.5.2.
107.6.3. If a vendor of a contractor doing work in West Virginia does not collect the West Virginia tax from the contractor, the contractor shall be liable for payment of the use tax on his purchases of tangible personal property and taxable services from the vendor.
107.7. Sales to Contractors.
107.7.1. Vendors who sell tangible personal property to contractors are required to collect consumers sales and service tax from such contractors based upon the gross proceeds from such sales unless they, in good faith, receive from the contractor a direct pay permit number or a material purchase certificate. Purchase discounts are not part of the sales price and are not part of the base for computing consumer sales and use taxes. (Note, there is a distinction between a purchase discount and a discount for prompt payment. The first is an allowable deduction where as the later is not an allowable deduction.) Materials purchased out-of-state for use in West Virginia are subject to the West Virginia use tax which is payable in the quarter the materials are delivered into this State.
W. Va. Code R. § 110-15-108 Contracting: Transition Rules
108.1. Transition Rules for the Period on or After March 1, 1989 to June 30, 1989.
108.1.1. Type of Activity. - "Contracting" is defined for the period March 1, 1989 to June 30, 1989 as the furnishing of work, or both materials and work, in fulfillment of a contract for the construction, alteration, repair, decoration or improvement of a new or existing building or structure, or any part thereof, or for the alteration, improvement or development of real property. For purposes of this definition, the term structure shall include, but not be limited to, everything built up or composed of parts joined together in some definite manner and attached to real property, or which adds utility to a particular parcel of property and is intended to remain there for an indefinite period of time.
108.1.1.1. Special Rule for Hourly, Open-Ended Contract Involving Minimal Materials. - Prior to July 1, 1989, not all activities relating to the alteration, repair, decoration, or improvement of a building or structure are contracting. Generally, if a person supplies labor on an hourly basis in fulfillment of a truly open-ended contract, they are not contracting, but instead are providing a taxable service. This is true even if the person also provides a minimal amount of materials, as long as the materials are incidental to the service being performed. The following three conditions must be met before such activity is considered to be a taxable service rather than contracting.
108.1.1.1.a. Minimal Materials Provided. - The activity must be for labor only, or the value of the materials supplied must be so minimal that they are incidental to the overall activity. Activities where the cost of materials are five percent (5%) or less of the total price will be deemed to involve "minimal" materials. For activities where the cost of materials are more than five percent (5%) of the total price, the issue of whether the materials will be classified as "minimal materials" will be determined on an individual basis, depending on the facts of each situation.
108.1.1.1.b. Hourly Basis. - The cost of the activity must be determined on an hourly basis.
108.1.1.1.c. Open-Ended Contract. - The contract must be open-ended, so that neither part can determine or agree to the final cost before performance of the contract is commenced.
108.2. Examples:
108.2.1. Lump-Sum Contract. - Prior to July 1, 1989, persons engaged in the providing of labor, or of labor and materials, to a customer for the alteration, repair, decoration or improvement of real estate, or of a building or structure, under a lump-sum contract are engaged in contracting, because they do not meet the three conditions, enumerated in Section 108.1.1.1 of these regulations, necessary to be considered a service activity.
108.2.2. Cost-Plus Percentage Contract. - Prior to July 1, 1989, persons engaged in the providing of labor, or of labor and materials, to a customer for the alteration, repair, decoration or improvement of real estate, or of a building or structure, under a cost-plus percentage contract are engaged in contracting because they do not meet the three conditions enumerated in Section 108.1.1.1 necessary to be considered a service activity.
108.2.3. Contract With "Not to Exceed X Dollars" Clause. - Prior to July 1, 1989, persons engaged in the providing of labor, or of labor and materials, to a customer for the alteration, repair, decoration or improvement of real estate, or of a building or structure, under a time and material type contract that contains a "not to exceed X dollars" clause are engaged in contracting, because they do not meet the three conditions enumerated in Section 108.1.1.1 necessary for the work to be considered a taxable service activity.
108.2.4. Maintenance Contracts. - Prior to July 1, 1989, persons engaged in the providing of labor, or of labor and materials, to a customer for the alteration, repair, decoration or improvement of real estate or of a building or structure, under a maintenance contract which meets all of the following criteria will be considered to be engaged in a taxable service activity so long as the contract also meets the criteria outlined in Section 108.1.1.1 of these regulations (minimal materials, hourly charges, and being open-ended so that neither party can determine the final cost):
108.2.4.1. The work is performed under a retainer contract with a broad rather than specific scope of work, which does not contain a "not to exceed X dollars" clause.
108.2.4.2. The contractor provides a list of types of craftsmen and equipment with a per hour cost.
108.2.4.3. The work is performed as requested by the customer on an open-ended job order basis.
108.3. Taxability of Sales. - To determine whether consumers sales and service tax should be collected from the customer and remitted, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in Section 108.1 of these regulations.
108.3.1. Sales of Contracting. - A person who engages in the providing of labor, or labor and materials, to a customer for the alteration, repair, decoration or improvement of real estate, or of a building or structure, under a contract which would be classified as contracting according to the criteria outlined in Section 108.1.1 does not charge consumers sales and service tax to the customer. The sale of contracting is exempt from sales and use tax set forth in Section 9.2.17 of these regulations.
108.3.2. Sales of Service. - A person who engages in the providing of labor, or labor and materials, to a customer for the alteration, repair, decoration or improvement of real estate, or of a building or structure under a contract which meets the criteria set forth under the special rule for hourly, open-ended contracts involving minimal materials outlined in Section 108.1.1.1 of these regulations must collect and remit consumers sales and service tax from the customer or obtain an exemption certificate or direct pay permit.
108.4. Taxability of Purchases. - In order to determine whether consumers sales and service tax and use tax should be paid on purchases for use in these types of activities, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in the previous Section 108.1.
108.4.1. Taxability of Purchases for Use in Contracting Activity. - Beginning March 1, 1989, except as outlined in Sections 108.5 and 108.6 of these regulations relating to transition rules and Section 109 of these regulations relating to the transition rules for the exemption for material used in government contracts, a person who engages in the providing of labor, or labor and materials, to a customer for the alteration, repair, decoration or improvement of real estate, or of a building or structure, under a contract, which would be classified as contracting according to the criteria outlined in Section 108.1 must pay consumers sales or use tax on his purchases for use in the contracting activity. This includes machinery, equipment, materials, and services used in the contracting activity. It does not include labor provided by employees of the contractor. Transition rules are provided in Sections 108.5, 108.6 and 109 of these regulations.
108.4.2. Taxability of Purchases for use in Service Activity. - Prior to July 1, 1989, a person who engages in the providing of labor, or labor and materials, to a customer for the alteration, repair, decoration, or improvement of real estate, or of a building or structure, whose activity would be classified as service according to the criteria outlined in Section 108.1.1 of these regulations is exempt on purchases for use in his taxable service activity.
108.4.3. Taxability of Purchases for use in Multiple Activities. - If a person is engaged in both contracting and taxable service activities or in multiple business activities of any type, it is possible that he may have to apportion the tax on purchases used in more than one activity. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
108.4.3.1. Example: Company X engages in both contracting and service activities. Of the total $1,000,000 in gross income earned by Company X, $600,000 was from contracting and $400,000 was from service activities. Company X purchases a drill, a ladder, and a backhoe on April 22, 1989. The drill will be used exclusively in service activities, the ladder will be used exclusively in contracting activities, but the backhoe will be used in both contracting and service activities. Since the drill will be used exclusively in service activities and purchases for use in service activities are exempt prior to July 1, 1989, no tax is paid on the purchase of the drill. However, tax is paid on the full price of the ladder, since it will be used exclusively in contracting activity and beginning March 1, 1989, purchases for use in contracting activity are taxable. The purchase price of the backhoe will have to be apportioned between exempt and nonexempt uses. This is necessary because the backhoe is used in both service activities, for which purchases for use are exempt, prior to July 1, 1989, and contracting activities, for which purchases for use are taxable beginning March 1, 1989. The purchase price of the backhoe was $50,000. One method of apportionment would be to use the percentage of gross income derived from each activity to determine the amount of tax due. Since 60% ($600,000 - $1,000,000) of Company X's income was derived from contracting activities, and purchases for use in contracting are taxable, 60% of the purchase price of the backhoe will be taxable for $30,000. At a rate of 6%, Company X would owe $1,800 in sales and use tax on the backhoe. The method of apportionment used in this example is for illustration purposes only and may or may not be considered reasonable by the Tax Commissioner in certain situations.
108.5. Transition Rules for Purchases for Use in Contracting. - Effective March 1, 1989, purchases made in-state and out-of-state for both indirect and direct use in contracting activity are taxable for consumers sales and use tax purposes. However, in some situations, purchases will continue to be exempt if they are directly used in contracting activity and fit within the situations outlined in Sections 108.5.1 through 108.5.5 of these regulations.
108.5.1. Pre-July 1, 1987 Contracts. - Where the contracting activity is performed pursuant to a binding contract executed prior to July 1, 1987, any purchases of tangible personal property or taxable services for use or consumption in connection with such contract or contracts continues to be exempt from payment of consumers sales or use taxes with respect to the purchase price of such tangible personal property or taxable services. This exemption is a refundable exemption unless the contractor has a valid direct pay permit number which is given to the vendor of the property or service
108.5.2. Pre-February 16, 1989 Contracts or Firm Bids. - Where the contracting activity is performed pursuant to a binding written contract that was executed prior to February 16, 1989 or pursuant to a written contract executed after February 15, 1989 which embodies a firm written bid for contracting made by the contractor prior to February 16, 1989, tangible personal property or taxable services purchased for direct use or consumption with respect to such contract or contracts continue to be exempt from consumers sales or use taxes under pre-March 1, 1989 rules. This exemption continues to be a refundable exemption unless the contractor has a valid direct pay permit number which is given to each vendor. However, tangible personal property or services purchased exempt for use in fulfilling a contract which is grandfathered under pre-March 1, 1989 rules which is later used in a contract other than a grandfathered contract may be partially taxable. See Section 108.5.2.1.
108.5.2.1. Example:
On April 1, 1989 XYZ Corporation Company purchases a bulldozer for $20,000 with a total remaining useful life of ten years, for use on a contract signed February 1, 1989 which is grandfathered under pre-March 1, 1989 sales and use tax rules. The initial purchase of the bulldozer is exempt from sales and use tax because it is being used on a grandfathered contract. However, beginning April 1, 1990 the bulldozer will be used on other contracts that are not grandfathered under pre-March 1, 1989 sales and use tax rules. To determine the amount of use tax due on the bulldozer, the following calculation is made.
A --- X C = D
B A - Portion of useful life remaining after use in grandfathered contracts B - Total useful life C - Cost of equipment D - Amount subject to use tax E X F = G E - Amount subject to use tax F - .06 G - Use tax on bulldozer H --- X K = L J H - 9-1/4 yrs.
J - 10 yrs.
K - $20,000
L - $18,600
M X N = P
M - $18,600
N - .06
P - $1,080
The use tax due should be remitted to the Department of Tax and Revenue on a purchaser's use tax form WV/CST 220.
108.5.3. Pre-February 16, 1989 Material Purchase Contracts. - The purchase of tangible personal property or taxable services after February 28, 1989 by a contractor will be exempt from consumers sales and use taxes, when they are purchased pursuant to a written contract entered into on or before February 15, 1989 irrevocably obligating the contractor to purchase identified building materials or specified taxable services in specified quantities. This exemption continues to be a refundable exemption unless the contractor has a valid direct pay permit number which he gives to the vendor of the tangible personal property or taxable service.
108.5.4. Pre-February 1, 1989 Approval of Federal or State Regulatory Body for New Construction. - Where the contracting activity is performed pursuant to a written contract entered into before September 1, 1989 for the construction of a new improvement to real property the construction or operation of which was approved by a federal or state regulatory body prior to February 1, 1989, tangible personal property or taxable services directly used or consumed in fulfillment of such contract will be exempt from consumers sales and use taxes under pre-March 1, 1989 rules. This exemption is a refundable exemption unless the contractor provides the vendor of the tangible personal property or taxable services with the contractor's valid direct pay permit number. Examples of federal or state regulatory bodies which must approve new construction include, but are not limited to, the West Virginia Public Service Commission, the West Virginia Health Care Cost and Review Authority and the Federal Energy Review Commission. Building permits issued by a local governmental entity are not issued by a federal or state regulatory body within the meaning of W. Va. Code '11-15-8a(b).
108.5.5. Pre-February 1, 1989 Federal Grant for New Construction. - Where the contracting activity is performed pursuant to a written contract executed after February 15, 1989 but prior to September 1, 1989 for construction of a new improvement to real property for which construction the owner of the improvement received a federal grant prior to February 1, 1989, tangible personal property or taxable services directly used or consumed in fulfillment of such contract will be exempt from consumers sales and use taxes under pre-March 1, 1989 rules. This exemption is a refundable exemption unless the contractor provides the vendor of the tangible personal property or taxable services with the contractor's direct pay permit number.
108.6. Transition Rules for Leased Tangible Personal Property Directly Used in Contracting. - A lease of tangible personal property is generally treated for consumers sales and use tax purposes in the same manner as a sale of tangible personal property. Accordingly, a written lease for identified tangible personal property executed prior to February 16, 1989 and expiring after February 28, 1989 will be exempt from consumers sales and use taxes during the period of its primary term, but only to the extent the tangible personal property is directly used in contracting.
108.6.1. When the leased property is directly used in contracting only part of the time, periodic lease payments must be apportioned between the exempt and nonexempt use of the property.
108.6.2. If prior to expiration of the primary lease term, the lease is extended or renewed, lease payments for periods beginning the day after the original primary term of the lease ended shall be subject to consumers sales and use taxes unless some other exemption applies to the transaction.
108.6.3. The following examples illustrate application of this rule.
Example 1: On December 15, 1987 the ABC Construction Company executed a three year written lease for a bulldozer for sole use in its contracting activity. The primary term of the written lease began January 1, 1988 and expires December 31, 1990. Lease payments for the period March 1, 1989 through December 31, 1990 will be exempt from consumers sales and use taxes provided the bulldozer continues to be directly used solely in the lessee's contracting activity.
Example 2: Same facts as example one, except on December 15, 1990, the lessee elects to renew the lease for one year. Lease payments for periods subsequent to December 31, 1990 are taxable unless some other exemption applies.
Example 3: Same facts as example one, except that on December 15, 1990 the lessee exercises his option to purchase the bulldozer for its then fair market value. The purchase price will be subject to consumers sales and use taxes unless some other exemption applies.
Example 4: On February 15, 1989 the ABC Construction Company executed a three year written lease for a bulldozer for use directly in its contracting activity. The primary term of the lease began March 1, 1989 and expires February 28, 1992. The lease payments will be exempt from consumers sales and use taxes provided the bulldozer is directly used solely in the lessee's contracting activity.
Example 5: Same facts as example four, except that on January 1, 1990 the lessee begins using the bulldozer in its coal mining activity. The lease payments for the period beginning January 1, 1990 will still be exempt from consumers sales and use taxes, regardless of whether the lessee is a contract miner or the producer of the coal for severance tax purposes.
Example 6: On February 26, 1989 L&M Construction Company executed a three year written lease for a bulldozer for use directly in its contracting activity. The primary term of the lease began March 1, 1989. The lease payments under the lease are taxable even though the bulldozer will be directly used in contracting activity because the lease was not executed until February 26, 1989, rather than on or before February 15, 1989.
Example 7: Same facts as example six, except that the written lease executed February 26, 1989 embodies an oral agreement of February 10, 1989 to lease the bulldozer. The lease payments are taxable even though there was an oral agreement on February 10, 1989 to lease the bulldozer. The transition rules recognize only written contracts.
Example 8: ABC Construction Company entered into a written three year lease for a bulldozer for direct use in its contracting business. This lease was executed on February 25, 1989 and the lease term commenced on that date. The lease provides for monthly rental payments which are due on the twenty-fifth day of each month. Rent is due in advance. On February 25, 1989 ABC Construction Company paid the first month's rental payment and obtained possession of the bulldozer. The first month's rental payment is exempt from consumers sales and use taxes because it was due on February 25, 1989 prior to the March 1, 1989 change in the law. Payments due for the remaining months of the rental period will be taxable because the lease was not executed on or before February 15, 1989.
W. Va. Code R. § 110-15-109 Contracting for Governmental Entities
109.1. Exemption from March 1, 1989 through September 30, 1990. Purchase of materials for use in fulfillment of contracts with the United States, the State of West Virginia, its political subdivisions and corporate entities created by the West Virginia Legislature.
Contractors are generally taxable on purchases of materials for use in their contracting activities. However, during the period from March 1, 1989 through September 30, 1990, contractors could purchase exempt from consumer sales and use taxes materials for use in fulfillment of written contracts to provide contracting services to certain governmental agencies, if the materials were installed, affixed or incorporated into a building to be used by the governmental agency for a governmental or proprietary purpose. This exemption was repealed October 1, 1990 except for contracts meeting the requirements set forth in Section 109.2.
109.1.1. The exemption from tax for purchases of materials by contractors for use in governmental contracts applies only if the following four conditions are met:
109.1.1.1. The contractor must enter into a written contract on or before September 15, 1990, or meet another transition rule set forth in Section 109.2, with the United States or the State of West Virginia or their political subdivisions including county and municipal governments or a corporate entity created by the West Virginia Legislature; and
109.1.1.2. The contract must be for the construction, alteration, improvement, repair or decoration of a building, structure or real property which is a capital improvement to the property; and
109.1.1.3. The materials purchased must be actually installed in, affixed to or incorporated into the building or structure or real property; and
109.1.1.4. The building, structure or real property must be or will be owned and used by the governmental entity for a governmental or proprietary purpose.
109.1.2. Example 1. ACE Construction Company enters into a contract with a West Virginia municipality to build a public swimming pool and related facilities which will be owned and operated by the municipality. The contractor applies for and receives a government contractor's material purchase certificate which he may use to purchase tax free materials that will be incorporated into this project by giving a copy of the material purchase certificate to each vendor. As used here, the term "materials" includes building and construction materials, machinery and equipment and any other tangible personal property that is incorporated into the project. This exemption does not apply to the contractor's purchase of any other tangible personal property such as materials not incorporated into the project, tools, construction equipment and construction supplies. Nor does this exemption apply to leases of tangible personal property or to the purchase of taxable services.
Example 2. Same facts as example one except that ACE Construction Company subcontracts the excavating and earth moving portion of its contract to Excavators, Inc. The materials and work provided by the subcontractor in fulfillment of this subcontract are exempt from consumers sales and use taxes because they are provided to fulfill the contractor's contract with the municipality. The subcontractor may use the contractor's material purchase certificate. The subcontractor must pay consumers sales and use taxes on his purchase of any materials, etc., not incorporated into the swimming pool project. The subcontractor's lease of tangible personal property, e.g., a bulldozer, or purchase of taxable service, e.g., repairs to construction equipment, are taxable. The material purchase certificate may not be used for items such as these.
Example 3. The X County Building Authority agrees to sell industrial revenue bonds to acquire certain land and construct a manufacturing facility which it will lease to Manufacturing Company. The County Building Authority enters into a contract with ACE Construction Company to build a turn-key facility in conformity with the plans, specifications and requirements of the Manufacturing Company. The primary lease term is for twenty (20) years. At the end of twenty (20) years, the manufacturing company may exercise its option to purchase the facility for $100. In accordance with generally accepted accounting principles and for federal income tax purposes, the Manufacturing Company will capitalize the cost of the facility and take depreciation on the machinery, equipment and other tangible personal property. The rent it pays to the Building Commission may not be expensed. Because the manufacturing facility will not be owned and used by the X County Building Commission for a governmental or proprietary purpose, the governmental contractor's exemption does not apply to materials and other tangible personal property which ACE Construction Company purchases for incorporation into the manufacturing facility.
109.2. Transition Rules for Repeal of the Exemption. - The exemption for the purchase of materials by contractors for use in governmental contracts was generally repealed as of October 1, 1990. However, the exemption continues for the following:
109.2.1. Purchases of tangible personal property after October 1, 1990 if used in fulfillment of a written contract executed and legally binding on the parties on or before September 15, 1990.
109.2.1.1. The term contract does not include change orders wherein the scope of work contained in the original contract is exceeded to a degree significant enough to require additional charges to the customer. Purchases by a contractor for use in contracting activities performed under such change orders are subject to consumer sales and use tax.
109.2.2. Purchases of tangible personal property purchased on or after October 1, 1990 if used in fulfillment of a written contract entered into after September 15, 1990, pursuant to a written bid made on or before September 15, 1990 to the extent the bid was subsequently incorporated into the contract. The bid must be binding on the contractor.
109.2.3. Purchases of tangible personal property after October 1, 1990 for consumption or use in fulfillment of a written contract for the construction of a new improvement to real property, the construction or operation of which was approved by a federal or state regulatory body prior to September 15, 1990 or pursuant to a federal grant awarded prior to September 15, 1990. Examples of federal or state regulatory bodies which must approve new construction include, but are not limited to, the West Virginia Public Service Commission, the West Virginia Health Care Cost and Review Authority, the Federal Energy Review Commission and the West Virginia School Building Authority. Building permits issued by a local governmental entity are not issued by a federal or state regulatory body within the meaning of this section.
109.3. Methods of Claiming Governmental Contract Exemption. - A contractor or subcontractor entitled to the exemption outlined in Section 109.1 may assert the exemption in one of two ways when purchasing materials prior to July 1, 1990. The contractor or subcontractor may either present his direct pay permit or a government contractor material purchase certificate to the vendor to purchase the materials tax exempt. Beginning July 1, 1990, the government contract exemption may only be claimed by presenting a government contractor material purchase certificate to the vendor.
109.3.1. Direct Pay Permit. - A direct pay permit includes a direct pay permit number, which may be presented to the vendor when purchasing items or services for use in business. When the direct pay permit number is given to the vendor, no tax is charged to the purchaser at the time of sale. However, each month the direct pay permit holder must file a direct pay permit consumers sales and use tax return with the Tax Commissioner showing the total amount of purchases, amount of taxable purchases, amount of exempt purchases, and the amount of tax due on the taxable purchases. The direct pay permit holder is responsible for directly remitting the amount of tax due on taxable purchases to the Tax Commissioner. In order to obtain a direct pay permit, application must be made to the Tax Commissioner. The applicant must have a valid business registration certificate issued in accordance with W. Va. Code '11-12-1 et seq.
109.3.2. Government Contractor Material Purchase Certificate. - The contractor or subcontractor may if he wishes use a government contractor's material purchase certificate obtained by the prime contractor from the Tax Commissioner to assert the governmental contract exemption for materials. A government contractor's material purchase certificate, unlike a direct pay permit, may only be used to purchase materials which are exempt because of the governmental contract exemption outlined in Section 109.1 of these regulations.
109.3.2.1. Application for Government Contractor Material Purchase Certificate. - A government contractor's material purchase certificate may only be obtained by the prime contractor making timely application to the Tax Commissioner. The application shall be in the form prescribed by the Tax Commissioner. When applying for the government contractor's material purchase certificate, the prime contractor must provide the Tax Commissioner with a list of all work sublet to others, indicating the amount of work to be performed, and the names and addresses of each subcontractor and such other information as the Tax Commissioner may require. The application for the government contractor's material purchase certificate may be obtained from the entity awarding the contract. A government contractor material purchase certificate will expire upon completion of the contract named therein.
109.3.2.2. Use of the Government Contractor's Material Purchase Certificate. - In order to assert the governmental contract exemption for material outlined in Section 109.1 of these regulations, the contractor or subcontractor must present a copy of the government contractor's material purchase certificate to the vendor when purchasing materials for use as a component part of a capital improvement to a building or structure or improvement to real property in fulfillment of a governmental contract. The vendor will not charge the contractor or subcontractor tax on the exempt materials upon receipt of the material purchase certificate number.
109.4. Vendor's Responsibilities in Relation to Governmental Contract Exemption. - As long as the vendor, in good faith, takes the direct pay permit number or government contractor material purchase certificate from the contractor or subcontractor and notes the number thereof on the invoice, sales slip or other record of sale, the vendor will be absolved of all duties and responsibilities imposed for the collection of sales and use tax on the sale. Failure to take the direct pay permit number or government contractor material purchase certificate or collect the amount of tax due will result in the vendor being liable for the amount of tax not collected.
109.5. A contractor who claims that tangible personal property is exempt from consumers sales and use taxes because it will be incorporated into a government contract will be held strictly accountable for the use of such property and will be liable for payment of consumers sales and use taxes on any tangible personal property purchased for use in a tax exempt government contract that is not used in such a contract.
W. Va. Code R. § 110-15-110 Nonresident Contractors
110.1. Use tax is levied upon the use in this State of tangible personal property purchased or leased in another state and brought, imported or caused to be brought into this state after February 28, 1989 for use in contracting activity. Excluded from tax are the following:
110.1.1. Tangible personal property directly used in the activity of contracting that was purchased by the contractor prior to March 1, 1989. See the Transition Rules in Section 108 of these regulations for discussion of the scope of this exception.
110.1.2. Tangible personal property not directly used in the activity of contracting that was purchased or leased by the contractor prior to July 1, 1987. See the Transition Rules in Section 108 of these regulations for a discussion of the scope of this exception.
110.1.3. The use in this State of any tangible personal property purchased or leased by a person for use in another state which was actually placed into substantial use in another state before being brought, imported or caused to be brought into this State by such person for use in constructing or repairing its own buildings, structures or real property. "Substantial use in another state" means that the property was used by the taxpayer outside this State for a period of time equal to or greater than seventy-five percent of the useful economic life of the determined at the time such property was first purchased or leased by the taxpayer.
110.2. Contractors (both resident and nonresident) shall compute West Virginia Use tax on tangible personal property which they purchased and used outside this State before such property is brought, imported or caused to be brought into this state for use in their contracting activity. The measure of tax shall be that proportion of the original purchase price of tangible personal property paid by the taxpayer as the duration of time such property is used in this State bears to its total useful life. For purposes of this rule, the word "use" means and includes use, storage, consumption and stand-by time occasioned by weather conditions, controversies or other causes, it being the intention of this rule that the tax shall be computed upon the basis of the relative time each item of tangible personal property is in this State for use, rather than upon the basis of its actual use by the taxpayer. In the case of leased tangible personal property, the measure of tax is the amount of the lease payments attributed to the duration of time such leased property was used in this State.
110.2.1. Example. - Contractor X is a nonresident contractor who had been recently awarded a contract in West Virginia. Contractor X must bring a bulldozer from out-of-state into West Virginia. The job in West Virginia is estimated to take one year. The useful life of the bulldozer when purchased by Contractor X was ten years and its cost to Contractor X was $20,000. The use tax liability of Contractor X on the bulldozer is computed as follows:
A X B X C = D
A - purchase price of the tangible personal property B - duration of time property is in WV useful life of property C - 6% D - Use tax due E X F X G = H E - $20,000 1 Yr.
F - 10 Yr.
G - 6%
H - Use tax J X K X L = M J - $20,000 K - .10 L - .06 M - $120
110.2.2. Example. - To compute the use tax due in the case of leased property was used in West Virginia is multiplied by the use tax rate (6%). Contractor Y, a nonresident contractor, leases a bulldozer to use on a contracting site in West Virginia at a cost of $1,500 a month for six months. The use tax liability of Contractor Y is calculated as follows:
A X B = C
A - Amount of Lease Payments for Period of Time Property is in West Virginia B - 6% C - Use Tax Due D X E = F D - ($1,500 X 6)
E - 6%
F - Use Tax Due G X H = J G - $9,000 H - 6% J - $540
110.3. Before any property subject to the use tax is brought into this State for use as provided above, the owner, or if the property is leased, the lessee shall register with the Accounting Division of the West Virginia Tax Department. After registering, the taxpayer shall file quarterly reports on forms furnished by the State Tax Commissioner reporting such property bought, imported or caused to be brought into this State during the preceding calendar quarter, together with remittance of the amount of tax due. Such reports are to be filed on or before the twentieth day of the month following the calendar quarter in which such property was brought into this State.
110.4. Reports filed pursuant to this rule shall be accompanied by a schedule listing the property included in the report and showing the original cost price, duration of time of use in this State, total useful life, and the taxable amount for each item.
110.5. In the absence of satisfactory evidence as to the period of use intended in this State, it will be presumed that such property will remain in this State for the remainder of its useful life, which shall be determined in accordance with the experiences and practices of the building and construction trades. Any taxpayer who claims a greater estimated useful life for a given piece of equipment than its economic useful life shall set forth his reasons therefore.
W. Va. Code R. § 110-15-111 Installation of Tangible Personal Property
111.1. General rule. - Installation of tangible personal property can either be a taxable service or contracting. Installation of tangible personal property is generally considered to be a taxable service, unless it results in a capital improvement to a building, structure, or real property or is performed "on or connected with" new construction, reconstruction, alteration, expansion, or remodeling of real property or structures which itself results in a capital improvement. When an installation of tangible personal property results in a capital improvement to a building, structure, or real property or is performed "on or connected with" new construction, reconstruction, alteration, expansion, or remodeling of real property or structures, constituting a capital improvement, it is considered to be contracting. Guidelines for determining whether these situations exist are given below.
111.2. Factors For Determination of Capital Improvement. - In determining whether an installation of tangible personal property results in a capital improvement to a building or other structure or to real property, the following factors shall be considered. If either of the criteria is met, the installation will be considered to be a capital improvement to a building, structure, or real property, and will be considered to be contracting.
111.2.1. The installation results in a significant increase in the capital value of the building or other structure or of the real property, and the tangible personal property becomes part of the building or structure or real property or is permanently affixed to or attached to the building or structure or real property so that its removal would cause material damage to the article being removed or to the building or structure or real property itself, and the tangible personal property is intended to become a permanent installation or to remain for an indefinite period of time.
111.2.2. The installation results in an appreciable increase in the original useful life of the building or other structure or of the real property and the tangible personal property becomes part of the building or structure or real property or is permanently affixed to or attached to the building or structure or real property so that its removal would cause material damage to the article being removed or to the building or structure or real property itself, and the tangible personal property is intended to become a permanent installation or to remain for an indefinite period of time.
111.3. New Construction, Reconstruction, Alteration, Expansion or Remodeling. - The installation of tangible personal property is contracting when it is performed "on or connected with" new construction, reconstruction, alteration, expansion or remodeling of real property or structures which itself results in a capital improvement to a building, structure, or real property.
111.3.1. The term "on or connected with" as used in Section 111.3 is broad and conveys its generally accepted meaning. Therefore, in a specific situation, the facts relating thereto are controlling in determining whether the service is contracting or is a taxable service. "On or connected with" does not connote that things connected have to be primary or subsidiary to the construction, reconstruction, alteration, expansion or remodeling of the building or other structure, or real property.
111.3.1.1. An incidental relationship can qualify the activity as contracting if the relationship forms an immediate connection with the construction activity.
111.3.1.2. The presence of a time relationship can also be a factor in determining the applicability of the contracting exemption.
111.3.1.3. The motive behind the activity and the course of events that could reasonably be expected to occur would be further consideration in determining if an exempt contracting service is involved.
111.3.1.4. A physical relationship is also a factor that should be evaluated. If a building is constructed to house machinery, any enumerated services relating to the installation of that machinery would be an exempt contracting service. For example, piping joining two pieces of equipment housed in separate buildings would be treated as tax exempt contracting if the equipment in either building was installed while such new construction, reconstruction, alteration, expansion or remodeling of the structure was also taking place to house the equipment.
111.4. Installation Activities Not Constituting Capital Improvement. - On the other hand, a capital improvement does not include a contract providing only for the sale and installation of tangible personal property that remains tangible personal property after its installation. Generally, tangible personal property that is not a capital improvement can be moved without causing damage or injury to itself or to the structure, does not bear the weight of the structure, and does not in any other manner constitute an integral part of the structure. Installation of tangible personal property that does not constitute a capital improvement is considered to be a taxable service.
111.5. Property Remaining Tangible Personal Property After Installation. The following is a list of property which, under normal conditions, remains tangible personal property after installation and does not constitute a capital improvement. This list is non-exclusive and is offered for illustrative purposes only:
111.5.1. Furnishings, radio and television sets and antennas, washers and dryers, portable lamps, home freezers, portable appliances and window air conditioning units.
111.5.2. Portable items such as tables, counters, cabinets, lockers, athletic and gymnasium equipment and other similar items.
111.5.3. Freestanding machinery and equipment, tools, appliances, and materials used exclusively as such by manufacturers, industrial processors and other persons performing a processing function with the items.
111.5.4. Freestanding furniture and equipment, including freestanding office machines, used in offices and banks.
111.6. Property Becoming Part of Realty After Installation. - The following is a list of property which, under normal conditions becomes a part of realty and would be considered to be a capital improvement, and would be treated as contracting. This list is non-exclusive and is offered for illustrative purposes only:
111.6.1. Boilers and furnaces for space heating.
111.6.2. Built-in household items such as kitchen cabinets, dishwashers, sinks (including faucets), fans, garbage disposals and incinerators.
111.6.3. Buildings and structural and other improvements to buildings, including awnings, canopies, foundations, for machinery, floors (including computer room floor), walls, general wiring and lighting facilities, roofs, stairways, stairlifts, sprinkler systems, storm doors and windows, door controls, air curtains, loading platforms, central air conditioning units, building elevators, sanitation and plumbing systems, and heating, cooling and ventilation systems.
111.6.4. Fixed year-round wharfs and docks.
111.6.5. Improvements to land including retaining walls, roads, walks, bridges, fencing, railway switch tracks, ponds, dams, ditches, wells, underground irrigation systems, drainage, storm and sanitary sewers, and water supply lines for drinking water, sanitary purposes and fire protections.
111.6.6. Telephone switching equipment and wiring.
111.6.7. Residential water heaters, water softeners, intercoms, garage door opening equipment when it satisfies the requirements of Section 117.8 of these regulations, pneumatic tub systems and music and sound equipment (except portable equipment).
111.6.8. Drive-up and walk-up windows, night depository equipment, remote TV, autoteller systems, vault and vault doors, and camera security equipment (except portable equipment).
111.6.9. Seating in auditoriums and theatres and theatre stage lights (except portable seating and lighting).
111.6.10. Silos and grain storage bins.
111.6.11. Storage tanks constructed on the site.
111.6.12. Swimming pools (the framework or walls of which are wholly and partially underground (except portable pools)).
111.6.13. Truck platform scale foundations.
111.6.14. Walk-in cold storage units becoming a component part of a building.
111.7. Tangible Personal Property Which Become Structures by Their Basic Nature. - Items which are manufactured as tangible personal property can, by their very nature, become structure and will be considered to constitute a capital improvement to a building, structure, or real property. Installation of these items will be considered to be contracting. However, the determination is factual and must be made on an item by item basis. The following is a list of criteria to be used in making such a determination:
111.7.1. The degree of architectural and engineering skills necessary to design and construct the structure.
111.7.2. The overall scope of the business and the contractual obligations of the person designing and building the structure.
111.7.3. The amount and variety of materials needed to complete the structure, including the identity of materials prior to assembly and the complexity of assembly.
111.7.4. The size and weight of the structure.
111.7.5. The permanency or degree of annexation of the structure to other real property which would affect its mobility.
111.7.6. The cost of building, moving or dismantling the structure.
Example. A farm silo, which is a prefabricated glass lined structure, is intended to be permanently installed. The prefabricated glass lined structure is 70 feet high, 20 feet around, weighs 30 tons, and it is affixed to a concrete foundation weighing 60 tons, and it is set in the ground specifically for the purpose of supporting the silo. The assembly kit includes 105 steel sheets and 7,000 bolts. The silo can be removed without material damage to the realty or the unit itself at a cost of $7,000. In view of its massive size, the firm and permanent manner in which it is erected on a most substantial foundation, its purpose and function, the expense and size of the task and the difficulty of removing it, it is considered a structure and not machinery and equipment.
111.7.7. The above criteria is intended only to be summation of factors which the Tax Commissioner will consider in determining whether or not a project involves contracting.
111.8. Installation of Tangible Personal Property By Retailer. - Special rules apply to the sale of certain tangible personal property by a retailer involving incidental hookup, connection or installation. These sales may be treated as a retail sale to the consumer. See Section 114 of these regulations for more detailed information concerning these transactions.
111.9. Taxability of Sales. - To determine whether consumers sales and service tax should be collected from the customer and remitted, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in this section.
111.9.1. Sales of Contracting. - A person who engages in contracting does not charge consumers sales and service tax to the customer. The sale of contracting is exempt from sales and use tax as set forth in Section 9.2.17 of these regulations.
111.9.2. Sales of Service. - A person who engages in providing of taxable service must collect consumers sales and service tax from the customer and remit it to the state or obtain an exemption certificate, or direct pay permit from the customer.
111.10. Taxability of Purchase. - In order to determine whether consumers sales and use tax should be paid on purchases for use in these types of activities, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in this section.
111.10.1. Taxability of Purchases for Use in Contracting Activity. - Beginning March 1, 1989, except as outlined in Section 108 of these regulations and relating to transition rules and Section 109 of these regulations relating to the exemption for material used in government contracts, a person who engages in contracting must pay consumers sales or use tax on his purchases for use in the contracting activity. This includes machinery, equipment, materials, and services used in the contracting activity. It does not include labor provided by employees of the contractor. Transition rules are provided in Section 108. Special rules are provided in Section 109 of these regulations for contracts with the United States the State of West Virginia, its political subdivision, or corporate entities created by the West Virginia Legislature.
111.10.2. Taxability of Purchases for Use in Service Activity. - On or after July 1, 1989, a person who engages in the providing of a service is taxable on purchases for use in his taxable service activity, except for purchases for resale.
W. Va. Code R. § 110-15-112 Materials Produced or Manufactured by Contractors
112.1. The consumers sales and use tax laws provide that where a person produces a natural resource product or manufactures tangible personal property which such person then uses or consumes in the performance of contracting activity in this State, such person must pay consumers sales or use tax on the gross value of the natural resource product or manufactured product so used or consumed by such person in such contracting activity. The three exceptions to this rule are as follows:
112.1.1. Prior to October 1, 1990, where the natural resource product or manufactured product is actually installed, affixed, or incorporated into a building, structure or real property in fulfillment of a contract with the government of the United States, the government of this State or a political subdivision thereof, or with a public corporation created by the West Virginia Legislature or by a governmental entity pursuant to an Act of the Legislature, the product is deemed to have been sold to the governmental entity for which the contracting is being done even though it is directly used or consumed by the contractor in contracting done for the governmental entity. As of October 1, 1990, the exemption for materials purchased by contractors for use in governmental contracts was generally repealed and the use of material purchase certificates became very limited. See Section 109 of these regulations for additional information on the transition rules relating to the taxation of materials for use in governmental contracts.
112.1.2. Where the manufacturer-contractor (or natural resource producer-contractor) enters into two separate and distinct written contracts in arm's length transactions with the contractor (customer), one for the furnishing of materials and the other for the furnishing of contracting work with respect to new construction or to a capital improvement to a building or structure or real property.
112.1.2.1. The contract to furnish materials and the contract to furnish contracting work shall not be treated as separate and distinct contracts for purposes of the consumers sales and use taxes unless it is established by the contractor through clear and convincing evidence that:
112.1.2.1.a. Each contract was an arm's-length transaction;
112.1.2.1.b. The performance of one contract was not dependent upon the award of the other contract;
112.1.2.1.c. The award of one contract was not dependent upon the award of the other contract; and
112.1.2.1.d. Title to the materials passed to the contractor (customer) prior to the time the materials were incorporated into the capital improvement to a building or structure or real property.
112.1.2.2. The burden of proving that Section 112.1.2 of these regulations applies shall be upon the contractor.
112.1.2.3. Example. XYZ Co., a public utility, is planning to construct a new electric power generating facility in West Virginia. The XYZ Co. is subject to the West Virginia Business and Occupation Tax on its entire business conducted within the State and is exempt from the West Virginia Consumer Sales and Service Tax on its purchases under Sections 9.4.1 and 9.4.4 of these rules. In constructing the plant, XYZ Co. will purchase major items of equipment, including the boiler; turbo generator, pumps, motors, piping, etc. by entering into contracts for the acquisition of materials and equipment with one or more equipment vendors. XYZ Co. may also enter into construction contracts for all or part of the facility. Under these facts, the consumer sales and use taxes are imposed on the acquisition of materials used in constructing the boiler as follows:
a. If XYZ Co. purchases the materials from a materials vendor and erects the boiler itself, it will owe no consumers sales or use tax on the purchase of the materials.
b. If XYZ Co. purchases the materials from a materials vendor and contracts with a contractor other than the materials vendor to construct the boiler, XYZ Co. will owe no consumers sales or use tax on the purchase of the materials. The contractor will also owe no consumers sales or use tax on the construction contract tax because contracting services are exempt under Section 9.2.17 of these rules.
c. If XYZ Co. requests separate bids for the materials and for construction of the boiler and the same contractor-manufacturer is awarded both the materials and erection contracts, the Tax Commissioner will recognize the separate contracts and XYZ Co. will not owe the consumers sales or use tax on the purchase of the materials. The charge for erection will also be exempt because contracting services are exempt under Section 9.2.17 of these rules.
d. If XYZ Co. enters into one contract covering both the procurement of materials and construction of the boiler with a contractor-manufacturer of boilers, the contractor-manufacturer will owe the consumers sales and use tax on the fair market value of the boiler which it manufactured as well as on the purchase price any tangible personal property or taxable services which it used directly or indirectly in rendering the tax exempt contracting service.
112.1.3. Where the natural resource product or manufactured product is physically produced or manufactured on the job site where the contracting activity is taking place, and such product is directly used or consumed in contracting activity at that job site, the raw materials used or consumed in such contracting activity are taxable and the gross value of the product or manufactured product is not separately taxed.
Example 1: ABC Asphalt Company enters into a subcontract with the general contractor of a large shopping mall for ABC Company to pave the mall's parking lot. ABC Asphalt Company moves its portable asphalt plant to the job site. The asphalt manufactured by the plant is used solely in fulfilling the shopping mall contract. The asphalt mix which ABC Asphalt Company purchases is taxable because it is tangible personal property which ABC Asphalt Company uses or consumes in its contracting activity. The exemption for tangible personal property directly used or consumed in manufacturing activity does not apply to asphalt mix (and other similar property) because the asphalt mix is directly used or consumed in contracting activity and the product is manufactured on the job site.
Example 2: Same facts as example one, except that ABC Asphalt Company utilizes the portable asphalt plant to also manufacture asphalt which it sells other contractors. Under these facts, the asphalt mix is a raw material used in manufacturing tangible personal property. ABC Asphalt Company must collect consumers sales and service tax from the contractors who purchase part of the manufactured asphalt. ABC Company must also pay consumers sales and service tax on the gross value of the manufactured asphalt which it consumes in its contracting activity.
Example 3: ACE Heating and Contracting (ACE) Company has a contract to install a heating and air conditioning system in a ten story office building that is being constructed. ACE has a metal shop at which it fabricates standard sizes of duct work which it uses in its contracting business. It also sells duct work to other contractors. The gross value of duct work which ACE fabricates at the shop and uses in its contracting activity is subject to consumers sales and service tax. ACE also fabricates duct work at the job site. ACE will not pay consumers sales and service tax on the gross value of the duct work which it fabricates on the job site, but will pay consumers sales and service tax or use tax on the sheet metal which it uses at the job site to fabricate the duct work. ACE will not pay consumers sales and service tax or use tax on the sheet metal which is uses at its shop to fabricate duct work, because this sheet metal is a raw material used to fabricate (manufacture duct work).
Example 4: XYZ Construction Company (XYZ) produces limestone which it manufactures into various limestone products. It uses a portion of these limestone products in its contracting activity. XYZ must pay consumers sales and service tax on the gross value of the limestone products which it manufactures and uses in its contracting activity.
112.2. Where the contractor is the manufacturer or compounder of ready-mix concrete or asphalt plant mix used in the performance of a contract, the ready mix concrete or asphalt plant mix is compounded at the job site, the tax applies to the cost of the ingredients that become a component part of the ready-mix concrete or the asphalt plant mix and to the portable mixer. "Mixed at the job site" as used herein means mixed in a portable plant or mixer set up at or near the job site for use solely in connection with the job for which the concrete or plant mix is prepared and used and from which plant no concrete or plant mix is produced for sale.
112.3. Determination of "Gross Value". - Whenever a person partially or wholly consumes or uses tangible personal property in contracting in this State which he produced or manufactured in this State or in another state, the gross value thereof for consumers sales and use tax purposes shall correspond as nearly as possible to the gross proceeds which such person would have received from the sale of such natural resource product or manufactured product to another person in an arms-length transaction, as that term is defined for federal income tax purposes. Such value shall be determined by application of the following rules in the order stated:
112.3.1. The value of the natural resource product or the manufactured product consumed or used shall be equal to the selling price, at the place of use or consumption, of similar products of like quality and character offered for sale in similar quantities by persons unrelated to the taxpayer.
112.3.2. In the absence of sales of similar natural resource products or similar manufactured products by other persons as a guide to value, gross value shall be equal to the average price at which sales of the same or a similar product are made during the taxable year to customers of the producer or manufacturer.
112.3.3. In the absence of sales to customers of the taxpayer as a guide to value, gross value shall be determined by first determining the cost of the product and adding thereto the average markup realized by the producer or manufacturer of the product being valued. The cost of the product shall include every item of cost attributable to that particular product, including all direct and indirect overhead costs.
W. Va. Code R. § 110-15-113 Contractors Who Are Also Retailers
113.1. Special rules apply where contractors are in a dual business which includes reselling to the general public, on a recurring "over-the-counter" basis, the same type of tangible personal property which are used by them in their own contracting activities. A person operating in such a manner is referred to in this rule as a contractor-retailer. A sale by a contractor-retailer of tangible personal property, which does not provide for installation of the merchandise sold is considered a retail sale and is subject to the consumers sales and service tax. Conversely, a sale by a contractor-retailer of tangible personal property which provides for installation of the tangible personal property is generally considered to be contracting and consumers sales and service tax shall be paid by the contractor-retailer based upon the cost of the tangible personal property at the time the tangible personal property is withdrawn from inventory for use in the contracting activity unless the rules set forth in Section 114 apply. Section 114 of these regulations provides special rules for retailers who sell certain types of tangible personal property including incidental installation.
113.2. A contractor-retailer may purchase construction materials, supplies and equipment etc. from vendors free of consumers sales and service tax when the purchase is for resale. When a valid exemption certificate is furnished, the vendor is relieved from the responsibility of collecting the tax if the purchaser has demonstrated that he is a contractor-retailer under the provisions of this rule. The burden of such proof is upon the purchaser.
113.3. The business records of a contractor-retailer must clearly reflect the use made of items purchased and the records must be in such form that the Tax Commissioner can readily determine that the proper consumers sales and use tax liability is being reported and paid.
113.4. The following examples are offered to illustrate the responsibility for paying and remitting consumers sales and service tax under the above rules:
Example 1. ABC Company operates a retail outlet that sells lumber and other building materials and supplies. ABC Company is also a contractor which builds residential and commercial structures. ABC Company would be considered a contractor-retailer and would, therefore, purchase all inventory items for resale. Those items which are used in the performance of a construction contract would be subject to tax in the period they are withdrawn from inventory. The tax would be computed on the cost of the items withdrawn from inventory. Those items which are sold over-the-counter in the retail outlets would be subject to tax at the time of sale. The tax would be computed on the over-the-counter selling price.
Example 2. EFG Company is a mechanical contractor and has no retail outlets. EFG Company rarely sells any of its inventory to other persons or to other contractors. EFG Company would not be considered a contractor-retailer under this rule. However, EFG Company would be considered a contractor and must pay tax to its vendor at the time it purchases any construction materials, supplies, equipment or other tangible personal property. However, on those rare occasions when an inventory item is sold to another person or to another contractor, tax must be collected at the time of sale, therefore, EFG Company should be registered to collect consumers sales and service tax. An adjustment can be made to the consumers sales and service tax reported by taking a credit for tax previously paid on the item sold.
Example 3. Country Construction Company is owned and operated by two individuals in a rural West Virginia community. They do not have a retail outlet but they frequently make sales of building materials which are in their inventory to local residents. Country Construction Company would be a contractor-retailer and could purchase all inventory items for resale. Those items which are used in the performance of a construction contract would be subject to tax in the period they are withdrawn from inventory. The tax would be computed on the cost of the items withdrawn from inventory. Those items which are sold to residents would be subject to the consumers sales and service tax at the time of the sale. The tax would be computed on the selling price of the items.
Example 4. Downhome Construction Company is operated by two individuals in a rural West Virginia community. They do not have a retail outlet and rarely make sales of building materials from their inventory to local residents. Downhome Construction Company would not be considered a contractor-retailer under this rule. Rather, Downhome Construction Company would be considered a contractor and must pay tax to its vendor at the time it purchases any building materials, supplies and equipment. When sales are made to local residents, tax must be collected at the time of sale, therefore, Downhome Construction Company should be registered to collect consumers sales and service tax. However, Downhome Construction Company can adjust its consumers sales and service tax report by taking a credit for tax paid to its vendor on the item sold to the local resident.
W. Va. Code R. § 110-15-114 Sales of Tangible Personal Property with Incidental Installation
114.1. The sale of certain types of tangible personal property with incidental hookup, connection or installation by a "retail dealer" or by his arrangement is a transaction which is considered to be a sale of tangible personal property to a final consumer. Therefore, the retail dealer who sells such tangible personal property with incidental hookup, connection or installation may purchase the tangible personal property exempt from tax as a purchase for resale. This rule should not be confused with Section 113 regarding building equipment. A "retail dealer," is a merchant engaged in reselling to the general public on a recurring "over the counter" basis from a general or special store during regular business hours. The term "retail dealer" does not include a contractor who makes only occasional retail sales to the public and who does not have a regular retail place of business. This section does not apply to installation performed by a third party arranged for directly by the purchaser, and not by the retail dealer.
114.2. In order to determine whether hookup, connection, or installation is incidental to the retail sale of tangible personal property, the true object of the transaction must be examined. If the true object of the transaction is to secure the tangible personal property, then the entire transaction is taxable, including the hookup, connection or installation charge.
114.2.1. Hookup, connection or installation will be considered incidental, when rendered in connection with the retail sale of the items set forth below. This list is for illustrative purposes only and is not intended to be all-inclusive.
Wall-to-wall carpeting Mobile Homes (See Section 122 for additional rules relating to the sale and installation of mobile homes)
Window air conditioning units Dishwashers Clothing washing machines or dryers Other household appliances Drapery rods Window shades Venetian blinds Canvas awnings Free-standing industrial and commercial equipment
114.3. Elements of a mixed contract, e.g., where an installation contract is mingled with a tangible personal property sales contract, cannot be separated for consumers sales and service tax purposes. For example, the entire transaction is taxable if it involves the sale by a retail dealer of tangible personal property with incidental installation. (Special rules apply to the sale and installation of mobile homes. See Section 122 of these regulations for details.) On the other hand, the entire transaction would be exempt if the transaction involves contracting for a capital improvement to a building or structure or real property.
114.4. Certain services are subject to tax when performed under a contract for the incidental installation of the machinery, equipment or other tangible personal property, which is not done in connection with a capital improvement to a building, structure, or real property. Examples of these services are: electrical installation, plumbing, welding, and pipelining, etc.
Example: Company B contracts with company A to furnish and install a portable conveyor unit in company A's new building. Company B can purchase the portable conveyor unit tax free because the portable conveyor unit maintains its identity as tangible personal property after installation and does not become a component part of the real property. Company B would then charge tax to company A on the sale of the portable conveyor unit. Installation would be part of the total gross receipts subject to consumers sales and service tax. It makes no difference whether the charge for installation is separately or included within the selling price of the machinery and equipment.
114.5. If the sales transaction is one made with an out-of-state vendor and the tangible personal property is shipped in interstate commerce to a consumer or user in West Virginia, and is not otherwise exempt from tax, the final purchaser is required to pay West Virginia use tax on the purchase price of the tangible personal property and installation, unless the transaction involves contracting or a capital improvement to a building or structure or real property.
114.6. Example 1. Downtown, Inc. a retail dealer, has a retail outlet and makes recurring sales to the general public. Downtown, Inc. sells a replacement hot water heater from inventory to a homeowner and either installs it or makes arrangements for its installation. The transaction is a retail sale of tangible personal property and the total charge to the homeowner for the merchandise and the installation is subject to sales and use tax. Downtown, Inc. may purchase the hot water heater exempt from tax as a purchase for resale.
Example 2. Uptown Construction Co. is a heating and plumbing contractor who makes only occasional retail sales to the public and who does not have a regular retail place of business. Uptown Construction Co. sells a homeowner a replacement hot water heater and installs it. The sale and installation of the hot water heater is considered to be contracting because it is not performed by a "retail dealer." Sales and use tax is not charged to the customer on the transaction, but the contractor must pay sales and use tax on his purchase of the hot water heater and other items used in the installation.
Example 3. Mr. Homeowner must replace his hot water heater. He goes to Downtown, Inc. a retail store and purchases the hot water heater and other items needed for installation and pays consumers sales and service tax on the purchase. Mr. Homeowner then arranges with Uptown Construction Co. to install the hot water heater. The installation transaction with Uptown Construction Co. is considered to be contracting. No sales or use tax is charged to the homeowner on the installation, but the contractor must pay sales or use tax on the equipment used in the installation.
W. Va. Code R. § 110-15-115 Maintaining, Servicing, or Repairing Tangible Personal Property
115.1. General rule. - Maintaining, servicing and repairing are terms used to cover all activities that relate to keeping tangible personal property in a condition of fitness, efficiency, readiness, or safety or restoring it to such condition. The activity of maintaining, servicing, or repairing of tangible personal property can either be a taxable service or contracting. The activity of maintaining, servicing or repairing of tangible personal property is generally considered to be a taxable service, whether or not any tangible personal property is transferred in conjunction with the service. However, the maintaining, servicing or repairing of tangible personal property will be considered to be contracting if it involves either a capital improvement or is performed on or connected with new construction, reconstruction, alteration, expansion, or remodeling which itself results in a capital improvement to a building, structure or real property. Guidelines for determining whether these situations exist are given below.
115.1.1. Capital Improvement. - The maintenance, service or repair of tangible personal property is considered to be contracting if both of the following two conditions are met:
115.1.1.1. Tangible Personal Property was Capital Improvement. - The maintenance, service or repair is performed on tangible personal property which constituted a capital improvement to a building, structure, or real property when installed, (See Section 111 of these regulations for detailed information regarding when installation of tangible personal property constitutes a capital improvement to a building, structure or real property) and;
115.1.1.2. Maintenance, Service or Repair Constitutes Capital Improvement. - The maintenance, service or repair itself constitutes a capital improvement to the building, structure, or real property to or in which the tangible personal property is affixed or incorporated.
115.1.1.3. Factors for Determination of Capital Improvement. - In determining whether maintaining, servicing or repairing tangible personal property results in a capital improvement to a building or other structure or to real property to or in which the tangible personal property is affixed or incorporated, the following factors shall be considered. If either of the criteria is met, the maintenance, service or repair will be considered to be a capital improvement and will be considered to be contracting.
115.1.1.3.a. The maintenance, service, or repair results in a substantial increase in the capital value of the building or other structure or of the real property to or in which the tangible personal property is affixed or incorporated;
115.1.1.3.b. The maintenance, service or repair results in a appreciable increase in the original useful life of the building or other structure or of the real property to or in which the tangible personal property is affixed or incorporated.
115.1.2. New Construction, Reconstruction, Alteration, Expansion or Remodeling. - The maintenance, service, or repair of tangible personal property is contracting when it is performed "on or connected with" new construction, reconstruction, alteration, expansion or remodeling of real property, buildings or structures which itself results in a capital improvement thereto.
115.1.2.1. The term "on or connected with" as used in Section 115.1.2 is broad and conveys its generally accepted meaning. Therefore, in a specific situation, the facts relating thereto are controlling in determining whether the service is contracting or is a taxable service. "On or connected with" does not connote that things connected have to be primary or subsidiary to the construction, reconstruction, alteration, expansion or remodeling of the building or other structure or real property, which results in a capital improvement thereto.
115.1.2.1.a. An incidental relationship can qualify the activity as contracting if the relationship forms an immediate connection with the construction activity.
115.1.2.1.b. The presence of a time relationship can also be a factor in determining the applicability of the contracting exemption.
115.1.2.1.c. The motive behind the activity and the course of events that could reasonably be expected to occur would be further consideration in determining if an exempt contracting service is involved.
115.1.2.1.d. A physical relationship is also a factor that should be evaluated. If a building is constructed to house machinery, any enumerated services relating to the installation of that machinery would be an exempt contracting service. For example, piping joining two pieces of equipment housed in separate buildings would be treated as tax exempt contracting if the equipment in either building was installed while such new construction, reconstruction, alteration, expansion or remodeling of the structure was also taking place to house the equipment.
115.2. Examples of Maintenance, Service or Repair of Tangible Personal Property Constituting a Taxable Service.
Example 1. The repair or tuning of a piano is a taxable service.
Example 2. The service of lubricating a motor vehicle is a taxable service.
Example 3. Washing an automobile is a taxable service, whether the washing is performed manually or by a money machine.
Example 4. A company operates a diagnostic service in which it tests an appliance for a set fee. The diagnostic service is a taxable service.
Example 5. A company-operated central station burglar alarm system charges its customers a fee for repairs to the system necessitated by damage beyond the control of the company. The repair of the system is a taxable service.
Example 6. The replacing of a thermocouple on a furnace is a taxable service. The repair is not contracting because it does not constitute a capital improvement to a building, structure or real property. It does not constitute a capital improvement, because it does not increase the capital value of the furnace, nor extend the original useful life of the furnace.
Example 7. The repair of a hole in the lining of a boiler is a taxable service. The repair is not contracting because it does not constitute a capital improvement to a building, structure, or real property. It does not constitute a capital improvement because it does not increase the capital value of the boiler or extend the original useful life of the furnace.
115.3. Examples of Maintenance, Service or Repair of Tangible Personal Property Constituting Contracting.
Example 1. The replacement of the lining of a boiler is contracting because it constitutes a capital improvement to a building, structure or real property. It constitutes a capital improvement because the original useful life of the boiler has been extended.
Example 2. The repair of a faucet is normally considered to be a taxable service. However, if the repair of the faucet is performed with or connected to the remodeling of a kitchen, it will be contracting, because the overall activity involves a capital improvement to a building, structure or real property.
115.4. Taxability of Sales. - To determine whether consumers sales and service tax should be collected from the customer and remitted, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in Section 115 of these regulations.
115.4.1. Sales of Contracting. - A person who engages in contracting does not charge consumers sales and service tax to the customer. The sale of contracting is exempt from sales and use tax as set forth in Section 9.2.17 of these regulations.
115.4.2. Sales of Service. - A person who engages in providing of taxable service must collect and remit consumers sales and service tax from the customer or obtain an exemption certificate or direct pay permit.
115.5. Taxability of Purchases. - In order to determine whether consumers sales and use tax should be paid on purchases for use in these types of activities, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in the previous Section 115 of these regulations.
115.5.1. Taxability of Purchases for Use in Contracting Activity. - Beginning March 1, 1989, except as outlined in Section 108 of these regulations relating to transition rules and Section 109 of these regulations relating to the exemption for material used in government contracts, a person who engages in contracting must pay consumers sales or use tax on his purchases for use in the contracting activity. This includes machinery, equipment, materials, and services used in the contracting activity. It does not include labor provided by employees of the contractor. Transition rules are provided in Section 108 of these regulations. Special rules are provided in Section 109 of these regulations for contracts with the United States, the State of West Virginia, its political subdivision, or corporate entities created by the West Virginia Legislature.
115.5.2. Taxability of Purchases for use in Service Activity. - On or after July 1, 1989, a person who engages in the providing of a service is taxable on purchases for use in his taxable service activity, except for purchases for resale.
W. Va. Code R. § 110-15-116 Maintaining, Servicing, Repairing, Altering, Improving, or Decorating of Buildings, Structures or Real Property
116.1. General Rule. - The activity of maintaining, servicing, repairing, altering, improving or decorating of buildings, structures or real property can either be a taxable service or contracting. The activity of maintaining, servicing, repairing, altering, improving, or decorating of buildings, structures or real property is generally considered to be a taxable service, whether or not any tangible personal property is transferred in conjunction with the service. However, the maintaining, servicing, repairing, altering, improving or decorating of buildings, structures or real property will be considered to be contracting if it involves either a capital improvement or is performed on or connected with new construction, reconstruction, alteration, expansion, or remodeling which itself results in a capital improvement to the building, structure or real property. Guidelines for determining whether these situations exist are given in Sections 116.1.1 and 116.1.12 of these regulations.
116.1.1. Capital Improvement. - The maintaining, servicing, repairing, altering, improving, or decorating of buildings, structures or real property is considered to be contracting if it results in a capital improvement to the building, structure or real property.
116.1.1.1. Factors for Determination of Capital Improvement. - In determining whether maintaining, servicing, repairing, altering, improving, or decorating of buildings, structures or real property results in a capital improvement to a building or other structure or to real property, the following factors shall be considered. If either of the criteria is met, the maintaining, servicing, repairing, altering, improving, or decoration will be considered to be a capital improvement and will be considered to be contracting.
116.1.1.1.a. The maintaining, servicing, repairing, altering, improving, or decoration results in a significant increase in the value of the building or other structure or of the real property.
116.1.1.1.b. The maintaining, servicing, repairing, altering, improving, or decoration results in an appreciable increase in the original useful life of the building or other structure or of the real property.
116.1.2. New Construction, Reconstruction, Alteration, Expansion or Remodeling. - The maintaining, servicing, repairing, altering, improving, or decoration of buildings, structures or real property is contracting when it is performed "on or connected with" new construction, reconstruction, alteration, expansion or remodeling of real property or structures which itself results in a capital improvement to the building, structure, or real property.
116.1.2.1. The term "on or connected with" as used in Section 116.1.2 is broad and conveys its generally accepted meaning. Therefore, in a specific situation, the facts relating thereto are controlling in determining whether the service is contracting or is a taxable service. "On or connected with" does not connote that things connected have to be primary or subsidiary to the construction, reconstruction, alteration, expansion or remodeling of the building or other structure or real property, resulting in a capital improvement thereto.
116.1.2.1.a. An incidental relationship can qualify the activity as contracting if the relationship forms an immediate connection with the construction activity.
116.1.2.1.b. The presence of a time relationship can also be a factor in determining the applicability of the contracting exemption.
116.1.2.1.c. The motive behind the activity and the course of events that could reasonably be expected to occur would be further consideration in determining if an exempt contracting service is involved.
116.1.2.1.d. A physical relationship is also a factor that should be evaluated. If a building is constructed to house machinery, any enumerated services relating to the installation of that machinery would be an exempt contracting service. For example, piping joining two pieces of equipment housed in separate buildings would be treated as tax exempt contracting if the equipment in either building was installed while such new construction, reconstruction, alteration, expansion or remodeling of the structure was also taking place to house the equipment.
116.2. Examples of Maintenance, Service, Repair, Alteration, improvement, or Decoration of Buildings, Structures or Real Property Constituting a Taxable Service.
Example 1. The replacement of some shingles, or the patching of a roof is a repair. However, a new asphalt shingle roof is a capital improvement.
Example 2. A contractor sells and installs an above-ground swimming pool. The pool consists of a vinyl liner supported by an aluminum and wood frame which rests on the ground and a wood and metal deck. The vinyl liner rests on a bed of sand to prevent damage. The deep end of the pool is set approximately 2 feet into the ground. The pool may be dismantled and moved without substantially damaging the real property. The installation of the pool is not a capital improvement, as it may be dismantled and moved without substantial injury to the land, and there is no intent that it become affixed so that it has become part of the real property. Therefore, the charges for the sale and installation of the pool are subject to the tax.
Example 3. The replacement of broken window panes is a repair to a building, which is taxable.
Example 4. Company A enters into an agreement to provide periodic maintenance services on elevators and escalators belonging to its customers. The contract provides for inspection, lubrication and the performance of necessary repairs. These services are taxable.
Example 5. The periodic repainting of a building is not by itself a capital improvement. The entire charge for the paint and the service is taxable.
Example 6. A landscaping company enters into a contract to mow a customer's lawn on a regular basis, re-seed in the spring and fall and fertilize as needed. The total charge to the customer is taxable.
Example 7. A consumer has a maintenance contract with a heating and air conditioning company to supply all parts and emergency services for his heating and air conditioning system for one full year for a set fee. The cost of the contract is taxable, whether or not any services or parts are actually furnished.
Example 8. Repair of broken or defective glass is a taxable service.
Example 9. Replacement of broken windowpanes is a taxable service.
Example 10. Replacing individual or damaged roof shingles is a taxable service.
Example 11. Replacing or repairing a portion of worn out or broken kitchen cabinets is a taxable service.
Example 12. Replacement of garage door hinges is a taxable service.
Example 13. Replacing or repairing a portion of a broken or worn tub, shower, or faucets is a taxable service.
Example 14. Replacing or repairing a portion of a broken water heater, furnace or central air conditioning compressor is a taxable service.
116.3. Examples of Maintenance, Service, Repair, Alteration, Improvement or Decoration of Buildings, Structure or Real Property Constituting Contracting.
Example 1. The building of a garage or adding a garage to an existing building would be considered a capital improvement.
Example 2. Adding a redwood deck to an existing structure would be considered a capital improvement.
Example 3. Replacing a complete roof on an existing structure would be considered a capital improvement.
Example 4. Adding a new room to an existing building would be considered new construction.
Example 5. Adding a new room by building interior walls would be considered a capital improvement.
Example 6. Replacing kitchen cabinets with some modifications would be considered a capital improvement.
Example 7. Paneling existing walls would be considered a capital improvement.
Example 8. Laying a new floor over an existing floor would be considered a capital improvement. (See special rules for carpeting and other floor coverings sold and installed by retailers in Section 114 of these regulations.)
Example 9. Rebuilding a structure damaged by flood, fire or other uncontrollable disaster or casualty would be considered to be a capital improvement.
Example 10. Building a new wing to an existing building would be considered a capital improvement.
116.4. Taxability of Sales. - To determine whether consumers sales and service tax should be collected from the customer and remitted, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in Section 116.1 of these regulations.
116.4.1. Sales of Contracting. A person who engages in contracting does not charge consumers sales and service tax to the customer. The sale of contracting is exempt from sales and use tax as set forth in Section 9.2.17 of these regulations.
116.4.2. Sales of Service. - A person who engages in providing of taxable service must collect and remit consumers sales and service tax from the customer or obtain an exemption certificate or direct pay permit.
116.5. Taxability of Purchase. - In order to determine whether consumers sales and use tax should be paid on purchases for use in these types of activities, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in the previous Section 116.1 of these regulations.
116.5.1. Taxability of Purchases for Use in Contracting Activity. - Beginning March 1, 1989, except as outlined in Section 108 of these regulations relating to transition rules and Section 109 of these regulations relating to transition rules for the exemption for purchases of material used in government contracts that was repealed October 1, 1990, a person who engages in contracting must pay consumers sales or use tax on his purchases for use in the contracting activity. This includes machinery, equipment, materials, and services used in the contracting activity. It does not include labor provided by employees of the contractor. Transition rules are provided in Section 108 of these regulations. Special transition rules are provided in Section 109 of these regulations for contracts with the United States, the State of West Virginia, its political subdivision, or corporate entities created by the West Virginia Legislature.
116.5.2. Taxability of Purchases for Use in Service Activity. - On or after July 1, 1989, a person who engages in the providing of a service is taxable on purchases for use in his taxable service activity, except for purchases for resale.
W. Va. Code R. § 110-15-117 Specific Businesses with Contracting Issues
117.1. Carpentry. - Persons engaged in the business of carpentry, (as the trade is known in the usual course of business) are generally considered to be rendering, furnishing or performing a service, the gross receipts from which are subject to consumers sales and service tax, when the work does not result in a capital improvement to a building, structure or real property.
117.2. Chimney Cleaning. - The cleaning and servicing of chimneys of gas, oil or woodburning stoves, furnaces or fireplaces in residential dwellings is a service subject to consumers sales and service tax.
117.3. Demolition. - The charges for the demolition of a building or structure (or any part of either) is contracting and is not subject to the consumers sales and service tax. In general, the demolition of buildings or structures constitutes an improvement to land, because it enhances the value of land in preparing it for its best use.
117.4. Draperies and Drapery Hardware. - Retailers who contract to sell and install draperies, including drapery hardware, such as brackets, rods, tracks, etc., are retailers of the items which they furnish and install. Tax applies to the entire contract price including the charge for installation. Installers who furnish drapery hardware or other tangible personal property may accept resale certificates from department stores or other sellers to furnish and install the draperies and drapery hardware. Department stores or other retailers furnishing resale certificates are required to collect and remit the consumers sales and service tax to this State upon the gross receipts which they derive from selling and installing the draperies and drapery hardware.
117.5. Electrical Repair and Installation. - Persons engaged in the business of repairing or installing electrical wiring, fixtures, switches in or on real property or repairing or installing any article of personal property powered by electric current are rendering, furnishing or performing a service, the gross receipts from which are subject to tax unless the repair results in a capital improvement. "Repair" is synonymous with mend, restore, maintain, replace, or service. A "repair" contemplates an existing structure or thing which has become imperfect and constitutes the restoration to the original existing structure that which has been lost or destroyed. A "repair" that is a capital improvement to a building or other structure or to real property is treated as a contracting service which is exempt from the consumers sales and service tax. A "repair" that is not a capital improvement is one that does not materially add to the value or substantially prolong the useful life of the property. "Installation" includes affixing electric wiring, fixtures or switches to real property, affixing any article of personal property powered by electric current to any other article of personal property, or making any article of personal property powered by electric current operative with respect to its intended functional purpose. Tax does not apply to electrical installation repair when the service is on or connected with a structural change (capital improvement) to a building or similar structure, whether the structural change be internal or external to the building or structure. For example, the electrical repair or installation on or connected with new construction on buildings or structures would not be subject to the consumers sales and service tax.
117.6. Excavation Services.
117.6.1. The charges for excavation services by a contractor who provides his equipment and operator to perform a specific job in the manner to be directed or controlled by the contractor are contracting services exempt from the consumers sales and service tax.
117.6.2. Charges for the basic rental of equipment are subject to the consumers sales and service tax. Where the rental includes the services of an operator the charges for the operator are also subject to consumers sales and service tax.
117.7. Floor Covering Dealer Transactions. - Whenever an installation service is incidentally rendered in conjunction with the sale of floor coverings, the agreement for installation is treated as a taxable service regardless of whether the installation is done by the retail dealer or by the retail dealer's agent. The sale of the floor covering is also subject to consumers sales and service tax.
117.8. Garage Door Openers.
117.8.1. The charges for the sale and installation of electrically controlled garage door openers are subject to consumers sales and service tax. Such installations are not deemed to result in a capital improvement to real property.
117.8.2. However, when there is construction of a new building or portion thereof, or the installation of new garage doors in an existing building and there is the installation of an electric garage door opener, the transaction constitutes a capital improvement to real property. In such instance, the charges to the customer are not subject to consumers sales and service tax. However, the contractor must pay sales tax on the new garage doors and the electric garage door opener.
117.9. Heating Plant. - The installation of a new heating plant in a building or other structure results in a capital improvement. No consumers sales and service tax is charged to the contractor's customer.
117.10. House and Building Moving. - Persons engaged in the business of moving houses or buildings from one location to another, whether for repair or otherwise, are rendering, furnishing or performing a service, the gross receipts from which are generally subject to consumers sales and service tax.
117.11. Janitorial and Building Maintenance.
117.11.1. Gross receipts from janitorial services and building maintenance and cleaning are subject to consumers sales and service tax. "Janitorial services" means the type of cleaning services performed by a janitor in the regular course of duty, whether such services are performed individually, under separate contract, or are included within a general contract to perform a combination of such services. This term includes, but is not limited to, contracts to perform interior window washing, floor cleaning, vacuuming and waxing, the cleaning of interior walls and movement of furniture and other items of personal property within a building. Persons performing either one or a number of janitorial services are engaged in a business the gross receipts from which are subject to consumers sales and service tax. Therefore, for example, a person engaged only in cleaning the interior windows of a building is engaged in taxable janitorial services.
117.11.2. Cleaning of the exterior walls or windows of any building or any other act performed upon the exterior of a building with the intent to keep the building in good upkeep or condition, other than a repair, is the service of "building maintenance." Gross receipts therefrom are subject to consumers sales and service tax.
117.11.3. Janitorial services or building maintenance performed on or in connection with new construction, reconstruction, alteration, expansion or remodeling of the structure is exempt from tax.
117.12. Kitchen Remodeling. - Generally, the remodeling of a kitchen results in a capital improvement to real property. The contractor is required to pay the consumers sales and use taxes on the materials, supplies and equipment he purchases for use on the job.
117.12.1. In instances where the remodeling is done by a retailer and is limited in its scope to mere replacement of kitchen cabinets, appliances and wall-to-wall carpet, the transaction is treated as a sale of tangible personal property and the providing of a taxable service. The retailer is required to charge consumers sales and service tax on the gross receipts from the transaction.
117.12.2. Special rules also apply to the sale of kitchen cabinets manufactured by the installer. See Section 114 of these regulations for more detail relating to such transactions.
117.13. Lawn Care. - Persons engaged in the business of "lawn care" are performing a service the gross receipts from which are subject to consumer sales and use taxes. "Lawn care" includes but is not limited to the following services: Mowing, trimming, watering, fertilizing, reseeding, resodding and killing of insects, moles, or other vermin, weeds or fungi which may be threatening a lawn. Persons who mow lawns are providing taxable services regardless of their ages.
117.14. Landscaping.
117.14.1. The gross receipts from the service of "landscaping" are subject to consumers sales and service tax unless the landscaping results in a capital improvement to real property. In such instance, the landscaping is contracting. The services performed by one who arranges and modifies the natural condition of a given parcel or tract of land so as to render the land suitable for public or private use or enjoyment is engaged in the business of "landscaping."
117.14.2. Any services for which a license as a landscape architect is required under Chapter 30 of the West Virginia Code are not subject to the consumer sales and use taxes. When the taxable landscaping service provided consists of both professional and non-professional services, the professional services shall not be taxed if the charge therefor is separately stated on the invoice. The gross receipts from landscaping performed by a contractor in connection with new construction, reconstruction, alteration, expansion or remodeling of a building or structure or a contract for the alteration, improvement or development of real property are not subject to tax. However, the contractor must pay consumers sales and use taxes on all tangible personal property or taxable services purchased for use or consumption in such activity.
117.15. Monuments and Grave Stones. - Sales of monuments and grave stones by a retail dealer are subject to consumers sales and service tax. Monuments and grave stones that are sold and installed for a customer by a retail dealer or his agent are subject to consumers sales and service tax. The retail dealer is not treated as a contractor unless the installation is not incidental to the sale of the monument or grave stone.
117.16. Painting, Papering and Interior Decorating.
117.16.1. Persons engaged in the business of painting, papering and interior decorating are generally considered to be rendering, furnishing or performing a service, the gross receipts from which are subject to consumers sales and service tax. "Painting" means covering of both interior and exterior surfaces of tangible personal or real property with a coloring matter and mixture of a pigment or sealant, with some suitable liquid to form a solid adherent when spread on thin coats for decoration, protection or preservation purposes and all necessary preparations necessary to, including surface preparation. The following are not within the definition of painting: automobile undercoating; the coating of railroad cars, storage tanks or the plating of tangible personal property with metals such as but not limited to chrome, bronze, tin galvanized metal, or platinum. "Papering" means applying wall paper or wall fabric to the interior of houses or buildings and all necessary preparations thereto including surface preparation. "Interior decorating" shall mean the service of designing or decorating or the procurement of furniture fixtures or home or building decorations. When any person provides interior decorating service without charge as an incident to the sale of real or personal property, no consumers sales and service tax in addition to that paid on purchase price or any part thereof of the personal property, shall be charged.
117.16.2. Paper Hanging and Painting New or Existing Structures.
117.16.2.1. Papering or painting the walls of a new structure or a new addition to a structure is considered to be a capital improvement. In such cases the contractor will pay consumers sales and service tax to his supplier when he purchases his materials and supplies. He will not charge the property owner any consumers sales and service tax as such. Presumably, the consumers sales tax paid by the contractor will be included in the price the contractor charges his customer.
117.16.2.2. Papering or painting the walls of an existing structure is considered to be maintenance or repair work which does not constitute a capital improvement. In this case, the charges to the customer for the materials and for the labor are subject to consumers sales and service tax.
117.17. Pest Control Services.
117.17.1. Persons engaged in the business of termite and pest control are providing services that are subject to consumers sales and use taxes. A nonexclusive list of taxable services includes:
117.17.1.1. initial inspection for termites or other pests
117.17.1.2. reinspection
117.17.1.3. certification of reports for mortgage lenders
117.17.1.4. spraying of insecticides
117.17.1.5. fumigation
117.17.1.6. replacement or rehabilitation of infested wood (provided, the degree of work does not result in a capital improvement to a building or other structure or to real property)
117.18. Prefabricated Cabinets. - A cabinet will be considered to be "prefabricated" as a "fixture" when seventy-five percent (75%) of the total direct cost of labor and material in fabricating and installing the cabinet is incurred prior to affixation to the realty. In determining this seventy-five percent (75%) the total direct cost of all labor and materials in fabricating the cabinet to the point of installation will be compared to the total cost of all labor and materials in completely fabricating and installing the cabinet. If more than one cabinet is fabricated and installed under the contract, each cabinet will be considered separately in determining whether the cabinet is prefabricated.
117.19. Removal Service, Solid Waste.
117.19.1. Charges for the removal of garbage, rubbish and trash are exempt from consumers sales and service tax when the service is regulated by the West Virginia Public Service Commission.
117.19.2. Charges for the removal of debris resulting from land clearing, demolition or capital improvement construction are exempt from consumers sales and service tax when the removal is performed by the contractor or the contractor's subcontractor.
117.20. Roofing.
117.20.1. When a contractor or other person engages to repair a roof, he is providing a taxable service and must collect consumers sales and service tax on the charges to his customer.
117.20.2. Installation of a new roof would constitute a capital improvement. Thus there would be no consumers sales and service tax added to the charges to the customer. However, the contractor must pay consumers sales and service tax on all materials purchased and used or consumed in installing the new roof.
117.21. Signs.
117.21.1. When a sign is sold and the installation thereof does not result in a capital improvement to a building or other structure or to real property, consumers sales and service tax must be charged on the charges for both the sign and its installation.
117.21.2. If a concrete base is installed in the ground to be used as a foundation for a pole sign, the base is considered to be a capital improvement to real property and the contractor must pay consumers sales and service tax on the sign and on the materials and supplies used or consumed in its installation.
117.22. Swimming Pools. - The sale and installation of an above-ground swimming pool does not ordinarily result in a capital improvement to real property. Thus the charges for the pool and its installation are subject to the consumers sales and service tax.
117.23. Tin and Sheet Metal Repair. - Persons engaged in the business of repairing tin or sheet metal whether the same has or has not been formed into a finished product are rendering, furnishing or performing a service, the gross receipts from which are subject to tax.
117.24. Tree Trimming and Removal. - Persons engaged in the business of tree trimming and removal are performing a service, the gross receipts of which are subject to consumers sales and service tax. Persons engaged in "stump removal" are engaged in a taxable service, as are persons engaged in the removal of any other portion of a tree, such as the branches or trunk. The trimming or removal of any scrub which has a woody main stem or trunk with branches shall constitute tree trimming or removal and the gross receipts from the trimming or removal of such a scrub shall be subject to tax. Persons who engage in the business of tree trimming and removal who cut the wood from the trees which they trim or remove into sizes suitable for sale as firewood and to sell this wood for firewood are engaged in the sale of tangible personal property, and the gross receipts from the sale of this wood are subject to tax. The services of persons who trim or remove trees and sell the wood which they have cut are providing services for resale. Therefore, such persons must collect consumers sales and service tax on the service of tree trimming or removal and on the sale of firewood.
117.25. Venetian Blinds. - The sales of venetian blinds and the incidental installation thereof by the retail dealer or his agent are transactions subject to consumers sales and service tax.
117.26. Wall-to-Wall Carpeting. - The sale and incidental installation of wall-to-wall carpeting by a retail dealer or his agent is subject to consumers sales and service tax beginning July 1, 1989.
117.27. Water Conditioning and Softening. - Persons engaged in the business of water conditioning and softening are performing a service, the gross receipts of which are subject to tax. "Water softening" means the removal of minerals from water to render it more suitable for drinking and washing. "Water conditioning" means any action other than water softening taken with respect to water which renders the water fit for its intended use for more healthful or enjoyable for human consumption. The phrase "water conditioning" includes but is not limited to water filtration, water purification, the ionization and reverse osmosis. The service of water purification is taxable whether performed for residential, commercial, industrial, or agricultural uses.
117.28. Well Drilling. - Persons engaged in the business of water well drilling are rendering a contracting service, the gross receipts from which are not subject to tax.
W. Va. Code R. § 110-15-118 through 110-15-121 are Reserved for Future Use
W. Va. Code R. § 110-15-122 Mobile Homes, Modular Homes and Manufactured Homes
122.1. General rule. Consumers sales and use taxes apply to the sale or use in this State of mobile homes. The term "mobile homes" is defined for purposes of these regulations to mean "manufactured homes," as defined in Section 122.2 of these regulations. If the manufactured home will be used by the owner thereof as the owner's principal year-round residence and dwelling, a special consumers sales and use tax rate of three (3%) applies to the sale or use rather than the general consumers sales and service tax rate. All other purchases and uses of manufactured homes are subject to the general consumers sales and service tax rate.
122.1.1. Before the special three percent consumers sales and use tax rate can apply to the sale of a manufactured home, the purchaser must give to the vendor of the manufactured home a properly executed exemption certificate. If the vendor of the manufactured home is not required to collect this State's consumers sales or use taxes, the purchaser must remit the amount of consumers sales or use taxes due directly to the Tax Commissioner.
122.1.2. A manufactured home owned and used by a nonresident outside this state for more than six months prior to moving it into this State and establishing residency here is exempt from use tax.
122.1.3. If the manufactured home was purchased outside this State, then the amount of sales or use taxes lawfully paid to another state on the purchase price of the mobile home may be applied to reduce to zero any West Virginia use tax liability based on the purchase price.
122.2. "Manufactured Home" Defined. The term "manufactured home" means a structure, transportable in one or more sections, which in the traveling mode is eight body feet or more in width or forty body feet or more in length or, when erected on site, is three hundred twenty or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning and electrical systems contained therein; except that such term shall include any structure which meets all the requirements of this definition except the size requirements and with respect to which the manufacturer voluntarily files a certificate which complies with the applicable federal standards as set forth in the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. 5401, et. seq.) and the federal manufactured home construction and safety standards and regulations promulgated by the Secretary of the United State Department of Housing and Urban Development to implement such act. The term "manufactured housing" includes:
122.2.1. Units containing parts that may be folded, collapsed or telescoped when being towed and that may be expanded to provide additional cubic capacity.
122.2.2. Units composed of two (2) or more separately towable components designed to be jointed into one (1) integral unit capable of being separated again into the components for repeated towing.
122.2.2.1. For purposes of these regulations, such units shall include, but not be limited to, "modular homes" comprised of two or more sections, with or without a chassis, built to a state or model code other than the National Manufactured Housing Construction and Safety Standards Act, which are primarily constructed at a location other than the permanent site at which they are to be finally assembled, which are shipped to the permanent site with most permanent components in place, and which require less than five percent (5%) of final assembly (measured by the cost of construction materials and labor) at the permanent site of installation.
122.2.3. Units designed to be used for residential, commercial, educational or industrial purposes, excluding, however recreational vehicles. As used herein, "recreational vehicle" means a vehicular portable structure built on a chassis designed to be used as a temporary dwelling for travel, recreational and vacation uses, permanently identified "travel trailer" by the manufacturer of the trailer and when factory equipped for the road, having a body width not exceeding eight feet and a body length not exceeding thirty-two feet.
122.2.3.1. Beginning July 1, 1989, recreational vehicles are subject to the vehicle title privilege tax imposed by W. Va. Code '17A-3-4. When that tax is paid, the recreational vehicle is exempt from consumers sale and use taxes.
122.3. Sale and Installation of Manufactured Home by Seller.
122.3.1. When a retail dealer of manufactured homes sells a manufactured home from his inventory and agrees to hook-up and connect the same, or to arrange for the hook-up and connection to be done by another, consumers sales and use taxes are due on the gross proceeds which the retail dealer derives from the entire transaction. By statute, the hook-up and connection of a manufactured home is deemed to be incidental to the sale thereof when the retail dealer does the hook-up and connection or arranges for another person to do the hook-up and connection.
122.3.2. Activities which are included in the phrase "hook-up or connection" include, but are not necessarily limited to, the hooking-up of utility lines, the blocking up of the home, the underskirting of the home, attaching the home to the foundation, the finishing of interior trim, the joining together of modules or sections, or mere delivery of the home to the site.
122.3.3. If the vendor of the home, or another whose work is arranged for by the vendor, prepares the site for the home by constructing a foundation for the home or by installing utility lines to the site or doing other contracting activity, the hook-up and connection of the home are no longer incidental to the sale of the manufactured home. Under these circumstances, the vendor should charge consumers sales and use taxes on only the sales price of the mobile home. Consumers sales and use taxes should not be charged on the contracting service. For example, the sales price of a manufactured home is $20,000.00. The vendor prepares the site at a cost of $5,000.00. The sales price of the home is subject to consumers sales and use tax. Site preparation, which is classified as contracting, is not taxable; but the materials purchased for use or consumption in the contracting activity would be taxable to the contractor at the time of purchase.
122.3.3.1. The special rule provided in Section 122.3.2 is contrary to the general rule that when materials are provided as part of a contract for contracting services the contractor is deemed to be the consumer or user of all the material used or consumed in the contract and must pay consumers sales and use taxes on the purchase price of such items. If the general rule were to be applied, the contractor would pay tax on the purchase price of the manufactured home at the rate of six percent (6%) even though, the contract might be with a person who will utilize the manufactured home as such person's principal year-round residence and dwelling. In order to preserve the benefit of the lower consumers sales and use tax for such persons, this special rule is provided. This special rule shall have no effect on the general rule; and if the general rule is successfully challenged because of this special rule, the special rule must be set aside.
122.3.4. Charges for activities which are incidental to the sale of a manufactured home are taxable at the rate of six percent (6%), regardless of the anticipated use of the home. To illustrate, a manufactured home cost $20,000. The vendor agrees to deliver, hook-up and connect the home at the customer's site for $2,000. Because the purchaser will use the manufactured home as his principal year-round residence and gives the vendor a certificate to that effect, the $20,000 charge for the manufactured home is taxed at three percent (3%). The $2,000 charge is taxed at six percent (6%).
122.3.5. A vendor of manufactured homes who sells accessories for manufactured homes or other tangible personal property must collect consumers sales and use taxes at the six percent (6%) rate.
122.3.6. See Section 107 of these regulations for information relative to contracting.
122.4. Activities by an Independent Third Party.
122.4.1. The hook-up and connection or installation of manufactured homes by a contractor who is not the vendor of the home, and who is not a person whose services are arranged for by the vendor of the home, will generally be classified as the performance of a contracting service.
122.4.2. Tangible personal property and taxable services used or consumed in the preparation of the site or in the hook-up and connection or installation of the home are taxable at the time of sale to the contractor.
W. Va. Code R. § 110-15-123 Direct Use Concept
123.1. General Concept. - Beginning July 1, 1987, the liability of certain industries outlined in Section 123.2 for consumers sales and service tax on purchases for use in business became subject to the direct use concept. Under this concept, the applicability of the sales and use tax depends on the classification of the business purchasing the property or service and the use of the property or service being purchased rather than the type of property or service purchased. The same purchase of the same item may be taxable in one instance and exempt in another, depending totally on its purchaser and usage. The basic concept is that purchases directly used in activities or operations which are an integral and essential part of the specified business' activity are exempt from sales and use tax, while purchases which are instead used in activities or operations which are incidental, convenient, or remote to such activities are taxable for sales and use tax purposes. More specific guidelines are provided in Sections 123.3 and 123.4 of these regulations.
123.2. Industries Subject to the Direct Use Concept and Effective Dates. - Persons who are engaged in the business of manufacturing, transportation, transmission, communication or production of natural resources who purchase property or services for use in that business activity are subject to the direct use concept. Persons engaged in the business activity of contracting are subject to the direct use concept only for the period July 1, 1987 to February 28, 1989. On or after March 1, 1989, purchases for use in contracting are subject to the rules outlined in Section 107 of these regulations.
123.3. General Guidelines for Determining Taxability of Purchases for Use in Industries Subject to Direct Use Concept. - General guidelines for determining whether property or services are directly or indirectly used in an activity, thereby making the purchase taxable or exempt, are outlined in Sections 123.3.1 and 123.3.2 of these regulations. More specific examples are listed by industry in Section 123.4 of these regulations.
123.3.1. Uses of Property or Services Constituting Direct Use. - Uses of property or services which will constitute direct use when used by a person engaged in the business of manufacturing, transportation, transmission, communication or the production of natural resources, thereby making its purchase exempt from sales and use tax shall include only the following
123.3.1.1. Tangible personal property physically incorporated into a finished product resulting from manufacturing production, production of natural resources or from contracting activity during the period July 1, 1987 to February 28, 1989. For example, raw materials used by a manufacturer in making the finished product would be directly used in manufacturing.
123.3.1.2. Tangible personal property or services causing a direct physical, chemical or other change upon property undergoing manufacturing production, production of natural resources or subject to contracting activity during the period July 1, 1987 to February 28, 1989. For example, equipment used to assemble parts during the manufacturing process would be directly used in manufacturing.
123.3.1.3. Tangible personal property or services used in transporting or storing property undergoing transportation, communication, transmission, manufacturing production, production of natural resources or subject to contracting activity during the period July 1, 1987 to February 28, 1989. For example, fork lifts used to move partially manufactured goods from one area to another would be directly used in manufacturing, while fork lifts used to move completed goods on the loading dock would not be directly used in manufacturing.
123.3.1.4. Tangible personal property or services used in measuring or verifying a change in property directly used in transportation, communication, transmission, manufacturing production, production of natural resources, or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, testing equipment used in quality control to determine whether goods being manufactured meet contract specifications would be directly used in manufacturing.
123.3.1.5. Tangible personal property or services used to physically control or direct the physical movement or operation of property directly used in transportation, communication, transmission, manufacturing production, production of natural resources or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, conveyor belts used in moving manufactured goods on an assembly line would be directly used in manufacturing.
123.3.1.6. Tangible personal property or services used to direct or record the flow of property undergoing transportation, communication, transmission, manufacturing production or production of natural resources or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, meters used to record the amount of natural gas traveling through a pipeline would be directly used in transmission.
123.3.1.7. Tangible personal property or services used to produce energy for property directly used in transportation, communication, transmission, manufacturing production or production of natural resources, or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, an electrical generator or boiler used to produce energy for use in operating equipment directly used in manufacturing is considered to be directly used in manufacturing.
123.3.1.8. Tangible personal property or services used to facilitate the transmission of gas, water, steam or electricity from the point of their diversion to property directly used in transportation, communication, transmission, manufacturing production, production of natural resources, or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, pipes used to carry water to equipment directly used in manufacturing would be directly used in manufacturing.
123.3.1.9. Tangible personal property or services used to control or otherwise regulate atmospheric conditions required for transportation, communication, transmission, manufacturing production, production of natural resources or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, air conditioning necessary to control temperatures during a manufacturing process would be directly used while air conditioning for the personal comfort of employees would not be directly used in manufacturing.
123.3.1.10. Tangible personal property or services which serve as an operating supply for property undergoing transmission, manufacturing production, production of natural resources or in contracting activity during the period July 1, 1987 to February 28, 1989, or for property directly used in transportation, communication, transmission, manufacturing production, production of natural resources or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, warehouses used to store property directly used in the manufacturing process are directly used in manufacturing.
123.3.1.11. Tangible personal property or services used in the maintenance or repair of property directly used in transportation, communication, transmission, manufacturing production, production of natural resources or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, repair services performed on equipment used directly in the manufacturing process are directly used in manufacturing.
123.3.1.12. Tangible personal property or services used in the storage, removal or transportation of economic waste directly resulting from the activities of transportation, communication, transmission, manufacturing production, production of natural resources, or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, trash bins used to store waste directly resulting from manufacturing are directly used in manufacturing.
123.3.1.13. Tangible personal property or services used in pollution control or environmental quality or protection activity directly relating to the activities of transportation, communication, transmission, manufacturing production, production of natural resources or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, a scrubber used to clean air emissions from a manufacturing facility would be directly used in manufacturing or a slurry pond used to collect runoff from a mine would be directly used in the production of natural resources.
123.3.1.14. Tangible personal property or services used in personnel, plant, product, or community safety or security activity directly relating to the activities of transportation, communication, transmission, manufacturing production, production of natural resources, or in contracting activity during the period July 1, 1987 to February 28, 1989. For example, safety shoes used by personnel for protection in a hazardous manufacturing facility are directly used in manufacturing.
123.3.1.15. Tangible personal property or services used as an integral and essential part of transportation, communication, transmission, manufacturing production, production of natural resources or in contracting activity during the period July 1, 1987 to February 28, 1989.
123.3.2. Uses of Property or Services Not Constituting Direct Use. - Uses of property or services which will not constitute direct use, thereby making the purchase subject to the sales and use tax shall include, but not be limited to the following:
123.3.2.1. Tangible personal property or services used in the heating or illumination of office buildings. For example, the purchase of lighting fixtures for an office building would not be directly used.
123.3.2.2. Tangible personal property or services used in janitorial or general cleaning activities. For example, cleaning supplies or janitorial services purchased for general maintenance of a facility would not be directly used.
123.3.2.3. Tangible personal property or services used for the personal comfort of employees. For example, couches purchased for the employee lounge would not be directly used.
123.3.2.4. Tangible personal property or services used in production planning, scheduling of work or inventory control. For example, a computer purchased for use in maintaining records on inventory levels or for layout and designing of products would not be directly used.
123.3.2.5. Tangible personal property or services used in marketing, general management, supervision, finance, training, accounting and administration. For example, property purchased for use in research for a new or improved product would not be directly used.
123.3.2.6. Tangible personal property or services used in an activity or function incidental or convenient to transportation, communication, transmission, manufacturing production, production of natural resources, or in contracting for the period July 1, 1987 to February 28, 1989, rather than in an integral or essential part of such activity.
123.4. Direct Use Guidelines for Specific Industries. - Guidelines for determining whether property or services are directly or indirectly used in certain specific industries are outlined in Sections 123.4.1 through 123.4.5 of these regulations.
123.4.1. Transportation. - Transportation means the act or process of conveying, as a commercial enterprise by a person engaged in the business of transportation, passengers or goods from one place or geographical location to another place or geographical location. The transportation activity must be conducted for others as a commercial enterprise and does not include the transportation of goods by the owner of the goods, such as the transportation of goods to a customer by the manufacturer, or the transportation of goods by the seller of the goods to the buyer of the goods, such as a retailer delivering goods it has sold. Transportation also does not include storage of tangible personal property unless it is only temporarily stored while in transit. Purchases of tangible personal property or services not directly used in transportation are subject to the sales and use tax. This regulation also applies to taxpayers engaged in transportation that are subject to the control of the Public Service Commission.
123.4.1.1. Taxable Items. - The following items are indirectly used in transportation activity and subject to sales and use tax. This list gives only examples of taxable items and is not intended to be all inclusive.
123.4.1.1.a. Office supplies.
123.4.1.1.b. Office equipment.
123.4.1.1.c. Billing supplies.
123.4.1.1.d. Tariff rate schedules.
123.4.1.1.e. Motor freight guides or other trade publications.
123.4.1.1.f. Uniforms.
123.4.1.1.g. Paper towels, cloth towels.
123.4.1.1.h. Hand cleaner.
123.4.1.1.i. Toilet supplies.
123.4.1.1.j. Space heaters, except when used to preserve property being transported.
123.4.1.1.k. Linens.
123.4.1.1.l. Beds.
123.4.1.1.m. Dishwasher, stove, other kitchen items.
123.4.1.1.n. Time records - log books.
123.4.1.1.o. Machinery and tools used to repair vehicles other than transportation vehicles, i.e., supervisor's car.
123.4.1.1.p. Repair parts for vehicles other than transportation vehicles, i.e., supervisor's car.
123.4.1.1.q. Equipment such as fork lifts or hand trucks used to move goods in storage rather than goods in transit.
123.4.1.1.r. Temporary employment services when persons are not employees of the taxpayer and are rendering services not directly used in the transportation activity, such as clerical services.
123.4.1.1.s. Consultant services unless the services rendered are professional or directly used in the transportation activity.
123.4.1.2. Exempt Items. - The following items are directly used in transportation activity and exempt from sales and use tax. The list only gives examples and is not intended to be all inclusive.
123.4.1.2.a. Repair parts for transportation vehicles.
123.4.1.2.b. Machinery and tools used to repair transportation vehicles.
123.4.1.2.c. Tires, tubes, batteries, motor oil, grease lubricants, and brake and transmission fluids used on or in transportation vehicles.
123.4.1.2.d. Repair manuals for transportation vehicles.
123.4.1.2.e. Cleaning supplies used to clean transportation vehicles.
123.4.1.2.f. Equipment such as fork lifts, hand trucks, conveyor systems and dollies, used to load, unload or move goods in transit rather than goods in storage.
123.4.1.2.g. Heating or cooling equipment used to maintain temperatures necessary to maintain goods in transit.
123.4.1.2.h. Truck scales.
123.4.1.2.i. Two-way radios used in transportation vehicles.
123.4.1.2.j. Reflectors and fire extinguishers used on transportation vehicles.
123.4.1.2.k. Crates and packing materials used to pack goods in transit.
123.4.1.3. Items Used in Both Taxable and Exempt Manner. - It is possible for an item to be used in both a taxable or exempt manner. In such instances, apportionment of the tax may be necessary. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
123.4.2. Manufacturing. - Manufacturing means a systematic operation or integrated series of systematic operations engaged in as a business or segment of a business which transforms or converts tangible personal property by physical, chemical or other means into a different form, composition or character from that in which it originally existed. Purchases of tangible personal property and services which are directly used in manufacturing activity by a person engaged in the business of manufacturing are exempt from sales and use tax. Purchases of tangible personal property or services not directly used in manufacturing are subject to sales and use tax.
123.4.2.1. Taxable Items. - The systematic operation or integrated series of systematic operations which constitutes manufacturing begins with the storage and handling of raw materials and continues through the last step of processing. Storage of completed products and transportation of completed products to the customer or to another site is not included in manufacturing. Also, items relating to the administration of the plant or manufacturing facility are not considered to be directly used and are taxable. The list provides only some examples of taxable items and is not intended to be all inclusive.
123.4.2.1.a. Office furniture.
123.4.2.1.b. Office supplies and equipment.
123.4.2.1.c. Recordkeeping materials.
123.4.2.1.d. Research and development equipment used in developing new products or improving present products.
123.4.2.1.e. Computer and computer software, unless used to control the flow of goods in production.
123.4.2.1.f. Layout and design equipment, including computers and computer software.
123.4.2.1.g. Manuals and trade publications.
123.4.2.1.h. Uniforms.
123.4.2.1.i. Toilet supplies, paper and cloth towels
123.4.2.1.j. Heating and air conditioning equipment, except if specifically designed to maintain atmospheric conditions essential to the manufacturing process or to the maintenance of the manufactured goods.
123.4.2.1.k. Machinery, tools, parts, and materials used to repair equipment other than equipment directly used in the manufacturing process.
123.4.2.1.l. Machinery, tools, parts and materials used to maintain site facilities other than facilities directly used in manufacturing, such as materials used to maintain office facilities.
123.4.2.1.m. Materials used to construct, pave or maintain parking lots.
123.4.2.1.n. Tangible personal property and services used to convey, handle, transport market or display finished products, including flag car services.
123.4.2.1.o. Tangible personal property and services used to convey finished goods to storage or to store, or to remove or load finished goods from storage at the plant site.
123.4.2.1.p. Tangible personal property or services used in advertising or marketing manufactured goods, including withdrawal of salesman's samples from inventory.
123.4.2.1.q. Purchases of repairs to fulfill manufacturer's warranty.
123.4.2.1.r. Temporary employment services when persons are not employees of the manufacturer and are rendering services not directly used in the manufacturing activity, such as clerical services.
123.4.2.1.s. Consultant services unless the services rendered are professional or directly used in manufacturing activity.
123.4.2.1.t. Blueprints and blueprinting equipment.
123.4.2.2. Exempt Items. - The following items when purchased by a person engaged in the business of manufacturing are directly used in manufacturing and are exempt from sales and use tax. The list provides only some examples and is not intended to be all inclusive.
123.4.2.2.a. Raw materials used in manufacturing which are incorporated into and become part of the completed product.
123.4.2.2.b. Tangible personal property or services used in conveying or unloading raw materials into storage or from storage to the production line.
123.4.2.2.c. Tangible personal property or services used in storage of raw materials or partially finished manufactured goods.
123.4.2.2.d. Machinery or equipment used directly in manufacturing.
123.4.2.2.e. Machinery, tools, repair parts, and materials used to repair and maintain equipment directly used in the manufacturing process.
123.4.2.2.f. Tangible personal property or services used to convey partially finished manufactured goods from storage to the production line or from one part of the production line to another.
123.4.2.2.g. Machinery, tools, repair parts, and materials used to maintain plant site facilities directly used in the manufacturing process.
123.4.2.2.h. Heating and air conditioning equipment, but only if specifically designed to maintain atmospheric conditions essential to the manufacturing process or to the maintenance of the manufactured goods.
123.4.2.2.i. Tangible personal property and services used in testing and inspecting products on the production line for quality control purposes.
123.4.2.2.j. Computer hardware and software but only if used to direct production line operations or control the flow of goods in production or in quality control. If used for administrative purposes, computer hardware and software are taxable.
123.4.2.2.k. Safety equipment or clothing such as safety shoes, safety goggles, safety gloves, fire extinguishers, or first aid kits, but only if used in connection with or if necessary to the manufacturing process.
123.4.2.2.l. Tangible personal property or services used in plant security, such as plant security guard services or alarm systems.
123.4.2.2.m. Pollution control equipment used to eliminate, prevent, or reduce air, water or noise pollution resulting directly from manufacturing activity.
123.4.2.2.n. Boxes, cartons, containers, and wrapping and packaging materials and supplies used in packaging or packing manufactured products for sale, but only if the packaging material is actually transferred to the purchaser as part of the product. For example, cartons transferred to the purchaser as part of the sale are exempt, but racks used to facilitate delivery which must be returned by the purchaser are taxable.
123.4.2.3. Items Used in Both Taxable and Exempt Manner. - It is possible for an item to be used in both a taxable or exempt manner. In such instances, apportionment of the tax may be necessary. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
123.4.2.4. Exemption from Direct Use Concept for Persons Engaged in Activities Subject to the Business and Occupation Tax. - Persons subject to the business and occupation tax are exempt on all purchases made by them for use in business and occupation tax activities. This exemption includes purchases used either directly or indirectly in the public service or utility business or in the business of generating or producing electric power, but only in activities for which the gross receipts are subject to business and occupation tax (W. Va. Code '11-13-1 et seq.). It should be noted that some entities may be engaged in many businesses, some of which are subject to business and occupation tax and some of which are not subject to the business and occupation tax. Both those purchases directly or indirectly used in activities subject to the business and occupation tax made by a person subject to the business and occupation tax would be exempt from sales and use tax. Purchases for use in the other activities would be taxable unless they qualify for another exemption. If a person will be using the item both in an exempt manner and a taxable manner, it is possible that he may have to apportion the tax on purchases used in more than one activity. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
123.4.3. Production of Natural Resources. - The production of natural resources means the performance by the owner of the natural resources, or another of the act or process of exploring, developing, severing, extracting, reducing to possession and loading for shipment for sale, profit, or commercial use of any natural resource products, and any reclamation, waste disposal or environmental activities associated with these activities. Persons engaged in the business of the production of natural resources are subject to the direct use concept, unless they fall within the special exemption for severance taxpayers outlined in Section 123.4.3.4 of these regulations. If the person engaged in the production of natural resources is not entitled to the exemption for severance taxpayers, they must pay tax on purchases of tangible personal property and services, which are indirectly used in the production of natural resources. Purchases of tangible personal property and services which are directly used in the business of the production of natural resources are exempt from sales and use tax when such property or services are purchased by a person engaged in the business of the production of natural resources.
123.4.3.1. Natural Resource. - The term natural resource means all forms of mineral including, but not limited to, rock, stone, limestone, coal, shale, gravel, sand, clay, natural gas, oil, and natural gas liquids which are contained in or on the soils or waters of this State, including standing timber.
123.4.3.2. Severing or Severed. - Severing or severed means the physical removal of the natural resources from the earth or waters of this State by any means or from the waste or residue of prior mining.
123.4.3.3. Activities Not Included in the Production of Natural Resources. - The production of natural resources shall not include the following:
123.4.3.3.a. In the case of limestone quarried or mined, any activity after the stone is severed and reduced to possession on the surface. Processing of limestone is considered to be manufacturing.
123.4.3.3.b. In the case of natural gas, any conversion or refining process. Conversion or refining of natural gas is considered to be manufacturing.
123.4.3.3.c. In the case of oil, any conversion or refining process. Refining of oil is considered to be manufacturing.
123.4.3.3.d. In the case of timber, any cuts after the tree is severed, topped and delimbed. See Burruss v. Hardesty, 297 S.E.2d 836 (W. Va. 1982). The cutting of timber at a sawmill is considered to be manufacturing.
123.4.3.4. Exemption from Direct Use Concept for Persons Engaged in Activities Subject to the Severance Tax. - Persons subject to the severance tax are exempt on all purchases made by them for use in severance activities. This exemption includes purchases used either directly or indirectly in the production of natural resources, but only in activities for which the gross receipts are subject to severance tax (W. Va. Code '11-13-1 et seq.). It should be noted that some entities may be engaged in many businesses, some of which are subject to severance tax and some of which are not subject to the severance tax. Both those purchases directly or indirectly used in activities subject to the severance tax made by a person subject to the severance tax would be exempt from sales and use tax. Purchases for use in the other activities would be taxable unless they qualify for another exemption. If a person will be using the item both in an exempt manner and a taxable manner, it is possible that he may have to apportion the tax on purchases used in more than one activity. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
123.4.3.4.a. Example. - The gross receipts received by the owner from the quarrying of limestone is subject to the severance tax. If that same entity also processes the limestone, the processing activity would be classified as manufacturing. Purchases for use either directly or indirectly, in the quarrying business would fall within the exemption for severance taxpayers. However, only those purchases directly used or consumed in the manufacturing activity would be exempt.
123.4.3.5. Treatment of Contract Miners or Contract Cutters Engaged in Production of Natural Resources. - A contract miner or cutter is a person engaged as an independent contractor in producing natural resources which are owned by others. Contract miners or cutters are considered to be engaged in the production of natural resources and their purchases are subject to the direct use concept when engaged in the activities outlined in Section 123.4.3 of these regulations. Purchases made by a contract miner or cutter for direct use in the production of natural resources are exempt, while purchases made for indirect use are taxable. Contract miners or cutters are not eligible for the exemption outlined in Section 123.4.3.4 of these regulations, because they are not subject to the severance tax. Contract miners or cutters are not subject to the severance tax because they do not have an economic interest in the natural resource product being produced.
123.4.3.6. Taxable Items. - Purchases of tangible personal property or services indirectly used in the production of natural resources are taxable, unless made by a person subject to the severance tax and used in an activity subject to the severance tax. The following items are not directly used in production of natural resources and may be subject to the sales and use tax depending on whether the purchaser is subject to the severance tax. The list provides only some examples of taxable items and is not intended to be all inclusive.
123.4.3.6.a. All Natural Resources. - (Special rules exist for severance taxpayers. See Section 123.4.3.4 of these regulations).
123.4.3.6.a.1. Blueprints or blueprinting equipment.
123.4.3.6.a.2. Engineering equipment and surveying equipment, maps, and other property used in exploration.
123.4.3.6.a.3. Office and clerical supplies and equipment.
123.4.3.6.a.4. Janitorial supplies.
123.4.3.6.a.5. Light bulbs and fixtures used in offices, repair shops, bath-houses, or similar facilities.
123.4.3.6.a.6. Supplies used in bath-house.
123.4.3.6.a.7. Textbooks, manuals, and reference materials.
123.4.3.6.a.8. Research and development equipment used in developing new products or improving present products.
123.4.3.6.a.9. Personnel records, time logs.
123.4.3.6.a.10. Machinery, tools, parts, and materials used to repair equipment other than equipment directly used in the production of natural resources.
123.4.3.6.a.11. Machinery, tools, parts and materials used to maintain office facilities, repair shops, bath-houses, or eating facilities.
123.4.3.6.a.12. Temporary employment services when persons not employees of the taxpayer and are rendering services not directly used in the activity of the production of natural resources, such as clerical services.
123.4.3.6.a.13. Consultant services, unless services rendered are professional or directly used in the activity of the production of natural resources.
123.4.3.6.b. Coal Mining and Processing. - (Special rules exist for severance taxpayers. See Section 123.4.3.4 of these regulations).
123.4.3.6.b.1. Tangible personal property or services used in the transportation of coal from the mine to the customer or from the processing plant to the customer.
123.4.3.6.c. Limestone Quarrying. - (Special rules exist for severance taxpayers. See Section 123.4.3.4 of these regulations).
123.4.3.6.c.1. Tangible personal property or services used in the transportation of limestone from the quarry floor to a customer.
123.4.3.6.c.2. Tangible personal property or services used indirectly in the processing of limestone. Limestone processing is considered to be manufacturing rather than the production of natural resources, therefore purchases for indirect use in processing are taxable. See Section 123.4.2 of these regulations for more specific guidelines.
123.4.3.6.d. Natural Gas and Oil Production. - (Special rules exist for severance taxpayers. See Section 123.4.3.4 of these regulations).
123.4.3.6.d.1. Tangible personal property or services used indirectly in the refining or processing of natural gas or oil. The refining or processing of natural gas or oil is considered to be manufacturing. Therefore, purchases for indirect use in refining or processing are taxable. See Section 123.4.2 of these regulations for more specific guidelines.
123.4.3.6.e. Timbering. - (Special rules exist for severance taxpayers. See Section 123.4.3.4 of these regulations).
123.4.3.6.e.1. Cables used to secure logs to a truck for transportation to a customer.
123.4.3.6.e.2. Machinery, tools, parts and materials used to maintain equipment used to transport logs to a customer.
123.4.3.6.e.3. Tangible personal property or services used indirectly in activities occurring after the delimbing of the tree. Activities such as cutting timber at the sawmill are considered to be manufacturing. Purchases for indirect use in manufacturing are taxable. See Section 123.4.2 of these regulations for more specific guidelines.
123.4.3.7. Exempt Items. - Purchases of tangible personal property or services directly used in the production of natural resources are exempt from sales and use tax. The following items when used by a person engaged in the business of production of natural resources are directly used in the production of natural resources and are exempt from sales and use tax. The list provides only some examples of exempt items and is not intended to be all inclusive.
123.4.3.7.a. All Natural Resources.
123.4.3.7.a.1. Pollution control equipment used to eliminate, prevent, or reduce air, water, or noise pollution resulting directly from production activity.
123.4.3.7.a.2. Tangible personal property or services used for production site security, such as security guard services or alarm systems.
123.4.3.7.a.3. Safety equipment or clothing such as safety shoes, safety goggles, safety gloves, fire extinguishers, or first aid kits, but only if used directly in the production process.
123.4.3.7.a.4. Machinery, tools, repair parts, and materials used to repair and maintain equipment directly used in production.
123.4.3.7.a.5. Machinery, tools, repair parts, and materials used in reclamation activities associated with the production of natural resources.
123.4.3.7.b. Coal Mining and Processing.
123.4.3.7.b.1. Machinery and equipment used to sever or extract the coal including continuous miners, augers, picks, and other cutting machines and tools for underground mining and dozers, end loaders, cranes, backhoes, and power shovels for surface mining.
123.4.3.7.b.2. Mine support and roof materials such as timbers, roof bolts, and glue.
123.4.3.7.b.3. Drainage pipes, pumps and valves located at or in the mine.
123.4.3.7.b.4. Blasting equipment and explosives.
123.4.3.7.b.5. Mine ventilation equipment.
123.4.3.7.b.6. Rock dust and other dust alloying materials.
123.4.3.7.b.7. Mine and supply cars.
123.4.3.7.b.8. Equipment used to generate energy to operate machinery and equipment directly used in production such as generators, battery chargers, compressors, and transformers.
123.4.3.7.b.9. Tangible personal property or services used in transportation of coal from the mine face to a stockpile located at the mouth of the mine, such as mine and shuttle cars, trolley and battery locomotives, conveyor belts, or railroad tracks located inside the mine.
123.4.3.7.b.10. Tangible personal property or services used in the transportation of coal from the site of a surface mine to a stockpile where coal is stored for further shipment.
123.4.3.7.b.11. Communication equipment used within the mine.
123.4.3.7.b.12. Processing equipment, such as washers, centrifuges.
123.4.3.7.b.13. Tangible personal property or services used to transport coal from the mine to the processing plant, but only if both activities are conducted by the same person.
123.4.3.7.c. Limestone Quarrying.
123.4.3.7.c.1. Machinery and equipment used to sever or extract the limestone from the face of the quarry.
123.4.3.7.c.2. Blasting equipment and explosives.
123.4.3.7.c.3. Rock dust and other dust alloying materials.
123.4.3.7.c.4. Tangible personal property or services used to transport limestone from the quarry to the processing plant but only if both activities are conducted by the same person.
123.4.3.7.d. Natural Gas and Oil Production.
123.4.3.7.d.1. Gas and oil drilling rigs and equipment.
123.4.3.7.d.2. Chemicals used in gas and oil well completion.
123.4.3.7.e. Timbering.
123.4.3.7.e.1. Axe.
123.4.3.7.e.2. Chain saw.
123.4.3.7.e.3. Cables and chains, if used to move trees to permit delimbing.
123.4.3.7.e.4. Hydraulic slasher.
123.4.3.7.e.5. Oil if used in severing equipment.
123.4.3.7.e.6. Sawblades.
123.4.3.7.e.7. Saws.
123.4.3.7.e.8. Shearers.
123.4.3.7.e.9. Wedges.
123.4.3.8. Items Used in Both Taxable and Exempt Manner. - It is possible for an item to be used in both a taxable or exempt manner. In such instances, apportionment of the tax may be necessary. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
123.4.4. Transmission. - The activity of transmission means the act or process of causing liquid, natural gas or electricity to pass or be conveyed for others for consideration from one place or geographical location through a pipeline or other medium for commercial purposes but does not include the passage or conveyance of liquid, natural gas or electricity by the owner thereof. The word medium refers to the stationary mode by which liquid, natural gas, or electricity moves from one location to another, including pipelines or wires, but excluding tank trucks and barges. Purchases of tangible personal property or services which are directly used in transmission by a person engaged in the business of transmission are exempt from sales and use tax. Purchases of tangible personal property or services which are not directly used in transmission are subject to the sales and use tax.
123.4.4.1. Taxable Items. - Purchases of tangible personal property or services relating to the administration or management of a transmission facility are not considered to be directly used and are taxable. The list provides only some examples of taxable items and is not intended to be all inclusive.
123.4.4.1.a. Office furniture.
123.4.4.1.b. Office supplies and equipment.
123.4.4.1.c. Recordkeeping materials.
123.4.4.1.d. Research and development equipment.
123.4.4.1.e. Computers and computer software, unless used to trace or control the flow of goods in transmission.
123.4.4.1.f. Uniforms.
123.4.4.1.g. Toilet supplies, paper and cloth towels.
123.4.4.1.h. Light bulbs and lighting fixtures.
123.4.4.1.i. Heating or air-conditioning equipment, except if specifically designed to maintain atmospheric conditions essential to the transmission process or to maintain products in transmission.
123.4.4.1.j. Machinery, tools, parts, and materials used to repair equipment other than equipment directly used in the transmission process.
123.4.4.1.k. Machinery, tools, parts, and materials used to maintain facilities other than those directly used in transmission, such as materials used to maintain office facilities.
123.4.4.1.l. Storage tanks used to store products before or after transmission.
123.4.4.1.m. Temporary employment services when persons are not employees of the taxpayer and are rendering services not directly used in the activity of transmission, such as clerical services.
123.4.4.1.n. Consultant services, unless the services are professional or directly used in the transmission activity.
123.4.4.2. Exempt Items. - The activity of transmission begins with the receipt or intake of the liquid, natural gas, or electricity into the transmission system and ends with the delivery of the product to the customer. Purchases by persons engaged in the business of transmission of tangible personal property or services directly used in transmission activities are exempt from sales and use tax. The list provides only some examples and is not intended to be all inclusive.
123.4.4.2.a. Machinery and equipment used directly in the transmission process, such as pipes, poles, and wires.
123.4.4.2.b. Machinery, tools, repair parts and materials used to repair and maintain equipment directly used in the transmission process.
123.4.4.2.c. Machinery and equipment used in clearing the right of way for transmission lines.
123.4.4.3. Items Used in Both Taxable and Exempt Manner. - It is possible for an item to be used in both a taxable or exempt manner. In such instances, apportionment of the tax may be necessary. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
123.4.4.4. Exemption from Direct Use Concept for Persons Engaged in Activities Subject to the Business and Occupation Tax. - Persons subject to the business and occupation tax are exempt on all purchases made by them for use in business and occupation tax activities. This exemption includes purchases used either directly or indirectly in the public service or utility business or in the business of generating or producing electric power, but only in activities for which the gross receipts are subject to business and occupation tax (W. Va. Code '11-13-1 et seq.). It should be noted that some entities may be engaged in many businesses, some of which are subject to business and occupation tax and some of which are not subject to the business and occupation tax. Both those purchases directly or indirectly used in activities subject to the business and occupation tax made by a person subject to the business and occupation tax would be exempt from sales and use tax. Purchases for use in the other activities would be taxable unless they qualify for another exemption. If a person will be using the item both in an exempt manner and a taxable manner, it is possible that he may have to apportion the tax on purchases used in more than one activity. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
123.4.5. Communication. - The activity of communication includes all telephone, radio, light, light wave, radio telephone, telegraph and other communication or means of communication, whether used for voice communication, computer data transmission, or other encoded symbolic information transfers. Communication activity also includes commercial broadcast radio, commercial broadcast television and cable television. Persons engaged in the business of communications are subject to the direct use concept on their purchases of tangible personal property or services for use in communication business, unless they fall within the exemption for telecommunication taxpayers outlined in Section 123.4.5.1 of these regulations. If a person does not fall within this exemption, their purchases of tangible personal property and services for use indirectly in the activity of communications are subject to sales and use tax. Purchases by persons engaged in this State in the business of communications of tangible personal property or services for use directly in the activity of communication are exempt from sales and use tax.
123.4.5.1. Exemption from Direct Use Concept for Persons Engaged in Activities Subject to Telecommunications Tax. - Persons subject to the telecommunications tax are exempt on all purchases for use in telecommunications activities. This exemption includes purchases of tangible personal property or services, whether used directly or indirectly, but only in activities for which the gross receipts are subject to the telecommunications tax (W. Va. Code '11-13B-1 et seq.). The Public Service Commission provides annually to the Tax Commissioner a list of activities deemed to be competitive, which are not subject to the telecommunications tax. Purchases of tangible personal property or services for use in these competitive activities may be taxable, since the gross receipts from them are not subject to the telecommunications tax. It should be noted that some entities may be engaged in many activities, some of which are subject to telecommunications tax and some of which are not subject to the telecommunications tax. Both those purchases directly or indirectly used in activities subject to the telecommunications tax made by a person subject to the telecommunications tax would be exempt from sales and use tax. Purchases for use in the other activities would be taxable unless they qualify for another exemption. If a person will be using the item both in an exempt manner and a taxable manner, it is possible that they may have to apportion the tax on purchases used in more than one activity. The apportionment must be performed using a reasonable method acceptable to the Tax Commissioner. Additional information on apportionment is provided in Section 9d of these regulations.
W. Va. Code R. § 110-15-124 Reserved for Future Use
W. Va. Code R. § 110-15-125 Educational Summer Camps
125.1. The tuition charged for attending an "educational summer camp," as defined in Section 2 of these regulations, is exempt per se from the consumers sales and service tax and use tax. This exemption does not extend to charges for services or tangible personal property provided by or sold by the educational summer camp. Those charges are subject to tax unless otherwise exempt under these regulations. Examples of taxable charges are those for food, lodging, equipment rental or usage, clothing, books and study materials, except for required textbooks and study materials directly related to the educational nature of the summer camp.
125.2. In order for the exemption to be claimed, the tuition charge must be separately identifiable and it may not include other charges for services or tangible personal property provided or sold by the educational summer camp.
125.3. The educational summer camp may claim exemption for those purchases of tangible personal property or taxable services which are purchased for resale. However, tangible personal property or taxable services purchased for use in the activity of selling tangible personal property or the dispensing of a taxable service are subject to the consumers sales and service tax and use tax.
W. Va. Code R. § 110-15-126 Food
126.1. Food sold by public or private schools, school sponsored student organizations, or school sponsored parent-teacher associations to students enrolled in such school or to employees of such school during normal school hours is exempt from the consumers sales and service tax and the use tax. However, sales of food to the general public during normal school hours are taxable.
126.1.1. Organizations which may make such exempt sales are as follows:
126.1.1.1. A public, private, parochial or denominational school which is subject to regulation by the West Virginia State Board of Education;
126.1.1.2. An organization which is sponsored by a public, private, parochial or denominational school which is subject to regulation by the West Virginia State Board of Education; or
126.1.1.3. A parent-teacher association which is sponsored by a public, private, parochial or denominational school which is subject to regulation by the West Virginia State Board of Education.
126.1.2. The following sales of food or food products during other than normal school hours also are exempt.
126.1.2.1. Sales by a school sponsored student or parent-teacher association, or similar association, at athletic, cultural or social events when the proceeds of such sales, after payment of reasonable expenses, are donated to the school or used to purchase tangible personal property or services which are donated to the school.
126.1.2.2. Sales by a school sponsored student or parent-teacher association, or similar association, during a fund raising activity which does not qualify as an athletic, cultural or social event when the proceeds of such sales, after payment of reasonable expenses, are donated to the school or used to purchase tangible personal property or services which are donated to the school.
126.1.3. The following sales of food or food products are subject to consumers sales and service tax.
126.1.3.1. Sales of food by vending machines regardless of where the machine is located, who owns the machine or the time of day when the sale occurs.
126.1.3.2. Sales of food to the general public during normal school hours.
126.1.4. Only purchases of food sold during normal school hours as authorized in the foregoing Section 126.1 of these regulations are exempt from the consumers sales and service tax and use tax. All other purchases are taxable unless an exemption other than a purchase for resale is available for use. The exemption may be claimed by issuing a properly completed exemption certificate to the vendor.
126.2. Food sold by a public or private college or university or by a student organization officially recognized by such college or university to students enrolled at such college or university is exempt from tax when such sales are made on a contract basis so that a fixed price is paid for consumption of food products for a specific period of time without respect to the amount of food product actually consumed by the particular individual contracting for the sale and no money is paid at the time the food product is served or consumed.
126.2.1. Applications.
126.2.1.1. College Operated Dormitory. - A public or private college subject to the control of the Board of Trustees of the University System of West Virginia, the Board of Directors of the State College System or a similar board for a private college in this State operates a dormitory providing room and board to its students on a semester-by-semester basis. An itemization is made for room and for board. The price for board is determined regardless of the amount of food consumed by the student or the number of missed meals. The charge made for board is exempt from the consumers sales and service tax.
126.2.1.2. Lump Sum Charge for Room and Board. - If a college-operated dormitory makes a lump sum charge for room and board, the entire amount is exempt from consumers sales and service tax. Room charges are exempt under Section 9.2.2.0 of these regulations.
126.2.1.3. Food Furnished by Caterer. - If the food service is furnished by a caterer and the contract is between the student and the caterer, the food is not being sold by the college or the university and the sale of food is subject to consumers sales and service tax but the charge for the room remains exempt. If the contract is between the student and the college or university, the charge is exempt.
126.2.1.4. Dormitory Operated by Private Person. - If room and board are furnished by a dormitory not operated by the college or university, the charge made for board is subject to consumers sales and service tax. The charge made for the room is exempt from the consumers sales and service tax if the person renting the room continues to do so for a period in excess of thirty (30) consecutive days.
126.2.1.5. Lump Sum Charge for Room and Board. - If a dormitory operated by a private person makes a lump sum charge for room and board, the entire amount is subject to the consumers sales and service tax.
126.2.1.6. Fraternities and Sororities. - Sales of food and meals on a "contract basis," as defined in Section 2 of these regulations, by student fraternities and sororities that are officially recognized by the college or university at which they are located, to a student enrolled at the college or university are exempt. Food or meals sold to the general public or on any basis other than a "contract basis," are subject to consumers sales and service tax.
126.2.2. To the extent that an organization qualifies for exemption for its sales of food under this Section 126.2, its purchases of such food shall also be exempt; however, purchases of food by a fraternity or sorority shall not be exempt as a purchase for resale. The exemption may be claimed by issuing a properly completed exemption certificate to the vendor.
126.3. Food sold by a charitable or private nonprofit organization, a nonprofit organization or a governmental agency under a program to provide food to low-income persons at or below cost is exempt from tax. All of the following conditions must be satisfied in order to establish the exemption:
126.3.1. The purchaser must be classified as having low income.
126.3.2. The sale must be made by a charitable or private nonprofit organization nonprofit organization or governmental agency.
126.3.3. The sale must be under a program established to provide food to low-income persons.
126.3.4. The sale must be made at or below cost.
126.3.5. Purchases of food by a charitable or private nonprofit organization, nonprofit organization or a governmental agency under a program to provide food to low-income persons at or below cost are exempt when such food is used or consumed in the program. The exemption may be claimed by issuing a properly completed exemption certificate to the vendor.
126.4. Food sold in an occasional sale by a charitable or nonprofit organization, including volunteer fire departments and rescue squads is exempt from tax, if the purpose of the sale is to obtain revenue for the functions and activities of the organization and the revenue so obtained is actually expended for that purpose.
126.4.1. Charitable Organization.
126.4.1.1. "Occasional sales of food," as defined in Section 2 of these regulations, by a corporation or organization that is exempt from income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and which satisfy the definition of "charitable organization" as provided in Section 2 of these regulations, are exempt from consumers sales and service tax.
126.4.2. Civic Organization Operated for Social Welfare.
126.4.2.1. "Occasional sales of food," as defined in Section 2 of these regulations, by a corporation or organization that is exempt from income tax under Section '501(c)(4) of the Internal Revenue Code of 1986, as amended, are exempt from consumers sales and service tax.
126.4.2.2. Examples of organizations that may qualify.
Educational radio stations Junior Chamber of Commerce Civic Improvement Association Volunteer fire department Volunteer rescue squad
126.4.3. Nonprofit Organization.
126.4.3.1. "Occasional sales of food," as defined in Section 2 of these regulations, by a nonprofit corporation or organization not included in Sections 126.4.1.1 and 126.4.1.2 of these regulations may be exempt from consumers sales and service tax.
126.4.3.2. Examples of organizations that may qualify.
126.4.3.2.a. Labor, agricultural or horticultural organizations which are exempt from income tax under Section 501(c)(5) of the Internal Revenue Code of 1986, as amended.
126.4.3.2.b. Business leagues, chambers of commerce and other organizations which are exempt from income tax under Section 501(c)(6) of the Internal Revenue Code of 1986, as amended.
126.4.3.2.c. Social clubs and clubs organized for pleasure, recreation and other nonprofit purposes which are exempt from income tax under Section 501(c)(7) of the Internal Revenue Code of 1986, as amended.
126.4.3.2.d. Fraternal or benevolent societies, orders or associations which are exempt from income tax under Section 501(c)(8) of the Internal Revenue Code of 1986, as amended.
126.4.4. Purchases of food for sale under the foregoing Section 126.4 are not exempt from the consumers sales and service tax or the use tax as a purchase for resale.
126.5. Food sold by any religious organization at a social or other gathering conducted by it or under its auspices, if the purpose in selling the food is to obtain revenue for the functions and activities of the organization and the revenue obtained from selling the food is actually used in carrying on such functions and activities: Provided, That purchases made by such organizations shall not be exempt as a purchase for resale.
126.6. Sales of food by little leagues, midget football leagues, youth football or soccer leagues and similar types of organizations including scouting groups and church youth groups are exempt if the purpose in selling the food is to obtain revenue for the functions and activities of the organization and the revenue obtained from selling the food is actually used in supporting or carrying on the functions and activities of the groups.
W. Va. Code R. § 110-15-127 Roadside Market, Open-Air Market, Farmer's Market, Etc
127.1. Sales by an agricultural producer or by members of such producer's immediate family, who is not otherwise engaged in making retail sales of tangible personal property of the type being sold at such market of livestock, poultry, or other farm products in their original state to consumers at pick-your-own fruit and vegetable operations, farmers markets, roadside stands, or through similar operations are exempt from the consumers sales and service tax; however, such sales by others who are not the producers of such goods are subject to the sales and service tax. It is the responsibility of the operator to collect and remit the tax or to accept from the purchaser a properly completed exemption certificate. See Section 9.2.26 of these regulations for additional information.
127.2. Vendors of livestock, poultry or other farm products who are required to collect the tax on the sale of agricultural products, are required to obtain a business registration certificate as provided in W. Va. Code '11-12-1 et seq.
W. Va. Code R. § 110-15-128 Mail Order Sales
128.1. Effective July 1, 1989, every person who engages in the business of making mail order sales is exercising a taxable privilege, when:
128.1.1. The retailer is a corporation doing business under the laws of this State or a person domiciled in, a resident of, or a citizen of this State;
128.1.2. The retailer maintains a retail establishment or office in this State whether or not the mail order sales result from or are related in any other way to the activities of such establishment or office; or
128.1.3. The retailer has agents in this State who solicit business or transact business on behalf of the retailer, whether or not the mail order sales result from or are related in any other way to such solicitation or transaction of business; or
128.1.4. The property or the result of a service was delivered within this State in fulfillment of a sales contract that was entered into in this State, in accordance with applicable conflict of laws rules, when a person in this State accepted an offer by ordering the property or the service; or
128.1.5. The retailer, purposefully or systematically exploiting the market provided by this State by any media-assisted, media-facilitated, or media-solicited means, including, but not limited to, direct mail advertising, unsolicited distribution of catalogs, computer-assisted shopping, television, radio or other electronic media or magazine or newspaper advertisements or other media, creates nexus with this State; or
128.1.6. Through compact or reciprocity with any other jurisdiction of the United States which jurisdiction uses its taxing power and its jurisdiction over the retailer in support of this State's taxing power; or
128.1.7. The retailer consents, expressly or by implication, to the imposition of the West Virginia use tax.
128.2. Definitions. - The following terms or phrases when used in this Section shall have the meaning ascribed to them except where the context clearly indicates a different meaning is intended:
128.2.1. "Retailer" means and includes every person engaging in the business of selling or leasing tangible personal property for use in this State or rendering taxable services the results of which will be used in this State, including a retailer who transacts mail order sales.
128.2.1.1. When in the opinion of the Tax Commissioner it is necessary for the efficient administration of the use tax, the Tax Commissioner may regard any salesperson, representative, trucker, peddler, or canvasser as the agent of the dealers, distributors, supervisors, employers or persons under whom they operate or from whom they obtain the tangible personal property or taxable service sold by them, regardless of whether they are making sales on their own behalf or on behalf of such dealers, distributors, supervisors, employers or persons; and the Tax Commissioner may regard such dealers, distributors, supervisors, employers or persons as retailers for purposes of collecting the use tax imposed by this State.
128.2.2. "Retailer engaging in business in this State" means and includes, but shall not be limited to:
128.2.2.1. Any retailer having or maintaining, occupying or using within this State, directly or by a subsidiary, an office, distribution house, sales house, warehouse, or other place of business, or any agent (by whatever name called) operating within this State under the authority of the retailer, or its subsidiary, regardless of whether such place of business or such agent is located here permanently or temporarily, or whether such retailer, or subsidiary, is admitted to do business within this State pursuant to W. Va. Code '31-1-49. This definition shall be administered and enforced in conformity with the Constitutions and statutes of this State and of the United States.
128.2.2.2. Any retailer soliciting orders from persons located in this State for the sale of tangible personal property or taxable services by means of any of the following:
128.2.2.2.a. By means of a telecommunication or television shopping system which utilizes a telephone or mail ordering system, including toll free telephone numbers, reverse charge telephone systems or other telephone ordering systems and which is intended by the retailer to be broadcast by cable television or other means of broadcasting to consumers located in this State.
128.2.2.2.b. By means of advertising that is broadcast from, printed at, or distributed from, a location in this State if the advertising from such location is primarily intended to be disseminated to consumers located in this State and is only secondarily or incidentally disseminated to bordering jurisdictions. Advertising which is broadcast from a radio or television station located in this State or is printed in or distributed by a newspaper published in this State is presumed to be primarily intended for dissemination to consumers located in this State. This presumption may be rebutted by persuasive evidence to the contrary. However, the number and geographic location of a television station's viewers, a radio station's listeners, a newspaper's subscribers or the distributees of advertising printed at or distributed from a location in this State is but one factor to be considered and, standing alone, shall not be controlling the controlling factor.
128.2.2.2.c. By mail if the solicitations are substantial and recurring and if the retailer economically benefits from any banking, financing, debt collection, telecommunication or marketing activities occurring in this State or economically benefits from the location in this State of an authorized installation or service or repair facility, regardless of whether such facility is owned or operated by such retailer or by a related or unrelated person.
128.2.2.2.d. By having a franchisee or licensee operating in this State under the retailer's trade name, if the franchisee or licensee is required to collect the consumers sales and service tax or use tax imposed by this State.
128.2.2.2.e. By means of a contract with a cable television operator located in this State pursuant to which the retailer solicits from persons located in this State orders for the sale of tangible personal property or taxable services by means of advertising which is transmitted or distributed over a cable television system in this State.
This definition shall be administered and enforced in conformity with the Constitutions and statutes of this State and of the United States.
128.2.3. "Final adjudication" means a decision of a court of competent jurisdiction from which no appeal can be taken or from which the official or officials of this State with authority to make such decisions have decided not to appeal.
128.2.4. "A mail order sale" is a sale of tangible personal property, or a taxable service that is ordered by mail, computer-assisted shopping, media-assisted, media-facilitated, or media-solicited, or by other means of communication (including but not limited to direct mail advertising, unsolicited distribution of catalogs, television, radio or other electronic media, telephone or magazine or newspaper advertising), to a purchaser who is in this State at the time the order is remitted, from a dealer who receives the order in another state of the United States, or is in a commonwealth, territory or other area under the jurisdiction of the United States, and transports the property or causes the property to be transported, whether or not by mail, from any jurisdiction of the United States, including this State to a person in this State, including the person who ordered the property. For purposes of this definition, there is a presumption that every person who is a resident of this State who remits an order was in this State when the order was finally remitted by the vendor.
Example 1: A purchaser, who is a resident of West Virginia, receives in the mail a catalog of the seller who resides in another state and whose business facilities are all located in that state. The purchaser orders tangible personal property advertised in the catalog by completing an order blank furnished with the catalog, attaching his or her personal check in the amount required for the purchase, and mails the order from within this State to the seller. The seller, by mail or other means of transportation, transmits the property to the purchaser in West Virginia. If any of the provisions of Section 128.1 are applicable, this is a taxable mail order sale and the out-of-state vendor must collect use tax from the West Virginia customer.
Example 2: A purchaser, not a resident of West Virginia, while outside this State orders tangible personal property from a seller in another state to be sent to the purchaser's grandchildren in West Virginia. This is not a "mail order sale" because the purchaser was not in West Virginia at the time the order was remitted.
Example 3: A West Virginia resident, while vacationing in another state, orders tangible personal property from a seller in another state to be sent to the purchaser's home in West Virginia. Since the purchaser is a West Virginia resident, he or she is presumed to have purchased the property for use or consumption in this State. If any of the provisions of Section 128.1 are applicable, the out-of-state vendor must collect West Virginia use tax. If this presumption is rebutted, this would not be a taxable "mail order sale."
128.3. Vendor's Responsibilities. - Every vendor engaged in the business of making mail order sales that are subject to use tax is required to have a business registration certificate. No registration fee is required unless the vendor has contact with this State that is sufficient to sustain imposition by this State of a direct tax on the out-of-state vendor.
128.4. Transportation and Handling Charges. - The total amount paid for tangible personal property, including transportation charges, handling charges, and any other charges whatsoever that occur prior to actual transfer of title to the tangible personal property to the purchaser by the vendor are subject to the tax regardless of whether such charges are separately stated.
128.5. No Dealer Collection Allowance. - Persons who collect consumers sales and service tax or use taxes must turn over to the Tax Commissioner the full amount of consumers sales and service or use taxes they collect from West Virginia customers. Neither the consumers sales and service tax law nor the use tax law authorizes the taking of a vendor's collection allowance.
128.6. Refund of Taxes on Mail Order Sales.
128.6.1. When there has been a final adjudication that any tax upon a mail order sales transaction was levied or collected, or both levied and collected, contrary to the Constitution of the United States, or the Constitution of West Virginia, or both Constitutions, the Tax Commissioner will, in accordance with Section 128.6.2 of these regulations, refund the amount of tax to the person who paid the tax or, at the taxpayer's election, establish a tax credit.
128.6.2. To receive a refund or credit of consumers sales and service tax or use tax, the person who paid the tax must file a claim for refund within two years from the date the tax was paid to the vendor or directly to the State Tax Commissioner. Such claim must include the following information.
128.6.2.1. A description of the tangible personal property or taxable service purchased;
128.6.2.2. The date on which the purchase was made;
128.6.2.3. The purchase price of the item(s) or service(s);
128.6.2.4. The amount of West Virginia consumers sales or use taxes paid for such item;
128.6.2.5. The name and mailing address of the seller from which the purchase of the tangible personal property or taxable service was made;
128.6.2.6. The citation of the court decision or decisions upon which the claim for refund is based;
128.6.2.7. A copy of the sales invoice made out by the seller of the tangible personal property or taxable service; and
128.6.2.8. Any other information that is required by the State Tax Department in order to verify the authenticity or accuracy of the claim for refund.
128.6.3. The Tax Commissioner may refuse to grant a claim for refund or credit if the claim for refund is incomplete or fails to contain all of the information required by Section 128.6.2 of these regulations.
128.6.4. Upon formal approval of a complete claim for refund, the Tax Commissioner shall promptly issue his requisition on the Treasury. If a claim for credit is approved, the Tax Commissioner shall promptly establish the amount of the credit.
W. Va. Code R. § 110-15-129 Leases of Tangible Personal Property
129.1. In General. - The consumers sales and service and use tax laws apply to leases of tangible personal property. A lessor of tangible personal property who engages in this State in selling or leasing tangible personal property is required to collect consumers sales and service tax with respect to such leases when the lessee takes delivery of the leased property in this State. A lessee is required to pay use tax with respect to the use in this State of leased tangible personal property unless the lessee has paid West Virginia consumers sales and service tax with respect to the transaction. A lessor who is a "retailer engaging in business in this State," as defined in Section 2 of these regulations, is required to collect and remit West Virginia use taxes with respect to tangible personal property leased for use in this State. A lessee who pays to the lessor of the tangible personal property either the amount of West Virginia consumers sales and service tax due or the amount of West Virginia use tax due has no further liability for payment of the tax directly to the Tax Commissioner. Exemptions from payment of tax allowed by law with respect to certain sales of tangible personal property equally apply to leases of tangible personal property and the methods of claiming exemption from payment of tax are the same. See Section 9 (exemptions) of these regulations. Additionally, long term leases of motor vehicles are exempt. See Section 9.2.10 of these regulations. A lessee of tangible personal property used in this State is allowed credit against his West Virginia use tax liability for payment of consumers sales and service taxes lawfully imposed by another state on lease payments attributable to the period of time the lessee uses the leased property in this State. The measure of tax is the amount of the periodic lease payments.
129.2. Certain terms used in this section have the following meanings for purposes of application of this regulation:
129.2.1. Financing Lease. - The term "financing lease" means:
129.2.1.1. A lease contract which contains at the inception of the contract a provision or condition that (1) title to the leased property must be transferred to the lessee at the end of the lease, or (2) the lessee has an option to purchase the leased property at a nominal price.
129.2.1.2. A lease contract containing either of the following provisions or conditions at the inception of the contract is presumed to be a financing lease:
129.2.1.2.a. The primary lease term is equal to seventy-five percent (75%) or more of the estimated economic life of the property (determined at the time the primary term of the lease begins) and makes no provision for the return of the property to the lessor. For used property, this provision does not apply if the beginning of the lease term falls within the last twenty-five percent (25%) of the total estimated economic life of the leased property, or
129.2.1.2.b. The residual value of the leased property is less than ten percent (10%) of the property's fair market value at the inception of the lease and the contract makes no provision for the return of the property to the lessor.
129.2.1.3. The presumption that the contract is a financing lease may be rebutted by showing that the contract is not merely a security device, that the property will be usable for its intended purpose at the end of the primary lease term, that the lessor in good faith intends to reclaim possession of the property at the end of the lease term or to sell or re-lease it at that time for its fair rent or fair market value, and that the lease was not treated by the lessor as a sale of tangible personal property or by the lessee as the acquisition of a capital asset.
129.2.2. Lease. - The term "lease" means a transaction in which possession but not title to tangible personal property is transferred for a consideration. The term "lease" includes a rental, hire or license. Likewise, "lessor" includes a rentor, hiror or licensor; and "lessee" includes a rentee, hiree or licensee. For the purpose of these regulations, a lease must be made for bona fide consideration with lease payments approximating fair market lease payments at the time the lease contract is entered into.
129.2.3. Nominal Price. - The term "nominal price" means consideration for obtaining technical title to leased property which is significantly less than the fair market value of the tangible personal property at the time the consideration is paid or the option to purchase is exercised, whichever occurs first.
129.2.4. Operating Lease. - The term "operating lease" means a lease contract which gives the lessee use of the leased property for a certain period, while the lessor retains all or substantially all of the risk and rewards of ownership. For purposes of the consumers sales and use taxes, a contract in the legal form of a lease will be treated as an operating lease unless it meets the definition of a financing lease.
129.2.5. Tangible Personal Property. - The term "tangible personal property" means property which may be seen, weighted, measured, felt or touched, or is in any other manner perceptible to the senses. "Tangible personal property" includes, but is not limited to, motor vehicles, machinery, equipment, movies, whether they be on reel, cassette, disk or other medium, computer software, whether it be off-the-shelf software or custom designed software, music whether it be sheet music or music on records, tapes, disks or other medium, and any other tangible goods, wares or merchandise.
129.3. Treatment of Leases.
129.3.1. An operating lease will be treated as a lease for purposes of the consumers sales and use taxes.
129.3.2. A financing lease will be treated as a sale for purposes of the consumers sales and use taxes.
129.3.3. Operating and financing leases are subject to consumers sales and use taxes.
129.3.4. The lessor of tangible personal property may purchase the property provided under the terms of a lease without paying tax on its purchase price by issuing a resale certificate to the seller of the property in lieu of paying the consumers sales or use tax. Tax must be collected from the lessee on all charges contained in the lease which are subject to the consumers sales and use taxes.
129.4. Service Contracts. - The charges for services provided under a service contract relating to leased tangible personal property are subject to consumers sales and use taxes.
129.5. Equipment Leased With and Without an Operator.
129.5.1. Receipts from the lease of equipment without an operator are taxable as lease or sale of tangible personal property.
129.5.2. The furnishing of equipment with an operator for which a single charge is made to the customer is presumed to be the providing of a taxable service, even when the charge is to a customer engaged in contracting or subcontracting activity. Itemization of the charges does not change the taxability of this transaction.
129.5.2.1. Contractors renting equipment (with or without operator) for use in their contracting activity must pay consumers sales or use taxes on the entire charge for the transaction regardless of whether the charge for the equipment and the charge for the operator are separately stated or are combined in a lump sum.
129.5.2.1.a. A lease of equipment and an operator to a contractor for use in providing tax exempt contracting services will be treated as a tax exempt subcontract only when the contractor can exercise no control (beyond specification of desired results or work to be accomplished) or supervision over the equipment and the operator thereof. In such a case the denominated lessor is viewed as a subcontractor providing equipment and labor in fulfillment of a contract with a prime contractor.
129.5.2.2. Providers of taxable services who rent equipment (with or without an operator) must pay consumers sales or use taxes on the entire charge for the transaction regardless of whether the charge for the equipment and the charge for the operator are separately stated or are combined in a lump sum. Allowable exemptions from tax must be asserted as provided in Section 9 (exemptions) of these regulations.
129.5.2.2.a. A lease of equipment and an operator to a provider of taxable services will be treated as a tax exempt subcontract for taxable services only when the person providing the taxable service to the customer can exercise no control or supervision over the equipment and the operator thereof.
129.6. Other Charges In a Lease Agreement. - Operating as well as financing lease agreements may contain a variety of charges in addition to the basic lease payment. These charges and their tax consequences are as follows:
129.6.1. Separately stated charges for labor or services rendered in remodeling, maintaining, or repairing the tangible personal property being leased are subject to tax.
129.6.2. Separately stated charges for labor or services rendered in installing or applying the tangible personal property being leased are subject to tax.
129.6.3. Separately stated charges by the lessor for transportation of the leased property from the lessor to the lessee and back which are included in the lease price are taxable. Charges for transportation of property from a supplier to the lessor which are included in the lease price are taxable. Separately stated charges for transportation of the property from the supplier directly to the lessee or from the lessor to the lessee are taxable unless an exemption otherwise provided by law is applicable.
129.6.4. A charge imposed for early termination of the lease is included in the lease price and is taxable.
129.6.5. Under an operating lease, any interest charges properly included in the cost of property to the lessor, or in overhead costs of the lessor and passed on or reflected in the ultimate lease payment paid by the lessee are taxable whether or not separately stated. Interest charges clearly imposed for late payments or other defaults of the lessee under the lease are not taxable.
129.6.6. Under a financing lease, charges for interest by the lessor to the lessee will be taxable unless the rate of interest or the actual interest charged is separately stated in the contract to the customer.
129.7. Imposition of Tax; Returns; Credits.
129.7.1. Operating Leases. - An operating lease executed while the property is within this state is subject to consumers sales and service tax. Tax is due on the total lease amount for the entire term of the lease regardless of where the property is used unless as a condition for the lease the lessor delivers the property to an out-of-state location for use there. Any renewal of the contract, extensions or options exercised while the lessee uses the property outside this State will not be subject to consumers sales and use taxes unless the property reenters this State.
129.7.2. Financing Leases. - A financing lease executed while the property is within this State is subject to consumers sales and service tax unless the lessor deliverers the property to an out-of-state destination for use there. Consumers sales and service tax will be due on the total amount of the contract regardless of where the leased property received in this State is used during the lease.
129.7.3. Leases Subject to Use Tax; Credit. - Tangible personal property bought or shipped into this State for use under the terms of a financing lease or an operating lease are presumed to be subject to use tax. The use tax will be due on the lease price, for the entire term of the lease and regardless of where the initial contract was executed, determined in the same manner as if consumers sales and service tax applied to the transaction. Credit will be allowed against any sales or use tax legally imposed and paid to another state. See Section 10 of these regulations.
129.7.4. Method and time for filing returns. - A lessor required to collect consumers sales and service tax or use tax must report the tax due based upon the lessor's method of accounting. The term "method of accounting" means the method of accounting used for federal income tax purposes. If the lessor does not have a method of accounting for federal income tax purposes, then any generally recognized method of accounting which correctly reflects the lessor's business operation may be used.
129.7.4.1. Under an operating lease, tax must be reported by the lessor in the period in which the lease payments are considered income based upon the lessor's method of accounting.
129.7.4.2. Under a financing lease, tax must be collected on any payment made at the time the purchaser (lessee) takes possession of the property or on any payment made when the first payment is due from the purchaser (lessee). Tax must be reported on each lease payment and paid as provided in Section 5 of these regulations.
129.7.4.3. When the lessor is not a "retailer engaging in business in this State" as defined in Section 2 of these regulations or a foreign retailer authorized to collect use tax, the lessee must remit the use tax directly to the Tax Commissioner. Tax must be reported by the lessee based upon the method of accounting the lessee uses for federal income tax purposes. Under a financing lease, the use tax must be reported on any payment made by the lessee when the lessee takes possession of the property or on any payment made when the first payment is due, whichever is earlier and on each lease payment made thereafter.
129.8. Sales of Leased Property Under Operating Leases; Credit Allowed.
129.8.1. When the lessor sells leased property to the lessee and allows credit against the sales price for all or part of the lease payments previously made by the lessee, tax should not be collected on the amount allowed as credit provided the lessor has collected and remitted tax on the prior lease payments. The lessor must collect tax on the balance of the sales price.
129.8.2. When the lessor sells leased property to a person other than the lessee and allows the lessee credit for a part of the sales price against lease payments previously made by the lessee, tax may not be refunded on the amount allowed as credit. The lessor must also collect the tax on the sales price of the property to the third party.
129.9. Sales for Resale
129.9.1. The purchaser of tangible personal property which the purchaser intends to hold for lease may issue an exemption certificate in lieu of payment of consumers sales and service tax at the time the property is purchased under the sale for resale exemption. If the purchaser subsequently uses the property in any manner other than by leasing it, or by displaying or demonstrating it, the purchaser becomes liable at the time of such other use for use tax based on the fair rental value of the property for the period of time it is used for a nonexempt purpose. The fair market rental value is the amount that the purchaser would pay on the open market to rent the item for use. If the fair market rental value of the property cannot be ascertained, tax is due on the original purchase price of the property.
129.9.2. At any time, the lessor using the property purchased under a exemption certificate may stop paying tax on the fair market rental value of such property and instead pay tax on the original purchase price. When the lessor elects to pay tax on the purchase price, no credit is allowed for taxes previously paid on the fair market rental value of the property.
129.10. Leases of Real Property With Tangible Personal Property.
129.10.1. If a contract for the lease of real property for a lump sum amount includes the lease of tangible personal property as part of the contract, e.g. a lease of a furnished apartment, no consumers sales or use taxes are due on the portion of lump sum rental amount charged the lessee, which is attributable to the leased tangible personal property. However, the lessor may not issue an exemption certificate, and consumers sales or use taxes must be paid at the time the tangible personal property is purchased by the owner or manager of the real estate.
129.10.2. Consumers sales and service tax is due on the separate lease of tangible personal property by a person owning or managing the real property in which the tangible personal property is or will be situated. An exemption certificate may be issued in lieu of paying the consumers sales and service tax at the time the tangible personal property is purchased for purposes of leasing it to a third party.
129.11. Leases of Motor Vehicles.
129.11.1. If the rental of a motor vehicle, leased in another state and driven into West Virginia, is paid in West Virginia, the entire amount of such rental is taxable. If a credit card is used in lieu of cash payments, the West Virginia vendor honoring the credit card is liable for the collection of the tax on the rental and the remitting of it directly to the Tax Commissioner. If the rental of a motor vehicle leased in West Virginia and driven to a destination in another state is paid in such other state, such rental is exempt from West Virginia tax. However, if a motor vehicle is leased in West Virginia and the rental is paid in West Virginia, the rental is taxable even though the motor vehicle is removed from West Virginia immediately after the lessee takes possession thereof.
129.11.2. A rental car agency shall charge the consumer sales and use taxes on the total rental charge, including any charge for insurance, except for a policy issued to the customer by a licensed insurance company for which a specific charge is made.
129.11.3. Where a "collision damage waiver" fee is paid by a customer (lessee) to the lessor of a vehicle and is considered as payment for the lessor's waiver of all claims against the customer for damage to the leased vehicle and the fee is not required as a condition of the lease, the fee, when separately stated, does not constitute rent and is not taxable.
129.11.4. Where a "personal accident insurance" fee is paid by a customer (lessee) to the lessor of a vehicle, which fee covers personal injuries, and the fee is not required as a condition of the lease, the fee, when separately stated, does not constitute rent and is not taxable.
129.11.5. Parts and materials used to maintain, repair, rebuild, and recondition aircraft, boats, and motor vehicles, which are used exclusively for rental purposes are exempt when tax is charged on the rental of such vehicles. Likewise exempt when the rentals are subject to tax are polishes, lubrication oils, and greases used in their operation when purchased by the owner-lessor of the vehicles. All items above are subject to the tax when the owner-lessor of motor vehicles is not required to charge tax on the rentals of the motor vehicles.
129.11.6. The taxable gross proceeds derived from the lease or rental of a vehicle shall not include the price of fuel on which the proper tax has been paid, provided the fuel is separately stated from the rental or lease charge. If the price of the fuel is not separately stated from the rental or lease charge, it is considered to be a portion of the gross proceeds derived from the rental or lease and is fully taxable.
129.12. Third Party Lessors; Sale and Lease-Back.
129.12.1. Each purchase of tangible personal property by a person engaged in the business of renting or leasing such tangible personal property to the final user or consumer shall be exempt from consumers sales and service tax as a purchase for resale when the lessor has a West Virginia Business Registration Certificate.
129.12.2. Consumer sales and service tax shall be imposed on the total amount of each lease payment when the lessee is obligated under the contract to pay the lessor for the continued use of the tangible personal property. There is no deduction or exclusion from the lease price for insurance, taxes, service or maintenance contracts, handling charges, administration charges, late fees, repair or service charges, or any other charges regardless of how any contract, invoice or other evidence of the transaction is stated or computed or whether separately billed or segregated on the same bill.
129.12.3. When a lessee contracts with a third party lessor to purchase and lease back to the original purchaser tangible personal property after the purchaser has received the billing and paid the vendor on the initial transaction, both the original purchase by the lessee and the subsequent lease payments made by the lessee shall be taxable. No deduction, exclusions, credits or refunds for consumers sales and service tax previously paid on the original sale shall be allowed. Both transactions are treated by the Tax Commissioner as separate sales subject to the consumers sales and service tax and neither transaction qualifies for an exemption.
W. Va. Code R. § 110-15-130 Emergency Medical Services and Ambulance Authorities
130.1. Emergency Medical Services (EMS) are primarily engaged in providing a personal and professional service when patients are accompanied in transport by "emergency medical service personnel" certified by the Director of Health as defined in the West Virginia Emergency Medical Services Act of 1984 as amended. See W. Va. Code '16-14C-1 et seq. No consumers sales and service tax is due for Emergency Medical Services. However, consumers sales and service tax must be charged on purchases for use in providing Emergency Medical Services.
130.2. Ambulance Authorities duly created and incorporated under the provisions of W. Va. Code '7-15-1 et. seq. are not required to either collect consumers sales and service tax on the service fees charged or to pay consumers sales and service or use tax on their purchases. Both exemptions are per se exemptions for such Ambulance Authorities and no exemption certificate or direct pay permit number is necessary to document these exemptions.
130.3. Non-emergency convalesent transportation is not a personal or professional service exempt from the sales and service tax.
Appendix 1. Condiments Considered to be "Food".
This list of condiments which are eligible food items is intended to illustrate application of these terms and is not intended to be a comprehensive listing.
1.1 Essential Oils, Oleoresins (Solvent-Free) and Natural Extractives.
Alfalfa Allspice Almond, bitter (free from prussic acid)
Ambrette (seed)
Angelica root Angelica seed Angelica steam Angostura (cusparia bark)
Anise Asafetida Balm (lemon balm)
Balsam of Peru Basil Bay leaves Bay (myrcia oil)
Bergamot (bergamot orange)
Bitter almond (free from prussic acid)
Bols de rose Cacao Camomile (chamomile) flowers, Hungarian Camomile (chamomile) flowers, Roman or English Cananga Capsicum Caraway Cardamom seed Carbo bean Carrot Cascarilla bark Cassia bark, Chinese Cassia bark, Padang or Batavia Cassia bark, Saigon Celery seed Cherry, wild, bark Chervil Chicory Cinnamon bark, Ceylon Cinnamon bark, Chinese Cinnamon bark, Saigon Cinnamon leaf, Ceylon Cinnamon leaf, Chinese Cinnamon leaf, Saigon Citronella Citrus peels Clary (clary sage)
Clove bud Clove leaf Clove stem Clover Coca (decocainized)
Coffee Cola nut Coriander Corn silk Cumin (cummin)
Curacao orange peel (orange, bitter peel)
Cusparia bark Dandelion Dandelion root Dog grass (quackgrass, triticum)
Elder flowers Estragole (esdragol, esdragon, tarragon)
Estragon (tarragon)
Fennel, sweet Fenugreek Galanga (galangal)
Geranium Garanium, East Indian Geranium, rose Ginger Glycyrrhiza Glycyrrhizin, ammoninated Grapefruit Guava Hickory bark Horehound (hoarhound)
Hops Horsemint Hyssop Immortelle Jasmine Juniper (berries)
Kola nut Laurel berries Laurel leaves Lavender Lavender, spike Lavandin Lemon Lemon balm (See balm)
Lemon grass Lemon peel Licorice Lime Linden flowers Locust bean Lupulin Mace Malt (extract)
Mandarin Marjoram, sweet Mate Melissa (See balm)
Menthol Menthyl acetate Molasses (extract)
Mustard Naringin Netroli, bigarade Nutmeg Onion Orange, bitter, flowers Orange, bitter, peel Orange leaf Orange, sweet Orange, sweet, flowers Orange, sweet, peel Origanum Palmarosa Paprika Parsley Pepper, black Pepper, white Peppermint Peruvian balsam Pettigrain Pettigrain lemon Pettigrain mandarin or tangerine Pimenta Pimenta leaf Pipcissewa leaves Pomegranate Prickly ash bark Rose absolute Rose (otto of roses, attar of roses)
Rose buds Rose flowers Rose fruit (hips)
Rose geranium Rose leaves Rosemary Saffron Sage Sage, Greek Sage, Spanish St. John's bread Savory, summer Savory, winter Schinus molle Sloe berries (blackthorn berries)
Spearmint Spike lavender Tamarind Tangerine Tannic acid Tarragon Tes Thyme Thyme, white Thyme, wild or creeping Triticum (seed or grass)
Tuberose Turmeric Vanilla Violet flowers Violet leaves Violet leaves absolute Wild cherry bark Ylang-ylang Zedoary bark
1.2 Flavorings and Flavoring Extracts.
Oil of Lemon Vanilla extract Vanilla flavoring Vanilla powder Vanilla - vanillin extract Vanilla - vanillin flavoring Vanilla - vanillin powder
1.3 Food Colorings.
1.4 Food Dressings.
French dressing Mayonnaise Mayonnaise dressing Salad dressing
1.5 Glazes.
1.6 Gravies.
1.7 Herbs (For Which No Medicinal Qualities Are Claimed).
Angelica Anise Bee balm Bays Borage Bunnet Camomile Capers Caraway Celenes Chervil Chives Corriander Dill Fennels Genugreek Geranum Horehound Horseradish Hyssop Lavender Leeks Lemon Verbena Lovage Marigold Mayorame Mints Mustards Nasturtium Onion Parsleys Peppers, red and green Ramps Rosemary Rue Sage Savories Scallions Sesame Shallots Sorrels Sweet Woodruff Tarragon Thymes Waldmeister Wild leeks
1.8 Marinades.
1.9 Mustard.
1.10 Natural Substances and Extractions (Solvent-Free) Used in Conjunction With Spices, Seasonings and Flavorings.
Algae, brown Algae, red Apricot kernel (persic oil)
Dulse Kelp (See algae, brown)
Peach kernel (persic oil)
Peanut stearine Persic oil (See apricot kernel and peach kernel)
Quince seed
1.11 Pepper.
Black pepper Cayenne pepper Red pepper White pepper
1.12 Salt and Salt Substitutes.
Coarse or kosher salt Cooking or table salt Dairy salt Monozodium glutamate Pickling salt Seasoned salt - These are usually a combination of vegetable salts, spices and monozodium glutomates.
Smoked salt Sour salt Vegetable salt - These are sodium chloride with added vegetable extracts, celery and onion.
Salt substitute - These are chlorides in which sodium is replaced by calcium, potassium or ammonium.
1.13 Sauces.
Worcestershire sauce Soy sauce A-1 steak sauce Barbecue sauce Shrimp cocktail sauce
1.14 Spices and Other Natural Seasonings and Flavorings.
Alfalfa herb and seed Allspice Ambrette seed Angelica Angelica root Angelica seed Anise Anise, star Balm (lemon balm)
Basil, bush Basil, sweet Bay Calendula Camomile (chamomile), English or Roman Camomile (chamomile), German or Hungarian Capers Capsicum Caraway Caraway, black (black cumin)
Cardamon Cassia, Chinese Cassia, Padang or Batavia Cassia, Saigon Cayene pepper Celery seed Chervil Chives Cinnamon, Ceylon Cinnamon, Chinese Cinnamon, Saigon Clary (clary sage)
Clover Cloves Corlander Cumin (cummin)
Cumin, black (black caraway)
Elder flowers Fennel, common Fennel, sweet (finocchio, Florence fennel)
Fenugreek Galanga (galangal)
Geranium Ginger Glycyrrhiza Grains of paradise Horehound (hoarhound)
Horseradish Hyssop Lavender Licorice Linden flowers Mace Marjoram Mustard, black or brown Mustard, brown Mustard, white or yellow Nutmeg Oregano (oreganum, Mexican oregano, Mexican sage, origan)
Paprika Parsley Pepper, black Pepper, cayenne Pepper, red Pepper, white Peppermint Poppy seed Rosemary Saffron Sage Sage, Greek Savory, summer Savory, winter Sesame Spearmint Star anise Tarragon Thyme Thyme, wild or creeping Turmeric Vanilla Zedoary
1.15 Vinegar.
110CSR15
Series 15A Baby-Sitting Services Exemption
W. Va. Code R. § 110-15A-1 General
1.1. Scope. -- This interpretive rule explains and clarifies the exemption from consumers sales tax provided in W. Va. Code '11-15-9(pp), as added by Com. Sub. for Senate Bill No. 348 (1992), exempting sales of baby-sitting services by individuals who baby-sit for profit provided the individual's gross receipts from providing baby-sitting services do not exceed $5,000.00 in a taxable year.
1.2. Authority. -- W. Va. Code '11-10-5.
1.3. Filing Date. -- July 17, 1992
1.4. Effective Date. -- August 17, 1992
W. Va. Code R. § 110-15A-2 Interpretive Note
This interpretive rule shall be read in pari materia with the Consumers Sales and Service Tax and Use Tax legislative regulations (110 C.S.R. 15, '1 et seq.) previously promulgated by the Tax Commissioner pursuant to authority granted by the Legislature in W. Va. Code '64-7-6. The definitions, policies and procedures provided in 110 C.S.R. 15, '1 et seq. are equally applicable to this interpretive rule. Should there be any inconsistency between the promulgated legislative rules and this interpretive rule, the legislative rules shall control, except to the extent the legislative rules do not reflect an amendment to the consumers sales and use tax laws which is addressed in this or another interpretive rule promulgated by the Tax Commissioner as provided in article 3, chapter 29A of the West Virginia Code.
W. Va. Code R. § 110-15A-3 Definitions
Unless a specific definition is provided in this section, terms used in this rule are defined as provided in legislative rule 110 C.S.R. 15, 1 et seq., unless the context in which the term is used clearly requires a different meaning. The following terms shall have the meaning ascribed herein, and shall apply in the singular as well as in the plural.
3.1. "Baby-sitting services" means taking care of the child or children of another for a fee. This term does not include services provided by licensed day-care centers, which services are exempt under W. Va. Code '11-15-9(p). Nor does this term include other services such as music lessons, dance lessons, tutoring or any other activity the primary purpose of which is something other than the child's well-being and protection.
3.2. "Baby-sitter" means the individual providing or performing the baby-sitting service.
3.3 "Child" or "children" means an individual under the age of fifteen, or an individual under the age of eighteen who is physically or mentally incapable of self-care.
W. Va. Code R. § 110-15A-4 Applicability of Consumers Sales Tax
4.1. General Rule. -- The consumers sales and service tax is imposed upon the sale of tangible personal property or selected services. All sales are presumed to be taxable unless the sale is either excepted or exempt from the tax.
4.2 Baby-sitting Exemption. -- The sale of baby-sitting services by an individual who performs such services for profit are exempt from consumers sales tax when the individual providing the service reasonably estimates that his or her gross receipts from providing baby-sitting services will not exceed $5,000.00 during the individual's taxable year for federal income tax purposes.
4.2.1. If an individual reasonably estimates that his or her gross receipts from providing baby-sitting services will exceed $5,000.00 for the taxable year, then consumers sales tax must be collected on all charges for baby-sitting services.
4.2.2. If an individual reasonably estimates that his or her gross receipts from providing baby-sitting services during the taxable year will not exceed $5,000.00 but, due to a material and unforseen change in circumstances, actual gross receipts exceed $5,000.00, then consumers sales tax must be collected on gross receipts earned in excess of $5,000.00, or on gross receipts earned after the individual should have known that his or her gross receipts from providing baby-sitting services would exceed $5,000.00, whichever event occurs first.
4.2.3. An individual providing baby-sitting services for profit is engaging in "business" in this State as that term is defined in the consumers sales tax law, W. Va. Code '11-15-2, and in the business registration tax law, W. Va. Code '11-12-2. Such person must obtain a business registration certificate from the Tax Commissioner, as provided in W. Va. Code '11-12-3, if such person's gross receipts from all business activity conducted in this State exceed $4,000.00 for the taxable year. Application is made by filing Form WV 8.01 "Application For Business Registration" with the Tax Commissioner.
NOTE: An individual rendering baby-sitting services for profit is not required to obtain a business registration certificate unless such individual's gross receipts from all business activity will exceed $4,000.00 for the taxable year. Gross receipts is calculated by excluding wages and other employee compensation earned by the individual as an employee.
4.2.4. This exemption applies only to sales of baby-sitting services. It does not apply to sales of tangible personal property or other services by the baby-sitter.
4.2.5. Method of Claiming the Baby-Sitting Exemption. -- A baby-sitter is not required to obtain an exemption certificate or any other proof of exemption from the person for whom the service is provided.
4.2.6. Baby-Sitter Required to Keep Accurate Records. -- A baby-sitter who earns more than $4,000.00 during his or her taxable year from business activity (including baby-sitting for profit) must maintain adequate books and records to support his or her claim of exemption under W. Va. Code '11-15-9(pp) and these regulations.
4.3. Effective Date of Exemption. -- Exemption '11-15-9(pp) takes effect June 5, 1992, and applies to charges for baby-sitting services rendered on or after that date.
110CSR15A
Series 15B Nails And Fencing Exemption For Commercial Production Of Agricultural Product
W. Va. Code R. § 110-15B-1 General
1.1. Scope. -- This interpretive rule explains and clarifies the exemption from consumers sales tax provided in W. Va. Code '11-15-9(i), as amended by Com. Sub. for Senate Bill No. 348 (1992), exempting sales of nails and fencing used or consumed in connection with the commercial production of an agricultural product, whether or not the fence is considered to be a permanent improvement to real property.
1.2. Authority. -- W. Va. Code '11-10-5.
1.3. Filing Date. -- July 17, 1992
1.4. Effective Date. -- August 17, 1992
W. Va. Code R. § 110-15B-2 Interpretive Note
This interpretive rule shall be read in pari materia with the Consumers Sales and Service Tax and Use Tax legislative regulations (110 C.S.R. 15, '1 et seq.) previously promulgated by the Tax Commissioner pursuant to authority granted by the Legislature in W. Va. Code '64-7-6. The definitions, policies and procedures provided in 110 C.S.R. 15, '1 et seq. are equally applicable to this interpretive rule. Should there be any inconsistency between the promulgated legislative rules and this interpretive rule, the legislative rules shall control, except to the extent the legislative rules do not reflect an amendment to the consumers sales and use tax laws which is addressed in this or another interpretive rule promulgated by the Tax Commissioner as provided in article 3, chapter 29A of the West Virginia Code.
W. Va. Code R. § 110-15B-3 Definitions
Unless a specific definition is provided in this section, terms used in this rule are defined as provided in legislative rule 110 C.S.R. 15, '1 et seq., unless the context in which the term is used clearly requires a different meaning. The following terms shall have the meaning ascribed herein, and shall apply in the singular as well as in the plural.
3.1. "Fence" means a temporary or permanent partition, other than a building or other structure or a naturally occurring barrier, such as a river, erected for the purpose of enclosing a parcel of land, or any part thereof, for purposes of commercial agricultural production.
3.2. "Fencing" means materials used to build or repair a fence that are incorporated into and become part of a fence used for purposes of agricultural production. It includes, but is not limited to, hedges in a hedge fence, common rails, posts and rails, posts and planks, posts and wire, pickets and wire, slotted hardwood or softwood battens used between posts, stones in a stone fence, and tangible personal property necessary to electrify the fence, etc.
3.3. "Nail" means a slender usually pointed and headed fastener or a staple designed to be pounded or otherwise forcibly inserted into wood or another building material.
W. Va. Code R. § 110-15B-4 Applicability of Consumers Sales Tax
4.1. General Rule. -- The consumers sales and service tax is imposed upon the sale of tangible personal property or selected services. All sales are presumed to be taxable unless the sale is either excepted or exempt from the tax.
4.2. Commercial Agricultural Exemption. -- Sales of tangible personal property, or of taxable services, that are used or consumed in connection with the commercial production of an agricultural product the ultimate sale of which is, in this State, subject to consumers sales tax are exempt from consumers sales tax, except as provided in subdivision 4.3, provided the purchaser furnishes the vendor with a properly executed exemption certificate. Beginning June 5, 1992, purchases of nails and fencing for use or consumption in the commercial production of an agricultural product are exempt from tax, whether or not the nails and fencing are used in a permanent improvement to real property.
4.3. Exceptions to Commercial Agricultural Exemption. -- Notwithstanding the exemption specified in subsection 3.2, a person engaged in the commercial production of an agricultural product must pay consumers sales tax on:
4.3.1. Purchases of gasoline or special fuel; and
4.3.2. Purchases of tangible personal property or taxable services used or consumed in the construction of a permanent improvement to real property. However, beginning June 5, 1992, purchases of nails or fencing are not considered to be used or consumed in constructing a permanent improvement to real property and will, therefore, be exempt from tax when they are used or consumed in the commercial production of an agricultural product.
4.4. Explanation of the nails and fencing exemption. -- In order for the purchase of nails or fencing incorporated into a permanent improvement to real property to be exempt from consumers sales tax after June 4, 1992, they must be used or consumed in the "commercial production of an agricultural product", as that phrase is defined in 110 C.S.R. 15, '2. The fact that such nails are used or consumed in a permanent improvement to real property will not destroy this exemption provided the building, fence or other structure, or other permanent improvement to real property, in which the nail is used or consumed is itself used in the commercial production of an agricultural product. Additionally, fencing is exempt whether or not the fence constitutes a permanent improvement to real property, so long as the fence is used in the commercial production of an agricultural product.
4.4.1. Nails and fencing incorporated into a fence erected to separate the farm house from an adjacent road or property are not exempt from tax unless the purpose of the fence is to protect crops or contain farm animals, or is otherwise necessary for the commercial production of an agricultural product. In other words, as a matter of law, nails and fencing incorporated into a fence erected around a residential lot located in the city and that incorporated into a fence erected around a farm house are treated in the same manner unless the fence around the farm house is necessary for the commercial production of an agricultural product.
4.5. Method of Claiming the nails and fencing exemption. -- The nails and fencing exemption from consumers sales tax may be claimed by either presenting a properly executed exemption certificate to the seller of the nails and fencing or by paying the tax to the seller and then applying to the Tax Commissioner for a refund. If an exemption certificate is used but the nails or fencing is used for a taxable purpose or in a taxable manner, then the tax due with respect to such nails or fencing must be remitted directly to the Tax Commissioner.
110CSR15B
Series 15C Consumers Sales and Service Tax and Use Tax - Drugs, Durable Medical Goods, Mobility Enhancing Equipment and Prosthetic Devices Per Se Exemption; Motor Vehicles Per Se Exemption
W. Va. Code R. § 110-15C-1 General
1.1. Scope. -- This legislative rule explains and clarifies the exemption from consumers sales tax provided in W. Va. Code §11-15-9i as added by Com. Sub. for House Bill No. 2380 (2007) and House Bill No. 2515 (2019), exempting the purchase by a health provider of certain drugs, durable medical goods, mobility enhancing equipment and prosthetic devices from the consumers sales and service tax. In addition, this legislative rule supersedes the rules for per se exemption from consumer sales tax for the lease or sale of motor vehicles.
1.2. Authority. -- W. Va. Code §§11-10-5 and 11-15-9i.
1.3. Filing Date. -- May 13, 2025.
1.4. Effective Date. -- May 13, 2025.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2030.
W. Va. Code R. § 110-15C-2 Interpretive Note
This legislative rule incorporates by reference the Department’s rule, Consumers Sales and Service Tax and Use Tax, 110CSR15, and shall be read in pari materia with that rule. The definitions, policies, and procedures provided in 110CSR15 are equally applicable to purchases made under this legislative rule. To the extent that this legislative rule differs from 110CSR15, then for the purpose of purchases by a health provider of certain drugs, durable medical goods, mobility enhancing equipment and prosthetic devices, and for the purpose of leasing or selling motor vehicles this legislative rule governs. However, for all other purposes, 110CSR15 governs the application of the Consumers Sales and Service Tax and Use Tax.
W. Va. Code R. § 110-15C-3 Definitions
Unless a specific definition is provided in this section, terms used in this rule are defined as provided in legislative rule 110CSR15, §1 et seq., unless the context in which the term is used clearly requires a different meaning. The following terms shall have the meaning ascribed in this rule.
3.1. "Drug” means a compound, substance or preparation, and any component of a compound, substance or preparation, other than food and food ingredients, dietary supplements or alcoholic beverages:
3.1.1. Recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States or official National Formulary, and supplements to any of them;
3.1.2. Intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease; or
3.1.3. Intended to affect the structure or any function of the body.
3.2. “Durable medical equipment” means equipment including repair and replacement parts for the equipment, but does not include “mobility enhancing equipment”, which:
3.2.1. Can withstand repeated use;
3.2.2. Is primarily and customarily used to serve a medical purpose;
3.2.3. Generally is not useful to a person in the absence of illness or injury; and
3.2.4. Is not worn in or on the body.
3.2.5. Includes the following examples: Home or portable oxygen equipment, home air fluidized beds, blood glucose monitors, commode chairs, nebulizers and infusion pumps.
3.3. “Health care provider” means any person licensed to prescribe drugs, durable medical goods, mobility enhancing equipment and prosthetic devices intended for use in the diagnosis, cure, mitigation, treatment or prevention of injury or disease. For purposes of this rule, the term “health care provider” includes any hospital, medical clinic, nursing home or provider of inpatient hospital services and any provider of outpatient hospital services, physician services, nursing services, ambulance services, surgical services or veterinary services.
3.4. “Mobility-enhancing equipment” means equipment, including repair and replacement parts to the equipment, but does not include “durable medical equipment”, which:
3.4.1. Is primarily and customarily used to provide or increase the ability to move from one place to another and which is appropriate for use either in a home or a motor vehicle;
3.4.2. Is not generally used by persons with normal mobility; and
3.4.3. Does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.
3.4.4. Includes the following examples: Walkers, wheelchairs, crutches, canes, and orthotic shoes.
W. Va. Code R. § 110-15C-4 Applicability of Consumers Sales Tax
4.1. General Rule. -- The consumers sales and service tax is imposed upon the sale of tangible personal property or selected services. All sales are presumed to be taxable unless the sale is either excepted or exempt from the tax.
4.2. Health Care Provider Exemption. -- The purchase by a health provider of drugs, durable medical goods, mobility enhancing equipment and prosthetic devices to be dispensed upon prescription and intended for use in the diagnosis, cure, mitigation, treatment, or prevention of injury or disease is exempt from the consumers sales and service tax.
4.2.1. Per Se Exemption. -- A health care provider is not required to obtain an exemption certificate, material purchase certificate or direct pay permit to claim the health care provider exemption.
4.3. Exclusions From Per Se Exemption. -- On and after July 1, 2008, sales of motor vehicles are subject to the consumers sales and service tax and use tax in accordance with West Virginia Code §11-15-3c. Therefore the per se exemptions regarding leases, sales and purchases of motor vehicles set forth in the Department’s rule, Consumers Sales and Service Tax and Use Tax, 110CSR15, subsections 9.2.10 and 9.2.24 and subdivisions of section 9.2.24 of the Code of State Rules are superseded by statute and are of no further force or effect. The tax imposed pursuant to the provisions of West Virginia Code §11-15-3c on motor vehicle purchases and uses is subject to the regulatory and administrative jurisdiction of the Commissioner of Motor Vehicles.
4.4. Exclusion for Mobility Enhancing Equipment. -- Notwithstanding any provision of article 15, article 15A, or article 15B of chapter 11 of the West Virginia Code, the sale and installation of mobility enhancing equipment, as defined in §11-15B-2 of the West Virginia Code, installed in a new or used motor vehicle for the use of a person with physical disabilities are exempt from the taxes imposed by article 15. Any sale and installation for the repair or replacement parts of mobility enhancing equipment, whether the repair or replacement parts are purchased separately or in conjunction with the mobility enhancing equipment, and whether the parts continue the original function or enhance the functionality of the mobility enhancing equipment, are exempt from the taxes imposed by article 15.
110CSR15C
110CSR15C
Series 15D Services Of Certain Community-Based Nonprofit Service Organizations Exempt from Tax
W. Va. Code R. § 110-15D-1 General
1.1. Scope. -- This interpretive rule explains and clarifies the exemption from consumers sales tax provided in W. Va. Code '11-15-11, as added by Com. Sub. for Senate Bill No. 348 (1992), exempting sales of taxable services by certain community-based service organizations such as YMCA's and YWCA's.
1.2. Authority. -- W. Va. Code '11-10-5
1.3. Filing Date. -- September 1, 1992
1.4. Effective Date. -- October 2, 1992
W. Va. Code R. § 110-15D-2 Interpretive Note
This interpretive rule shall be read in pari materia with the Consumers Sales and Service and Use Tax legislative regulations (110 CSR 15, '1 et seq.) previously promulgated by the Tax Commissioner pursuant to authority granted by the Legislature in W. Va. Code '64-7-6. The definitions, policies and procedures provided in 110 CSR 15, '1 et seq. are equally applicable to this interpretive rule. Should there by an inconsistency between the promulgated legislative rules and this interpretive rule, the legislative rules shall control, except to the extent the legislative rules do not reflect an amendment to the consumers sales and use tax laws which is addressed in this or another interpretive rule promulgated by the Tax Commissioner as provided in article 3, chapter 29A of the West Virginia Code.
W. Va. Code R. § 110-15D-3 Definitions
Unless a specific definition is provided in this section, terms used in this rule are defined as provided in legislative rule 110 CSR 15, '1, et seq., unless the context in which the term is used clearly requires a different meaning. The following terms shall have the meaning ascribed herein, and shall apply in the singular as well as in the plural.
3.1. "Aged" means individuals who are older than sixty-five (65) years of age.
3.2. "Charitable" means of, or for, charity.
3.3. "Charity" means the provision of services or tangible personal property, whether for free, or at or below cost, which assists in the relief of the poor and distressed or of the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening of the burdens of Government; and promotion of social welfare by organizations designed to accomplish any of the above purposes, or (i) to lessen neighborhood tensions; (ii) to eliminate prejudice and discrimination; (iii) to defend human and civil rights secured by law; or (iv) to combat community deteriorated and juvenile delinquency.
3.4. "Education" means the moral, intellectual and physical training of an individual.
3.5. "Educational" means of, or for, education.
3.6. "Family" means a collective body of two (2) or more individuals related by blood or marriage and living together in one residential unit as their common home.
3.7. "Health and fitness" means physical health and fitness of individuals but does not include mental health and fitness or spiritual health and fitness.
3.8. "Youth" means individuals less than eighteen (18) years of age.
W. Va. Code R. § 110-15D-4 Applicability of Consumers Sales Tax
4.1. General Rule. -- The consumers sales and service tax is imposed upon the sale of tangible personal property or selected services. All sales are presumed to be taxable unless the sale is either excepted or exempt from the tax.
4.2. Exemption for Taxable Services Provided by Certain Community-Based Nonprofit Service Organizations. -- Sales of taxable services by a community-based nonprofit corporation or organization that meets the requirements specified in subsection 4.3 of this rule are exempt from consumers sales tax, unless the gross income derived from the sale is taxable under Section 511 of the Internal Revenue Code of 1986, as amended.
4.2.1. This exemption does not apply to sales of tangible personal property.
4.2.2. This exemption does not apply when the gross income derived from selling the service is taxable under Section 511 of the Internal Revenue Code.
4.2.3. This exemption does not apply to the sale of taxable services by a non-qualifying corporation or organization even though the sale occurs or takes place through the sponsorship of or at the facilities of the qualifying corporation or organization. To illustrate, the charges imposed by a business which provides scuba diving lessons to its students at a YMCA are taxable even though the YMCA receives a portion of the charges paid by the participants. In contrast, if the YMCA contracts with a third party to provide scuba diving lessons at the YMCA's pool but the students contract with the YMCA for the lessons rather than with the third party, the charges paid by the students will be exempt.
4.2.4. This exemption does not apply to a 501(c)(3) hospital or nursing home.
4.3. Requirements for Exemption. -- The exemption provided in W. Va. Code '11-15-11 does not apply unless the community-based service organization satisfies all of the requirements specified in this subsection 4.3.
4.3.1. The corporation or organization must be exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
4.3.1.1. The corporation or organization must have a determination letter from the Internal Revenue Service finding that it is exempt from federal income tax under Section 501(c)(3), and that letter must be in effect for the current taxable year.
4.3.2. The corporation or organization must be organized and operated primarily for charitable or education purposes and its activities and programs must contribute importantly to (1) promoting the general welfare of youth, families and the aged, (2) improving health and fitness, and (3) providing recreational opportunities to the public.
4.3.2.1. The charitable or educational purposes for which the corporation or organization is organized must be stated in the corporation's or organization's articles of incorporation or by-laws.
4.3.2.2. A corporation or organization is not operated primarily for charitable or education purposes unless the normal usage of its facilities and programs are predominantly for charitable or educational purposes, as those terms are defined in this rule. See Section 3 of this rule.
4.3.3. The corporation or organization must offer memberships or participation in its programs and activities to the general public, and the charges, fees or dues for membership or participation must allow its programs and activities to be accessible by a reasonable cross-section of the community.
4.3.3.1. The programs and activities of the corporation or organization must be available to the general public, regardless of ability to pay for participation.
4.3.3.2. The memberships, programs and activities must be obtainable regardless of race, creed, color or national origin.
4.3.4. The corporation or organization must offer financial assistance, on a regular and on-going basis, to individuals unable to afford the corporation's or organization's membership dues, or its fees or charges, imposed for participation in any of its programs or activities.
4.3.4.1. The corporation or organization must have official guidelines or rules on eligibility for financial assistance.
4.3.4.2. While the corporation or organization may require sufficient information to satisfy it that financial assistance is needed, the standards for determining the awarding of financial assistance may not be such that only those individuals who are destitute qualify for such assistance.
4.3.4.3. Financial assistance to qualifying individuals may take the form of reduced dues, fees or charges, or the provision of free taxable services.
4.4. Method of Claiming Exemption. -- A community-based nonprofit service organization or corporation that qualifies for this exemption is not required to obtain an exemption certificate or any other proof of exemption from persons participating in the organization's tax exempt activities.
4.5. Organization Required to Keep Accurate Records. -- A community-based nonprofit service organization is required to keep accurate books and records to support the accuracy of gross receipts it claims are exempt from consumers sales tax and the basis for the exemption(s) claimed.
4.6. Effective Date of Exemption. -- Exemption '11-15-11 takes effect June 5, 1992.
110CSR15D
Series 15F Sales Tax Holiday
W. Va. Code R. § 110-15F-1 General
1.1. Scope. -- This rule clarifies, explains and implements the Sales Tax Holiday for purchases of certain school supplies, school instructional materials, laptop and tablet computers, and sports equipment as authorized by W. Va. Code §11-15-9s.
1.2. Authority. -- W. Va. Code §§11-15-9s(c) and 11-10-5.
1.3. Filing Date. -- July 1, 2022.
1.4. Effective Date. -- July 1, 2022.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on August 1, 2027.
W. Va. Code R. § 110-15F-2 Interpretive Note
This rule shall be read in pari materia with the legislative rule for the consumers sales and service tax and use tax codified in 110 C.S.R. 15. The definitions, policies and procedures provided in 110 C.S.R. 15 are equally applicable to this rule. All sales and services are presumed to be taxable unless there is an applicable exemption. Should there be any inconsistency between this rule and 110 C.S.R. 15, the language of 110 C.S.R. 15 shall control, except to the extent it does not reflect the amendment to the consumers sales and use tax laws that is addressed in this rule.
W. Va. Code R. § 110-15F-3 Definitions
3.1. Unless a specific definition is provided in this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §§11-15-2, 11-15A-1, and 11-15B-2.
3.2. “Clothing” means “clothing” as defined in W. Va. Code §11-15B-2.
3.3. “Computer” means an electronic device that accepts information in digital or similar form and manipulates the information for a result based on a sequence of instructions, as defined in W. Va. Code §11-15B-2.
3.4. “Eligible item” means tangible personal property that is exempt from tax under W. Va. Code §11-15-9s and this rule that is purchased during the sales tax holiday period. “Eligible item” includes, and is limited to: certain clothing with a purchase price of $125.00 or less; certain school supplies with a purchase price of $50.00 or less; certain school instruction material with a purchase price of $20.00 or less; certain laptop and tablet computers that are not purchased for use in a trade or business and with a purchase price of $500.00 or less; and certain sports equipment that is not purchased for use in a trade or business and with a purchase price of $150.00 or less.
3.5. “Holiday” or “exemption period” means the sales tax holiday exemption period authorized by W. Va. Code §11-15-9s, which consists of the first Sunday of August, the previous Friday and Saturday and the following Monday. The exemption period starts at 12:01 a.m. eastern daylight time on the Friday date and ends at midnight eastern daylight time on the Monday date.
3.6. “Laptop computer” means a computer that is portable, capable of operating on battery power, with a physical keyboard, a mouse trackpad, and may have capacity to play CD or DVD ROM. The term includes only the hardware device, any necessary or bundled peripherals such as a charging cord, and pre-loaded software included in the purchase of the laptop computer. Any separately purchased peripheral such as a separate mouse, keyboard or screen is not included in the definition of laptop computer. Any separately purchased software is not included in the definition of laptop computer.
3.7. “Purchased for use in a trade or business” means that the item is purchased with the primary intent of using it in a trade or business, rather than for educational or personal purposes. For purposes of this definition, the term “trade or business” means any activity engaged in by any person or caused to be engaged in by any person with the object of direct or indirect gain, benefit, or advantage.
3.8. “School instructional material” means “school instructional material” as defined in W. Va. Code §11-15B-2.
3.9. “School supplies” means “school supply” as defined in W. Va. Code §11-15B-2.
3.10. “Sports equipment” means “sport or recreational equipment” as defined in W. Va. Code §11-15B-2.
3.11. “Tablet computer” means a computer that is portable, uses a touchscreen for all functions, and does not have the capacity to play CD or DVD ROM. The term includes only the hardware device, any necessary or bundled peripherals such as a charging cord, and pre-loaded software included in the purchase of the tablet computer. Any separately purchased peripheral such as a separate mouse, keyboard or screen is not included in the definition of tablet computer. Any separately purchased software is not included in the definition of tablet computer.
W. Va. Code R. § 110-15F-4 Articles normally sold as a unit
4.1. Articles that are normally sold as a unit must continue to be sold as a unit. The retailer may not separate items normally sold as a unit and sell them separately in order to obtain the exemption. A retailer may not separately state the price of each item normally sold as a unit in order to obtain the exemption. The following examples illustrate application of this rule:
Example 1: A pair of shoes normally sells for $150.00. The pair cannot be split in order to sell each shoe for $75.00 to qualify for the exemption.
Example 2: A suit is normally priced at $200.00 on a single price tag. The suit may not be split into separate articles so that each or any of the items may be sold for under $125.00 in order to qualify for the exemption. However, when components of a suit are normally sold and priced as separate articles, they may continue to be sold as separate articles and qualify for the exemption, if the price for each article is less than $125.00.
W. Va. Code R. § 110-15F-5 Buy one, get one free or for a reduced price
5.1. The total price of items advertised as "buy one, get one free" or "buy one, get one for a reduced price" may not be averaged in order for both items to qualify for the exemption. The following examples illustrates application of this rule:
Example 1: A retailer advertises pants as "buy one, get one free." The first pair of pants is priced at $150.00; the second pair of pants is free. Tax is due on $150.00. The store cannot sell each pair at $75.00 in order for the items to qualify for the exemption. However, the retailer may advertise and sell the items for 50 percent off, selling each pair of $150.00 pants for $75.00, making each pair eligible for the exemption.
Example 2: A retailer advertises shoes as "buy one pair at the regular price, get a second pair for half price." The first pair of shoes is sold for $140.00; the second pair is sold for $70.00 (half price). Tax is due on the $140.00 shoes, but not on the $70.00 shoes. The store cannot sell each pair of shoes for $105.00 in order for the items to qualify for the exemption. However, a retailer may advertise each pair for 25 percent off, thereby selling each pair of $140.00 shoes for $105.00, making each pair eligible for the exemption.
W. Va. Code R. § 110-15F-6 Exchanging a tax-exempt purchase after the Holiday ends
6.1. When a customer purchases an eligible item during the Holiday and later exchanges the item for the same item (different size, different color, etc.), no tax will be due even if the exchange is made after the Holiday ends, unless the sales price of the second item is greater than the sales price of the exchanged item. In this situation, the retailer must collect tax on the entire sales price of the exchanged item unless the exchange occurs during the Holiday and the sales price of the second item is less than the applicable threshold.
6.2. When a customer purchases an eligible item during the Holiday and later returns the item and receives credit on the purchase of a different item, the appropriate tax must be collected measured by the full sales price of the newly purchased item, unless the new purchase occurs during the Holiday and the sales price is less than the applicable threshold.
Example 1: During the Holiday, a customer purchases a $90.00 dress that qualifies for the exemption. Later, during the Holiday, the customer exchanges the $90.00 dress for a $130.00 dress. Tax is due on the $130.00 dress. The $90.00 credit from the returned item cannot be used to reduce the sales price of the $130.00 item to $40.00 for exemption purposes.
Example 2: A customer purchases a $35.00 shirt during the Holiday. After the Holiday ends, the customer exchanges the shirt for a $35.00 jacket. Since the jacket was not purchased during the Holiday, tax is due on the $35.00 price of the jacket.
W. Va. Code R. § 110-15F-7 Returning an eligible item
When a customer returns an eligible item purchased during the Holiday, the retailer may refund tax only if the customer produces a receipt or invoice showing tax was paid on the item, or if the retailer has sufficient documentation to show that tax was paid on the specific item.
W. Va. Code R. § 110-15F-8 Coupons and discounts
8.1. Manufacturer's coupons do not reduce the sales price of an item. Therefore, a manufacturer's coupon cannot be used to reduce the selling price of an item to less than the applicable threshold in order to qualify for the exemption.
Example: A jacket sells for $130.00. The customer has a $10.00 manufacturer's coupon good for the purchase of the jacket. The manufacturer's coupon does not reduce the sales price of the jacket. Tax is due on the $130.00 even though the customer only pays the retailer $120.00 for the jacket.
8.2 Store coupons and discounts do reduce the sales price of an item. Therefore, a store coupon or discount can be used to reduce the sales price of an item to less than the threshold amount in order to qualify for the exemption.
Example: A customer buys a $400.00 suit and a $130.00 shirt. The retailer is offering a 10 percent discount. After applying the 10 percent discount, the final sales price of the suit is $360.00, and the sales price of the shirt is $117.00. The suit is taxable (it is over $125.00) and the shirt is exempt (it is less than $125.00).
W. Va. Code R. § 110-15F-9 Gift certificates
The sale of a gift certificate is not taxable. Eligible items sold and delivered during the Holiday using a gift certificate will qualify for the exemption regardless of when the gift certificate was purchased. Eligible items sold and delivered after the Holiday using a gift certificate are taxable even if the gift certificate was purchased during the Holiday. A gift certificate cannot be used to reduce the selling price of an item to under the threshold amount in order for the item to qualify for the exemption.
W. Va. Code R. § 110-15F-10 Layaway sales
10.1. A layaway sale is a transaction in which merchandise selected by the customer is set aside for future delivery to the customer who makes a deposit, agrees to pay the balance of the purchase price over a period of time and, at the end of the payment period, receives the merchandise.
10.2. Eligible items will qualify for the exemption if during the Holiday (1) a retailer and a customer enter into a layaway sale agreement, (2) the customer makes the usual deposit in accordance with the retailer's layaway policy, and (3) the merchandise is segregated from the retailer's inventory.
10.3. Eligible items will also qualify for exemption if prior to the Holiday (1) a retailer and a customer entered into a layaway sale agreement, (2) the customer made the usual deposit in accordance with the retailer's layaway policy, (3) the merchandise was segregated from the retailer's inventory and (4) the customer makes the final payment and takes delivery of the merchandise during the Holiday.
W. Va. Code R. § 110-15F-11 Mail, telephone, e-mail, and internet orders and custom orders
11.1. Under West Virginia sales tax law, a sale of tangible personal property occurs when a purchaser receives title to or possession of the property for consideration. Accordingly, an eligible item qualifies for the sales tax holiday exemption if:
11.1.1. The item is both delivered to and paid for by the customer during the exemption period; or
11.1.2. The customer orders and pays for the item and the retailer accepts the order during the exemption period for immediate shipment, even if physical delivery is made after the exemption period.
11.2. A retailer accepts an order when the retailer has taken action to fill the order for immediate shipment. Actions to fill an order include placement of an "in date" stamp on a mail order, or assignment of an "order number" to a telephone, e-mail or Internet order.
11.3. An order is for immediate shipment when the customer does not request delayed shipment. An order is for immediate shipment notwithstanding that the shipment may be delayed because of a backlog of orders, or because stock is currently unavailable to the retailer, or because the item needs to be custom made.
W. Va. Code R. § 110-15F-12 Rain checks
Eligible items that customers purchase during the Holiday using a rain check qualify for the exemption regardless of when the rain check was issued. However, issuance of a rain check during the Holiday will qualify an eligible item for the exemption only if the purchased price is paid in full at the time the rain check is issued. If the item is actually sold after the Holiday, the Holiday exemption does not apply.
W. Va. Code R. § 110-15F-13 Rebates
13.1. Rebates generally occur after the sale and do not affect the sales price of an item for sales tax purposes. Even when the manufacturer's rebate is applied by the retailer at the time of sale, the rebate amount does not reduce the sales price of the item for sales tax purposes.
Example 1. A jacket sells for $130.00. The customer receives a $10.00 mail-in rebate from the manufacturer. The rebate occurs after the sale and does not reduce the sales price of the jacket. Tax is due on $130.00.
Example 2. A dress sells for $130.00. As a promotion for its new line of dresses, the manufacturer is offering an in-store instant rebate of $30.00, which the retailer allows at the cash register. Even though the net sales price to the customer is $100.00, the purchase is taxable and sales tax must be collected on $130.00. The money the retailer received for the sale was $100.00 from the customer plus $30.00 from the manufacturer.
W. Va. Code R. § 110-15F-14 Repairs and alterations
14.1. Repairs to eligible items do not qualify for the Holiday exemption. Alterations to eligible items do not qualify for the exemption even though alterations may be sold, invoiced, and paid for at the same time as the item to be altered.
Example: A customer purchases a pair of pants for $120.00 and pays $10.00 to the retailer to have the pants cuffed. The $120.00 charge for the pants is exempt; however, tax is due on the $10.00 alteration charge.
W. Va. Code R. § 110-15F-15 Refunds
15.1. A customer who pays West Virginia sales or use tax to a vendor when no tax is due may either seek a refund of the tax paid from that vendor or apply to the State Tax Department for a refund.
15.1.1. Retailers are encouraged to refund the tax to any customer who was charged sales or use tax on an exempt purchase. Customers who were charged tax by a vendor for an exempt purchase should take their tax paid receipt to the retailer to facilitate obtaining the refund.
15.1.2. If the retailer has not already remitted the tax to the State Tax Department, the retailer should simply refund the tax to the customer. If the retailer has remitted the tax to the State Tax Department, the retailer should refund the tax to the customer and then take a credit for the tax refunded on the retailer's next sales or use tax return.
15.2. If the retailer refuses to refund the tax, the customer may file a claim for refund with the State Tax Department. The original sales receipt showing (1) the date of the purchase, (2) a description of the item purchased, (3) the name of the retailer, (4) the place or store number where the sale was made, and (5) the amount of tax paid shall be attached to the claim for refund.
15.3. The State Tax Department may not refund sales or use tax paid to another state.
W. Va. Code R. § 110-15F-16 Shipping and handling charges
16.1. Shipping and handling charges that are separately stated are taxable.
Example. The sales price of an eligible item purchased during the Holiday is $85.00 and the shipping and handling charges are $15.00 for a total of $100.00. Tax must be collected on the $15.00.
W. Va. Code R. § 110-15F-17 Records and reporting
No special record-keeping or reporting is necessary. Records should be maintained as currently required by law or rules of the Tax Commissioner.
W. Va. Code R. § 110-15F-18 Exceptions
18.1. This Holiday exemption does not apply to:
18.1.1. The rental of clothing, school supplies, school instructional material, laptop computers, tablet computers, or sports equipment;
18.1.2. The sale or rental of tangible personal property for use in a trade or business.
18.2. For purposes of this rule, purchase payments made through the use of a business check or business credit card are presumed to be for use in a trade or business and are not exempt from tax under the Holiday exemption.
Series 15H Consumer Sales And Service Tax And Use Tax - Reduced Sales Tax On Food
W. Va. Code R. § 110-15H-1 General
1.1. Scope. -- This legislative rule explains and clarifies application of reduced Sales Tax imposed on the sale of food and food ingredients.
1.2. Authority. -- W. Va. Code §§ 11-10-5 and 11-15-3a..
1.3. Filing Date. -- May 3, 2007.
1.4. Effective Date. -- June 1, 2007.
W. Va. Code R. § 110-15H-2 Interpretive Note
2.1. This legislative rule incorporates by reference legislative rule 110 C.S.R. 15, Consumers Sales and Service Tax and Use Tax and shall be read in pari materia with that rule. The definitions, policies, and procedures provided in 110 C.S.R. 15 are equally applicable to purchases made under this emergency rule. To the extent that this legislative rule differs from 110 C.S.R. 15, then for the purposes of sales of food and food ingredients, this legislative rule governs. However, for all other purposes, 110 C.S.R. 15 governs the application of the Consumers Sales and Service Tax and Use Tax.
W. Va. Code R. § 110-15H-3 Definitions
3.1. "Alcoholic beverages" means beverages that are suitable for human consumption and contain one half of one percent or more of alcohol by volume.
3.2. “Bundled transaction” means the retail sale of two or more products, except real property and services to real property, where the products are otherwise distinct and identifiable and the products are sold for one nonitemized price. A “bundled transaction” does not include the sale of any products in which the “sales price” varies, or is negotiable, based on the selection by the purchaser of the products included in the transaction.
3.2.1. “Distinct and identifiable products” does not include:
3.2.1.a. Packaging – such as containers, boxes, sacks, bags, and bottles – or other materials – such as wrapping, labels, tags, and instruction guides – that accompany the “retail sale” of the products and are incidental or immaterial to the “retail sale” of those products. Examples of packaging that are incidental or immaterial include grocery sacks, shoeboxes, dry cleaning garment bags and express delivery envelopes and boxes;
3.2.1.b. A product provided free of charge with the required purchase of another product. A product is “provided free of charge” if the “sales price” of the product purchased does not vary depending on the inclusion of the product “provided free of charge”; or
3.2.1.c. Items included in the member state’s definition of “sales price,” as defined in this section.
3.2.2. The term “one nonitemized price” does not include a price that is separately identified by product on binding sales or other supporting sales-related documentation made available to the customer in paper or electronic form including, but not limited to, an invoice, bill of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, or price list.
3.2.3. A transaction that otherwise meets the definition of a “bundled transaction” is not a “bundled transaction” if it is:
3.2.3.a. The “retail sale” of tangible personal property and a service where the tangible personal property is essential to the use of the service, and is provided exclusively in connection with the service, and the true object of the transaction is the service;
3.2.3.b. The “retail sale” of services where one service is provided that is essential to the use or receipt of a second service and the first service is provided exclusively in connection with the second service and the true object of the transaction is the second service;
3.2.3.c. A transaction that includes taxable products and nontaxable products and the “purchase price” or “sales price” of the taxable products is de minimis.
3.2.3.c.1. “De minimis” means the seller’s “purchase price” or “sales price” of the taxable products is ten percent or less of the total “purchase price” or “sales price” of the bundled products.
3.2.3.c.2. Sellers shall use either the “purchase price” or the “sales price” of the products to determine if the taxable products are de minimis. Sellers may not use a combination of the “purchase price” and “sales price” of the products to determine if the taxable products are de minimis.
3.2.3.d. Sellers shall use the full term of a service contract to determine if the taxable products are de minimis;
3.2.3.e. A transaction that includes products taxable at the general rate of tax and food or food ingredients taxable at a lower rate of tax and the “purchase price” or “sales price” of the products taxable at the general sales tax rate is de minimis.
3.2.3.e.1. “De minimis” means the seller’s “purchase price” or “sales price” if the products taxable at the general Sales Tax rate is ten percent or less of the total “purchase price” or “sales price” of the bundled products.
3.2.3.e.2. Sellers shall use either the “purchase price” or the “sales price” of the products to determine if the products taxable at the general rate of tax are de minimis. Sellers may not use a combination of the “purchase price” and “sales price” of the products to determine if the products taxable at the general rate of tax are de minimis.
3.2.3.e.3. Sellers shall use the full term of a service contract to determine if the products taxable at the general rate of tax are de minimis; or
3.2.3.f. The “retail sale” of exempt tangible personal property, or food and food ingredients taxable at a lower rate of tax, and tangible personal property taxable at the general rate of tax where:
3.2.3.f.1. The transaction includes “food and food ingredients”, “drugs”, “durable medical equipment”, “mobility enhancing equipment”, and “prosthetic devices” all as defined in W. Va. Code §11-15B-1 et seq.; and
3.2.3.f.2. Where the seller's “purchase price” or “sales price” of the taxable tangible personal property, taxable at the general rate of tax, is fifty percent or less of the total “purchase price” or “sales price” of the bundled tangible personal property. Sellers may not use a combination of the “purchase price” and “sales price” of the tangible personal property when making the fifty percent determination for a transaction.
3.3. “Candy” means a preparation of sugar, honey or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops or pieces. “Candy” does not include any preparation containing flour and requires no refrigeration.
3.4. "Dietary supplement" means any product, other than "tobacco", intended to supplement the diet that:
3.4.1. Contains one or more of the following dietary ingredients:
3.4.1.a. A vitamin;
3.4.1.b. A mineral;
3.4.1.c. A herb or other botanical;
3.4.1.d. An amino acid;
3.4.1.e. A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or
3.4.1.f. A concentrate, metabolite, constituent, extract or combination of any ingredient described in paragraphs a through e of this subdivision;
3.4.2. Is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and
3.4.3. Is required to be labeled as a dietary supplement, identifiable by the "Supplemental Facts" box found on the label as required pursuant to 21 CFR §101.36, or in any successor section of the Code of Federal Regulations.
3.5. "Drug" means a compound, substance or preparation, and any component of a compound, substance or preparation, other than food and food ingredients, dietary supplements or alcoholic beverages:
3.5.1. Recognized in the official United States pharmacopoeia, official homeopathic pharmacopoeia of the United States, or official national formulary, and supplement to any of them;
3.5.2. Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans; or
3.5.3. Intended to affect the structure or any function of the human body.
3.6. “Food and food ingredients” means substances, whether in liquid, concentrated, solid, frozen, dried or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. "Food and food ingredients" does not include alcoholic beverages, prepared food, or tobacco.
3.7. “Food sold through a vending machine” means food dispensed from a machine or other mechanical device that accepts payment.
3.8. “NAICS” means North American Industry Classification Code.
3.9. "Person" means an individual, trust, estate, fiduciary, partnership, limited liability company, limited liability partnership, corporation or any other legal entity.
3.10. “Prepared food” means:
3.10.1. Food sold in a heated state or heated by the seller;
3.10.2. Two or more food ingredients mixed or combined by the seller for sale as a single item; or
3.10.3. Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food.
3.10.4. “Prepared food” does not include
3.10.4.a. Food that is only cut, repackaged, or pasteurized by the seller, and eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the Food and Drug Administration in chapter 3, part 401.11 of its Food Code of 2001 so as to prevent food borne illnesses;
3.10.4.b. Food sold by a seller whose proper primary NAICS classification is manufacturing in sector 311, except subsection 3118 (bakeries);
3.10.4.c. Food sold in an unheated state by weight or volume as a single item; or
3.10.4.d. Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas.
3.11. "Purchase price" means the measure subject to the tax imposed by W. Va. Code §§ 11-15-1 et seq., or 11-15A-1 et seq., and has the same meaning as sales price.
3.12. "Purchaser" means a person to whom a sale of personal property is made or to whom a service is furnished.
3.13. "Retail sale" or "sale at retail" means:
3.13.1. Any sale or lease for any purpose other than for resale as tangible personal property, sublease or subrent; and
3.13.2. Any sale of a service other than a service purchased for resale.
3.14. "Sales price" means the measure subject to the Sales Tax and includes the total amount of consideration, including cash, credit, property and services, for which personal property or services are sold, leased or rented, valued in money, whether received in money or otherwise, without any deduction for the following:
3.14.1. The seller's cost of the property sold;
3.14.2. The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller;
3.14.3. Charges by the seller for any services necessary to complete the sale, other than delivery and installation charges;
3.14.4. Delivery charges;
3.14.5. Installation charges;
3.14.6. The value of exempt personal property given to the purchaser where taxable and exempt personal property have been bundled together and sold by the seller as a single product or piece of merchandise; and
3.14.7. Credit for the fair market value of any trade-in.
3.14.7.a. "Sales price" does not include:
3.14.7.a.1. Discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale;
3.14.7.a.2. Interest, financing and carrying charges from credit extended on the sale of personal property, goods or services, if the amount is separately stated on the invoice, bill of sale or similar document given to the purchaser; and
3.14.7.a.3. Any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale or similar document given to the purchaser.
3.15. "Sales Tax" means the tax levied under W. Va. Code § 11-15-1 et seq.
3.16. "Seller" means any person making sales, leases or rentals of personal property or services.
3.17. "Service" includes all nonprofessional activities engaged in for other persons for a consideration, which involve the rendering of a service as distinguished from the sale of tangible personal property, but does not include contracting, personal services, services rendered by an employee to his or her employer, any service rendered for resale, or any service furnished by a business that is subject to the control of the Public Service Commission when the service or the manner in which it is delivered is subject to regulation by the Public Service Commission of this State. The term "service" or "selected service" does not include payments received by a vendor of tangible personal property as an incentive to sell a greater volume of such tangible personal property under a manufacturer's, distributor's or other third-party's marketing support program, sales incentive program, cooperative advertising agreement or similar type of program or agreement, and these payments are not considered to be payments for a "service" or "selected service" rendered, even though the vendor may engage in attendant or ancillary activities associated with the sales of tangible personal property as required under the programs or agreements.
3.18. “Soft drink” means nonalcoholic beverages that contain natural or artificial sweeteners. “Soft drinks” do not include beverages that contain milk or milk products, soy, rice or similar milk substitutes, or greater than fifty percent of vegetable or fruit juice by volume.
3.19. "Tangible personal property" means personal property that can be seen, weighed, measured, felt, or touched, or that is in any manner perceptible to the senses. "Tangible personal property" includes, but is not limited to, electricity, steam, water, gas and prewritten computer software.
3.20. "Tax" includes all taxes levied under W. Va. Code §§ 11-15-1 et seq., or 11-15A-1 et seq., and additions to tax, interest and penalties levied under article ten of this chapter.
3.21. "Tobacco" means cigarettes, cigars, chewing or pipe tobacco or any other item that contains tobacco.
3.22. "Use Tax" means the tax levied under W. Va. Code §11-15A-1 et seq.
3.23. "Vendor" means any person furnishing services taxed by W. Va. Code §§ 11-15-1 et seq., or 11-15A-1 et seq., or making sales of tangible personal property or custom software. "Vendor" and "seller" are used interchangeably in W. Va. Code §§ 11-15-1 et seq., and 11-15A-1 et seq.
W. Va. Code R. § 110-15H-4 Reduction of Sales Tax on Food and Food Ingredients
4.1. Effective January 1, 2006, the rate of Sales Tax and Use Tax is reduced to 5% on the sales, purchases and uses of food and food ingredients, as defined in Section 3 of this rule, intended for human consumption. However, the reduced rate of tax does not apply to sales, purchases and uses by consumers of prepared food.
4.2. A number of items sold by grocery stores, supermarkets, and similar type businesses are classified in this rule under the headings “Food Items” and “Prepared Food Items.” Food Items fall within the definition of “food and food ingredients” and are subject to the Sales Tax at the reduced rate of 5%; a representative listing of Food Items is found in Appendix A of this rule.
4.2.1. Food items include food sold unheated by weight or volume as a single item.
4.2.2. Food items include food that is only cut, repackaged or pasteurized by the seller and eggs, fish, meat, poultry and foods containing these raw animal foods requiring cooking by the consumer such as meat from a deli counter, sliced and wrapped for a customer.
4.2.3. Food items include all food sold through a vending machine that is not prepared food.
4.2.4. Food items include all bakery items unless sold re-heated or with an eating utensil.
4.2.5. Food items include food sold by a seller whose proper primary NAICS classification is manufacturing in sector 311.
4.3. The seller may elect to compute the Sales Tax due on a transaction on a per item basis or on an invoice basis provided the method used is consistently used during the reporting period.
4.4. The reduction in the amount of Sales Tax imposed on the sale of food and food ingredients may not affect the application of the exemption from Sales Tax provided in W. Va. Code § 11-15-9 for food purchased by an eligible person using food stamps, electronic benefits transfer cards or vouchers issued to individuals participating in the Federal Food Stamp Program, by whatever name it is called, or the Women, Infants and Children Program, or the application of any other exemption authorized in W. Va. Code §§ 11-15-1 et seq., or 11-15A-1 et seq.
W. Va. Code R. § 110-15H-5 Prepared Food
5.1. Prepared food, as defined in Section 3 of this rule, is food that is prepared by the seller for sale to the consumer. Generally, this does not include food prepared by the manufacturer and sold to the retailer or vendor. Prepared Food Items are subject to the Sales Tax at the regular rate of 6%; a representative listing of Prepared Food Items is found in Appendix B of this rule.
5.2. All food sold with eating utensils provided by the seller including plates, knives, forks, spoons, glasses, cups, napkins or straws falls within the classification of Prepared Food Items. Food is considered to be sold with eating utensils provided by the seller when the food is intended for consumption with the utensils provided.
5.2.1. Prepared Food Items therefore includes all food sold by an eating establishment that sells meals, sandwiches, or other food for consumption on or off the premises.
5.2.2. Prepared Food Items also includes self-service food such as salad bars or drink islands.
5.2.3. The presence of self-service utensils in a facility does not change Food Items (taxable at 5%) into Prepared Food Items (taxable at 6%) unless it is intended that the food be consumed with those utensils. Further, items provided solely pursuant to sanitary statutes or regulations and not for purposes of consumption do not qualify as utensils.
5.3. Prepared Food Items remain taxable at 6% if they are previously heated by the seller and are ready to eat without further cooking by the purchaser.
5.4. Two or more food ingredients that are mixed or combined by the seller and then sold as a single food item are included in Prepared Food Items.
5.5. Heated food sold in combination with unheated food is included in Prepared Food Items and taxable at 6%. For example, hot chicken prepared by the seller with a pint of potato salad that was not prepared by the seller is sold for a single price.
5.6. Prepared Food Items includes food sold by a seller whose proper primary NAICS classification is 311, food manufacturing (except subsector 3118, bakeries), if:
5.6.1. The food is sold with eating utensils provided by the seller; or
5.6.2. The food is sold in a heated state
5.6.3. If the manufacturer, rather than the seller, provides an eating utensil with the food, the food is not considered to be provided with eating utensils. For example, a box of crackers and cheese that includes a spreader is subject to the 5% rate because the spreader is not provided by the seller.
W. Va. Code R. § 110-15H-6 Bundled Transactions
6.1. When an item subject to the Sales Tax rate or the Use Tax rate of 6% is sold with an item subject to Sales Tax rate or the Use Tax rate of 5%, for a single non-itemized price, the purchase amount is subject to the Sales Tax rate or the Use Tax rate of 6%.
6.1.1. Example: Selling a pizza, breadsticks and a 2-liter bottle of soda all for the purchase price of $14.99 (the pizza and breadsticks are Prepared Food and subject to the rate of 6%, and the bottle of soda is a Food Item and subject to the rate of 5%), the transaction is taxable at the rate of 6% of the purchase price, unless the price of the bottle of soda is separate from the price of the pizza and breadsticks. If separately itemized the soda would be taxable at the rate of 5% and the pizza and breadsticks at 6%.
6.1.2. Example: Popcorn prepared by the seller and sold with a drink and candy for one price is a bundled transaction subject to the 6% rate. However, if the popcorn, drink (if sold in a cup) and candy are sold individually, the popcorn and drink (in a cup) are subject to the 6% rate while the candy is subject to the 5% rate.
APPENDIX A. FOOD ITEMS
The Sales Tax rate and the Use Tax rate of 5% applies to the sale of food and food ingredients listed below if sold unheated, without eating utensils provided by the seller and the seller is not the manufacturer.
All food sold through a vending machine that is not a prepared food.
Baby food Bakery items (including bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas).
Baking chocolate (whether liquid, powder, or solid)
Baking soda or other forms of leavening agents Beverages containing greater than 50% fruit or vegetable juice or containing milk, milk products or milk substitutes Broths and bouillons (whether liquid, instant, freeze dried, or cubes)
Butter Candy and confections including breath mints Cereal and cereal products Cheese Chewing Gum Chip dip Chocolate covered nuts Cocoa Coconut (whether whole, shredded, sweetened, processed or raw)
Coffee and coffee substitutes (coffee beans, ground coffee, freeze dried coffee, coffee in brewing bags and instant coffee)
Condiments Cooking oil Cooking wine (that exceeds alcohol content of .5%, that is intended for use in cooking and that is not an alcoholic beverage)
Dairy products Deli items when sold unheated by weight or volume as a single item Dietary supplements Dried fruit Eggs and egg products or substitutes Extracts and flavorings intended as a cooking ingredient Fish and fish products (including all other forms of seafood)
Flour (including wheat, whole wheat, rye, corn, rice, barley, buckwheat, soy or other forms of milled grains or nuts)
Food coloring Food sold by a seller whose primary NAICS classification is manufacturing in sector 311, except subsector 3118 (bakeries)
Food sold unheated by weight or volume as a single item Food only sliced, repackaged, or pasteurized by the seller such as meat from a deli counter, sliced and wrapped for a customer Frozen meals such as pizza or french fries Fruit and fruit products (whether fresh, frozen, canned or dehydrated, but excludes fruit on salad bars)
Fruit juices (including juices with 50% or less fruit juices)
Gelatins (whether powdered or prepared)
Gravies Herbs (seasonings)
Honey Ice except block or dry ice (which remain taxable at 6%)
Ice cream (including prepackaged novelties)
Jams and jellies (including marmalades and preserves)
Ketchup Lard Margarine Marshmallows (including marshmallow crème)
Meat and meat products (whether fresh, frozen, cured, canned, or dehydrated)
Meatloaf - uncooked Milk and milk products Mustard Nuts (including salted nuts)
Olive oil Packaged popcorn Pasteurized eggs Peanut butter Pepper Pickles Popsicles Powdered drink mixes (including sweetened mixes)
Pumpkins except pumpkins decorated at the time of sale (which remain taxable at 6%)
Relishes Salad dressings and mixes Salad purchased for resale and repackaged in smaller containers by the seller unless heated and/or sold with eating utensils Salads or other deli dishes unless heated and/or sold with eating utensils Salt except rock salt (which remains taxable at 6%)
Sauces Seasonings Sherbets and sorbets Shortenings Soups Snack chips and pieces (includes potato chip or crisp type chips, corn chips, pork rinds, pretzels and trail mixes)
Spices Sandwich spreads Soft drinks in bottles and cans Sugar, sugar products and sugar substitutes Sunflower seeds Syrups (including molasses and dietetic syrups and similar products)
Tea (bags, leaves, or instant only)
Vegetables and vegetable products (whether fresh, frozen, canned or dehydrated, but excludes food on salad bars)
Vegetable oils Water
APPENDIX B. PREPARED FOOD ITEMS
The Sales Tax rate and the Use Tax rate of 6% applies to the sale of prepared food items listed below if prepared by the seller:
All food sold in a heated state or heated by the seller Bakery items if sold with eating utensils provided by the seller Bakery items sold in a heated state Cold soups, casseroles, beans, potatoes, etc.
Combined raw meats - that do not require cooking Drinks prepared by the seller (coffee, tea, etc.)
Fried chicken Frozen yogurt dispensed as cones, sundaes, etc.
Fruits cut and combined by the seller (fruit tray)
Ice cream novelties, cakes or pies Ice cream or ice milk dispensed as cones, sundaes, etc.
Marinated raw meats - that do not require cooking Marinated raw seafood - that do not require cooking Party trays Rotisserie chicken Salad greens mixed by the seller Salads and deli items if heated and/or sold with eating utensils Sandwiches Soups, casseroles or meals sold warm Warmed nuts Vending machine sales of hot coffee, hot chocolate or other hot foods
APPENDIX C. OTHER ITEMS
The Sales Tax rate and the Use Tax rate of 6% applies to the sale of the items listed below:
Alcoholic beverages and nonintoxicating beer Cocktail mixes (dry or liquid)
Cooking utensils Liver Oils Lozenges Over the counter medicines Paper products Pet food and supplies Soap and soap products Tobacco and tobacco products Tonics Toothpaste and mouthwash 110CSR15H 110CSR15H
Series 15I Consumers Sales And Service Tax And Use Tax - Executive Orders Declaring Emergency And Exempting from Tax Mobile Homes And Similar Units And Building Materials Used And Consumed In Repair Or Replacement Of Residences And Businesses Damaged In A Disaster
W. Va. Code R. § 110-15I-1 General
1.1. Scope. -- This legislative rule explains and clarifies application of an Executive Order declaring a state of emergency that exempts from Consumers Sales and Service Tax and Use Tax purchases of mobile homes, house trailers, modular homes and similar units by and for persons rendered homeless by a disaster and the service of installing them, and purchases of building construction materials and supplies used or consumed in the repair, restoration, reconstruction or replacement of structures damaged in a disaster, during the period of time stated in the Executive Order.
1.2. Authority. -- W. Va. Code §11-10-5.
1.3. Filing Date. -- May 5, 2005.
1.4. Effective Date. -- June 1, 2005
W. Va. Code R. § 110-15I-2 Interpretive Note
2.1. This legislative rule incorporates by reference legislative rule Consumer Sales and Service Tax and Use Tax, W. Va. Code §110-15, and shall be read in pari materia with that rule. The definitions, policies, and procedures provided in that rule are equally applicable to purchases made under this rule. To the extent that this legislative rule differs from W. Va. Code §110-15, then for the purposes of the purchases, installations, repairs, restorations and reconstructions or replacements that occur as a result of the disaster referenced in the Executive Order, this legislative rule governs. However, for all other purposes, W. Va. Code §110-15 governs the application of the Consumer Sales and Service Tax and Use Tax.
W. Va. Code R. § 110-15I-3 Definitions
3.1. “Executive Order” means an Executive Order issued by the Governor of the State of West Virginia under the authority of W. Va. Code §15-5-6(g) that exempts from Consumers Sales and Service Tax and Use Tax certain purchases related to recovery from damage resulting from a disaster, as that term is defined in W. Va. Code §15-5-2.
3.2. “FEMA” means the Federal Emergency Management Agency.
3.3. “Mobile home, house trailer, modular home or similar units” means and includes any factory built home or manufactured home as defined in W. Va. Code §37-15-2.
W. Va. Code R. § 110-15I-4 Exempt purchases
4.1. Purchases of mobile homes, house trailers, modular homes or similar units primarily designed for permanent habitation and occupancy, purchases of the service of installing those units and purchases of contracts for installation of those units by or for persons that have been rendered homeless by the disaster referenced in the Executive Order are exempt from Consumer Sales and Service Tax; Provided, That the mobile homes, house trailers, modular homes or similar units for which the exemption is claimed are sited and installed within the State of West Virginia for use as the primary habitation of one or more persons who have been rendered homeless by the disaster.
4.1.1. The Sales Tax imposed by W. Va. Code §11-15-7a and the use tax imposed by W. Va. Code §11-15A-2b on the manufacturer or seller of a modular home is not applicable to any modular homes, or building materials for incorporation in the modular home, sold to a modular dwelling manufacturer or seller for resale to or for persons that have been rendered homeless by the disaster referenced in the Executive Order; Provided, That no credit under W. Va. Code §11-15-7a(b) or W. Va. Code §11-15-2b(b) shall be given for any tax lawfully imposed and paid to another state and paid by the manufacturer on the purchase of building supplies and materials used in the manufacture of the modular dwelling.
4.2. Tangible personal property in the form of building construction materials and supplies purchased for direct and immediate use or consumption in the repair and restoration of residential and business properties located within the State of West Virginia that were damaged by the disaster referenced in the Executive Order are exempt from Consumers Sales and Service Tax and Use Tax; Provided, That the purchases are made by the owner of the damaged structure or by the person who will actually perform the repair and restoration for that owner.
4.3. Tangible personal property in the form of building construction materials and supplies purchased for direct and immediate use or consumption in the reconstruction or replacement of residential and business properties located within the State of West Virginia, that were sufficiently damaged or destroyed by the disaster referenced in the Executive Order so as to require reconstruction or replacement are exempt from Consumers Sales and Service Tax and Use Tax; Provided, That the purchases are made by the owner of the structure or by the person who will actually perform the reconstruction for that owner.
4.3.1. If the property owner relocates his or her residence or commercial building to a new site, he or she may still claim the exemption in constructing a new residence or commercial building; Provided, That the new residence or commercial building is located within the State of West Virginia.
4.4. This exemption applies to those building construction materials and supplies that are used or consumed in the repair or reconstruction of a structure or in the construction of a replacement structure. This includes certain essential equipment that is classified as a fixture to the structure. Examples of building construction materials and supplies that may be purchased under this rule exempt from tax include, but are not necessarily limited to: bathtubs brick cement block central heating or central air conditioning units and ductwork circuit breakers and circuit breaker panels decking doors, interior and exterior electrical wall switches, electrical receptacles and fuse boxes electric wiring floor coverings, including wall-to-wall carpeting hot water heaters insulation kitchen cabinets and counters lumber nails and screws paint plumbing supplies and fixtures plywood roofing siding sump pumps wall board wall paneling wallpaper well pumps, related pressure switches and water supply tanks windows
4.5. The exemption allowed by this rule does not apply to the replacement or repair of tangible personal property that, although destroyed, is not classified as a permanent fixture to the structure. The exemption does not apply to non-essential or luxury items or to typical household appliances. Examples of non-exempt purchases include, but are not limited to: backhoes boats bulldozers clothes dryers computers cooking utensils, pots and pans dish washers (whether or not built-in) draperies food freezers furniture guns hand tools hot tubs or components of hot tubs lawnmowers microwave ovens (whether or not built-in) power tools refrigerators (whether or not built-in) stoves (whether or not built-in) swimming pools or components of swimming pools tangible personal property used in carrying on a business* television satellite dishes televisions washing machines * These purchases are taxable unless the purchase is exempt under a provision of the consumers sales and service tax law or the use tax law, or unless the purchase is exempt under another provision of the West Virginia Code. For example: Purchases of some business inventory items may be subject to the purchases for resale exemption of W. Va. Code §11-15-9(a)(9).
§10-15I-5. Procedure for Claiming the Exemption.
5.1. Mobile homes, house trailers, modular homes and similar units. In the case of purchases of mobile homes, house trailers, modular homes and similar units that qualify for the exemption authorized by this rule, if the purchaser is a person rendered homeless by the disaster, the purchaser shall present to the seller a set of documentation consisting of a completed and executed special exemption certificate, developed by the Tax Department for this rule, and a copy of a FEMA housing assistance letter showing the purchaser to be a person who has a housing need resulting from the disaster. The seller shall retain a copy of this set of documents in the sales records subsequent to the sale.
5.1.1. If the purchase of a mobile home, house trailer, modular home or similar unit that qualifies for the exemption authorized by this rule is made by a contractor or other person for and on behalf of a person who was rendered homeless by the disaster, the purchaser shall present to the seller a set of documentation consisting of a completed and executed special exemption certificate, developed by the Tax Department for this rule, and a copy of a FEMA housing assistance letter showing the person for and on behalf of whom the purchase is made to be a person who has a housing need resulting from the disaster. The seller shall retain a copy of this set of documents in the sales records subsequent to the sale.
5.2. Building construction materials. In the case of purchases of building materials the exemption authorized by this rule shall be asserted at the time the building materials are purchased by or for the property owner who has suffered disaster related damage, by presenting to the vendor a set of documentation consisting of a completed and executed special exemption certificate, developed by the Tax Department for this rule, and documentation verifying the disaster related losses of the property owner by or for whom the purchases are made. For example: a copy of a FEMA housing assistance letter, proof of settlement of an insurance claim for damage resulting from the disaster, an insurance adjuster’s record of damage inspection or any other documentation determined by the Tax Department to be acceptable.
5.2.1. For purchases qualified for exemption in accordance with this rule and that were made prior to the availability of the special exemption certificate, the purchaser may claim a refund by filing form WV/CST-240 with an attached copy of the FEMA housing assistance letter, a copy of the proof of settlement of an insurance claim for damage resulting from the disaster, or a copy of the insurance adjuster’s record of damage inspection.
5.3. The property owner who has suffered disaster related damage or a contractor or other person making purchases of building materials for repair, reconstruction or replacement of property of the property owner shall file one set of the documentation specified in subsection 5.2 of this section for each damaged or destroyed structure with each vendor. If the purchaser is claiming the exemption on purchases from more than one vendor, the property owner shall have a set of documentation on file with each of the vendors from whom exempt purchases are made. If the purchaser has two structures that suffered damage, then the purchaser shall have a set of documentation on file with each vendor for each loss. The required documentation needs to be filed with a vendor only one time. The vendor shall keep records that tie each exempt purchase to the appropriate documentation.
5.4. If the purchaser is a contractor who is doing the repair or reconstruction work, or, in the case of a property owner who has suffered disaster related damage and who relocates, a contractor doing the construction work for that relocated property owner, the contractor shall file the required set of documentation with each vendor.
5.4.1. The contractor may only assert the exemption for building construction materials and supplies that are purchased for direct and immediate use or consumption in the repair or reconstruction of the residential and business property to which the exemption certificate applies.
5.4.2. If the property owner relocates to a different site in West Virginia, the contractor may only assert the exemption for building construction materials and supplies that are purchased for direct and immediate use and consumption in the construction of the residential property or commercial structure to which the exemption certificate applies.
5.4.3. The contractor may only assert the exemption in relation to qualified structures located within the State of West Virginia.
W. Va. Code R. § 110-15I-6 Implementation of Rule
6.1. This rule shall be implemented only through the issuance of an Executive Order issued as a result of a specified disaster.
6.2. The exemption authorized by the Executive Order and implemented by this rule applies to eligible purchases made within the dates specified in the Executive Order.
110CSR15I
110CSR15I
Series 15J Per se Exemption For Purchases By Contractors Performing Contracting For Government-owned Water Or Sewer Utilities Or Public Service District Water Or Sewer Utilities
W. Va. Code R. § 110-15J-2 Interpretive Note
2.1. This interpretive rule incorporates by reference the Department’s rule, Consumers Sales and Service Tax and Use Tax, 110CSR15, and shall be read in pari materia with that rule. The definitions, policies, and procedures provided in 110CSR15 are equally applicable to purchases made under this interpretive rule: Provided, That to the extent that this interpretive rule differs from 110CSR15, then for the purpose of the per se exemption for purchases by certain contractors providing specified contracting services to government-owned or public service district water or sewer utilities, this interpretive rule shall control. However, for all other purposes, 110CSR15 governs the application of the Consumers Sales and Service Tax and Use Tax.
W. Va. Code R. § 110-15J-3 Definitions
Unless a specific definition is provided in this section, terms used in this rule are defined as provided in legislative rule 110CSR15 §1, et seq., unless the context in which the term is used clearly requires a different meaning. The following terms shall have the meaning ascribed in this rule.
3.1. “Government-owned water utility” and “government-owned sewer utility” means a water system or a sewer system, or both, that is acquired, constructed, or established by a municipality or a county and operated under the authority of W. Va. Code §§8-19-1 et seq., or 8-20-1 et seq., and includes the provision of stormwater services.
3.2. “Public service district water utility” or “public service district sewer utility” means a water utility or sewer utility constructed or purchased and maintained and operated by a public service district created and operated under the authority of W. Va. Code §§16-13A-1 et seq., and includes the provision of stormwater services.
3.3. “Public utility” means a government-owned water utility, a government-owned sewer utility, a public service district water utility or a public service district sewer utility, or any combination thereof.
W. Va. Code R. § 110-15J-4 Applicability of Consumers Sales and Service Tax and Use Tax
4.1. General Rule. -- The Consumers Sales and Service Tax and Use Tax is imposed upon the sale of tangible personal property and selected services. All sales are presumed to be taxable unless the sale is either excepted or exempt from the tax.
4.2. Contractor and Subcontractor Per Se Exemption. -- Purchases of services, machinery, supplies, or materials, except gasoline and special fuel, to be directly used or consumed in the construction, alteration, repair or improvement of a new or existing public utility structure or system by a contractor or subcontractor providing contracting services to a public utility are per se exempt from Consumers Sales and Service Tax and Use Tax.
4.3. Exclusion From Per Se Exemption. -- This per se exemption is not available to and may not be claimed by a privately owned water utility or privately owned sewer utility, or by a contractor providing contracting services to a privately owned water utility or privately owned sewer utility.
W. Va. Code R. § 110-15J-5 Application of per se exemption
5.1. The per se exemption applies to purchases of tangible personal property that remain on the construction site after the construction activity is completed.
5.1.a. Rentals of cranes, bulldozers, and other equipment rented only for use on the specifically identified job by the contractor, or the hiring of a subcontractor to provide bulldozer services, crane services, etc., with an operator of the machine also qualify for the per se exemption.
5.1.b. Purchases by a subcontractor, who is working for a prime contractor, where the prime contractor is entitled to this per se exemption, are also exempt in the same manner and with the same restrictions as are applicable to the prime contractor.
5.2. The per se exemption does not apply to purchases of tools, bulldozers, cranes, etc. that become the property of the construction contractor or subcontractor and are removed from the site after construction is completed.
W. Va. Code R. § 110-15J-6 Method of claiming the exemption
6.1. Contractors or subcontractors making qualified purchases may claim the per se exemption by one of two methods:
6.1.a. The contractor or subcontractor may pay the appropriate amount of Sales Tax and claim a refund from the Tax Department; or
6.1.b. The contractor or subcontractor may use Form WV CST-286, “Special Contractors Exempt Purchases Certificate” using the public utility’s tax identification number for each qualified purchase.
W. Va. Code R. § 110-15J-7 Records required
7.1. Vendors shall obtain and retain the following records for each transaction claimed to be per se exempt from Consumers Sales and Service Tax or Use Tax:
7.1.a. A properly completed Form WV CST-286;
7.1.b. Demonstrable proof that the purchaser has a valid Business Registration Certificate; and
7.1.c. A copy of the sales slip or purchase invoice evidencing the transaction and showing the purchaser's name, address and Business Registration Certificate Number.
7.1.d. The vendor shall maintain a reasonable method of record keeping that associates each per se exempt sale transaction to the customer using the Special Contractors Exempt Purchases Certificate.
7.1.e. The vendor shall retain each Special Contractors Exempt Purchases Certificate for at least three years after the due date of the last tax return to which it relates, or at least three years after the date when such return was filed, if later.
7.2. Requirements for contractors and subcontractors:
7.2.a. The contractor or subcontractor, as applicable, is required to possess a valid Business Registration Certificate.
7.2.b. The contractor or subcontractor, as applicable, shall properly complete the WV CST-286 by properly signing the form and checking all applicable boxes.
7.2.c. The contractor or subcontractor, as applicable, shall retain the sales slip or purchase invoice evidencing each transaction and showing the vendor's name, address and Business Registration Certificate Number.
7.2.d. The above records must be retained for at least three years after the due date of the last tax return to which it relates, or at least three years after the date when such return was filed, if later.
W. Va. Code R. § 110-15J-8 Unauthorized use of the exemption; penalties
8.1. A vendor or purchaser who engages in any business activity in West Virginia without possessing a valid Business Registration Certificate may be subject to criminal and civil penalties.
8.2. A contractor’s Business Registration Certificate (and any duplicates) may be suspended or revoked if the contractor, or someone acting on the contractor’s behalf, willfully issues the Special Contractors Exempt Purchases Certificate to make a tax exempt purchase that is not used in a tax exempt manner.
8.3. When property or services are purchased tax exempt with a Special Contractors Exempt Purchases Certificate, but later used or consumed in a non-exempt manner, the purchaser shall pay to the West Virginia State Tax Department the proper amount of Consumers Sales and Service Tax or Use Tax on the purchase price.
8.3.a. A penalty of up to 50% of the tax shall be added to the amount of Consumers Sales and Service Tax or Use Tax for the misuse of the Special Contractors Exempt Purchases Certificate with intent to evade the Sales or Use Tax.
8.3.b. The Consumers Sales and Service Tax or Use Tax on a false or fraudulent use of the Special Contractors Exempt Purchases Certificate may be assessed at any time subsequent to such use.
8.4. The willful issuance of a false or fraudulent Special Contractors Exempt Purchases Certificate with the intent to evade Consumers Sales and Service Tax or Use Tax is a misdemeanor.
8.5. The tax, interest and penalties are in addition to any other penalty imposed by law upon the willful misuse of the Special Contractors Exempt Purchases Certificate.
110CSR15J
110CSR15J
Series 15K Aircraft Operated Under a Fractional Ownership Program
W. Va. Code R. § 110-15K-4 Exemption from Use Tax Tangible personal property or services are exempt from use tax where (a) the gross receipts from the sale of the personal property or services are exempt from the sales tax by the terms of §11-15-1, et seq., of the West Virginia Code, and (b) the property or services are being used for the purpose for which it is exempted from the use tax imposed under W. Va. Code §11-15A-1, et seq. §110‑15K‑5. Claiming the Exemption
5.1. Any person having a right or claim to the exemption set forth in this rule may claim the exemption by:
5.1.a. First paying to the vendor the tax imposed by this article and then applying to the Tax Commissioner for a refund or credit; or
5.1.b. Providing to the vendor his or her West Virginia direct pay permit number, as provided in §11-15-9d and §11-15a-3d of the West Virginia Code and W. Va. Code State R. §110-15-9c; or
5.1.c. A person having a right or claim to the exemption set forth in this Rule may, in lieu of paying the sales tax and filing a claim for refund, execute a certificate of exemption, in the form required by the Tax Commissioner, and deliver it to the vendor of the property or service in the manner required by the Tax Commissioner. The Tax Commissioner finds that the requirement that permission to execute such a certificate be granted specifically upon application of the Tax Commissioner is unnecessary, and thereby generally grants permission to execute such a certificate.
5.2. Any person having a right or claim to the exemption set forth in this rule may apply for a refund or credit under subdivision 5.1.a., by timely filing a claim for refund or credit of the consumers sales and service tax or the use tax overpayments on such form and in such manner as the Tax Commissioner may require and in accordance with the requirements of §11-10-1, et seq. and §11-15-1, et seq. of the West Virginia Code and W. Va. Code State R. §110-15-1, et seq., and W. Va. Code State R. §110-10L-1, et seq.
5.3. Any person having a right or claim to the exemption set forth in this rule may use an exemption certificate as set forth under subdivision 5.1.c., as follows:
5.3.a. To purchase tangible personal property or services using an exemption certificate, a person must:
5.3.a.1. Apply for and obtain a valid West Virginia Business Registration Certificate; and
5.3.a.2. Properly complete an Exemption Certificate, in the form required by the Tax Commissioner, and present it to the vendor or retailer.
5.3.b. If the steps under subdivision 5.3.a. have been completed, the person claiming the exemption has applied for and received permission to use an exemption certificate under subdivision 5.1.c.:
5.3.b.1. If the Tax Commissioner believes that the exemption certificate was incomplete, deficient or otherwise erroneous, or that the taxpayer was not entitled to claim the exemption for any reason, the Tax Commissioner may proceed to investigate and determine or estimate the tax liability and make an assessment therefor as permitted under W. Va. Code §11-10-1, et seq.
5.3.b.2. In order that the Tax Department may verify the taxable and nontaxable sales upon audit, a taxpayer claiming an exemption under this rule must retain the appropriate books and records supporting its claim for exemption for at least three (3) years, or for so long as the taxable period remains open for assessment or refund, whichever is greater.
5.3.c. In order that the Tax Department may verify a vendor's or a retailer's taxable and nontaxable sales upon audit, it is necessary that such persons retain executed exemption certificates and other appropriate books and records for at least three (3) years or for so long as the taxable period remains open for assessment or refund whichever is greater. An exemption certificate, to be valid, must be given by the vendee and accepted by the vendor at the time of the sale and not thereafter. If a vendor lists nontaxable sales or services for which he has no exemption certificates or material purchase certificate, the Tax Department will presume such sales were taxable and make an assessment of tax against the vendor.
Series 15L Exemption for Repair, Remodeling, and Maintenance of Aircraft
W. Va. Code R. § 110-15L-1 General
1.1. Scope. -- This rule explains and clarifies administrative and procedural requirements for the consumer sales and service tax exemption for purchases of services and tangible personal property sold for the repair, remodeling, and maintenance of aircraft as set forth under W. Va. Code §11-15-9t.
1.2. Authority. -- W. Va. Code §11‑15-9t.
1.3. Filing Date. -- July 1, 2022.
1.4. Effective Date. -- July 1, 2022.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on August 1, 2027.
W. Va. Code R. § 110-15L-2 Definitions
2.1. Unless a specific definition is provided in subsection 2.2 of this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §11-10-1, et seq., §11-15-1, et seq., §11-15A-1, et seq., or §11-15B-1, et seq.
2.2. As used in this rule:
2.2.1. "Directly used or consumed," in the context of repair, remodeling or maintenance of aircraft, aircraft engines or aircraft component parts for an aircraft shall mean used or consumed in those activities which constitute an integral and essential part of such activities, as contrasted with, and distinguished from those activities which are simply incidental, convenient, or remote to such activities.
2.2.1.a. Sales of machinery, tools or equipment directly used or consumed exclusively in the repair, remodeling or maintenance of aircraft, aircraft engines or aircraft component parts for an aircraft shall include only:
2.2.1.a.1. Machinery, tools, or equipment physically incorporated into the finished aircraft, or physically incorporated into the finished aircraft engine or aircraft component part on an aircraft, because of repair, remodeling, or maintenance activities;
2.2.1.a.2. Machinery, tools, or equipment used exclusively for repairing, remodeling, or maintaining aircraft; or
2.2.1.a.3. Machinery, tools, or equipment used exclusively for repairing, remodeling, or maintaining aircraft that qualifies for the exemption under §11-15-9(a)(33) of the W. Va. Code.
W. Va. Code R. § 110-15L-3 Exemption from the Consumer Sales and Service Tax
3.1. The following sales are exempt from the consumer sales and service tax:
3.1.1. Sales of aircraft repair, remodeling, and maintenance services when the services are to an engine or other component part of an aircraft;
3.1.2. Sales of tangible personal property that is permanently affixed or permanently attached as a component part of an aircraft, as part of the repair, remodeling, or maintenance service; and
3.1.3. Sales of machinery, tools or equipment directly used or consumed exclusively in the repair, remodeling or maintenance of aircraft, aircraft engines, or aircraft component parts for an aircraft, or used exclusively in combination with the purposes specified in W. Va. Code §11-15-9t(a) and the purposes specified in W. Va. Code §11-15-9(a)(33) of this code.
3.2. This exemption applies to sales made on and after September 1, 2021.
W. Va. Code R. § 110-15L-4 Exemption from Use Tax Tangible personal property or services are exempt from use tax where (a) the gross receipts from the sale of the personal property or services are exempt from the sales tax by the terms of §11-15-1, et seq., of the W.Va. Code, and (b) the property or services are being used for the purpose for which it is exempted from the use tax imposed under W. Va. Code §11-15A-1, et seq. §110‑15L‑5. Claiming the Exemption
5.1. Any person having a right or claim to the exemption set forth in this rule may claim the exemption by:
5.1.1. First paying to the vendor the tax imposed by this article and then applying to the Tax Commissioner for a refund or credit; or
5.1.2. Providing to the vendor his or her West Virginia direct pay permit number, as provided in §11-15-9d and §11-15A-3d of the W. Va. Code and W. Va. Code State R. §110-15-9c; or
5.1.3. A person having a right or claim to the exemption set forth in this rule may, in lieu of paying the sales tax and filing a claim for refund, execute an exemption certificate, in the form required by the Tax Commissioner, and deliver it to the vendor of the property or service in the manner required by the Tax Commissioner. The Tax Commissioner finds that the requirement that permission to execute such a certificate be granted specifically upon application of the Tax Commissioner is unnecessary, and so generally grants permission to execute such a certificate. The form required to apply for an exemption certificate is available online at https://tax.wv.gov.
5.2. Any person having a right or claim to the exemption set forth in this rule may apply for a refund or credit by timely filing a claim for refund or credit of the consumers sales and service tax or the use tax overpayments on such form and in such manner as the Tax Commissioner may require and in accordance with the requirements of §11-10-1, et seq. and §11-15-1, et seq. of the W.Va. Code and W. Va. Code State R. §110-15-1, et seq., and W. Va. Code State R. §110-10L-1, et seq. The form required to claim a refund or credit is available online at https://tax.wv.gov.
5.3. Any person having a right or claim to the exemption set forth in this rule may use an exemption certificate as follows:
5.3.1. To purchase tangible personal property or services using an exemption certificate, a person must:
5.3.1.a. Apply for and obtain a valid West Virginia Business Registration Certificate. The form required to apply for a West Virginia Business Registration Certificate is available at https://tax.wv.gov; and
5.3.1.b. Properly complete an exemption certificate, in the form required by the Tax Commissioner, and present it to the vendor or retailer.
5.3.2. An exemption may be rendered void and invalid due to fraud, error, deficient or incomplete records or documentation, failure to retain records, or acceptance or use of an exemption certificate in bad faith.
5.3.2.a. If the Tax Commissioner believes that the exemption certificate was incomplete, deficient, or otherwise erroneous, or that the taxpayer was not entitled to claim the exemption for any reason, the Tax Commissioner may proceed to investigate and determine or estimate the tax liability and make an assessment therefor as permitted under W. Va. Code §11-10-1, et seq.
5.3.2.b. In order that the Tax Department may verify the taxable and nontaxable sales upon audit, a taxpayer claiming an exemption under this rule must retain the appropriate books and records supporting its claim for exemption for at least three (3) years, or for so long as the taxable period remains open for assessment or refund, whichever is greater.
5.3.3. In order that the Tax Department may verify a vendor's or a retailer's taxable and nontaxable sales upon audit, it is necessary that such persons retain executed exemption certificates and other appropriate books and records for at least three (3) years or for so long as the taxable period remains open for assessment or refund, whichever is greater. An exemption certificate, to be valid, must be given by the vendee and accepted by the vendor at the time of the sale and not thereafter. If a vendor lists nontaxable sales or services for which the vendor has no exemption certificate, the Tax Department will presume such sales were taxable and assess the tax against the vendor.
Series 15M Vendor Absorption or Assumption of Sales and Use Tax
W. Va. Code R. § 110-15M-1 General
1.1. Scope. -- This rule addresses certain requirements that must be followed if a vendor absorbs or assumes sales tax, and addresses certain consequences of such action.
1.2. Authority. -- W. Va. Code §11-10-5, and §11-15A-8(b).
1.3. Filing Date. -- July 1, 2022.
1.4. Effective Date. -- July 1, 2022.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on and after August 1, 2027.
W. Va. Code R. § 110-15M-2 Background
Prior to 2021, it was unlawful for a retailer to advertise or hold out or state to the public or to any purchaser, consumer or user, directly or indirectly, that the West Virginia Consumers Sales and Service Tax and Use Tax would be assumed or absorbed by the retailer, or that any part of the tax would be refunded to the purchaser, consumer or user by the retailer. Pursuant to SB 661, enacted during the 2021 regular legislative session, W. Va. Code §11-15A-8 was amended, along with various other sections of the code, to allow retailers to absorb or assume the sales and use tax if certain requirements are met.
W. Va. Code R. § 110-15M-3 Definitions
3.1. Unless a specific definition is provided under this section heading, or the context in which the term is used clearly requires a different meaning, the definitions of terms used in this rule are the same as the definitions of those terms found in W. Va. Code §11-15-1, et seq., §11-15A-1, et seq., and §11-15B-1, et seq.
3.2. “Retailer,” “seller,” and “vendor” may be used interchangeably in this rule, and are generally defined as those terms are defined in W. Va. Code §11-15-1, et seq., §11-15A-1, et seq., and §11-15B-1, et seq.
3.3. “Sales tax” means the West Virginia Consumers Sales and Service Tax set forth in W. Va. Code §11-15-1, et seq. Unless context requires that the term refer only to the West Virginia Consumers Sales and Service Tax, “sales tax” should be understood to implicitly also mean the West Virginia Use Tax set forth in W. Va. Code §11-15A-1, et seq., as the two taxes are complementary.
3.4. “Use tax” means the West Virginia Use Tax set forth in W. Va. Code §11-15A-1, et seq. Unless context requires that the term refer only to the West Virginia Use Tax, “use tax” should be understood to implicitly also mean the West Virginia Consumers Sales and Service Tax set forth in W. Va. Code §11-15-1, et seq., as the two taxes are complementary.
W. Va. Code R. § 110-15M-4 Requirements for absorbing or assuming the tax
4.1. A retailer may directly or indirectly advertise, hold out, or state to a customer or to the public that the retailer will absorb or assume the tax for the customer if:
4.1.1. The retailer indicates in the advertisement, holding out, or statement that the retailer is paying the tax for the customer;
4.1.2. The retailer does not indicate or imply in the advertisement, holding out, or statement that the sale is exempt or excluded from taxation; and
4.1.3. Any purchaser’s receipt or other statement given to the customer listing the sale price paid or to be paid by the customer separately states the total amount of the tax and indicates how much of the total tax will be paid by the retailer.
4.2. Any sales tax or use tax that is absorbed or assumed by a retailer must be remitted and reported by the retailer the same as if it had been paid by the retailer’s customer.
4.3. When recording a sale for which the retailer absorbed or assumed the sales tax or use tax, the retailer must separately state the purchase price and the tax and indicate how much of the tax it absorbed or assumed.
W. Va. Code R. § 110-15M-5 Identity of the taxpayer
5.1. When a retailer absorbs or assumes payment of all or part of the sales tax, the retailer is personally liable for payment of the amount of the tax absorbed or assumed, consistent with the provisions of W. Va. Code §11-15-4a.
5.2. The purchaser, consumer, or user of the tangible personal property or service is not considered the taxpayer for any portion of the sales tax that is absorbed or assumed by the retailer.
5.3. The purchaser, consumer, or user of the tangible personal property or service is considered the taxpayer for any portion of the sales tax that is not absorbed or assumed by the retailer.
W. Va. Code R. § 110-15M-6 Refunds
6.1. A retailer that absorbs or assumes payment of the sales tax ordinarily due from its customer is considered the taxpayer with regard to that portion of the sales tax absorbed or assumed.
6.2. As the taxpayer of that portion of the sales tax it assumes or absorbs, a retailer may file for a refund of taxes paid.
6.3. No refund shall be paid to a retailer that absorbs or assumes any part of the sales tax unless the retailer can prove that it first paid the tax.
6.4. Records and documents relating to and supporting the request for refund of assumed or absorbed sales and use tax, penalty, or interest must show that sales and use tax was separately stated from the sale price on any record of sale, and conclusively demonstrate that the vendor paid the sales and use tax on behalf of the buyer, and that the tax was timely remitted to the State.
W. Va. Code R. § 110-15M-7 Application to municipal sales and use taxes
7.1. Pursuant to W.Va. Code §§8-1-5a and 8-13C-1, et. seq. municipal sales and use tax is to be administered in the same manner as the state sales and use tax. Therefore, retailers are permitted to absorb or assume the municipal sales and use tax provided the requirements of section 4 of this rule are met.
W. Va. Code R. § 110-15M-8 Application to sales tax on motor vehicle sales
8.1. This rule does not apply to the sales tax imposed on motor vehicle sales pursuant to W. Va. Code §11-15-3c.
8.2. The sales tax imposed on motor vehicle sales pursuant to W. Va. Code §11-15-3c is collected by the West Virginia Division of Motor Vehicles, and any request for refund of that tax must be submitted to the Division of Motor Vehicles.
W. Va. Code R. § 110-15M-9 Application to motor fuel tax
9.1. This rule does not apply to the motor fuel tax as imposed pursuant to W. Va. Code §11-15-8b and §11-15A-13a.
9.2. The motor fuel tax as imposed pursuant to W. Va. Code §11-15-8b and §11-15A-13a is essentially a tax imposed at the wholesale level.
W. Va. Code R. § 110-15M-10 Application to special district excise tax
10.1. This rule does apply to the special district excise tax as imposed pursuant to W. Va. Code §7-22-1, et. seq. and §8-38-1, et. seq.
10.2. Retailers are permitted to absorb or assume the special district excise tax in the same manner and under the same rules as provided in this rule as if it were the state sales and use tax.
Series 16 Bingo
W. Va. Code R. § 110-16-1 General
1.1. Scope. -- The West Virginia Bingo law allows bingo and super bingo games to be lawfully operated by licensed qualified charitable or public service organizations under certain specified restrictions and conditions. The purpose of this legislative rule is to provide the clarification and guidance necessary for lawful implementation and application of the so-called "Bingo Act".
1.2. Authority. -- W. Va. Code ''47-20-23 and 11-10-5.
1.3. Filing Date. -- April 30, 2001.
1.4. Effective Date. -- May 1, 2001.
W. Va. Code R. § 110-16-2 Definitions
2.1. When used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section, and apply in the singular or in the plural.
2.1.1. "Act" or "Bingo Act" means the Act contained in Article twenty, Chapter forty-seven of the W. Va. Code (W. Va. Code '47-20-1 et seq.).
2.1.2. "Bingo" or "bingo game" means the game in which participants pay consideration for the use of one or more cards bearing several rows of numbers or other designations no two (2) of which cards played in any one (1) game contain the same sequence or pattern. When the game commences, numbers are selected by chance, one (1) by one (1), and announced. The players cover or mark those numbers announced as they appear on the card or cards which they are using.
2.1.3. "Bingo Card" means a card bearing numbers or other designations, five or more in each line.
2.1.4. "Bingo Occasion" or "Occasion" means a single gathering or session at which a series of one or more successive bingo games are played pursuant to an annual license, a super-bingo license, a limited occasion license or a state fair license. During a series, only one game at a time may be played.
2.1.5. "Bona Fide Senior Citizen Organization" means any nonprofit organization that is organized and operated solely to provide service to persons who are fifty-five (55) or older. These organizations must be described, and qualified under I.R.C. Section 501(c)(3) and have a determination letter to that effect from the Internal Revenue Service.
2.1.6. "Charitable or Public Service Activity or Endeavor" means any bona fide activity or endeavor which directly benefits a number of people by:
2.1.6.1. assisting them to establish themselves in life as contributing members of society through education or religion;
2.1.6.2. relieving them from disease, distress, suffering, constraint, or the effects of poverty;
2.1.6.3. increasing their comprehension of and devotion to the principles upon which this nation was founded and to the principles of good citizenship;
2.1.6.4. making them aware of or educating them about issues of public concern so long as the activity or endeavor is not aimed at influencing legislation or supporting or participating in the campaign of any candidate for public office;
2.1.6.5. by lessening the burdens borne by government or voluntarily supporting, augmenting or supplementing services which government would normally render to the people;
2.1.6.6. providing or supporting nonprofit community activities for youth, senior citizens or the disabled; or
2.1.6.7. providing or supporting nonprofit cultural or artistic activities.
2.1.6.7.a. Occasionally questions will arise as to whether a particular activity is a "charitable or public service activity or endeavor." The criteria in this subdivision should provide some guidance. Further references and explanations are contained in Appendix A of this rule.
2.1.7. "Charitable or public service organization" means a bona fide, nonprofit, tax exempt organization which is either benevolent, educational, philanthropic, humane, patriotic, civic, religious, fraternal or eleemosynary. An organization shall obtain an I.R.C. ' 501 tax exempt status determination letter from the Internal Revenue Service finding that it is exempt from the federal income taxes under section 501(c)(3), 501(c)(4), 501(c)(8), 501(c)(10), 501(c)(19), or 501(d) of the Internal Revenue Code of 1954, as amended. However, an organization that is a subdivision of the federal, state and local governments does not need to obtain an I.R.C. ' 501 tax exempt status determination letter from the Internal Revenue Service. "Charitable or public service organization" also includes volunteer fire departments, rescue units or other similar volunteer community service organizations. These organizations do not need to obtain an I.R.C. Section 501 tax exempt status determination letter from the Internal Revenue Service. The term "charitable or public service organization" does not include social or political organizations.
2.1.7.1. Test for determining tax exempt status. - In every instance, a charitable organization wishing to obtain a bingo license shall file with its application a copy of its current determination letter from the Internal Revenue Service stating that the organization is exempt from taxes under certain Internal Revenue Code provisions. Requirements for each tax exempt status are set in this paragraph:
2.1.7.1.a. I.R.C. Section 501(c)(3) exempts from federal taxation corporations, community chests, funds or foundations which are organized and operated only for:
2.1.7.1.a.1. religious purposes;
2.1.7.1.a.2. charitable purposes;
2.1.7.1.a.3. scientific purposes;
2.1.7.1.a.4. testing for public safety purposes;
2.1.7.1.a.5. literary or educational purposes;
2.1.7.1.a.6. the fostering of national or international amateur sports competition (no part of these organizations activities can involve the provision of athletic equipment or facilities); or
2.1.7.1.a.7. the prevention of cruelty to children or animals: Provided, that for an organization to be considered tax exempt under this section no portion of its net earnings can be given to or benefit any private shareholder or individual, no substantial propagandizing can be carried on, no attempts to influence legislation can be carried on, and no participation or intervention in political campaigns for candidates can be maintained.
2.1.7.1.b. I.R.C. Section 501(c)(4) exempts from federal taxation nonprofit civic leagues or organizations operated solely for the promotion of social welfare. It also exempts a local employee association in which:
2.1.7.1.b.1. membership is limited to employees of a designated person in a particular municipality; and
2.1.7.1.b.2. all net earnings are given or used solely for charitable, educational or recreational purposes.
2.1.7.1.c. I.R.C. Section 501(c)(8) exempts from federal taxation fraternal beneficiary societies that operate under the lodge system (parent organization which charters local branches), or societies operating for the sole benefit of members of a lodge system fraternity. These organizations must also provide for the payment of benefits (life, sick, accident or other) to the members or their dependents.
2.1.7.1.d. I.R.C. Section 501(c)(10) exempts from federal taxation domestic fraternal societies that operate under the lodge system, do not pay benefits and devote their net earnings solely to charitable, religious, scientific, literary, educational and fraternal purposes.
2.1.7.1.e. I.R.C. Section 501(c)(19) exempts from federal taxation organizations, auxiliary units, and trusts of foundations for war veterans. They must be organized in the United States, and no part of their net earnings may benefit any shareholder or individual. Seventy-five percent (75%) of the members must be war veterans and substantially all of the other members must be veterans, cadets, or spouses, widowers or widows of war veterans.
2.1.7.1.f. I.R.C. Section 501(d) exempts from federal taxation religious or apostolic associations if they have a common treasury. These associations may engage in business which commonly benefits all members if the members include their share as gross income on their income tax returns. These amounts are to be considered dividends received.
2.1.7.2. Further references and explanations are contained are contained in Appendix B of this rule.
2.1.8. "Commissioner" or "Tax Commissioner" means the West Virginia State Tax Commissioner or his or her duly appointed representative except as otherwise required by law.
2.1.9. "Concession" means any stand, booth, cart, counter or other facility, whether stationary or movable, where beverages, both alcoholic and nonalcoholic, food, snacks, cigarettes or other tobacco products, newspapers, souvenirs or any other items are sold to patrons by an individual or individuals operating the concession. In no case is the sale or the consumption of alcoholic beverages, beer or nonintoxicating beer permitted in any area where bingo is being played.
2.1.9.1. Clarification of the term "Area". - For illustrative purposes, several examples are set forth in this paragraph to help determine what constitutes "any area where bingo is being played."
2.1.9.1.a. Example 1. - Organization X is holding a bingo occasion in their organization headquarters' large meeting room. The lounge next to this meeting room contains a bar. This bar is not considered to be in an "area where bingo is being played," and alcoholic beverages, beer and nonintoxicating beer may be sold and consumed in the lounge. But, no alcoholic beverages, beer or nonintoxicating beer may be taken into the bingo area from the lounge.
2.1.9.1.b. Example 2. - Organization Y is holding a open air street fair at which they plan to play bingo and sell alcoholic beverages, beer and nonintoxicating beer. These beverages may not be sold at the tables where bingo games are being conducted, and may not be consumed by persons at the tables or by the operators of bingo games.
2.1.9.1.c. Example 3. - Organization Z is sponsoring a picnic where bingo is to be played. The organization sets up a tent to cover and contain the gaming space. This covered space thus constitutes the "area where bingo is being played," and alcoholic beverages, beer and nonintoxicating beer may not be sold or consumed within this space.
2.1.10. "Conduct" means to direct the actual playing of a bingo game by activities including, but not limited to, handing out bingo cards, collecting fees, drawing the numbers, announcing the numbers, posting the numbers, verifying winners and awarding prizes.
2.1.11. "Consideration" means more than five cents (54). The licensing may not charge any other fee in conjunction with the fee for the use of the cards if the organization intends to play bingo without a license.
2.1.11.1. Example 1. - X society plays bingo and charges two cents (24) per card. There is no door fee. Therefore, X society does not need to obtain a bingo license.
2.1.11.2. Example 2. - Y organization plays bingo and charges one cent (14) per card. The door fee is one dollar ($1.00). Y organization must obtain a bingo license.
2.1.12. ADe minimis violations@ includes a violation the Commissioner finds to not be a material violation if, having regard to the nature of the conduct charged to constitute a violation, and the nature of the attendant circumstances, the Commissioner finds that the violator's conduct:
2.1.12.1. Was within a customary license or tolerance, neither expressly negated by the Commissioner nor inconsistent with the purpose of the law defining the violation;
2.1.12.2. Did not actually cause or threaten the harm or evil sought to be prevented by the law defining the violation or did so only to an extent too trivial to warrant the condemnation of the law;
2.1.12.3. Considered with regard to the totality of the facts and circumstances, cannot reasonably be regarded as envisaged by the Legislature in forbidding the violation; or
2.1.12.4. Resulted from mistake or inadvertent omissions, and was not deliberately committed for the purpose of evading the statutory requirements and restrictions applicable to licensees.
2.1.13. "Employee" means an individual who is an "employee" for purposes of federal income tax withholding, as defined in 26 U.S.C. '3401;
2.1.14. "Expend net proceeds for charitable or public service purposes" means to devote the net proceeds of a bingo occasion or occasions to a qualified recipient organization.
2.1.15. "Immediate family member" means a person=s spouse, mother, father, son, daughter, brother, sister, grandchild, grandparent, mother-in-law, father-in-law or step-child. A legally adopted child of a person is treated for these purposes as a child of the individual by birth.
2.1.16. "Licensee" means any organization or association granted an annual, limited occasion, super-bingo or State Fair bingo license.
2.1.17. AMaterial violation@ includes any of the following listed acts or omissions, set forth in W. Va. Code '47-20-1, et seq., (except violations found to be de minimis violations by the Commissioner in accordance with this section), committed by a licensee, or an officer, director, employee, designee, agent or representative of a licensee:
2.1.17.1. Conducting charitable bingo occasions at times or at a location inconsistent with the license application;
2.1.17.2. Failing to timely amend or modify the charitable bingo license in accordance with section 9 of this rule;
2.1.17.3. Not having the bingo license posted at the occasion;
2.1.17.4. Allowing charitable bingo workers to play bingo;
2.1.17.5. Utilizing charitable bingo workers who fail to qualify under W. Va. Code '47-20-1 et seq and this rule;
2.1.17.6. Allowing individuals under the age of eighteen years (with the exception of junior firefighters, in accordance with the provisions of section 6 of this rule) to participate in the conduct of charitable bingo activities;
2.1.17.7. Allowing individuals under the age of eighteen to participate in the playing of bingo;
2.1.17.8. Expending or using charitable bingo proceeds for unauthorized expenses;
2.1.17.9. Distributing charitable bingo net proceeds for purposes other than qualified charitable or public service purposes or for unauthorized purposes;
2.1.17.10. Continuing failure to maintain accurate records;
2.1.17.11. Continuing violations of any nature, subsequent to the licensee having been notified in writing of a violation;
2.1.17.12. Conducting fraudulent charitable bingo occasions; or
2.1.17.13. Obtaining a charitable bingo license under false pretenses or deceptive or fraudulent circumstances.
2.1.18. AMeaningfully associated with the licensee@ means persons who are members of the licensee organization, family members of members of the licensee organization, clients of licensee organizations, supporters of the licensee organization, volunteers and employees of the licensee organization.
2.1.19. "Member" means a person who, under the rules or practices of the licensee, may participate in the selection of persons authorized to manage the affairs of the licensee or in the development of policy of the licensee.
2.1.20. "Net proceeds" means the gross receipts (i.e. all moneys connected with participation in bingo games, the sale of supplies and other miscellaneous receipts) from all bingo occasions held during a license period minus the reasonable, necessary and actual expenses. Expenses of holding the game may not exceed twenty-five percent (25%) of the gross receipts collected during the entire license period, and expenses for prizes for any bingo occasion may not exceed seventy-five hundred dollars ($7,500) in value.
2.1.21. "Non-membership organization" or "organization that is not a bona fide membership organization" means an organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, but does not have bona fide members, or which has bona fide members, the majority of whom cannot operate charitable bingo games over a sustained period of time by reason of physical disability or legal disability or any other bona fide disability.
2.1.21.1. Example 1: An organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, has only a board of directors. The organization carries out its operations through volunteer workers. The organization is a non-membership organization for purposes of this definition.
2.1.21.2. Example 2: A young persons club (appropriately supported and sponsored by adults, parents and others) is a section 501(c)(3) organization which has members, all of whom are young persons under the age of 16. The members are prevented by law from participating in charitable bingo operations because of their ages (W. Va. Code ''47-20-4 and 5). This young persons club is an organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, and the organization's bona fide members cannot operate charitable bingo games by reason of a legal disability. This organization qualifies as a "non-membership" organization or an organization that is "not a bona fide membership organization" for the limited purposes of this definition.
2.1.22. "Person" means any individual, association, society, incorporated or unincorporated organization, firm, partnership or other nongovernmental entity or institution.
2.1.23. "Qualified recipient organization" means charitable or public service organizations which are organized and function solely to benefit people by charitable or public service activities or endeavors.
2.1.24. "Residents of this State meaningfully associated with a licensee" means individuals that are residents of West Virginia, are associated with a licensee that is a non-membership organization, are age eighteen years or older (or junior firefighters qualified to participate in bingo operations under W. Va. Code '47-20-4), including the immediate family members of any resident of this State meaningfully associated with a licensee, provided that the family members are residents of West Virginia, and fulfill one or more of the following criteria:
2.1.24.1. Who are clients of the licensee for one or more years prior to the date of the applicant=s application for a bingo license, or for renewal of a bingo license, whichever is the latter, and have regularly or routinely utilized the services of the licensee organization,
2.1.24.2. Who are regular financial supporters of the licensee organization,
2.1.24.3. Who are employees of the licensee organization, or
2.1.24.4. Who are volunteers that regularly assist the licensee in delivering its services.
2.1.25. "Super-bingo" means bingo where larger prizes are authorized in accordance with W. Va. Code '47-20-6a. (Section 6a of this Rule provides additional information.)
2.1.26. ASupporters@ of the licensee organization includes persons who promote the charitable interests of a licensee through monetary or volunteer assistance, and who uphold and advocate the charitable interests and charitable causes of the licensee.
2.1.27. AVolunteers@ of a licensee organization means persons who give their services of their own free will to accomplish the charitable purposes of the organization, to furnish the services provided by the licensee organization or to support the charitable bingo operations of the licensee without any express or implied promise of direct or indirect payment, remuneration or gratuity, and having no direct or indirect monetary or legal interest or concern in the licensee organization=s charitable purposes, services or charitable raffle operations. For purposes of this definition, a person does not qualify as a volunteer if that person=s services are rendered pursuant to any mandate decision or action of a court, appeals board, parole board or other judicial or administrative body as part of an alternative sentencing program, parole program, sentence, judgement, settlement, plea bargain, or other administrative or judicial action or judgement; and a person does not qualify as a volunteer if that person=s services are rendered pursuant to any state, local, county or administrative requirement for graduation from any high school or other school or institution of learning.
2.1.28. All other terms defined in the Act have the same meaning when used in this rule.
W. Va. Code R. § 110-16-3 Bingo Operations
3.1. The following requirements are imposed upon licensees for the conduct of a bingo occasion.
3.1.1. Persons may not solicit gifts or donations during the conduct of a bingo occasion.
3.1.2. No games of chance other than bingo, super-bingo and charitable raffles authorized in W. Va. Code '47-21-1 and charitable raffle boards and games authorized in W. Va. Code Article 47-23 may be conducted or allowed at any bingo occasion.
3.1.3. Bingo cards shall have bingo numbers printed only on one side.
3.1.4. No push out bingo cards may be used.
3.1.5. Bingo cards may not be switched during bingo games being called.
3.1.6. Cards may not be transferred between players.
3.1.7. Bingo workers and operators may not play in games of bingo in which they are working or assisting.
3.1.8. The combinations required to win a game shall be clearly announced before each game is begun.
3.1.9. No checks or money orders may be accepted in payment for a bingo game: Provided, That a licensee conducting a bingo event under the authority of an annual license may receive and cash no more than one (1) personal check from any player during only one (1) game for each occasion in an amount not in excess of $100.00 which is made payable to the licensee and clearly marked on the face of each check with the term "Bingo."
3.1.10. No checks other than those provided in Subdivision 3.1.9 of this Subsection may be cashed out of bingo funds.
3.1.11. Any player may request a verification of the numbers drawn at the time a winner is determined.
3.1.12. The numbers appearing on the winning card shall be verified at the time that the winner is determined.
3.1.13. If more than one player is verified a winner on the call of the same number, the designated prize shall be divided equally to the nearest dollar. If the prize cannot be divided, substitute prizes may be given but, the value of the sum of the substitute prizes shall not exceed the value of the original prize.
3.1.14. Every player shall be given an equal opportunity to win.
W. Va. Code R. § 110-16-4 Licensing
4.1. Who may hold bingo games.
4.1.1. Any charitable or public service organization, as defined in Subdivision 2.1.6 of this Rule, may hold bingo games under a valid license if it has been in existence in this state for two (2) years prior to its filing for a bingo license.
4.1.2. If the applicant is a charitable organization it shall have an I.R.C. Section 501 determination letter before it may file for a bingo or super-bingo license.
4.1.3. Before any organization may hold a bingo or super-bingo game, the organization shall register with the Secretary of State under the Solicitation of Charitable Funds Act. (Section 30 of this Rule provides additional information).
4.2. Application for bingo license.
4.2.1. The applicant shall file its application with the tax commissioner on the provided form.
4.2.2. Filing of applications.
4.2.2.1. "Filing" means that the complete application is delivered to the West Virginia State Tax Division, Registration Unit, P. O. Box 2666, Charleston, West Virginia 25330, by regular mail, certified mail or in-person delivery at 1001 Lee Street, Charleston, West Virginia. The filing date of an application is the date of its receipt.
4.2.2.2. An application shall not be considered as filed if it is not complete, does not have all required documentation or does not have the appropriate license fee attached.
4.2.2.3. The applicant shall file its application at least sixty (60) days before the date specified in the application for the holding of the first bingo occasion. If the filing is not made at least sixty (60) days prior to the date scheduled for the first bingo game, the license shall be automatically denied. If the properly filed application is not denied within thirty (30) days after receipt, the application is considered approved. Within five (5) days after approval the commissioner shall send the applicant its license.
4.3. Transferability. - No bingo license issued under the Act may be transferred.
W. Va. Code R. § 110-16-5 Annual License
5.1. A charitable or public service organization may apply for an annual license which is valid for one (1) year from the date of issuance and allows the licensee to hold no more than two (2) bingo occasions per week. Each occasion may not exceed six (6) hours in duration.
5.2. Only one (1) license per year may be granted to the major organization and all of its auxiliaries, affiliates, chapters or lodges. If the major organization does not obtain a license, the auxiliary, affiliate, chapter or lodge may obtain a license.
5.2.1. Example 1. - X is a national charitable organization with its headquarters in another state. Chapter B is located in Morgantown. This Chapter wishes to hold bingo occasions. Chapter B may apply for and obtain a license.
5.2.2. Example 2. - X is a national charitable organization with its headquarters in another state. X applies for and obtains a bingo license. X also has two (2) chapters in this State. Chapter A is located in Beckley and Chapter B in Morgantown. Both Chapter A and Chapter B wish to hold bingo occasions. Both may apply for and obtain a license.
5.2.3. Example 3. - C is a West Virginia volunteer fire department with two auxiliaries in the state. If C applies for and obtains a bingo license, neither of the auxiliaries may apply for and obtain a license. However, the auxiliaries may play on C's license if they comply with all provisions of the Act and this rule. (e.g. the total number of bingo occasions conducted by C and its auxiliaries may not exceed two (2) per week or one hundred four (104) per year, etc.).
5.3. Branches, chapters or lodges of any national association or organization are not considered affiliates or auxiliaries of each other. Nor are local churches of a nationally organized church considered to be affiliates or auxiliaries of each other. In addition every school is considered a major organization for purposes of this Act.
5.4. No two (2) or more organizations may hold a joint bingo occasion under any annual license.
5.5. The licensee shall conspicuously display its Bingo license at the location where the bingo occasions are held.
5.6. All bingo occasions shall be open to the public. A person shall be at least eighteen (18) years of age to play in or conduct any bingo game: Provided, That a junior volunteer firefighter sixteen (16) years of age or older may assist the volunteer fire company of which the junior volunteer firefighter is a member in the conduct of a bingo event when the junior volunteer firefighter is supervised by a senior member of the same volunteer fire company who is over the age of twenty-one (21) years. A person under eighteen (18) may attend the playing of a bingo game if accompanied by or under the supervision of an adult relative or a legal guardian of the person. Additionally, a person shall be at least eighteen (18) to purchase a charitable raffle board ticket authorized under W. Va. Code '47-23-1 et seq. and Tax Department rule Charitable Raffle Boards and Games, 110 C.S.R. 35.
W. Va. Code R. § 110-16-6 Limited Occasion License
6.1. A charitable or public service organization may apply for a limited occasion license which is valid only for the time period specified in the application. This time period may not exceed two (2) weeks and bingo occasions may be held only once every twenty-four (24) hours during the time period. No bingo occasion held in accordance with a limited occasion license may exceed twelve (12) hours in duration.
6.2. Only three (3) limited occasion licenses a year may be granted to the major organization and all of its auxiliaries, affiliates, chapters or lodges. If the major organization does not obtain a license, the auxiliary, affiliate, chapter or lodge may obtain a license. If an organization holds an annual license and it wishes to hold bingo occasions as provided for in this section, it shall also obtain a limited occasion license. But, no licensee that holds an annual license may obtain more than one (1) limited occasion license.
6.3. For purposes of this section, branches, chapters or lodges of any national association or organization are not considered affiliates or auxiliaries of each other. Nor are local churches of a nationally organized church considered to be affiliates or auxiliaries of each other. In addition, every school is considered a major organization for purposes of this Act.
6.4. Two (2) or more organizations may hold a joint bingo occasion if each organization has a valid limited occasion license for jointly held occasion.
6.5. The licensee shall conspicuously display its Limited occasion bingo license at the location where the bingo occasions are held.
6.6. All bingo occasions held under a limited occasion license shall be open to the public. A person shall be at least eighteen (18) years of age to play in or conduct a limited occasion bingo game. A person under eighteen (18) may attend the playing of a bingo game if accompanied by or under the supervision of an adult relative or a legal guardian of the person. Additionally, a person shall be at least eighteen (18) to purchase a charitable raffle board ticket authorized by W. Va. Code '47-23-1 et seq. and Tax Department rule Charitable Raffle Boards and Games, 110 C.S.R. 35.
W. Va. Code R. § 110-16-6a Super-Bingo License. 6a.1. Any charitable or public service organization that is eligible to apply for a regular or limited occasion bingo license may, upon payment of the super-bingo license fee, apply to the Tax Commissioner for an annual license to conduct super-bingo occasions. The holder of a super-bingo license may conduct one super-bingo occasion each month during the period of the license. No super-bingo occasion may last longer than six (6) hours, regardless of whether it is held separately or in conjunction with a regular or limited occasion bingo license. 6a.2. A holder of a regular or limited occasion bingo license may apply to the Commissioner for a super-bingo license. However, possession of a regular of limited occasion bingo license is not required in order to obtain a super-bingo license. 6a.3. Only one (1) super-bingo license per year may be granted to the major organization and all of its auxiliaries, affiliates, chapters or lodges. If the major organization does not obtain a license, the auxiliary, affiliate, chapter or lodge may obtain a license. 6a.3.1. Example 1. - X is a national charitable organization with its headquarters in another state. Chapter B is located in Morgantown. This Chapter wishes to hold super-bingo bingo occasions. Chapter B may apply for and obtain a license. 6a.3.2. Example 2. - X is a national charitable organization with its headquarters in another state. X applies for and obtains a super-bingo bingo license. X also has two (2) chapters in this State. Chapter A is located in Beckley and Chapter B in Morgantown. Both Chapter A and Chapter B wish to hold super-bingo bingo occasions. Both may apply for and obtain a license. 6a.3.3. Example 3. - C is a West Virginia volunteer fire department with two auxiliaries in the state. If C applies for and obtains a super-bingo bingo license, neither of the auxiliaries may apply for and obtain a license. However, the auxiliaries may play on C's license if they comply with all provisions of the Act and this rule. 6a.4. Branches, chapters or lodges of any national association or organization are not considered affiliates or auxiliaries of each other. Nor are local churches of a nationally organized church considered to be affiliates or auxiliaries of each other. In addition, every school is considered a major organization for purposes of this Act. 6a.5. No two (2) or more organizations may hold a joint super-bingo occasion under any annual super-bingo license. 6a.6. The licensee shall conspicuously display its Super-bingo license at the location where the bingo occasions are held. 6a.7. All super-bingo occasions shall be open to the public. A person shall be at least eighteen (18) years of age to play in or conduct any super-bingo game. Any person under eighteen (18) may attend the playing of a super-bingo game if accompanied by or under the supervision of an adult relative or a legal guardian of the person. Additionally, a person shall be at least eighteen (18) to purchase a charitable raffle board ticket authorized by W. Va. Code '47-23-1 et seq. and Tax Department rule Charitable Raffle Boards and Games, 110 C.S.R. 35
W. Va. Code R. § 110-16-7 License Fees and Exemption From Taxes
7.1. License fees.
7.1.1. Annual License. - $500.00.
7.1.2. Annual license for a volunteer or nonprofit group which grosses less than $20,000. - $200.00.
7.1.3. Bona fide senior citizens organization annual license. - $50.00.
7.1.4. Limited occasion license. - $100.00.
7.1.5. State Fair license. - $500.00.
7.1.6. Super-bingo license. - $5,000.00.
7.1.7. The applicant for a license shall pay all fees to the tax commissioner and the payment shall accompany the application for license. If no license fee accompanies the application, the application shall not be considered to be filed. License fee amounts, if mailed, shall be remitted in the form of a check or money order except the license fee for the State Fair must be made either by certified check or money order. If payment is made in person to the West Virginia State Tax Division, Registration Unit, it may be made in cash.
7.2. Exemption from taxes.
7.2.1. Franchise taxes.
7.2.1.1. The license fee imposed is in lieu of all other license or franchise taxes or fees of this state.
7.2.1.2. A political subdivision of the state may not impose, in regard to any bingo occasion, any license or franchise taxes or fees.
7.2.2. Consumers sales taxes.
7.2.2.1. The licensee is not required to pay consumers sales tax on purchases to be used or consumed in the conduct of a bingo game. This exemption does not apply to State Fair licensees.
7.2.2.2. The licensee is not required to collect consumers sales tax on any admission fees or any sales of bingo cards. This exemption does not apply to State Fair licensees.
7.2.3. Other taxes. - The gross proceeds derived from the conduct of bingo occasions, except proceeds from State Fair bingo, are exempt from:
7.2.3.1. state and local business and occupation taxes;
7.2.3.2. income taxes;
7.2.3.3. excise taxes; and
7.2.3.4. all special taxes.
W. Va. Code R. § 110-16-8 Information Required in Applications
8.1. All applications for bingo licenses shall contain:
8.1.1. The name of the applicant and whether the applicant is the major organization, such as, for example, a national headquarters of a fraternal or religious association, or an affiliate, subsidiary, chapter or lodge of a major organization;
8.1.2. The name of the state or national organization;
8.1.3. The headquarters' address of the state or national organization;
8.1.4. The address of the applicant organization;
8.1.5. The telephone number of the applicant organization. If there is no telephone number for the applicant organization, then the address and telephone number of the person applying on behalf of the organization shall be listed;
8.1.6. The address or location where bingo games are to be held;
8.1.7. For charitable organizations, a copy of an Internal Revenue Service determination letter which states that the organization is exempt from taxation under Internal Revenue Code Section 501(a) and is described in Internal Revenue Code Sections 501(c)(3), 501(c)(4), 501(c)(8), 501(c)(10), 501(c)(19), or 501(d);
8.1.8. A copy of the organization's charter, articles of incorporation or other evidence showing that the organization has been in existence for at least two (2) years prior to the making of the application;
8.1.9. The day or days of the week and the time or times when the bingo occasions will be held. The date of the first bingo occasion shall also be included;
8.1.10. The name of the owner of the premises where the bingo occasions are to be held;
8.1.11. A copy of all rental agreements involved if the premises where the bingo occasions are to be held are leased or subleased;
8.1.12. A statement as to whether the applicant has ever had a previous application for any bingo license refused, or whether any previous license has been revoked or suspended. This Subdivision applies to bingo licenses applied for or issued by other states;
8.1.13. A detailed statement of the charitable or public service purpose or purposes for which the bingo proceeds will be spent;
8.1.14. A list and description of all expenses estimated to be incurred in connection with the holding of bingo occasions and any concessions operated. The name and address of each payee shall also be included;
8.1.15. If a concession is to be operated by an individual or organization other than the applicant organization, a copy of any written agreement or an explanation of any oral agreement shall be attached. The agreement shall include the remuneration to be received by the concession operator;
8.1.16. A statement stating that the individuals specified in Subdivisions 8.1.18, 8.1.19 or 8.1.20 of this rule and the officers of the applicant organization understand that:
8.1.16.1. Allowing anyone, other than authorized individuals, to conduct any portion of the bingo occasion or operate any concessions is a violation of the Act;
8.1.16.2. Reports shall be filed and records shall be kept as required in the Act;
8.1.16.3. It is a crime to violate any provision of the Act; and
8.1.16.4. Any violations may result in suspension or revocation of its license and denial of applications for subsequent licenses;
8.1.17. A sworn statement by an authorized representative of the applicant organization that the information contained in the application is true to the best of his or her knowledge;
8.1.18. A list of the names and addresses of all officers and members of the board of directors, governors or trustees of the applicant organization.
8.2. Limited occasion licenses. - In addition to the requirements in Subsection 8.1 of this section, the application must also include:
8.2.1. The names and addresses of two (2) or more bona fide active members of the organization. These members shall have the overall responsibility for the organizations bingo operations. One (1) of these members shall be present at all times when bingo is conducted; and
8.2.2. The names and addresses of the highest elected officer of the applicant organization and his or her officially appointed designee. One (1) of these members shall also be present at all times when bingo is conducted.
8.3. Annual licenses. - In addition to the requirements in Subsection 8.1 of this section, the application for an annual license shall also include:
8.3.1. The names, addresses and telephone numbers of three (3) or more bona fide active members of the organization. These members shall have the overall responsibility for the organizations bingo operations. One (1) of these members shall be present at all times when bingo is conducted; and
8.3.2. The names, addresses and telephone numbers of the highest elected officer of the applicant organization and his or her officially appointed designee. One (1) of these members shall also be present at all times when bingo is conducted.
8.4 Super-bingo licenses. - In addition to the requirements in Subsection 8.1 of this section, the application for a super-bingo license shall also include:
8.4.1. The names, addresses and telephone numbers of three (3) or more bona fide active members of the organization. These members shall have the overall responsibility for the organizations super-bingo operations. One (1) of these members shall be present at all times when super-bingo is conducted; and
8.4.2. The names, addresses and telephone numbers of the highest elected officer of the applicant organization and his or her officially appointed designee. One (1) of these members shall also be present at all times when super-bingo is conducted.
W. Va. Code R. § 110-16-9 Amendment of License
9.1. If any circumstances, which are beyond the licensees' control, arise that make the information in the original application inaccurate or prevent the licensee from holding a bingo occasion in accordance with the information in the application, then before holding any bingo occasion under those circumstances the licensee shall request approval from the tax commissioner to amend or modify its license: Provided, That a super-bingo license may not be amended to allow more than one (1) super-bingo occasion during each calendar month of the licensed period or to extend the period of time for which the super-bingo license is issued.
9.2. Application for amendment or modification shall be made to the tax commissioner. The commissioner shall provide application forms for this purpose. The commissioner, upon receipt of the application, may:
9.2.1. modify the license to reflect changes in the holding of one (1) or more bingo occasions under an annual license if these changes are temporary;
9.2.2. modify the license to reflect changes affecting fewer than one-third (1/3) of the bingo occasions to be held under a limited occasion license; or,
9.2.3. amend the license if the changes under an annual license are permanent or if the changes under a limited occasion license affect one-third (1/3) or more of the occasions scheduled.
9.3. The tax commissioner shall notify the licensee of amendments or modifications by regular mail within sixty (60) days after receipt of the application by the Tax Commissioner.
W. Va. Code R. § 110-16-10 Licensee Rules
10.1. Each licensee may adopt rules so long as they are not inconsistent with or in violation of the Bingo Act or these rules this rule.
10.2. A licensee may not allow an individual not present to play any bingo games.
10.3. Any rules adopted by a licensee shall be made available for inspection at all bingo occasions.
10.4. Any rules adopted are a part of the records required to be kept.
10.5. The licensee shall file a copy of licensee promulgated rules with the tax commissioner.
W. Va. Code R. § 110-16-11 Limits on Prizes Awarded: State Fair Excepted
During the period of a license, the average total prizes awarded for any single bingo occasion, whether held by one (1) licensee or by two (2) or more limited occasion licensees' holding a joint bingo occasion, may not exceed ten thousand dollars ($10,000.00) in value: Provided, That if a properly licensed licensee holds a super-bingo occasion during a bingo occasion, regular bingo prizes awarded during that occasion may not exceed ten thousand dollars ($10,000.00) and the super-bingo prizes awarded during that occasion may not exceed fifty thousand dollars ($50,000.00).
11.2.1. Example. - B organization holds bingo occasions on Tuesday and Thursday under a valid license. On Tuesday, prizes totaling five thousand dollars ($5,000) are awarded. B may award ten thousand dollars ($10,000) on Thursday or any subsequent night. The average total prizes for any bingo occasion may not exceed ten thousand dollars ($10,000.00).
11.3. Prizes shall be valued at fair market value on the day they are awarded.
11.4. Prizes may be money or merchandise, but they may not be beer, nonintoxicating beer, wine, spirits or alcoholic liquor.
11.5. If an individual, group or association plans to play bingo without a license because there is no consideration paid for the use of bingo cards and no other fees are charged to play, the prizes awarded for each game may not exceed ten dollars ($10.00) in cash or merchandise.
11.5.1. Example 1. - X family has a reunion every year at which bingo is played. No consideration is charged for the bingo cards and no door fee is charged. The prize for each game is an ice cream gift certificate worth five dollars ($5.00). X family does not need to obtain a license to play bingo.
11.6. This section does not apply to State Fair bingo licenses.
W. Va. Code R. § 110-16-12 Operators of Bingo Games and Related Concessions; State Fair Excepted
12.1. Only persons who are residents of West Virginia and who are active members of the licensee organization or its authorized auxiliary may participate in the conduct of any bingo game or operate any concession in conjunction with a bingo occasion. This Subsection does not apply to State Fair bingo licenses.
12.2. In no instance may an individual, under eighteen (18) years of age, participate in the conduct of a bingo occasion: Provided, That a junior volunteer firefighter sixteen (16) years of age or older may assist the volunteer fire company of which the junior volunteer firefighter is a member in the conduct of a bingo event under an annual license when the junior volunteer firefighter is supervised by a senior member of the same volunteer fire company who is over the age of twenty-one (21) years.
W. Va. Code R. § 110-16-12a Compensation of Bingo Operator. 12a.1. A bingo licensee, under certain circumstances, may to pay a salary, not to exceed the federal minimum wage, to operators of bingo games who are active members of the licensee organization. 12a.1.1. If the licensee's gross receipts from bingo occasions equal or exceed $100,000.00 for the licensee's most recently filed annual financial report, a salary may be paid to not more than eight (8) operators. 12a.1.2. If the licensee's gross receipts from bingo occasions are less than $100,000.00 but equal or exceed $50,000.00 for the licensee's most recently filed annual financial report, a salary may be paid to no more than five (5) operators. 12a.1.3. If the licensee's gross receipts from bingo occasions are less than $50,000.00 for the licensee's most recently filed annual financial report, a salary may be paid to no more than three (3) operators. 12a.2. The amount of work time for which an operator may be compensated may not exceed 20 hours a week
W. Va. Code R. § 110-16-13 Compensation
13.1. The licensee may not pay any monetary consideration to any individual who participates in the conduct of a bingo occasion, except as otherwise authorized in Section 12a of this rule.
W. Va. Code R. § 110-16-14 Concessions Exception
14.1. The only exceptions to the prohibition in Section 13 of this rule that no monetary consideration may be paid to any individual who participates in the conduct of a bingo occasion are:
14.1.1. That a licensee may allow another to operate concessions in conjunction with bingo occasions if the following conditions are met:
14.1.1.1. the licensee holds regular meetings or functions other than bingo occasions;
14.1.1.2. the concession is regularly operated at these regular meetings;
14.1.1.3. the individual, firm or corporation who operates the concession at regular meetings is to be the concessionaire for bingo occasions;
14.1.1.4. the agreement terms are the same for both regular meetings and for bingo occasions. The licensee shall file the agreement with the application for license, and any changes are made in the agreement must be filed with the tax commissioner within ten (10) days.
14.1.1.4.a. In this circumstance, the concessionaire may be compensated from the bingo occasion proceeds for his or her services. This compensation is considered a reasonable and necessary expense as provided for in Section 16 of this rule.
14.1.2. The licensee may also allow any charitable or public service organization to act as concessionaire if the net proceeds it receives from the concession are used solely for charitable or public service purposes of that organization.
W. Va. Code R. § 110-16-15 Use of Facilities for Bingo
15.1. The property owner may not allow his or her facilities to be used for the playing of bingo or super-bingo for more than six (6) consecutive hours during any calendar day. The rent paid for using the facilities for the playing of bingo and super-bingo may not exceed fair market value rent of the facilities.
15.2. The property owner may not allow his or her facilities to be used by more than four (4) super-bingo licensees for the playing of super-bingo during any period of four (4) consecutive calendar weeks. Additionally, super-bingo may be played during two (2) consecutive days during a conventional weekend (Saturday and Sunday); Provided, That the super-bingo occasions may occur at the same facility no more often than on alternating weekends during a calendar month.
W. Va. Code R. § 110-16-16 Payment of Reasonable Expenses: Disbursements and Net Proceeds
16.1. The licensee may pay reasonable, necessary and actual expenses incurred in connection with the conduct of bingo occasions from the proceeds of the conduct of bingo, but the payments cannot exceed twenty-five percent (25%) of the gross receipts collected during a license period measured at the end of that license period and not at the end of any single bingo occasion or at the end of any applicable quarterly reporting period: Provided, That so long as the licensee's records can provide sufficient supporting information, the percentage limitations may be applied separately with respect to each separate bingo license a given licensee organization holds. These payments may be made for:
16.1.1. rent paid for the use of any premises that does not exceed the fair market value for the premises, prorated for the days on which bingo occasions are conducted, but only if a copy of the rental agreement was filed with the application for license and any changes to the agreement were filed within ten (10) days of being made;
16.1.2. custodial services;
16.1.3. costs to the licensee for equipment and supplies used to hold the bingo occasion;
16.1.4. costs to the licensee for advertising the bingo occasion, but only to the extent the advertising is authorized in W. Va. Code '47-20-17 and Section 18 of this rule;
16.1.5. hiring security personnel but only if the personnel are licensed in accordance with W. Va. Code '30-18-1 et seq;
16.1.6. the cost of providing child care services to bingo patrons: Provided, That any proceeds received from the provision of child care services shall be handled in the same manner as bingo proceeds;
16.1.7. the actual cost to the licensee for prizes; and
16.1.8. other reasonable, necessary and actual expenses such as the reasonable legal fees incurred to obtain bingo licensing, accounting fees incurred to provide reports required by virtue of holding bingo licenses, license fees, authorized salaries paid to bingo operators and the prorata cost of utilities.
16.2. The cost of refreshments, souvenirs or any other items sold or provided through any concession may not be paid for out of the gross proceeds from bingo.
16.3. The net bingo proceeds, including any interest earned thereon, shall be expended for the charitable or public service purpose stated in the application within one (1) year after the expiration of the license.
16.4. None of the bingo proceeds may be used for construction or acquisition, of real or personal property unless the property is used exclusively for charitable or public service purposes.
16.4.1. Example 1. - Bingo proceeds may not be used to build a clubhouse for X charitable organization.
16.4.2. Example 2. - Bingo proceeds may be used to build a camp for the underprivileged.
16.4.3. Example 3. - Bingo proceeds may be used to maintain X club's barbecue pit.
16.4.4. Example 4. - Bingo proceeds may be used to repair a bus that transports children from the inner city to a church day camp.
16.5. If a licensee, in good faith, finds that it cannot meet or comply with any of the above requirements or wishes to use the proceeds of bingo games for a long range charitable or public service purpose, such as, for example, building a fire hall, then application must be made to tax commissioner for permission to:
16.5.1. spend the net proceeds for charitable or public service purpose not listed in the application, or
16.5.2. spend the net proceeds later than the one (1) year time period. If this permission is granted, the licensee must file quarterly reports with the tax commissioner until the proceeds are spent. This application must be filed no later than sixty (60) days prior to the end of the one (1) year time period.
W. Va. Code R. § 110-16-17 Records
17.1. Separate accounting and bookkeeping procedures for bingo operations shall be maintained by each licensee. This means, at the minimum, that a separate bank account shall be maintained for bingo and only the preprinted serially numbered checks used in conjunction with this account may be used for the payment of expenses. The checks shall be made payable to a specific person, firm or corporation and at no time may a check be made payable to cash. The licensee shall keep Detailed books of receipts and disbursements.
17.2. The licensee shall maintain all records for at least three (3) years or for such longer period as the tax commissioner shall, in writing, order and these records shall be held open for reasonable inspection by the commissioner. Results of these inspections may be used as grounds for performing an audit of the licensee's books.
17.3. Audits of the licensee's books may be performed by the tax commissioner if he or she has reasonable cause to believe that the licensee has violated the act.
17.4. The Tax Commissioner shall perform, or cause to be performed, an audit of the books and records of any licensee that has awarded during the previous license year total prizes in excess of one hundred seventy-five thousand dollars ($175,000.00). The Tax Commissioner shall file a copy of the completed audit with the county commissioner of the county wherein the license holds bingo occasions.
W. Va. Code R. § 110-16-18 Advertising
18.1. A licensee may advertise its bingo occasions in a reasonable manner; Provided, That the advertisements shall include the name of the licensee holding the bingo occasion. However, a licensee may not hire any person to develop or conduct an advertising campaign to promote any bingo occasion. Advertising is considered a reasonable and necessary expense as provided for in Section 16 of this rule.
W. Va. Code R. § 110-16-19 Fraud; Penalties
19.1. Any person or licensee that knowingly conducts or participates in a fraudulently or deceptively conducted bingo game with intent to defraud is guilty of a felony.
19.2. The penalties upon conviction are:
19.2.1. A fine of not less than five hundred ($500) or more than ten thousand dollars ($10,000); and/or
19.2.2. imprisonment in the penitentiary for not less than one (1) or more than five (5) years.
W. Va. Code R. § 110-16-20 Obtaining License Fraudulently; Penalties
20.1. Any individual, association, organization or corporation than knowingly uses false, deceptive or fraudulent methods to obtain a license for themselves or others is guilty of a misdemeanor.
20.2. The penalty upon conviction is a fine of not less than five hundred ($500) or more than ten thousand dollars ($10,000).
W. Va. Code R. § 110-16-21 Violation of Provisions; Penalties
21.1. Any person who violates the provisions of the bingo act (other than the provisions concerning fraud and fraudulently obtaining a license) is guilty of a misdemeanor.
21.2. The penalty upon conviction is a fine of not less than one hundred ($100) or more than one thousand dollars ($1,000). The penalties upon a second conviction are:
21.2.1. a fine of not less than one hundred ($100) or more than one thousand dollars ($1,000); and/or
21.2.2. imprisonment for not more than one (1) year.
W. Va. Code R. § 110-16-22 Proceeds of State Fair
22.1. All proceeds which accrue to the West Virginia State Fair are considered used for charitable or public service purposes. Proceeds that the State Fair Board pays to or allows the licensee to retain are expenses incurred by the State Fair Board.
'11-16-23. State Fair.
23.1. Bingo occasions to be held at the State Fair: Provided, That super-bingo occasions may not be held at the State Fair. To obtain a State Fair bingo license a person shall:
23.1.1. have held regular bingo games for a period of two (2) years prior to the filing of the application;
23.1.2. file an application for a license which shall include a copy of any license or agreement entered into between the State Fair Board or its licensee and the applicant; and
23.1.3. pay a license fee of five hundred dollars ($500.00). This payment shall be made by certified check or money order, or, if the payment is made in person at the State Tax Division, it may be made in cash.
23.2. The State Fair Board may adopt reasonable rules to govern the holding of bingo games at the State Fair. These rules may not be inconsistent with or in violation of the Act.
23.3. Section 7.2 of this rule provides information regarding the taxability of persons holding bingo occasions at the State Fair.
W. Va. Code R. § 110-16-24 Administration
24.1. The tax commissioner may:
24.1.1. deny an application for license if the issuance of the license would be in violation of the Act.
24.1.1.1. The applicant may protest the denial of the application. Any protest shall be made in writing and shall state the reason for the protest. The protest shall be filed with the tax commissioner within sixty (60) days of the receipt of the denial of the license.
24.1.1.2. The Commissioner, upon receipt of the protest, shall set a time and place for a hearing on the matter.
24.1.1.3. The Commissioner shall send a notice to the applicant containing:
24.1.1.3.a. the date of hearing;
24.1.1.3.b. the time of hearing;
24.1.1.3.c. the place where the hearing will be held; and
24.1.1.3.d. a short, plain statement of the matters asserted.
24.1.1.4. The notice shall be service by certified mail, or by personal or substituted service.
24.1.1.5. At the hearing the applicant may:
24.1.1.5.a. produce evidence in its behalf; and
24.1.1.5.b. be represented by counsel.
24.1.1.6. A decision by the commissioner upholding the denial of the license is subject to judicial review on appeal by the applicant.
24.1.1.7. The burden of proof is on the applicant;
24.1.2. revoke, suspend or refuse to renew a license if:
24.1.2.1. The licensee or any member of the licensee's organization has been convicted under W. Va. Code '' 47-20-18 or 47-20-19, and the commissioner finds it would be in the public interest to do so;
24.1.2.2. the licensee has violated any of the provisions of the Act;
24.1.2.3. the licensee has failed to maintain records or file reports as required. Licenses will only be revoked, suspended or refused under this paragraph if the commissioner finds that the failure to record or report impairs the commissioner's ability to administer the act: Provided,
24.1.2.3.a That before revocation or suspension of a license, the commissioner shall give ten (10) days notice to annual licensees or three (3) days notice to limited occasion and State Fair licensees. This notice shall be written, shall state reasons for the action and shall specify a time and place where the licensee may show why the action should not be taken. Notice may be served by:
24.1.2.3.a.1 certified mail to the licensee's address;
24.1.2.3.a.2 certified mail to the person who applied for the license on behalf of the organization; or
24.1.2.3.a.3 personal or substituted service on the person who applied for the license on behalf of the organization.
24.1.2.3.b That at the time designated for any hearing the licensee may:
24.1.2.3.b.1 produce evidence in its behalf; and
24.1.2.3.b.2 be represented by counsel;
24.1.2.3.c That a decision of the commissioner suspending or revoking a license is subject to judicial review on appeal by the licensee.
24.1.3 conduct hearings according to the provisions of the State Administrative Procedures Act (W. Va. Code '29A-5-1 et seq.). The burden of proof in the hearings is upon the licensee;
24.1.4. issue emergency orders suspending a license when:
24.1.4.1. The commissioner believes that a criminal violation of the act has occurred;
24.1.4.2 the commissioner believes that the suspension is necessary to prevent a criminal violation of the act; or
24.1.4.3 the commissioner believes that the suspension is necessary to preserve the public peace, health, safety, morals, good order or general welfare;
24.1.5 The orders authorization in Subdivision 24.1.4 of this rule shall set forth the grounds for issuance. This includes a statement of facts of the alleged emergency. The order shall be served by personal or substituted service on the licensee or the person who applied for the license on behalf of the licensee;
24.1.6 The orders authorized in Subdivision 24.1.4 of this rule shall become effective immediately upon issuance and service.
24.1.7 After the issuance of an emergency order authorized under Subdivision 24.1.4 of this rule, the commissioner shall set a time and place for hearing within five days. At this hearing the licensee may show cause why its license should not be revoked.
W. Va. Code R. § 110-16-25 Filing of Reports
25.1. Annual licensees and super-bingo licensees shall file, quarterly and annually, financial reports on forms provided by the commissioner. These reports shall summarize the financial activity of the licensee for the reported time period. The quarterly reports shall be filed no later than twenty (20) days after the end of the quarter which it covers. Annual reports shall be filed no later than thirty (30) days after the expiration of the license. The time period covered by the annual report is the full license year or, at the election of a licensee receiving state or federal funding, the most recently ended state or federal fiscal year. With the annual report, the licensee shall include its expired license.
25.1.1. Example 1. - Y organization obtains a license and starts bingo operations on November 1. Its quarterly reports are due on January 20 (twenty (20) days after the end of this quarter on December 31), April 20, July 20 and October 20. The annual report is due on November 30 (thirty (30) days after the expiration of the license on October 31).
25.1.2. Quarters are on standard basis. In other words January 1 - March 31, is the first quarter, April 1 - June 30, is the second quarter July 1 - September 30, is the third quarter, and October - December 1, is the fourth quarter.
25.2. Limited occasion licensees and State Fair licensees shall file a financial report on forms provided by the commissioner. These reports shall summarize financial activity for the license period. This report shall be filed within thirty (30) days after the expiration of the license and the expired license shall accompany such report.
25.3. Final reports for annual licensees and limited occasion licensees shall contain the name, address and social security number of any person who receives prizes with an aggregate value of over one hundred dollars ($100).
25.4. Any licensee failing to file a required report when due is liable for a penalty of $25.00 for each month, or fraction thereof, during which the failure continues, the penalty not to exceed $100.00 for each delinquent report.
25.5. The annual financial reports required to be filed for each license year shall contain a compilation and review of the financial report, as defined by the American Institute of Certified Public Accountants, if for the license year just completed the licensee's gross receipts exceed $50,000.00.
W. Va. Code R. § 110-16-26 Filing of Copy of License
26.1. When the commissioner grants a license, he or she shall file a copy of the license with the clerk of the county commission of the county in which the bingo occasions are to be held. The clerk shall record this copy.
26.2. The commissioner shall make a copy of the application available for public inspection.
W. Va. Code R. § 110-16-27 County Option Election
27.1. The county commission may call a local option election to determine if the provisions of this act will continue in their county. But, no local option election can be called to disapprove the playing of bingo games at the State Fair. Bingo shall be permitted in all counties unless and until a local option election is held which results in a majority of voters determining that the provisions of the act will not continue in force and effect in that county.
27.2. A petition for election shall be filed with the county commission. The form shall be substantially as follows:
PETITION ON LOCAL OPTION ELECTION
RESPECTING THE CONDUCT OF BINGO AND SUPER BINGO GAMES FOR CHARITABLE PURPOSES IN _______________ COUNTY WEST VIRGINIA
Each of undersigned certifies that he or she is a person residing in ___________________ county, West Virginia, and is duly qualified to vote in that county under the laws of the state, and that his or her name, address, and the date of signing this petition are correctly set forth below.
The undersigned petition the county commission to call and hold a local option election at: (1) a special or (2) the next primary, general or special election (the petition shall specify (1) or (2) upon the following question: Shall the provisions of Article twenty (20), Chapter forty-seven (47) of the Code of West Virginia, one thousand nine hundred thirty-one (1931), as amended, continue in effect in ___________________ county, West Virginia.
NAME ADDRESS DATE _____________ (Each person signing must specify either his post office address or his street number).
At least ten percent (10%) of the persons qualified to vote within the county must shall sign this petition before the election may be called.
27.3. If the petition is filed as specified in this section, the county commission shall enter an order calling a local option election, and shall publicize notice of the local option election by publication of a Class II-O legal advertisement with a county publication area. This notice shall be published within fourteen (14) consecutive days before the election.
27.4. Any person qualified to vote in the county at any primary, general or special election may vote at the local option election.
27.5. Election officers appointed and qualified to serve at any primary, general or special election shall conduct the local option election. These election officers shall count the ballots and make a return which shall be certified by the commissioners of election to the county commission. The county commission shall canvass the ballots and certify the result without delay.
27.6. Local option elections may be held at the same time as any primary, general or special elections, but, it must be held in connection with and as a part of the election if it is held at the same time.
27.7. The form for the ballot shall be substantially as follows:
"Shall the playing of bingo to raise money for charitable or public service organizations continue in effect in ____________ county of West Virginia? (Place a cross mark in the square opposite your choice)." Yes No
27.8. If a majority vote no, then the act no longer continues in effect in that county.
27.9. There shall be five (5) years between local option elections on this question, whether the question was approved or disapproved at the previous local option election.
W. Va. Code R. § 110-16-28 Prohibited Acts
28.1. Any person convicted of a felony, or misdemeanor for a gambling offense:
28.1.1. may not obtain, either directly or indirectly, a bingo license;
28.1.2. may not conduct a bingo game;
28.1.3. may not operate a concession; and
28.1.4. may not lease or provide to any licensee organization any premise where bingo occasions may be held.
28.2. This restriction applies for ten (10) years from the date of conviction.
Example 1. - X was convicted of a misdemeanor gambling offense in 1972. During the year 1981, X may not participate in the operation of bingo in any way. But, in 1983, X would be permitted to participate, if he or she had obtained a valid license.
W. Va. Code R. § 110-16-28a Smoking and Nonsmoking Sections. 28a.1. If smoking is permitted during the conduct of any bingo, super-bingo or limited occasion bingo occasion, any bingo operator who distributes more than 100 bingo cards and/or bingo sheets at the occasion shall provide smoking and nonsmoking sections
'110-15-29. Restriction on Use of Bingo Equipment.
29.1. A licensee may only use bingo equipment:
29.2. which it owns;
29.3. which it borrows without compensation from another licensee, or
29.4. which it leases from another licensee for a reasonable and customary amount.
Example 1. - Bill's Bingo Equipment Rental, an organized for profit company, may not rent bingo equipment to licensees in this state.
29.5. Rental or purchase of bingo equipment is considered a reasonable and necessary expense as provided for in Section 16 of this rule.
W. Va. Code R. § 110-16-30 Requirement for a Registration Statement
30.1. Unless exempt, every charitable or public service organization that obtains a bingo license shall file an annual registration statement with the Secretary of State's Office, under the Solicitation of Charitable Funds Act.
30.2. These registration statements shall be filed on forms provided by the Secretary of State and shall be filed before any bingo occasions are held.
W. Va. Code R. § 110-16-31 Additional Remedies for the Tax Commissioner, Administrative Procedures; Deposit of Money Penalties
31.1. For any material violation of the Bingo act or this rule, the Tax Commissioner may:
31.1.1. Revoke or refuse to renew any charitable bingo license;
31.1.2. Suspend the charitable bingo license of any licensee for the period of time the Tax commissioner considers appropriate. A suspension may not be for less than one week nor more than twelve months for each material violation;
31.1.3. Place a charitable bingo licensee on probation for a period of not less than six months nor for more than five years for each material violation;
31.1.3.1. In the event a licensee is placed on probation, then, as a condition of the probation, the licensee shall pay to the Tax Commissioner a Probation Supervision Fee in an amount equal to two thousand dollars or two percent of the gross proceeds derived by the licensee from the conduct of bingo occasions during the period of the probation, whichever is greater.
31.1.3.2. No Probation Supervision Fee paid in accordance with this section may be claimed by the licensee as a reasonable, necessary or actual expense incurred in connection with the conduct of a bingo occasion under the authority of W. Va. Code '47-20-15.
31.1.3.3. The imposition of probation shall be used, when warranted, to insure the charitable bingo licensee's continued adherence to the applicable statutes and legislative rules. After due consideration of the severity of the violation, probationary terms and conditions shall be determined by the Tax Commissioner;
31.1.4. Require a charitable bingo licensee to replace any officer who knew or because of the officer=s responsibilities within the licensee organization should have known of a material violation.
31.1.4.1. The Tax Commissioner shall suspend for a period of not less than one month nor more than twenty-four months the license of a licensee that refuses to replace any officer as directed by the Tax Commissioner. The Tax Commissioner shall consider the severity of the violation and whether the violation was a one-time or repeated occurrence when implementing this disciplinary action;
31.1.5. Require a charitable bingo licensee to prohibit one or more members, supporters, volunteers or employees of the licensee involved in material violations from participating in, or being present at or on the premises of all future bingo occasions held under the charitable bingo license, or for the period of time specified by the Tax Commissioner.
31.1.5.1. The Tax Commissioner shall suspend for a period of not less than one month nor more than twelve months the license or licenses of a licensee that refuses to prohibit the participation of identified members, supporters, volunteers or employees as directed by the Tax Commissioner. The Tax Commissioner shall consider the severity of the violation and whether the violation was a one-time or repeated occurrence when applying this disciplinary action; and
31.1.6. Impose a civil money penalty of not less than one hundred dollars nor more than two times the annual gross proceeds derived by the charitable bingo licensee from the conduct of bingo, for each material violation:
31.1.6.1. In setting any monetary penalty for a first violation, the Tax Commissioner shall take into consideration the ability of the licensee to continue to exist and operate.
31.1.6.2. No money penalty paid in accordance with this section may be claimed by the licensee as a reasonable, necessary or actual expense incurred in connection with the conduct of a bingo occasion.
31.1.6.3. For each material violation that is a second or succeeding violation, the amount of the civil penalty that may be imposed may not be less than five hundred dollars and may not exceed the greater of one hundred thousand dollars or two times the annual gross proceeds of the licensee from the conduct of bingo.
31.1.6.4. Any charitable bingo licensee aggrieved by the amount of the civil penalty may in lieu of paying the penalty surrender its charitable bingo license for a minimum period of twelve consecutive months.
31.1.6.5. If the licensee refuses to pay the penalty or surrender its license, the license shall be revoked:
31.1.6.6. After the licensee has exhausted all administrative remedies provided in subsection 31.4 of this rule, the licensee may have the issue of whether a material violation was committed by the licensee reviewed in the circuit court of the county where the violation giving rise to the civil penalty occurred.
31.1.6.7. The imposition of civil penalties shall be implemented in accordance with the criteria set forth in subsection 31.2 of this rule.
31.1.6.8. For purposes of this rule, surrender of the charitable bingo license or surrender of the license means and includes surrender of all regular, limited occasion and super bingo licenses held by the licensee, unless specifically otherwise directed by the Tax Commissioner.
31.2. The imposition of civil money penalties shall be in accordance with the following criteria:
31.2.1. For conducting charitable bingo occasions at times or at a location inconsistent with the license application, the money penalty is: but not more than $3,000
31.2.2. For failure to timely amend or modify the charitable bingo license in accordance with section 9 of this rule, the money penalty is: but not more than $3,000
31.2.3. For not having the bingo license posted at the occasion; and allowing charitable bingo workers to play bingo, the money penalty is: but not more than $3,000
31.2.4. For utilizing charitable bingo workers who fail to qualify under W. Va. Code '47-20-1 et seq. and this rule, the money penalty is: but not more than $500 but not more than $2500
31.2.5. For allowing individuals under the age of eighteen years (with the exception of junior firefighters, in accordance with the provisions of section 6 of this rule) to participate in the conduct of charitable bingo activities, the monetary penalty is: but not more than $500 but not more than $2500
31.2.6. For allowing individuals under the age of eighteen years (with the exception of junior firefighters, in accordance with the provisions of section 6 of this rule) to participate in the playing of bingo in violation of W. Va. Code '47-20-5, the monetary penalty is: but not more than $500 but not more than $2500
31.2.7. For expending or using charitable bingo proceeds for unauthorized expenses, the money penalty is:
31.2.8. For distributing charitable bingo net proceeds for purposes other than qualified charitable or public service purposes or for unauthorized purposes, the money penalty is:
31.2.9. For continuing failure to maintain accurate records, the money penalty is:
31.2.10. For continuing violations of any nature, subsequent to the licensee having been notified in writing of a violation, the monetary penalty is:
31.2.10.a The penalty for violations occurring subsequent to written notice is in addition to the penalty that may be applied for a second or succeeding violation under any other provision of this rule.
31.2.11. For conducting fraudulent charitable bingo occasions, or obtaining a charitable bingo license under false pretenses or deceptive or fraudulent circumstances, the monetary penalty is:
31.2.12. The Tax Commissioner may impose any one or more, or any combination, of the penalties provided for in this subsection.
31.3. No sanctions or other penalty shall be imposed under subdivision 31.2.4 on a charitable bingo licensee for failure to operate charitable bingo occasions with members when:
31.3.1. The licensee is exempt from federal income taxation under Internal Revenue Code '501 (c)(3) or 501 (c)(4); and
31.3.2. The licensee is a non-membership organization that does not have bona fide members, and
31.3.3. The bingo occasions are operated by residents of this State who have been employed by the licensee or who have been meaningfully associated with the licensee for one or more years before the date of the licensee's application for a license under the Act, or for one or more years before the date of the licensee=s most recent application for renewal of a license under the Act, whichever is later.
31.3.3.1. Use of non-members of the licensee to operate a bingo occasion may not include allowing individuals under the age of eighteen years (with the exception of junior firefighters, in accordance with the provisions of section 6 of this rule) to participate in the conduct of charitable bingo activities.
31.4. Administrative procedures.
31.4.1. An order issued under this section shall be served by certified mail or in the manner provided in rule 4(d) of the West Virginia Rules of Civil Procedures
31.4.2. A charitable bingo licensee may appeal an order of the Tax Commissioner issued under this section by filing a written protest with the Tax Commissioner, either in person or by certified mail, properly addressed and postage prepaid, within twenty days after the licensee is served with a copy of the order. Appeals shall be filed in the form or forms as the Tax Commissioner furnishes with the order.
31.4.3. When a timely written protest is filed, the procedures for contested cases set forth in W. Va. Code '29A-5-1 et seq. apply.
31.4.4. The burden of proof in any administrative or court proceeding is on the charitable bingo licensee to show cause why the order of the Tax Commissioner under this section should be modified, in whole or in part, or set aside.
31.5. Nothing contained in this rule shall be construed to prohibit, limit, alter or amend the Tax Commissioner=s power under W. Va. Code '47-20-23 to issue an emergency order suspending a bingo licensee.
APPENDIX A
UNITED STATES TREASURY REGULATIONS
(Reg. Section 1.501(c)(3)-1)
The regulation below is intended to provide guidance to the public in the determination of what a charitable or public service activity or endeavor is. ' 1.501(c)(3)-1. Organizations organized and operated for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals.
(a) Organization and operational tests.
(1) In order to be exempt as an organization described in section 501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt.
(2) The term "Exempt Purpose or Purposes", as used in this section, means any purpose or purposes specified in section 501(c)(3), as defined and elaborated in paragraph (d) of this section.
(b) Organizational test.
(1) In general.
(A) An organization is organized exclusively for one or more exempt purposes only if its articles of organization (referred to in this section as its "articles") as defined in subparagraph (2) of this paragraph:
(i) Limit the purposes of such organization to one or more exempt purposes; and (ii) Do not expressly empower the organization to engage, otherwise, than as an insubstantial part of its activities, in activities which in themselves are not in furtherance of one or more exempt purposes.
(B) In meeting the organizational test, the organization's purpose, as stated in its articles, may be as broad as, or more specific than, the purposes stated in section 501(c)(3). Therefore, an organization which, by the terms of its articles, is formed "for literary and scientific purposes within the meaning of section 501(c)(3) of the Code shall, if it otherwise meets the requirements in this paragraph, be considered to have met the organizational test. Similarly, articles stating that the organization is created solely "to receive contributions and pay them over to organizations which are described in section 501(c)(3) and exempt from taxation under section 501(a)" are sufficient for purposes of the organizational test. Moreover, it is sufficient if the articles set forth the purpose of the organization to be the operation of a school for adult education and describe in detail the manner of the operation of such school. In addition, if the articles state that the organization is formed for "Charitable Purposes", such articles ordinarily shall be sufficient for purposes of the organizational test (See subparagraph (5) of this paragraph for rules relating to construction of terms).
(C) An organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it to carry on, otherwise than as an insubstantial part of its activities, activities which are not in furtherance of one or more exempt purposes, even though such organization is, by the terms of such articles, created for a purpose that is no broader than the purposes specified in section 501(c)(3). Thus, an organization that is empowered by its articles "to engage in a manufacturing business," or "to engage in the operation of a social club" does not meet the organizational test regardless of the fact that its articles may state that such organization is created "for charitable purposes within the meaning of Section 501(c)(3) of the Code."
(D) In no case shall an organization be considered to be organized exclusively for one or more exempt purposes, if by the terms of its articles, the purposes for which such organization is created are broader than the purposes specified in section 501(c)(3). The fact that the actual operations of such an organization have been exclusively in furtherance of one or more exempt purposes shall not be sufficient to permit the organization to meet the organizational test. Similarly, such an organization will not meet the organizational test as a result of statements or other evidence that the members thereof intend to operate only in furtherance of one or more exempt purposes.
(E) An organization must, in order to establish its exemption, submit a detailed statement of its proposed activities with and as a part of its application for exemption (See paragraph (b) of ' 1.501(a)-1).
(2) Articles of organization. - For purposes of this section, the term "articles of organization" or "articles" includes the trust instrument, the corporate charter, the articles of association, or any other written instrument by which an organization is created.
(3) Authorization of legislative or political activities. - An organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it:
(A) To devote more than an insubstantial part of its activities to attempting to influence legislation by propaganda or otherwise; or (B) Directly or indirectly to participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office; or (C) To have objectives and to engage in activities which characterize it as an "action" organization as defined in paragraph (c)(3) of this section. The terms used in subdivisions (A), (B), and (C) of this subparagraph shall have the meanings provided in paragraph (c)(3) of this section.
(4) Distribution of assets on dissolution. - An organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt purpose. An organization's assets will be considered dedicated to an exempt purpose, for example, if upon dissolution, such assets would, by reason of a provision in the organization's articles or by operation of law, be distributed for one or more exempt purposes, or to the Federal government, or to a State or local government, for a public purpose, or would be distributed by a court to another organization to be used in such manner as in the judgment of the court will best accomplish the general purposes for which the dissolved organization was organized. However, an organization does not meet the organizational test if its articles or the law of the State in which it was created provide that its assets would, upon dissolution, be distributed to its members or shareholders.
(5) Construction of terms. - The law of the State in which an organization is created shall be controlling in construing the terms of its articles. However, any organization which contends that such terms have under State law a different meaning from their generally accepted meaning must establish such special meaning by clear and convincing reference to relevant court decisions, opinions of the State attorney general, or other evidence of applicable State law.
(6) Applicability of the organizational test. - A determination by the Commissioner or a district director that an organization is described in section 501(c)(3) and exempt under section 501(a) will not be granted after July 26, 1959 (regardless of when the application is filed), unless such organization meets the organizational test prescribed by this paragraph. If, before July 27, 1959, an organization has been determined by the Commissioner or district director to be exempt as an organization described in section 501(c)(3) or in corresponding provision of prior law and such determination has not been revoked before such date, the fact that such organization does not meet the organizational test prescribed by this paragraph shall not be a basis for revoking such determination. Accordingly, an organization which has been determined to be exempt before July 27, 1959, and which does not seek a new determination of exemption is not required to amend its articles of organization to conform to the rules of this paragraph, but any organization which seeks a determination of exemption after July 26, 1959, must have articles of organization which meet the rules of this paragraph. For the rules relating to whether an organization determined to be exempt before July 27, 1959, is organized exclusively for one or more exempt purposes, See 26 CFR (1939 39.101(5)-1 (Regulation 118) as made applicable to the Code by Treasury Decision 6091, approved August 16, 1954 (19 F.R. 5167; C.B. 1954-2, 47).
(c) Operational test.
(1) Primary activities. - An organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.
(2) Distribution of earnings. - An organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. For the definition of the words "private shareholders or individual", See paragraph (c) of ' 1.501(a)-1.
(3) "Action" organization.
(A) An organization is not operated exclusively for one or more exempt purposes if it is an "Action" organization as defined in subdivisions (B), (C), or (D) of this subparagraph.
(B) An organization is an "Action" organization if a substantial part of its activities is attempting to influence legislation by propaganda or otherwise. For this purpose, an organization will be regarded as attempting to influence legislation if the organization - (i) Contacts, or urges the public to contact, members of a legislative body for the purpose of proposing, supporting, or opposing legislation; or (ii) Advocates the adoption or rejection of legislation. The term "legislation", as used in this subdivision, includes action by the Congress, by any State legislature, by any local council or similar governing body, or by the public in a referendum, initiative, constitutional amendment, or similar procedure. An organization will not fail to meet the operational test merely because it advocates, as an insubstantial part of its activities, the adoption or rejection of legislation.
(C) An organization is an "Action" organization if it participates or intervenes, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office. The term "Candidate for Public Office" means an individual who offers himself, or is proposed by others, as a contestant for an elective public office, whether such office be national, State or local. Activities which constitute participation or intervention in a political campaign on behalf of or in opposition to a candidate include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.
(D) An organization is an "Action" organization if it has the following two characteristics:
(i) Its main or primary objective or objectives (as distinguished from its incidental or secondary objectives) may be attained only by legislation or a defeat of proposed legislation; and (ii) It advocates, or campaigns for, the attainment of such main or primary objective or objectives as distinguished from engaging in nonpartisan analysis, study, or research and making the results thereof available to the public. In determining whether an organization has such characteristics, all the surrounding facts and circumstances, including the articles and all activities of the organization, are to be considered.
(E) An "Action" organization, described in subdivisions (ii) or (iv) of this subparagraph, though it cannot qualify under section 501(c)(3) may nevertheless qualify as a social welfare organization under section 501(c)(4) if it meets the requirements set out in paragraph (a) of ' 1.501(c)(4)-1.
(d) Exempt purposes.
(1) In general.
(A) An organization may be exempt as an organization described in section 501(c)(3) if it is organized and operated exclusively for one or more of the following purposes:
(i) Religious, (ii) Charitable, (iii) Scientific, (iv) Testing for public safety, (v) Literary, (vi) Educational, or (vii) Prevention of cruelty to children or animals.
(B) An organization is not organized or operated exclusively for one or more of the purposes specified in subdivision (A) of this subparagraph unless it serves a public rather than a private interest. Thus, to meet the requirement of this subdivision, it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organizations, or persons controlled, directly or indirectly, by such private interest.
(C) Since each of the purposes specified in subdivision (A) of this subparagraph is an exempt purpose in itself, an organization may be exempt if it is organized and operated exclusively for any one or more of such purposes. If, in fact, an organization is organized and operated exclusively for exempt purpose or purposes, exemption will be granted to such an organization regardless of the purpose or purposes specified in its application for exemption. For example, if an organization claims exemption on the ground that it is "Educational", exemption will not be denied if, in fact, it is "Charitable".
(2) "Charitable" defined. - The term "Charitable" is used in section 501(c)(3) in its generally accepted legal sense and is, therefore, not to be construed as limited by the separate enumeration in section 501(c)(3) of other tax-exempt purposes which may fall within the broad outlines of "Charity" as developed by judicial decisions. Such term includes: Relief of the poor and distressed or of the underprivileged; advancement of religion; advancement of education or science; erection of maintenance of public buildings, monuments, or works; lessening of the burdens of Government; and promotion of social welfare by organizations designed to accomplish any of the above purposes, or (A) to lessen neighborhood tensions;
(B) to eliminate prejudice and discrimination;
(C) to defend human and civil rights secured by law; or (D) to combat community deterioration and juvenile delinquency.
The fact that an organization which is organized and operated for the relief of indigent persons may receive voluntary contributions from the persons intended to be relieved will not necessarily prevent such organization from being exempt as an organization organized and operated exclusively for charitable purposes. The fact that an organization, in carrying out its primary purpose, advocates social or civic changes or presents opinion on controversial issues with the intention of molding public opinion or creating public sentiment to an acceptance of its views does not preclude such organization from qualifying under section 501(c)(3) so long as it is not an "Action" organization of any one of the types described in paragraph (c)(3) of this section.
(3) "Educational" defined.
(A) In general. - The term "Educational", as used in section 501(c)(3), relates to - (i) The instruction or training of the individual for the purpose of improving or developing his capabilities; or (ii) The instruction of the public on subjects useful to the individual and beneficial to the community.
An organization may be educational even thought it advocates a particular position or viewpoint so long as it presents a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion. On the other hand, an organization is not educational if its principal function is the mere presentation of unsupported opinion.
(B) Examples of educational organizations. - The following are examples of organizations which, if they otherwise meet the requirements of this section, are educational:
Example 1. - An organization, such as a primary or secondary school, a college, or a professional or trade school, which has a regularly scheduled curriculum, a regular faculty, and a regularly enrolled body of students in attendance at a place where the educational activities are regularly carried on.
Example 2. - An organization whose activities consist of presenting public discussion groups, forums, panels, lectures, or other similar programs. Such programs may be on radio or television.
Example 3. - An organization which presents a course of instruction by means of correspondence or through the utilization of television or radio.
Example 4. - Museums, zoos, planetariums, symphony orchestras, and other similar organizations.
(4) "Testing for Public Safety" defined. - The term "Testing for Public Safety", as used in section 501(c)(3), includes the testing of consumer products, such as electrical products, to determine whether they are safe for use by the general public.
(5) "Scientific" defined.
(A) Since an organization may meet the requirements of section 501(c)(3) only if its serves a public rather than a private interest, a "Scientific" organization must be organized and operated in the public interest. Research when taken alone is a word with various meanings; it is not synonymous with "Scientific"; and the nature of particular research upon the purpose which it serves. For research to be "Scientific", within the meaning of section 501(c)(3), it must be carried on in furtherance of a "Scientific" purpose. The determination as to whether research is "Scientific" does not depend on whether such research is classified as "Fundamental" or "Basic" as contrasted with "Applied" or "Practical". On the other hand, for purposes of the exclusion from unrelated business taxable income provided by section 512(b)(9), it is necessary to determine whether the organization is operated primarily for purposes of carrying on "Fundamental", as contrasted with "Applied", research.
(B) Scientific research does not include activities of a type ordinarily carried on as an incident to commercial or industrial operations, as, for example, the ordinary testing or inspection of materials or products or the designing or construction of equipment, buildings, etc.
(C) Scientific research will be regarded as carried on in the public interest - (i) If the results of such research (including any patents, copyrights, processes, or formula resulting from such research) are made available to the public on a nondiscriminatory basis;
(ii) If such research is performed for the United States, or any of its agencies or instrumentalities, or for a State or political subdivision thereof; or (iii) If such research is directed toward benefiting the public. The following are examples of scientific research which will be considered as directed toward benefiting the public, and, therefore, which will be regarded as carried on in the public interest:
(a) Scientific research carried on for the purpose of aiding in the scientific education of college or university students;
(b) Scientific research carried on for the purpose of obtaining scientific information, which is published in a treatise, thesis, trade publication or in any other form that is available to the interested public;
(c) Scientific research carried on for the purpose of discovering a cure for a disease; or (d) Scientific research carried on for the purpose of aiding a community or geographical area by attracting new industry to the community or area or by encouraging the development of, or retention of, an industry in the community or area. Scientific research described in this subdivision (c) will be regarded as carried on in the public interest even though such research is performed pursuant to a contract or agreement under which the sponsor or sponsors of the research have the right to obtain ownership or control of any patents, copyrights, processes, or formula resulting from such research.
(D) An organization will not be regarded as organized and operated for the purpose of carrying on scientific research in the public interest and, consequently, will not qualify under section 501(c)(3) as a "Scientific" organization, if - (i) Such organization will perform research only for persons which are (directly or indirectly) its creators and which are not described in section 501(c)(3), or (ii) Such organization retain (directly or indirectly) the ownership or control of more than an insubstantial portion of the patents, copyrights, processes, or formula resulting from its research and does not make patents, copyrights, processes, or formula available to the public. For purposes of this subdivision, a patent, copyright, process, or formula shall be considered as made available to the public if such patent, copyright, process, or formula is made available to the public on a nondiscriminatory basis. In addition, although one person is granted the exclusive right to the use of a patent, copy right, process, or formula, such patent, copyright, process, or formula shall be considered as made available to the public if the granting of such exclusive right is the only practicable manner in which the patent, copyright, process, or formula can be utilized to benefit the public. In such a case, however, the research from which the patent, copyright, process, or formula resulted will be regarded as carried on in the public interest (within the meaning of subdivision (C) of this subparagraph) only if it is carried on for a person described in subdivision (C)(ii) of this subparagraph of if it is scientific research described in subdivision (C)(iii) of this subparagraph.
(E) The fact that any organization (including a college, university, or hospital) carries on research which is not in furtherance of an exempt purpose described in section 501(c)(3) will not preclude such organization from meeting the requirements of section 501(c)(3) so long as the organization meets the organizational test and is not operated for the primary purpose of carrying on such research (See paragraph (e) of this section, relating to organizations carrying on a trade or business). See paragraphs (a)(5) of ' 1.513-2, with respect to research which constitutes an unrelated trade or business, and section 512(b)(7)(8), and (9), with respect to income derived from research which is excludable from the tax on unrelated business income.
(F) The regulations in this subparagraph are applicable with respect to taxable years beginning after December 31, 1960.
(e) Organizations carrying on trade or business.
(1) In general. - An organization may meet the requirements of section 501(c)(3) although it operates a trade or business as a substantial part of its activities, if the operation of such trade or business is in furtherance of the organization's exempt purpose or purposes and if the organization is not organized or operated for the primary purpose of carrying on an unrelated trade or business, as defined in section 513. In determining the existence or nonexistence of such primary purpose, all the circumstances must be considered, including the size and extent of the trade or business and the size and extent of the activities which are in furtherance of one or more exempt purposes. An organization which is organized and operated for the primary purpose of carrying on an unrelated trade or business is not exempt under section 501(c)(3) even though it has certain religious purposes, its property is held in common, and its profits do not inure to the benefit of individual members of the organization. See, however, section 501(d) and ' 1.501(d)-1, relating to religious and apostolic organizations.
(2) Taxation of unrelated business income. - For provisions relating to the taxation of unrelated business income of certain organizations described in section 501(c)(3), See sections 511 to 515, inclusive, and the regulations thereunder.
(f) Applicability of regulations in this section. - The regulations in this section are, except as otherwise expressly provided, applicable with respect to taxable years beginning after July 26, 1959. For the rules applicable with respect to taxable years beginning before July 27, 1959, See 26 CFR (1939) 39.101(6)-1 (Regulations 118) as made applicable to the Code by Treasury Decision 6091, approved August 16, 1954 (19 F.R. 5167; C. B. 1954-2, 47). Reg. Section 1.501(c)(3)-1.
APPENDIX B
This list of nonprofit charitable organizations which may be exempt from taxation under the Internal Revenue Code is intended to illustrate application of these terms and is not intended to be a comprehensive listing.
(A) 501(c)(3) Organizations.
(1) Religious Churches Church affiliated colleges Sermon publishing organizations that apply proceeds to purchase of materials for theology school libraries.
(2) Educational, literary or scientific.
Primary and secondary schools Colleges or universities Professional or trade schools Private schools (Must have a racially nondiscriminatory admissions policy)
Teachers travel study groups Historical exposition organizations Engineering societies engaged in scientific research Abortion counseling organizations Sterilization information organizations Credit union educational organizations School Accreditation organizations Organizations formed to provide work experience to students Anthropological research organizations Educational, cultural and public interest television programming organizations Training program product sales organizations Educational day care organizations Political educational organizations (must not solicit for or endorse candidates)
(3) Public safety.
Traffic safety organizations Organizations which inspect and test for public safety (4) Prevention of cruelty to children or animals.
(5) Fostering national or international amateur sports competition.
(6) Charitable.
Nonprofit hospitals Health care and maintenance organizations Drug Clinics Alcoholic treatment organizations Organizations that provide aid to the blind Public interest law firms Nonprofit legal aid societies Prisoner rehabilitation organizations Housing organizations which provide specially designed housing for the elderly or handicapped Honor Societies Volunteer fire company Disaster service organizations Racial discrimination prevention organizations Aid to senior citizen organizations Aid to immigrants organizations Organizations formed to promote civic pride (b) 501(c)(4) Organizations.
(1) Civil leagues.
Homeowner's association Garden clubs Women's vacation and rest home Bus transportation organizations (providing relief for regular bus service)
Environmental protection organizations Organization involved in processing of consumer complaints (2) Nonprofit local employees' associations.
(c) 501(c)(8) Organizations. - Fraternal beneficiary societies (must operate) under the lodge system and have an established system for payment of benefits.
(d) 501(c)(10) Organization.
(1) Fraternal beneficiary societies (must operate) under the lodge system and give its net earnings solely for religious, charitable, scientific, literary, educational and fraternal purposes.
(e) 501(C)(19) Organizations. - Veteran's organizations (membership must consist of seventy-five (75%) war veterans and substantially all of the remainder must be veterans, cadets, or spouses, widows or widowers of war veterans. They must also be organized in the United States).
(f) 501(d) Organizations. - Religious and apostolic organizations.
110CSR16
Series 16A On-Line Bingo and Raffles
W. Va. Code R. § 110-16A-1 General
1.1. Scope. -- This rule provides guidance for the conduct of charitable bingo and charitable raffles online within the existing laws and legislative rules for charitable gaming.
1.2. Authority. -- W. Va. Code §47-20-23 and §47-21A-23.
1.3. Filing Date. -- April 28, 2026.
1.4. Effective Date. -- April 28, 2026.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect on and after August 1,2031.
W. Va. Code R. § 110-16A-2 Definitions
2.1. “Bingo” means the game wherein participants pay consideration for the use of one or more paper or virtual cards bearing several rows of numbers in which no two cards played in any one game contain the same sequence or pattern. When the game commences, numbers are selected by chance, one by one, and announced. The players cover or mark those numbers announced as they appear on the card or cards which they are using. The player who first announces that he or she has covered a predetermined sequence or pattern which had been preannounced for that game is, upon verification that he or she has covered the predetermined sequence or pattern, declared the winner of that game. Bingo, as authorized by W. Va. Code §47-20-1, et seq., may be operated and played virtually over the Internet using an online bingo software system or web application.
2.2. “Bingo occasion” or “occasion” means a single gathering or session at which a series of one or more successive bingo games is conducted by a single licensee.
2.3. “On-line bingo” means the game of bingo, as defined by this rule and W. Va. Code §47-20-2, when the game is conducted to allow remote play by patrons through the Internet using electronically simulated “virtual” bingo cards.
2.4. “Raffle” means a game involving the selling or distribution of paper or virtual tickets, entitling the holder or holders to participate in a raffle game for a chance on a prize or prizes: Provided, That any mechanical or electronic raffle ticket system of whatever design or function is prohibited except as provided subdivision 2.4.2. This subsection shall not be interpreted to prevent the use of:
2.4.1. Hand-cranked or motorized drum mixers which randomly mix tickets or other indicia together for the purpose of allowing the hand drawing of a ticket or winning indicia;
2.4.2. Mechanical or electronic ticket dispenser systems that produce paper tickets with randomly generated indicia that cannot be redeemed electronically, cannot be used for any other purpose than a one-time raffle, and are limited as follows:
2.4.2.a. No more than three electronic ticket dispensing units in facilities with a capacity of fewer than 3,000 people; or
2.4.2.b. No more than one electronic ticket dispensing unit for every 1,000 persons permitted in facilities with a maximum occupancy greater than 3,000 people, not to exceed a total of 10 dispensing units;
2.4.3. A cash register for handling proceeds of sales and other ordinary cash-handling and record-keeping functions of a raffle licensee;
2.4.4. Accounting and record-keeping software for the purpose of maintaining accounting and reporting records of the licensee, and the computer for running those applications; or
2.4.5. An online raffle software system, web application, method, or process for the purpose of conducting online raffles over the Internet.
2.5. “Raffle occasion” or “occasion” means a single gathering or session at which a series of one or more successive raffles is conducted by a single licensee.
2.6. “On-line raffle” means a raffle, as defined by this rule and W. Va. Code §47-21-2 when the game is conducted to allow remote play by patrons by means of an online raffle software system, web application, method, or process for the purpose of conducting online raffles over the Internet, using electronically simulated “virtual” tickets.
2.7. “Licensee” means a tax-exempt not-for-profit charitable or public service organization holding a current valid bingo or raffle license issued by the State Tax Commissioner under the provisions of W. Va. Code §47-20-4 or W. Va. Code §47-21-4.
2.8. “Provider” or “on-line service provider” means the facilitator of an on-line platform for the conduct of on-line bingo or raffles over the Internet, including providers of an on-line bingo or raffle system, web application, method or process for the purpose of conducting on-line bingo or raffle occasions on the Internet. For purposes of this rule, providers of on-line services for the conduct of charitable raffles shall be considered wholesalers or distributors of charitable raffle boards and games, as defined by W. Va. Code §47-23-2.
2.9. “Commissioner” means the Tax Commissioner of the State of West Virginia or his or her delegate.
W. Va. Code R. § 110-16A-3 Licensed On-Line Bingo and Raffles
3.1. On-line bingo may be conducted by any organization licensed to conduct bingo under the provisions of W. Va. Code §47-20-1, et seq., and all laws and legislative rules relating to the conduct of bingo shall apply equally to the conduct of such on-line games.
3.2. On-line raffles may be conducted by any organization licensed to conduct raffles under the provisions of W. Va. Code §47-21-1, et seq., and all laws and legislative rules relating to the conduct of raffles shall apply equally to the conduct of such on-line games.
3.3. Pursuant to the authority granted to the Commissioner under W. Va. Code §47-23-2(e), electronic raffles or on-line raffles, as defined by this Rule, shall be considered “charitable raffle games” subject to the provisions of the Charitable Raffle Boards and Games Act [W. Va. Code §47-23-1, et seq.].
3.4. On-line service providers, as defined by this rule, shall register with the State Tax Division under the provisions of W. Va. Code §11-12-1, et. seq.
3.5. Providers of any supplies or equipment for the conduct of electronic raffles, or providers of on-line services to facilitate the conduct of on-line raffles shall register as wholesalers or distributors of charitable raffle boards and games under the provisions of W. Va. Code §47-23-3. Fees imposed by that section shall be based on the gross charges to the licensee for the provision of such services.
W. Va. Code R. § 110-16A-4 Age Restriction on Bingo
4.1. No licensee shall permit or allow any individual under the age of eighteen to participate in the playing of any bingo game.
4.2. Any licensee conducting on-line bingo games shall establish and maintain a positive age-verification system to ensure that no individual under the age of eighteen may participate in the playing of any bingo game.
W. Va. Code R. § 110-16A-5 Sales of Bingo Cards and Raffle Tickets
5.1. Payment for participation in an on-line bingo game or raffle must be made directly to the licensee. Third-party payors may not be used.
5.2. Payment may be made through a pre-payment account established with the licensee, by debit card, or an electronic funds transfer.
5.3. A licensee may receive and cash personal checks in an amount not to exceed one hundred dollars during the normal operation of a bingo game.
5.4. In no case may a licensee accept payment by credit card, and licensees may not extend credit in any form to any patron of a bingo game or raffle, either in-person or on-line.
W. Va. Code R. § 110-16A-6 Frequency and Duration of Bingo Occasions
6.1. A holder of an annual bingo license may hold no more than two bingo occasions per week, whether such games are conducted in-person or on-line.
6.2. No bingo occasion or on-line bingo occasion held pursuant to an annual bingo license may exceed six hours’ duration.
W. Va. Code R. § 110-16A-7 Restrictions on Use of Equipment; expenses for the conduct of on-line games
7.1. A bingo licensee may use only bingo equipment, including software or programming for conducting bingo or raffles on-line over the Internet, which the licensee owns or which it borrows without compensation, or leases for a reasonable and customary amount from another licensee.
7.2. A raffle licensee may use only raffle equipment, including software or programming for conducting raffles on-line over the Internet, which the licensee owns or which it borrows without compensation, or leases for a reasonable and customary amount from a wholesaler or distributor of raffle boards and games licensed under W. Va. Code §47-23-3.
7.3. Fees paid to a provider for access to an internet platform for the conduct of on-line bingo or on-line raffles shall be limited to a reasonable fixed rate, and in no case may a licensee enter into a revenue-sharing agreement with an on-line service provider whereby access fees are based on a percentage of the licensee’s gross or net revenues or the volume of patrons for any on-line bingo occasion or raffle.
W. Va. Code R. § 110-16A-8 Limits on Prizes Awarded
8.1. The average total prizes awarded by a licensee for any bingo occasion held pursuant to an annual or limited occasion license may not exceed ten thousand dollars in value, whether in cash or merchandise.
8.2. Bingo or raffle prizes may be money or merchandise other than beer, nonintoxicating beer, wine, spirits or alcoholic liquor. The value assigned to merchandise prizes is their fair market value at the time of purchase.
W. Va. Code R. § 110-16A-9 Violations
9.1. Violations of the provisions of this rule shall be subject to the penalties set forth in W. Va. Code §47-20-1 et seq., W. Va. Code §47-1-1 et seq., or W. Va. Code §47-23-1 et seq., as applicable.
Series 17 Tobacco Products Excise Tax
W. Va. Code R. § 110-17-1 General
1.1. Scope. -- This rule establishes policies and operating procedures for administering the Tobacco Products Excise Tax.
1.2. Authority. -- W. Va. Code §§11-10-5, 11-17-10 and 60-9-5.
1.3. Filing Date. -- April 4, 2002.
1.4. Filing Date. -- May 1,2002.
W. Va. Code R. § 110-17-2 Definitions
When used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
2.1. “Authorized wholesaler” is a wholesale dealer of cigarettes or other tobacco products authorized to do business in this State and who has received a valid West Virginia business registration certificate prior to the sale or delivery of any tobacco product to any retail dealer or subjobber in this State.
2.2. “Business Registration Certificate” means the West Virginia Business Registration Certificate required by W. Va. Code §11-12-4a.
2.3. "Cigarette" means:
2.3.1. Any roll for smoking made wholly or in part of tobacco, irrespective of size or shape and whether or not such tobacco is flavored, adulterated or mixed with any ingredient, the wrapping or cover of which is made of paper or any substance or material, except tobacco.
2.3.2. Any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packing and labeling, is likely to be offered to, or purchased by, consumers as a cigarette.
2.4. “Cigarette wrappers” means paper, or any other material except tobacco, prepared for use or that is likely to be used by consumers to make cigarettes.
2.5. “Code” means the Code of West Virginia of one thousand nine hundred thirty–three, as amended.
2.6. "Commissioner" or “Tax Commissioner” means the West Virginia Tax Commissioner, or his or her delegate.
2.7. "Consumer" means a person who receives or in any way comes into possession of tobacco products for the purpose of consuming or giving them away or disposing of them in any way other than by sale, barter or exchange.
2.8. “Counterfeit stamp” means any stamp, label or print, indicium or character, that evidences or purports to evidence the payment of any tax levied under W. Va. Code §11-17-1 et seq., and
2.8.1. has not been printed, manufactured or made by authority of the Commissioner, and
2.8.2. has not been issued, sold, or circulated by the Commissioner.
2.9. "Excise tax” means the tax imposed by W. Va. Code §11-17-1 et seq.
2.10. ''Importer'' means:
2.10.1. Any person in the United States to whom non-tax-paid tobacco products or cigarette papers or tubes manufactured in a foreign country, Puerto Rico, the Virgin Islands, or a possession of the United States are shipped or consigned;
2.10.2. Any person who removes cigars or cigarettes for sale or consumption in the United States from a customs bonded manufacturing warehouse; and
2.10.3. Any person who smuggles or otherwise unlawfully brings tobacco products or cigarette papers or tubes into the United States.
2.11. “Manufacturer” means a person who manufactures or produces a tobacco product but does not include a tobacco grower.
2.12. “Other tobacco products” or “tobacco products other than cigarettes” means snuff and chewing tobacco and any other tobacco product that is intended by the seller to be consumed by means other than smoking and any cigar, pipe tobacco or other tobacco product other than cigarettes.
2.13. "Package" means the individual package, box or other container in or from which retail sales of tobacco products are normally made or intended to be made.
2.14. "Person" means any individual, firm, association, company, partnership, corporation, limited liability company, joint-stock company, club, agency, syndicate, other legal entity, municipal corporation or other political subdivision of this State, trust, receiver, trustee, fiduciary or conservator, and when used in connection with any penalties imposed by W. Va. Code §11-17-1 et seq., means and includes officers, directors, trustees or members of any firm, copartnership, association, corporation, limited liability company, trust or any other unit acting as a group.
2.15. “Place of business” means a place where a tobacco product is sold or where a tobacco product is brought or kept for the purpose of sale or consumption, including a vessel, airplane, train or vending machine; Provided, That “place of business” does not include a farmers market or a tobacco auction house unless tobacco products are sold at the location.
2.16. "Retail dealer" means every person in this State, other than a wholesaler or sub-jobber, engaged in the business of selling tobacco products at retail to a consumer or to any person for any purpose other than resale but does not include a tobacco grower when selling tobacco to a manufacturer.
2.17. "Sale" means selling, exchange, transfer of title, barter, gift, offer for sale or distribution or disposition of tobacco products.
2.18. "Sale at retail" or "retail sale" means a sale to a consumer or to any person for any purpose other than resale.
2.19. "Sale by wholesaler" means and includes any bona fide transfer of title to tobacco products by a wholesaler for a valuable consideration, made in the ordinary course of trade or in the usual conduct of the wholesaler's business.
2.20. "Stamp" or “Meter impression” means any cigarette stamp, whether applied by hand, or any meter or ink impression or other indicia, or by heat, and authorized by the Tax Commissioner to serve as a stamp, and shall be of the design and color as prescribed by the Commissioner.
2.21. "Stamped cigarettes" means that the stamp as required by W. Va. Code §11-17-1 et seq. has been lawfully affixed to the bottom of the package of cigarettes.
2.22. "Sub-jobber" or “sub-jobber dealer” means and includes any person engaged in this State in the business of purchasing tax-paid tobacco products from another person who had purchased from the manufacturer or importer and who purchases the tax-paid tobacco products solely for the purpose of bona fide resale to retail dealers.
2.23. “This State” means the State of West Virginia.
2.24. “Tax-not-paid tobacco product” means a tobacco product upon which the excise tax has not been paid.
2.25. “Tax-paid tobacco product” means a tobacco product upon which the excise tax has been paid.
2.26. “Tobacco grower” means a person who has a direct financial interest in planting, cultivating and harvesting tobacco for sale. “Tobacco grower” includes a person who possesses a quota to market tobacco as administered by the United States Department of Agriculture.
2.27. “Tobacco products” includes cigarettes, and other tobacco products that have been manufactured by a manufacturer, but does not include planted or cultivated tobacco or harvested tobacco that has not completed the manufacturing activity.
2.28. “Transporter” means a person importing or transporting into this State a tobacco product obtained from a source located outside this State, or transporting within this State tobacco products belonging to another person.
2.29. "Unstamped cigarettes" means that the stamp as required by W. Va. Code §11-17-1 et seq. has not been affixed to the bottom of the package of cigarettes.
2.30. "Vending machine operator" means any person engaged in this State in the business of operating one or more vending machines for the sale of any tobacco products.
2.31. “Wholesale price” means the gross invoice price, including all federal excise taxes, at which the manufacturer of the tobacco product sells the tobacco product to unaffiliated distributors, excluding all trade discounts and other reductions in the manufacturer price. If the taxpayer buys from a person who is not the manufacturer of the tobacco product, “wholesale price” means the gross invoice price at which the taxpayer purchases the tobacco product, including all federal excise taxes and excluding all trade discounts and other similar reductions in price.
2.32. "Wholesaler" or “wholesale dealer” means and includes any person engaged in this State in the business of purchasing tax-not-paid tobacco products directly from a manufacturer, or any other person as may be approved by the Tax Commissioner. Any distributor, dealer, subjobber, subjobber dealer, retailer or any other person that imports or transports tax-not-paid tobacco products into this state, or that causes tax-not-paid tobacco products to be imported or transported into this state is liable for the Excise Tax. No wholesaler or person may purchase tax-not-paid tobacco products from any seller not approved by the Tax Commissioner.
W. Va. Code R. § 110-17-3 Tobacco Products Dealer Requirements
3.1. Wholesalers and Sub-jobbers – Every wholesaler or sub-jobber, whether a resident or non-resident of this State, engaging in the business of selling tax-paid tobacco products in this State shall first apply for and obtain a Business Registration Certificate and the license required by W. Va. Code §11-12-4a for the purpose of selling tax-paid tobacco products and cigarette wrappers. Application for the Business Registration Certificate and license shall be made on the forms provided by the Tax Commissioner.
3.1.1. A wholesaler may not sell tax-paid tobacco products to any person in this State other than another wholesaler, a sub-jobber or a retail dealer, and a person in this State other than a wholesaler or sub-jobber may not sell tax-paid tobacco products to a retail dealer.
3.1.2. The use or application of any kind or type of West Virginia tax stamp other than those authorized by the Tax Commissioner shall be considered a violation of this rule and subject to the penalties provided in W. Va. Code §11-17-1 et seq.
3.1.3. Unless they have been previously affixed, each wholesaler in this State shall affix the required West Virginia tax stamps prior to delivery of any cigarettes to any person in this State.
3.2. Retail Dealers - No retail dealer may offer for sale or sell any tax-paid tobacco products in West Virginia without first having applied for and obtained a Business Registration Certificate and the license required by W. Va. Code §11-12-4a for the purpose of selling tobacco products and cigarette wrappers. Application shall be made on forms prescribed and furnished by the Tax Commissioner.
3.3. Tobacco products or cigarette wrapper vending machine operators – Each vending machine operator shall apply for and obtain a Business Registration Certificate and the license required by W. Va. Code §11-12-4a for the purpose of selling tobacco products and cigarette wrappers before selling or offering for sale any tax-paid tobacco products or cigarette wrappers through a vending machine. Whenever any cigarette vending machine operator purchases tax-not-paid tobacco products directly from the manufacturer, the operator is considered to be a wholesaler and is liable for both the payment of the proper amount of excise tax and affixing the required stamps.
3.3.1. Although tobacco product vending machine operators, like wholesalers, purchase tax-not-paid tobacco products directly from the manufacturer, the sale of tobacco products through vending machines is construed as a sale at retail. Therefore, vending machine operators shall also be classified as retail dealers.
3.3.2. It is the location of the vending machine and not the vending machine that is subject to Business Registration. The person responsible for stocking the machine and collecting the money from sales shall obtain the Business Registration Certificate for the operation of a tobacco products vending machine.
3.3.2.a. If the vending machine is owned by a person who leases the machine to another person who then places the machine at a business location and the lessee assures the machine is stocked and collects the money from the sales, the lessee shall obtain a Business Registration Certificate for the location.
3.3.2.b. If the vending machine is owned by a person who leases the machine to another person who then leases the machines to a business establishment and the business establishment assures the machine is stocked and collects the money from the sales, the machine is covered by the business establishment’s Business Registration Certificate.
3.3.2.c. If the vending machine is owned by a person who places it at a business location and assures the machine is stocked and collects the money from the sales, the owner of the machine shall obtain a Business Registration Certificate for the location.
3.3.2.d. If the vending machine is owned by a person who leases the machine to a business establishment, and the business establishment assures the machine is stocked and collects the money from the sales, the machine is covered by the business establishment’s Business Registration Certificate.
3.3.2.e. If the vending machine is owned by the business establishment where it is situated, the machine is covered by the establishment’s Business Registration Certificate.
3.3.2.f. If a person has more than one vending machine at a location, only one Business Registration Certificate is required for all of the machines at that location.
3.3.3. Each tobacco products vending machine operator in this State shall for each shipment of tobacco products obtain an invoice showing the amount and value of the shipment, the date of receipt of the shipment, and the name of the shipper. The operator shall retain the invoice for a period of three years, and the invoice is subject to inspection by the Tax Commissioner. The operator shall file a monthly report showing total purchases of tax-paid and of tax-not-paid tobacco products and sales of tobacco products, and any other information the Tax Commissioner may require on forms provided by the Tax Commissioner.
3.3.4. Records of tobacco product vending machine operators are subject to audit by the Tax Commissioner and the vending machine operators shall make records available at any time during regular business hours for that purpose.
3.3.5. If tax-not-paid tobacco products are found in any vending machine, both the tobacco products and the vending machine are contraband goods and may be seized by the Tax Commissioner, or by any peace officer of the State at the direction of the Tax Commissioner, without a warrant.
3.3.6. No tobacco product vending machines shall be placed in operation within this State that is not constructed to display at least one package of tobacco product in each column. All cigarettes shall be placed in the machines in such a manner that when they are displayed, the stamps affixed to the package are clearly visible.
3.4. A tobacco grower is considered to not be a manufacturer, wholesaler, subjobber, retailer or vending machine operator and therefore is not subject to the licensing required by W. Va. Code §11-12-4a unless the tobacco grower is actually performing the activities of a manufacturer, wholesaler, subjopbber, retailer or vending machine operator.
W. Va. Code R. § 110-17-4 Cigarette Tax-Paid Stamps and Taxing Other Tobacco Products
4.1. General - W. Va. Code §11-17-1 et seq. authorizes the use of stamps to evidence payment of the excise tax on cigarettes. All stamps shall conform to the contract entered into between the State of West Virginia and the manufacturer of the stamps.
4.2. Form and Description of Hand Applied Cigarette Tax Stamps - The stamps shall measure approximately one-half inch by five-eighths inch in size. The design of the stamps shall be as follows: Across the top part of the stamp shall be the words "State of West Virginia"; in the center part of the stamp shall be an outline of the State of West Virginia; inside the outline of the map of West Virginia shall appear the numerals twenty (20) which will indicate that the tax has been paid on twenty (20) cigarettes or twenty-five (25) which will indicate that the tax has been paid on twenty-five (25) cigarettes; and on the lower part of the stamp shall appear the words "Cigarette Tax Stamp". The Commissioner may designate any other marks to be included in the design and layout of the stamps, and in the case of packaging not containing 20 or 25 cigarettes, the Tax Commissioner may prescribe any alternative designs that may be appropriate.
4.3. Form and Description of Cigarette Tax-paid Meter Impressions - The size of the meter impressions shall be approximately five-eighths inch by one and one-quarter inch, and rectangular in shape or design. The form of the meter impressions, made by a metering device, to be placed on the package of cigarettes, shall contain the words "West Virginia Tax-paid Cigarettes". In the center of the meter impression shall be the outline of the map of the State of West Virginia and on both sides of the outline of the map of West Virginia, shall appear numerals which will designate the meter which was used to make the impression. The Commissioner may designate any other marks to be included in the design and layout of the stamps and may prescribe any alternative designs that may be appropriate.
4.4. Form and Description of Cigarette Tax-paid Stamps Heat Applied by Machine - The stamps shall measure approximately one-half inch by one-half inch in size. The design of the heat applied stamps shall be as follows: Across the top part of the stamp shall be the words "State of West Virginia"; in the center part of the stamp shall be an outline of the map of the State of West Virginia; inside the outline of the map of West Virginia shall appear the numerals (20) twenty which shall indicate that the tax has been paid on twenty (20) cigarettes or (25) twenty-five, which shall indicate that the tax has been paid on twenty-five; and on the lower part of the stamp shall appear the words "Cigarette Tax Stamp". The Commissioner may designate any other marks to be included in the design and layout of the stamps, and in the case of packaging not containing 20 or 25 cigarettes, the Tax Commissioner may prescribe any alternative designs that may be appropriate.
4.5. Purchase of Cigarette Tax-paid Stamps - Stamps may be purchased only from the Tax Commissioner. The Tax commissioner shall sell stamps only upon receipt of the prescribed requisition form and, unless the purchaser has secured a Cigarette Tax Credit Purchase Bond, the proper remittance.
4.5.1. A wholesaler may obtain a continuous Cigarette Tax Credit Purchase Bond to allow the purchase of cigarette stamps on credit. The terms of credit shall be payment on the third purchase or within thirty days (whichever comes first) with no more than two requisitions on credit simultaneously. The total amount of tax due on the two requisitions shall be no more than one-half (1/2) the amount of the total bond. After approval of the bond by the Attorney General, an annual notice of renewal is the only requirement. Any surety issuing a bond shall be released and discharged from all liability on the bond after the expiration of sixty days from the date the surety filed, by certified mail, with the Tax Commissioner a written request to cancel the bond. This cancellation does not relieve, release or discharge the surety from liability already accrued, or which accrues before the expiration of the sixty day period. The bond shall be conditioned upon compliance with the provisions of W. Va. Code §11-17-1 et seq., including the filing of the returns and payment of all applicable taxes.
4.5.2. The Tax Commissioner shall not ship any stamps prior to receipt of proper remittance if terms of credit are not followed.
4.5.3. W. Va. Code §11-17-3 sets a tax at a specified rate for each twenty cigarettes or in like ratio on any part thereof. (For example, 17 cents for each 20 cigarettes.) The Tax commissioner shall allow a discount of four per cent for the purchase of stamps or meter impression as an allowance for affixing stamps and /or meter impression and prepaying the excise tax imposed on cigarettes.
4.5.4. Cigarette tax stamps are intended for the use of the authorized purchaser and are not transferable. If the wholesaler ceases business or stops stamping, the wholesaler shall return any unused stamps shall be returned to the Tax Commissioner for refund.
4.5.5. The Tax Commissioner shall redeem any unused or mutilated, but identifiable, stamps that any registered wholesaler may present for redemption. The Tax Commissioner may either issue a credit or a refund for stamps destroyed by fire or flood, on written verified requests made by the purchaser or his or her representative. The credit or refund shall be ninety-five per cent of the face value of the stamps, less any discounts allowed on the purchase of the stamps. Each request for redeeming or refunding shall be verified to the satisfaction of the Tax Commissioner.
4.5.6. In the event a retail dealer suffers loss of stamped cigarettes as a result of fire or flood, the retail dealer shall file a verified request for refund with the Tax Commissioner in order to obtain a refund. The verified request for refund shall contain the pertinent facts relating to the cause of the loss and the quantity of cigarette packages lost or packages damaged so as to be unsalable. A statement from an agent authorized by the Tax Commissioner may also be attached to the request for refund when the agent has declared certain packages of cigarettes to be unfit for use or sale. The amount of the refund shall be ninety-five per cent of the face value of the stamps, less any discounts allowed on the purchase of the stamps.
4.5.7. Stamps on cigarettes returned to the manufacturers shall be subject to either a credit or a refund upon the wholesaler filing an application and affidavit completed by the manufacturer that evidences the destruction of stamps or meter impressions. The amount of the refund shall be ninety-five per cent of the face value of the stamps, less any discounts allowed on the purchase of the stamps.
4.5.8. The Tax Commissioner shall not allow refunds to users of metering machines for loss of impressions.
4.6. Purchase of other tobacco products. – The excise tax is imposed on the sale or use of other tobacco products at the statutory rate as a specified percentage of the wholesale price of each article or item of the other tobacco product sold or used by a wholesaler or subjobber dealer. (For example, 7% of the wholesale price of each article or item of the other tobacco product.)
4.6.1. The excise tax imposed on other tobacco products shall be paid by the invoice method. This means the correct amount of tax shall be separately stated on the invoice when the products are sold by the wholesaler. The wholesaler shall pay the correct amount of excise tax on any other tobacco product that is sold in West Virginia, or removed from inventory for any purpose other than to return the other tobacco product to the manufacturer or be exported to another state.
4.6.2. Payment of the excise tax to the Tax Department shall be by cash, money order, bank draft, certified check, non-certified check or electronic funds transfer. If a non-certified check is returned unpaid by the bank, the payment is considered to not have been made; as a result, the Excise Tax remains due and owing.
4.6.3. Failure by a retail dealer or subjobber to provide evidence of the payment of excise tax on other tobacco products found in his or her place of business is considered to demonstrate that the other tobacco products are retained at that place of business in violation of W. Va. Code §11-17-1 et seq. Other tobacco products retained in violation of W. Va. Code §11-17-1 et seq. are contraband goods and may be seized by the Tax Commissioner, or by any peace officer of the State at the direction of the Tax Commissioner, without a warrant.
4.6.4. Upon the return of tobacco products other than cigarettes upon which the excise tax was paid, a wholesaler may file an application with an attached affidavit claiming either a credit or a refund of ninety-five percent of the tax that was paid on those other tobacco products, less any discount allowed on the original remittance of the Excise Tax.
4.6.5. Every taxpayer that pays the excise tax on tobacco products shall be allowed a discount of 4 percent on all tax due.
4.7. Effect of change of Excise Tax rate.
4.7.1. The effective date for imposition of the excise tax on other tobacco products is January 1, 2002.
4.7.2. All tobacco products on hand or in inventory on the effective date of a change in the applicable tax rate are considered to have been purchased or received on that effective date.
4.7.3. Every wholesaler, subjobber, subjobber dealer, retail dealer and vending machine operator that, on the effective date of any excise tax rate change has, on hand or in inventory, any tobacco products upon which any portion of the excise tax has been paid shall take a physical inventory on that date and file the required report with payment of any additional tax due under the increased tax rate. The required report and payment shall be filed within 30 days after the inventory was made. Imposition of the excise tax on tobacco products other than cigarettes is considered to be a change in the rate of tax for purposes of this provision.
4.7.4. Every taxpayer that pays excise tax on tobacco products shall be allowed a discount of 4 per cent on all tax due.
W. Va. Code R. § 110-17-5 Affixing Stamps
5.1. Wholesalers - Wholesalers shall affix the required stamps on each package of cigarettes prior to delivery of the cigarettes to any sub-jobber or retail dealer in this State. Except where the Tax Commissioner has issued a written waiver of the requirement, the stamp shall be affixed to the bottom of the package so that when the package is opened for consumption the stamp will not be destroyed but will evidence payment of the tax.
5.2. Retail Dealers – Retail dealers, unless also classified as a wholesaler, have no authority to affix stamps. Therefore, retail dealers that are not classified as wholesalers may only purchase tax-paid tobacco products for resale. Whenever any package of cigarettes is found in the place of business of a retail dealer without the required stamps affixed, or other tobacco products are found in the place of business of a retailer and there is no evidence of payment of the excise tax imposed on the tobacco products, there shall be a presumption that the tobacco products are kept in violation of W. Va. Code §11-17-1 et seq. Tobacco products kept in violation of W. Va. Code §11-17-1 et seq. are contraband goods and may be seized by the Tax Commissioner, or by any peace officer of the State at the direction of the Tax Commissioner, without a warrant.
W. Va. Code R. § 110-17-6 Authority And Permit For Use Of Metering devices And Heat Applied Stamp Machines
6.1. Authority and Permit for Use of Metering Machines - Registered wholesalers may, upon application, secure authority from the Tax Commissioner to use metering machines for the purpose of imprinting a stamp on each package of cigarettes. A wholesaler electing to use a metering device shall pay the excise tax in advance unless the wholesaler purchases stamps on credit as provided by W. Va. Code §11-17-1 et seq. When these metering devices are used, no further cancellation is required as evidence of payment of tax.
6.2. Authority and Permit to Use Heat Applied Stamp Machine - Registered wholesalers may, upon application, secure authority from the Tax Commissioner to use heat applied stamps and machines for applying the stamps. The Tax Commissioner shall furnish forms for application for authority to use heat applied stamps and machines. A wholesaler electing to use a heat applied stamp machine shall pay the excise tax in advance unless the wholesaler purchases stamps on credit as provided by W. Va. Code §11-17-1 et seq. No further cancellation is required where these heat-applied stamps are used as evidence of payment of tax.
W. Va. Code R. § 110-17-7 Sales Of Cigarettes On Railways, Boats And Buses
Common carriers operating club or dining cars, boats or other cars, vehicles or conveyances in which cigarettes and other tobacco products are sold are not required to affix and cancel stamps on packages of cigarettes in stock, cigarettes that are exposed for sale or cigarettes that will be offered for sale or sold in the State of West Virginia. The common carriers shall file monthly reports with and pay to the Tax Commissioner the proper amount of excise tax for all sales made within the State of West Virginia. The reports and payments shall be filed and payment made within fifteen days after the end of each calendar month.
W. Va. Code R. § 110-17-8 State Institutions And The Excise Tax
All tobacco products sold for use or resale in an institution operated by this State shall be tax-paid tobacco products and in the case of cigarettes shall have the required stamps affixed to each package.
W. Va. Code R. § 110-17-9 Metering Machines
Meter impressions shall be clear and easily distinguished. The metering machine shall be maintained in a manner that assures clear stamp impressions are definitively identified.
9.1. The Tax Commissioner may deny a wholesaler that maintains metering machines that fail to produce legible impressions authority to purchase additional metering machines until such time as the situation has been satisfactorily corrected.
9.2. The Tax Commissioner may revoke the authority of a wholesaler to use a metering machine that continues to produce illegible impressions.
W. Va. Code R. § 110-17-10 Contractual Obligations Of Meter Users And Stamp Machine Users
While the Tax Commissioner is required to authorize the use of machines for affixing a required stamp to each package of cigarettes, neither the Tax Commissioner nor this State is a party to any contract for the purchase or lease of a machine, nor does the Tax Commissioner or this State warrant or guarantee that the machine will function in the authorized manner.
W. Va. Code R. § 110-17-11 Prohibitions
11.1. Except as otherwise authorized in writing by the Tax Commissioner, wholesalers may not transfer unstamped cigarettes or other tobacco products upon which the excise tax has not been paid to another person or stamp any cigarettes that they do not own. Wholesalers shall maintain a complete daily stamping record which shall be available for inspection by the Tax Commissioner.
11.1.1. A wholesale dealer may sell tax-paid tobacco products only to another wholesaler or a retail dealer or subjobber in this State. No wholesaler or other person may purchase tax-not-paid tobacco products from any seller not approved by the Tax Commissioner.
11.2 Neither the wholesaler, the wholesaler’s employees nor any other parties may remove unstamped cigarettes or any other tobacco products from stock for any purpose other than affixing a stamp to the cigarettes or returning the tobacco products to the manufacturer. Neither the wholesaler, the wholesaler’s employees or any other parties may consume unstamped cigarettes or tobacco products upon which the excise tax has not been paid. The wholesaler shall account for each and every package of tobacco products disposed of by a record available for inspection.
11.3. A wholesaler or retailer may not sell or distribute to consumers in this State, or acquire, hold, own, possess, import or transport into this State for sale or distribution in this State any tobacco products if the package of tobacco product bears any statement, label, stamp, sticker, or notice indicating that the manufacturer did not intend the tobacco products to be sold, distributed, or used in the United States, including, but not limited to, labels stating "for export only," "U.S. tax-exempt," "for use outside U.S." or similar wording.
11.4. A wholesaler or retailer may not sell or distribute to consumers in this State, or acquire, hold, own, possess, import or transport into this State for sale or distribution in this State any tobacco products if the package does not comply with requirements imposed by federal law regarding warnings and other information on packages of cigarettes manufactured, packaged or imported for sale, distribution, or use in the United States, including the precise warning labels specified in the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1333, and all federal trademark and copyright laws.
11.5. A wholesaler or retailer may not sell or distribute tobacco products to consumers in this State, or acquire, hold, own, possess, import or transport into this State for sale or distribution in this State any cigarettes if any of the tobacco products were imported into the United States in violation of 26 U.S.C. 5754 or any other federal law or the implementing federal regulations.
11.6. wholesaler or retailer may not sell or distribute tobacco products to consumers in this State, or acquire, hold, own, possess, import or transport into this State for sale or distribution in this State tobacco products that the wholesaler or retailer knows or has reason to know were not intended by the manufacturer to be sold, distributed or used in the United States.
11.7. wholesaler or retailer may not sell or distribute to consumers in this State, or acquire, hold, own, possess, import or transport into this State for sale or distribution in this State tobacco products for which there has not been submitted to the Secretary of the United States Department of Health and Human Services the list of the ingredients added to the tobacco in the manufacture of the tobacco products as required by the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1355a;
11.8. A wholesaler or retailer may not alter any package of tobacco products prior to sale or distribution to the ultimate consumer so as to remove, conceal or obscure:
11.8.1. Any statement, label, stamp, sticker or notice described in Subsection 11.3 of this Section; or
11.8.2. Any health warning that is specified in or does conform with the requirements of the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1333.
11.9. No wholesaler may affix any stamp required by W. Va. Code §11-17-1 et seq. to any package of cigarettes described in Subsection 11.3 of this Section and no wholesaler may alter any package of tobacco products in violation of Subsection 11.8 of this Section.
11.10. Misdemeanor offenses related to the excise tax are set forth in W. Va. Code §11-17-9a. Felony offenses related to the excise tax are set forth in W. Va. Code §11-17-19b.
W. Va. Code R. § 110-17-12 Records And Reports
12.1. Records - Each person required to file a report under W. Va. Code §11-17-1 et seq. shall make and keep the records as prescribed by the Tax Commissioner that are necessary to substantiate the information on the returns, including, but not limited to, inventories, receipts, disbursements and sales, for a period of time not less than three years.
12.1.1. Unless otherwise permitted in writing by the Tax Commissioner, each delivery ticket or invoice for each purchase or sale of cigarettes and other tobacco products shall be recorded upon a serially numbered invoice showing the name and address of the seller and the purchaser, point of delivery, the date of delivery, quantity, and price of the tobacco product delivered in this State. The tax shall be set out separately, or the invoice shall indicate that the tax is included in the total price. The ticket or invoice shall include any other reasonable information as the Tax Commissioner may require.
12.1.2. Each wholesaler, sub-jobber, retail dealer and vending machine operator in this State and each out-of-State wholesaler, sub-jobber and vending machine operator authorized to do business in this State shall obtain invoices showing the amount and value of each shipment received, the date of receipt, and the name of the shipper. All invoices shall be retained for a period of at least three years and are subject to inspection by the Tax Commissioner.
12.1.3. The manufacturers shall furnish information as required by the Tax Commissioner to aid in auditing of the excise tax returns for tobacco products. The wholesaler shall indicate the exact date the tobacco products were received into stock. Each invoice shall reflect any shortage in the shipment in order to account for only those tobacco products that are of a salable quality.
12.1.4. All equipment, books, papers, invoices and records of any manufacturer, importer, wholesaler, sub-jobber, vending machine operator or retail dealer in this State, showing sales, receipts and purchases of cigarettes and other tobacco products shall, at all times during the usual business hours of the day, be open for the inspection of the Tax Commissioner, and the Tax Commissioner may investigate and examine the stock of cigarettes and other tobacco products in and upon any premises where they are placed, stored or sold, for the purpose of determining compliance with W. Va. Code §11-17-1 et seq. and this rule. The Tax Commissioner, under the authority of W. Va. Code §11-17-1 et seq., may also examine witnesses under oath in order to obtain and inspect the records, books and papers of any person required to file a report.
12.2. Reports.
12.2.1. Each wholesaler, sub-jobber and vending machine operator in this State and each out-of-state wholesaler, sub-jobber and vending machine operator authorized to do business in this State shall each month file a Monthly Report For Distributors and/or Wholesalers of Cigarettes, including all required schedules and other information, with the Tax Commissioner. Additionally, the Tax Commissioner may require manufacturers, importers and common carriers to file a monthly report reflecting information the Tax Commissioner considers necessary to assure the proper assessment and payment of the excise tax. The Tax Commissioner may also require retail dealers to furnish similar reports. The report to be filed by wholesalers, subjobbers, vending machine operators and retailers, which may from time to time be amended by the Tax commissioner so as to require additional information, shall disclose the following information:
12.2.1.a. A monthly inventory taken at the close of business on the last business day of the reporting period of all stamped cigarettes, all unstamped cigarettes and all other tobacco products;
12.2.1.b. Total purchases of tobacco products from all sources, supported by copies of invoices from each source of supply;
12.2.1.c. Total sales of stamped and unstamped tobacco products supported by sales slips or invoices issued to each customer and or records of sales through vending machines;
12.2.1.d. Total sales of tobacco products outside West Virginia. Separate records shall be maintained for each state into which tobacco products are shipped. Complete records shall be maintained for any sales or transactions for which tax exemption is to be claimed. A stamp or meter account shall be maintained. The record shall show:
12.2.1.d.1. The number of stamps and meter impressions on hand the last day of the previous reporting period;
12.2.1.d.2. The number of stamps and meter impressions purchased during the reporting period;
12.2.1.d.3. The number of stamps and the total number of meter impressions affixed during the reporting period; and
12.2.1.d.4. The number of stamps and meter impressions on hand at close of business on the last business day of the reporting period.
12.2.2. Each wholesaler, sub-jobber and vending machine operator in this State and each out-of-state wholesaler, sub-jobber and vending machine operator authorized to do business in this State shall file the report with the Tax Commissioner on or before the fifteenth day of each month immediately following the reporting period. The excise tax shown due on the monthly report shall be remitted on or before the due date of the monthly report. The due date shall be determined without regard to any authorized extension of time for filing the monthly report. Incorrect or incomplete reports will be returned by the Tax Commissioner or an amended report will be requested. Whenever a dealer fails to file a report within fifteen days after formal notification by the Tax Commissioner or fails to submit additional evidence or records required by the Tax Commissioner, the dealer shall be classified as delinquent. The Tax Commissioner shall assess a penalty of $25.00 for each month or part of a month that a return is late. In addition to the monetary penalty, the Tax Commissioner may deny the discount on stamp or meter impression purchases. The Tax Commissioner may suspend, revoke or cancel the Business Registration Certificate of the delinquent taxpayer to deal in cigarettes and other tobacco products following the second offense. Repeated infractions shall result in a cancellation of the authorization to deal in cigarettes and other tobacco products.
12.2.3. The taxpayer shall maintain a complete record is to be maintained by the taxpayer showing the date a requisition for stamps was submitted to the Commissioner, the serial numbers, the date and quantity of stamps received, and the quantity of stamps affixed daily.
12.2.4. Each dealer using a metering device shall maintain a complete record at all times, showing the exact usage of the machine. This record should be maintained daily and available at all times for inspection by the Tax Commissioner.
12.2.5. Because administration of the registration and tax administration functions of the Tax commissioner will be facilitated by the exchange of information with the Attorney General relating to trade, transport, possession, transfer and sales of cigarettes and tobacco products and related products in this State and elsewhere, and because there is a material interest of the Attorney General in the enforcement and administration of W. Va. Code §16-9B-1 et seq, the Tax Commissioner is authorized to enter into an exchange of information agreement with the West Virginia Attorney General and provide to that Office any information the Tax Commissioner considers to be relevant relating to trade, transport, possession, transfer and sales of cigarette and tobacco products, and related products, including but not limited to cigarette tax returns and information. For this purpose, the term “cigarette” has the following meaning.
12.2.5.a. "Cigarette" means any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains: (1) Any roll of tobacco wrapped in paper or in any substance not containing tobacco; or (2) tobacco, in any form, that is functional in the product, which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette; or (3) any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette as that term is herein described. The term "cigarette" includes "roll-your-own" tobacco, which means any tobacco which, because of its appearance, type, packaging, or labeling is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes. For purposes of this definition of the term “cigarette,” 0.09 ounces of "roll-your-own" tobacco shall constitute one individual cigarette or the equivalent of one cigarette.
12.3. Imported Cigarettes. Each authorized Wholesaler or Distributor that affixes stamps to cigarettes imported into the United States shall file the following information with each Monthly Report For Distributors and/or Wholesalers of Cigarettes on or before the fifteenth day of each month covering the transactions of the preceding month:
12.3.1. A copy of the permit issued pursuant to the Internal Revenue Code, 26 U.S.C. § 5713, to the importer importing the cigarettes into the United States and allowing the importer to import the cigarettes. A copy of the permit shall be filed once a year at the time determined by the Tax Commissioner, but the permit number shall be annotated on the Monthly Report;
12.3.2. A copy of the customs form containing, with respect to the imported cigarettes, the Internal Revenue Service tax information required by the U.S. Bureau of Alcohol, Tobacco and Firearms;
12.3.3. A statement, signed by an individual, officer, agent, employee or representative of the authorized wholesaler or distributor under penalty of perjury, that shall be treated as confidential tax information under W. Va. Code §11-10-5d, and exempt from disclosure under the Freedom of Information Act, W. Va. Code §29B-1-1 et seq., identifying the brand and brand styles of all the imported cigarettes, the quantity of each brand style of the imported cigarettes, and the supplier of the imported cigarettes. This subdivision shall not be construed to prohibit disclosure of the information to the Attorney general pursuant to subdivision 12.2.4 of this rule;
12.3.4. A statement signed by the individual, officer, agent, employee or representative of the authorized wholesaler or distributor under penalty of perjury, which shall not be treated as confidential or exempt from disclosure, that separately identifies the brands and brand styles of the imported cigarettes; and
12.3.5. A statement signed by an officer of the manufacturer or importer under penalty of perjury, certifying that the manufacturer or importer has complied with the package health warning and ingredient reporting requirements of the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1333 and 1335a, with respect to the imported cigarettes and certifying whether the manufacturer is, or is not, a participating tobacco manufacturer within the meaning of W. Va. Code §16-9B-1 et seq.
12.3.5.a. The manufacturer or importer shall file the Federal Cigarette Labeling and Advertising Act compliance statement with the United States Department of Health and Human Services and the Tax Commissioner on an annual basis and when the ingredients of the cigarettes change or there is a change in the warning requirements. Additionally, cigarettes shall not be released from the United States Customs Services without the appropriate labeling.
12.3.5.a.1. Any cigarettes found without either the mandated stamps or labeling are contraband goods and may be seized by the Tax Commissioner, or by any peace officer of the State at the direction of the Tax Commissioner, without a warrant.
12.3.5.b. The provisions of W. Va. Code §§16-9B-1 et seq. and 60-9-3 impose on tobacco product manufacturers, as defined in W. Va. Code §16-9B-3, the requirement to be either a participating manufacturer and fulfill financial obligations under the master settlement agreement or to place certain amounts of moneys in a qualified escrow fund. Because the status of the manufacturer is monitored to assure satisfaction of financial obligations, the manufacturer or importer shall include with its West Virginia tobacco excise tax filings a statement indicating whether the manufacturer is, or is not, a participating tobacco manufacturer within the meaning of that statute.
W. Va. Code R. § 110-17-13 Audits
The Tax Commissioner may make periodic audits of accounts of all wholesalers, sub-jobbers, vending machine operators and retail dealers in this State and of out-of-state wholesalers, sub-jobbers and vending machine operators doing business in the State. All records shall be made available during the conduct of audits of the accounts.
13.1. The Tax Commissioner may issue an assessment whenever an audit reveals a material discrepancy, tax liability, underpayment or other amount due.
W. Va. Code R. § 110-17-14 Administrative Sanctions
14.1. If a violation of W. Va. Code §60-9-1 et seq. occurs, the State Tax Commissioner may revoke or suspend the violator’s authorization to affix the tax stamps.
14.2. Tobacco products acquired, held, owned, possessed, transported, imported into, or sold or distributed in this State in violation of either W. Va. Code §11-17-1 et seq. or W. Va. Code §60-9-1 et seq. are considered contraband under W. Va. Code §11-17-1 et seq., and are subject to seizure and forfeiture. The tobacco products are considered contraband whether the violation is knowing or otherwise.
14.3. The State Tax Commissioner may assess any tax, interest and penalty on any product acquired, possessed, sold, or offered for sale in violation of either W. Va. Code §11-17-1 et seq. or W. Va. Code §60-9-1 et seq.
W. Va. Code R. § 110-17-15 General Enforcement Provisions
15.1. In order to assist in the enforcement of the excise tax, the State Tax Commissioner may request information from any state agency, constitutional officer or local agency. Additionally, pursuant to the provisions of W. Va. Code §11-10-5d, 11-10-5s and other applicable provisions of the West Virginia Code, the Tax Commissioner may enter into an exchange of information agreement with federal agencies, the District of Columbia, any territory, possession, protectorate or any other state or subdivision thereof, or agencies or governmental subdivisions of this State. Specifically, the Tax Commissioner may enter into an exchange of information agreement with the Alcohol Beverage Control Administration to facilitate the enforcement of W. Va. Code §60-9-1 et seq.
110CSR17
110CSR17
Series 21 Personal Income Tax
W. Va. Code R. § 110-21-1 General
1.1. Scope. -- These regulations explain and clarify the West Virginia Personal Income Tax Act as stated in W. Va. code '11-21-1(d) et seq.
1.2. Authority. -- W. Va. code ''11-21-1 et seq. and 29A-3-15
1.3. Filing Date. -- April 2, 1990
1.4. Effective Date. -- April 2, 1990
Part I. In General.
W. Va. Code R. § 110-21-2 Legislative Findings
2.1. It is the intent of the Legislature that this State for purposes of its personal income tax adopt the provisions of the laws of the United States relating to the determination of income for federal income tax purposes in order to simplify preparation of State income tax returns by taxpayers, to improve enforcement of the State income tax through use of information obtained from federal income tax audits and to aid in the interpretation of the State tax law through use of federal judicial and administrative determinations and precedents. To facilitate this intent, the West Virginia Personal Income Tax Act as set forth under W. Va. Code '11-21-1 et seq. shall be construed to accomplish the foregoing purposes.
W. Va. Code R. § 110-21-3 Imposition of Tax; Minimum Tax; Persons Subject To Tax
3.1. Imposition of Tax.
3.1.1. Primary Tax. The West Virginia Personal Income Tax Act, W. Va. Code '11-21, imposes a personal income tax on the West Virginia taxable income of every individual, estate, and trust in accordance with the rates set forth therein.
3.1.2. Minimum Tax. In addition to the primary tax, there is imposed, pursuant to W. Va. code '11-21-3(a)(3), a minimum tax. This minimum tax is the excess, if any, by which an amount equal to twenty-five percent (25%) of any federal minimum tax or alternative minimum tax for the taxable year exceeds the sum of the primary tax imposed for the taxable year.
3.1.2.1. In determining the amount of the West Virginia minimum tax, taxpayers whose federal base income, for puposes of computing any federal minimum tax or alternative minimum tax, includes items of income which the states are prohibited under federal law from taxing or items of income specifically exempt from personal income taxation by the West Virginia Code must subtract such items of income from their federal base income and recompute their federal minimum tax before calculating the amount of West Virginia minimum tax.
3.2. Partners and partnership. A partnership is not subject to the personal income tax, although individuals carrying on business as partners are liable for tax in their separate or individual capacities. (See section 58.2 as to filing of returns by partnerships).
3.3. Associations taxable as corporations. A corporation is not a taxable entity within the purview of the West Virginia Personal Income Tax Act. An association, trust or other unincorporated organization which is taxable as a corporation for federal income tax purposes is not subject to the personal income tax. A corporation, association, trust or unincorporated organization must be so taxed under Subchapter C of the Internal Revenue Code of 1986, as amended, in order to be beyond the purview of the West Virginia Personal Income Tax Act.
3.4. Exempt trust and organizations. A trust or other unincorporated organization which by reason of its purposes or activities is exempt from federal income tax is exempt from the personal income tax, regardless of whether such organization is subject to federal income tax on unrelated business taxable income. Thus, for such an unincorporated organization, there is no unrelated business income tax in West Virginia.
3.5. Cross references.
3.5.1. For definition of West Virginia taxable income of resident individuals, see section 11 of these regulations.
3.5.2. For definition of the West Virginia taxable income of resident estates and trusts, see section 18 of these regulations.
3.5.3. For definition of the West Virginia taxable income of nonresident individuals, see section 31 of these regulations.
3.5.4. For definition of the West Virginia taxable income of nonresident estates and trusts, see section 38 of these regulations.
W. Va. Code R. § 110-21-4 Rate Of Tax
4.1. Rate of tax on individuals. (Except Married Individuals Filing Separate Returns), Individuals Filing Joint Returns, Heads of Households, Estates and Trusts. - The tax imposed by the West Virginia Personal Income Tax Act on the West Virginia taxable income of every individual (except married individuals filing separate returns), every individual who is a head of household in the determination of his or her federal income tax for the taxable year, every husband and wife who file a joint return, every individual who is entitled to file his or her federal income tax return for the taxable year as a surviving spouse, and every estate and trust shall be determined in accordance with the applicable rates set forth under W. Va. code '11-21.
4.2. Rate of Tax on Married Individuals Filing Separate Returns. - The tax imposed by the West Virginia Personal Income Tax Act on the West Virginia taxable income of a husband and wife filing separate returns for the taxable year shall be determined in accordance with the applicable rates set forth under W. Va. code '11-21.
W. Va. Code R. § 110-21-5 Effect Of Rate Changes During A Taxable Year
5.1. If the rate of personal income tax imposed by the West Virginia Personal Income Tax Act is changed to become effective after the thirty-first (31st) day of December of a calendar year, and if a taxpayer subject to the West Virginia Personal Income Tax Act has a taxable year which includes the effective date of the change (unless that date is the first day of the taxable year), then the following rules shall be observed in computing such taxpayer's rate of tax:
5.1.1. Tentative taxes shall be computed by applying the rate for the period before the effective date of the change, and the rate for the period on and after such date, to the taxable income for the entire taxable year; and
5.1.2. The tax for such taxable year shall be the sum of that proportion of each tentative tax which the number of months in each period bears to the number of months in the taxable year.
5.1.3. For puposes of this Section:
5.1.3.1. If the rate changes for taxable years beginning after or ending after a certain date, the following day shall be considered the effective date of the change; and
5.1.3.2. If a rate changes for taxable years beginning on or after a certain date, that date shall be considered the effective date of the change of rate.
W. Va. Code R. § 110-21-6 Accounting Periods And Methods
6.1. Accounting periods. A taxpayer's taxable year under these regulations shall be the same as his taxable year for federal income tax purposes.
6.2. Change of Accounting Periods. If a taxpayer's taxable year is changed for federal income tax purposes, his taxable year for purposes of these regulations shall be changed so that it is identical to that used by the taxpayer for federal income tax purposes. If a taxable year of less than twelve (12) months results from a change of taxable year, the West Virginia personal exemptions, and any credits allowed under the West Virginia Code shall be prorated to reflect the portion of the year which is being covered by the return being filed due to the change of accounting periods.
6.3. Accounting Methods. A taxpayer's method of accounting for West Virginia income tax purposes shall be the same as that used for federal income tax purposes. In the absence of any method for federal tax purposes, his taxable income for West Virginia tax purposes shall be computed under a method which will clearly reflect income.
6.4. Change of Accounting Methods.
6.4.1. If a taxpayer's method of accounting is changed for federal tax purposes, his method of accounting shall be changed for West Virginia tax purposes so that the accounting method is identical to that used by the taxpayer for federal income tax purposes.
6.4.2. If a taxpayer's method of accounting is changed, other than from an accrual to an installment method, any additional tax which results from adjustments determined to be necessary solely by reason of the change shall not be greater than if such adjustments were ratably allocated and included for the taxable year of the change and the preceding taxable years, not in excess of two(2), during which the taxpayer used the method of accounting from which the change is made.
6.4.3. If a taxpayer's method of accounting is changed from an accrual to an installment method, any additional tax for the year of such change of method, and for any subsequent year which is attributable to the receipt of installment payments properly accrued in a prior year shall be reduced by the portion of tax for any prior taxable year attributable to the accrual of such installment payments.
6.4.4. Example-A. A sole proprietor, has been engaged in a service oriented business and uses the cash basis method of accounting. A decides to expand his business so that in addition to providing services, A will also make sales from inventory. As a result of A's use of inventory, current federal income tax law requires A to adopt the accrual method of accounting. A must change to the accrual method of accounting for purposes of West Virginia's personal income tax as well.
W. Va. Code R. § 110-21-7 Resident And Nonresident Defined
7.1. Resident individual. An individual may be a resident of West Virginia for income tax purposes, and be taxable as a resident, even though such individual would not be deemed a resident for other purposes.
7.1.1. As used in these regulations, the term "resident individual" means and includes;
7.1.1.1. All persons domiciled in West Virginia, with the exception of those domiciliary residents who maintain no permanent place of abode in this State, maintain a permanent place of abode elsewhere and spend in the aggregate not more than thirty (30) days of the taxable year in this State; or.
7.1.1.2. Any person, other than a member of the Armed Forces of the United States, who is not domiciled in West Virginia but who maintains a permanent place of abode in this state and spends in the aggregate more than 183 days of the taxable year in this state.
7.1.2. Domicile Defined. Domicile, in general, is the place which an individual intends to be his permanent home; the place to which he intends to return whenever he may be absent.
7.1.2.1. A domicile once established continues until the person in question moves to a new location with the bona fide intention of making his fixed and permanent home there.
7.1.2.2. No change of domicile results from a removal to a new location if the intention is to remain there only for a limited time even if the individual has sold or disposed of his former home.
7.1.2.2.a. The burden is upon any person asserting a change of domicile to show that the necessary intention to change domicile existed.
7.1.2.2.b. In determining an individual intention regarding a change of domicile, his declarations will be given due weight but will not be conclusive if they are contradicted by his conduct.
7.1.2.2.c. The fact that a person registers and votes in one place is an important indication of domicile but not necessarily determinative, especially if the facts indicate that such actions were merely undertaken to escape taxation in a particular jurisdiction.
7.1.2.3. Domicile is not dependant on citizenship. For example, an alien who has permanently established his home in West Virginia is domiciled in this state regardless of whether he has become a citizen of the United States or has applied for citizenship. A citizen of the United States, however, will not ordinarily be deemed to have changed his domicile by going to a foreign country unless it is clearly established that he intends to remain there permanently. A citizen of the United States domiciled in West Virginia who goes abroad because of an assignment by his employer or for study, research or recreation, does not lose his West Virginia domicile unless it is clearly shown that such individual intends to remain abroad permanently and not to return.
7.1.2.4. An individual can have only one (1) domicile. Where an individual has two (2) or more homes, his domicile is at the home he regards as principal and permanent. In determining his intention in this matter, the length of time customarily spent at each location is important but not conclusive. A person who maintains a permanent place of abode in West Virginia and spends more than one hundred eighty-three (183) days of the taxable year in this state is taxable as a resident, regardless of his domicile.
7.1.2.5. A wife's domicile follows that of her husband unless a separate domicile has been established by her. A child's domicile generally follows that of his father, or of his mother after the father's death, until the child reaches the age of self-support and actually establishes his own separate domicile. The domicile of a child of divorced parents ordinarily follows that of the custodial parent.
7.1.3. Permanent place of abode. A permanent place of abode means a dwelling place permanently maintained by the taxpayer, whether or not owned by him, and will generally include a dwelling place owned or leased by his or her spouse.
7.1.3.1. A mere camp or cottage, or other similar site or dwelling, which is suitable and used only for vacation purposes does not constitute a permanent place of abode.
7.1.3.2. A place of abode, whether in West Virginia or elsewhere, will not be deemed permanent if such abode is maintained only during a temporary stay for the accomplishment of a particular purpose.
7.1.3.2.a. Where an individual domiciled in another state is assigned to his employer's West Virginia office for a fixed and limited period, after which he is to return to his permanent location, and said individual takes an apartment or other dwelling in West Virginia during the fixed and limited period, he will not be deemed a resident for income tax puposes even if he spends more than one hundred eighty-three (183) days of the taxable year in this State, because his place of abode here is not permanent. This person, however, will be taxable as a nonresident for income tax purposes on his income from West Virginia sources, including his salary or other compensation for services performed in West Virginia.
7.1.3.2.b. If an individual's assignment to his employer's West Virginia office is not for a fixed or limited period, but is for an indefinite period, the individual's West Virginia place of abode will be deemed a permanent place of abode and he will be a resident for tax purposes if he spends more than one hundred eighty-three (183) days of the year in West Virginia.
7.1.3.3. In the case of a person domiciled in West Virginia, the maintenance of a permanent place of abode in this state is alone sufficient to make him a resident for tax purposes, even though he remains outside the state for the entire year because the one hundred eighty-three (183) day rule applies only to taxpayers who are not domiciled in West Virginia.
7.1.4. Rules for days within and without West Virginia. In counting the number of days spent within and without West Virginia, presence within the State for any part of a calendar day constitutes a day spent within the State, except that such presence within the State may be disregarded if it is solely for the purpose of boarding a plane, train or bus for travel to a destination outside West Virginia, or while traveling by motor vehicle, plane or train through West Virginia to a destination outside the STate. Any person domiciled outside this STate who maintains a permanent place of abode within this State during any taxable year and claims to be a nonresident must keep and have available for examination by the Tax Commissioner adequate records to substantiate the fact that he did not spend more than one hundred eighty-three (183) days of such taxable year within the State.
7.1.5. Certain Persons Not Deemed Residents Although Domiciled in West Virginia. Any individual domiciled in West Virginia is a resident for income tax purposes for a specific taxable year, unless for such year he satisfies all three (3) of the following conditions:
(1) he maintains no permanent place of abode in West Virginia, (2) he maintains a permanent place of abode elsewhere, and (3) he spends in the aggregate not more than thirty (30) days of the taxable year in West Virginia.
7.1.5.1. Example. An individual, although retaining his West Virginia domicile, maintains his only permanent place of abode in the State of New York. As long as this individual continues to meet all three (3) conditions set forth under Subsection 7.1.5 above, he will be a nonresident of West Virginia for income tax purposes. If, however, for any taxable year there is a failure to meet any one (1) of the three (3) Subsection 7.1.5 conditions, the individual is subject to West Virginia's personal income tax as a resident for that year.
7.1.5.2. Where an individual domiciled in West Virginia claims to be a nonresident for any taxable year, the burden is upon said individual to show that during the year in question all three (3) Subsection 7.1.5 conditions had been satisfied.
7.2. Nonresident individual. For personal income tax purposes, a nonresident individual is any person who is not a resident as defined in subsection 7.1 of this regulation.
7.2.1. All references in these regulations to nonresidents are equally applicable to nonresident aliens unless otherwise specifically provided.
7.3. Resident estate or trust. A resident estate or trust means and includes:
(1) The estate of a descendent who at his death was domiciled in this state;
(2) a trust created by will of a descendent who at the date of his death was domiciled in West Virginia; or (3) a trust created by, or consisting of property of, a person domiciled in West Virginia.
7.3.1. Examples.
Example 1. An individual who is domiciled in Canada, creates a trust with a bank in Charleston, as trustee. The corpus of this trust consists of securities of American corporations, which are actively traded by the trustee on the several Stock Exchanges and also consists of rental property located in West Virginia. The beneficiaries of the trust are all West Virginia residents. Regardless of whether the trust is held to be a resident of the United States for federal income tax purposes, it is, for purposes of this State's personal income tax law, a nonresident trust.
Example 2. An individual who is a domiciliary resident of West Virginia, creates a trust with the a bank in Pittsburgh, Pennsylvania, as trustee. The trust corpus consists of West Virginia rental property and Pennsylvania rental property. The beneficiaries of the trust are all residents of Pennsylvania. The trust is a resident trust for West Virginia income tax purposes.
7.4. Nonresident estate or trust. A nonresident estate or trust is an estate or trust which is not a resident estate or trust as defined in subsection 7.3. of this regulation.
7.5. Cross reference. For effect of a change of an individual's resident status, see section 54 of these regulations.
W. Va. Code R. § 110-21-8 Credits Against Tax
8.1. Business and Occupation Tax Credit. If the taxpayer is subject to the business and occupation tax imposed by W. Va. code '11-13-1 et seq. said taxpayer may be entitled to a credit against his West Virginia personal income tax. However, the amount of the credit shall not exceed the amount of income tax attributable to West Virginia taxable income for the taxable year derived from the business or activity subjected to such other tax. If the West Virginia taxable income of the taxpayer includes income from a partnership, estate, trust or a S corporation, a part of any business and occupation tax liability of the partnership, estate, trust or S corporation shall be allowed, in computing the credit, in an amount proportionate to the income of such partnership, estate, trust or S corporation, which is included in the taxpayer's West Virginia taxable income.
8.1.1. For purposes of Subsection 8.1 above, the tax imposed under W. Va. code '11-13 shall be the amount of the liability of the taxpayer for such tax under said Article 13 computed without reduction for the tax Industrial Expansion or Revitalization tax credit and the Capital Company tax credit allowed for such year.
8.1.2. Credit Limitations. The business and occupation tax credit allowed under W. Va. code '11-21-8 and this regulation shall be limited to the smallest of the following:
(1) The amount of business and occupation tax imposed after all credits except the Industrial Expansion or Revitalization tax credit and the Capital Company tax credit; or (2) The amount of West Virginia personal income tax before credits; or (3) The amount of West Virginia personal income tax imposed on income from the business subject to the business and occupation tax.
8.1.2.1. The limitation set forth under Subsection 8.1.2.(3) is placed upon the amount of the credit to preclude exempting from personal income tax such of the taxpayer's income as is not derived from a business subject to business and occupation tax. Stated another way, the credit for business and occupation tax cannot offset the income tax imposed on income derived from sources which are not subject to business and occupation tax.
8.1.2.2. There can be no credit against personal income tax for business and occupation tax imposed on a business which operated at a loss, because no income from a business which operates at a loss enters into a taxpayer's West Virginia taxable income. Likewise, there can be no credit against personal income tax for business and occupation tax imposed, unless the West Virginia taxable income of a taxpayer includes business income. The West Virginia taxable income of a taxpayer is determined by offsetting business losses against business gains.
8.1.2.3. Who may claim the credit. The credit is allowable to taxpayers engaged in activities subject to the business and occupation tax in their capacities as proprietors, members of partnerships, beneficiaries and fiduciaries of estates and trusts, and stockholders of corporations, if and only if, they elected to be taxed under subchapter S of the Internal Revenue Code. The credit allowed these taxpayers is based on their share of the business and occupation tax imposed, and is limited to the amount of personal income tax imposed on business income derived from the proprietorship, partnership , S corporation, estate or trust. Salaries that are not, in fact, part of the distributive share of the partnership income, (for example, salaries guaranteed to partners by the articles of partnership), and salaries paid to stockholders of S corporations, are not income of partnerships or subchapter S corporations for the purpose of computing the credit.
8.1.2.3.a. Examples.
Example 1. The taxpayer is engaged in a sole proprietorship which is subject to the business and occupation tax. The amount of business and occupation tax liability imposed for the taxable year was seventy-five dollars ($75.00). The taxpayer's net income from the business was twelve thousand dollars ($12,000). He received no other income during the year. The taxpayer filed a joint return and claimed two (2) personal exemptions. Presuming a West Virginia income tax liability before credits would be two hundred and forty dollars ($240.00), the business and occupation tax credit would be limited to seventy-five dollars ($75.00), the amount of business and occupation tax imposed.
Example 2. Assume the same facts as in example 1 except that the amount of business and occupation tax imposed was three hundred dollars ($300.00). The West Virginia personal income tax before credits is two hundred and forty dollars ($240.00), therefore, the business and occupation tax credit is limited to two hundred and forty dollars ($240.00), the amount of income tax before credits. No carry over of this credit is available.
Example 3. The taxpayer was engaged in a business (partnership) subject to the business and occupation tax. His share of the distributive profits was eight thousand dollars ($8,000), and his share of the business and occupation tax liability was four hundred dollars ($400.00). In addition to his business income, the taxpayer received a salary of four thousand dollars ($4,000.00) from a local bank; therefore, his total income for the taxable year was twelve thousand dollars ($12,000.00). Presuming a personal income tax liability of three hundred dollars ($300) before credits, the business and occupation tax credit would be limited to two hundred dollars ($200.00), which is the amount of personal income tax imposed on income from the business subject to the business and occupation tax credit.
8.1.2.4. No credit shall be allowed against the West Virginia personal income tax unless the West Virginia taxable income of a taxpayer includes positive amounts of income from a business subject to the business and occupation tax. In computing the business income for purposes of applying the ratio of income from business, subject to the business and occupation tax to the total West Virginia adjusted gross income for determining the limitation of credit, business losses must be offset against business gains to reflect the positive amount of business income, subject to business and occupation tax in determining West Virginia taxable income. The purpose of the business and occupation tax credit is to avoid the imposition of income tax, and not to relieve the taxpayer from the imposition of income tax on income not subject to the business and occupation tax that would otherwise have been imposed in the absence of business activity.
8.1.2.4.a. Example. Taxpayer is engaged in a business subject to the business and occupation tax. Business and occupation tax in the amount of five hundred dollars ($500.00) was imposed on gross receipts of forty thousand dollars ($40,000.00). His business operated at a loss of ten thousand dollars ($10,000,00). The taxpayer had income, from a source other than his business, in the amount of thirty thousand dollars ($30,000.00) for the taxable year. This taxpayer is not entitled to a business and occupation tax credit on his personal income tax return, because his West Virginia taxable income does not include a positive amount of income from business subject to the business and occupation tax.
8.1.2.5. In determining the income from a business or occupation which is subject to the business and occupation tax, the net income, from such business or occupation, as reported in federal adjusted gross income without reference to the component items of income from the business or occupation, shall be considered prima facie evidence of the income of the subject business. For purposes of determining net income, gross income may include, but is not limited to: gross income from sales, interest income, bad debt recoveries, rents and royalties, earned discounts and miscellaneous income.
8.1.2.5.a. Salaries which have been deducted as a business expense for federal income tax purposes, in determining net income from the business or occupation subject to the business and occupation tax, shall not thereafter be included as income from the business in determining the individual's business and occupation tax credit.
8.1.2.6. Partnerships. In determining the income from a partnership which is subject to the business and occupation tax, the salaries paid to the partners which are not considered a draw against the distributive share of profits shall be deducted in arriving at the net income of the partnership; and such salaries shall not be included in the basis for computing the business and occupation tax credit of the individual partner. If the salary is not a guaranteed salary, provided in the articles of partnership, the Tax Commissioner will accept as prima facie evidence that the salary is considered a draw against distributive share of profits; therefore, the salary will be allowed in the basis for computing the business and occupation tax credit of the individual partner.
8.1.2.7. S Corporations. In determining the income from an S corporation which are subject to the business and occupation tax, salaries paid to stockholders shall be deducted in arriving at the net income of said corporation. The taxpayer, who is a stockholder and receives a salary from from such corporation, is not permitted to use said salary in the computation of his or her business and occupation tax credit on his or her West Virginia Personal Income Tax Return, because such salaries are not income of S corporations but are expenses of S corporations deductible in arriving at their net income.
8.1.2.7.a. Example 1. Mr. X is a stockholder in an S corporation and is also an employee of the corporation. Mr. X receives a salary of six thousand dollars ($6,000.00) from the corporation. At the end of the corporation's taxable year, Mr. X receives two thousand dollars ($2,000.00) as his distributive share of profits from the corporation. In computing his business and occupation tax credit on his West Virginia Personal Income Tax Return, Mr. X is permitted to use only his distributive share of profits two thousand dollars ($2,000) as his basis.
8.2. Carrier Income Tax Credit. If a taxpayer is subject to the carrier income tax imposed under W. Va. code '11-12A-1 et seq., said taxpayer may be entitled to a credit against his West Virginia personal income tax. The amount of this credit shall not exceed the amount of personal income tax attributable to West Virginia taxable income for the taxable year derived from the activities subjected to such other tax. If the West Virginia taxable income of the taxpayer includes income from a partnership, estate, trust or S corporation, a part of any S corporation shall be allowed in computing the credit in an amount proportionate to the income of such partnership, estate, trust or S corporation which is included in the taxpayer's West Virginia taxable income.
8.2.1. The West Virginia Carrier Income Tax was repealed effective July 1, 1987. A carrier income tax credit may, however, still be applicable in cases where said tax is paid subsequent to July 1, 1987.
8.2.2. Credit Limitations. The provisions regarding limitations on the business and occupation tax credit which are set forth under Subsection 8.1.2. of this regulation are equally applicable to the carrier income tax credit.
8.3. Severance Tax Credit. If a taxpayer is subject to the severance tax imposed under W. Va. code '11-13A-1 et seq., said taxpayer may be entitled to a credit against his West Virginia personal income tax. THe amount of this credit shall not exceed the amount of personal income tax attributable to West Virginia taxable income for the taxable year derived from the activities subjected to such other tax. If the West Virginia taxable income of the taxpayer includes income from a partnership, estate, trust or S corporation, a part of any severance tax liability of the partnership, estate, trust or S corporation shall be allowed in computing the credit in an amount proportionate to the income of such partnership, estate, trust or S corporation which is included in the taxpayer's West Virginia taxable income.
8.3.1. Credit Limitations. The provisions regarding limitations on the business and occupation tax credit which are applicable to the severance tax credit.
W. Va. Code R. § 110-21-9 Meaning Of Terms
9.1. Any term used in the West Virginia Personal Income Tax Act and these regulations shall have the same meaning as when used in a comparable context in the laws of the United States relating to personal income taxes, unless a different meaning is clearly required.
9.2. Any reference in the West Virginia Personal Income Tax Act and these regulations to the laws of the United States shall mean the provisions of the Internal Revenue Code of 1986, as amended, and such other provisions of the laws of the United States which relate to the determination of income for federal income tax purposes. See W. Va. Code '11-21-9 for the most recent updating of terms used in Article 21 to those used in the Internal Revenue Code.
9.3. Only to the extent provided under Article 21 shall amendments made to the laws of the United States be given effect in determining the taxes imposed under the West Virginia Personal Income Tax Act. No amendment made to the laws of the United States relating to personal income taxes on or after January 1, 1988, shall be given effect, until such time as the provisions of Article 21 are amended accordingly.
9.3.1. Example. - If on February 6, 1988, Congress passed a law making life insurance proceeds payable to a named beneficiary subject to federal income tax, the law will have no effect on the West Virginia Personal Income Tax Act for tax year 1988 and subsequent tax years until such time as Article 21 has been amended accordingly.
W. Va. Code R. § 110-21-9a Pledge Of Credit Or Collateral By Endorser, Guarantor Or Accommodator Not To Constitute Investment In Borrower. 9a.1. Any person pledging his credit or collateral as an endorser, guarantor, or accommodator to another person or corporation for the purpose of assisting another in obtaining credit shall not be, or construed to be, an investor in said borrower as to the amount so borrowed, nor shall any payments by said borrower on the indebtedness be, or construed to be, dividend to the endorser, guarantor or accommodator
W. Va. Code R. § 110-21-10 Reserved For Future Use
Part II. Residents.
W. Va. Code R. § 110-21-11 West Virginia Taxable Income Of Resident Individual
11.1. General. - The tax rates referred to in Section 4 of these regulations are applied against the taxpayer's West Virginia taxable income. The taxpayer's federal adjusted gross income is the actual starting point each year for computing the West Virginia taxable income on which his West Virginia personal income tax liability is based. The West Virginia taxable income of a resident individual means his federal adjusted gross income with the modifications stated in Sections 12, 12a and 12b of these regulations, less his West Virginia personal exemptions.
11.2. West Virginia Taxable Income Of Husband And Wife.
11.2.1. If a husband and wife file separate federal income tax returns for a particular year, they must also file separate West Virginia income tax returns for that year.
11.2.2. If a husband and wife file a joint federal income tax return for a particular year, or if neither files a federal return:
(1) They may file a joint West Virginia income tax return, or (2) They may file separate West Virginia income tax returns; Provided, that they comply with the requirements of the Tax Commissioner in setting forth information on a single form or on separate forms as the Tax Commissioner may require.
11.2.3. If both spouses are residents of West Virginia and elect to file separate West Virginia returns, each must determine his or her West Virginia income and exemptions as if his or her total federal income and exemptions had been determined separately.
11.3. West Virginia Taxable Income Of Husband And Wife Having Different Resident Status.
11.3.1. If either the husband or wife is a resident of West Virginia and the other is a nonresident, they must file separate returns unless they file a joint federal return and elect to file a joint State return, computing their joint West Virginia taxable income as if both spouse were residents of West Virginia.
11.3.1.1. Subsection 11.3.1 applies only in those cases where one spouse was a resident of West Virginia for the entire taxable year and the other spouse was a nonresident for the entire taxable year.
11.3.1.2. Subsection 11.3.1 does not apply in cases where either the husband or wife separately changed his or her residence during the taxable year. (For change of resident status during the taxable year, see Section 54 of these regulations).
11.3.1.3. Where an election to file a joint return is made under Subsection 11.3.1, the spouses shall file a resident West Virginia Personal Income Tax Return and will be treated in all respects as residents for purposes of West Virginia's personal income tax. Thus, said spouses are entitled to claim the number and amount of personal exemptions allowed resident individuals as set forth under W. Va. Code '11-21-16 and Section 16 of these regulations and any applicable credit for personal income tax paid another state as provided in W. Va. Code '11-21-20 and Section 20 of these regulations.
W. Va. Code R. § 110-21-12 West Virginia Adjusted Gross Income Of Resident Individual
12.1. General. - The West Virginia adjusted gross income of a resident individual means his federal adjusted gross income as defined in the laws of the United States for the taxable year with certain modifications. These modifications relate to items which are treated differently under the West Virginia Personal Income Tax Act than under the United States Internal Revenue Code of 1986, as amended. Subsection 12.2 below lists the modifications which increase West Virginia adjusted gross income in comparison with federal adjusted gross income, while Subsection 12.3 below lists the modification items which in such comparison reduce the West Virginia adjusted gross income. When the net amount of all applicable modifications, as set forth under W. Va. Code ''11-21-12 and 11-21-12a and Section 12b of these regulations, is added to or subtracted from federal adjusted gross income, the result is the taxpayer's West Virginia adjusted gross income.
12.1.1. Depreciation. - West Virginia follows the federal rules of depreciation; therefore, the depreciation of property for federal income tax purposes by methods permitted under the laws of the United States relating to the determination of income will be reflected automatically in West Virginia adjusted gross income, without modification, to the extent reflected in the taxpayer's federal adjusted gross income.
12.2. Modifications Increasing Federal Adjusted Gross Income. - The following items are to be added to federal adjusted gross income, unless already included therein, in arriving at the West Virginia adjusted gross income of a resident individual:
12.2.1. Interest income on obligations of any state other than the State of West Virginia, or interest income on obligations of a political subdivision of any state other than the State of West Virginia unless created by compact or agreement to which West Virginia is a party.
12.2.1.1. The amount to be added to federal adjusted gross income for the purposes of Subsection 12.2.1 is the gross amount of such interest, without reduction for incidental expenses incurred by the taxpayer, including, but not limited to custodian fees, investment advisory fees and other related expenses.
12.2.1.2. Example. - The gross amount of interest received by a resident individual on bonds of the State of California must be added to his federal adjusted gross income in arriving at his West Virginia adjusted gross income because this interest is subject to West Virginia income taxation but not to income taxation under federal law. If a resident individual receives interest income on obligations of the State of West Virginia, the interest is not subject to West Virginia income taxation because interest income on West Virginia obligations is specifically excluded from taxation by the provisions of the West Virginia Personal Income Tax Act.
12.2.1.3. Interest On Zero Coupon Bonds. - The amount to be added to federal adjusted gross income in the case of a zero coupon bond issued by any state other than the State of West Virginia, or interest on obligations of a political subdivision of any state other than the State of West Virginia shall be accrued ratably over the time period to maturity.
12.2.1.3.a. Example. - X, a resident of Elkins, West Virginia, purchases zero coupon public purpose bonds issued by the City of Columbus, Ohio. These bonds were purchased for fifteen hundred dollars ($1500) and mature in twenty (20) years at which time these bonds will pay their face value of four thousand dollars ($4000) to the investor. These bonds are tax-exempt for federal income tax purposes. For purposes of West Virginia's personal income tax, the holder of these bonds must recognize interest income through the following formula:
Face Value Less Purchase Price Years To Maturity Thus, X will have an increasing modification of one hundred twenty-five dollars ($125) ($4,000 - $1,500) . 20 = $125.
12.2.2. Interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States, which the laws of the United States exempt from federal income tax but not from state income taxes.
12.2.3. Interest on indebtedness incurred or continued to purchase or carry obligations or securities the income from which is exempt from West Virginia personal income tax, to the extent deductible in determining federal adjusted gross income.
12.2.4. The amount of a lump sum distribution received after December 31, 1989 for which the taxpayer has elected under Section 402(e) of the Internal Revenue Code of 1986, as amended, to be separately taxed for federal income tax purposes.
12.3. Modifications Reducing Federal Adjusted Gross Income. - The following items are to be subtracted from federal adjusted gross income in order to properly compute the West Virginia adjusted gross income of a resident individual:
12.3.1. Interest income on obligations of the United States and its possessions, to the extent includible in gross income for federal income tax purposes.
12.3.1.1. Example. - Interest on United States savings bonds is subject to federal income tax but not to state income tax. Therefore, the amount of such interest should be subtracted from federal adjusted gross income in computing West Virginia adjusted gross income.
12.3.2. Interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States or of the State of West Virginia to the extent includible in gross income for federal income tax purposes but exempt from state income taxes under the laws of the United States or of the State of West Virginia, including federal interest or dividends paid to shareholders of a regulated investment company under Section 852 of the Internal Revenue Code.
12.3.2.1. Example. - Dividend income received from Federal Reserve Banks for stock issued before March 28, 1942 should be subtracted from federal adjusted gross income. Also, interest on obligations of the Home Owner's Loan Corporation should be subtracted from federal adjusted gross income as a modification item in computing West Virginia adjusted gross income of a resident individual because an Act of Congress exempts this interest from state income taxation but not from federal income taxation. However, interest income received from a Federal Savings and Loan Association is not a proper modification and is taxable by West Virginia.
12.3.3. The amount of any refund or credit for overpayment of income taxes imposed by West Virginia, or any other taxing jurisdiction, to the extent properly included in gross income for federal income tax purposes.
12.3.3.1. This modification applies to any refund of income taxes which was actually included in federal adjusted gross income, whether the refund represented West Virginia income taxes, or the income taxes of another state, a political subdivision of any state or any foreign government.
12.3.3.2. This modification does not include any portion of the total refund which represents interest received. Such interest whether received in connection with a state, federal or other tax refund, is not exempt from tax because it is paid on a claim against the particular government, rather than paid on an obligation thereof arising from the exercise of its borrowing powers.
12.3.4. To the extent includible in gross income for federal income tax purposes, the first (1st) two thousand dollars ($2,000) of annuities, retirement allowances, returns of contributions and any other benefit received under the West Virginia Public Employees Retirement System, the West Virginia State Teachers Retirement System, all forms of military retirement, including regular armed forces, reserves and national guard and any federal retirement system to which Title 4 U.S.C. 111 is applicable, including survivorship annuities derived from any of the foregoing.
12.3.5. To the extent includible in gross income for federal income tax purposes, all retirement income received in the form of pensions and annuities under any West Virginia police, West Virginia firemen's retirement system or the West Virginia Department of Public Safety Death, Disability and Retirement fund, including any survivorship annuities derived from any of the foregoing.
12.3.6. Federal adjusted gross income in the amount of eight thousand dollars ($8,000) received from any source by any person who has obtained the age of sixty-five (65) on or before the last day of the taxable year or by any person certified by proper authority as permanently and totally disabled, regardless of age, on or before the last day of the taxable year, to the extent includible in federal adjusted gross income for federal tax purposes: Provided, That if a person has a medical certification from a prior year and is still permanently and totally disabled, the Tax Commissioner shall accept as proof of disability either a copy of the original medical certification or a copy of the form filed for the federal disability income tax exclusion.
12.3.6.1. Limitations On Application Of Subsection 12.3.6 Modification. - No eight thousand (8,000) dollar deduction for having attained the age of sixty-five (65), or for disability, shall be allowed where any one or combination of the item modifications set forth in the following Subsections 12.3.6.1.a through 12.3.6.1.d total eight thousand dollars ($8,000) or more per person. Where the total of the item modifications set forth in the following Subsections 12.3.6.1.a through 12.3.6.1.d is less than eight thousand dollars ($8,000) per person, the total deduction allowed for all gross income received by such person for age, or disability, shall be limited to the difference between eight thousand dollars ($8,000) and the sum total of the specified item modifications.
12.3.6.1.a. The modification for interest income on obligations of the United States and its possessions as detailed under Subsection 12.3.1 of this regulation.
12.3.6.1.b. The modification for interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States, or of the State of West Virginia, as detailed under Subsection 12.3.2 of this regulation.
12.3.6.1.c. The two thousand (2,000) dollar modification for annuities, retirement allowances, returns of contributions and any other benefit received under the West Virginia Public Employees Retirement System, the West Virginia State Teachers Retirement System, all forms of military retirement and any federal retirement system to which Title 4 U.S.C. 111 is applicable, including survivorship annuities derived from any of the foregoing, as detailed under Subsection 12.3.4 of this regulation.
12.3.6.1.d. The modification for all retirement income received in the form of pensions and annuities under any West Virginia police or firemen's retirement system or the West Virginia Department of Public Safety Death, Disability and Retirement Fund, including survivorship annuities derived from any of the foregoing, as detailed under Subsection 12.3.5 of this regulation.
12.3.6.2. Examples Of Limitations On Application Of Subsection 12.3.6 Modification.
Example 1. - The taxpayer, a resident of West Virginia for income tax purposes, is a retired police officer, sixty-nine (69) years of age, who, during tax year 1989, received a twelve thousand (12,000) dollar pension from a West Virginia police retirement system. This taxpayer is entitled to exclude his total pension income in determining his West Virginia adjusted gross income pursuant to W. Va. Code '11-21-12(c)(6) and Subsection 12.3.5 of this regulation. Because the taxpayer's retirement income exceeds eight thousand dollars ($8,000), he is not permitted any decreasing modification for having attained the age of sixty-five (65).
Example 2. - The taxpayer, a resident of West Virginia for income tax purposes, is a retired teacher who qualifies as permanently and totally disabled. This taxpayer's income for tax year 1989 consists of twelve thousand dollars ($12,000) in retirement income from the West Virginia State Teachers Retirement System, and three thousand dollars ($3,000) in interest income from United States Savings Bonds. In computing this taxpayer's West Virginia adjusted gross income two thousand dollars ($2,000) of the twelve thousand (12,000) dollar teachers retirement system income will be excluded pursuant to W. Va. Code '11-21-12(c)(5) and Subsection 12.3.4 of this regulation and all of the three thousand dollars ($3,000) of interest income will be excluded pursuant to Subsection 12.3.2 of this regulation. Because this taxpayer is disabled, he is potentially entitled to modify his adjusted gross income by eight thousand dollars ($8,000). The amount of the decreasing modification for disability is, however, restricted for this taxpayer by the application of the limitation set forth under Subsection 12.3.6.1 of this regulation. Therefore, the taxpayer's disability modification is three thousand dollars ($3,000) because this is the difference between eight thousand dollars ($8,000) and the sum of the modifications for retirement income and interest income.
12.3.7. Federal adjusted gross income in the amount of eight thousand dollars ($8,000) received from any source by the surviving spouse of any person who had attained the age of sixty-five (65) or who had been certified as permanently and totally disabled to the extent includible in federal adjusted gross income for federal income tax purposes.
12.3.7.1. Limitations On Application Of Subsection 12.3.7 Modification. - No eight thousand (8,000) dollar deduction for being the surviving spouse of a person who had attained the age of sixty-five (65) or who had been qualified as disabled shall be allowed where any one or combination of the item modifications set forth in the following Subsections 12.3.7.1.a through 12.3.7.1.e total eight thousand dollars ($8,000) or more. Where the total of the item modifications set forth in the following Subsections 12.3.7.1.a through 12.3.7.1.e is less than eight thousand dollars ($8,000) per person, the total deduction allowed for all gross income received by such surviving spouse shall be limited to the difference between eight thousand dollars ($8,000) and the sum of the specified item modifications.
12.3.7.1.a. The modification for interest income on obligations of the United States and its possessions as detailed under Subsection 12.3.1 of this regulation.
12.3.7.1.b. The modification for interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States, or of the State of West Virginia, as detailed under Subsection 12.3.2 of this regulation.
12.3.7.1.c. The two thousand (2,000) dollar modification for annuities, retirement allowances, returns of contributions and any other benefit received under the West Virginia Public Employees Retirement System, the West Virginia State Teachers Retirement System, all forms of military retirement and any federal retirement system to which Title 4 U.S.C. 111 is applicable, including survivorship annuities derived from any of the foregoing as detailed under Subsection 12.3.4 of this regulation.
12.3.7.1.d. The modification for all retirement income received in the form of pensions and annuities under any West Virginia police or firemen's retirement system or the West Virginia Department of Public Safety Death, Disability and Retirement Fund, including survivorship annuities derived from any of the foregoing, as detailed under Subsection 12.3.5 of this regulation.
12.3.7.1.e. The eight thousand (8,000) dollar modification for any person who has attained the age of sixty-five (65) or qualified as disabled as detailed under Subsection 12.3.6 of this regulation.
12.3.7.2. Surviving Spouse Defined. - For purposes of W. Va. Code '11-21-12 and Section 12 of these regulations, surviving spouse means a taxpayer whose spouse died during the taxable year prior to the taxable year for which the annual return is being filed, and who has not remarried at any time before the end of the taxable year for which the annual return is being filed.
12.3.7.2.a. During the tax year in which the death of a spouse occurs, either a joint income tax return or separate income tax returns will be filed, and any applicable modifications to be claimed will not be affected by the death of the spouse.
12.3.7.2.b. The surviving spouse modification is a one time modification which is to be claimed on the annual income tax return in the year following the year in which the death of the spouse occurs.
12.3.7.2.c. No modification is permitted under Subsection 12.3.7 of this regulation where a spouse remarries at any time prior to December 31 of the tax year in which the surviving spouse modification may be claimed.
12.3.7.3. Examples Of Limitations On Application Of Surviving Spouse Modification.
Example 1. - The taxpayer, a resident of West Virginia for income tax purposes, is a surviving spouse (as defined in Subsection 12.3.7.2) of a person who had attained the age of sixty-five (65). This taxpayer's income for tax year 1989, the year in which the one time surviving spouse modification is applicable, consists of a survivorship annuity in the amount of nine thousand dollars ($9,000) from a West Virginia firemen's retirement system and wages in the amount of twelve thousand dollars ($12,000). This taxpayer is entitled to exclude the total amount of the West Virginia firemen's retirement system survivorship annuity in determining her West Virginia adjusted gross income pursuant to W. Va. Code '11-21-12(c)(6) and Subsection 12.3.5 of this regulation. Because the taxpayer's decreasing modification for the survivorship annuity exceeds eight thousand dollars ($8,000), no modification is permitted for being the surviving spouse of a person who had attained the age of sixty-five (65).
Example 2. - The taxpayer, a resident of West Virginia for income tax purposes, is a surviving spouse (as defined in Subsection 12.3.7.2) of a person who had been certified as permanently and totally disabled. This taxpayer's income for tax year 1989, the year in which the one time surviving spouse modification is applicable, consists of thirty thousand dollars ($30,000) in wages and two thousand dollars ($2,000) of interest income from United States Savings Bonds. In computing West Virginia adjusted gross income, a two thousand (2,000) dollar decreasing modification will be made pursuant to Subsection 12.3.1 of this regulation for the interest income. Thus, the taxpayer is entitled to a six thousand (6,000) dollar decreasing modification for being the surviving spouse of a disabled person because this is the difference between eight thousand dollars ($8,000) and the sum of the decreasing modification for interest income on obligations of the United States.
12.3.8. The amount of any lottery prize awarded by the West Virginia State Lottery Commission to the extent properly included in gross income for federal income tax purposes.
12.3.9. Any other income which West Virginia is prohibited from taxing under the laws of the United States.
12.4. Modification For West Virginia Fiduciary Adjustment. - Where a resident individual is a beneficiary of an estate or trust, his federal adjusted gross income shall be increased or decreased (as the case may be) by his share of the West Virginia fiduciary adjustment applicable to the estate or trust.
12.4.1. This fiduciary adjustment is the net amount of modifications relating to estate or trust items of income, gain, loss or deduction as computed by the fiduciary on the return for the estate or trust. The fiduciary is responsible for allocating to each beneficiary his proportionate share of the fiduciary adjustment. (See Section 19 of these regulations).
12.4.2. Each beneficiary, on his individual West Virginia Personal Income Tax Return is required to apply his share of the fiduciary adjustment as a modification of his federal adjusted gross income in order to determine his West Virginia adjusted gross income.
12.5. Partners And S Corporation Shareholders. - For the amounts of modifications to be made by a resident partner or resident S corporation shareholder which relate to items of income, gain, loss or deduction of a partnership or S corporation in determining West Virginia adjusted gross income, see Sections 17 and 17a of these regulations.
12.6. Husband And Wife. - Where a husband and wife determine their federal income tax liability on a joint return but determine their West Virginia income tax liability for a particular tax year on separate returns, they shall determine their West Virginia adjusted gross incomes in the same manner as if the federal adjusted gross income of each had been determined on separate federal returns.
W. Va. Code R. § 110-21-12a Additional Modification Reducing Federal Adjusted Gross Income. 12a.1. In addition to amounts authorized to be subtracted from federal adjusted gross income pursuant to W. Va. Code '11-21-12(c), any payment made under a tuition prepayment contract or tuition trust account, as provided under W. Va. Code '18-30-14, shall also be allowed as a modification reducing federal adjusted gross income to the extent that the amount of such payment is included therein. 12a.1.1. Under W. Va. Code ''11-21-12a and 18-30-14, a purchaser is entitled to a modification decreasing federal adjusted gross income for State personal income tax purposes for the following payments made by such purchaser in the tax year:
(1) The amount of payment made under a tuition prepayment contract or tuition trust account contract, or both; and (2) The amount of payment made under a contract with a private sector investment manager, broker-dealer or agent, approved by the Securities Division of the West Virginia State Auditor or the federal Securities and Exchange Commission, for the private placement of contracts under Article 30, Chapter 18 of the West Virginia Code, when such contract has been certified and approved by the West Virginia Education Tuition Trust Board of Directors. 12a.1.2. The West Virginia Higher Education Tuition Trust is not authorized to enter into any tuition prepayment contracts or tuition trust account contracts until such time as it has received a ruling or opinion from the Internal Revenue Service regarding the federal tax consequences of any benefits or refunds received from the Trust under the applicable contract. In the event that the Internal Revenue Service determines that any benefits or refunds received from the Trust arising from either type of contract must be included in federal adjusted gross income and thus subject to federal taxation, such benefits and refunds will likewise be subject to State personal income taxation. Payments, however, made to the Trust are exempt from State personal income taxation as provided under Subsection 12a.1.1 of this regulation.
W. Va. Code R. § 110-21-12b Modification For The Purchase Of Revenue Bonds Under An Individual Higher Education Savings Plan Program. 12b.1. Pursuant to W. Va. Code '18-9D-5, the State School Building Authority is authorized to offer to the general public one or more individual higher education savings plan programs. The amount which an individual invests during his or her taxable year in the purchase of revenue bonds issued under W. Va. Code '18-9D-5 shall be allowed as a modification decreasing federal adjusted gross income, to the extent such amount is included therein, in order to arrive at West Virginia taxable income, except as provided under Subsection 12b.1.2. 12b.1.1. The interest which an individual earns on revenue bonds issued under W. Va. Code '18-9D-5 shall not be subject to the imposition of personal income tax under Article 21, Chapter 11 of the West Virginia Code, except as provided in Subsection 12b.1.2. 12b.1.2. If the owner of a bond purchased under W. Va. Code '18-9D-5 sells such bond during a taxable year and does not spend the entire amount for tuition and fees, books, reasonable room and board, and child care to attend an institution which is accredited to award higher education degrees by the West Virginia Board of Regents, or any successor thereto, or by its equivalent in another state, the proceeds of the sale not so spent shall be taxed under Article 21, Chapter 11 of the West Virginia Code, by application of the highest marginal rate applicable to the taxpayer to the amount not so spent. 12b.1.2.1. Penalty. - Where the owner of a bond purchased under W. Va. Code '18-9D-5 sells such bond and does not spend the entire amount for the purposes set forth in Subsection 12b.1.2 of this regulation, there is imposed, in addition to any personal income tax otherwise due, a penalty equal to ten percent (10%) of the tax due. 12b.1.2.1.a. This penalty may be waived by the Tax Commissioner if the taxpayer shows that any failure to spend the sale proceeds of the bond in accordance with Subsection 12b.1.2 was due to reasonable cause and not due to willful neglect. 12b.1.3. The amount of tax and penalty, where applicable, shall be due and payable on the fifteenth (15th) day of the fourth (4th) month of the taxable year immediately succeeding the taxable year in which the bond was sold. 12b.2. Reports. - The West Virginia School Building Authority and the trustee of an individual higher education savings plan program shall make such reports regarding such bonds to the Tax Commissioner and to the individuals of record who own the bonds with respect to bond principal and interest (and the years to which they relate) and such other matters as the Tax Commissioner may require. The reports required under W. Va. Code '18-9D-5(f) shall be filed with the Tax Commissioner at least annually, at such time and in such manner as the Tax Commissioner may require
W. Va. Code R. § 110-21-13 West Virginia Deduction Of Resident Individual Abolished
The West Virginia Personal Income Tax Act, as set forth under W. Va. Code '11-21-1 et seq., contains no provision for the allowance of either a standard deduction or itemized deductions for a resident individual.
W. Va. Code R. § 110-21-14 Reserved For Future Use
W. Va. Code R. § 110-21-15 Reserved For Future Use
W. Va. Code R. § 110-21-16 West Virginia Personal Exemptions Of A Resident Individual
16.1. In General. - A resident individual is allowed a West Virginia exemption of two thousand dollars ($2,000) for each exemption for which said individual is entitled to a deduction for the taxable year for federal income tax purposes. The number of personal exemptions to be claimed on a resident individual's State income tax return shall be the same as the number of personal exemptions claimed on his or her federal income tax return unless otherwise provided in this regulation.
16.2. Husband And Wife.
16.2.1. Where a husband and wife determine their federal income tax liability by filing a joint federal return and also determine their West Virginia income tax liability by filing a joint State return, they shall be entitled to claim the same number of personal exemptions on their joint State return as claimed on their joint federal return for the taxable year.
16.2.2. Where a husband and wife determine their federal income tax liability by filing separate federal returns and also determine their West Virginia income tax liability by filing separate State returns, each spouse shall be entitled to claim the same number of personal exemptions on his or her separate State return as claimed on the respective separate federal return for the taxable year.
16.2.3. Where a husband and wife determine their federal income tax liability by filing a joint federal return but determine their West Virginia income tax liability by filing separate State returns, each spouse shall be entitled to claim a West Virginia personal exemption for each federal exemption to which he or she would have been entitled to claim had their federal income taxes been determined on separate federal returns for the taxable year.
16.2.4. The amount of each West Virginia exemption allowed under Subsections 16.2.1, 16.2.2 or 16.2.3 shall be two thousand dollars ($2,000).
16.3. Surviving Spouse.
16.3.1. Additional Exemption. - A surviving spouse shall be allowed one additional exemption of two thousand dollars ($2,000) for each of the two (2) taxable years which follow the year in which the death of the spouse occurred.
16.3.2. Surviving Spouse Defined. - For purposes of W. Va. Code '11-21-16 and this regulation surviving spouse means a taxpayer whose spouse died during the taxable year prior to the taxable year for which the annual return is being filed and who has not remarried at any time before the end of the taxable year for which the annual return is being filed.
16.3.3. Example. - Taxpayer's Spouse dies on January 15, 1988. As of December 31, 1989, the taxpayer has not remarried. For tax year 1989 this taxpayer is entitled to claim an additional exemption as provided under Subsection 16.3.1. This additional exemption will also be available for tax year 1990 provided that this taxpayer has not remarried as of December 31, 1990.
16.4. $500 Exemption For Certain Dependents. - Notwithstanding any provision in this regulation to the contrary, a resident individual whose exemption for federal income tax purposes is zero by virtue of Section 151(d)(2) of the Internal Revenue Code of 1986, as amended, is entitled to claim a single West Virginia exemption in the amount of five hundred dollars ($500).
16.4.1. As a general rule, a resident individual is entitled to claim the same number of exemptions on his or her State income tax return as claimed on the federal income tax return for the taxable year. Under Section 151(d)(2) of the Internal Revenue Code of 1986, as amended, an individual with respect to whom a deduction is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins is prohibited from claiming an exemption for himself or herself on his or her federal return. Where Section 151(d)(2) of the Internal Revenue Code is applicable, a West Virginia exemption of five hundred dollars ($500) shall be allowed.
W. Va. Code R. § 110-21-17 Resident Partners
17.1. Definition. - For purposes of Article 21, Chapter 11 of the Code of West Virginia, 1931, as amended, a resident partner with respect to a taxable year is an individual, trust, or estate which is domiciled in the State of West Virginia, and otherwise qualifies both as a resident individual under W. Va. Code '11-21-7 and is a partner in a partnership.
17.2. Partner's Modifications. - In determining the West Virginia adjusted gross income of a resident partner, any modification referred to in W. Va. Code '11-21-12 and in Section 12 of these regulations which relates to a partnership item of income, gain, loss or deduction must be made with respect to the distributive share of the resident partner in such item as determined for federal tax purposes and filed upon such partner's federal income tax return for the tax year. Such modification, if applicable, must be made regardless of whether in the partner's federal return the partnership item is reflected on his distributive share of partnership income or is one of the items separately reported.
17.2.1. The modifications covered by this regulation do not apply to any item which, for federal income tax purposes, is not treated as a partnership item.
17.2.2. In determining West Virginia adjusted gross income, a resident partner combines the modification relating to his share of any partnership item with the modification relating to any similar item from sources other than the partnership. For example, if a portion of the partnership income constitutes interest on bonds of another state, and the nonpartnership income of a resident member of the partnership also includes similar bond interest, the resident partner must make an increasing modification to his federal adjusted gross income for both his distributive share of the partnership income from such bonds and the interest from similar bonds which he received individually.
17.2.3. If a modification relates to an item that is not taken into account for federal income tax purposes, and consequently does not appear in federal adjusted gross income, such as interest on bonds of another state, each partner's modification relating to that item is governed by the rules of this Subsection. In such cases, the partner's modification is determined by his distributive share of the partnership's ordinary income or loss.
17.2.3.1. Example. - X and Y are partners in a motorcycle sales and repair business. The Articles of Partnership provide that X is entitled to seventy-five percent (75%) and Y is entitled to twenty-five percent (25%) of the partnership profits or losses. In 1989, the partnership received four thousand dollars ($4,000) of interest income on United States obligations (Series E Bonds). This item is subject to a decreasing modification as such income is in federal adjusted gross income and is prohibited from being subjected to state income taxation by federal law. The amount of each partner's modification is computed by allowing seventy-five percent (75%) of the interest income to X and twenty-five percent (25%) to Y; therefore, the modification is to be distributed in the same proportion as is profit and loss. Each partner is entitled to his allocable share of the modification and claims the modification on his individual return. X will claim a three thousand (3,000) dollar decreasing modification on his West Virginia Personal Income Tax Return, and Y will claim a one thousand (1,000) dollar decreasing modification on his West Virginia Personal Income Tax Return.
17.2.4. The West Virginia Personal Income Tax Return provides the appropriate spaces to make the applicable additions and subtractions of modification items to or from federal adjusted gross income to arrive at an individual's West Virginia adjusted gross income.
17.3. Character Of Items. - In order that the modifications may be properly applied to partnership items of income, gain, loss or deduction, whenever applicable, each of such partnership items shall have the same character for a partner for purposes of the West Virginia Personal Income Tax Act as that item did for that partner for federal income tax purposes. Where an item is not characterized for federal income tax purposes but is reflected in the computation of the income of the partnership, such item, if a gain or a loss, shall have the same character for a partner as if realized directly from the source from which realized by the partnership or, if an expense, incurred in the same manner as incurred by the partnership. If a partnership item is not required to be taken into account for federal tax purposes (such as interest on bonds of a state or of Puerto Rico), the character of the item for a partner for West Virginia income tax purposes is the same as if he, or she, had individually realized or incurred the item directly.
17.4. West Virginia Tax Avoidance Or Evasion Through Partnership Form Of Business.
17.4.1. If a partnership agreement provides for a special allocation among the partners of any item of partnership income, gain, loss or deduction, and federal law or regulations require that such provision with respect to partners' distributive shares be disregarded, for federal income tax purposes, because the principal purpose of such provision is the avoidance or evasion of federal income tax, as such special allocation otherwise lacks substantial economic effect as that term is defined and applied in Treasury Regulation 1.704-1, each partner's distributive share of such item must be determined in accordance with his share of the partnership's ordinary income or loss as is determined for federal income tax purposes. This treatment and distribution of the item is reflected in each partner's federal adjusted gross income and is therefore already in his or her West Virginia adjusted gross income, even though in a particular case no West Virginia tax avoidance or evasion may be involved.
17.4.2. In certain cases, however, a provision for special allocation does not have as its principal purpose the avoidance or evasion of federal income tax, but has as its principal purpose the avoidance or evasion of West Virginia income tax. In such an instance, any such provision shall be disregarded and each partner's share of the pertinent item of partnership-income, gain, loss or deduction shall be determined in accordance with his share of the partnership's ordinary income or loss.
17.4.3. Whether the principal purpose of a special allocation of an item is the avoidance or evasion of West Virginia income tax depends upon all surrounding facts and circumstances. Among the relevant circumstances to be considered are: whether the partnership, or a partner individually, has a business purpose for the allocation; whether the allocation has "substantial economic effect", that is, whether the allocation may actually affect the dollar amount of the partner's shares of the total partnership income or loss independently of West Virginia income tax consequences; whether the related items of income, gain, loss or deduction from the same source are subject to the same allocation; whether the allocation was made without recognition of normal business factors and only after the amount of the specially allocated item could reasonably be estimated; the duration of the allocation; and the overall tax consequences of the allocation and any other factors from Treasury Regulation 1.704-1.
17.4.4. Example. - A and B are equal partners in a cleaning business. However, the partnership agreement allocates to A, who is in a higher West Virginia income tax bracket than B, all interest on bonds of the State of West Virginia held by the partnership and allocates to B all interest on bonds of other states. The partnership agreement also provides that any difference in the amounts of such interest allocated to each partner is to be equalized out of other partnership income. Since the purpose and effect of this allocation is solely to reduce the West Virginia income tax of A without actually affecting the shares of A and B in partnership income, such allocation is not recognized. Accordingly, in determining their West Virginia adjusted gross income, A and B will each add to his federal adjusted gross income one-half (1/2) of the interest from bonds of states other than West Virginia under Section 12 of these regulations.
W. Va. Code R. § 110-21-17a Resident Shareholders Of S Corporations. 17a.1. Resident Shareholder Defined. - For purposes of Article 21, Chapter 11 of the Code of West Virginia, 1931, as amended, a resident shareholder is, for any taxable year, an individual, trust or estate which is domiciled in the State of West Virginia, and which qualifies as a resident individual under W. Va. Code '11-21-7 and who is also a shareholder in a small business corporation for which a valid election under Section 1362 of the Internal Revenue Code is in effect for such year. 17a.2. S Corporation Shareholder's Modifications. - in determining West Virginia adjusted gross income and West Virginia taxable income of a resident S corporation shareholder any modification described in W. Va. Code '11-21-12 (b), (c) or (d), which relates to an item of income, gain, loss or deduction shall be made in accordance with the S corporation shareholder's pro rata share, for federal income tax purposes, of the items to which the modifications relate. Where a shareholder's pro rata share of any such item is not required to be taken into account separately for federal income tax purposes, the shareholder's pro rata share of such item shall be the pro rata share that such shareholder showed on his or her federal tax return for the tax year in question for S corporation taxable income or loss generally. 17a.2.1. Example. - Wilson is a shareholder in an S corporation, owning sixty percent (60%) of the outstanding shares. In 1989, the S corporation received one thousand dollars ($1,000) interest income on United States obligations and five hundred dollars ($500) interest income on West Virginia bonds. These items are subject to modification. The amount of Wilson's modification is computed by allowing him sixty percent (60%) of the fifteen hundred dollars ($1,500) of the interest income. Each shareholder is entitled to his or her allocable share of modification based upon their ownership percentage. 17a.3. Character Of Items. - Each item of S corporation income, gain, loss or deduction has the same character for an S corporation shareholder on his or her West Virginia Personal Income Tax Return as that item did on such shareholder's federal income tax return for any given taxable year. Where an item is not characterized for federal income tax purposes, it shall have the same character for the S corporation shareholder as if realized by such shareholder directly from the source from which realized by the S corporation, or as if it was incurred by the shareholder in the same manner as incurred by the S corporation
W. Va. Code R. § 110-21-18 West Virginia Taxable Income Of Resident Estate Or Trust
18.1. General. - The income of a resident estate or trust is subject to taxation under the provisions of the West Virginia Personal Income Tax Act. The rates referred to in Subsection 4.1 of these regulations are to be applied against the taxable income of the estate or trust in determining the personal income tax liability of such estate or trust.
18.1.1. The West Virginia taxable income of a resident estate or trust means its federal taxable income as defined pursuant to the laws of the United States for the taxable year with certain modifications. Thus, the federal taxable income of the estate or trust is the starting point for computing the West Virginia taxable income. This method of computing the West Virginia taxable income of an estate or trust applies, for example, in:
(1) the computation of the West Virginia taxable income of an estate for the first taxable period thereof starting with the day following the decedent's death, and (2) the computation of the West Virginia taxable income for the final taxable period of an estate or trust ending at the date of termination thereof.
18.1.1.1. The computation of the taxable income of a resident decedent on the final return ending with the date of his death is computed in the same manner as the taxable income of a resident individual.
18.2. Modification of Federal Taxable Income. - In order to determine the West Virginia taxable income of a resident estate or trust, two (2) modifications must be made. These modifications are the exemption modification and the fiduciary adjustment.
18.2.1. Exemption Modification. - Each estate or trust is allowed a West Virginia exemption of six hundred dollars ($600). An estate or trust is not allowed any exemption for dependents.
18.2.1.1. In computing the West Virginia taxable income of a resident estate or trust six hundred dollars ($600) shall be subtracted from the estate's or trust's federal taxable income and there shall be added to the estate's or trust's federal taxable income the amount of its federal deduction for a personal exemption.
18.2.2. Fiduciary Adjustment. - The applicable modifications as described in Subsections 12.2 and 12.3 of these regulations relating to items of income, gain or deduction may be applicable against the federal taxable income of the estate or trust when computing its West Virginia taxable income. These modifications shall be first combined in a single net amount. This amount, which may be a positive or negative, constitutes the fiduciary adjustment. After this amount is computed, it is then allocated in the manner described under W. Va. Code '11-21-19 and Section 19 of these regulations. The amount, which is allocable to the fiduciary, is added to or subtracted from the federal taxable income of the estate or trust (depending on whether it is a positive or negative number) to arrive at the West Virginia taxable income of such estate or trust.
W. Va. Code R. § 110-21-19 Share Of Resident Estate, Trust, Or Beneficiary In West Virginia Fiduciary Adjustment
19.1. General. - Whenever a resident estate or trust realizes items of income or gain, or incurs items of loss or deduction, which give rise to one or more of the modifications described in Subsections 12.2 and 12.3 of these regulations, an adjustment must be made in order to determine the West Virginia taxable income of the resident estate or trust. An adjustment must also be made in order to determine the West Virginia adjusted gross income of a resident beneficiary of any estate or trust in the amount of the share of each in the West Virginia fiduciary adjustment. For example, where an estate or trust receives interest on obligations of the United States, such interest is includible in federal gross income but is not subject to West Virginia personal income tax by reason of the modification provided under W. Va. Code '11-21-12(c)(1). Where such modification is made, it becomes necessary to determine how much of the modification is to be taken into account in determining the West Virginia taxable income of the estate or trust taxable to the fiduciary and how much of the modification is to be allocated to the resident beneficiaries.
19.1.1. This regulation prescribes the methods to be employed in dividing among the fiduciary and the beneficiaries, on an equitable basis, the particular items of income, gain, loss and deduction which give rise to modifications for West Virginia personal income tax purposes.
19.1.2. These modifications are combined into a single net number. This number, which may be a negative or positive, is termed the "West Virginia Fiduciary Adjustment". After this number is computed, it is then divided among the fiduciary and the beneficiaries in the manner described in Subsection 19.3 of this regulation.
19.1.3. The share of a resident estate or trust in the West Virginia fiduciary adjustment is then added to or subtracted from the federal taxable income of the estate or trust in arriving at its West Virginia taxable income. Similarly, the share of a resident beneficiary in the West Virginia fiduciary adjustment is then added to or subtracted from his federal adjusted gross income in arriving at his West Virginia adjusted gross income.
19.1.4. A nonresident trust, estate or beneficiary must compute West Virginia taxable income in accordance with the provisions of W. Va. Code '11-21-39 and Section 39 of these regulations.
19.2. Definition Of West Virginia Fiduciary Adjustment. - The West Virginia fiduciary adjustment is the net amount of the modifications described in Subsections 12.2 and 12.3 of these regulations which relate to items of income, gain, loss or deduction of the estate or trust.
19.2.1. Example. - A resident trust had the following modifications for 1988:
Additions:
(1) Interest income on bonds of the State of California. (See Subsection 12.2.1)...$2,000 Total Additions Modification...$2,000 Subtractions: (1) Interest income on United States Series E Savings Bonds. (See Subsection 12.3.1)...$500 (2) Interest income on bonds of the State of West Virginia. (See Subsection 12.3.2)...$200 Total Subtractions Modification...$700 West Virginia Fiduciary Adjustment...$1,300
19.2.1.1. Because the additions are in excess of the subtractions, the West Virginia fiduciary adjustment is a "positive number" and is allocated between the trust and its beneficiaries as provided in Subsections 19.3 or 19.4 of this regulation.
19.2.1.2. If, in the example above, the subtractions had exceeded the additions, the West Virginia fiduciary adjustment would be a negative number and would be similarly allocated.
19.3. Allocation Of West Virginia Fiduciary Adjustment Between The Trust And Its Beneficiaries.
19.3.1. In General. - As a general rule, the percentage share of each beneficiary and of a fiduciary of an estate or trust in the West Virginia fiduciary adjustment is equal to the percentage share of the beneficiary of the fiduciary in the federal distributable net income of the estate or trust. Exceptions to this general rule are set forth under Subsections 19.3.2 and 19.4 of this regulation.
19.3.1.1. Example. - The West Virginia fiduciary adjustment with respect to an estate is a positive number which equals one thousand dollars ($1,000). The estate has federal distributable net income of five thousand dollars ($5,000) and makes distributions of three thousand dollars ($3,000) to A and fifteen hundred dollars ($1,500) to B, both of whom are resident beneficiaries. The foregoing distributions are considered to be made from distributable net income for federal income tax purposes. The estate makes no other distributions during the taxable year. Since the distributions to A represent sixty percent (60%) of federal distributable net income, A is required to report sixty percent (60%) of the West Virginia fiduciary adjustment of the estate, or six hundred dollars ($600) on his West Virginia Personal Income Tax Return. Similarly, B is required to report thirty percent (30%) of the West Virginia fiduciary adjustment, or three hundred dollars ($300), on his West Virginia return. The remaining ten percent (10%) of the West Virginia fiduciary adjustment, or one hundred dollars ($100), is required to be reported by the fiduciary on the West Virginia Fiduciary Income Tax Return for the estate.
19.3.1.1.a. If in the foregoing example, B was a nonresident beneficiary, the computation of the shares of the resident beneficiary A and of the fiduciary in the West Virginia fiduciary adjustment would remain the same, but the thirty percent (30%) allocated to B would be reported by him only to the extent provided in Section 39 of these regulations.
19.3.1.1.b. Where the separate shares of beneficiaries of a trust are to be treated, for federal income tax purposes, as separate trusts for the purpose of determining the amount of federal distributable net income allocable to the beneficiary and to the fiduciary, such separate shares of federal distributable net income shall determine the percentage shares of the beneficiaries and of the fiduciary in the West Virginia fiduciary adjustment.
19.3.2. Special Rule Where Estate Or Trust Has No Federal Distributable Net Income. - If the federal distributable net income of an estate or trust for the taxable year is zero or a negative number, the share of each beneficiary in the West Virginia fiduciary adjustment is in proportion to his share of the income of the estate or trust for the taxable year, determined under local law or the governing instrument. The beneficiary's share of such income consists of the amount thereof which is required to be distributed to him during the taxable year, or which is distributed to him during the taxable year although not required to be distributed currently. Any balance of the West Virginia fiduciary adjustment not so allocable to the beneficiary is allocable to the estate or trust.
19.3.2.1. Examples.
Example 1. - A trust has income for trust accounting purposes of ten thousand dollars ($10,000). The West Virginia fiduciary adjustment with respect to the trust is a "positive" number which equals five thousand dollars ($5,000). The trust pays trustee's commissions and other expenses of a formal accounting chargeable to principal which, for the purpose of this example, are deductible for federal and West Virginia income tax purposes and have the effect of reducing federal distributable net income exactly to zero.
Under the trust instrument, four thousand dollars ($4,000) of income is required to be distributed to A. An additional three thousand dollars ($3,000) is paid to A, pursuant to the discretionary authority of the trustee out of the balance of the total income of ten thousand dollars ($10,000), and the remaining three thousand dollars ($3,000) is accumulated by the trust. A's seven thousand dollar ($7,000) share is therefore seventy percent (70%) of the income for trust accounting purposes. Accordingly, A is required to add seventy percent (70%) of the West Virginia fiduciary adjustment of five thousand dollars ($5,000), or thirty-five hundred dollars ($3,500), to his federal adjusted gross income in determining his West Virginia adjusted gross income, as provided in Subsection 12.4. The remaining fifteen hundred dollars ($1,500) is the trust's share in the West Virginia fiduciary adjustment, which is required to be added to the federal taxable income of the trust in determining its West Virginia taxable income, as provided under Subsection 18.2.
Example 2. - The facts are the same as in Example 1 except that the West Virginia fiduciary adjustment is a "negative" number which equals five thousand dollars ($5,000). In computing his West Virginia adjusted gross income, the beneficiary is therefore permitted to subtract thirty-five hundred dollars ($3,500) which is his share in the West Virginia fiduciary adjustment, from his federal adjusted gross income. The trust is permitted to subtract fifteen hundred dollars ($1,500), which is its share in the West Virginia fiduciary adjustment, from its federal taxable income. In this particular case, the trust will derive no West Virginia taxable benefit from this subtraction except in a case where it has nondistributable capital gains or extraordinary dividends allocated to principal.
19.4. Alternative Apportionment Of West Virginia Fiduciary Adjustment Between The Estate Or Trust And Its Beneficiaries. - Where the methods provided under Subsection 19.3 will not result in a fair and equitable apportionment of the West Virginia fiduciary adjustment, the fiduciary may, upon application, adopt and use on a return for the taxable year of the estate or trust, any other method which is equitable, subject to such terms and conditions as the State Tax Commissioner may require.
19.4.1. No alternative method shall be approved which results in the inclusion in the West Virginia adjusted gross income of the beneficiary an amount greater than the amount of the trust income paid, credited, or required to be distributed to such beneficiary for the taxable year.
19.4.2. Any fiduciary whose alternative method of apportionment under W. Va. Code '11-21-19(d) and this regulation is approved, must attach to the West Virginia Fiduciary Income Tax Return for the particular year a signed statement containing a summary of the facts relied upon and used to support the position that the alternative allocation, rather than the allocation prescribed in Subsection 19.3 is fair and equitable.
W. Va. Code R. § 110-21-20 Credit For Income Tax Of Another State
20.1. General. - A West Virginia resident may be allowed a credit against his West Virginia personal income tax for any personal income tax imposed for the taxable year by another state of the United States or the District of Columbia, upon income derived from sources within the other state or the District. Where a resident estate or trust receives income from another state of the United States or the District of Columbia, then the estate or trust is entitled to a similar credit, computed in the same manner and subject to the same exceptions and limitations as in the case of a resident individual. No credit, however, shall be allowed for personal income taxes imposed by a county, municipality, borough, township or any other political subdivision of a state or for any taxes other than personal income taxes.
20.1.1. The amount of the credit allowed under W. Va. Code '11-21-20(a) and Subsection 20.1 above shall be determined in accordance with forms and instructions provided by the Tax Commissioner.
20.1.1.1. The Tax Commissioner may by instruction or otherwise require any resident individual, estate or trust to provide evidence, including but not limited to, a copy of the completed and signed nonresident personal income tax return filed with the other taxing jurisdiction for the taxable year, in order to establish that the individual, estate or trust is entitled to claim a credit under the provisions of W. Va. Code '11-21-20.
20.1.1.1.a. No credit shall be allowed under W. Va. Code '11-21-20 unless the taxpayer has proved to the satisfaction of the Tax Commissioner the amount of tax paid to the other taxing jurisdiction. A Form W-2 indicating personal income tax withheld for another jurisdiction shall not be sufficient to establish credit under this Section. The mere fact that tax was withheld does not.establish the fact that the taxpayer has been liable for the payment of tax to another jurisdiction. Therefore, when claiming a credit for taxes paid to another jurisdiction, the taxpayer must file with his West Virginia Personal Income Tax Return a signed copy of the personal income tax return filed with the other jurisdiction. Such return shall be considered as prima facie evidence of the amount of personal income tax, if any, paid to the jurisdiction.
20.2. Limitation. - The amount of the credit allowed to a resident individual is subject to the following limitations:
(1) The credit allowed shall not exceed the amount of tax actually payable to the other jurisdiction on income also subject to West Virginia tax.
(2) The credit shall not exceed the percentage of the West Virginia personal income tax determined by dividing the portion of the taxpayer's West Virginia income subject to taxation in such other jurisdiction by the total amount of the taxpayer's West Virginia income. For example, if the total income of a resident was five thousand dollars ($5,000) and two thousand dollars ($2,000) thereof was subject to tax by another jurisdiction, the amount of the West Virginia tax credit would be limited to forty percent (40%) ($2,000 divided by $5,000) of the West Virginia tax.
(3) The credit shall not reduce the West Virginia personal income tax otherwise due to an amount less than would have been due if the income subject to taxation by the other jurisdiction were excluded from the taxpayer's West Virginia income. If in the example above, the West Virginia personal income tax would have been twenty dollars ($20) less by eliminating the other jurisdiction's income from the income subject to West Virginia personal income tax, the credit shall be limited to twenty dollars ($20).
20.3. Exception. - Where there exists a written reciprocal credit agreement between West Virginia and another taxing jurisdiction as authorized under the provisions of W. Va. Code '11-21-40, no credit shall be allowed for a tax levied by such other jurisdiction against personal income taxes imposed by this State.
20.3.1. The resident credit allowed under W. Va. Code '11-21-20(a) and Subsection 20.1 of this regulation is only applicable where another taxing jurisdiction has not by written agreement with this State consented to grant nonresidents a credit for personal income taxes imposed by the state of residence. In such cases, the taxpayer must look to West Virginia for the applicable credit and must claim the credit on the West Virginia Personal Income Tax Return.
20.3.1.1. Example. - X, a resident West Virginia taxpayer, earns income in Virginia during the taxable year. Presuming this State and Virginia are operating under a written reciprocal credit agreement whereby Virginia grants nonresidents a credit for personal income tax imposed by the state of residence on the income earned in Virginia, this taxpayer who receives a credit by Virginia on his nonresident Virginia return for West Virginia personal income taxes paid is not entitled to a credit on his West Virginia resident return for personal income tax imposed by Virginia.
20.4. Definitions. - For purposes of W. Va. Code '11-21-20 and this regulation, the terms and phrases set forth below shall have the following meaning.
20.4.1. "West Virginia income" means the West Virginia adjusted gross income of an individual or the amount of the income of an estate or trust determined as if the estate or trust were an individual computing his West Virginia adjusted gross income as described in Section 12 of these regulations.
20.4.2. "West Virginia tax" means the total tax payable on the West Virginia taxable income of the resident individual under the West Virginia Personal Income Tax Act excluding any amounts representing penalties or interests.
20.4.3. "Tax of the other jurisdiction" means the total tax imposed for the taxable year by a state of the United States other than West Virginia or by the District of Columbia as provided under Subsection 20.1 of this regulation, exclusive of any penalty or interest.
20.4.4. "Income derived from sources within" means compensation for personal services performed in the other jurisdiction, income from a business, trade or profession carried on in the other jurisdiction and income from the ownership of real or tangible personal property situated in the other jurisdiction but not income from intangibles, except where such income is from property employed in a business, trade or profession carried on in the other jurisdiction.
W. Va. Code R. § 110-21-21 to '110-21-30. Reserved For Future Use
Part III. Nonresidents.
W. Va. Code R. § 110-21-31 West Virginia Taxable Income Of Nonresident Individual
31.1. General. - The West Virginia taxable income of a nonresident individual shall be his West Virginia adjusted gross income less his personal exemptions, said exemptions to be computed in accordance with W. Va. Code '11-21-36 and Section 36 of these regulations.
31.1.1. The West Virginia taxable income of a nonresident individual includes those items of income, gain, loss and deduction included in his federal adjusted gross income which are derived from or connected with West Virginia sources.
31.1.2. The same tax rates which are applicable to a resident individual's taxable income are likewise applicable to a nonresident individual's taxable income.
31.2. Husband And Wife.
31.2.1. Where a husband and wife, both of whom are nonresidents, compute their federal taxable incomes separately by filing separate federal income tax returns, they shall also file separate West Virginia returns and compute their West Virginia taxable incomes separately for such year.
31.2.2. Where a husband and wife (both of whom are nonresidents) compute their federal taxable income on a joint federal return, or if neither files a federal return, they may either determine their West Virginia taxable income jointly or they may determine their West Virginia taxable incomes separately provided that they comply with the requirements of the Tax Commissioner in setting forth information on a single form.
31.3. Different Resident Status Of Husband And Wife. - If either the husband or the wife is a resident of West Virginia and the other is a nonresident, the West Virginia taxable income of each spouse must be separately computed and stated by the filing of separate personal income tax returns.
31.3.1. Exception. - Not withstanding Subsection 31.3 above, in the case where one spouse is a resident and the other is a nonresident, they may compute a joint West Virginia taxable income by filing a joint West Virginia return so long as they compute their federal taxable income on a joint federal return and they elect to compute their joint combined West Virginia taxable income as if both the husband and wife were residents of West Virginia.
31.3.1.1. The exception provision of Subsection 31.3.1 does not apply in any case where either the husband or the wife separately changed his or her residence during the taxable year. Subsection 31.3.1 applies only where one spouse was a resident of West Virginia for the full taxable year and the other spouse was a nonresident for such full taxable year.
31.3.1.2. Where an election is made under Subsection 31.3.1, the spouses shall file a resident West Virginia Personal Income Tax Return and will be treated in all respects as residents for purposes of West Virginia's personal income tax. Thus, said spouses are entitled to claim the number and amount of personal exemptions allowed resident individuals as set forth under W. Va. Code '11-21-16 and Section 16 of these regulations and any applicable credit for personal income tax paid another state as provided in W. Va. Code '11-21-20 and Section 20 of these regulations.
W. Va. Code R. § 110-21-32 West Virginia Adjusted Gross Income Of A Nonresident Individual
32.1. General. - The computation of the West Virginia adjusted gross income of a nonresident requires a separate determination of those items of income, gain, loss and deduction entering into said individual's federal adjusted gross income which are derived from or connected with West Virginia sources. The items thus determined are subject to the same modifications as are applicable for a resident individual under Subsection 12.2 and 12.3 and Sections 12a and 12b of these regulations.
32.1.1. Items Included In West Virginia Adjusted Gross Income. - The West Virginia adjusted gross income of a nonresident individual includes the net amount of income, gain, loss and deduction which enter into said individual's federal adjusted gross income, but limited to the portions of such items derived from or connected with West Virginia sources as determined under Subsection 32.2 of this regulation.
32.1.1.1. In addition to items received or accrued directly by the taxpayer, a nonresident individual's West Virginia adjusted gross income includes: (1) his or her distributive share of partnership income, gain, loss and deduction described under Section 37 of these regulations, (2) his or her distributive share of S corporation income, gain, loss and deduction described under Section 37a of these regulations, and (3) his or her share of estate or trust income, gain, loss and deduction described under Section 39 of these regulations.
32.1.2. Example. - A, a nonresident, received during 1988 the following items of income:
(1) Income from salary paid in West Virginia...$10,000.00 During 1988, eighty percent (80%) of A's working days were required to be worked inside West Virginia.
(2) Distributive share of income from a partnership carrying on business both within and without West Virginia...$35,000.00 Seventy percent (70%) of the partnership income is properly allocated to West Virginia as seventy percent (70%) of the partnership business was transacted in West Virginia.
(3) Net rental income from an apartment house located in Ohio...$3,000.00 (4) A's share as a beneficiary under a testamentary trust. The trustee is Wheeling National Bank and all of the trust corpus is located within West Virginia. Income of the trust includes:
Net rentals from medical office building located in Wheeling...$10,000 A's share as 50% beneficiary...$5,000.00 (5) Dividends from stock of a West Virginia corporation...$6,000.00 The net amount of A's items of income and gain entering into his federal adjusted gross income derived from or connected with West Virginia sources is determined as follows:
(A) Salaries (determined with regard to days worked in West Virginia but not where payment was made) (80% X $10,000.00 = $8,000.00) ...$8,000.00 (B) Partnership income (determined on the basis of the partnership's allocation) (70% X $35,000.00 = $24,500.00) ...$24,500.00 (C) Income from an apartment house (entirely excluded, because it is Ohio rental property)...$ -O- (D) Income from trust (limited to income from real or tangible personal property, see Subsection 32.2) ...$5,000.00 (E) Dividend from stock of a West Virginia corporation (entirely excluded, see Subsection 32.2)...$ -O- Total SA's West Virginia adjusted gross income)... $37,500.00
32.2. Income And Deductions From West Virginia Sources.
32.2.1. General. - A nonresident individual's items of income, gain, loss and deduction derived from or connected with West Virginia sources are the items attributable to:
(1) the ownership of any interest in real or tangible personal property in this State; or (2) a business, trade, profession or occupation carried on in this State; or (3) personal services performed in this State. The determination as to whether items of income, gain, loss and deduction are derived or connected with West Virginia sources is made in accordance with Subsections 32.2.1.1 and 32.2.1.2 of this regulation.
32.2.1.1. Items Attributable To Real Or Tangible Personal Property In This State. - The West Virginia adjusted gross income of a nonresident individual includes items of income, gain, loss and deduction entering into his or her federal adjusted gross income which are attributable to the ownership of any interest in real or tangible personal property in this State. Thus, West Virginia adjusted gross income includes rental income from real or tangible personal property in this State after deducting ordinary and necessary expenses attributable to the ownership, operation or maintenance of such property. Income and deductions attributable to a lease-hold interest in property in this State are included, as well as income and deductions attributable to ownership in fee.
32.2.1.1.a. Interest income received from an installment sale of West Virginia real or tangible personal property must to the extent included in federal adjusted gross income be included in the West Virginia adjusted gross income of a nonresident individual because such income is source income.
32.2.1.1.b. The West Virginia adjusted gross income of a nonresident individual does not include items of income, gain, loss and deduction attributable to the ownership of any interest in real or tangible personal property located outside this State, even though rental payments or installment payments in respect of the property may be made from a point within this State by a resident individual, partnership or corporation.
32.2.1.2. Business, Trade, Profession Or Occupation Carried On In This State. - The West Virginia adjusted gross income of a nonresident individual includes items of income, gain, loss and deduction entering into his federal adjusted gross income which are attributable to a business, trade, profession or occupation carried on in this State.
32.2.1.2.a. The West Virginia adjusted gross income of a nonresident individual rendering services as an employee includes the compensation for services entering into his federal adjusted gross income, but only if, and to the extent that, his or her services were rendered within this State. Compensation for services rendered by a nonresident individual wholly without the State is not included in his or her West Virginia adjusted gross income, regardless of the fact that payment may be made from a point within the State or that the employer is a resident individual, partnership or corporation.
32.2.1.2.b. The West Virginia adjusted gross income of a nonresident individual includes the income of a West Virginia corporation which is an electing small business corporation for federal income tax purposes (S corporation).
32.2.1.2.c. If services are performed within West Virginia whether or not as an employee, the compensation for such services includible in federal adjusted gross income constitutes income from West Virginia sources.
32.2.1.2.d. Prizes, awards, and similar payments are derived from or connected with West Virginia sources so long as such gains are incident to the nonresident's presence or other activities within West Virginia.
32.2.1.2.e. If services were performed in part within West Virginia and in part without West Virginia, the portion of the compensation attributable to the services performed within West Virginia is determined in accordance with the ratio of days worked within West Virginia to the total days worked over the period during which the compensation was earned.
32.2.1.2.e.1. Example. - X, a nonresident individual, is a salaried employee of a North Carolina construction company. X works partly within West Virginia and partly within North Carolina. X earns twenty thousand dollars ($20,000) during tax year 1988. The amount allocable to West Virginia sources is that portion of X's salary income which the number of days worked in West Virginia bears to the total days worked during the year (excluding non-working days; such as, Saturdays, Sundays, holidays, vacations, sick leave, etc.) both within and without West Virginia. Out of the total of two hundred eighty (280) working days, X worked seventy (70) days within West Virginia. X determines his West Virginia income in the following manner:
Days actually worked during year in West Virginia...70 Total days worked during the year...280 Since the number of days worked within West Virginia amounts to twenty-five percent (25%) of X's total working days, X multiplies his total salary by twenty-five percent (25%) to arrive at the amount of his West Virginia income. His West Virginia income is five thousand dollars ($5,000) (25% X $20,000 = $5,000).
32.2.1.2.f. Pensions and retirement pay which are eligible for federal tax treatment under Section 72 of the Internal Revenue Code as "amounts received as an annuity" under an annuity, endowment or life insurance contract shall be considered to be income from annuities and not taxable to nonresidents.
32.2.2. Income From Intangible Personal Property. - Items of income, gain, loss and deduction attributable to intangible personal property of a nonresident individual, including annuities, dividends, interest, and gains and losses from the disposition of intangible personal property, do not constitute items of income, gain, loss and deduction derived from or connected with West Virginia sources except to the extent attributable to property employed in a business, trade, profession, or occupation carried on in this State. For a nonresident individual who is a shareholder of a corporation which is an electing small business corporation for federal income tax purposes (S corporation shareholders), undistributed taxable income of such corporation does constitute income or gain derived from West Virginia sources and a net operating loss of such corporation does constitute a loss or deduction derived from or connected with West Virginia sources.
32.2.3. Deductions with respect to capital losses, net long-term capital gains and net operating losses shall be based solely on income, gain, loss and deduction derived from or connected with West Virginia sources, but otherwise shall be determined in the same manner as the corresponding federal deductions.
32.3. Income And Deductions Partly From West Virginia Sources. - Because the West Virginia adjusted gross income of a nonresident individual takes into account only items of income, gain, loss and deduction derived from or connected with West Virginia sources, an apportionment and allocation of items of income, gain, loss and deduction are required when a nonresident individual carries on a business, trade, profession or occupation partly within and partly without the State.
32.3.1. Record Keeping. - If the taxpayer does not maintain books and records which clearly and accurately reflect the amount of business conducted within West Virginia, he may employ any method which is fair and equitable; however, the taxpayer must make a full disclosure and explanation of such method when filing his return. If the Tax Commissioner deems such method of allocation and apportionment to be inequitable, the Tax Commissioner may prescribe any method which clearly and accurately reflects the proportion of the net amount of the items of income, gain, loss and deduction attributable to the activities of the business carried on in West Virginia.
32.4. Purchase And Sale For Own Account. - A nonresident individual, other than a dealer holding property primarily for sale to customers in the ordinary course of his trade or business, is not deemed to be carrying on a business, trade, profession or occupation in this State solely by reason of the purchase and sale of property for his own account.
32.5. Husband And Wife. - Where a husband and wife determine their federal income tax on a joint return but determine their West Virginia personal income taxes separately, their West Virginia adjusted gross incomes must be determined separately, as if they had filed separate federal income tax returns and their federal adjusted gross incomes had been determined separately.
32.6. Military Pay. - Compensation paid for service in the Armed Forces of the United States, performed during active duty by an individual not domiciled in this State, shall not constitute income derived from West Virginia sources. Accordingly, if an individual not domiciled in this State is a member of the Armed Forces of the United States during active duty, such compensation received by him does not constitute income derived from West Virginia sources even though the service is performed in whole or in part within this State.
W. Va. Code R. § 110-21-33 West Virginia Deduction Of A Nonresident Individual
The West Virginia Personal Income Tax Act contains no provision for the allowance of either a standard deduction or for itemized deductions for a nonresident individual.
W. Va. Code R. § 110-21-34 to '110-21-35. Reserved For Future Use
W. Va. Code R. § 110-21-36 West Virginia Personal Exemptions Of A Nonresident Individual
36.1. A nonresident individual is allowed the same number of personal exemptions for State income tax purposes as for federal income tax purposes. A nonresident individual shall be permitted the same West Virginia exemptions as are permitted under W. Va. Code '11-21-16 and Section 16 of these regulations provided that such exemptions shall be the product of the amount allowed as a personal exemption for a West Virginia resident multiplied by the ratio which the nonresident's West Virginia source income bears to that nonresident individual's federal adjusted gross income for the taxable year.
36.1.1. Example. - X, a taxpayer entitled to claim one (1) federal exemption, has West Virginia source income of ten thousand dollars ($10,000) and federal adjusted gross income of fifty thousand dollars ($50,000). Pursuant to W. Va. Code '11-21-16(a) and Subsection 16.1 of this regulation the amount of the personal exemption to be multiplied by the ratio of the nonresident's West Virginia source income is two thousand dollars ($2,000). Thus, the amount of personal exemption to be claimed on the nonresident return equals four hundred dollars ($400) ($2000 X $10,000/$50,000 = $400).
36.2. Husband And Wife (Both Nonresidents). - Where a husband and wife file a joint federal return and also a joint State return, the same number of personal exemptions are allowed on the joint State return as on the joint federal return. Similarly, where a husband and wife file separate federal returns, the same number of personal exemptions are allowed on the separate State nonresident returns of each spouse as on the respective separate federal returns. If, however, a husband and wife file a joint federal return but separate State returns, each of them is entitled to a West Virginia exemption for each federal exemption to which he or she would be separately entitled had they filed separate federal returns.
36.3. In no event shall the amount per exemption allowed for a nonresident individual under W. Va. Code '11-21-36 and this regulation exceed the amount allowed per exemption for a resident individual under W. Va. Code '11-21-16 and Section 16 of these regulations.
W. Va. Code R. § 110-21-37 Nonresident Partners
37.1. Nonresident Partner Defined. - A nonresident partner is an individual who is a partner in a West Virginia partnership or a partner in any partnership doing business in West Virginia where that individual does not qualify as a resident individual under the provisions of W. Va. Code '11-21-7.
37.2. Partnership Doing Business In West Virginia Defined. - A partnership is doing business in West Virginia if it has any revenue from West Virginia sources, or if it engages in any purposeful revenue generating activity with the object of direct or indirect gain or economic benefit in West Virginia.
37.3. Partnership Income And Deductions Derived From West Virginia Sources. - The West Virginia adjusted gross income of a nonresident partner of any partnership shall include his or her distributive share of all partnership items of income, gain, loss and deduction which entered into his or her federal adjusted gross income as filed for the taxable year in question to the extent that the amount or amounts of such items are derived from or connected with West Virginia sources; that is, from real or tangible personal property having an actual situs in West Virginia or from a business, trade, profession, or occupation carried on in this State, as determined under Section 32 of these regulations.
37.4. Special Rules As To West Virginia Sources. - In determining the sources of a nonresident partner's share of partnership income, as either within or without West Virginia the following shall apply:
37.4.1. No recognition or tax effect shall be given to a provision in the partnership agreement which characterizes payments to the partner as being employee compensation or other consideration paid or distributable for the use of capital of a partner.
37.4.2. Similarly, no tax effect shall be given to a provision in the partnership agreement which allocates to the nonresident partner, as income or gain from sources outside West Virginia, a greater proportion of his distributive share of partnership income or gain than the ratio of partnership income or gain from sources outside West Virginia to partnership income or gain from all sources.
37.4.2.1. Example. - X is a nonresident partner of a partnership located in West Virginia, sixty percent (60%) of the business of which is from West Virginia sources. X's total distributive share of partnership income from all sources is five thousand dollars ($5,000). X is required to report on his West Virginia nonresident income tax return three thousand dollars ($3,000) (60% of $5,000), as his partnership distributive share, even though, under special provisions of the partnership agreement, his share of the total West Virginia income of the partnership may have been fixed at less than three thousand dollars ($3,000).
37.4.3. Similarly, no tax effect shall be given to a provision in the partnership agreement which allocates to the nonresident partner a greater proportion of a particular partnership item of loss or deduction connected with West Virginia sources than his proportionate share for federal income tax purposes of partnership loss or deduction generally. If, for example, the proportionate share of a nonresident partner of partnership losses is generally fifty percent (50%) for federal income tax purposes, he is not permitted to deduct on his West Virginia income tax return more than fifty percent (50%) of any particular partnership loss or deduction connected with West Virginia sources, irrespective of any special provision of the partnership agreement allocating a larger percentage of the specific loss or deduction to him.
37.5. Partner's Modifications.
37.5.1. In determining the West Virginia adjusted gross income of a nonresident partner, any modification described in W. Va. Code '11-21-12 and Section 12 of these regulations which relates to a partnership item of income, gain, loss or deduction shall be made with respect to such partner's distributive share of the partnership. The modifications covered by these Sections do not apply to any item a nonresident himself receives or incurs directly, and these Sections do not apply to any item which, for federal income tax purposes, is not treated as a partnership item.
37.5.2. The total applicable modification of any partnership item of income, gain, loss, or deduction shall be set forth on the partnership return, together with the respective portion thereof distributable to each partner. Where any particular modification pertains to an item includible in federal adjusted gross income, the partnership return shall show each nonresident's portion thereof derived from or connected with West Virginia sources.
37.6. Alternate Methods. - Upon written application, the Tax Commissioner may authorize the use of such other methods of determining a nonresident partner's portion of partnership items derived from or connected with West Virginia sources as he deems to be appropriate and equitable. Whenever a nonresident partner's distributive share of partnership items of income, gain, loss or deduction are so determined, any of the modifications relating thereto shall be similarly determined.
W. Va. Code R. § 110-21-37a Nonresident S Corporation Shareholders. 37a.1. Definition. - A nonresident S corporation shareholder is a nonresident individual who holds stock in a corporation that was formed in West Virginia, or that transacts business in West Virginia, and has in effect a valid election under Section 1362 of the Internal Revenue Code, 26 U.S.C. 1362. 37a.2. Definition - An S Corporation Doing Business In West Virginia. - An S corporation is doing business in West Virginia if it has any revenue from West Virginia sources, or if it engages in any purposeful revenue generating activity with the object of direct or indirect gain or economic benefit. 37a.3. In determining West Virginia adjusted gross income of a nonresident shareholder of any S corporation, such shareholder may only include in his or her West Virginia adjusted gross income such shareholder's pro rata share of the portion of the S corporation's income that was derived from or connected with West Virginia sources, that entered into such shareholder's federal adjusted gross income as filed by that shareholder on his or her federal income tax return for the taxable year
W. Va. Code R. § 110-21-38 West Virginia Taxable Income Of Nonresident Estate Or Trust
38.1. General. - Certain income of a nonresident estate or trust (like certain income of a nonresident individual) is subject to taxation under the West Virginia Personal Income Tax Act. Nonresident estates and trust are defined in Section 7 of these regulations. The rates referred to in Section 4 of these regulations are applied against the taxable income of the estate or trust. The taxable income of a nonresident estate or trust does not include the amount distributable or properly paid or credited to the beneficiaries because beneficiaries are taxed on their distributive shares of the estate or trust and the estate or trust is taxed on the remaining balance of the income not distributed.
38.1.1. The West Virginia taxable income of a nonresident estate or trust is its federal taxable income to the extent derived from or connected with West Virginia sources subject to the applicable West Virginia exemption. Thus, subject to the applicable West Virginia exemption, the West Virginia taxable income of a nonresident estate or trust includes its share of federal distributable income and, in addition thereto, any other items of income, gain, loss or deduction of the estate or trust recognized for federal income tax purposes but not included in federal distributable net income to the extent that such share and other items are derived from or connected with West Virginia sources.
38.1.2. Items In Distributable Net Income. - The share of a nonresident estate or trust in the items of income, gain, loss and deduction, derived from or connected with West Virginia sources, which enter into the federal definition of distributable net income is the amount, if any, by which such items exceed the aggregate of all the beneficiaries' shares therein. The share of the nonresident estate or trust is determined in accordance with W. Va. Code '11-21-39 and Section 39 of these regulations.
38.1.3. Items Not In Distributable Net Income. - The amount of any West Virginia connected items of income, gain, loss and deduction recognized for federal income tax purposes but excluded from the federal definition of distributable net income, must be added to or subtracted from, as the case may be, the estate's or trust's share of items reflected in distributable net income. The determination of the source of such items is made in accordance with the applicable rules of Sections 32 of these regulations and the provisions of W. Va. Code '11-21-32.
38.1.4. Exemption. - Each estate or trust is allowed a West Virginia exemption of six hundred dollars ($600), regardless of the amount of the federal exemption. An estate or trust is not allowed any exemption for dependents. The West Virginia exemption of six hundred dollars ($600) is allowed an estate or trust even though the particular return filed may be for a taxable period of less than twelve (12) calendar months where the election is allowable federally.
38.2. West Virginia Source Rules. - For the purpose of this regulation, an item of income, gain, loss or deduction is considered derived from or connected with West Virginia sources when any such item is attributable to the ownership by the estate or trust of any interest in real or tangible personal property in this State or when the item is attributable to a business, trade, profession or occupation carried on in West Virginia by the estate or trust, in accordance with the applicable rules set forth in Section 32 of these regulations pertaining to nonresident individuals. Deductions with respect to capital losses, net long-term capital gains, and net operating losses shall be based solely on income, gains, losses and deductions derived from or connected with West Virginia sources, but such West Virginia items shall otherwise be computed or determined in the same manner as the corresponding federal items.
W. Va. Code R. § 110-21-39 Share Of Nonresident Estate, Trust Or Beneficiary In Income From West Virginia Sources
39.1. General. - The share of a nonresident estate or trust and the share of a nonresident beneficiary of any estate or trust, in estate or trust income, gain, loss and deduction from West Virginia sources shall be determined in accordance with W. Va. Code '11-21-39 and this regulation.
39.1.1. Items Of Distributable Net Income From West Virginia Sources. - There shall be determined the items of income, gain, loss and deduction derived from or connected with West Virginia sources which enter into the definition of federal distributable net income of the estate or trust for the taxable year (including such items from another estate or trust of which the first (1st) estate or trust is a beneficiary). Items of federal distributable net income from West Virginia sources represent items of income, gain, loss and deduction which are either attributable to the ownership by the estate or trust of any interest in real or tangible personal property in West Virginia or attributable to a business, trade, profession or occupation carried on in this State by the estate or trust. Such determination of items from West Virginia sources shall be made in accordance with W. Va. Code '11-21-32 and the rules prescribed in Section 32 of these regulations.
39.1.2. Modifications. - The applicable modifications, described in Subsections 12.2 and 12.3 of these regulations, pertaining to items from West Virginia sources shall be first combined into a single net number. This number, which may be a positive or negative number, constitutes the net modification. After this number is computed, it is then allocated in the manner prescribed in Subsection 39.1.3 of this regulation for allocating distributable net income from West Virginia sources. When, however, a West Virginia item which would be treated as a modification is already included in federal distributable net income, no modification which in effect would duplicate the item shall be made.
39.1.3. Allocation Among Estate Or Trust And Beneficiaries. - The distributable net income of an estate or trust from West Virginia sources shall be allocated between the nonresident estate or trust and its nonresident beneficiaries in proportion to their respective shares of federal distributable net income, including, solely for the purpose of this allocation, any share of resident beneficiaries. The share of the estate or trust in federal distributable net income is the amount, if any, by which the federal distributable net income exceeds the aggregate of the shares therein of all its beneficiaries.
39.1.3.1. Character Of Items. - Each of the estate or trust items of income, gain, loss or deduction shall have the same character for West Virginia income tax purposes as for federal income tax purposes. Where such an item is not characterized for federal income tax purposes, the item shall have the same character as if realized directly from the source from which realized by the estate or trust, or incurred in the same manner as incurred by the estate or trust. The same is true if an estate or trust item is not required to be taken into account for federal income tax purposes.
39.2. Alternate Methods Of Determining Shares. - If the estate or trust has no federal distributable net income for the taxable year, the share of each beneficiary (including, solely for the purpose of this allocation, resident beneficiaries) in the net amounts determined under Subsection 39.1 (distributable net income and net modification) shall be in proportion to his share of the estate or trust income for such year, under local law or the governing instrument, which is required to be distributed currently and any other amounts of such income distributed in such year. Any balance of such net amounts shall be allocated to the estate or trust.
39.2.1. The Tax Commissioner may allow the use of other methods of determining the respective shares of the beneficiaries and of the estate or trust in its income derived from West Virginia sources, and the modifications related thereto, if such other methods are fair and equitable to all parties concerned, and if a full disclosure of the adopted method is made to the Tax Commissioner.
W. Va. Code R. § 110-21-40 Credit For Income Tax Of State Of Residence
40.1. General. - A nonresident individual, who has income derived from West Virginia sources, shall be allowed a credit against his West Virginia personal income tax imposed on his West Virginia income for any income tax imposed by another state of the United States or by the District of Columbia of which the taxpayer is a resident where there exists between West Virginia and the nonresident's state of residence a written reciprocal credit agreement authorized under W. Va. Code '11-21-40(c).
40.1.1. If a nonresident estate or trust is in receipt of income derived from West Virginia sources, then the estate or trust is entitled to a similar credit computed in the same manner and subject to the same limitations and exceptions as in the case of a nonresident individual.
40.1.2. No credit shall be allowed for personal income taxes imposed by a county, borough, township, or any other political subdivision of a state.
40.1.3. The amount of the credit allowed under W. Va. Code '11-21-40 and this regulation shall be determined in accordance with forms and instructions provided by the Tax Commissioner.
40.1.3.1. The Tax Commissioner may by instruction or otherwise require any nonresident individual, estate or trust to provide evidence, including but not limited to, a copy of the completed and signed resident income tax return filed with the other taxing jurisdiction for the taxable year, in order to establish that the individual, estate or trust is entitled to claim a credit under the provisions of W. Va. Code '11-21-40.
40.1.4. Where the provisions of W. Va. Code '11-21-41 and Section 41 of these regulations are applicable a nonresident will not be required to file an income tax return with West Virginia for the taxable year.
40.2. Limitations. - The amount of the credit for any taxable year is subject to the following limitations:
(1) The credit allowed shall not exceed the amount of tax actually payable to the other state or the District on income also subject to West Virginia tax.
(2) The credit shall not exceed the percentage of the other tax determined by dividing the portion of the taxpayer's West Virginia income subject to taxation in such other state or the District by the total amount of the taxpayer's income subject to such other tax. If, for example, the total income subject to such other tax was five thousand dollars ($5,000) and two thousand (2,000) thereof was derived from West Virginia sources, the amount of the credit would be limited to forty percent (40%) ($2,000 divided by $5,000 of such other state's tax).
(3) The credit shall not exceed the percentage of the West Virginia tax otherwise due, determined by dividing the portion of the taxpayer's West Virginia income subject to taxation in such other state or the District by the total amount of the taxpayer's income subject to West Virginia tax. If, for example, the taxpayer's West Virginia income subject to such other tax was eighteen thousand dollars ($18,000) and the total amount of the taxpayer's income subject to West Virginia tax was twenty-thousand dollars ($20,000), the amount of the West Virginia credit would be limited to ninety percent (90%) (18,000 divided by 20,000) of the West Virginia tax.
40.3. Definitions. - For purposes of W. Va. Code '11-21-40 and this regulation, the terms and phrases set forth below shall have the following meaning.
40.3.1. "West Virginia income" means the West Virginia adjusted gross income of a nonresident individual or the income derived from West Virginia sources by a nonresident estate or trust determined in accordance with the applicable rules of W. Va. Code '11-21-32 as in the case of a nonresident individual.
40.3.2. "West Virginia tax" means the total tax payable on the West Virginia taxable income of the nonresident under the West Virginia Personal Income Tax Act excluding any amounts representing penalties or interest.
40.3.3. "Tax of the other state or the District" means the total tax imposed for the taxable year exclusive of any penalty or interest.
40.3.4. "Income derived from sources within this State" means compensation for services performed in West Virginia, income from a business, trade or profession carried on within this State and income from the ownership of real or tangible personal property situated here but not income from intangibles, except where such income is from property employed in a business, trade or profession carried on in West Virginia.
W. Va. Code R. § 110-21-41 Special Case In Which Nonresident Need Not File West Virginia Income Tax Return
41.1. A nonresident individual who at no time during the taxable year was a resident of West Virginia will not be required to file an income tax return to this State for that taxable year provided that all four (4) of the following conditions exist:
(1) The nonresident's only income from sources within West Virginia was from salaries, wages or compensation for personal services performed within this State.
(2) Such salaries, wages or compensation for personal services were subject to income taxation by the state of his residence under a net income tax law substantially similar in principle to the West Virginia Personal Income Tax Act.
(3) The other state and West Virginia are operating under a written reciprocal credit agreement as detailed under W. Va. Code '11-21-40.
(4) The laws of such other state afford like treatment to a resident of West Virginia who earned salaries, wages or compensation for personal services performed in such other state in that a resident of this State is not required to file a nonresident income tax return for the taxable year in such other state.
W. Va. Code R. § 110-21-42 Veterans Incentive Tax Credit
42.1. General. - Certain employers may be entitled to a credit against their personal income tax liability for the employment of economically disadvantaged Vietnam era and Korean conflict veterans, and disabled veterans generally, as provided under W. Va. Code '21A-2C-1 et seq.
42.2. Tax Credit, Eligibility, Amount.
42.2.1. Each person or partnership which employs an economically disadvantaged Vietnam era or Korean conflict veteran, or a disabled veteran, for a continuous period of one (1) year, except as otherwise provided under W. Va. Code '21A-2C-5 and Subsection 42.3 of this regulation, will be entitled to an appropriate tax credit for such veteran so employed which credit shall be applied against the employer's personal income tax liability. This tax credit is nonassignable and may not exceed an employer's total personal income tax liability.
42.2.2. The amount of the tax credit allowed under Subsection 42.2.1 shall be an amount equal to the following and shall be computed in accordance with such forms and instructions as the Tax Commissioner may prescribe.
42.2.2.1. For each economically disadvantaged Vietnam era veteran or Korean conflict veteran, as those terms are defined under W. Va. Code '21A-2C-3, who is employed as provided under Subsection 42.2.1, the amount of the tax credit against personal income tax liability allowed shall be thirty percent (30%) of the employee's wage base. For purposes of this regulation, the employee's wage base is the first (1st) two thousand dollars ($2,000) in wages or compensation actually paid to the employee by the employer.
42.2.2.1.a. The maximum credit for each "disadvantaged" veteran under Subsection 42.2.2.1 above is limited to the smallest of the percentage calculation or six hundred dollars ($600).
42.2.2.2. For each disabled veteran as defined under W. Va. Code '21A-2C-3 who is employed as provided under Subsection 42.2.1, the amount of the tax credit against personal income tax liability shall be a percentage equal to the percentage of disability suffered by the veteran multiplied by the employee's wage base. For purposes of this regulation, the employee's wage base is the first (1st) two thousand dollars ($2,000) in wages or compensation actually paid to the employee by the employer and the percentage of disability is the percentage of compensation for service-connected disability as defined by the Veterans Administration of the United States.
42.2.2.2.a. The maximum credit for each "disabled" veteran under Subsection 42.2.2.2 above is limited to the smallest of the percentage calculation or two thousand dollars ($2,000).
42.3. Restrictions And Limitations Regarding Tax Credit.
42.3.1. An employer may not claim a credit against personal income tax for any veteran employed for less than a continuous period of one (1) year unless the veteran voluntarily leaves employment with the employer, the veteran becomes totally disabled and unable to continue his employment, or the veteran is terminated for good cause shown.
42.3.2. In the event that the veteran is employed for less than a one(1)-continuous-year period due to any circumstance enumerated in Subsection 43.3.1, the employer shall be entitled to a partial tax credit in a proportional amount corresponding to the ratio of the time period during which the veteran was actually employed to the one(1)-year period required for a full tax credit multiplied by the amount of the full tax credit which would have accrued to the employer had the veteran's employment continued for a full year.
42.3.3. An employer may not claim credit against personal income tax for any veteran who is employed and displaces a person already employed. In addition, no such credit may be claimed for the employment of any veteran for whom the employer is receiving job training payments from either the federal or state government. Nothing, however, prohibits an employer from receiving tax credits from both the federal and state governments under similar targeted jobs programs if the employer is otherwise qualified to receive both.
42.4. Employer Certification.
42.4.1. Each year, the Commissioner of the West Virginia Department of Employment Security must certify to the Tax Commissioner a list of employers who may be qualified to receive a Veterans Incentive Tax Credit. Any employer not properly certified by the Department of Employment Security will not be entitled to claim the tax credit set forth under W. Va. Code '11-21-42 and this regulation.
42.4.2. Where an employer has been certified and desires to claim the Veterans Incentive Tax Credit he must complete the appropriate schedule for credit computation, as prescribed by the Tax Commissioner, and he must attach the completed schedule to his West Virginia Personal Income Tax Return for the taxable year for which the credit is claimed.
W. Va. Code R. § 110-21-43 Credit For Consumers Sales And Service Tax And Use Tax Paid
43.1. General. - Any person having a right or claim to certain exemptions from the consumers sales and service tax or use tax, as detailed under W. Va. Code ''11-15-9b or 11-15A-3b, who has paid to the vendor the consumers sales and service tax or use tax imposed, may be entitled to exercise or assert such exemption from consumers sales or use taxes by filing a claim for credit of the consumers sales or use tax overpayments against taxes otherwise due under the West Virginia Personal Income Tax Act.
43.2. Filing Claim For Credit. - If in lieu of filing a claim for refund of consumers sales and service or use tax overpayments, the taxpayer elects to file a claim for credit, which claim must be filed within one (1) year from the date of the payment of consumers sales or use tax, the taxpayer may file a claim for credit on such form and in such manner as the Tax Commissioner requires and credit may be allowed for the amount of sales and service tax and use tax overpayments against personal income tax liability, so long as such credit is applied in accordance with the requirements set forth in this regulation.
43.2.1. A credit may not be claimed unless the taxpayer has submitted a properly completed application for credit to the Tax Commissioner. For purposes of claiming this credit, the completed application must accompany the appropriate personal income tax form, return, or report.
43.2.1.1. An application for credit is required each time a taxpayer seeks to obtain this credit.
43.2.1.2. Any credit may be disallowed as the result of Tax Department audits of the taxpayer's records.
43.3. Method Of Applying Credit. - The credit provided under Subsection 43.1 of this regulation may only be taken in the following order.
43.3.1. If the taxpayer is a vendor who is subject to Consumers Sales and Service Tax on certain purchases, he may credit the amount of sales and service tax and use tax overpayments made against the sales and service tax liability accrued through the use of his direct pay permit and apply any remaining tax liability against his quarterly or monthly remittance of the Consumers Sales and Service Tax imposed and otherwise due; or
43.3.2. If the taxpayer is a vendor who is subject to the Use Tax on certain purchases, he may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsection 43.3.1 against the use tax liability accrued through the use of his direct pay permit and apply the remaining tax liability against his monthly remittance of the Use Tax imposed and otherwise due; or
43.3.3. If the taxpayer is subject to Consumers Sales and Service Tax, he may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 and 43.3.2 against his quarterly or monthly remittance of the Consumers Sales and Service Tax imposed and otherwise due; or
43.3.4. If the taxpayer is subject to the Use Tax, he may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 through 43.3.3 against his quarterly remittance of the Use Tax imposed and otherwise due; or
43.3.5. If the taxpayer is subject to the Business and Occupation Tax imposed under W. Va. Code '11-13-1 et seq., he may credit the amount of sales and service tax and use tax overpayments after application of the foregoing Subsections 43.3.1 through 43.3.4 against his quarterly or monthly remittance of the Business and Occupation Tax imposed and otherwise due; or
43.3.6. If the taxpayer is subject to the Annual Tax On Incomes Of Certain Carriers imposed under W. Va. Code '11-12A-1 et seq., he may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 through 43.3.5 against his annual or semi-annual remittance of the tax imposed under W. Va. Code '11-12A-1 et seq. and otherwise due; or
43.3.7. If the taxpayer is subject to the Severance Tax imposed under W. Va. Code '11-13A-1 et seq., the taxpayer may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 through 43.3.6 against the taxpayer's quarterly or monthly remittance of the Severance Tax imposed and otherwise due; or
43.3.8. If the taxpayer is subject to the Telecommunications Tax imposed under W. Va. Code '11-13B-1 et seq., the taxpayer may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 through 43.3.7 against the taxpayer's quarterly or monthly remittance of the Telecommunications Tax imposed and otherwise due; or
43.3.9. If the taxpayer is subject to the Corporation Net Income Tax imposed under W. Va. Code '11-24-1 et seq., the taxpayer may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 through 43.3.8 against the taxpayer's installment of estimated tax for the Corporation Net Income Tax imposed and otherwise due under W. Va. Code '11-24-17; or
43.3.10. If the taxpayer is subject to the Personal Income Tax imposed under W. Va. Code '11-21-1 et seq., the taxpayer may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 through 43.3.9 against the taxpayer's installment of estimated tax for the Personal Income Tax imposed and otherwise due under W. Va. Code '11-21-56; or
43.3.11. If the taxpayer is subject to the Business Franchise Tax imposed under W. Va. Code '11-23-1 et seq., the taxpayer may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 through 43.3.10 against the taxpayer's annual remittance of the Business Franchise Tax imposed and otherwise due; or
43.3.12. If the taxpayer is required to deduct and withhold Personal Income Tax under W. Va. Code '11-21-1 et seq., the taxpayer may credit the amount of sales and service tax and use tax overpayments remaining after application of the foregoing Subsections 43.3.1 through 43.3.11 against the taxpayer's monthly remittance of the Personal Income Tax withheld under said W. Va. Code '11-21-1 et seq. and otherwise due.
43.4. Documents Supporting Claim. - Any person asserting or exercising a claim of credit arising from an exemption from the consumers sales and service tax or use tax under Subsection 43.2 of this regulation shall file with the Tax Commissioner an application for such credit in such form as the Tax Commissioner shall prescribe, and shall file such affidavits, invoices, sales slips, records or documents as the Tax Commissioner may require to prove or verify the taxpayer's right and entitlement to such credit. The Tax Commissioner may inspect or examine the records, books, papers, documents, affidavits, sales slips and invoices of a taxpayer or any other person to verify the truth and accuracy of any report or return or to ascertain whether the sales and service tax or the use tax has been paid.
43.4.1. In addition to the powers of the Tax Commissioner set forth in W. Va. Code '11-10-1 et seq., as a further means of obtaining the records, books, papers, documents, affidavits, sales slips or invoices of a taxpayer or any other person and ascertaining the amount of sales and services taxes or use taxes paid or due under W. Va. Code '11-15-1 et seq. or W. Va. Code '11-15A-1 et seq. or under any report, form, document or affidavit required, the Tax Commissioner shall have the power to examine witnesses under oath; and if any witness shall fail or refuse at the request of the Tax Commissioner to grant access to the books, records, papers, documents, affidavits, sales slips or invoices requested by the Tax Commissioner, the Tax Commissioner shall certify the facts and the names to the circuit court of the county having jurisdiction over the party, and such court shall thereupon issue a subpoena duces tecum to such party to appear before the Tax Commissioner, at a place designated within the jurisdiction of such court, on a day fixed.
43.5. Time Limit For Filing Claim For Credit. - Any credit of sales and service tax or use tax overpayments against taxes imposed under the West Virginia Personal Income Tax Act shall be taken within one (1) year after the payment of consumers sales and or use taxes by the taxpayer to the vendor. Any such credit or claim of entitlement to such credit made or asserted more than one (1) year after the payment of such tax by the taxpayer to the vendor shall be null and void, and such tax overpayments shall be forfeited.
43.6. Assignment Of Right To Credit. - Any assignment of the right or entitlement to a credit arising under either W. Va. Code '11-15-9b or W. Va. Code '11-15A-3b shall be subject to strict proof. Any assignee claiming a right or entitlement to an assigned credit shall submit to the Tax Commissioner and in the form prescribed by him, an affidavit signed by the assignor and acknowledging the assignment. The assignee shall attest to the assignment and the terms thereof in his signed application for credit. The assignee will be subject to the penalties provided under West Virginia law for perjury for any falsehood set forth in his signed application. The assignee also will be subject to the penalties set forth in W. Va. Code '11-9-1 et sea. for any violation thereof.
43.7. No credit shall be allowed unless the taxpayer or assignee shall have filed a claim for credit, as appropriate, with the Tax Commissioner in accordance with this regulation.
43.8. Any claim for a tax credit for sales and service tax or use tax overpayments which is not timely filed or not filed in proper form or in accordance with the requirements of this regulation shall not be construed to constitute an obligation of the State of West Virginia for such credit. No overpayment of sales and service tax or use tax shall be subject to either W. Va. Code ''11-10-17(d) or 11-10-17(e)(1).
W. Va. Code R. § 110-21-44 to '110-21-50. Reserved For Future Use
Part IV. Returns, Declarations and Payment of Tax.
W. Va. Code R. § 110-21-51 Returns And Liabilities
51.1. General. - On or before the fifteenth (15th) day of the fourth (4th) month following the close of a taxable year, a West Virginia income tax return shall be made and filed by or for:
(1) Every resident individual required to file a federal income tax return for the taxable year, or having West Virginia adjusted gross income for the taxable year, determined under W. Va. Code '11-21-12 and Section 12 of these regulations, in excess of the sum of his West Virginia personal exemptions;
(2) Every resident estate or trust required to file a federal income tax return for the taxable year, or having any West Virginia taxable income for the taxable year as determined under W. Va. Code '11-21-18 and Section 18 of these regulations;
(3) Every nonresident individual having any West Virginia adjusted gross income for the taxable year, determined under W. Va. Code '11-21-32 and Section 32 of these regulations, in excess of the sum of his personal exemptions;
(4) Every nonresident estate or trust having items of income or gain derived from West Virginia sources, determined in accordance with W. Va. Code '11-21-32 and the applicable rules of Section 32 of these regulations as in the case of a nonresident individual, in excess of its West Virginia exemption; and (5) Every resident or nonresident individual who is entitled to claim and who claims an overpayment of income tax for the taxable year regardless of whether he would not otherwise be required to file a return under this regulation.
51.1.1. A taxpayer who has had West Virginia income tax withheld from his wages, or who has paid estimated tax during the taxable year, but whose West Virginia adjusted gross income for such taxable year does not exceed his exemptions must file a West Virginia income tax return in order to obtain a refund.
51.1.2. Any taxpayer required to file a West Virginia income tax return must file a return even if such return, after modifications, exemptions and credits, shows no tax liability.
51.2. Returns Of Husband And Wife.
51.2.1. Separate Federal Returne. - If a husband or wife files and determines their tax liability on separate federal returns, they must file separate West Virginia income tax returns.
51.2.2. Joint Federal Returns. - If a husband and wife, other than a husband and wife described in Subsection 51.2.3 of this regulation, file and determine their tax liability on a joint federal return, or if neither spouse files a federal return, they may either:
(1) File a joint West Virginia income tax return in which event their tax liabilities shall be joint and several and each is liable for the entire tax on such joint return regardless of whether only one spouse had income, or (2) File separate West Virginia income tax returns where their tax liabilities shall be separate.
51.2.3. If either the husband or wife is a resident and the other is a nonresident of West Virginia, they shall file separate West Virginia income tax returns without regard to their method of filing for federal income tax purposes, in which event their West Virginia tax liabilities shall be separate. Provided, however, that a West Virginia joint resident return may be filed by such husband and wife where all three (3) of the following requirements are met:
(1) they are otherwise entitled to file a joint return, (2) each spouse maintained his or her status as a resident or nonresident during the entire taxable year, and (3) they elect to determine their West Virginia taxable income on a joint return as if both were residents for the entire taxable year.
51.2.3.1. Where the husband and wife qualify under the above requirements and file a joint resident return, their tax liabilities shall be joint and several.
51.3. Returns For Decedents. - In general, the rules set forth in this regulation pertaining to the filing of returns apply to decedents as well as other taxpayers.
51.3.1. The executor or administrator of the estate of a taxpayer who died during the taxable year, or other person charged with the property of a decedent, shall make and file the return of income required in respect of such decedent on the form which would have been appropriate had such taxpayer lived. For a decedent's taxable year which ends with the date of the taxpayer's death, the return shall cover the period during which said taxpayer was alive. For purposes of this Subsection, the term "executor or administrator" means the person who is actually appointed to and qualifies for such office and not a person who is merely in charge of the property of the decedent.
51.3.2. Joint Return After Death. - Where one or both spouses die during the year, a joint West Virginia income tax return may be made if the following conditions are met:
(1) a joint federal return was made for the taxable year;
(2) the taxable year of both decedents or of the decedent and the surviving spouse, as the case may be, began on the same day and ended on different days only because of the death of either or both;
(3) neither taxpayer was reporting for a fractional part of a year as a result of a change in accounting; and (4) the surviving spouse had not remarried before the end of the taxable year.
51.4. Individuals Under A Disability. - The return required for an individual who is unable to make a return by reason of minority, insanity or other disability shall be made and filed by his guardian, committee, fiduciary or other person charged with the care of his person or property (other than a receiver in possession of only a part of his property), or by his duly authorized agent. In such case, the fiduciary, duly authorized agent, or other person charged with the care of his person or property shall be liable for the tax.
51.5. Estates And Trusts. - The return for an estate or trust shall be made and filed by the fiduciary.
51.6. Joint Fiduciaries. - If two (2) or more fiduciaries are acting jointly, the return may be made by either of them. When the fiduciary is a trustee of two (2) or more trusts, he must make a separate return for each trust, even though such trusts were created by the same grantor for the same beneficiary or beneficiaries.
51.7. Tax A Debt. - Any tax imposed by the West Virginia Personal Income Tax Act, and any additions, interest or penalty thereon, shall, from the time it is due and payable be a personal debt of the person or persons (including fiduciaries of estates or trusts) liable to pay the same, to the State of West Virginia.
51.8. Cross Reference. - For provisions as to information returns by partnerships, employers, and other persons, see Section 58 of these regulations.
W. Va. Code R. § 110-21-51a Composite Returns. 51a.1. Any return required under the West Virginia Personal Income Tax Act for nonresident individuals who are: (1) partners in a partnership deriving income from a West Virginia source or sources, (2) shareholders of a corporation which made an election under 26 U.S.C. 1362(a) (S corporations) for the taxable year, or (3) who have received a distribution from an estate or trust having income from a West Virginia source or sources, may, upon payment of a composite return processing fee of fifty dollars ($50), file a composite return in accordance with the provisions of this regulation. The fifty (50) dollar filing fee must accompany the composite return. 51a.2. When filing a composite return and determining the tax due thereon, no personal exemptions may be utilized and the rate of tax shall be six and one-half (6.5) percent of the taxable income determined in accordance with the applicable provisions of the West Virginia Personal Income Tax Act. 51a.2.1. The entity or entities, to which the composite return relates are responsible for collection and remittance of all income tax due at the time the return is filed. 51a.2.2. Although no exemptions are to be utilized in determining the tax due on a composite return, a credit is allowed for severance taxes paid by the partnership, trust, estate, or corporation electing S status under 26 U.S.C. 1362(a) for the taxable year. 51a.3. The composite return shall be filed on the form prescribed by the Tax Commissioner and completed according to the instructions contained therewith. 51a.3.1. The composite return need not be signed by all nonresident individuals on whose behalf the return is filed: Provided, That the return is signed by a partner in case of a partnership, a corporate officer in the case of a corporation, by a trustee in the case of a trust, or by an executor or administrator in the case of an estate. 51a.4. For purposes of this regulation a composite return means a return filed on a group basis as though there was only one (1) taxpayer and which sets forth the name, address, taxpayer identification number and percent ownership or interest of each nonresident individual in addition to return information as that term is defined in Section 5d, Article 10 of the West Virginia Code. The term "composite return" also includes block filing. 51a.5. Nothing in this regulation shall be construed to prohibit a nonresident individual from filing a separate nonresident personal income tax return for the taxable year and a nonresident personal income tax return shall be filed where the nonresident has income from any other West Virginia source
W. Va. Code R. § 110-21-52 Time And Place For Filing Returns And Paying Tax
52.1. Time For Filing Returns.
52.1.1. General Rule. - The returns of individuals, trusts, estates or partnerships required to be made under these regulations shall be filed on or before the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year (April 15th in the case of a calendar year taxpayer), except that where a later due date has been fixed for filing the federal return (without regard to any extension of time granted for this purpose), such later date shall apply for West Virginia tax purposes. However, in the last instance, a statement must be attached to the West Virginia return setting forth the circumstances and the authority under which the federal return was permitted to be filed on a date other than the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year. The words "close of the taxable year" refer to and shall have the same meaning for West Virginia income tax purposes as when used for federal income tax purposes.
52.1.2. Mailing Of Returns. - If a return is placed in the mail, it must be postmarked on or before the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year (April 15th in the case of calendar year taxpayer) to be timely filed. See W. Va. Code '11-10-5f(b) regarding timely mailing.
52.1.3. Return Of A Decedent. - The West Virginia income tax return of a decedent for a fractional part of a year shall be due on or before April fifteenth (15th), following the close of the year which began with the first (1st) day of such fractional part of the year. The due date is the same as if the decedent had lived until the end of his normal taxable year.
52.1.4. Last Day On A Saturday, Sunday, Or Legal Holiday. - When the last day prescribed in these regulations, determined by including any authorized extension of time, for filing a return, making a payment, or performing any act, falls on Saturday, Sunday, or a day which is a legal holiday in the State of West Virginia, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a legal holiday, Saturday or Sunday. See W. Va. Code '11-10-5g.
52.2. Place For Filing Returns Or Other Documents. - The personal income tax return or declaration of estimated income tax for resident and nonresident individuals, partnerships, resident and nonresident estates and trusts, must be delivered to the Tax Commissioner or mailed to the West Virginia State Tax Department, Accounting Division, Charleston, West Virginia 25324. For requirements regarding delivery or mailing of returns and other documents, see W. Va. Code '11-10-5f.
52.3. Payment Of Taxes.
52.3.1. Any tax under the West Virginia Personal Income Tax Act becomes due and payable on the day immediately following the close of the person's taxable year, whether the latter be the fiscal or calendar year, but remains due and payable unless paid on or before the due date fixed for filing the return thereof. Except as otherwise provided herein, a person required to make and file a return under the provisions of the West Virginia Personal Income Tax Act shall, without assessment, notice or demand, pay in full the tax due thereon to the State Tax Commissioner on or before the due date fixed for filing such return.
52.3.2. Method Of Paying Tax Due. - The remittance, whether check or money order, for the balance of the tax shown to be due on the return must be made payable to the State Tax Commissioner or to the State Tax Department. A remittance by check or money order should contain thereon the taxpayer's social security number or taxpayer identification number.
52.3.2.1. Postage stamps will not be accepted in payment of personal income tax.
52.3.2.2. A cash register receipt will be issued for any payment of tax made in cash by the taxpayer which is presented in person at a location duly authorized by the Tax Commissioner, if so requested.
52.3.2.3. Where payment in person is made by check or money order, the cancelled remittance is considered sufficient receipt and an official receipt will only be issued upon specific request by the taxpayer.
52.3.2.4. Uncertified checks or drafts in payment of income taxes are acceptable subject to the condition that such checks or drafts may be presented for payment in accordance with the practice of the State Tax Commissioner, the State Treasurer's Office, and the collection bank or banks.
52.3.2.4.a. Payment will not be deemed to have been made unless the full amount of an uncertified check or draft is received by the State Treasurer's Office.
52.3.2.5. The date on which a hand delivered remittance is received will be considered the date of payment so far as the taxpayer is concerned unless the check is returned because it was dishonored upon presentment, except when it was dishonored because of the death of the taxpayer. See W. Va. Code '11-10-5n regarding payment by check or money order.
W. Va. Code R. § 110-21-53 Signing Of Returns And Other Documents
53.1. General. - Each individual, including a fiduciary, shall sign any return, declaration, statement or other document which he is making or filing pursuant to requirements stated in these regulations, except that the return, declaration, statement or other document may be signed for such individual by an agent who is duly authorized to act for such person. The fact that an individual's name is signed to a return, declaration, statement or other document shall be prima facie evidence for all purposes that the return, declaration, statement or other document was actually signed by him.
53.1.1. Signature BY Agent. - When by reason of illness, absence, minority, or otherwise, the person required to make or file any return, declaration, statement or other document is unable to do so, such return, declaration, statement or other document may be made and signed by an agent, or by a guardian or other person charged with the care of the person or property of such taxpayer. Such agent assumes responsibility for making and signing the return or other document, and incurs liability for the penalties provided for erroneous, false or fraudulent returns, declarations, statements or other documents.
53.1.2. Signatures Of Husband And Wife.
53.1.2.1. A return or declaration of a husband and wife (if not made by an agent) shall be signed by both spouses. If signed by one spouse, individually and as agent for the other, authorization for such action must accompany the return or declaration.
53.1.2.1.a. The spouse acting as agent for the other shall, with the principal, assume responsibility for making the return and declaration and incur liability for the penalties provided for erroneous, false or fraudulent returns or declarations.
53.1.2.1.b. Where the signature or authorization of either the husband or the wife cannot be obtained because of illness or absence, and no power of attorney or written authorization is available for the same reason, a return or declaration signed by one spouse and offered to the Tax Commissioner for filing as a joint return or declaration may be accepted as such if all the evidence indicates that the taxpayers intended to file it as a joint return or declaration.
53.1.2.2. In the case of death of one or both spouses during the year for which a joint return is made under the circumstances referred to in Subsection 51.3.2 of these regulations, the signatures and evidence of authorization required under the United States Internal Revenue Code and applicable regulations for such purpose shall apply for West Virginia income tax purposes.
53.2. Partnerships. - Any return, statement or other document required to be made or filed by a partnership shall be signed by one (1) or more partners. The fact that a partner's name is signed to a return, statement, or other document shall be prima facie evidence for all purposes that such partner is authorized to sign on behalf of the partnership and that the signature is his.
53.3. Certifications. - The making or filing of any return, declaration, statement or other document or copy thereof required to be made or filed pursuant to these regulations, including a copy of a federal return, shall constitute a certification by the person making or filing such return, declaration, statement or other document or copy thereof that the statements contained therein are true and that any copy filed is a true copy.
53.4. Signature Of Preparer. - If a return is prepared for a taxpayer by another person or firm (other than the taxpayer's agent as detailed in Subsection 53.1.1 above) for compensation, such person or firm must sign such return. This signature is in addition to the required signature of the taxpayer or his agent. If the return is prepared by a firm, such return shall be signed by the person duly authorized to act on behalf of the firm, the name of which shall be stated in conjunction with such signature. This regulation does not apply to a return prepared for an employer by an employee who is regularly and continuously employed by such employer, such as, for example, a clerk, secretary or bookkeeper, nor does this regulation apply to a person who renders mere mechanical assistance in the preparation of a return, such as a stenographer or typist.
W. Va. Code R. § 110-21-54 Change Of Resident Status During Year
54.1. General. - A taxpayer who changes his residence either from West Virginia to another place or from another place to West Virginia during his taxable year is required to file two (2) income tax returns with the State of West Virginia: one (1) return covering the period of residence, and one (1) return covering the period of nonresidence.
54.1.1. If a change of residence occurred during the taxable year and the taxpayer had no income derived from or connected with West Virginia sources during the period of nonresidence, a statement verifying that the taxpayer had no West Virginia income during such period may be attached to the required return in lieu of filing the nonresident return. Such statement will serve as the return for the nonresident period only if the taxpayer had no West Virginia income during the period of nonresidence.
54.1.1.1. Example. - If an individual resided in the State of Ohio for the first (1st) six (6) months of the taxable year and in West Virginia for the last six (6) months of the taxable year and had no West Virginia source income while an Ohio resident but did have income while a West Virginia resident, a statement verifying that such individual had no West Virginia income while a nonresident, attached to the required return, will satisfy filing requirements for the nonresident portion of the year.
54.1.2. The provisions of Subsection 54.1.1 above are equally applicable where the taxpayer had West Virginia income while a nonresident but had no income while a resident.
54.1.3. Husband And Wife With Different Resident Status. - If a husband or wife changes his or her resident status during the taxable year, while the other spouse maintains his or her status as a resident or nonresident, as the case may be, during the entire taxable year, the spouse who changes his or her residence during the taxable year must, unless excused under Subsection 54.1.1 of this regulation, file two (2) returns for that year: one (1) return for the portion of the year during which such spouse was a resident and one (1) return for the portion of the year during which such spouse was a nonresident. The spouse who did not change his or her residence during the taxable year must file a separate West Virginia return, if such spouse has income subject to taxation under the West Virginia Personal Income Tax Act, without regard to the change made by the other spouse.
54.1.3.1. Example. - X, a West Virginia resident, marries Y, an Ohio resident, on November 1, 1989, and on the same date Y moves into West Virginia to live with X. Y earned income in West Virginia after she became a resident; therefore, Y is required to file two (2) returns with the State of West Virginia for the taxable year 1989, and X must file a separate resident return for the taxable year 1989. Each must claim his own exemption. Neither spouse may file a joint return.
54.2. West Virginia Taxable Income As Resident And Nonresident. - The West Virginia taxable income for the portion of the year during which an individual was a resident shall be determined except for the special accruals under Subsection 54.3 of this regulation, as if his taxable year for federal income tax purposes was limited to the period of his resident status. The West Virginia taxable income for the remaining portion of the taxable year during which he was a nonresident shall be determined, except for the special accruals under Subsection 54.3 of this regulation, as if his taxable year for federal income tax purposes was limited to the period of his nonresident status.
54.2.1. For purposes of the preceding Subsection annual limitations with respect to specific items of income, gain, loss and deduction allowable for federal income tax purposes are to be applied separately to the applicable federal items attributable to the separate periods covered by the West Virginia resident and nonresident returns required under this regulation.
54.3. Special Accruals.
54.3.1. If an individual changes his status from resident to nonresident, he must, regardless of the method of accounting he normally employs, accrue and include on his West Virginia return for the portion of the year prior to such change, any items of income, gain, loss or deduction accruing prior to the change if not otherwise properly includible or allowable for West Virginia income tax purposes for such portion of the taxable year or for a prior taxable year. Thus, in computing his West Virginia taxable income for that period, he must include all the items he would be required to include if he were filing a federal return for the same period on the accrual basis, together with any other accruals, such as deferred gain on installment obligations, which are not otherwise includible or deductible for federal or West Virginia income tax purposes either for such period or for a prior taxable period.
54.3.1.1. Where a taxpayer sells his business in West Virginia at a gain, under a contract whereby the purchase price is to be paid in installments, and later changes his status from resident to nonresident, he must accrue the entire amount of the gain remaining unpaid from such installment obligations, regardless of the method of accounting he normally uses in reporting his transactions. Likewise, where a beneficiary of an estate or trust changes his status during the taxable year from resident to nonresident, he must accrue on his West Virginia return for the resident period any estate or trust income credited, distributable, payable or required to be distributed to him as of the date of his change of residence.
54.3.1.1.a. Gain which is not recognized for federal income tax purposes need not be accrued for West Virginia income tax purposes solely because of the change of residence. For example, a gain realized on the sale of the taxpayer's principal residence, if it is not recognized for federal tax purposes by virtue of the provisions of the Internal Revenue Code relating to acquisition of a new residence, then it need not be accrued in the taxpayer's West Virginia return for the period prior to his change of residence.
54.3.1.2. The amount of the accrued items shall be determined, with the applicable modifications described in W. Va. Code '11-21-12 and Section 12 of these regulations, as if such accrued items were includible or allowable for federal income tax purposes.
54.3.1.2.a. Example. - on September 10, 1989, A, a cash basis calendar year taxpayer residing in West Virginia, terminates his employment in West Virginia and moves to Florida. His salary up to the termination amounted to eight thousand dollars ($8,000). On September 1, 1989, his employer notifies him that under his employment contract he will receive on October 1, 1989, a bonus of one thousand dollars ($1,000), subject to no contingencies.
On August 15, 1989, the X Corporation declares a dividend of six hundred dollars ($600), payable to A on September 20, 1989, as a stockholder of record on August 15, 1989.
On June 1, 1989, A closed title with C on a tract of vacant land in Pennsylvania, taking from C a purchase money mortgage calling for annual payments on July 1 of each year. By reason of A's federal election of the installment method of accounting with respect to this transaction, A will realize a gain of five hundred dollars ($500) each year for five years or twenty-five hundred dollars ($2,500).
On November 1, 1989, the XYZ Realty Company sells A's West Virginia residence, and A realizes a taxable gain of three thousand dollars ($3,000).
For 1989, A must file two (2) West Virginia income tax returns: one (1) as a resident, and one (1) as a nonresident. On his 1989 income tax return for the portion of the year during which A was a resident, he includes in West Virginia adjusted gross income the following items:
Salary until termination...$8,000 Bonus-nonforfeitable...$1,000 Dividends accrued...$600 Gain on sale of Pennsylvania property-accrued...$2,500 On his 1989 nonresident income tax return, A includes in West Virginia adjusted gross income the following item which is derived from West Virginia sources.
Gain on sale of West Virginia residence...$3,000 The gain from the sale of the West Virginia residence was not accruable for the portion of the year A was a resident, for the sale was made and the gain realized after A became a nonresident. Because A reports the bonus payment on his West Virginia return for the resident portion of 1989, he need not take it into account on his nonresident return as an item of income derived from West Virginia sources even though he actually receives this item of income when he is a nonresident. See Subsection 54.3.3 of this regulation.
54.3.2. If an individual changes his status from nonresident to resident, he shall make the same accruals as those set forth in Subsection 54.3.3 of this regulation, except that no accrual is required for items of income, gain, loss or deduction derived from or connected with West Virginia sources. The amounts of such accrued items shall be determined with the applicable modifications described in Section 12 of these regulations as if such accrued items were includible or allowable for federal income tax purposes.
54.3.3. No item of income, gain, loss or deduction accrued under Subsection 54.3 of this regulation for the portion of a taxable year prior to a change of resident status is taken into account in determining West Virginia adjusted gross income of any subsequent taxable period.
54.3.3.1. Example. - A, a cash-basis calendar year taxpayer residing in Kentucky, performs services in Kentucky in March, 1989, for which he is paid ten thousand dollars ($10,000) in September, 1989, from the employer's West Virginia office. On August 10, 1989, A moves to West Virginia where on September 1, 1989, he receives the ten thousand dollar (10,000) salary. For 1989, A is required to file two (2) West Virginia returns, one (1) as a nonresident and one (1) as a resident. No part of the ten thousand (10,000) dollar salary is taken into account as this item was sourced in another state which preceded the date of the change of residence.
54.3.4. The return for the period prior to a change from resident to nonresident status may be filed without the special accruals referred to herein if the taxpayer files with the Tax Commissioner a bond or other security acceptable to the Tax Commissioner, in an amount not less than the amount of additional income tax which would be payable had such bond or security not been filed. The additional tax, which is considered in determining the amount of the bond or other security which the taxpayer will be required to furnish, is computed at the rates which he would have been obligated to pay if no bond or other security had been filed, taking into.account all accrued items of income, gain, loss and deduction, and resolving against him all matters in dispute affecting the amount of tax.
54.4. Minimum Tax. - Where two (2) returns for one (1) taxable year are required because of a change of resident status, the total of the income taxes due thereon shall not be less than would be due if the West Virginia taxable incomes reportable on the two (2) returns were includible in one (1) return.
54.5. Prorations. - Where two (2) returns are required to be filed because of a change in resident status, the West Virginia personal exemptions allowable under Sections 16 and 36 of these regulations must be prorated between the period before the change of residence and the period after the change of residence to reflect the portions of the entire taxable year during which the individual was a resident and a nonresident.
54.5.1. The proration of personal exemptions is based upon the fractional periods of time both as a resident and as a nonresident. In determining fractional periods, a fraction of a month amounting to half a month or more constitutes a full month, and a fraction of a month amounting to less than half a month is disregarded.
54.5.2. Personal ExemPtion Proration For Resident Return. - The proration of personal exemptions on the return for the period of residency equals the amount allowed per exemption times the number of personal exemptions to which the taxpayer is entitled multiplied by a fraction the numerator of which is the number of months during which the taxpayer was a resident and the denominator of which is twelve (12). Thus, the resident proration formula is as follows:
Amount Per Exemption X Number Of Exemptions X (Number of Months in State/12) = Prorated Exemption Amount To Be Claimed On Resident Return.
54.5.3. Personal ExemPtion Proration For Nonresident Return. - The proration of personal exemptions on the return for the period of nonresidency equals the product of the amount allowed as a personal exemption for a West Virginia resident multiplied by the ratio the nonresident individual's West Virginia source income during the period of nonresidency bears to that nonresident individual's federal adjusted gross income for the taxable year times the number of personal exemptions to which the taxpayer is entitled to claim multiplied by a fraction the numerator of which is the number of months during which the taxpayer was a nonresident and the denominator of which is twelve (12). Thus, the nonresident proration formula is as follows:
W.Va. Source Income Amount Per Exemption X For Nonresident Period X Number of Federal Adjusted Gross Income Personal Exemptions X Number of Months Outside W.Va. = Prorated Exemption Amount To Be Claimed on Nonresident Return.
54.5.4. Examples.
Example 1. - A taxpayer moves into West Virginia on May 1, 1989. He was a nonresident for four (4) months and a resident for eight (8) months during tax year 1989. This taxpayer has four (4) personal exemptions and because he is required to file two (2) income tax returns with West Virginia there must be a proration of his personal exemptions to reflect the portions of the tax year where he was a resident and a nonresident. In order to determine the amount of his personal exemption to be claimed on the resident income tax return, the taxpayer must multiply two thousand dollars ($2,000) (the amount for each personal exemption) times four (4) (the number of his personal exemptions) times 8/12 (the fractional period of residence). Therefore, the amount of personal exemption on the resident return will be $5,333 ($2,000 X 4 X (8/12) = $5,333).
To find the amount to be claimed as the personal exemption on the nonresident return, this taxpayer will multiply two thousand dollars ($2,000) (the amount per exemption) by 25,000/100,000 (the ratio that his West Virginia source income for the period of nonresidence bears to his federal adjusted gross income for the taxable year) times four (4) (the number of his personal exemptions) multiplied by 4/12 (the fractional period of nonresidence). Therefore, the amount of personal exemption on the nonresident return will be $667 ($2,000 X 25,000/100,000 X 4 X (4/12) = $667).
Example 2. - The taxpayer, a dependent child, leaves West Virginia with his family on August 5, 1989. This taxpayer is entitled to one (1) West Virginia personal exemption even though he is not permitted an exemption for federal income tax purposes because he is claimed by his parents on their federal return. Since he is required to file two (2) State returns to reflect the portions of the taxable year as a resident and nonresident, he must prorate his personal exemption. For purposes of determining the fractional period of time, a fraction of a month amounting to half a month or more constitutes a full month, and a fraction of a month amounting to less than a month is disregarded. Thus, the taxpayer's fractional period of residence is 7/12, and his fractional period of nonresidence is 5/12. To find the amount of his personal exemption to be claimed on the resident return, the taxpayer multiplies five hundred dollars ($500) (the amount of the dependency exemption) by 7/12 (the fractional period of residence). Therefore, the amount allowable will be $292. ($500 x (7/12) = $292). The amount of personal exemption on his nonresident return presuming West Virginia source income for the nonresident period of three thousand dollars ($3,000) and federal adjusted gross income of nine thousand dollars ($9,000) will be $69. ($500 X 3,000/9,000 X (5/12) = $69).
W. Va. Code R. § 110-21-55 Declarations Of Estimated Tax
55.1. Requirement Of Declaration. - Every resident and nonresident individual whose West Virginia adjusted gross income (other than from wages on which the proper amount of tax is withheld under Section 71 of these regulations) can reasonably be expected to exceed four hundred dollars ($400) shall make and file a West Virginia declaration of estimated tax for the taxable year unless the estimated tax otherwise due in installment payments is remitted through additional withholding by the employer from the employee's wages during the taxable year or withholding satisfies at least ninety percent (90%) of the annual personal income tax liability.
55.1.1. If in addition to income from wages subject to West Virginia withholding an individual also has other income, the sum of that individual's allowable personal exemptions are to be counted only once for purposes of determining the amount of withholding taxes and estimating the tax due on the additional income. In other words, the amount of West Virginia personal income taxes owed for the taxable year (determined before application of credit for employer withholding) must be prepaid either by employer withholding, installment payments or a combination of both. Taxpayers are encouraged to increase the amount withheld from wages under W. Va. Code '11-21-71 and Section 71 of these regulations whenever practicable in order to insure that the proper amount of taxes are prepaid for the taxable year.
55.1.1.1. Whether or not a taxpayer is required to file a federal declaration of estimated tax for the taxable year or remit installment payments of estimated federal income tax is not relevant to determining whether or not the taxpayer is required to file a West Virginia declaration of estimated tax for the taxable year.
55.1.2. Examples. - Application of Subsection 55.1 of this regulation is illustrated by the following examples. The applicability of safety zones is not considered in any of the examples set forth below. See Subsection 56a of these regulations for a discussion of safety zones.
Example 1. - X, a taxpayer making his return on the calendar year basis, is married and has two (2) dependent children. X is sole proprietor of a retail business which is his only source of income. X can reasonably expect to realize twenty-five thousand dollars ($25,000) from the business during 1989, based on prior year's earnings. Therefore, X is required to make a declaration of estimated tax, because his income can reasonably be expected to exceed the sum of his personal exemptions plus four hundred dollars ([2,000 X 4] + 400 = $8,400) for 1989.
Example 2. - Y is a cash basis taxpayer with three (3) personal exemptions including himself. Y is employed and expects to receive twenty-three thousand dollars ($23,000) subject to withholding during calendar year 1989. Also, Y expects to receive twelve thousand dollars ($12,000) of income during the taxable year from the practice of a profession on his own account. Y is required to file a West Virginia declaration of estimated tax, for Y's income ($12,000) not subject to withholding exceeds four hundred dollars ($400). The sum of his personal exemptions (2,000 X 3 = $6,000) was considered in determining the amount withheld from his wages for the 1989 taxable year. Alternatively, Y could increase the amount being withheld for West Virginia personal income taxes by his employer. If the amount of estimated tax due on Y's other income is remitted through additional withholding, Y will not be required to file a declaration of estimated tax and make quarterly installment payments.
Example 3. - P is a taxpayer making his return on a calendar year basis. P is engaged in the practice of law as a sole practitioner. He has West Virginia adjusted gross income of three thousand dollars ($3,000) from his profession each month in the first (1st) quarter of 1989. He can reasonably expect that his profession will continue to average three thousand dollars ($3,000) for each month throughout the year, and that he will not have income from any other source during 1989. Since P's gross income is not subject to withholding, he is required to file a declaration of estimated tax for that year, on or before April 15, 1989. Since P's West Virginia adjusted gross income from sources other than wages subject to withholding exceeds his two thousand (2,000) dollar personal exemption plus four hundred dollars ($400), P is required to file a declaration of estimated tax for the 1989 tax year on or before April 15, 1989, and make quarterly installment payments.
Example 4. - S, a married taxpayer, has been regularly employed for many years. As of January 1, 1989, his salary was twenty-six thousand dollars ($26,000) per year. S also owns stocks and other investments which he inherited when his father died in 1987, and which pay S approximately five thousand dollars ($5,000) a year. Because his West Virginia adjusted gross income not subject to withholding taxes exceeds four hundred dollars ($400), and the sum of his personal exemptions (2,000 X 2 = $4,000) was considered in determining employer withholding taxes, S is required to file a declaration of estimated tax for calendar year 1989 by April 15, 1989, unless the amount of tax remitted with his 1989 annual return will be ten percent (10%) or less of his liability for the taxable year. Alternatively, S can avoid filing a declaration of estimated tax by increasing the amount being withheld for West Virginia personal income taxes by his employer in order to pay the amount of estimated tax that otherwise would be due in installment payments.
Example 5. - H is a married individual with three (3) dependent children. H is employed at an annual salary of eighteen thousand dollars ($18,000). His spouse, W, is employed at an annual salary of sixteen thousand dollars ($16,000). Both salaries are subject to this State's withholding taxes. They have additional income of fifteen thousand dollars ($15,000) from investments. H and W will file a joint personal income tax return for calendar year 1989. Because the amount of West Virginia adjusted gross income from sources not subject to withholding taxes is in excess of four hundred dollars ($400), a declaration of estimated tax is required for the 1989 calendar year. In lieu of filing the declaration of estimated tax, H and W can elect to increase the amount of West Virginia personal income taxes withheld from their wages by their employees so that the required amount of tax is prepaid.
Example 6. - Presuming the same facts as in Example 5 above except that on July 20, 1989, W is the grand prize winner in a contest sponsored by a national magazine. The prize is an initial payment of five thousand dollars ($5,000) plus a payment of one thousand dollars ($1,000) per month for the rest of W's life. An amended declaration of estimated tax must be filed by W or a joint amended declaration by H and W on or before September 15, 1989.
55.1.3. Exemption Of Spouse. - For the purpose of determining whether a declaration of estimated tax is required under Subsection 55.1 of this regulation, a married taxpayer filing a separate declaration may not take into account the exemption of his spouse, if his spouse has, or is reasonably expected to have, West Virginia adjusted gross income, or is reasonably expected to be the dependent of another taxpayer for the taxable year.
55.1.4. Income Of Child. - In estimating the amount of West Virginia adjusted gross income for the taxable year, a parent should not include the income of his or her minor child. Such income is not includible in the gross income of the parent.
55.1.5. Partnerships And S Corporations. - Neither a partnership nor an S Corporation is subject to tax under the West Virginia Personal Income Tax Act. Partners and S Corporation shareholders in their individual capacities must file declarations of estimated income tax for their estimated income from the partnership or S Corporation.
55.1.6. Estates And Trusts. - An estate or trust is generally taxed as an individual but is not required to file a declaration of estimated tax, or remit estimated tax in installment payments during the taxable year. Beneficiaries of estates and trusts must file declarations of estimated tax in their individual capacities and must take into consideration their estimated distributive shares of income from estates and trusts.
55.1.7. Death Of Taxpayer. - No declaration of estimated income tax is required to be filed for a decedent subsequent to the date of his or her death. A short year tax return may however need to be filed and additions to tax may be due for any failure of the decedent to: (1) timely file a declaration of estimated tax required under W. Va. Code '11-21-55 and Section 55 of these regulations; (2) timely pay any installment of estimated tax required under W. Va. Code '11-21-56 and Section 56 of these regulations; or (3) properly estimate his or her income tax. See Subsection 55.3.4.2 of this regulation regarding the making of an amended declaration by a surviving spouse where a joint declaration had been made prior to the death of the decedent.
55.1.8. Fiscal Year Taxpayers. - The provisions of this regulation are equally applicable to fiscal year taxpayers. See Subsection 55.10 of this regulation.
55.1.9. Declaration For Taxable Year Of 52 - 53 Weeks. - No declaration may be made for a period of more than twelve (12) months. For purposes of this Subsection, a taxable year of fifty-two (52) or fifty-three (53) weeks, in the case of a taxpayer who computes his or her taxable income for federal income tax purposes in accordance with the election permitted by 26 U.S.C. s 441(f) shall be deemed a period of twelve (12) months. A separate declaration for a fractional part of a year is required where the taxpayer has a short taxable year for federal income tax purposes.
55.1.10. When Preceding Year Was A Loss Year. - If an individual has zero (0) or negative West Virginia taxable income for the preceding year, a declaration of estimated tax is not required to be filed for the current taxable year until such time as the individual can reasonably estimate that his or her West Virginia adjusted gross income for the current tax year will exceed the amount of his or her allowable exemption(s) plus four hundred dollars ($400) unless the zero (0) or negative West Virginia taxable income in the preceding taxable year was due to:
(1) the carry forward of a loss from a preceding taxable year unless the loss will also be carried forward to the current taxable year with like effect; or (2) unusual events or occurrences not reasonably expected to affect the current taxable year with like effect.
55.1.10.1. Notwithstanding the provisions of Subsection 55.1.10 above, a declaration of estimated tax is not required for the current year if the amount remitted or that should be remitted with the annual return for that year is ten percent (10%) or less of the tax liability for the taxable year (determined before application of any credits) for employer withholding taxes and installment payments of estimated tax.
55.1.11. Contents Of Declaration.
55.1.11.1. The declaration of estimated tax by an individual shall be made on Form 140-ES.
55.1.11.1.a. For the purpose of making the declaration, the amount of West Virginia adjusted gross income which the taxpayer can reasonably be expected to receive or accrue, depending upon the method of accounting upon which his or her taxable income is computed, and the sum of the estimated allowable deductions and credits to be taken into account in computing the amount of estimated income tax shall be determined upon the basis of the facts and circumstances existing at the time prescribed for the filing of the declaration along with those reasonably to be anticipated for the taxable year.
55.1.11.1.b. Where the taxpayer is employed at the date prescribed for filing his or her declaration at a given wage or salary, it should, in the absence of circumstances indicating the contrary, be presumed by him or her for purposes of the declaration that such employment will continue to the end of the taxable year at the wage or salary received by him or her as of such date.
55.1.11.1.c. In the case of income other than wages and salary, it is the responsibility of the taxpayer to estimate correctly or comply with provisions of these regulations allowing for the timely filing of an annual return to be accepted as a declaration of estimated tax where such other income is expected to be paid with regularity.
55.1.11.1.d. In the caRe of a taxpayer engaged in a trade, business or profession, he or she shall make an estimate of gross income, deductions and credits in the light of the best available information affecting the trade, business or profession.
55.1.11.1.e. In determining whether or when the filing of a declaration of estimated tax is required by law and these regulations, and in determining the amount of estimated tax, the burden is on the taxpayer to show he or she complied with the law and these regulations. If, upon filing of the annual return, more than ten percent (10%) of the taxpayer's liability is remitted or should have been remitted with the return it will be presumed that there was noncompliance. Similarly, a taxpayer's total West Virginia personal income tax liability for the taxable year, as shown on his or her annual return for that year, will be divided by five (5) to determine whether tax was timely remitted in "equal" installment payments in compliance with the law and these regulations.
55.1.11.2. Use Of Prescribed Form. - Copies of Form 140-ES will, so far as possible, be furnished to the taxpayer by the Tax Commissioner. A taxpayer will not be excused from making a declaration, however, by the fact that no form has been furnished to him or her. Taxpayers not supplied with the proper form should make application therefor to the Tax Department in ample time to have their declarations prepared, verified, and filed with the Tax Commissioner on or before the date prescribed for filing the declaration. If the prescribed form is not available, a statement disclosing the amount estimated as the tax, the estimated credits, and the estimated tax after deducting such credits should be filed as a tentative declaration within the prescribed time, accompanied by the payment of the required installment. Such tentative declaration should be supplemented, without unnecessary delay, by a declaration made on the proper form.
55.2. Definition Of Estimated Tax. - The term "estimated tax" means the amount which an individual estimates to be his income tax under the provisions of the West Virginia Personal Income Tax Act and these regulations for the taxable year, less the amount such individual estimates to be the sum of any credits allowable against the tax.
55.3. Joint Declaration Of Husband And Wife.
55.3.1. In General.- A husband and wife may make a joint declaration of estimated income tax as if they are one (1) taxpayer, even though they are not living together, except as provided below. A joint declaration may be made even though one (1) spouse is expected to have no income during the taxable year. If a husband and wife make a joint declaration, their liability with respect to the estimated tax shall be joint and several.
55.3.2. Exceptions. - A joint declaration of estimated income tax may not be made if the husband and wife are separated under a decree of divorce or of separate maintenance, or if they have different taxable years. Also, a joint declaration of estimated tax may not be filed if the husband and wife do not have the same resident status unless both elect to determine their joint West Virginia taxable income as if both were residents.
55.3.3. Application To Separate Returns. - The fact that a joint declaration of estimated income tax is made by a husband and wife will not preclude them from electing to determine their West Virginia income taxes on separate annual returns. In the case where a joint declaration is made but a joint annual return is not made for the same taxable year, the installment payments of estimated tax for such year may be treated as payments on account of the tax liability of either the husband and wife for the taxable year or may be divided between them in such manner as they may agree. One spouse may claim the full amount of estimated tax paid during the year. Where husband and wife file separate returns, the spouse claiming the estimated tax paid, or each spouse if each claims a portion of the estimated tax paid, must make a notation on his or her West Virginia Personal Income Tax Return to the effect that the estimated tax paid was by a joint declaration.
55.3.3.1. In the event that a husband and wife file separate returns and fail to agree to a division of any estimated tax payments, such payments shall be allowed between them in accordance with the following rule. The portion of estimated tax payments to be allocated to a spouse shall be that portion of the aggregate of all such payments as the amount of tax imposed under the West Virginia Personal Income Tax Act shown on the separate return of the taxpayer bears to the sum of the taxes imposed under the West Virginia Personal Income Tax Act shown on the separate returns of both the taxpayer and his or her spouse.
55.3.3.2. Example. - Assume that for calendar year 1989 H and his spouse, W, make a joint return of estimated tax and pursuant thereto, pay a total of nine hundred dollars ($900) of estimated tax. H and W subsequently file separate returns for 1989 showing tax imposed under the West Virginia Personal Income Tax Act in the amount of five hundred forty-eight dollars ($548) and four hundred fifty dollars ($450) respectively. H and W fail to agree to a division of the estimated tax paid. The amount of the aggregate estimated tax payments allocated to H is computed as follows:
(1) Amount of tax imposed as shown on H's return...$548 (2) Total taxes imposed as shown on W's return...$450 (3) Total taxes imposed as shown on both H's and W's returns...$998 (4) Proportion of taxes on H's return to the total amount of taxes shown on both returns. ($548 - 998) ...54.90% (5) Amount of estimated tax payments allocated to H ...$494.10 Accordingly, H's return would show remaining tax liability in the amount of $53.90 ($548 taxes shown less than $494.10 estimated tax allocated.)
55.3.4. Death Of Spouse.
55.3.4.1. A joint declaration may not be made after the death of either a husband or wife. However, if it is reasonable for a surviving spouse to assume that there will be filed a joint return for himself and the deceased spouse for his taxable year and the last taxable year which includes the period comprising such last taxable year of his spouse, he may estimate the amount of tax imposed on his and his spouse's taxable income on an aggregate basis and compute his estimated tax in the same manner as though a joint declaration had been filed.
55.3.4.2. If a joint declaration is made by a husband and wife and thereafter one spouse dies, no further payments of estimated tax on account of the joint declaration are required from the estate of the decedent. The surviving spouse, however, shall be liable for the payment of any subsequent installments of the joint estimated tax unless an amended declaration setting forth the separate estimated tax for the taxable year is made by the surviving spouse. Such separate estimated tax shall be paid at the times and in the amounts determined under the rules prescribed in Section 56 of these regulations.
55.3.4.2.a. For the purposes of making the amended declaration by the surviving spouse, and for the allocation of payments made pursuant to a joint declaration between the surviving spouse and the legal representative of the decedent in the event a joint return is not filed, the payments made pursuant to the joint declaration may be divided between the decedent and the surviving spouse in such proportion as the surviving spouse and the legal representative of the decedent may agree.
55.3.4.2.a.1. In the event the surviving spouse and the legal representative of the decedent fail to agree to a division, such payments shall be allocated in accordance with the following rule. The portion of such payments to be allocated to the surviving spouse shall be that portion of the aggregate amount of such payments as the amount of tax imposed under the West Virginia Personal Income Tax Act shown on the separate return of the surviving spouse bears to the sum of the taxes imposed by said Act shown on the separate returns of the surviving spouse and of the decedent; and the balance of such payments shall be allocated to the decedent. This rule may be illustrated by analogizing the surviving spouse described in this rule to H in the example contained in Subsection 55.3.1.1 of this regulation and the decedent in this rule to W in that example.
55.3.5. Signing Of Joint Declaration. - A joint declaration of a husband and wife (if not made by an agent of one (1) or both spouses) shall be signed by both spouses. The provisions of Subsection 55.11 of this regulation, relating to returns made by agents shall apply where one (1) spouse signs a declaration as agent for the other or where a third (3rd) party signs a declaration as agent for both spouses.
55.4. Time For Filing Declaration.
55.4.1. In General. - A declaration of estimated income tax of an individual, other than a farmer, shall be filed on or before April fifteenth (15th) of the taxable year, except that if the requirements of Subsection 55.1 of these regulations are met:
(1) After April first (1st) and before June second (2nd) of the taxable year, the declaration shall be filed on or before June fifteenth (15th) or (2) After June first (1st) and before September second (2nd) of the taxable year, the declaration shall be filed on or before September fifteenth (15th), or (3) After September first (1st) of the taxable year, the declaration shall be filed on or before January fifteenth (15th) of the succeeding year.
55.4.2. Exceptions. - A declaration of estimated tax need not be filed for the taxable year if:
(1) At least ninety percent (90%) of the annual tax liability is satisfied by withholding; or (2) The amount of taxes due for the taxable year that will be remitted (or should be remitted) with the annual return is ten percent (10%) or less.
55.4.3. Optional Rule For Farmers. - See Subsection 55.5 of this regulation.
55.4.4. Fiscal Year Taxpayers. - An individual's tax year for purposes of this tax shall be the same as his or her taxable year for federal income tax purposes. Fiscal year taxpayers, except farmers, shall file declarations of estimated tax in accordance with Subsection 55.9 of this regulation.
55.5. Declarations Of Estimated Tax By Farmers.
55.5.1. In General. - In the case of an individual on a calendar year basis, if that individual expects to derive at least two-thirds (2/3) of his or her estimated West Virginia adjusted gross income from farming, he or she may file a declaration of estimated income tax at any time on or before January fifteenth (15th) of the succeeding year in lieu of the time for filing set forth in Subsection 55.4 of these regulations.
55.5.1.1. "Farming" Defined. - Income is attributable to farming if it is obtained from cultivation of the soil, the raising or harvesting of any agricultural or horticultural commodities, the raising, etc., of livestock, bees, poultry, furbearing animals, or wildlife. In other words, the requisite percentage of West Virginia adjusted gross income must be derived from the operation of a stock, dairy, poultry, fruit or truck farm. If an individual receives for the use of his or her land income in the form of a share of the crops produced thereon, such income is from farming.
55.5.2. Fiscal Year. - In the case of an individual on a fiscal year basis, if that individual expects to derive at least two-thirds (2/3) of his or her estimated West Virginia adjusted gross income from farming, he or she may file a declaration of estimated income tax at any time on or before the fifteenth (15th) day of the first (1st) month of the succeeding year.
55.5.3. Joint Return. - If a joint declaration of estimated tax will be filed by a husband and wife, at least two-thirds (2/3) of their combined estimated West Virginia adjusted gross income must be from farming before that declaration may be filed under Subsections 55.5.1 and 55.5.2. Otherwise, the rules of Subsection 55.4 of this regulation shall control.
55.6. Automatic Extension Of Time For Filing Declarations Of Estimated Tax.
55.6.1. In General. - If an individual determines that the amount of tax to be remitted with his or her annual return for the taxable year will be ten percent (10%) or less of the amount of tax shown (or that should have been shown) to be due on the annual return for the taxable year, determined before application of credits for employer withholding taxes and installment payments of estimated tax, whichever is greater, he or she is only required to file an annual return for the taxable year and pay the amount of tax shown thereon to be due, on or before April fifteenth (15th) of the succeeding tax year. For this purpose, all eligible taxpayers are granted an automatic extension of time from the date when the declaration of estimated tax and installment payments would otherwise be lawfully due until April fifteenth (15th) of the next tax year.
55.6.1.1. A husband and wife who file a joint declaration of estimated tax or a joint annual return are treated as one (1) individual for purposes of Subsection 55.6.1.
55.6.1.2. An individual with estimated tax in excess of forty dollars ($40) would in the absence of Subsection 55.6.1 be required to file his or her declaration of estimated tax as provided in Subsection 55.4 of this regulation.
55.6.1.3. An individual with estimated tax of forty dollars ($40) or less would in the absence of Subsection 55.6.1 be required to file his or her declaration of estimated tax on or before January fifteenth (15th) of the succeeding tax year.
55.6.2. Additions To Tax.
55.6.2.1. If the amount remitted with the annual return is ten percent (10%) or less of the tax liability for the taxable year, or if one of the safety zones applies (See Subsection 56a), no additions to tax under W. Va. Code '11-10-18a will begin to accrue on the amount due until April sixteenth (16th) of the succeeding tax year (sixteenth (16th) day of the fourth (4th) month of the succeeding tax year if filing on a fiscal year basis).
55.6.2.2. If the amount remitted with the annual return exceeds ten percent (10%) of the tax liability and if none of the safety zones discussed under Section 56a of these regulations is applicable, additions to tax shall be imposed and shall be calculated from the date when the declaration of estimated tax and the first installment payment should have been remitted. Additions to tax shall similarly be applied to any subsequent installment payments that should have been remitted, calculated from the date such installments should have been paid. See Sections 56 and 56a of these regulations for matters pertaining to additions to tax and application of safety zones.
55.7. Amendment Of Declaration.
55.7.1. In General. - In making a declaration of estimated income tax, the taxpayer is required to take into account the then existing facts and circumstances as well as those reasonably to be anticipated relating to prospective West Virginia adjusted gross income, allowable deductions for personal exemptions and estimated credits for the taxable year. Amended or revised declarations may be made in any case in which the taxpayer estimates that his or her West Virginia adjusted gross income, deductions for personal exemptions or credits will differ from the West Virginia adjusted gross income, deductions for personal exemptions, or credits reflected in the previous declaration. Only one amended declaration, however, may be filed during the interval between installment dates and no further amendment may be made until a succeeding installment date. An amended declaration may be filed jointly by husband and wife even though separate declarations have previously been filed.
55.7.2. Payments. - Subsequent installment payments shall be proportionally increased or decreased based on the amended declaration. No refund will be issued due to the filing of an amended declaration. Consideration will be given to a refund only in connection with a completed annual return filed by a taxpayer for the taxable year covered by his or her declaration, and/or amended declaration.
55.7.3. Time For Filing Amended Declaration. - An amended declaration of estimated income tax may be filed on or after an installment date prescribed for the taxable year. However, no amended declaration may be filed until after the original declaration has been filed and only one (1) amended declaration may be filed during any interval between installment due dates.
55.7.4. Forms. - An amended declaration shall be made on Form 140-ES clearly marked "AMENDED". If the proper form is not available, the procedure outlined in Subsection 55.1 of this regulation must be followed.
55.8. Return As Declaration Or Amendment.
55.8.1. In General. - If the annual return of the taxpayer is filed as hereinafter provided, the annual return may be treated as the declaration or amended declaration of estimated tax.
55.8.2. Time For Filing Return.
55.8.2.1. Return As Declaration; February Fifteenth (15th). - If the taxpayer files his or her return for the calendar year on or before February fifteenth (15th) of the succeeding calendar year (or if the taxpayer is on a fiscal year basis, the fifteenth (15th) day of the second (2nd) month of the next succeeding fiscal year) and pays therewith the full amount of the tax shown to be due on the return, then such return shall be considered as the taxpayer's declaration if the declaration is not required to be filed during the taxable year, but is otherwise required to be filed on or before January fifteenth (15th) of the succeeding year (or in the case of a fiscal year, the fifteenth (15th) day of the first (1st) month of the succeeding fiscal year).
55.8.2.2. Return As Amendment Of Declaration: JanuarY Fifteenth (15th). - If the taxpayer files his or her return for the calendar year on or before January fifteenth (15th) of the succeeding calendar year (or if on a fiscal year basis, the fifteenth (15th) day of the first (1st) month of the succeeding fiscal year), and pays therewith the full amount of the tax shown to be due on the return, then if a declaration was filed during the taxable year, such return shall be considered as the amendment of the declaration if the tax shown on the return is greater than the estimated income tax shown in the declaration.
55.8.2.3. Examples.
Example 1. - An individual taxpayer on the calendar year basis who, subsequent to September 1, 1989, first meets the requirements of Subsection 55.1 of this regulation for filing a declaration for 1989, may satisfy such requirements by filing his or her return for 1989 on or before February 15, 1990, and paying in full at the time of such filing the tax shown thereon to be payable.
Example 2. - Similarly, if a taxpayer files on or before September 15, 1989, a timely declaration for such year and on or before January 15, 1990, files a 1989 return on which the tax shown is more than the estimated income tax shown on such declaration, and pays at the time of such filing the tax shown by the return to be payable, such return shall be treated as the amended declaration permitted to be filed on or before January 15, 1990.
Example 3. - A taxpayer discovers on January 10, 1990, that he underpaid his estimated tax for the calendar year 1989. He may in lieu of filing the amended declaration on January 15, 1990, file his annual return on January fifteenth (15th), and pay in full the amount computed thereon as payable. By so doing he will avoid the additions to tax with respect to the installment payment that was due January 15, 1990. The periods of underpayment of the installments due April 15, 1989, June l5, 1989, and September 15, 1989, will also terminate on January 15, 1990.
55.8.3. Additions To Tax.
55.8.3.1. Compliance with the provisions of Subsection 55.8 will enable a taxpayer to avoid paying additions to tax with respect to an underpayment of the installment not required to be paid until January fifteenth (15th) of the succeeding calendar year.
55.8.3.2. With respect to an underpayment of any earlier installment, compliance with Subsection 55.8 will not relieve the taxpayer from additions to tax imposed under Article 10, Chapter 11, of the West Virginia Code. However, the period of the underpayment with respect to an earlier installment will terminate on January fifteenth (15th) of the succeeding calendar year.
55.9. Fiscal Year Taxpayers. - In the case of individuals on a fiscal year basis, other than those referred to in Subsections 55.5 and 55.6 of this regulation, the declaration must be filed on or before the fifteenth (15th) day of the fourth (4th) month of the taxable year. The provisions of this Section and of Section 56 of these regulations shall apply to a taxable year other than a calendar year by the substitution of the corresponding fiscal year months for the calendar year months referred to in this Section 55. See Section 6 relating to accounting periods and tax years.
55.10. Short Taxable Periods.
55.10.1. In General. - If a taxpayer is required to make a declaration of estimated income tax pursuant to Subsection 55.1 of this regulation, and a short taxable year is involved, a separate declaration for such fractional part of the year is required, except as hereinafter provided.
55.10.2. Income And Income Tax Placed On Annual Basis. - In order to determine whether a declaration of estimated tax needs to be filed for a short taxable year, West Virginia adjusted gross income and the taxes imposed under the West Virginia Personal Income Tax Act shall be placed on an annual basis in the manner prescribed in 26 U.S.C. 443(b)(1).
55.10.2.1. Example. - A taxpayer changes from a calendar year to a fiscal year basis beginning July first (1st). The taxpayer will have a short taxable year beginning January first (1st), and ending June thirtieth (30th). The anticipated West Virginia adjusted gross income - (excluding wages on which tax is withheld) for such short taxable year is three thousand dollars ($3,000). His West Virginia adjusted gross income for the purpose of determining whether a declaration is required is six thousand dollars ($6,000), which is the amount obtained by placing the anticipated income of three thousand dollars ($3,000) upon an annual basis ($3,000 multiplied by 12 and divided by 6).
55.10.3. Four (4) Months Or Less. - No declaration is required if the short taxable year is a period of less than four (4) months or one (1) of the safety zones set forth under Section 56a of these regulations is applicable.
55.10.4. Time For Filing.
55.10.4.1. In General. - In the case of a short taxable year, the declaration shall be filed by individuals (other than those referred to in Subsection 55.5 and - 55.6 of this regulation) on or before the fifteenth (15th) day of the fourth (4th) month of such taxable year. If the requirements prescribed in Subsection 55.1 of this regulation are originally met after the first (1st) day of the fourth (4th) month but before the second (2nd) day of the sixth (6th) month, the declaration must be filed on or before the fifteenth (15th) day of the sixth (6th) month. If the requirements of Subsection 55.1 are originally met after the first (1st) day of the sixth (6th) month but before the second (2nd) day of the ninth (9th) month, the declaration must be filed on or before the fifteenth (15th) day of the ninth (9th) month.
55.10.4.2. Short Year Of More Than Six But Less Than Nine (9) Months. - If, however, the period for which the declaration is filed is at least six (6) months but less than nine (9) months and the requirements of Subsection 55.1 of this regulation are not met until after the first (1st) day of the fourth (4th) month, the declaration may be filed on or before the fifteenth (15th) day of the succeeding taxable year.
55.10.4.3. Short Year Of More Than Nine (9) Months. - If, however, the period for which the declaration is filed is for nine (9) months or more and such requirements are not met until after the first (1st) day of the sixth (6th) month, the declaration may be filed on or before the fifteenth (15th) day of the succeeding taxable year.
55.11. Declaration Made By Agent For Individual Under Disability.
55.11.1. In General. - The declaration of estimated tax for an individual who is unable to make a declaration by reason of minority, disease, injury, or other disability may be made and filed by his or her guardian, committee, fiduciary or other person charged with care of the individual or his property (other than a receiver in possession of only a part of the individual's property), or by his or her duly authorized agent in accordance with Subsection 55.11.2 below.
55.11.2. Procedure.
55.11.2.1. General. - Whenever a declaration is made by a duly authorized agent, it must be accompanied by a power of attorney (or copy thereof) authorizing the agent to represent his or her principal in making, executing, or filing the declaration. A copy of the Federal Form used for the same purpose, when properly completed, is sufficient, and in the case of a court appointed agent, a copy of the court order of appointment is sufficient.
55.11.2.2. Disabled Spouse. - Where one spouse is physically unable by reason of disease or injury to sign a joint declaration, the other spouse may, with the oral consent of the one who is incapacitated, sign the incapacitated spouse's name in the proper place in the declaration followed by the words "By...........Husband (or Wife)," and by the signature of the signing spouse in his or her own right, provided that a dated statement signed by the spouse who is signing the declaration is attached to and made a part of the declaration providing the following information: the name of the declaration being filed, the taxable year to which the declaration applies, the reason for the inability of the incapacitated spouse to sign the declaration and a statement verifying that the spouse who is incapacitated consented to the signing of the declaration.
55.11.2.3. Liability Of Taxpayer And Agent. - The taxpayer and his or her agent, if any, are responsible for the declaration as filed and incur liability for any penalties for false, or fraudulent declarations.
55.11.2.3.a. "Agent" Defined. - For purposes of this regulation, the term "agent" includes guardian, committee, fiduciary or other person charged with the care of the individual under a disability, and a duly authorized agent of the taxpayer.
W. Va. Code R. § 110-21-56 Payments Of Estimated Tax
56.1. General. - The amount of estimated income tax due as shown on a declaration of estimated income tax may be paid in installments or, at the election of the taxpayer, may be paid in full at the time of filing the declaration. If the estimated income tax is paid in installments, the first (1st) payment must accompany the declaration.
56.1.1. Installment Dates. - In the case of a declaration of estimated income tax for a calendar year, the initial payment date and the subsequent payment dates are set forth in the following table:
Date Of Dates Of Filing Installment Declaration Payments (1) On or before April 15th . . . In four (4) equal installments - one (1) at time of filing declaration (on or before April 15), one (1) on or before June 15, one (1) on or before September 15, and one (1) on or before January 15 of the succeeding taxable year.
(2) After April 15 and before June 16, if not required to be filed on or before April 15 . . . In three (3) equal installments - one (1) at time of filing declaration (on or before June 15), one (1) on or before September 15, and one (1) on or before January 15 of the succeeding taxable year.
(3) After June 15 and before September 16, if not required to be filed on or before June 15 or... In two (2) equal installments one (1) at time of filing declaration (on or before September 15), and the other succeeding on or before January 15 of the succeeding taxable year.
(4) After September 15, if not required to be filed on or before September 15... In full at time of filing declaration.
56.1.1.1. Filing After The Prescribed Time. - If a declaration is filed after the time prescribed in Section 55 of these regulations, or after the expiration of any extension of time, items (2), (3) and (4) of the table set forth under Subsection 56.1.1 shall not apply, and there shall be paid at the time of filing the declaration of estimated tax all installments of the estimated tax which would have been payable on or before such date of filing if the declaration had been filed on or before its due date, determined without regard to any extension of time. The remaining installments shall be paid at the time and in the amounts in which they would have been payable if the declaration had been filed when originally due.
56.1.1.1.a. Example. - A taxpayer who was required to file a declaration of estimated income tax on or before April 15, 1989, files his declaration for 1989 on September 15, 1989. Under this example, at the time of filing his declaration, this taxpayer was delinquent in the payment of two (2) installments of his estimated income tax for the taxable year of 1989 and therefore three-fourths (3/4) of the estimated tax shown on his declaration must be paid.
56.2. Estimated Income Tax Payments By Farmers. - Special provisions are made with respect to the filing of the declaration and the payments of the tax by an individual whose estimated West Virginia adjusted gross income for the taxable year is at least two-thirds (2/3) from farming as defined under Subsection 55.5.1.2 of these regulations. The declaration of such an individual may be filed on or before January fifteenth (15th) of the succeeding taxable year, in lieu of the time prescribed for taxpayers generally. Where such an individual makes a declaration of estimated income tax after September fifteenth (15th) of the taxable year, the estimated income tax shall be paid in full at the time of the filing of the declaration as provided under W. Va. Code '11-21-56(b).
56.3. Amendments Of Declaration. - If any amendment of a declaration is filed, the remaining installments, if any, shall be ratably increased or decreased (as the case may be) to reflect any increase or decrease in the estimated tax by reason of such amendment, and if any amendment is made after September fifteenth (15th) of the taxable year, any increase in the estimated tax by reason thereof shall be paid in full at the time of making such amendment.
56.4. Short Taxable Years. - In the case of a short taxable year of an individual for whom a declaration is required to be filed, the estimated income tax may be paid in equal installments, one (1) at the time of filing the declaration, one (1) on the fifteenth (15th) day of the sixth (6th) month of the taxable year and another on the fifteenth (15th) day of the ninth (9th) month of such year (unless the short taxable year closed prior to such sixth (6th) or ninth (9th) month, in which case the respective installment will be eliminated) and one (1) on the fifteenth (15th) day of the first (1st) month of the succeeding taxable year. For example, if the short taxable year is the period of then (10) months from January 1, 1989 to October 31, 1989 and the declaration is required to be filed on or before April 15, 1989, the estimated income tax is payable in four (4) equal installments: one (1) on the date of filing the declaration, and one (1) each on June 15, September 15 and November 15, 1989. If, in such case, the declaration is required to be filed after April 15 but on or before June 15, the tax will be payable in three (3) equal installments, one (1) on the date of filing the declaration, and one (1) each on September 15 and November 15, 1989.
56.5. Fiscal Year. - In the case of individuals on a fiscal year basis, other than those referred to in Subsections 55.4 and 55.5 of these regulations, the declaration must be filed on or before the fifteenth (15th) day of the fourth (4th) month of the taxable year. The provisions of this Section and of Section 55 of these regulations shall apply to a taxable year other than a calendar year by the substitution of the corresponding fiscal year months for the calendar year months referred to in this Section.
56.6. Installments Paid In Advance. - An individual may elect to pay any installment of his estimated tax prior to the date prescribed for its payment.
56.7. Death Of Taxpayer. - In the case of a decedent, payments of estimated income tax are not required subsequent to the date of the decedent's death. However, see Subsection 55.3.4.2 of these regulations relating to the making of an amended declaration by a surviving spouse if a joint declaration had been made prior to the death of the decedent.
56.8. Application Of Installment Payments. - The payment of any installment of estimated income tax shall be considered payment on account of the income tax for the taxable year for which the declaration is made. The aggregate amount of the payments of estimated income tax should be entered upon the income tax return for such taxable year as payments to be applied against the tax shown on such return. See W. Va. Code '11-10-5L pertaining to installment payments.
56.9. Overpayment Of Installments. - In the case of tax payable in installments, if the taxpayer has paid, as an installment of the tax, more than the amount determined to be the correct amount of such installment, the overpayment shall be credited against the unpaid installments, if any for the taxable year. If the amount already paid, whether or not on the basis of installments, exceeds the amount determined to be the correct amount of the tax due for the taxable year, the overpayment shall be credited or refunded as provided under W. Va. Code '11-10-14. See W. Va. Code '11-10-5m.
56.10. Criminal And Administrative Sanctions For Failure To Pay Estimated Tax. - The provisions of the West Virginia Code relating to failure to pay estimated tax or any installment thereof in a proper and timely manner, including but not limited to, the applicable provisions of Chapter 11, Article 9 of the West Virginia Code, Sections 5L, 5m and 18a of Chapter 11, Article 10 of the West Virginia Code, shall apply to payments of estimated tax under W. Va. Code '11-21-56 and Section 56 of these regulations.
W. Va. Code R. § 110-21-56a Additions To Tax For Failure To Pay Estimated Tax. 56a.1. Applicability. - The additions to tax provisions of W. Va. Code '11-10-18a are applicable to underpayments of estimated personal income tax. Such provisions will be applicable regardless of whether there is a failure to pay the entire amount of any installment of estimated tax on or before its due date or the amount of estimated tax (employer withholding tax plus installment payments) paid during the taxable year was less than ninety percent (90%) of the tax due for the taxable year. Exceptions to this rule, hereinafter referred to as "safety zones", are set forth in Subsection 56a.4 of this regulation. 56a.2. How Underpayment Of Estimated Tax Is Measured. 56a.2.1. In General. - To determine whether an individual's estimated tax payments for the taxable year equal at least ninety percent (90%) of his or her actual liability for the primary tax, and minimum tax imposed by W. Va. Code '11-21-3, the following procedure shall be applied. The term "estimated tax payments" includes both the amount of installment payments remitted under W. Va. Code '11-21-56, and the amount of taxes actually deducted and withheld at the source from wages under W. Va. Code '11-21-71
(1) Determine the sum of the individual's primary income tax shown on his or her return for the taxable year (as reduced by the amount of allowable credits) plus his or her minimum tax for the taxable year. If no annual return was filed, take one hundred percent (100%) of the total tax determined to be due for the taxable year.
(2) Take ninety percent (90%) of the above amount.
(3) Divide the amount of (2), above, by the number of installments required for the year. Generally, this will require dividing by four, but may be three, two or one. See Subsection 56.1 of these regulations.
(4) For each installment as computed in (3), above, find the excess, if any, over the amount actually paid or credited toward that installment payment. (Add in any overpayments available from a previous installment). If there is not excess, no further computation is necessary for that installment. For purposes of subparagraph (4), it is presumed that wages are received in equal payments throughout the year and that taxes are withheld under W. Va. Code '11-21-71 in equal installments. 56a.2.2. Amount Of Underpayment. - Any excess computed in (4), above, for any installment is the amount of underpayment of that installment. If the actual payment made which is an underpaid installment does not meet at least one (1) of the available safety zone tests, additions to tax must be paid on the amount of that underpayment of estimated tax as provided under W. Va. Code '11-10-18a. Additions to tax for failure to pay estimated tax are not waiveable by the Tax Commissioner. 56a.3. Period Of Underpayment. - The period of underpayment shall run from the date the installment was required to be paid to whichever of the following is earlier:
(1) The due date of the annual return following the close of the taxable year for which the installment was due;
(2) With respect to any portion of the underpayment, the date on which such portion is paid. For purposes of this regulation, a payment of estimated tax on any installment shall be considered a payment of any previous underpayment only to the extent such payment exceeds the amount of the installment which would be required to be paid if the estimated tax were an amount equal to ninety percent (90%) of the tax shown on the return for the taxable year for such installment date. 56a.4. "Safety Zones" Bar Imposition Of Additions To Tax For UnderPayment Of Estimated Tax. 56a.4.1. In General. - Additions to tax will not be imposed for any underpayment of any installment of estimated tax if, on or before the date prescribed for payment of the installment (determined with regard to any authorized extension of time for payment), the total amount of all payments of estimated tax made equals or exceeds the least of the amounts due under "Safety Zones" 56a.4.1.3 through 56a.4.1.5 unless "Safety Zones" 56a.4.1.1 or 56a.4.1.2 is applicable: 56a.4.1.1. Safety Zone No. 1. - The amount of tax due with the annual return on the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year is two hundred dollars ($200) or less. 56a.4.1.2. Safety Zone No. 2. - The amount of tax due with the annual return on the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year is ten percent (10%) or less of the tax liability for the taxable year. 56a.4.1.3. Safety Zone No. 3. - The amount of "tax shown" on the previous year's West Virginia personal income tax return was a taxable year of twelve (12) months reduced by the amount of West Virginia withholding taxes for the current year. Safety Zone No. 3 avoids additions to tax if the total payments of estimated tax made by each installment date are at least equal to the amount which would have been required on that installment date if the estimated tax was the amount of "tax shown" on the previous year's West Virginia Personal Income Tax Return reduced by the amount of West Virginia withholding taxes for the current year. In applying Safety Zone No. 3, the following rules shall apply: 56a.4.1.3.a. An individual that did not file a West Virginia personal income tax return for the preceding year cannot use Safety Zone No. 3. 56a.4.1.3.b. A married couple that did not file a joint West Virginia personal income tax return for the preceding tax year cannot use Safety Zone No. 3. 56a.4.1.3.c. The applicable tax credits are those allowed on the annual return for the preceding tax year. 56a.4.1.3.d. If the annual return for the preceding year is not filed on or before the due date of the declaration of estimated tax for the taxable year, the declaration of estimated tax for the current tax year cannot be based on last year's tax. 56a.4.1.4. Safety Zone No. 4. - The amount of tax which would be due if computed based on the facts and law applicable to the West Virginia Personal Income Tax Return for the preceding year, but using current year rates, personal exemptions and credits. This safety zone avoids additions to tax if the total payments of estimated tax already made by the installment date are at least equal to an amount which would have been required on that installment date if the estimated tax was a tax based on the facts shown on the previous year's return and the previous year's law, but using current year rates, personal exemptions and credits. In applying Safety Zone No. 4, the following rules apply: 56a.4.1.4.a. Nonrecurring items of income and deductions are not to be excluded. 56a.4.1.4.b. An individual who did not file a West Virginia personal income tax return for the preceding tax year cannot use Safety Zone No. 4. 56a.4.1.4.c. A married couple that did not file a joint West Virginia personal income tax return for the preceding tax year cannot use Safety Zone No. 4. 56a.4.1.5. Safety Zone No. 5. - The amount of West Virginia personal income tax which would have been required to be paid on or before the date prescribed for payment if the estimated tax was an amount equal to ninety percent (90%) of the tax for the current taxable year, and computed by placing on an annualized basis the taxable income: for the first (1st) three (3) months of the taxable year where the installment is required to be paid in the third (3rd) or fourth (4th) month; for the first (1st) three (3) months of the first (1st) five (5) months of the taxable year where the installment is required to be paid in the sixth (6th) month: for the first (1st) six (6) months or the first (1st) eight (8) months of the taxable year where the installment is required to be paid in the ninth (9th) month and for the first (1st) nine (9) months or for the first (1st) eleven (11) months of the taxable year where the installment is required to be paid in the twelfth (12th) month of the taxable year or the first (1st) month of the next succeeding taxable year. 56a.4.1.5.a. For purposes of Subsection 56a.4.1.5, the taxable income shall be placed on an annualized basis by multiplying by twelve (12) the taxable income and dividing the resulting amount by the number of months in the taxable year by three (3), five (5), six (6), eight (8), nine (9) or eleven (11) as the case may be. 56a.4.2. Application Of Safety Zones To Short Tax Years. - Additions to tax for an underpayment of estimated tax are equally applicable to short tax years where a declaration of estimated tax is required to be filed. In computing the safety zones for short taxable years, the estimated tax (whether based on that shown on the previous year's return, based on the previous year's facts, or annualized current income) i8 reduced by multiplying the estimated tax for a full year by the percentage which the number of months in the short tax year bears to twelve (12). For this safety zone, the percentage figure will be applied to reduce the tax. 56a.4.2.1. If the preceding taxable year was a short year, estimated tax for the current year (for purposes of Safety Zone No. 4) will be computed on an annual basis (income multiplied by twelve (12) minus number of months in the short year). The tax will not be reduced because of the short year. 56a.4.2.2 If the tax rates for the year of underpayment have changed for the preceding year, the estimated tax must be computed using current rates. 56a.4.3. Safety Zone Requirements. - Safety zone requirements must be satisfied on each installment date to avoid the imposition of additions to tax on an underpayment of estimated tax as of the installment date. For purposes of this regulation, it is presumed that a taxpayer's West Virginia taxable income is received in equal installments throughout the taxable year. The taxpayer bears the burden of proof to establish that the West Virginia taxable income was received during the taxable year in some other manner. 56a.4.4. Return For The Preceding Taxable Year. - The term "return for the preceding taxable year" means the West Virginia Personal Income Tax Return required to be filed under W. Va. Code '11-21-51 for the taxable year immediately preceding the current taxable year. If an amended return was filed for the preceding taxable year before the due date of the declaration of estimated tax for the current taxable year (determined with regard to any extension of time for filing), then it constitutes the return for the preceding taxable year if it is a reasonable estimate of the amount of tax due for the current taxable year. 56a.4.5. "Facts Shown On The Preceding Year's Return." - The facts shown on the preceding year's return may include a net operating loss deduction properly claimed on the preceding year's return, information shown on a West Virginia joint personal income tax return for the preceding taxable year where the individual no longer qualifies to file a joint return, and tax credits claimed on the return for the previous year, even though allowable credits for the current taxable year are reasonably expected to be greater than or less than those allowed for the preceding year.
W. Va. Code R. § 110-21-57 Extensions Of Time
57.1. General. - Pursuant to W. Va. Code '11-21-57(a) the Tax Commissioner has discretionary authority to grant a reasonable extension of time for the payment of tax or estimated tax including any installments thereof, or for the filing of any return, declaration, statement or other document required to be filed under the provisions of the West Virginia Personal Income Tax Act, on such terms and conditions as he may require. Except for a taxpayer who is outside the United States, no such extension shall exceed six months.
57.1.1. Extensions Of Time For Filing Returns.
57.1.1.1. Automatic Extension Of Time. - Except as provided under Subsection 57.1.1.4 of this regulation, an extension of time for the filing of a taxpayer's federal income tax return shall automatically extend the time for the filing of the West Virginia Personal Income Tax Return for the same period as the extension for filing such federal return. A copy of the federal form requesting an extension of time must be attached to the West Virginia annual return when said return is filed. While an extension of time for filing a federal income tax return automatically extends the time for filing the West Virginia income tax return, it does not extend the time for payment of the balance of the West Virginia tax due.
57.1.1.2. Extension By Application. - An extension of time to file the West Virginia Personal Income Tax Return may be granted by the Tax Commissioner upon written application by the taxpayer where no extension of time has been sought for federal income tax purposes. No such extension shall be granted unless the taxpayer applies in writing to the Tax Commissioner and sets forth a full recital of the causes for the delay. The application must be filed on or before the regular due date of the return. Failure to timely file a written application for an extension constitutes automatic denial of such extension. An extension of time for filing a return does not operate to extend the time for payment of the tax or any part thereof.
57.1.1.2.a. An extension of time to file a return on an original application will be limited to a period of time not in excess of one hundred twenty (120) days. Longer periods of time will not be granted by the Tax Commissioner unless sufficient need for such extended period is clearly established by the taxpayer.
57.1.1.3. Where an additional extension of time is requested by a taxpayer, a copy of the last extension granted must be attached to the new request in every instance and such request must be made in writing and filed on or before the expiration of the preceding extension. This additional extension request must also contain a full recital of the causes necessitating further delay.
57.1.1.4. Limitation On Extensions To File Returns. - In no event shall any extension of time to file a West Virginia Personal Income Tax Return be granted in excess of six (6) months for taxpayers within the United States.
57.1.1.5. Payment Of Tax. - A taxpayer who is granted an extension of time for filing his or her annual income tax return whether such extension is automatic under Subsection 57.1.1.1 or by application under Subsection 57.1.1.2 of this regulation) is not automatically granted a similar extension for the payment of tax otherwise due on or before the regular due date of the return. Where an extension of time to file the West Virginia return has been granted and no corresponding extension of time for payment of tax has been granted or has been denied, the taxpayer must pay the balance of any tax on or before the statutory due date of the return. Failure to so pay will act to revoke any extension of time granted to file the West Virginia return.
57.1.1.5.a. If a taxpayer desires an extension of time for paying his or her West Virginia income tax, an application for such extension must be timely filed with the Tax Commissioner as provided in Subsection 57.1.3 of this regulation.
57.1.2. Extensions For Filing Declaration Of Estimated Tax.
57.1.2.1. An application for an extension of time for filing a declaration, or amended declaration, of estimated tax must be in writing, addressed to the Tax Commissioner, contain a full recital of the cause for the delay and be filed on or before the due date of the declaration of estimated tax. Payment of estimated tax must accompany the request for extension of time to file the declaration unless an extension of time to pay has been granted prior to the due date of the estimated tax payment.
57.1.2.2. An extension of time granted to a taxpayer for filing a declaration of estimated tax does not automatically extend the time for paying the first (1st) installment of estimated tax for the same period, or any subsequent installments that become due during the extension period for filing the declaration.
57.1.3. Extension Of Time For Payment Of Tax. - The Tax Commissioner may grant a reasonable extension of time for the payment of tax shown, or required to be shown, on the annual return, or for the payment of any installment of estimated tax for a period, such extension of time not to exceed six (6) months for a taxpayer who is not outside the United States. The basis for determining whether to grant an extension of time for payment depends on the taxpayer's ability to establish that payment of tax at the required date would work an undue hardship on the taxpayer.
57.1.3.1. Application For Extension. - A taxpayer desiring an extension of time for payment of tax must submit a written request for such extension detailing the assets and liabilities of the taxpayer, and the request must be accompanied by evidence of the undue hardship that would result to the taxpayer if the extension were to be denied. Application for extension must be filed on or before the date prescribed for payment of the tax. Failure to timely file a written request for an extension of time for payment constitutes automatic denial of such request.
57.1.3.2. Undue Hardship Required For Extension. - An extension of time for payment of tax will be granted only upon a satisfactory showing that payment of tax at the time prescribed by statute will result in undue hardship. The extension will not be granted on a general statement of hardship.
57.1.3.2.a. Undue Hardship Defined. - The term "undue hardship" means more than an inconvenience to the taxpayer. It must appear that substantial financial loss, such as selling assets at a sacrifice price, will result to the taxpayer from making payment on the due date of the amount with respect to which the extension is desired. If a market exists for assets owned by the taxpayer, the sale of such assets at the current market price is not ordinarily considered as resulting in undue hardship.
57.1.3.2.b. Except in extremely unusual circumstances, an extension of time to pay will not be granted to a taxpayer who can borrow the amount needed to make timely payment from a bank or other financial organization or institution. It is to be presumed that a taxpayer has the ability to borrow until the taxpayer affirmatively proves otherwise.
57.1.4. Filing Returns And Declarations, And Paying Tax Where Extensions Have Been Granted.
57.1.4.1. Where an extension of time to file the annual return or a declaration of estimated tax has been granted the return or declaration must be filed on or before the date the extension period expires and the return or declaration must include a copy of the document granting the extension. In the case of an automatic extension discussed under Subsection 57.1.1.1 of this regulation, a copy of the federal application for automatic extension must be attached to the West Virginia income tax return filed on or before the expiration of the extension.
57.1.4.2. Where an extension of time has been granted for the payment of tax, the taxpayer shall remit, on or before the last day of the extension period, the entire tax due plus nonwaivable interest and or nonwaivable additions to tax as provided under W. Va. Code ''11-10-17, 11-10-17a and 11-10-18a.
57.1.4.3. Under no circumstances shall an extension to file a return or declaration be construed to automatically extend the time for payment of tax otherwise due. Likewise, an extension of time to pay shall not constitute an extension of time to file.
57.2. Amount Determined As Deficiency. - The Tax Commissioner may extend the time for payment of an amount he determines to be a deficiency of the tax imposed under the provisions of the West Virginia Personal Income Tax Act for a period not to exceed eighteen (18) months from the date fixed for payment of the deficiency so determined. In exceptional cases, a further period of time not to exceed twelve (12) months may be granted. An extension under this Subsection may be granted only where it is established to the satisfaction of the Tax Commissioner that payment of the deficiency upon the date fixed for payment thereof will result in undue hardship to the taxpayer. (See Subsection 57.1.3.2.a for a definition of the term "undue hardship").
57.2.1. No Extension For Certain Deficiencies. - No extension shall be granted under Subsection 57.2 of this regulation for any deficiency of tax, additions to tax, penalties or other charges if such deficiency is due to negligence, intentional disregard of Tax Department rules and regulations, or to fraud with intent to evade tax.
57.2.2. Application For Extension Of Time For Payment Of Amount Determined As Deficiency. - Taxpayers seeking an extension of time for payment of an amount determined to be a deficiency shall file a written request with the Tax Commissioner for such an extension on or before the time fixed by the Tax Commissioner for payment of the deficiency. Such request shall set forth the relevant facts including a statement of the assets and liabilities of the taxpayer, the reason for the taxpayer's inability to pay the amount determined as a deficiency and a statement of the undue hardship that would result to the taxpayer if the extension were to be denied.
57.2.3. An extension of time for the payment of an amount determined to be a deficiency shall not constitute an extension of time for filing any other return or document due during the extended period for payment.
57.2.4. No extension of time shall be granted for the payment of an amount determined to be a deficiency unless the Tax Commissioner finds that exceptional circumstances exist and that to require payment of the deficiency at the date prescribed by the Tax Commissioner would work an undue hardship on the taxpayer.
57.2.5. If the time for payment of an amount determined to be a deficiency is extended, nonwaivable additions to tax at the rate established under W. Va. Code '11-10-18a and accruing from the statutory due date of the tax until the tax and all additions relating to the deficiency are paid, shall be added to such tax.
57.3. Claims In Bankruptcy Or Receivership Proceedings. - An extension of time for payment of any portion of a claim for tax allowed in bankruptcy, receivership or similar proceedings, which is unpaid, may be granted by the Tax Commissioner, subject to the same provisions and limitations as in the case of a deficiency in such tax as detailed under Subsection 57.2 of this regulation.
57.4. Furnishing Of Security. - As a prerequisite to granting an extension of time for payment of any tax or deficiency, the Tax Commissioner may require the taxpayer to furnish a bond or other security. Such bond or other security shall be in an amount not exceeding twice the amount of any tax or deficiency for which the extension of time for payment is granted.
W. Va. Code R. § 110-21-58 Requirements Concerning Returns, Notices, Records And Statements
58.1. General. - Every person subject to tax under the West Virginia Personal Income Tax Act, or subject to collection of such tax, and any person required to file a return of information with respect to income, shall keep such permanent books of account or records as are sufficient to establish the amount of gross income, deductions, credits or other matters required to be shown by such person in any return of such tax or information. The Tax Commissioner is authorized to prescribe the content and form of returns and statements, and may require the inclusion in a return, document, or statement of any information he deems necessary for the proper enforcement of the West Virginia Personal Income Tax Act. For purposes of this regulation, the term "person" shall include, but is not limited to, any individual, firm, partnership, limited partnership, copartnership, joint adventure, association, corporation, S corporation, municipal corporation, organization, receiver, estate, trust, guardian, executor, administrator, and also any officer, employee or member of any of the foregoing who, as such officer, employee or member, is under a duty to perform or is responsible for the performance of an act prescribed by the provisions of the West Virginia Personal Income Tax Act or these regulations.
58.1.1. If no method of accounting has been regularly used by the taxpayer, or if the method used does not clearly reflect income, then the computation of taxable income shall be made under such a method as, in the opinion of the Tax Commissioner, does clearly reflect income.
58.1.2. Bookkeeping entries, in and of themselves, are not conclusive of the amount of income. The actual facts, rather than the book entries, control. In addition, entries on another individual's books are not conclusive against a taxpayer.
58.1.3. Retention Of Records. - The books or records required by this Section 58 shall be kept at all times available for inspection by authorized representatives of the Tax Commissioner.
58.1.4. Farmers And Wage Earners. - Individuals deriving gross income from the business of farming as defined under Subsection 55.5.1.1 of these regulations, and individuals whose gross income includes salaries, wages or similar compensation for personal services rendered, are required with respect to such income to keep such records (including duplicate copies of the wage and tax deduction statements furnished by their employers) as will enable the Tax Commissioner to determine the correct amount of income subject to tax.
58.1.5. Form Of Records. - The records required in this regulation shall be kept accurately, but no particular form is required for keeping the records. Such methods of accounting shall be used which will enable the Tax Commissioner to ascertain whether liability for tax has been incurred, and, if so, the correctness of the amounts required to be reported in any return of tax or information.
58.1.6. Employer's Records.
58.1.6.1. Every employer or withholding agent, as defined for federal withholding tax purposes, required under the West Virginia Personal Income Tax Act to deduct and withhold State income taxes upon the wages of employees, and every person, firm, organization or corporation required to file information returns as described in this regulation, shall keep all records pertinent to these taxes and information reports available for examination and inspection by the Tax Commissioner, or his authorized representatives. Such records shall be retained and preserved for a period of five (5) years following the close of the calendar year to which they relate.
58.1.6.2. No particular form is prescribed for such records, but the records shall include the amounts and dates of all wage payments subject to West Virginia personal income taxes, the names, addresses and occupations of employees receiving such payments, the periods of their employment, the periods for which they are paid by the employer while absent due to sickness or personal injuries and the amount and weekly rate of such payments, their social security account numbers, their income tax withholding exemption certificates, the employer's identification number, records of monthly or quarterly and annual withholding returns and reports filed, and the dates and amounts of withholding tax payments made.
58.1.6.3. For nonresidents, performing services partly within and partly without the State, a record of the allocation used for withholding purposes must be kept.
58.1.7. Notice By Tax Commissioner Requiring Returns, Statements, Or The Keeping Of Records. - The Tax Commissioner may require any person, by notice served upon him, to make such returns, render such statements, furnish such copies of federal income tax returns and of federal audit determinations, or keep such specific records as the Tax Commissioner may deem necessary to verify whether or not such person is complying or has complied with any applicable provision of the West Virginia Personal Income Tax Act.
58.1.8. Copies Of Returns, Schedules And Statements. - Every person who is required in these regulations or by instructions applicable to any form prescribed thereunder to keep a copy of any return, schedule, statement or other document, shall keep such copy as a part of his records.
58.1.9. Place For Keeping Records. - All records prescribed by these regulations shall be kept, by the person required to keep them at one (1) or more convenient safe locations accessible to the authorized representatives of the Tax Commissioner, and shall at all times be available for inspection by such representatives.
58.2. Partnerships. - Every partnership having a resident partner or having any income derived from West Virginia sources shall file a partnership return for the taxable year. The partnership shall file a return regardless of the amount of its income and regardless of the taxable years of the partners. Such partnership return shall set forth all items of income, gain, loss and deduction. The return shall also set forth the names, addresses, social security numbers, and amount of distributive shares of income and deduction of all partners, and such other information or schedules which the Tax Commissioner may prescribe on income tax forms and instructions.
58.2.1. Under certain prescribed circumstances, the Internal Revenue Service does not require the execution and filing of a federal partnership return of information. Where a federal partnership return is not required for a taxable year, a West Virginia partnership return is not required for such taxable year.
58.3. Information At Source. - See Section 72 of these regulations.
58.4. Notice Of Qualification As Receiver, Trustee, Assiqnee Or Other Fiduciary. - Every receiver, trustee in bankruptcy, assignee for the benefit of creditors, or like fiduciary shall give written notice of his qualification as such to the Tax Commissioner.
58.5. Employers With Nonresident Employees Working Both Within And Without The State. - If an employer has nonresident individuals as employees and such individuals work both within and without West Virginia, the employer is required to keep records which clearly reflect the amount of income earned within West Virginia and the number of days worked therein.
W. Va. Code R. § 110-21-59 Report Of Change In Federal Taxable Income
59.1. General. - If the amount of a taxpayer's federal taxable income reported on his federal income tax return for any taxable year is changed or corrected by the United States Internal Revenue Service or other competent authority or as the result of a renegotiation of a contract or subcontract with the United States, the taxpayer shall report such change or correction in federal taxable income within ninety (90) days after the final determination of such change, correction, or renegotiation, or as otherwise required by the Tax Commissioner, and shall concede the accuracy of such determination or state wherein it is erroneous. When making such report, the taxpayer shall disclose to the Tax Commissioner the full particulars of such federal tax change or correction.
59.2. Any taxpayer who files an amended federal income tax return must also file within ninety (90) days thereafter an amended West Virginia income tax return, and shall in addition provide the Tax Commissioner with such further information as he may require.
W. Va. Code R. § 110-21-60 Change Of Election
60.1. General. - Unless otherwise provided herein, any change of election made by a taxpayer for federal income tax purposes pursuant to the provisions of the Internal Revenue Code and its applicable regulations, which increases or decreases the taxpayer's federal taxable income for a taxable year, must be made identically for West Virginia income tax purposes, except to the extent that such federal provisions are inconsistent with the West Virginia Personal Income Tax Act. A taxpayer making such a change of election for federal income tax purposes shall file an amended West Virginia return within ninety (90) days thereafter.
60.1.1. Any change of election - shall be subject to the approval of the Tax Commissioner and, for this purpose, he may require such information, records or evidence that he deems necessary and may attach such conditions or limitations to his approval of such a change of election as he may consider advisable.
60.2. Husband And Wife.
60.2.1. Change From Separate To Joint Return. - A husband and wife can file separate West Virginia returns, and then after the time for filing returns (April 15th, for calendar year taxpayers) has passed they may elect to file a joint West Virginia return. This election may be made within three (3) years after the date the original return was originally due, without regard to any extension of time. This election to change from separate to joint may, however, only be made if the taxpayer has made the same election federally. See Section 11 of these regulations.
60.2.1.2. If a husband and wife determine their federal taxable income on a joint federal return, they may elect to determine their West Virginia taxable income on a joint West Virginia return. If the taxpayers elect to change from a joint return to separate returns federally, within the prescribed time period, the taxpayers must also make the same election for West Virginia purposes. (See Section 11 of these regulations). An election to file a joint West Virginia return is binding and may not be changed after the due date of the original West Virginia return. A different election may be made each year.
60.2.2. Husband And Wife With Different Resident Status. - Sections 11 and 31 of these regulations provide that, where either husband and wife is a resident and the other is a nonresident, they shall file separate returns unless they were otherwise entitled to file a joint federal return and both elect to file a joint West Virginia return for the taxable year as if both were residents. A husband and wife may elect to file a joint West Virginia return only if one spouse was a resident for the entire taxable year and the other spouse was a nonresident for the entire taxable year. If they exercise such election they will be permitted to change their original election to file separate State returns and to make, instead, a joint return as if both were residents in accordance with Subsection 60.1 above, provided that the tax due on such joint return is paid in full at the time it is filed.
60.2.3. Approval For Change Of Election. - Elections to make the changes as hereinbefore described and to file amended returns shall be subject to the Tax Commissioner's approval and discretion. No amended return filed with the Tax Commissioner shall be valid unless the amount of tax due on such amended return is or has been paid in full at the time of the filing of the amended return.
60.3. Additions To Tax And Interest. - The filing or acceptance of an amended return pursuant to this regulation shall not prevent the assessment of additions to tax or interest to which the taxpayer may be subject prior to the filing of such amended return, except that the amount thereof shall be computed upon the amount of tax due after giving effect to any change of election made in such amended return.
W. Va. Code R. § 110-21-61 to '110-21-70. Reserved For Future Use
Part V. Withholding of Tax.
W. Va. Code R. § 110-21-71 Requirement Of Withholding Tax From Wages
71.1. General. - Every employer maintaining an office or transacting business within West Virginia and making payment of any wages taxable under the West Virginia Personal Income Tax Act to a resident or nonresident individual shall deduct and withhold from such wages for each payroll period such amount of tax as will result in withholding from the employee's wages during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due as the result of the inclusion in the employee's West Virginia adjusted gross income of his wages received during such calendar year. For this purpose, the provisions of the United States Internal Revenue Code and its applicable regulations, with respect to deducting and withholding of federal income tax by employers from wages, including the meaning of the various federal terms (such as "employer", "employee", "wages", "payroll period", "withholding exemptions") shall apply for West Virginia personal income tax purposes except as otherwise specifically provided herein or where such federal rules and definitions are clearly inconsistent with and inapplicable to the provisions of W. Va. Code '11-21-71.
71.1.1. Employer. - The term employer means any person for whom an individual performs or performed any service, of whatever nature, as the employee of such person. An employer may be an individual, a corporation including an S corporation, a partnership, a trust, an estate, a joint-stock company, an association, or a syndicate, group, pool, joint venture, or other unincorporated organization, group or entity. A trust or estate, rather than the fiduciary acting on behalf of the trust or estate, is generally the employer.
71.1.1.1. The term employer embraces not only individuals and organizations engaged in trade or business, but organizations exempt from federal and State income tax; such as, charitable organizations and educational institutions.
71.1.1.2. The term employer shall also mean any person or organization qualifying as an employer for federal income tax purposes and maintaining an office or transacting business within West Virginia, whether or not a paying agency is maintained within this State.
71.1.2. Wages. - Any remuneration which constitutes payments which are considered wages for federal income tax withholding purposes also constitutes wages for purposes of West Virginia income tax withholding. Wages in respect to withholding for West Virginia personal income tax purposes shall not, however, include either payments made by the United States to members of the Armed Forces of the United States, including Reserve and National Guard components for service therein or payments made to seamen who are members of the crew on a vessel engaged in foreign, coastwise, intercoastal, interstate or noncontiguous trade.
71.1.3. Employers Relieved From Withholding. - A determination by the Internal Revenue Service which relieves an employer from the requirement of withholding with respect to wages paid to an employee shall likewise apply for West Virginia personal income tax withholding purposes; Provided, That the employer granted such relief by the Internal Revenue Service must notify and provide the Tax Commissioner with all particulars pertaining to the granting of such relief by the Internal Revenue Service including but not limited to a copy of the Internal Revenue Service determination.
71.1.3.1. Where an employer is required to reinstate withholding of federal income tax with respect to an employee, such reinstatement is equally applicable for West Virginia personal income tax withholding purposes.
71.2. Withholding Exemptions. - An employee shall be entitled to the same number of West Virginia withholding exemptions as the number of withholding exemptions to which he is entitled for federal income tax withholding purposes. An employer may rely upon the number of federal withholding exemptions claimed by the employee except where the employee claims a higher number of West Virginia withholding exemptions.
71.2.1. In determining the proper tax to be deducted and withheld from an employee's wages, the employer shall allow the number of exemptions claimed by the employee on his withholding exemption certificate. Because the number of exemptions for federal and West Virginia income withholding purposes is generally the same, the employer may accept the Federal Form W-4 filed by the employee, unless such employee elects to file a West Virginia withholding exemption certificate. Once filed with the employer, a withholding exemption certificate will remain in effect until an amended certificate is furnished or until a new certificate is required to be filed.
71.2.1.1. An employee has the right to request that an employer withhold an additional amount of income taxes from wages to the extent that any amount of wages remains after all other federal, state or local withholding taxes have been withheld. When such a request is made, the employer must comply with the employee's request. Any employee who desires additional withholding should make his request to his employer by completing and presenting the appropriate West Virginia withholding exemption certificate to his employer.
71.2.2. The "withholding exemptions", in general, should correspond with the exemptions to be allowed the employee in computing his income tax on his annual West Virginia Personal Income Tax Return. An employer is not required to ascertain whether an employee has claimed the correct number of exemptions. If, however, the employer believes that the employee has claimed an excessive number of exemptions, said employer should so notify the West Virginia State Tax Department.
71.2.2.1. The amount of each West Virginia exemption shall be two thousand dollars ($2,000) except as otherwise provided under W. Va. Code ''11-21-16 and 11-21-36.
71.3. Exception To Employer Withholding For Certain Nonresidents.
71.3.1. As a general rule, every employer maintaining an office or transacting business in West Virginia and making payment of wages subject to personal income taxation by West Virginia is required to deduct and withhold from such wages. The Tax Commissioner, however, pursuant to W. Va. Code '11-21-71(c) has discretionary authority to promulgate regulations dictating conditions under which employers of certain nonresidents may be relieved of the requirement of withholding set forth under W. Va. Code '11-21-71(a). Where West Virginia and another taxing jurisdiction in accordance with the provisions of W. Va. Code '11-21-40 have entered into a written reciprocal credit agreement which results in allowing the residents of another taxing jurisdiction (nonresidents for West Virginia income tax purposes) a credit against West Virginia personal income tax sufficient to offset all taxes required to be withheld, the employer of such employee is hereby relieved from the withholding requirements set forth under the West Virginia Personal Income Tax Act.
71.3.1.1. Employers of resident individuals of Virginia who are nonresident employees of West Virginia persons or organizations need not withhold from wages and salaries of said individuals even though such nonresident employees may otherwise be required to file annual income tax returns for the taxable year with this State due to a written reciprocal credit agreement between West Virginia and Virginia.
71.3.1.1.a. As a condition precedent to not withholding, the employer must obtain from the nonresident employee a properly executed West Virginia exemption certificate.
71.3.1.1.b. Employers paying wages to nonresident employees should contact the Tax Department for information pertaining to which taxing jurisdictions have entered into written reciprocal credit agreements with West Virginia.
71.4. Wages Paid To A Nonresident.
71.4.1. In General. - An employer shall deduct and withhold on all wages paid to a nonresident employee for services performed in West Virginia except as provided under Subsection 71.3 of this regulation. Where such services are performed entirely within West Virginia, the employer shall withhold the tax from all wages paid to such employee.
71.4.1.1. The compensation or remuneration paid to a nonresident employee for services rendered entirely without the State is not considered West Virginia wages and therefore is not subject to West Virginia withholding, whether payment is made from within or without the State.
71.4.2. Wages Of A Nonresident For Services Performed Partly Within And Partly Without West Virginia.
71.4.2.1. If a nonresident employee performs services for his employer partly within and partly without West Virginia, the employer may require him to execute an employee's certificate of nonresidence for the purposes indicated in this regulation.
71.4.2.2. The employer may withhold on the basis of the apportionment shown by the nonresident employee on the above certificate but must nevertheless make necessary adjustments during the year so that the proper amount of tax is withheld from the employee's wages. For the purpose of making these adjustments, the proportion of renumeration which is paid for services rendered within West Virginia shall be determined as follows:
71.4.2.2.a. If the services are rendered by a traveling salesman, agent or other employee whose compensation on the basis of commissions depends directly on the volume of business transacted by him, the amount attributable to services in West Virginia is that proportion of the compensation received which the volume of business transacted by the employee within the State of West Virginia bears to the volume of business transacted by him both within and without the State of West Virginia.
71.4.2.2.b. With respect to all other employees, the amount of wages attributable to services within West Virginia is that proportion of the total compensation which the total number of working days employed within West Virginia bears to the total number of working days employed within and without West Virginia, exclusive of nonworking days, such as Saturdays, Sundays, holidays, and days of absence because of illness, personal injury, vacation or leave with or without pay.
71.4.2.3. The portion of wages allocable to West Virginia may be determined by the employer on the basis of the preceding year's experience, except that the employer shall make any necessary adjustments during the year to insure that the required tax is withheld for the current year. If the employee reasonably expects that the preceding year's experience will not be applicable to the current year, he may furnish to his employer a statement estimating the proportion of his wages allocable to West Virginia, or the employer himself may make such estimate and may then withhold on the basis thereof; in either case, however, the employer is required to make the necessary adjustments during the year so that the proper amount is withheld from the employee's salary for the current year.
71.4.2.4. Where a nonresident employee will work only a short period of time within West Virginia and it is reasonably expected that the total wages of such nonresident employee for services rendered within West Virginia will not exceed his personal exemption amount, the employer need not withhold or deduct any amount from his wages until the aggregate amount paid to him exceeds his personal exemption amount.
71.4.2.5. An employer is required to withhold on all wages paid to a nonresident who works partly within and partly without West Virginia unless there is filed with him the statement referred to in Subsection 71.4.2.3 or unless the employer maintains adequate current records to determine accurately the amount of wages paid for services performed in West Virginia. In this instance, merely accepting such statement does not relieve the employer from the duty of withholding the proper amount of tax from wages paid to an employee. The statement shall be retained by the employer and made available for inspection by representatives of the Tax Commissioner when so required.
71.5. Wages Paid To A Resident. - Wages paid to a resident of West Virginia are fully subject to withholding even though some or all of the services may have been rendered without West Virginia, because a resident's wages are taxable under the West Virginia Personal Income Tax Act regardless of where earned.
71.6. Determining Tax To Be Withheld.-The West Virginia income tax to be withheld by an employer must be determined in accordance with one of the following income tax withholding methods: the Wage Bracket Method or the Percentage Method. For unusual circumstances, an employer may apply to the Tax Commissioner for permission to use another method. Information pertaining to employer withholding, including explanations on the use of either the Wage Bracket or Percentage Method of withholding, is available in booklet form from the Tax Department.
W. Va. Code R. § 110-21-72 Information Statement For Employee
72.1. General. - Every employer required to deduct and withhold tax under the West Virginia Personal Income Tax Act from the wages of an employee, or who would have been required to deduct and withhold tax if the employee had claimed no more than one withholding exemption, shall furnish to each such employee on or before February fifteenth (15th) of the year succeeding the taxable year a West Virginia withholding tax statement. If an individual's employment is terminated before the close of the taxable year, the employer is required to furnish the employee a West Virginia withholding statement on the date of the last payment of wages to such employee.
72.2. Information Required On Withholding Statement.-The West Virginia withholding tax statement must contain the following information:
(1) The employer's name, address, and identification number.
(2) The employee's name, complete address and social security account number.
(3) The employee's total West Virginia wages before payroll deductions, i.e., all wages paid residents, or all wages earned in West Virginia by nonresidents.
(4) The total amount of West Virginia income tax withheld, if any, from the employee's wages.
(5) The employee's total wages for federal tax purposes, if different from wages for West Virginia tax purposes.
(6) The total amount of federal income tax withheld, if any, from the employee's wages.
W. Va. Code R. § 110-21-73 Credit For Tax Withheld
73.1. General. - The West Virginia income tax deducted and withheld from an individual's wages in any calendar year shall be allowed as a credit against the West Virginia income tax imposed on such individual. If the tax has actually been withheld by the employer, such credit shall be allowed to the person from whose wages the tax was withheld, even though such tax has not been paid over to the Tax Commissioner. However, the taxpayer will not be granted credit for West Virginia income taxes withheld from wages unless the taxpayer attaches a withholding tax statement to his annual return to substantiate such claimed credit.
73.1.1. Where an employer fails to provide an employee with a withholding tax statement and the employee is unable to obtain such statement from the employer, the employee should request from the Tax Department an Affidavit Of West Virginia Income Taxes Withheld. A completed Affidavit Of West Virginia Income Taxes Withheld serves as a substitute withholding tax statement and is useable only where it is impossible to obtain a withholding tax statement from the employer.
73.2. Year Of Credit.-The tax withheld during any calendar year shall be allowed as a credit in accordance with Subsection 73.1 above against the tax imposed for the taxable year which begins in such calendar year. Since most employees file returns on the calendar year basis, they receive credit for the tax withheld during their entire reporting year. However, in the case of a taxpayer who files his return on a fiscal year basis and who is required to include in a return for such fiscal year the income from wages received during such fiscal year (cash basis taxpayer), credit must be claimed for the entire tax withheld in the calendar year during which such fiscal year began. This is true even though the withholding tax statement furnished by the employer shows wages paid and tax withheld for the calendar year.
73.2.1. Example.-A files on a fiscal year basis beginning June 1, 1988, and ending May 31, 1989. The full amount of tax withheld during the calendar year 1988 must be claimed as a credit on such fiscal year return and it may not be prorated to reflect the portion withheld from June 1 to December 31, 1988. The withholding tax statement for 1988 must be attached to the return filed for such fiscal year ending May 31, 1989.
W. Va. Code R. § 110-21-74 Employer Return And Payment Of Withheld Taxes
74.1. General. - Every employer required to deduct and withhold tax under the West Virginia Personal Income Tax Act shall file with the Accounting Division of the Tax Department an Employer's Return of West Virginia Income Tax Withheld and remit with said return the full amount of taxes withheld at such time and in such manner as provided in this regulation.
74.1.1. Monthly Returns. - Every employer who withholds more than one hundred dollars ($100) per month must file a monthly return and remit therewith the tax withheld for such month. The due date for the filing of a monthly return shall be on or before the twentieth (20th) day of the succeeding month except for the month of December where the due date of the return shall be on or before the thirty-first (31st) day of January.
74.1.1.1. Where an employer is required to file on a monthly basis, such employer shall continue to file on a monthly basis until the end of the calendar year regardless of the amount of tax withheld. The monthly status of an employer can only be changed by permission of the Tax Commissioner when it can be established that the amount of tax will not exceed one hundred dollars ($100) per month. Such change will only be permitted to be made at the beginning of a calendar year.
74.1.1.2. Monthly returns are required to be filed even though, in any given month, no wages are paid or tax withheld. On such returns, the employer shall state the reason why no West Virginia income tax was withheld on the monthly return.
74.1.1.3. Once a monthly return is required to be filed, an employer must continue to file monthly returns unless the Tax Commissioner has ordered otherwise or until the employer has permanently ceased to pay wages under his current identification number.
74.1.2. Quarterly Returns. - Every employer who withholds less than one hundred dollars ($100) per month must file quarterly returns and remit therewith the tax withheld during each calendar quarter. Quarterly returns are due on or before the last day of the month following the close of each calendar quarter as herein provided:
Period ... Due Date January 1 to March 31 ... April 30 April 1 to June 30 ... July 31 July 1 to September 30 ... October 31 October 1 to December 31 ... January 31
74.1.2.1. Quarterly returns are required to be filed even though, in any calendar quarter, no wages are paid or tax withheld. On such returns, the employer shall state the reason why no West Virginia income tax was withheld on the quarterly return.
74.1.2.2. Once a quarterly return is required to be filed, an employer must continue to file quarterly returns unless the Tax Commissioner has ordered otherwise or until the employer has permanently ceased to pay wages under his current identification number.
74.1.3. Annual Returns. - Where the aggregate amount of West Virginia income tax withheld by the employer is less than twenty-five dollars ($25) in a calendar quarter and the total amount can reasonably be expected to be less than one hundred dollars ($100) for the entire calendar year, the employer may be granted permission to file his withholding returns annually instead of quarterly. An employer, however, may not withhold on an annual basis unless he has obtained written permission to do so from the Tax Commissioner.
74.1.3.1. The due date for filing an annual return and for remitting tax therewith is January thirty-first (31st) of the succeeding year.
74.1.4. Not withstanding the provisions of Subsections 74.1.1, 74.1.2, 74.1.3, the Tax Commissioner may, if he believes such action necessary for the protection of the revenues, require any employer to make such return and pay to him or to a designated depository the tax deducted and withheld at any time, or from time to time as he deems advisable.
74.1.5. Credits Against Tax Withheld. - A payment of tax withheld pursuant to W. Va. Code '11-21-74 and this regulation may be subject to the credit set forth in W. Va. Code '11-15-9b and the credit set forth in W. Va. Code '11-15A-3b as detailed under Section 43 of these regulations.
74.1.6. Correction Of Over And Underwithholding. - Any errors or mistakes in withholding shall be corrected in the same manner as provided for federal withholding tax purposes.
74.1.6.1. If a withholding error is discovered in a subsequent month of the same calendar year, wages and salary payments shall be adjusted in that month.
74.1.6.2. If a withholding error cannot be adjusted on a return for a subsequent return period of the same calendar year, the employer is required to consult the Accounting Division for purposes of determining the proper method of correction.
74.1.6.3. If an error is made on the Employer's Return of West Virginia Income Tax Withheld, a credit or additional payment shall be made on the succeeding return.
74.2. Annual Reconciliation Of Tax Withheld.
74.2.1. The Annual Reconciliation of West Virginia Income Tax Withheld (Form I.T 103) must be submitted by the employer on or before February twenty-eighth (28th) following the close of the calendar year, together with Tax Department copies of all withholding tax statements for the year. Such annual reconciliation must be accompanied by a list, preferably in the form of an adding machine tape or accounting machine listing of the amounts of income tax withheld. This reconciliation is to be submitted separately from the employer's monthly or quarterly return.
74.2.2. Where the number of withholding statements is substantial, they may be forwarded to the Tax Department's Accounting Division in packages of convenient size. When this procedure is followed, the packages should be identified with the name and identification number of the employer and consecutively numbered and the annual reconciliation placed in the package numbered one (1). The number of packages should be indicated on the annual reconciliation.
74.2.3. If an employer's total payroll consists of a number of separate establishments, the withholding statements may be assembled accordingly and a separate list submitted for each establishment. In such case, a summary list should be submitted, the total of which must agree with the corresponding entry made on the annual reconciliation.
74.3. Termination Of Business. - If an employer permanently discontinues or sells his business or permanently ceases to pay wages under his current identification number, withholding returns shall be filed simultaneously with or within thirty (30) days after the filing of the final monthly or quarterly return and shall be accompanied by the adding machine tape or accounting machine listing referred to above. Such last return must be marked "Final Return".
74.3.1. Liability Of Successor. - The successor in business of any employer required under W. Va. Code '11-21-71 and Section 71 of these regulations to deduct and withhold personal income tax from wages who sells out his or its business or stock of goods, or ceases doing business, shall be personally liable for the payment of personal income tax withheld or which should have been withheld plus additions to tax, penalties and interest relating thereto which remain unpaid after expiration of the thirty (30) day period allowed for payment by the predecessor except as provided in Subsection 74.3.1.1 of this regulation.
74.3.1.1. Where a business is purchased in an arms-length transaction, and where the purchaser withholds so much of the consideration for the purchase as will satisfy any withholding tax, additions to tax, penalties and interest which may be due until the seller produces a receipt from the Tax Commissioner evidencing the payment thereof, the purchaser shall not be personally liable for withholding taxes attributable to the former owner of the business unless the contract of sale provides for the purchaser to be liable for some or all of such taxes. The amount of tax, additions to tax, penalties and interest for which the successor is liable constitutes a lien on the property of the successor in accordance with W. Va. Code '11-10-ll(f)(2).
74.3.1.1.a. Purchase price is not limited to cash transferred to the seller, but includes any consideration flowing directly or indirectly to a seller or predecessor.
74.3.1.1.b. The requirement to withhold consideration does not necessarily mean to retain or hold physical assets, but means dealing with the purchase consideration in such a manner as to deny the seller or the predecessor the benefit of the purchase consideration and to make it available to the State for the satisfaction of the tax liability.
74.3.1.2. The term "successor" refers to any person who directly or indirectly purchases, acquires, or succeeds to the business or the stock of goods of any employer quitting, selling, or otherwise disposing of a business or stock of goods. The purchase or acquisition of a business may give rise to successor liability whether the consideration is money, property, assumption of liabilities or cancellation of indebtedness.
74.3.1.3. The liability of a successor arises from any sale, transfer, assignment or other acquisition of a business or stock of goods. A person who purchases or acquires a portion of a business or stock of goods may become liable as a successor where he purchases or acquires substantially all of the business assets or stock of goods.
74.3.1.4. The business assets include the assets of a business pertaining directly to the conduct of the business. Business assets include real property or any interest therein; tangible personal property, including fixtures, equipment and vehicles; and intangible property, including accounts receivable, contracts, business name, business goodwill, customer lists, delivery routes, patents, trademarks or copyrights.
74.3.1.5. If any taxpayer operates more than one business at separate locations, each business location is a separate business and has a separate stock of goods for purposes of determining successor liability. A successor of the business or stock of goods of any business location is subject to liability as a successor with respect to the tax attributable to that location even if he does not purchase the business or stock of goods of all the locations.
74.3.1.6. A change in the form of a business will generally give rise to successor liability, such as the incorporation of a sole proprietorship or partnership, the voluntary or involuntary dissolution of a corporation, the merger or consolidation of two or more corporations, the formation of a partnership from one or more sole proprietorships or corporations; or change in the name of a corporation.
74.3.1.7. Successor liability does not arise in connection with sales or transfers pursuant to assignments for the benefit of creditors, deeds of trust, or security interests, statutory liens, judgment liens unless the previous owner receives purchase money from the transfer or sale. Any business operated under Title 11 of the United States Code, which is purchased or acquired by another person, shall not give rise to successor liability.
74.3.1.8. The liability of a successor extends to taxes incurred in the course of operation of the business by the predecessor, or any prior predecessor. The liability includes all taxes, interest, and additions to tax, whether assessed or unassessed against the predecessor, and without regard to whether a tax lien has been issued or perfected against the predecessor. If any predecessor is given a certificate relating to the tax liability of a prior predecessor, then the successor shall only be liable for the tax liability of his immediate predecessor.
74.4. Use Of Pre-Addressed Forms. - If pre-addressed forms are mailed to the employer by the Accounting Division for use in filing the employer's withholding returns, such pre-addressed forms shall be used by the employer in filing these reports. Where use of such forms is impractical, the employer must exercise extreme care to show the employer's name and identification number exactly as they appear on previously filed returns. Lack of any form or return required under this regulation shall not excuse an employer's failure to file any such form or return.
74.5. West Virginia Employer's Identification Number.
74.5.1. Each employer will be identified by a West Virginia employer's identification number. This identification number will be the same as the federal identification number in every case where the employer has been assigned such a number by the Internal Revenue Service.
74.5.2. In any instance where an employer has not been assigned an identification number for federal purposes and is not required to obtain such a federal number, the employer must notify the Accounting Division which will assign a West Virginia number for his use. If an employer has been assigned an identification number by the Accounting Division and later obtains a federal number, he must notify the Accounting Division of the federal number and he will be notified to discontinue using the West Virginia identification number.
74.5.3. Each employer shall have only one identification number. If an employer has been assigned more than one (1) federal number and has not been advised which to use, he should notify the Internal Revenue Service of the numbers he has, the name and address to which each number was assigned and the address of his principal place of business. The Internal Revenue Service will then advise him which number to use.
74.5.4. An employer who has acquired the business of another employer must not use any identification number assigned to the original employer, but must obtain a new identification number in accordance with this regulation.
74.6. Deposit In Trust For Tax Commissioner. - Whenever any employer fails to collect, truthfully account for, pay over the tax, or make returns of the tax as required under W. Va. Code '11-21-74 and this regulation, the Tax Commissioner may serve a notice requiring such employer to collect the taxes which become collectible after service of such notice, to deposit such taxes within the time specified in such notice in a bank approved by the Tax Commissioner, in a separate account in trust for and payable to the Tax Commissioner, and to keep the amount of such tax in such account until payment over to the Tax Commissioner. Such notice shall remain in effect until a notice of cancellation is served by the Tax Commissioner. Any employer, who, after service of such notice by the Tax Commissioner, fails to comply with the instructions contained therein shall be liable for criminal and civil penalties.
74.6.1. In lieu of the requirement set forth in Subsection 74.6 to deposit the taxes in a separate bank account in trust for and payable to the Tax Commissioner, the notice may require the employer to remit such taxes to a designated officer or employee of the Tax Commissioner.
W. Va. Code R. § 110-21-75 Employer's Liability For Withheld Taxes
75.1. Every employer required to deduct and withhold West Virginia income tax from the wages of an employee is liable for the payment of such tax regardless of whether such tax is collected from the employee by the employer. To the extent not inconsistent with the provisions of the West Virginia Personal Income Tax Act, all of the provisions of W. Va. Code '11-10-1 et seq. relating to assessment and collection of taxes, and to penalties, additions to tax and interest in respect thereto, shall apply to every employer required to withhold tax.
75.1.1. Where the employer deducts less than the correct amount of tax or fails to deduct any part of the tax, he is nevertheless liable for the correct amount of tax.
75.1.1.1. Exception. - If an employer fails to deduct and withhold tax as required and thereafter the tax against which such tax may be credited is paid, the tax so required to be deducted and withheld shall not be collected from the employer, but the employer remains liable for any penalties, additions to tax and interest otherwise applicable for failure to deduct and withhold.
75.1.2. An employer is relieved of liability to any other person for the amount of income tax withheld and paid over to the Tax Commissioner, and no employee shall have any right of action against his employer in respect to any monies deducted and withheld from his wages and paid over to the Tax Commissioner in compliance or intended compliance with the West Virginia Personal Income Tax Act.
75.1.3. Any amount of tax withheld shall, with respect to the recipient of the wages, be deemed to have been paid by him and shall, in the hands of the employer or withholding agent, constitute a special fund in trust for the Tax Commissioner.
W. Va. Code R. § 110-21-76 Employer's Failure To Withhold
76.1. General. - If an employer fails to deduct and withhold tax as required, and thereafter the income tax against which such tax may be credited is paid by the employee, the tax required to be deducted and withheld shall not be collected from the employer. Where this situation occurs, the employer shall not be relieved of liability for any penalties, additions to tax or interest otherwise applicable for failure to deduct and withhold.
76.1.1. Example. - An employer fails to deduct and withhold West Virginia income tax from an employee's wages (on whose wages he is required to withhold). Thereafter, the employee files his West Virginia Personal Income Tax Return and pays the income tax shown on the return to be due. Since the tax was paid by the employee, the Tax Commissioner is precluded from collecting the tax from the employer who should have withheld from the employee. This payment of tax, however, does not relieve the employer from any penalties, additions to tax or interest in respect to his failure to withhold.
76.1.1.1. In the event that an employer provides an employee with a wage withholding tax statement but has not actually deducted and withheld personal income tax from the wages of the employee, the employer remains liable for the payment of withholding taxes if a credit against personal income tax is claimed by the employee on his income tax return based on the employer provided withholding tax statement.
W. Va. Code R. § 110-21-77 to '110-21-79. Reserved For Future Use
Part VI. Procedure and Administration.
W. Va. Code R. § 110-21-80 Criminal Penalties
80.1. Each and every provision of the West Virginia Tax Crimes And Penalties Act set forth under W. Va. Code '11-9-1 et seq. shall apply to the tax imposed pursuant to the West Virginia Personal Income Tax Act with like effect as if said Act were applicable only to the tax imposed by Article 21, Chapter 11 and were set forth in extenso in Article 21.
W. Va. Code R. § 110-21-81 General Procedure And Administration
81.1. Each and every provision of the West Virginia Tax Procedure And Administration Act set forth under W. Va. Code '11-10-1 et sea. shall apply to the tax imposed pursuant to the West Virginia Personal Income Tax Act with like effect as if said Act were applicable only to the tax imposed by Article 21, Chapter 11 and were set forth in extenso in Article 21.
W. Va. Code R. § 110-21-82 Severability
82.1. If any provision of the West Virginia Personal Income Tax Act or the application thereof shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgement shall not affect, impair or invalidate the remainder of said Act, but shall be confined in its operation to the provision thereof directly involved in the .controversy in which such judgement shall have been rendered, and the applicability of such provision to other persons or circumstances shall not be affected thereby.
110CSR21
Series 21A Personal Income Tax Low Income Exclusion
W. Va. Code R. § 110-21A-1 General
1.1. Scope. -- This legislative rule explains and clarifies the low income exclusion set forth in Senate Bill 17 enacted by the West Virginia Legislature on January 23, 1996. The exclusion is codified in W. Va. Code ''11-21-10, 11-21-51 and 11-21-71.
1.2. Incorporations. -- This low income exclusion rule should be read in pari materia with State Tax Division Legislative Rule, Personal Income Tax, 110 C.S.R. 21. Specifically, 110 C.S.R. 21, W. Va. Code ''110-21-51 (Returns and Liabilities) and 110-21-71 (Requirement of Withholding Tax From Wages) are incorporated by reference as if fully set forth in this rule.
1.3. Authority. -- W. Va. Code ''11-21-51(a)(1) and 11-21-71(a).
1.4. Filing Date. -- May 14, 1997.
1.5. Effective Date. -- June 1, 1997.
W. Va. Code R. § 110-21A-2 Definitions
As used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this rule.
2.1. The term "eligible taxpayer" means:
2.1.1. An unmarried individual with a federal adjusted gross income of $10,000.00 or less;
2.1.2. A husband and wife who file a joint return with a total federal adjusted gross income of $10,000.00 or less; or
2.1.3. A husband or wife who files a separate return and who has a federal adjusted gross income of $5,000.00 or less.
2.2. For the purposes of this deduction, the term "earned income" includes:
2.2.1. Wages, salaries, tips and other employee compensation as set forth on the eligible taxpayer's W-2 form; and
2.2.2. Net earnings from self-employment activity as defined in Section 1402(a) of the Internal Revenue Code minus any deduction available to the taxpayer pursuant to Section 164 of the Internal Revenue Code.
2.3. For the purposes of this deduction, the term "earned income" excludes:
2.3.1. Income attributable to a taxpayer on the basis of a divorce decree or separation agreement to distribute community property;
2.3.2. Income received from a pension, IRA distributions, 401(k) distributions, payments or distributions from a deferred compensation plan, retirement annuity, or any other retirement plan;
2.3.3. Any annuity; and
2.3.4. Income received by a taxpayer while that taxpayer was an inmate at a penal institution.
W. Va. Code R. § 110-21A-3 Taxable Income Calculation
Eligible taxpayers may deduct earned income from federal adjusted gross income to the extent it is included in federal adjusted gross income as set forth in Section 4 of this rule in order to determine the taxpayer's West Virginia taxable income.
W. Va. Code R. § 110-21A-4 Amount of Deduction
Eligible taxpayers may deduct the following maximum amounts of earned income from federal adjusted gross income to the extent it is included in federal adjusted gross income.
4.1. For tax years beginning after December 31, 1996:
4.1.1. Individual taxpayers: $10,000.00;
4.1.2. Married taxpayers filing jointly: $10,000.00; and
4.1.3. Married taxpayers filing separately: $5,000.00 for each spouse who qualifies as an eligible taxpayer.
4.2. For the tax year beginning January 1, 1996, eligible taxpayers may only deduct earned income received after June 30, 1996, from federal adjusted gross income to the extent it is included in federal adjusted gross income, as follows:
4.2.1. Individuals: $5,000.00;
4.2.2. Married individuals filing jointly: $5,000.00; and
4.2.3. Married individuals filing separately: $2,500.00 for each spouse who qualifies as an eligible taxpayer.
W. Va. Code R. § 110-21A-5 Withholding
If an eligible taxpayer is not subject to withholding of taxes from wages pursuant to W. Va. Code '11-21-71, then he or she is not subject to withholdings pursuant to this rule. Otherwise, an eligible taxpayer under this rule is subject to withholding of taxes from wages.
W. Va. Code R. § 110-21A-6 Filing of a Return
If an eligible taxpayer is not required to file a West Virginia personal income tax return pursuant to W. Va. Code '11-21-51, then heor she is not required to file a return pursuant to this rule. Otherwise, an eligible taxpayer under this rule shall to file a personal income tax return.
110CSR21A
Series 21B Citizen Tax Credit for Property Taxes Paid
W. Va. Code R. § 110-21B-1 General
1.1. Scope. -- This rule provides necessary guidance on implementing the personal income tax credit available to certain citizens, as provided in W. Va. Code §11-21-21.
1.2. Authority. -- W. Va. Code §11-21-21(c).
1.3. Filing Date. -- April 30, 2024.
1.4. Effective Date. -- April 30, 2024.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2029.
W. Va. Code R. § 110-21B-2 Definitions
When used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
2.1. “Ad valorem tax” means the tax imposed upon the value of property as authorized by West Virginia Constitution Article X, Section 1.
2.2. "Assessed value" means the value of property as determined under W. Va. Code §11-3-1 et seq.
2.3. “Commissioner” means the West Virginia Tax Commissioner, or his or her delegate.
2.4. “Department” means the West Virginia State Tax Department.
2.5. "Homestead" means a single family residential house, including a mobile or manufactured or modular home, and the land surrounding the structure; or a mobile or manufactured or modular home regardless of whether the land upon which the mobile or manufactured or modular home is situated is owned or leased.
2.6. “Low income” means federal adjusted gross income for the taxable year that is 150% or less of the federal poverty guideline for the year in which property tax was paid, based upon the number of individuals in the family unit residing in the homestead, as determined by the United States Secretary of Health and Human Services.
2.7. "Owner" means the person who possesses the homestead, whether in fee or for life. A person seized or entitled in fee subject to a mortgage or deed of trust is considered the owner. A person who has an equitable estate of freehold, or is a purchaser of a freehold estate who is in possession before transfer of legal title is also the owner. Personal property mortgaged or pledged shall, for the purpose of taxation, be considered the property of the party in possession.
2.8. “Personal income tax” means the tax imposed by W. Va. Code §11-21-1 et seq.
2.9. “State” means the State of West Virginia.
2.10. “System” means the statewide data processing system for property tax administration authorized by W. Va. Code §11-1A-21.
2.11. “Taxable assessed value” means the assessed value of the homestead remaining after application of the homestead exemption.
2.12. “Taxes paid” means the aggregate of regular levies, excess levies and bond levies of property taxes extended against not more than $20,000 of the taxable assessed value of a homestead that are paid during the calendar year, determined after application of any discount for early payment of taxes but before application of any penalty or interest for late payment of property taxes for a property tax year that begins on or after January 1, 2002.
2.13. "Taxpayer" means an owner who qualifies for the homestead exemption and is required to file a personal income tax return or is liable for the payment of personal income tax.
W. Va. Code R. § 110-21B-3 Citizen Tax Credit
3.1. A low income taxpayer who under the authority of W. Va. Code §11-6B-1 et seq., is allowed a homestead exemption from ad valorem tax shall be allowed a credit against West Virginia personal income tax in an amount equal to the ad valorem property taxes paid by that person on up to the first $20,000 of taxable assessed value of the homestead.
3.1.1. The credit commences for ad valorem taxes paid for property tax years that begin on or after January 1, 2003.
3.1.2. The credit may only be claimed by a taxpayer that qualifies under subsection 3.1 of this rule and only on the annual personal income tax return filed by that taxpayer.
W. Va. Code R. § 110-21B-4 Qualification for Homestead Exemption
4.1. The determination as to whether a property owner qualifies for the homestead exemption shall be made by the assessor of the county in which the property owner resides. When an owner is qualified, the homestead exemption attaches to the homestead occupied by the qualified owner.
4.2. If the property owner qualifies for the homestead exemption, the assessor shall enter the following information about the qualifying property into the System
4.2.1. The name and address of the owner;
4.2.2. The county identifier for the county in which the property is located;
4.2.3. The tax district identifier for the tax district in which the property is located;
4.2.4. The map number where the property may be found;
4.2.5. The parcel number for the property;
4.2.6. The assessed value of the property after application of the homestead exemption; and
4.2.7. The gross property tax on the property after application of the homestead exemption.
4.3. The assessor shall maintain the information required in subsection 4.2 of this rule.
W. Va. Code R. § 110-21B-5 Determination of Eligibility
5.1. The Commissioner shall, using the information entered into the System by the assessor, annually determine the taxpayers that have qualified for the homestead exemption.
5.1.1. The Commissioner shall also determine the amount of the tax credit available to the respective taxpayers. The amount of the tax credit shall be based upon the information in the System.
W. Va. Code R. § 110-21B-6 Notice of Eligibility, Forms and Instructions
6.1. The Commissioner shall annually issue a taxpayer specific notice only to (1) those eligible taxpayers who claimed the credit in the prior tax year, (2) those taxpayers who are newly eligible for the tax credit as determined by the Tax Commissioner, and (3) by request of a taxpayer who reasonably believes he or she is eligible and will file for the tax credit.
6.2. The notice shall state the amount of credit that, based upon the information applicable to a given tax year in the System, may be available to the taxpayer.
6.3. The Department shall prepare appropriate forms and instructions to be used for calculating the actual amount of credit claimed by the taxpayer.
W. Va. Code R. § 110-21B-7 Calculation of Credit
7.1. The definition of “taxes paid” requires that the amount subject to the credit be determined after application of any discount for early payment but before application of any penalty or interest for late payment.
7.1.1. W. Va. Code §11A-1-3 authorizes the payment of ad valorem taxes in two installments. The first installment is payable on or before September 1st and becomes delinquent on October 1st. The second installment is payable on or before the succeeding March 1st and becomes delinquent April 1st.
7.1.2. Taxes paid on or before the date they are payable are subject to a 2 ½% discount. Delinquent taxes are subject to accrued interest at the rate of 9% per year, and the accrued interest is added to the delinquent taxes until the taxes plus interest are paid.
7.1.3. “Taxes paid” therefore is the amount remaining either after the tax amount due is reduced by the application of the discount or before the tax amount due is increased by the addition of any interest or penalties.
7.2. Examples are found in the appendix to this rule.
APPENDIX
Example 1.
The credit available (when the taxpayer pays the property tax liability after the date for eligibility to receive a 2 ½ % discount) for eligible property with an assessed value of $30,000 is calculated as follows.
Assessed value of eligible property as found on county property book. $ 30,000 Homestead Exemption 20,000 Taxable assed value 10,000 Average tax rate (varies by county) .0123 Property tax due the county sheriff $ 123.00* Tax credit available to eligible owner $ 123.00 *paid after discount period expires Example 2.
The credit available (when the taxpayer pays the property tax liability on or before the date for eligibility to receive a 2 ½% discount) for eligible property with an assessed value of $25,000 is calculated as follows.
Assessed value of eligible property as found on county land book $ 25,000 Homestead Exemption 20,000 Taxable assessed value 5,000 Average tax rate (varies by county) .0123 Property tax due the county sheriff $ 59.96* Tax credit available to eligible owner $ 59.96 *paid before discount expires Example 3.
The credit available for eligible property with an assessed value of $19,000 is calculated as follows.
Assessed value of eligible property as found on county land book $19,000 Homestead Exemption 20,000 Taxable assessed value 0 Property taxes due the county sheriff 0 Tax credit available 0
Series 21C Method of Claiming the Qualified Rehabilitated Buildings Investment Credit
W. Va. Code R. § 110-21C-1 General
Scope. – This rule provides the method of reporting the alternative method for distribution of qualified rehabilitated buildings investment credit that is required by W. Va. Code § 11-21-8e(b); the method to sell, assign or transfer the credit pursuant to W. Va. Code §§11-21-8h or 11-24-23g, and requirements to claim the credit once transferred; the method to show good standing with the State Tax Division and local, municipal and county taxing authorities as required by W. Va. Code §§11-21-8a and 11-24-23a; and limitations on claiming the credit, including those set forth by House Bill 203, passed October 17, 2017.
Authority. – W. Va. Code §§11-21-8a(a), 11-21-8e(b), 11-21-8h(e), and 11-24-23a(a).
Filing Date. – November 30, 2018 Effective Date. – December 31, 2018
W. Va. Code R. § 110-21C-2 Definitions
2.1. General Rule. -- Unless a specific definition is provided in subsection 2.2 of this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §§11-10-1 et seq., 11-21-1 et seq. and 11-24-1 et seq.
2.2. Terms defined.
2.2.a. “C corporation” means a corporation which is not an S corporation for federal income tax purposes.
2.2.b. “Corporation” means any entity taxed as a corporation for federal income tax purposes.
2.2.c. “Credit” means the tax credit for qualified rehabilitated building investment authorized by W. Va. Code §§11-21-8a, 11-24-23a, and 11-21-8g.
2.2.d. “General partnership” means a partnership other than a “limited partnership” as defined in this subsection.
2.2.e. “General partner” means a person who has been admitted to a limited partnership as a general partner in accordance with the partnership agreement and is named in the certificate of limited partnership as a general partner.
2.2.f. “Limited liability company” means a limited liability company or foreign limited liability company as defined in W. Va. Code §31B-1-101 which is taxable as a partnership, and includes a professional limited liability company as defined in W. Va. Code § 31B-13-1301.
2.2.g. “Limited liability partnership” means a “registered limited liability partnership” or “foreign limited liability partnership” as defined in W. Va. Code §47B-1-1.
2.2.h. “Limited partner” means a person who has been admitted to a limited partnership as a limited partner in accordance with the partnership agreement.
2.2.i. “Limited partnership” means a partnership formed by two or more persons under the laws of this State and having one or more general partners and one or more limited partners.
2.2.j. ”Multiple owners of property” or “owners” means persons (other than shareholders of a C corporation) having an ownership interest in a qualified rehabilitated building who are eligible to claim the credit for qualified rehabilitated buildings investment.
2.2.k. “Member” means a member of a limited liability company.
2.2.l. “Operating agreement” means the agreement described in W. Va. Code § 31B-1-103 concerning the relationship among the members, managers and limited liability company. “Operating agreement” includes amendments to the agreement pursuant to W. Va. Code § 31B-1-101(16).
2.2.m. “Partner” means a member of a partnership, including a limited partner or a general partner of a limited partnership.
2.2.n. “Partnership” means a partnership as defined in Section 761 of the Internal Revenue Code of 1986, as amended, and includes a general partnership, a limited partnership, and a limited liability partnership.
2.2.o. “Partnership agreement” means any valid agreement, written or oral, of the partners as to the affairs of a partnership and the conduct of its business.
2.2.p. “Partnership interest” means a partner’s share of the profits and losses of a partnership and the right to receive distributions of partnership asset.
2.2.q. “Shareholder” means a shareholder of an S corporation, and does not include a shareholder of a C corporation.
2.2.r. “S corporation” means a small business corporation for which a valid election under subchapter S of the Internal Revenue Code is in effect for the taxable period. All other corporations are C corporations.
2.2.s. “Taxpayer” means the person or entity who made the qualified rehabilitation expenditures eligible for credit under W. Va. Code §§11-21-8a, 11-21-8g, or 11-24-23a as well as the person or entity who acquires tax credits pursuant to W. Va. Code §§11-21-8h or 11-24-23g.
W. Va. Code R. § 110-21C-3 Methods for Certain Entities to Distribute Credit
3.1. S corporations, partnerships, limited liability companies and other unincorporated groups such as multiple owners of property which would otherwise be eligible for the credit are not directly subject to income tax and thus are not able to claim the credit because they have no income tax against which to apply the credit. However, their shareholders, partners, members, and owners who are subject to income tax may be able to apply the credit to their income tax liability.
3.2. Unless an S corporation, partnership, limited liability company or other unincorporated group not subject to income tax elects the alternative distribution method set forth in subsection 3.3 of this rule, it shall allocate the qualified rehabilitated buildings investment credit allowed under W. Va. Code §§11-21-8a or 11-24-23a by using the pro rata method.
3.2.a. Under the pro rata method, the credit shall be allocated to the shareholders, members, partners or owners, as the case may be, either in proportion to their ownership interest in the S corporation, partnership, limited liability company or other unincorporated group, or using the same ratio used to divide profits and losses of the group.
3.3. If the group elects not to use the pro rata method of distribution, it may use an alternative method of its own devising, upon approval in writing by all of the shareholders, members, direct partners or owners and by the Tax Commissioner. The alternative method shall be in writing and shall describe how the credit is to be allocated in sufficient detail that the persons claiming the credit will be able to determine the amount of credit which they are entitled to claim when filing their return. Taxpayers claiming the credit shall file a written copy of the method with the credit Schedule RBIC which is filed with their income tax return.
3.4. No loss of credit shall occur as a result of a change in the type of entity by which a taxpayer conducts its business. Likewise, if a taxpayer subject to the tax imposed by W. Va. Code §11-24-1 et seq. is a partner or a member of an entity that has applied for and received the credit, its share of the credit may be applied against the tax imposed by W. Va. Code §11-24-1 et seq. This subsection does not apply to the credit set forth by W. Va. Code §11-21-8g.
W. Va. Code R. § 110-21C-4 Sale, Assignment or Other Transfer of Credit
4.1. Pursuant to W. Va. Code §11-24-23g, a Corporation Net Income Tax taxpayer granted credit pursuant to W. Va. Code §11-24-23a may sell, assign or otherwise transfer some or all of its credit to another taxpayer, which may apply that credit to its Corporation Net Income Tax liability even though it would not be eligible for the credit pursuant to W. Va. Code §11-24-23a.
4.1.a. Corporation Net Income Tax taxpayers not eligible for credit to be granted to them pursuant to W. Va. Code §11-24-23a may not sell, assign or transfer any credit sold, assigned or transferred to them.
4.2. Pursuant to W. Va. Code § 11-21-8h, Personal Income Tax taxpayers eligible for credit to be granted pursuant to W. Va. Code §§11-21-8a or 11-21-8g may sell, assign or transfer their credit to another taxpayer, in accordance with the provisions of W. Va. Code §11-21-8h, as passed in 2002.
4.3. The sale, assignment or transfer of the certified historic structure, absent the sale, assignment or transfer of the credit, does not entitle the purchaser, assignee or transferee of the structure to claim the credit that was certified for the structure. Further, no two parties may claim the credit for the same tax year.
4.4. In cases where the credit that was granted pursuant to W. Va. Code §§ 11-21-8a or 11-24-23a has been sold, assigned or otherwise transferred, the recipient of the credit is subject to the requirements set forth in W. Va. Code §§11-21-8a(a) or 11-24-23a(a), as amended in 2017.
4.4.a. Specifically, the transferee, purchaser, or assignee is not entitled to this credit if, on the date of transfer and throughout the time period within which the credit is claimed, the transferee, assignee, or purchaser is in arrears in the payment of any tax administered by the Tax Division or the transferee, assignee, or purchaser is delinquent in the payment of any local or municipal tax, or the transferee, assignee, or purchaser is delinquent in the payment of property taxes on the property containing the certified historic tax structure throughout the time period within which the credit is claimed.
4.4.b. Provided that the transferee, assignee, or purchaser will not lose eligibility to claim the credit when the property taxes on the property containing the certified historic tax structure are delinquent, if the transferee, assignee, or purchaser can demonstrate by documentation that he or she was not subject to the property tax on the property containing the certified historic tax structure during the tax period in which the credit is claimed.
4.5. Documentation of the transferor, assignor, or seller taxpayer’s as well as the transferee, assignee, or purchaser taxpayer’s good standing, as described in Section 5 of this rule, must be submitted to the State Historic Preservation Office along with the request for the Certificate of Approval, the requirement of which is set forth in W. Va. Code §11-21-8h(a). If this documentation is not submitted, then the request for Certificate of Approval will not be considered complete.
W. Va. Code R. § 110-21C-5 Method to demonstrate good standing with state, local, municipal and county taxing authorities
5.1. Demonstration of good standing during the application process. – When requesting certification for the credits that are granted pursuant to W. Va. Code §§11-21-8a and 11-24-23a, the taxpayer must include documentation demonstrating the taxpayer’s good standing in the following manner.
5.1.a. The documentation of good standing shall be submitted with the Request for Certification to the State Historic Preservation Office and must address the time period between the initial application for the Qualified Rehabilitated Building Credit through the end of the tax period immediately prior to the date of the Request for Certification. Prior tax arrearages and delinquencies must have been resolved prior to the time the documentation of good standing is issued.
5.1.b. The Request for Certification will not be complete without the documentation of good standing.
5.2. Demonstration of good standing during the period the tax credit is claimed. – When claiming the credits that are granted pursuant to W. Va. Code §§11-21-8a and 11-24-23a, the taxpayer must include documentation demonstrating the taxpayer’s good standing in the following manner.
5.2.a. Documentation of good standing shall be submitted with the Schedule RBIC and tax return to the State Tax Division. During the initial tax period during which the credit is claimed, the documentation of good standing must address the time period between the end of the tax period immediately preceding the Request for Certification through the end of the tax period ending immediately preceding the date of the request for credit. For subsequent tax periods in which the credit is claimed, the documentation of good standing must address the period immediately succeeding the most recent tax period addressed by the most recently-submitted documentation of good standing through the end of the tax period immediately preceding the request for good standing. Prior tax arrearages and delinquencies must have been resolved by the time the documentation of good standing is issued.
5.2.b. The request for credit will not be considered complete, and will not be granted, without this documentation of good standing. However, the return will be processed as if no claim for credit has been made.
5.3 The documentation of good standing described in Subsections 5.1 and 5.2. must be issued by the relevant taxing authority and the documentation of good standing may include a receipt, a letter of good standing, or other type of documentation that shows the date issued, the periods covered, the type of taxes, the taxpayer’s identity and address, the name and title of the official from the taxing authority issuing the documentation of good standing, and other such relevant information as the issuing taxing authority deems necessary.
5.4. Taxes that must be included in the documentation of good standing include the following –
5.4.a. Every tax to which the taxpayer is subject that is imposed in Chapter 8, Articles 13, 13A, and 13C of the Code of West Virginia, as well as any other lawfully-imposed local or municipal tax,
5.4.b. Every tax administered by the State Tax Division to which the taxpayer is subject that is imposed in Chapter Eleven of the Code of West Virginia, as well as any other lawfully-imposed tax, including but not limited to the municipal sales and use tax set forth by W. Va. Code §8-1-5a,
5.4.c. Property taxes to which the taxpayer is subject on the property containing the certified historic structure, except for the situation set forth by Subsection 4.4.b of these rules.
5.5. For purposes of this section, “good standing” means a taxpayer is not in arrears on the payment of and reporting on any tax administered by the State Tax Division; and is not delinquent on the payment of or reporting on any tax administered by a county, local or municipal authority, including the payment on and reporting of property taxes on the property containing the certified historic structure.
5.5.a. For purposes of this section, “in arrears on the payment of and reporting on any tax administered by the State Tax Division” mean the requirements for timely filing and paying taxes as set forth in W. Va. Code §11-10-5f have not been met.
5.5.b. For purposes of this section, “delinquent on the payment on any tax administered by a local or municipal authority” means the taxpayer has not paid the relevant tax and filed the relevant return by the due date set forth in the municipality’s code.
5.5.c. For purposes of this section, “delinquent on the payment of property taxes on the property containing the certified historic tax structure” means that the taxpayer has not paid the property tax or submitted the return that included the property that contains the certified historic structure.
5.6. Whether documentation demonstrating good standing can be issued in any particular instance depends upon each taxing authority’s legal authority and internal policies. For example, one taxing authority may issue documentation of good standing if a taxpayer is currently in compliance with the terms of a payment plan, while another may not issue documentation of good standing under those circumstances, or even offer payment plans. Further, some tax authorities may only issue documentation of good standing for the current period if all prior periods are also in good standing. In those circumstances, the documentation of good standing will be accepted as covering all relevant periods.
5.7. Alternative method to demonstrate good standing. - In the event that a taxing authority lacks the ability to issue documentation of good standing, an invoice and cancelled check or electronic banking record that shows the tax was paid will be considered persuasive evidence of good standing. This alternative form of documentation must be accompanied by an affidavit from the taxpayer that attests what efforts were made by the taxpayer to obtain documentation of good standing from the taxing authority; that the corresponding return has been filed; and shows the date the affidavit was issued, the tax periods covered, the type(s) of taxes, the taxpayer’s identity and address, the name and title of the taxpayer representative completing the affidavit, and any other relevant information the taxpayer deems necessary. The alternative method to demonstrate good standing will not be considered complete without the affidavit.
5.8. Information requests. - The State Tax Division and State Historic Preservation Office have the authority to contact county, municipal and local taxing authorities, upon receipt of a Request for Certification, a request for Certificate of Approval, or request for credit, to make inquiries regarding a taxpayer’s status. The county, municipal and local taxing authority may respond within the limits of the legal authority establishing the county, municipal or local tax.
W. Va. Code R. § 110-21C-6 Limitations on claiming the credit
6.1. The credits granted pursuant to W. Va. Code §§11-21-8a or 11-24-23a for qualified investment made after December 31, 2017, may not be used to offset tax liabilities arising prior to January 1, 2020. This prohibition does not apply to the credits granted pursuant to W. Va. Code § 11-21-8g.
6.2. No credit is allowed for qualified investments made after December 31, 2022, unless the Legislature of West Virginia amends W. Va. Code §§11-21-8a and 11-24-23a to change the December 31, 2022 termination date.
6.3. In cases where qualified investment is made before January 1, 2023, and the investment is approved for credit pursuant to W. Va. Code §§ 11-21-8a or 11-24-23a prior to January 1, 2023, the unused portion of the credit may be carried forward for ten (10) years until it has been exhausted. However, this limitation date does not apply to the credit granted pursuant to W. Va. Code §11-21-8g.
6.4. In accordance with the provisions of W. Va. Code §11-24-23a, as amended in 2017, the aggregate value of credits authorized by the State Historic Preservation Officer pursuant to W. Va. Code §§11-21-8a and 11-24-23a may not exceed $30 million per fiscal year. Further, no more than $10 million may be allocated to any single certified rehabilitation granted pursuant to W. Va. Code §§11-21-8a or 11-24-23a. At least $5 million of the $30 million annual credits that may be granted pursuant to W. Va. Code §§11-21-8a and 11-24-23a must be set aside each year for small qualified rehabilitation projects that are eligible for a credit, not to exceed $500,000 for each allocation.
6.5. The State Historic Preservation Office must approve all Qualified Rehabilitated Buildings Investment Tax Credits, as provided for in W. Va. Code §§11-24-23a and 11-21-8g.
110CSR21C
110CSR21C
Series 21F The Coal Severance Tax Rebate
W. Va. Code R. § 110-21F-1 General
1.1. Scope. -- This interpretive rule sets forth the State Tax Commissioner’s interpretation of W. Va. Code §11-13EE-1, et seq., originally enacted in Enrolled H.B. 3144 (2019), amended by Enrolled H. B. 4439 (2020), and amended further by Enrolled S. B. 718 (2021). W. Va. Code §11-13EE-1, et seq. provides a coal severance tax rebate when a taxpayer’s qualified capital investment results in taxpayer’s increased coal production and an increase in the taxpayer’s workforce.
1.2. Authority. -- W. Va. Code §§11-13EE-14 and 11-10-5.
1.3. Filing Date. -- May 2, 2022.
1.4. Effective Date. -- June 2, 2022.
1.5. Applicability. -- The coal severance tax rebate is available to eligible taxpayers that make a qualified capital investment in a new or existing mine, which is placed in service or use in this state on or after July 1, 2019, and that results in an increase in coal production and in the taxpayer’s workforce, in accordance with S.B.18 passed during the 2021 General Legislative Session. S.B.718 superseded the provisions of H.B. 3144 passed during the 2019 General Legislative Session and the provisions of H.B. 4439 passed during the 2020 General Legislative Session. The qualified investment may be in the form of new machinery or equipment, repairs or refurbishment of machinery or equipment that is capitalized for federal income tax purposes, or infrastructure improvements to real property.
W. Va. Code R. § 110-21F-2 Definitions
2.1. General Rule. -- Unless a specific definition is provided in subsection 2.2 of this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §§11-13EE-1, et seq.; 11-10-1, et seq.; 11-13A-1, et seq.; 11-21-1, et seq.; and 11-24-1, et seq.
2.2. Terms defined.
2.2.1. “Base period” means the five-year period directly preceding the year the qualifying capital investment in new machinery and equipment was placed into service. See W.Va. Code §11-13EE-2(b)(2).
2.2.1.a. When a business has not been in business for five years, but has been in business for at least two years, the base period is the most recent tax year prior to making the investment.
2.2.1.b. “Base period” applies to every threshold to rebate eligibility, including severance tax paid, tons mined, and employment levels.
2.2.2. “Base period annual average severance taxes” means the annual average of the state portion of severance taxes under W. Va. Code §11-13A-3 during the five-year period directly preceding the year the qualifying capital in new machinery and equipment was placed into service. The annual average of severance taxes is found by taking the cumulative total of the state portion of severance taxes paid from all mines operated within the state by the eligible taxpayer and dividing the aggregate cumulative total of the state portion of severance taxes by five. See W.Va. Code §11-13EE-2(b)(3).
2.2.3. "Coal loading facility" is defined in W. Va. Code §11-13E-2(b)(1). An investment in a new or expanded coal loading facility may be eligible for the credit allowed by W. Va. Code §11-13E-3 against the business and occupation tax. If the credit allowed by W.Va. Code §11-13E-3 is claimed by the taxpayer, then the cost of the coal loading facility is not eligible as qualified investment for purposes of the coal tax rebate.
2.2.4. "Directly used or consumed in the production of coal” means used or consumed in those activities or operations that constitute an integral and essential part of the production of coal, as contrasted with and distinguished from those activities or operations that are simply incidental, convenient or remote to the production of coal.
2.2.4.a. Uses of tangible personal property that constitute direct use or consumption in the production of coal include only:
2.2.4.a.1. New machinery or new equipment that is depreciable, or amortizable, and has a useful life of five or more years for federal income tax purposes, and that is directly used in the production of coal in this state;
2.2.4.a.2. Transportation of coal within the coal mine from the coal face or coal deposit to the exterior of the mine or to a point where the extracted coal is transported away from the mine;
2.2.4.a.3. Directly and physically recording the flow of coal during the production of coal including those coal treatment processes specified in W. Va. Code §11-13A-4;
2.2.4.a.4. Safety equipment and apparatus directly used in the production of coal, or to secure the safety of mine personnel in direct use in the production of coal;
2.2.4.a.5. Controlling or otherwise regulating atmospheric conditions required to produce coal;
2.2.4.a.6. Transformers, pumps, rock dusting equipment or other property used to supply electricity or water, or to supply or apply rock dust directly used in the production of coal;
2.2.4.a.7. Storing, removal or transportation of economic waste, including coal gob, resulting from the production of coal;
2.2.4.a.8. Engaging in pollution control or environmental quality or protection activity directly relating to the production of coal; or
2.2.4.a.9. Otherwise using as an integral and essential part of the production of coal.
2.2.4.b. Uses of tangible personal property which do not constitute direct use or consumption in the production of coal include, but are not limited to:
2.2.4.b.1. Heating and illumination of office buildings;
2.2.4.b.2. Janitorial or general cleaning activities;
2.2.4.b.3. Personal comfort of personnel: Provided, that safety equipment and apparatus directly used in the production of coal or to secure the safety of mine personnel is direct use in the production of coal when the tangible personal property is depreciable, or amortizable, for federal income tax purposes and has a useful life of five or more years for federal income tax purposes when it is placed in service or use;
2.2.4.b.4. Production planning, scheduling of work or inventory control;
2.2.4.b.5. Marketing, general management, supervision, finance, training, accounting and administration;
2.2.4.b.6. Measuring or determining weight, and ash content, water content;
2.2.4.b.7. An activity or function incidental or convenient to the production of coal, rather than an integral and essential part of these activities. See W. Va. Code §11-13EE-2(b)(13).
2.2.5. “Eligible taxpayer” means:
2.2.5.a. Any person who pays the tax imposed by W. Va. Code §11-13A-3 on the privilege of producing coal for sale, profit or commercial use for at least two years before the capital investment in new machinery or new equipment is placed in service or use in this state; or
2.2.5.b. A taxpayer that has experienced a change in business composition through merger, acquisition, split-up, spin-off or other ownership changes or changes in the form of the business organization from limited liability company to C corporation, or partnership, or from one form of business organization to a different form of business organization, may constitute an eligible taxpayer if the entity currently operating in this state was operating in a different form of business organization in this state at least two years before the capital investment in new machinery or equipment is placed in service or use in this state. In the case of a business composition change through merger, acquisition, split-up, spin-off or other ownership changes, the current business may constitute an eligible taxpayer if at least 50 percent of the business assets of such component were actively and directly used in coal production activity in this state for such two-year period. If at least 50 percent of the assets of the current entity were not actively and directly used in coal production activity in this state for such two-year period, then the current entity resulting from a business composition change through merger, acquisition, split-up, spin-off or other ownership shall not constitute an eligible taxpayer. See W. Va. Code §11-13EE-2(b)(15).
2.2.5.c. When the rebate applicant is part of a controlled or affiliated group, for purposes of determining the increase in the state portion of severance taxes paid, the increase in coal production tonnage, and the increase in full-time and full-time equivalent employment, the term, “eligible taxpayer” includes all members of the rebate applicant’s controlled or affiliated group. Thus, the increase in the state portion of severance taxes is determined by subtracting the base period annual average severance taxes paid by the eligible taxpayer’s controlled or affiliated group for all coal mined in this state from the state portion of severance taxes paid by year for which the rebate is claimed. Likewise, the “eligible taxpayer’s” total aggregate production tonnage and total employment figures referenced in W. Va. Code §11-13EE-3(c) are determined by reference to the controlled group or affiliated group’s total aggregate production tonnage and total employment numbers across all mines operated by the controlled or affiliated group within the state.
2.2.6. “Full-time employee” means an employee who is compensated by an annual salary and who works, on average, at least 35 hours per week.
2.2.7. “Full-time equivalent employee” means the quotient obtained by dividing the total number of hours for which hourly employees were compensated for employment over the 12-month period in question by 1,820.
2.2.8. "Gross proceeds" means the value, whether in money or other property, actually proceeding from the sale or lease of tangible personal property, or from the rendering of services, without any deduction for the cost of property sold or leased or expenses of any kind. See W. Va. Code §11-13A-2(b)(5).
2.2.9. "Gross value" in the case of natural resources means the market value of the natural resource product, in the immediate vicinity where severed, determined after application of post-production processing generally applied by the industry to obtain commercially marketable or usable natural resource products. For every natural resource, "gross value" is reported as follows:
2.2.9.a. For natural resources severed or processed (or both severed and processed) and sold during a reporting period, gross value is the gross proceeds received or receivable by the taxpayer.
2.2.9.b. In a transaction involving related parties, gross value shall not be less than the fair market value for natural resources of similar grade and quality.
2.2.9.c. In the absence of a sale, gross value shall be the fair market value for natural resources of similar grade and quality.
2.2.9.d. If severed natural resources are purchased for the purpose of processing and resale, the gross value is the amount received or receivable during the reporting period reduced by the amount paid or payable to the taxpayer actually severing the natural resource. If natural resources are severed outside the State of West Virginia and brought into the State of West Virginia by the taxpayer for the purpose of processing and sale, the gross value is the amount received or receivable during the reporting period reduced by the fair market value of natural resources of similar grade and quality and in the same condition immediately preceding the processing of the natural resources in this state.
2.2.9.e. If severed natural resources are purchased for the purpose of processing and consumption, the gross value is the fair market value of processed natural resources of similar grade and quality reduced by the amount paid or payable to the taxpayer actually severing the natural resource. If severed natural resources are severed outside the State of West Virginia and brought into the State of West Virginia by the taxpayer for the purpose of processing and consumption, the gross value is the fair market value of processed natural resources of similar grade and quality reduced by the fair market value of natural resources of similar grade and quality and in the same condition immediately preceding the processing of the natural resources.
2.2.9.f. In all instances, the gross value shall be reduced by the amount of any federal energy tax imposed upon the taxpayer after June 1, 1993, but shall not be reduced by any state or federal taxes, royalties, sales commissions or any other expense. See W. Va. Code §11-13A-2(c)(6).
2.2.10. “Infrastructure improvements to real property” means those improvements to the basic physical systems of a mine. Such infrastructure upgrades include, but are not limited to, materials used for construction of sewage, water, electrical, telecommunications, and ventilation systems, including ventilation fans, as well as transportation systems, including haul roads or access roads, culverts, and belt lines, and coal processing and conveying equipment, including machinery to reduce the size of coal or to separate coal from refuse, and the equipment used to convey coal to or remove coal and refuse from the machinery.
2.2.11. “Improvements to real property” means those improvements made to buildings, structures, fixtures, and other capital improvements, which are permanently affixed to the land in a manner that they are part of the realty.
2.2.12. "Mining" includes not merely the extraction of ores or minerals from the ground, but also those treatment processes necessary or incidental thereto.
2.2.13. “New property” or “new tangible personal property” means:
2.2.13.a. New property is limited to new machinery and equipment that meets all of the following requirements:
2.2.13.a.1. The new property is directly used in the production of coal in this state,
2.2.13.a.2. The new property is depreciable or amortizable by the coal producer for federal income tax purposes,
2.2.13.a.3. The new property has a useful life of five or more years for federal income tax purposes when placed in service or use in this state, and
2.2.13.a.4. The new property is purchased or leased by the taxpayer on or after July 1, 2019, when the original use by anyone of the property in this state is by the taxpayer, and the property results in increased coal production.
2.2.13.b. Equipment and machinery that has been remanufactured will be treated as new property for purposes of the Coal Severance Tax Rebate provided that each of the following requirements has been met:
2.2.13.b.1. If purchased or leased, the remanufactured equipment or machinery must have been purchased or leased from a third party in an arm’s length transaction.
2.2.13.b.2. The equipment or machinery must have been purchased or leased and placed into service or use on or after July 1, 2019, and meet all other requirements set forth in order to obtain this rebate.
2.2.13.b.3. In order to qualify as new equipment for the rebate, the remanufactured equipment or machinery must have been retitled and assigned a new vehicle or equipment identification number (or manufacturer’s equivalent) prior to its purchase or lease.
2.2.13.b.4. The remanufactured equipment or machinery must be treated as new equipment or machinery for federal income tax purposes.
2.2.13.b.5. Under no circumstances can the same piece of machinery or equipment be claimed in the same tax year as a capitalized repair and as a purchase of new equipment for purposes of this rebate, even if it has been retitled and assigned two different vehicle or equipment identification numbers (or manufacturer’s equivalent).
2.2.13.b.6. Adequate records will be required to establish entitlement to this rebate on the basis of purchase of a remanufactured or remanufacture and retitle of equipment or machinery.
2.2.13.c. New property does not include any of the following:
2.2.13.c.1. Tangible personal property acquired from a person whose relationship to the person acquiring it would result in disallowance of deductions under I.RC § 267 or 707 (b):
2.2.13.c.2. Tangible personal property acquired by one component member of a controlled group from another component member of the same controlled group;
2.2.13.c.3. Tangible personal property where the basis of the tangible personal property or improvements to property for federal income tax purposes, in the hands of the person acquiring it, is determined:
2.2.13.c.3.1. In whole or in part by reference to the federal adjusted basis of the property in the hands of the person from whom it was acquired; or
2.2.13.c.3.2. Under I.R.C § 1014 (e). See W. Va. Code §11-13EE-2(b)(24).
2.2.13.c.4. Used equipment or machinery;
2.2.13.c.5. The repair or replacement of a component part does not constitute remanufacture of the equipment or machinery and, accordingly, does not qualify as new property. For purposes of this paragraph, “component part” includes, but is not limited to, chassis, roof bolts, belts, shields, individual body parts, hoses, piping, control panels, wheels, tires, tracks, rollers, paint, hydraulics, mechanical parts, transmissions, steering mechanisms, fuel systems, brakes, axles, engines, or motors. However, repair costs will be eligible for this rebate if capitalized. See W. Va. Code §11-13EE-2(b)(4) and (23).
2.2.13.c.6. Remanufactured equipment or machinery that was titled to the taxpayer seeking the rebate, or any affiliate, subsidiary, or parent company, prior to its remanufacture. However, repair costs will be eligible for this rebate if capitalized. See W. Va. Code §11-13EE-2(b)(4) and (23).
2.2.14. “Property purchased or leased for business expansion” means:
2.2.14.a. Included property. -- Except as provided in subdivision 2.2.14.b. of this rule, the term "property purchased or leased for business expansion" means tangible personal property, but only if the property was purchased, or leased, and placed in service for direct use by the taxpayer in the production of coal in West Virginia. This term includes only:
2.2.14.a.1. New tangible personal property placed in service or use by the taxpayer on or after July 1, 2019, with respect to which depreciation, or amortization in lieu of depreciation, is allowable in determining the personal or corporation net income tax liability of the business, or its equity owners, under W. Va. Code §§11-21-1, et seq., or 11-24-1, et seq., and has a useful economic life at the time the property is placed in service or use in this state of five or more years.
2.2.14.a.2. New tangible personal property acquired by written lease having a primary term of five years or more, that is depreciable or amortizable by the lessor or lessee for federal income tax purposes and has a useful life of five or more years for federal income purposes when it is placed in service or use in this state, and when the lease commences and was executed by the parties thereto on or after July 1, 2019, if used as a component part of a new or expanded coal mining operation in this state shall be included within this definition.
2.2.14.a.3. Repair or refurbishment costs to tangible personal property directly used in the production of coal that are incurred on or after July 1, 2019, which are capitalized for federal income tax purposes.
2.2.14.b. Excluded property. -- The term "property purchased or leased for business expansion" shall not include:
2.2.14.b.1. Machinery or equipment owned or leased by the taxpayer for which credit was taken or is claimed under any other article in chapter 11 of the West Virginia Code;
2.2.14.b.2. Repair costs, including materials used in the repair, unless for federal income tax purposes the repair costs must be capitalized and not expensed;
2.2.14.b.3. Motor vehicles licensed by the West Virginia Division of Motor Vehicles;
2.2.14.b.4. Airplanes and helicopters;
2.2.14.b.5. Off-premise transportation equipment;
2.2.14.b.6. Machinery or equipment that is primarily used outside this state;
2.2.14.b.7. Machinery or equipment that is acquired incident to the purchase of the stock or assets of the seller except as otherwise provided in W. Va. Code §11-13EE-1, et seq.;
2.2.14.b.8. Coal loading facilities for which the taxpayer has claimed credit under W.Va. Code §11-13E-1, et. seq.;
2.2.14.b.9. Used machinery and equipment; and
2.2.14.b.10. Improvements to real property, although tangible personal property used for infrastructure improvements to real property may qualify.
2.2.14.c. Purchase date. -- New machinery or new equipment shall be deemed to have been purchased prior to July 1, 2019, if:
2.2.14.c.1. The machinery or equipment was owned by the taxpayer prior to July 1, 2019, or was acquired by the taxpayer pursuant to a binding purchase contract that was in effect prior to July 1, 2019; or
2.2.14.c.2. In the case of leased machinery and equipment, there was a binding written lease or contract to lease identifiable machinery or equipment in effect prior to July 1, 2019. See W. Va. Code §11-13EE-2(b)(23).
2.2.15. “Purchase” means any acquisition of new machinery or new equipment directly used or consumed in the production of coal, but only if:
2.2.15.a. The tangible personal property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of deductions under I.R.C. § 267 or § 707 (b);
2.2.15.b. The tangible personal property is not acquired by one component member of a controlled group from another component member of the same controlled group; and
2.2.15.c. The basis of the tangible personal property or improvements to property for federal income tax purposes, in the hands of the person acquiring it, is not determined:
2.2.15.c.1. In whole or in part by reference to the federal adjusted basis of the property in the hands of the person from whom it was acquired; or
2.2.15.c.2. Under I.R.C. § 1014 (e). See W. Va. Code §11-13EE-2(b)(24).
2.2.16. “Qualified coal mining activity” means any business or other activity subject to the tax imposed by W. Va. Code §11-13A-3 on the privilege of severing, extracting, reducing to possession and producing coal for sale, profit or commercial use including the treatment process described as mining in W. Va. Code §11-13A-4(a)(1). See W. Va. Code §11-13EE-2(b)(25).
2.2.17. “Qualified investment” or “qualified investment property” for purposes of this rule means a capital investment in machinery or equipment directly used in the production of coal in this state that is depreciable, or amortizable, for federal income tax purposes and has a useful life for federal income tax purposes of five or more years when it is placed in service or use in this state and the investment results in increased coal production at the mine where the qualified investment is made. Qualified investments are limited to the following:
2.2.17.a. Tangible personal property in the form of new machinery and new equipment that is purchased on or after July 1, 2019, and placed in service for direct use in the production of coal, when the original or first use of the machinery or equipment in the state commences on or after July 1, 2019;
2.2.17.b. Tangible personal property in the form of new machinery and new equipment that is leased by the taxpayer and placed in service in this state for direct use in the production of coal by the taxpayer on or after July 1, 2019, if the original or first use of the machinery or equipment by anyone in this state commences on or after July 1, 2019, and the new machinery or new equipment is depreciable, or amortizable, for federal income tax purposes and has a useful life of five or more years for federal income tax purposes;
2.2.17.c. Tangible personal property in the form of materials used for infrastructure improvements to real property on or after July 1, 2019, and placed in service for direct use in the production of coal, when the original or first use of the materials used for the infrastructure upgrades commences in this state on or after July 1, 2019; and
2.2.17.d. Repair or refurbishment costs to tangible personal property directly used in the production of coal that are incurred on or July 1, 2019, which are capitalized for federal income tax purposes.
2.2.18. “Rebate” means the amount allowable as a rebate under W. Va. Code §11-13EE-3. See W. Va. Code §11-13EE-2(b)(27).
2.2.19. "Sale" includes any transfer of the ownership or title to property, whether for money or in exchange for other property or services, or any combination thereof. "Sale" includes a lease of property, whether the transaction be characterized as a rental, lease, hire, bailment or license to use. "Sale" also includes rendering services for a consideration, whether direct or indirect.
2.2.20. “Severance Tax” for purposes of this rule means the tax imposed in W. Va. Code §11-13A-3(a) on the privilege of engaging or continuing within this state in the business of severing coal, extracting coal, reducing coal to possession and producing coal for sale, profit or commercial use computed at the five percent rate of tax. “Severance tax” for purposes of this rule does not include any other rate of severance tax.
2.2.21. "Severing" or "severed" means the physical removal of the natural resources from the earth or waters of this state by any means.
2.2.22. “State portion of severance taxes payable” or “state portion of severance taxes paid” or “state portion of severance taxes due” means the portion of severance taxes due under W. Va. Code §11-13A-3(a), when computed at the 4.65 percent rate of tax, before credit for the minimum severance tax paid. See W. Va. Code §11-13EE-2(b)(29). “State portion of severance tax” for purposes of this rule does not include any other rate of severance tax.
2.2.23. “State Tax Commissioner” or “Tax Commissioner” means the Commissioner of the West Virginia State Tax Department or his or her designee.
2.2.24. “Tangible personal property” means, and is limited to, new machinery and new equipment that is depreciable, or amortizable, for federal income tax purposes and that has a useful life of five or more years for federal income tax purposes when it is placed in service or use in this state. See W. Va. Code §11-13EE-2(b)(30).
2.2.25. "Taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which a tax liability is computed under W. Va. Code §11-13A-1, et seq. In the case of a return made under W. Va. Code §11-13A-1, et seq., or regulations of the Tax Commissioner, for a fractional part of a year, the term "taxable year" means the period for which such return is made.
2.2.26. “Taxpayer” means any person exercising the privilege of severing, extracting, reducing to possession, and producing coal for sale, profit, or commercial use, which privilege is taxable under W. Va. Code §11-13A-3(a). See W. Va. Code §11-13EE-2(b)(31).
2.2.27. "This code" means the Code of West Virginia, 1931, as amended. See W. Va. Code §11-13EE-2(b)(32).
2.2.28. "This state" means the State of West Virginia. See W. Va. Code §11-13EE-2(b)(33).
2.2.29. “United States Internal Revenue Code” or “Internal Revenue Code,” or “I.R.C.” means the Internal Revenue Code as defined in W. Va. Code §11-24-3. See W. Va. Code §11-13EE-2(b)(34).
2.2.30. “Used property” means property that has been previously owned or put to a purpose by someone other than the taxpayer. Used property is any property that is not new property as defined in this rule.
W. Va. Code R. § 110-21F-3 Rebate allowable
3.1. Rebate allowable. Eligible taxpayers shall be allowed a rebate against a portion of severance taxes imposed by W. Va. Code §11-13A-3 on the privilege of engaging in the production of coal in an amount not to exceed 35 percent of the eligible taxpayer’s qualified investment in tangible personal property purchased or leased for business expansion, subject to the limitations in section 3.2. of this rule.
Example. If the taxpayer makes a $1,000,000 qualified investment, the amount of the potential rebate is $350,000.
3.2. Limitations on the rebate. --
3.2.1. Maximum rebate limited to 80 percent of increase above base period severance taxes. The maximum amount of rebate allowable for any given tax year is limited to an amount not to exceed 80 percent of the increase in the state portion of severance taxes paid for coal mined at the specific mine where the qualified investment is made when compared to the average annual state portion of severance taxes paid for coal mined at the specific mine where the qualified investment is made during the base period.
3.2.1.a. “Base period annual average severance taxes” means the annual average of the state portion of severance taxes under W. Va. Code §11-13A-3 during the five-year period directly preceding the year the qualifying capital investment in new machinery and equipment was placed into service. The annual average of the state portion of severance taxes is found by taking the cumulative total of the state portion of severance taxes paid from all mines operated within the state by the eligible taxpayer and dividing the aggregate cumulative total of the state portion of severance taxes by five.
Example. Taxpayer’s base period amount at the investment mine is $1,000,000, which is the annual average of the five-year base period. Taxpayer paid $1,500,000 severance tax in the claim year from production at the investment mine. The difference is $500,000. The taxpayer can claim the rebate against $400,000 of severance taxes paid during the claim year, which is 80 percent of the difference.
3.2.1.b. When the eligible taxpayer has produced coal in this state for two years before making the capital investment in new machinery and equipment but was not in business during a full five-year base period, then the eligible taxpayer’s base severance tax amount shall be the amount of state severance tax due under W. Va. Code §11-13A-3 on coal produced in this state during the most recent tax year prior to making the investment.
Example 1: Taxpayer company has three mines, Mine A, Mine B, and Mine C. Mine A has been in operation for five years. Mine B has been in operation for three years. Mine C goes into production during the current year. The base severance tax amount for this taxpayer is the average annual production of all mines during the past five years.
Example 2: Taxpayer company has three mines, Mine A, Mine B, Mine C. Mine A went into production two years ago, while Mine B and Mine C go into production during the current year. The taxpayer’s base severance tax production is the average production for all three mines during the prior year.
Example 3: Taxpayer company has three mines, Mine A, Mine B, and Mine C. All three mines go into production in West Virginia during the current year. The taxpayer is not eligible to claim the rebate until it has been in business in the State of West Virginia for at least two years.
3.2.2. The increase in the state portion of severance taxes paid against which the rebate may be taken is further limited by a fraction, the numerator of which is the increase in coal production, measured in tons produced, at all mines operated by the taxpayer, the denominator of which is the increase in coal production, measured in tons produced, at the specific mine where investment is made;
3.2.2.a. The factor cannot exceed 1.
3.2.2.b. The increase in coal production is determined by subtracting the base period coal production, measured in tons produced, from the coal production, measured in tons produced, during the tax year for which the rebate is claimed.
Example 1: Taxpayer’s base period amount at the investment mine is $3,000,000, which is the annual average of the five-year base period. Taxpayer paid $3,800,000 severance tax in the claim year from production at the investment mine. The difference is $800,000. 80 percent of that difference is $640,000 ($800,000 X 0.8 = $640,000). The taxpayer may be able to claim the rebate against $640,000 of severance taxes paid during the claim year, depending upon the result of the limiting factor below.
The base period coal production of all the taxpayer’s mines, including the mine where the investment was made, is 400,000 tons. The claim year production of all the taxpayer’s mines is 450,000. 450,000 tons minus 400,000 tons is 50,000 tons.
The base period coal production of the taxpayer’s mine where the investment was made is 100,000 tons. The claim year production at the taxpayer’s mine where the investment was made is 160,000 tons. 160,000 tons minus 100,000 tons is 60,000 tons.
Increase in production all mines = 50,000 tons Increase in production at investment mine = 60,000 tons The factor does not exceed one.
The factor is multiplied by 80 percent of the increase in the state portion of severance taxes, which results in $533,333. ((50,000/60,000) X ($800,000 X 0.8) = $533,333). The rebate may only be claimed against $533,333.
Example 2: The taxpayer’s increase in severance tax is the same as above, so that the taxpayer may be able to claim the rebate against $640,000 of severance taxes paid during the claim year, depending upon the result of the limiting factor below.
However, this time the base period coal production of all the taxpayer’s mines, including the mine where the investment was made, is 400,000 tons. The claim year production of all the taxpayer’s mines is 460,000. 460,000 tons minus 400,000 tons is 60,000 tons.
The base period coal production of the taxpayer’s mine where the investment was made is 100,000 tons. The claim year production at the taxpayer’s mine where the investment was made is 150,000 tons. 150,000 tons minus 100,000 tons is 50,000 tons.
Increase in production all mines = 60,000 tons Increase in production at investment mine = 50,000 tons The resulting factor is larger than one. The factor cannot exceed one, so the factor will be reduced to one.
The factor is multiplied by 80 percent of the increase in the state portion of severance taxes, which results in $640,000. (1 X ($800,000 X 0.8) = $640,000). The limiting factor did not decrease the amount of rebate that may be taken.
W. Va. Code R. § 110-21F-4 Eligibility to claim the coal severance tax rebate
4.1. The coal severance tax rebate is available to taxpayers that meet every requirement as set forth in W. Va. Code §11-13EE-1, et. seq., any other controlling section of the W. Va. Code and W. Va. Code of State Rules, and any other recognized legal authority including controlling decisions rendered by courts of competent jurisdiction.
4.2. In order to qualify for the coal severance tax rebate, each of the following criteria must be met. Even if every requirement has been met, the rebate may be denied, limited, suspended or forfeited for any lawful reason.
4.2.1. The taxpayer must be an eligible taxpayer, which means that the taxpayer was engaged in the business of producing coal for sale, profit or commercial use, as defined by W. Va. Code §11-13EE-2(b)(19), for at least two years in the State of West Virginia before the qualified investment property is placed in service or use in this state. See W. Va. Code §11-13EE-2(b)(15).
4.2.2. However, a mere change in the form of doing business, from one business form to another, or a mere change in ownership, does not disqualify an otherwise eligible taxpayer as long as the transferor produced coal in this state and paid the tax imposed by W. Va. Code §11-13A-3(a), for at least two years prior to placing the qualified investment in service or use. See W. Va. Code §11-13EE-2(b)(15)(B) and section heading 9 of this rule.
4.2.3. When changes in business composition result in a new entity, at least 50 percent of the new entity’s business assets must have been actively and directly used in coal production activity in this state for a two-year period, in order for the resulting taxpayer to be eligible to claim the rebate for qualified investments made during the current tax year. See W. Va. Code §11-13EE-2(b)(15)(B).
4.2.4. The taxpayer must purchase or lease the qualified purchase property on or after July 1, 2019 and place it into service or use at the coal mining operation in the State of West Virginia.
4.2.5. The qualified investment property must result in an increase in the number of tons of coal produced as well as increase in the taxpayer’s workforce. Additionally, there must be an increase in the state portion of the severance taxes paid. The rebate paid in any year may not exceed 80 percent of the additional severance taxes payable, before credit for payment of the minimum severance tax, that is attributable to the increase in coal production. When the taxpayer operates more than one mine in West Virginia, the production from all mines is considered when determining whether there is an increase in the taxpayer’s production of coal due to placing qualified investment property into service or use. Additionally, when the taxpayer is a member of a controlled or affiliated group that has other members that produce coal in West Virginia, tons of coal produced by all members of the controlled or affiliated group, including the taxpayer, are used to determine whether the qualified investment property has resulted in an increase in the number of tons of coal produced.
4.2.6. The qualified investment property must be directly used at the coal mining operation at which it is placed in service or use for at least five years after it is placed in service or use by the taxpayer. If it is not directly used for at least five years after it is placed in service or use by the taxpayer, the taxpayer is subject to recapture of the rebate granted as described in section heading 13 of these rules.
4.2.7. No credit shall be allowed unless the aggregate total coal production tonnage from all mines operated by the eligible taxpayer in this state during the year for which the rebate or rebate carryover is claimed has increased above the annual average aggregate total coal production tonnage from all mines operated by the eligible taxpayer during the base period.
4.2.8. No rebate shall be allowed unless the aggregate total number of full-time employees along with full-time equivalent employees, at all mines operated by the eligible taxpayer in this state during the rebate year has increased above the annual average aggregate total number of full-time employees, along with full-time equivalent employees at all mines operated by the eligible taxpayer in this state during the base period.
Example 1: Taxpayer company owns three mines, Mine A, Mine B, and Mine C. The base tonnage produced at Mine A and Mine B was 200,000, which is 100,000 tons each. Mine C subsequently opens during 2021. Each of the three mines produced 150,000 tons during the claim year. Therefore, production increased for the aggregate group from 200,000 tons to 450,000 tons.
Example 2: Taxpayer company owns three mines, Mine A, Mine B, and Mine C. The base number of aggregate full-time employees for both Mine A and Mine B was 200, which is 100 each. Mine C subsequently opens during 2021. Each of the three mines had 100 aggregate full-time employees during the claim year. Therefore, the employment increased from 200 to 300 aggregate full-time employees.
4.2.9. No rebate shall be allowed under W. Va. Code §11-13EE-1, et seq., when credit is claimed under any other article of Chapter 11 of the W. Va. Code for capital investment in the new machinery and equipment. No credit shall be allowed under any other article of Chapter 11 of the W. Va. Code when a rebate is allowed under W. Va. Code §11-13EE-1, et seq., for the capital investment in new machinery and equipment.
W. Va. Code R. § 110-21F-5 Information required to determine amount of rebate allowable
5.1. A taxpayer claiming a rebate under W. Va. Code §11-13EE-1, et seq., who operates a single coal mine in this state, shall provide a schedule with the annual severance tax return filed under W. Va. Code §11-13A-1, et seq., that shows, for the mine, the number of tons of coal produced, the gross value of the coal produced at the mine during the taxable year for which the rebate is sought, the aggregate number of full-time employees at the mine, and such other information deemed by the Tax Commissioner to be necessary to determine the base production and the net increase in state severance tax payable attributable to the qualified investment property placed in service or use at the coal mining operation.
5.2. A taxpayer claiming a rebate under W. Va. Code §11-13EE-1, et seq., who operates more than one coal mine in this state, shall provide a schedule with the annual severance tax return filed under W. Va. Code §11-13A-1, et seq., that shows, for each coal mine, the number of tons of coal produced, the gross value of the coal produced at each mine during the taxable year for which rebate is sought, the aggregate number of full-time employees at the mine, and such other information deemed by the Tax Commissioner to be necessary to determine the base amount of production and the net increase in state severance tax payable attributable to the qualified investment property placed in service or use at the coal mining operation.
5.3. When a taxpayer claiming a rebate under W. Va. Code §11-13EE-1, et seq., is a member of an affiliated or controlled group, as the case may be, that operates more than one coal mine in this state, the group shall provide a schedule with its annual severance tax return filed under W. Va. Code §11-13A-1, et seq., for the taxable year that shows for each coal mine operated in this state by the affiliated or controlled group, as the case may be, or any member thereof, the number of tons of coal produced at each mine, the gross value of the coal produced at each mine during the taxable year for which rebate is sought, the aggregate total number of full-time employees, and such other information deemed by the Tax Commissioner to be necessary to determine the base production amount and the net increase in state severance tax and severance tax paid, as well as employment levels, attributable to the qualified investment property placed in service or use at the coal mining operation.
5.4. When a taxpayer claims a coal severance tax rebate under W. Va. Code §11-13EE-1, et seq., the information required by this section heading must be updated and provided for each year the taxpayer applies for a rebate carry forward payment.
W. Va. Code R. § 110-21F-6 Determining the qualified investment
6.1. In order to be eligible for the coal severance tax rebate, a qualified investment must be made that results in increased production of coal and increased workforce.
6.2. The capital investment must be in new machinery or new equipment, repairs or refurbishment of machinery or equipment that his capitalized for federal income tax purposes, or infrastructure improvements to real property. A qualified investment must be in tangible personal property and can only be made in one of the following, although multiple qualified investments can be made at the same mine. This list is inclusive.
6.2.1. New machinery used directly in the production of coal that is depreciable, or amortizable, for federal income tax purposes and has a useful life for federal income tax purposes of five or more years when it is placed in service or use in this state; or
6.2.2. Refurbished or rebuilt machinery or equipment used directly in the production of coal that is depreciable, or amortizable, for federal income tax purposes and has a useful life for federal income tax purposes of five or more years when it is placed in service or use in this state; or
6.2.3. Improvements to real property used directly in the production of coal that is depreciable, or amortizable, for federal income tax purposes and has a useful life for federal income tax purposes of five or more years when it is placed in service or use in this state.
6.2.4. Repair or refurbishment costs to tangible personal property directly used in the production of coal that are incurred on or after July 1, 2019, which are capitalized for federal income tax purposes.
6.3 The capital investment must be directly used in the production of coal.
6.3.1 The qualified investment must be a capital asset within the meaning of I.R.C. §1221.
6.3.2 The property must have a useful life for federal income tax purposes of five or more years when it is placed into service in this state.
6.3.3 Depreciation, or amortization in lieu of depreciation, must be allowable for federal income tax purposes with respect to the tangible personal property for the taxable year in which the property is placed in service or use by the taxpayer.
6.3.4. The first use of the qualified investment property by anyone in this state must be by the taxpayer when making the qualified investment that results in taxpayer’s increased coal production and increased workforce.
6.4. The following are not qualified investments. This list is merely illustrative and does not include every investment that is not eligible for the coal severance tax rebate.
6.4.1. Real property, including land, mineral rights, a coal mine, or an expansion of the geographical boundaries of a pre-existing mine.
6.4.2. Used property.
6.4.3. Intangible personal property.
6.4.4. Machinery and equipment owned or leased by the taxpayer for which an economic, industrial, or other type of credit was taken or is claimed under any article of chapter 11 of the W. Va. Code.
6.4.5. Repair costs, including the cost of materials used in the repair, do not qualify as qualified investments unless for federal income tax purposes they are required to be capitalized and not expensed.
6.4.6. Motor vehicles licensed by the West Virginia Division of Motor Vehicles or any other state authority with jurisdiction to license on-road vehicles.
6.4.7. Airplanes or helicopters.
6.4.8. Off-premise transportation equipment.
6.4.9. Machinery or equipment that is acquired incidental to the purchase of the stock or assets of the seller.
6.5. The qualifying investment must be directly used by the taxpayer or its successor in accordance with section heading 9 of this rule in the production of coal as defined in W. Va. Code §11-13EE-2(b)(13) in this state for at least five years after it is placed in service or use in this state. When the property is used for less than five years, a recapture tax may apply. See W. Va. Code §11-13EE-11 and section heading 13 of this rule.
6.6. For purposes of this rebate, “leased” property is treated like “purchased” property provided the primary term of the lease is for at least five years and the lessee may take depreciation, or amortization in lieu thereof, for federal income tax purposes and the first use of the leased property by anyone is the current lessee.
W. Va. Code R. § 110-21F-7 Application for rebate required
7.1. Application for rebate required. -- Notwithstanding any provision of W. Va. Code §11-13EE-1, et seq., to the contrary, no rebate shall be paid under W. Va. Code §11-13EE-1, et seq., for any qualified investment property placed in service or use at a mine site until the person asserting a claim for the allowance of rebate under W. Va. Code §11-13EE-1, et seq., makes written application to the Tax Commissioner for allowance of rebate as provided in W. Va. Code §11-13EE-7 and this rule. The application for rebate must be filed using MYTAXES, which is available at the Tax Department’s webpage.
7.2. Due date and contents of application. -- An application for rebate shall be filed, in the form prescribed by the Tax Commissioner, no later than the last day for filing the annual severance tax return under W. Va. Code §11-13A-1, et seq., determined by including any authorized extension of time for filing the return, for the taxable year in which the qualified investment property to which the rebate relates is placed in service or use and all information required by the form is provided.
7.3. Separate application required for each taxable year in which qualified investment property is placed in service or use. -- A separate application for rebate is required for each taxable year during which the taxpayer places a new qualified investment into service or use in this state.
7.4. When amended return filed. -- When the taxpayer files an amended severance tax return for a tax year for which a rebate was allowed, or a rebate carry forward was allowed, the taxpayer must file an amended application for rebate, or an amended application for rebate carried forward, and provide the information required by the Tax Commissioner.
7.5. The Tax Commissioner will issue a form 1099 showing the amount of the Coal Severance Tax Rebate paid to a taxpayer during a taxable year.
7.6. Rebate carry forward. -- When the amount of rebate claimed exceeds 80 percent of the additional state severance tax payable, the unused portion of the rebate amount may be carried forward and rebated by the Tax Commissioner after severance taxes due in subsequent years are paid and the taxpayer files a claim for the rebate carry forward amount, or a portion thereof, and provides the information required by the Tax Commissioner.
7.6.1. In order for a rebate carry forward to be allowed, the qualified investment property that is the basis of the rebate must result in an increase in the number of tons of coal produced in the rebate carry forward year from the base year as well as an increase in the taxpayer’s workforce.
7.6.2. There must also be an increase in the state portion of the severance taxes paid. The rebate paid in any year may not exceed 80 percent of the additional state portion of severance taxes payable, before credit for payment of the minimum severance tax, that is attributable to the increase in coal production. This provision also applies in cases where the taxpayer is claiming rebate as well as rebate carry forward. When there are two or more base period amounts at issue, the highest will be used to determine the increase in severance tax paid.
7.6.3. When the taxpayer operates more than one mine in West Virginia, the production from all mines is considered when determining whether there is an increase in the taxpayer’s production of coal due to placing qualified investment property into service or use from the base year. Additionally, when the taxpayer is a member of a controlled or affiliated group that has other members that produce coal in West Virginia, tons of coal produced by all members of the controlled or affiliated group, including the taxpayer, are used to determine whether the qualified investment property has resulted in an increase in the number of tons of coal produced from the base period determination.
7.6.4. The number of full-time equivalent employees must also increase in order to claim carry forward rebate in accordance with section heading 3.
7.6.5. However, the rebate amount cannot be carried forward for a period that exceeds 10 years from the date the qualified investment property is first placed in service or use in this state by the taxpayer applying for the rebate.
7.7. Application for rebate carried forward. -- When an eligible taxpayer carries forward unused rebate, and then seeks to claim the rebate carried forward, an application for rebate carried forward shall be filed, in the form prescribed by the Tax Commissioner, no later than the last day for filing the severance tax return under W. Va. Code §11-13A-1, et seq., determined by including any authorized extension of time for filing the return for that taxable year. Rebate carried forward may not be claimed as a credit against severance taxes on any periodic estimate of severance tax liability or on the annual severance tax return.
7.8. Failure to make timely application. -- The failure to timely apply for the rebate results in the forfeiture of 25 percent of the rebate amount otherwise allowable under W. Va. Code §11-13EE-1, et seq., for the taxable year. This 25 percent penalty applies each year until the application is filed.
7.8.1. The late filing of the required application does not cure the failure to timely file the application and the 25 percent penalty still applies.
7.8.2. Due to the retroactive application of these rules due to changes made by the Legislature during the 2021 regular session, the failure to make timely application will not apply to rebate applications due on January 31, 2021. Instead, those applications are due 60 days after the effective date of this rule. § 110-21F- 8. Records Required for capital investment property.
8.1. Records required. -- Every taxpayer who claims a rebate pursuant to W. Va. Code §11-13EE-1, et seq., and this rule shall maintain adequate records establishing the following facts for each item of qualified investment property:
8.1.1. The property’s identity;
8.1.2. The property’s actual cost, or reasonably determined cost in the absence of actual cost;
8.1.3. Whether the machinery or equipment are new or refurbished property as defined in subsection 2.2.23 of this rule;
8.1.4. The property’s useful life for federal income tax purposes;
8.1.5. The month and taxable year in which the property was placed in service or use;
8.1.6. The amount of rebate claimed; and
8.1.7. The date the property was disposed of, or otherwise ceased to be used at the mine or coal preparation and processing plant at which it was first placed in service or use.
8.2. Burden of proof. -- The burden of proof is on the taxpayer to establish by clear and convincing evidence that the taxpayer is entitled to the benefits allowed by W. Va. Code §11-13EE-1, et seq.
8.3. A taxpayer who does not keep the records required by this rule for identification of the qualified investment property is subject to the following rules:
8.3.1. A taxpayer is treated as having disposed of, during the taxable year, any qualified investment property that the taxpayer cannot establish was still in use at the mine or coal preparation and processing plant at which it was first placed in use in this state, at the end of that taxable year.
8.3.2. If a taxpayer cannot establish when qualified investment property was placed in service or use for purposes of claiming this rebate, the taxpayer is treated as having placed the property in service or use in the most recent taxable year in which similar property was placed in service or use at the mine or coal preparation and processing plant.
8.4. A taxpayer placing qualified investment property in service or use at a coal mining operation in this state is required to keep the property in service or use for five years after the property is placed in service or use at that coal mining operation. If in any year the taxpayer cannot establish that qualified investment property is still in service or use at the coal mining operation at which it was first placed in service or use and used to qualify for the rebate under W. Va. Code §11-13EE-1, et seq., and this rule, the property will be treated as having been taken out of service during that taxable year and the recapture tax may apply.
8.5. Recapture tax. -- Failure to maintain adequate records may result in imposition of the recapture tax imposed in W. Va. Code §11-13EE-11.
W. Va. Code R. § 110-21F-9 Transfer of qualified investment property to successors
9.1. Mere change in form of business. -- Qualified investment property may not be treated as disposed of under W. Va. Code §11-13EE-9 by reason of a mere change in the form of conducting the business as long as the qualified investment property is retained in the successor business at the coal mining operation at which it was first placed in service or use and used to qualify for the rebate under W. Va. Code §11-13EE-1, et. seq., and the transferor business retains a controlling interest in the successor business. In this event, the successor business is allowed to claim the remaining amount of rebate still available with respect to the qualified investment property transferred, and the transferor business may not be required to redetermine the amount of rebate allowed in earlier years.
9.2. Transfer or sale to successor. -- Qualified investment property is not treated as disposed of under W. Va. Code §11-13EE-11 by reason of any transfer or sale to a successor business provided the successor business continues to operate the qualified investment property at the mine or coal preparation and processing facility in this state at which the qualified investment property was first placed in service or use. Upon transfer or sale, the successor shall acquire the amount of rebate, if any, that remains available under W. Va. Code §11-13EE-1, et seq., and the transferor business is not required to redetermine the amount of rebate allowed in earlier years.
9.3. Reporting transaction. -- When there is a change in the form of the business, or there is a transfer of the business to a successor, the business that claimed the rebate must notify the Tax Commissioner of the change in the form of the business, or the transfer of the business to a successor, within 30 calendar days after the transfer or change in form and provide the information required by the Tax Commissioner regarding the event.
W. Va. Code R. § 110-21F-10 Rebate carry back, carry forward, and transfer
10.1. No rebate allowable under W. Va. Code §11-13EE-1, et seq. for qualified investment property placed in service or use may be carried back to a taxable year before the taxable year in which the qualified investment property is placed in service or use; unused severance tax rebate may only be carried forward.
10.2. When the amount of rebate allowable exceeds 80 percent of the state portion of the additional severance tax payable on the increased production at the mine where the qualified investment is placed in service or use during the taxable year for which the application for rebate is submitted, then the unused portion of the rebate amount may be claimed as rebate in subsequent taxable years by filing a claim for unused rebate with the Tax Commissioner no later than the due date of the annual severance tax return for the carried forward taxable year, determined with regard to any authorized extension of time for filing the annual return. Under no circumstances can the unused rebate be claimed after the expiration of the tenth consecutive tax year after the qualified investment giving rise to the rebate is placed in service or use.
10.3. The allowable rebate can only be used to recover the state portion of severance tax payable attributable to coal produced at the coal mining operation at which the qualified investment property was first placed in service or use. The amount of severance tax subject to the remainder rebate each year is determined by comparing (1) the amount of the state portion of severance tax payable for the taxable year in which rebate carry forward is sought (before credits such as the credit for payment of the minimum severance tax) on the increase in coal production at the mine where the qualified investment was placed in service or use, with (2) the amount of the state portion of severance tax imposed by W. Va. Code §11-13A-3(a) paid during for the base production period, as established in accordance with the provisions of W. Va. Code §11-13EE-3 and section heading 3 of this rule.
10.3.1. The rebate amount carried forward can only be applied against 80 percent of the state portion of the increased severance tax payable for the taxable year to which the rebate amount is carried forward that is attributable to the qualified investment property.
10.3.2. Any rebate remaining after the tenth consecutive year following the taxable year in which the qualified investment property is placed in service or use is forfeited.
10.3.3. The amount of rebate carried forward may be paid only when coal production at the mine in the carry forward year continues to be greater than the base production amount.
10.3.4. Under no circumstances may the rebate be treated as refundable credit.
10.4. When the taxpayer operates more than one coal mine in West Virginia, and when the taxpayer is a member of a controlled or affiliated group that operates more than one coal mine in West Virginia, the increase in coal production is determined by comparing:
10.4.1. The tons of coal produced at all mines in this state operated by the taxpayer, or by all mines operated in this state by all members of the taxpayer’s controlled or affiliated group, including the taxpayer, as appropriate, for the taxable year for which rebate is sought with tons of coal produced by all such mines in the base production year; and
10.4.2. Tons of coal produced at the mine at which the qualified investment property was placed in service or use during the taxable year for which rebate is sought with the tons of coal produced at that mine during the base production year.
10.4.3. There must be an increase in the total tons of coal produced at all mines operated in this state by the taxpayer, or by all mines operated in this state by all members of the taxpayer’s affiliated or controlled group, including the taxpayer, equal to or greater than the increase in the tons of coal produced at the mine at which the qualified investment property was placed in service or use. There must also be a corresponding increase in the number of full-time equivalent employees in accordance with section heading 3.
10.5. The provisions limiting the rebate set forth in this rule also apply when the taxpayer files a claim for application of an amount of rebate carried forward.
10.6. No provision in W. Va. Code §11-13EE-1, et seq., allows transfer of the coal severance tax rebate, including but not limited to transfer between members of a controlled or affiliated group, in the absence of a transfer of the qualified investment property to a successor as provided in this rule.
W. Va. Code R. § 110-21F-11 Suspension of payment of rebate
11.1. No rebate may be paid under W. Va. Code §11-13EE-1, et seq., when the taxpayer, or any member of the taxpayer’s controlled or affiliated group is delinquent in the payment of severance taxes imposed pursuant to W. Va. Code §§11-12B-3 or 11-13A-3, or any local, state, or federal tax or fee, until such time as the delinquency is cured. This includes, but is not limited to:
11.1.1. West Virginia minimum severance tax on coal imposed pursuant to W. Va. Code §11-12B-1, et seq.
11.1.2. West Virginia severance taxes imposed pursuant to W. Va. Code §11-13A-1, et seq.
11.1.3. West Virginia employer withholding taxes imposed pursuant to W. Va. Code §11-21-1, et seq.
11.1.4. West Virginia consumers sales and service tax imposed pursuant to W. Va. Code §11-15-1, et seq., use taxes imposed pursuant to W. Va. Code §11-15A-1, et seq., and municipal sales and use tax administered, collected and enforced by the Tax Commissioner.
11.1.5. West Virginia income taxes imposed pursuant to W. Va. Code §11-21-1, et seq., or §11-24-1, et seq.
11.1.6. Any other tax imposed pursuant to chapter 11 of the West Virginia Code.
11.1.7. West Virginia unemployment taxes imposed pursuant to W. Va. Code §21A-1-1, et seq.
11.1.8. Ad valorem property taxes levied on the real or tangible personal property of the eligible taxpayer and members of the taxpayer’s affiliated or controlled group, if applicable.
11.1.9. The special reclamation tax imposed pursuant to W. Va. Code §22-3-11.
11.1.10. The special tax on coal imposed pursuant to W. Va. Code §22-3-32 and §22-3-32a.
11.1.11. Any fees imposed by the Secretary of the West Virginia Department of Environmental Protection, or any agency thereof.
11.1.12. Federal taxes including, but not limited to, federal income taxes, employer withholding taxes, social security taxes and federal excise taxes on coal.
11.1.13. Federal reclamation fee.
11.2. Affidavit. -- When a claim for rebate is filed, including a claim for rebate carried forward, the taxpayer must attach to the claim a sworn affidavit signed by the taxpayer attesting that neither it nor any member of its controlled or affiliated group, as defined in section heading 2 of this rule, is delinquent in the payment of any tax or fee to (1) the federal government, (2) the State of West Virginia or any agency thereof, or (3) any local government agency, including but not limited to, ad valorem property taxes.
11.2.1. When the taxpayer is a corporation, the affidavit must be signed by an officer of the corporation, or its chief executive officer.
11.2.2. When the taxpayer is a limited liability company that is member managed, the affidavit must be signed by the member manager of the limited liability company.
11.2.3. When the taxpayer is a limited liability company that is not member managed, or is a partnership, limited partnership, joint venture or other similar type entity, the affidavit must be signed by an equity owner of the entity.
11.2.4. When the taxpayer is a sole proprietor, the affidavit must be signed by its owner.
11.3. For purposes of W. Va. Code §11-13EE-6 and this rule, a taxpayer is not delinquent if the taxpayer is contesting liability for a tax or fee before the West Virginia Office of Tax Appeals, or in any court of competent jurisdiction in this state, or before the state or federal agency imposing the tax or fee, or in a federal or state court of competent jurisdiction, or is complying with the terms of any payment plan agreement administered by the Tax Commissioner for payment of the tax or fee. When this subsection applies, taxpayer shall include in, or with, the affidavit sufficient information for the Tax Commissioner to verify the accuracy of the affidavit.
11.4. When the taxpayer claiming a rebate under W. Va. Code §11-13EE-1, et seq., is a member of a controlled group, or an affiliated group, no rebate allowable under W. Va. Code §11-13EE-1, et seq., to the taxpayer may be claimed, in whole or in part, by another member of the group.
W. Va. Code R. § 110-21F-12 Forfeiture of coal severance tax rebate
12.1. The failure to timely apply for the rebate results in the forfeiture of 25 percent of the rebate amount otherwise allowable under W. Va. Code §11-13EE-1, et seq. This 25 percent forfeiture penalty applies each year until the properly completed application for rebate is filed with the State Tax Commissioner.
12.2. Exceptions to forfeiture are set forth below.
12.2.1. The qualified investment property may not be treated as disposed of under W. Va. Code §11-13EE-9 by reason of a mere change in the form of conducting the business, as long as the qualified investment property continues to be used at the coal mining operation at which it was originally placed in service or use by the transferor business in this state, and the transferor business retains a controlling interest in the successor business. In order to avoid forfeiture, the successor business must continue to operate the same qualified investment property at the coal mining operation in this state at which the qualified investment property was first placed in service or use subject to the requirements in W. Va. Code §11-13EE-1, et seq., and this rule regarding use and duration.
12.2.1.a. Under the scenario described above, the successor business can claim the rebate amount of credit still available with respect to the qualified investment property that was transferred.
12.2.1.b. Under the scenario described above, the transferor business is not required to redetermine the amount of rebate allowed in earlier years.
12.2.2. Qualified investment property is not treated as disposed of under W. Va. Code §11-13EE-11 by reason of any transfer or sale to a successor business which continues to operate the same qualified investment property at the coal mining operation in this state at which the qualified investment property was first placed in service or use subject to the requirements in W. Va. Code §11-13EE-1, et seq., and this rule regarding use and duration.
12.2.2.a. Upon transfer or sale of qualified investment property and the coal mining operation, the successor shall acquire the amount of rebate, if any, that remains available under W. Va. Code §11-13EE-1, et seq.
12.2.2.b. Upon transfer or sale of qualified investment property and the coal mining operation, the transferor business is not required to redetermine the amount of rebate allowed in earlier years.
12.3. Notice of transfer to Tax Commissioner. -- Within 30 days after transfer of qualified investment property and the coal mining operation to a successor business, the transferor shall provide notice to the Tax Commissioner of the transfer and provide such information about the transfer that the Tax Commissioner may require.
W. Va. Code R. § 110-21F-13 Recapture of rebate; recapture tax imposed
13.1. When recapture tax applies. --
13.1.1. Any person who places qualified investment property in service or use for purposes of this rebate and who fails to use the qualified investment property or any portion thereof for at least five years in the production of coal in this state at the coal mining operation where it was placed in service or use shall pay the recapture tax imposed by W. Va. Code §11-13EE-11(b). No temporary downtime can exceed 30 consecutive days.
13.1.2. This section does not apply when section heading 9 of this rule, relating to transfer of qualified investment property, applies. However, the successor(s) may be subject to a recapture tax in the event they prematurely dispose of the qualified investment property or any portion thereof.
13.1.3. When the severance tax return filed by the taxpayer, or taxpayer’s controlled or affiliated group, as applicable, is audited and the amount of severance tax rebate allowable is redetermined, resulting in less rebate being allowable, then if the rebate amount has already been paid by the Tax Commissioner, the recapture tax will be assessed to recover the amount of rebate that was erroneously paid.
13.1.4. When the taxpayer’s books and records, or the books and records of taxpayer’s controlled or affiliated group, as applicable, are audited and the amount of severance tax rebate allowable is redetermined, resulting in less rebate being allowable, then if the rebate amount has already been paid by the Tax Commissioner, the recapture tax will be assessed to recover the amount of rebate that was erroneously paid.
13.2. Recapture tax imposed. -- If the taxpayer prematurely removes from service qualified investment property at the coal mining operation in this state where it was first placed in service or use prior to its fifth anniversary after being placed in service or use, the Tax Commissioner shall recapture the amount of rebate claimed under W. Va. Code §11-13EE-1, et seq., for the current taxable year, and all preceding taxable years, attributable to qualified investment property that was prematurely removed from service at the coal mining operation in this state at which the qualified investment property was first placed in service or use.
13.3. Payment of recapture tax.
13.3.1. The recapture tax is due and payable on the day the taxpayer's annual severance tax return is due under W. Va. Code §11-13A-1, et seq., including any authorized extension of time for filing the return, for the taxable year in which there was a premature removal of qualified investment property from service or use at the coal mining operation at which it was first placed in service or use and qualified for the rebate allowed by W. Va. Code §11-13EE-1, et seq.
13.3.2. The recapture tax shall be paid by the taxpayer subject to the recapture tax. However, if the taxpayer does not pay the recapture tax and the taxpayer is a partnership, limited liability company, an S corporation, or other flow-through entity, for federal income tax purposes, then the recapture tax shall be paid by those persons who are equity owners of the partnership, limited liability company, S corporation, or other flow-through entity, in the taxable year in which recapture tax is imposed under W. Va. Code §11-13EE-11. The equity owners are liable for their respective proportionate shares of the recapture tax, determined in accordance with how income, gain, loss, deductions and other items are distributable for the taxable year among the equity owners.
Series 21G Income Tax Paid at the Entity Level by Electing Pass-Through Entities
W. Va. Code R. § 110-21G-1 General
1.1. Scope. -- This rule provides requirements, procedures and limitations for filing and payment of income tax by electing pass-through entities and assertion of credits and deductions in accordance with W. Va. Code §11-21-3a.
1.2. Authority. -- W. Va. Code §11-21-3a(p).
1.3. Filing date. -- April 30, 2024.
1.4. Effective date. -- April 30, 2024.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect after August 1, 2029.
W. Va. Code R. § 110-21G-2 Definitions
2.1. General Rule. -- Unless a specific definition is provided elsewhere in this rule, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §§11-10-1 et seq., 11-21-1 et seq., and 11-24-1 et seq.
2.2. Terms defined.
2.2.1. The definitions set forth in W.Va. Code §11-21-3a are incorporated here by reference.
2.2.2. “Owners of qualifying pass-through entity” or “owners” means the partners of a partnership or other pass-through entity, or shareholders of an S-corporation.
2.2.3. “Partners” means a person that holds an interest directly or indirectly in a partnership or other pass-through entity. For the purposes of this rule, “person” includes, but is not limited to, any individual, firm, partnership, limited partnership, co-partnership, limited liability company, other pass-through entity, joint venture, association, corporation, municipal corporation, organization, receiver, estate, trust, guardian, executor, administrator, and any other group or combination acting as a unit.
2.2.4. “Reconciliation tax credit” means a credit that owners of an electing pass-through entity may take against their West Virginia personal income tax liability for income taxes paid by the electing pass-through entity.
W. Va. Code R. § 110-21G-3 Introduction
W. Va. Code §11-21-3a authorizes an electing pass-through entity (“electing PTE”) to make an annual election to pay an elective income tax at the entity level, at a rate equal to the top marginal personal income tax rate on individuals. A nonrefundable income tax credit, subject to a 5-year carryforward, is authorized for owners of the electing PTE for West Virginia income tax paid by the electing PTE. The electing PTE tax is payable in addition to any other taxes imposed on the entity, including sales and use taxes, withholding taxes with respect to employees, property tax, and other local or municipal taxes.
W. Va. Code R. § 110-21G-4 Owner’s Reconciliation Tax Credit for Tax Paid at the Entity Level
4.1. Owner’s reconciliation tax credit -- Subject to the requirements and limitations of W. Va. Code §11-21-3a the owner of an electing PTE may apply a reconciliation tax credit against the owner’s personal income tax liability under W. Va. Code §11-21-1 et seq., in the amount of the owner’s proportionate share of the tax paid under W. Va. Code §11-21-1 et seq., by the electing PTE for the taxable year.
4.1.1. An owner of an electing PTE may claim a reconciliation tax credit against the owner’s West Virginia individual income tax or fiduciary income tax.
4.1.2. A trust (other than a trust that is disregarded for income tax purposes) that is an owner of an electing Subchapter S corporation may claim the reconciliation tax credit that it receives on its fiduciary income tax return or distribute any portion of the reconciliation tax credit to its beneficiaries as may be appropriate: Provided, That no credit may be claimed by both a trust and a beneficiary of the trust.
4.2. Timing -- The reconciliation tax credit for tax paid by the electing PTE may only be claimed in the taxable year for which the tax was paid by the electing PTE. If the reconciliation tax credit exceeds the owner’s tax liability for the taxable year, the excess credit may be carried forward by the owner for not more than five consecutive tax years.
4.2.1. Eligible taxpayers must wait until the electing PTE makes the election and pays the tax at the entity level before claiming the reconciliation tax credit.
4.2.2. If the electing PTE does not make the election and pay the tax until after the due date for the owner’s return, the owner may (1) make any necessary extension payments and file the return during the extension period, or (2) file the original return without claiming the credit and then file an amended tax return once the election has been made and the tax paid by the electing PTE.
4.3. Resident owners’ tax credit for tax paid to another state -- Subject to the requirements and limitations of W. Va. Code §11-21-20, individual resident owners of the electing PTE may claim a credit for income taxes paid by the electing PTE to other states for the same taxable year under laws substantially similar to the West Virginia pass-through entity income tax, or directly paid by a West Virginia resident pass-through entity owner, on pass-through income taxed by another state, that is also subject to West Virginia personal income tax, which would be taxed by both the other state and the State of West Virginia but for the W. Va. Code §11-21-20 tax credit. Any such credit may also be included as a credit against the PTE tax liability as determined by such individual resident owner's includable income in any PTE tax liability pursuant to Section 7.2.1 to the extent paid on behalf of such owner through non-resident withholding, a composite return, or a similar PTE tax in such other state.
W. Va. Code R. § 110-21G-5 Making the Election
5.1. A pass-through entity has the option to make the election to pay West Virginia income tax directly under W. Va. Code §11-21-3a for the taxable year. The election can be made as follows:
5.1.1. For Taxable Years 2023 and after, by timely filing a form, as directed by the Tax Commissioner, for electing to pay the tax at an entity level.
5.1.2. An electing PTE must also file a form for quarterly estimated payments of tax for the taxable year and submit timely quarterly estimated payments of tax due with that form.
5.1.3. If, as a result of a federal partnership audit, a partnership elects to be taxed at the entity level for federal tax purposes, that federal election will also act as an election to be taxed at the entity level for West Virginia state income tax purposes.
5.2. Electing PTEs may obtain an extension of time to file; but may only do so pursuant to timely payment of tax for the taxable year.
5.3. Electing PTEs must file an annual tax return, as directed by the Tax Commissioner, on or before the due date, or extended due date, for the taxable year.
5.4. Once the form for electing to pay the tax at an entity level is filed, the election is binding for that taxable year.
5.5. Each electing PTE may decide how to obtain consent from its owners. The election is binding on all the owners for the taxable year once the election is made by the pass-through entity and filed with the Tax Division. Once the electing PTE has filed its election with the Tax Division, an owner may not “opt out” of the pass-through entity’s election for that particular taxable year. An owner, officer, or employee of the pass-through entity who is authorized to act on behalf of the pass-through entity in tax matters must sign the tax return. By signing the return, the signer declares that they are the authorized representative of the pass-through entity. Because the tax return must be filed electronically, the return must be signed using the electronic signature procedures established by the Tax Division.
W. Va. Code R. § 110-21G-6 Pass-Through Entity Qualification to Make the Election
Generally, a pass-through entity qualifies to make the election only if it is taxable under W. Va. Code §11-21-1 et seq., and not taxable under W. Va. Code §11-24-1 et seq. Any pass-through entity that is treated as a disregarded entity for federal income tax purposes may not elect to be taxed under W. Va. Code §11-21-3a.
W. Va. Code R. § 110-21G-7 Taxable Income
7.1. West Virginia Taxable Income -- An electing PTE’s West Virginia taxable income is the total of: (1) all resident owner’s share of the electing PTE’s income or loss; (2) all nonresident owner’s share of pass-through entity income or loss, other than apportionable income, multiplied by the pass-through entity’s apportionment percentage; and (3) each nonresident owner’s share of income allocable to West Virginia.
7.1.1. The electing PTE must determine the status of each owner as a resident or nonresident of West Virginia.
7.1.2. Individual owners of a pass-through entity are West Virginia residents if they meet the definition of “resident individual” specified in W. Va. Code §11-21-7.
7.1.3. Estates or trusts that are owners of a pass-through entity are West Virginia residents if they meet the definition of “resident estate or trust” specified in W. Va. Code §11-21-7.
7.1.4. Individual owners of a pass-through entity are nonresidents of West Virginia if they meet the definition of “nonresident individual” specified in W. Va. Code §11-21-7.
7.1.5. Estates or trusts that are owners of a pass-through entity are nonresidents of West Virginia if they meet the definition of “nonresident estate or trust” specified in W. Va. Code §11-21-7.
7.1.6. For the purposes of the electing PTE tax computation, owners may not be classified as part-year residents. Part-year residents will be calculated as nonresidents on the electing PTE return.
7.2. Computation For Resident Owners. --
7.2.1. An electing PTE’s calculation of its pass-through entity taxable income must include all items of income, gain, loss, and deduction, to the extent they would flow through and be included in the income of resident owners that are taxable under W. Va. Code §11-21-1 et seq.
7.2.2. Pass-through entity taxable income includes each resident owner's share of the electing PTE’s income or loss, subject to increasing and decreasing modifications directly applicable to the electing PTE’s income or loss that is attributable to West Virginia. Modifications subject to the provisions of W. Va. Code §11-21-17 and W. Va. Code §11-21-17a shall be made in accordance with the requirements of those sections as applicable.
7.2.3. The West Virginia personal exemption specified in W. Va. Code §11-21-16 may not be applied by the electing PTE in determining electing PTE taxable income.
7.2.4. West Virginia residents are taxable on all of their pass-through entity income regardless of the pass-through entity’s allocation and apportionment. However, subject to the requirements and limitations of W. Va. Code §11-21-20, owners of the electing PTE may claim a credit for income taxes paid to another state. Any such credit may also be used as a credit against the PTE’s tax liability as determined by such individual resident owner’s includable income in any PTE tax liability pursuant to Section 7.2.1 to the extent paid on behalf of such owner through nonresident withholding, a composite return, or a similar PTE in such other state.
7.2.5. In determining West Virginia taxable income, an electing PTE must add to its West Virginia taxable income any state and local taxes to the extent that the electing PTE deducted such taxes in determining the electing PTE’s federal taxable income.
7.3. Computation For Nonresident Owners.
7.3.1. A pass-through entity’s taxable income includes each nonresident owner's share of the electing PTE’s income or loss, subject to increasing and decreasing modifications directly applicable to the pass-through entity’s income or loss attributable to West Virginia. Modifications subject to the provisions of W. Va. Code §11-21-17 and W. Va. Code §11-21-17a shall be made in accordance with the requirements of those sections as applicable.
7.3.2. The West Virginia personal exemption specified in W. Va. Code §11-21-16 may not be applied by the electing PTE in determining the electing PTE’s taxable income.
7.3.3. In determining the share of pass-through entity income or loss that is attributable to West Virginia, the electing PTE adds each nonresident owner’s share of pass-through entity income or loss other than dividend income (“apportionable income”), after any increasing or decreasing modifications, multiplied by the pass-through entity’s apportionment percentage; and each nonresident owner’s share of dividend income (“allocable income”) if the pass-through entity is commercially domiciled in West Virginia.
7.3.4. An electing PTE’s calculation of its pass-through entity taxable income must include all items of income, gain, loss, and deduction, to the extent they would flow through and be included in the income of owners that are taxable under W. Va. Code §11-21-1 et seq.
7.3.5. The electing PTE can exclude income from the calculation of pass-through entity taxable income to the extent that the electing PTE can establish that the amount is properly allocable to an owner who is not subject to tax on such amount under W. Va. Code §11-21-1 et seq. Two examples are: (1) income that is not U.S. sourced and is allocable to nonresident alien partners and, therefore, not included in federal adjusted gross income under the Internal Revenue Code; and (2) retirement income of former partners that is exempt from nonresident state taxation under 4 U.S.C § 114.
7.3.6. In determining West Virginia taxable income, an electing PTE must add to its West Virginia taxable income any state and local taxes to the extent that the electing PTE deducted such taxes in determining the electing PTE’s federal taxable income.
W. Va. Code R. § 110-21G-8 Computing Electing Pass-Through Entity Tax
8.1. An electing PTE calculates its West Virginia income tax by multiplying its West Virginia taxable income by a tax rate equal to the top marginal personal income tax rate on individuals.
8.2. Economic development tax credits and other credits allowed by law to be passed through to the owners of a pass-through entity may be applied against the electing PTE tax. These credits include, but are not limited to:
Economic Opportunity Tax Credit (W.Va. Code §11-13Q-1 et seq.);
High Technology Manufacturers Credit (W.Va. Code §11-13Q-10a);
Jobs Creation Tax Credit (W.Va. Code §11-13Q-22);
Small Business Property Tax Adjustment Tax Credit (a refundable credit) (W.Va. Code §11-13MM-5);
Downstream Natural Gas Manufacturing Investment Tax Credit (W. Va. Code §11-13GG-1 et seq.);
Natural Gas Liquids Property Tax Adjustment Credit (W. Va. Code §11-13HH-1 et seq.);
Post-Coal Mine Site Business Credit (W. Va. Code §11-28-1 et seq.);
Environmental Agricultural Equipment Credit (W. Va. Code §11-13K-1 et seq.);
Military Incentive Credit (Formerly Veterans Employment Credit) (W. Va. Code §11-21-42);
High-Wage Growth Business Tax Credit (W. Va. Code §11-13II-1 et seq.);
Neighborhood Investment Program Credit (W. Va. Code §11-13J-1 et seq.);
Historic Rehabilitated Buildings Investment Credit (W. Va. Code §11-21-8a);
Credit For Qualified Rehabilitated Residential Building Investment (W. Va. Code §11-21-8a);
Apprenticeship Training Tax Credit (W. Va. Code §11-13W-1 et seq.);
West Virginia Farm To-Food Bank Tax Credit (W. Va. Code §11-13DD-1 et seq.);
Tax Credit For Donation Or Sale Of Vehicle (W. Va. Code §11-13FF-1 et seq.);
Professional Services Destination Facility Tax Credit (part of the Tourism Development Tax Credit) (W. Va. Code §5B-2e-1 et seq.);
Small Arms and Ammunition Manufacturing Facility Tax Credit For Federal Excise Tax Paid (W. Va. Code §11-13KK-1 et seq.);
High-Wage Growth Business Tax Credit (a refundable credit) (W. Va. Code §11-13II-1 et seq.); and The West Virginia Film Industry Investment Act Credit (W. Va. Code §11-13X-1 et seq.);
8.3. Treatment of the federal 26 U.S.C. § 199A deduction -- The federal income tax deduction allowable under 26 U.S.C. § 199A is not an allowable adjustment in determining the tax liability of an electing PTE. The federal 26 U.S.C. § 199A deduction is a “below the line” federal income tax deduction. It does not reduce a Taxpayer's federal adjusted gross income. The deduction is taken after federal adjusted gross income is determined.
8.4. Treatment of depletion allowance -- The electing PTE may take a proforma depletion allowance in the amount allowable under 26 U.S.C. § 611 et seq., to be deducted by the electing PTE in determining West Virginia taxable income of the electing PTE at the entity level.
W. Va. Code R. § 110-21G-9 Filing the Annual Electing Pass-Through Entity Tax Return
9.1. Electing PTEs are required to file their returns and the accompanying schedules, and make any tax payments electronically.
9.2. Electing PTE tax returns are due by the 15th day of the third month following the close of the taxable year.
9.3. For calendar year filers, the PTE tax return is due by March 15. West Virginia allows an automatic 6-month filing extension for electing PTE. An application for extension is required and must be filed on or before the original due date of the income tax return. An extension of time to file does not extend the due date for payment of taxes. An electing PTE must pay all electing PTE tax due by the original due date for filing the return.
9.4. If the annual return is filed within the automatic extension period, but less than 100 percent of the tax liability was paid on or before the original due date, a penalty will apply. That penalty may include revocation of the election of the pass-through entity to be taxed at the entity level, with tax liabilities, penalties and interest being assessed against the owners of the pass-through entity.
9.5. When an electing PTE files an annual West Virginia income tax return reflecting an overpayment, the Tax Division will refund the overpayment of electing PTE tax to the electing PTE. Only the electing PTE is entitled to request a refund of an overpayment of electing PTE tax. Owners of the electing PTE shall not be eligible for a refund of overpaid electing PTE tax.
9.6. An electing PTE must notify its owners that the election has been made and provide its owners with information regarding the income and related deductions and the amount of the reconciliation tax credit passed through to the owner so that owners can complete their West Virginia tax returns.
9.7. The total amount of reconciliation tax credits reported by an electing entity shall not exceed the total electing PTE tax paid by the electing PTE.
W. Va. Code R. § 110-21G-10 Estimated Tax Payments
10.1. For the 2022 tax year, an electing PTE is not required to make estimated payments of tax and will not be subject to penalties or interest for not making estimated payments for that year.
10.2. For taxable years beginning on and after January 1, 2023, an electing PTE is required to make estimated payments if its tax for the taxable year can reasonably be expected to exceed $2,400.
10.3. Estimated payments for electing PTE will be based upon the requirements set forth in W. Va. Code §11-21-1 et seq. and rules promulgated pursuant thereto. Calendar year filers are required to make four quarterly installments to the Tax Division: 25 percent of the amount due by April 15, 25 percent of the amount due by June 15, 25 percent of the amount due by September 15, and 25 percent of the amount due by December 15.
10.4. Non-calendar year filers are required to make four quarterly installments to the Tax Division: 25 percent of the amount due by the 15th day of the 4th month following the beginning of its fiscal year. Subsequent installments are payable by the 15th day of the 6th month, the 15th day of the 9th month, and the 15th day of the 12th month following the beginning of its fiscal year. In case of any underpayment of estimated tax payments by an electing PTE, additions to tax, penalties and interest may be imposed in accordance with the West Virginia Tax Procedure and Administration Act.
W. Va. Code R. § 110-21G-11 Nonresident Withholding Payments and Composite Payments
Electing PTEs should not make nonresident withholding payments or payments associated with composite returns (“composite payments”). If nonresident withholding payments were made before the electing PTE made the election to be an electing PTE taxed at the entity level, the electing PTE should request the withholding payments be treated as an estimated payment, in the form and manner as directed by the Tax Commissioner, or request a refund of any such payments made.
W. Va. Code R. § 110-21G-12 Filing Requirements for Nonresident Owners of an Electing Pass-Through Entity
An electing PTE may not file a composite return on behalf of its nonresident owners. If a nonresident owner’s only West Virginia source income is through an electing PTE that fully pays the tax, that nonresident owner is not required to file a West Virginia nonresident return, but may do so at the election of the nonresident owner.
Series 21H Income Tax Credits for Property Taxes Paid
W. Va. Code R. § 110-21H-1 General
1.1. Scope. -- This legislative rule addresses implementation of the income tax credits for property taxes paid by certain taxpayers.
1.2. Authority. -- W. Va. Code §11-13MM-6.
1.3. Filing Date. -- April 28, 2026.
1.4. Effective Date. -- April 28, 2026.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect after August 1, 2031.
W. Va. Code R. § 110-21H-2 Definitions
2.1. General Rule. -- Unless a specific definition is provided in subsection 2.2 of this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §§11-10-1 et seq., 11-21-1 et seq., and 11-24-1 et seq.
2.2. Terms defined.
2.2.1. “Ad valorem property tax” means and is limited to the West Virginia ad valorem property tax.
2.2.2. “Business” means any activity taxable under W. Va. Code §11-12-1 et seq., which is engaged in by any person in this state.
2.2.3. "Disabled veteran taxpayer" means a person given an honorable discharge from any branch of the armed services of the United States and who, according to the United States Department of Veteran Affairs, is considered at least 90 percent totally and permanently disabled due solely to service-connected disabilities.
2.2.4. “Eligible motor vehicle” means a motor vehicle on which the ad valorem property tax has been paid for the taxable year by the eligible taxpayer, and which is a motor vehicle as defined in this rule.
2.2.5. “Eligible widowed spouse” means the unmarried surviving spouse of a disabled veteran taxpayer who had previously received the disabled veteran real property tax credit authorized by §11-13MM-4 of this code.
2.2.6. “Flow-through entity,” “conduit entity,” or “pass-through entity” means an S corporation, partnership, limited partnership, limited liability partnership, or limited liability company. The term “flow-through entity,” “conduit entity,” or “pass-through entity” includes a publicly traded partnership as that term is defined in section 7704 of the Internal Revenue Code that has equity securities registered with the Securities and Exchange Commission under section 12 of Title I of the Securities Exchange Act of 1934, 15 U.S.C. § 78l: Provided, That a publicly traded partnership as defined in section 7704 of the Internal Revenue Code having equity securities registered with the Securities and Exchange Commission under section 12 of Title I of the Securities Exchange Act of 1934, 15 U.S.C. § 78l, and any other person or entity that is treated as a C corporation for federal income tax purposes, shall be treated as a corporation taxable under W. Va. Code §11-24-1 et seq., for purposes of this rule.
2.2.7. "Motor Vehicle" means the following classes of vehicles defined in W. Va. Code §17A-10-1: Class A, Class B, Class G, Class H, Class T, Class V, Class X, and all-terrain vehicles and utility terrain vehicles as defined in W. Va. Code §20-15-2.
2.2.8. “Person” means and includes an individual, a trust, estate, partnership, pass-through entity, association, company, or corporation.
2.2.9. “Personal property” shall have the same meaning as in W. Va. Code §11-5-1 et seq. For the purposes of this rule, the term “personal property” shall not include a working interest in any oil, natural gas, or natural gas liquid producing property or any property of a public service company.
2.2.10. “Personal property taxes paid” means the aggregate of regular levies, excess levies and bond levies extended against personal property that are timely paid during the calendar year and determined after any application of any discount for early payment of taxes. For example, if a taxpayer receives a personal property tax assessment of $200, but pays the assessment before the due date to take advantage of a discount and so pays $195 in full satisfaction of the assessment, then the “personal property taxes paid” would be the $195 actually paid, and not the $200 assessed amount. “Personal property taxes paid” does not include any untimely ad valorem property tax paid, or any payment of delinquent ad valorem property tax, or payment of “back tax” ad valorem property taxes, or any penalty or interest for late payment of property taxes. For purposes of determining personal property taxes paid, the phrase “during the calendar year” refers to the personal income tax taxable year or the corporation net income tax taxable year, whichever applies, during which the personal property taxes were paid, and does not refer to the property tax year.
2.2.11. "Public service company" means a corporation or other business entity which delivers services considered essential to the public interest that are regulated by the applicable federal or state regulatory body, including, but not limited to, businesses furnishing electricity, natural gas, telecommunications, and water, and those transporting personal property or passengers, including, but not limited to, airlines, railroads, trucking, and bus companies, and which are centrally assessed by the state for property tax purposes.
2.2.12. “Real property taxes paid” means the aggregate of regular levies, excess levies and bond levies that are timely paid during the calendar year and determined after any application of any discount for early payment of taxes. For example, if a taxpayer receives a real property tax assessment of $2,000, but pays the assessment before the due date to take advantage of a discount and so pays $1,950 in full satisfaction of the assessment, then the “real property taxes paid” would be the $1,950 actually paid, and not the $2,000 assessed amount. “Real property taxes paid” does not include any untimely ad valorem property tax paid, or any payment of delinquent ad valorem property tax, payment of supplemental assessments, or payment of “back tax” ad valorem property taxes, or any penalty or interest for late payment of property taxes. For purposes of determining real property taxes paid, the phrase “during the calendar year” refers to the personal income tax taxable year during which the real property taxes were paid, and does not refer to the property tax year.
2.2.13. “Timely paid” means paid before October 1 of the property tax year with respect to the first installment, and paid before April 1 of the following calendar year with respect to the second installment.
W. Va. Code R. § 110-21H-3 Motor Vehicle Property Tax Adjustment Credit
3.1. Eligible taxpayers -- for purposes of the motor vehicle property tax adjustment credit, the term “eligible taxpayer” has different definitions, depending on the ownership of the vehicle.
3.1.1. Vehicles owned by the taxpayer. In the case of a vehicle that is owned by the taxpayer, an “eligible taxpayer” is any person who owns a motor vehicle for which the ad valorem property tax has been timely paid during the corporation net income tax taxable year or the personal income tax taxable year, as applicable. For purposes of this definition, ownership of a motor vehicle includes ownership and possession of a motor vehicle for which a title has been issued by the Division of Motor Vehicles to the eligible taxpayer. For purposes of this definition, ownership of a motor vehicle also includes ownership and possession of a motor vehicle, subject to a purchase financing arrangement whereby a financial institution holds a lien on the motor vehicle, or for which ultimate issuance of title by the Division of Motor Vehicles to the taxpayer, as owner of the motor vehicle, is contingent upon payment in full of the purchase price of the motor vehicle pursuant to an installment payment financing arrangement.
3.1.2. Leased vehicles. In the case of a vehicle that is subject to lease agreement between the owner of the vehicle and the operator of the vehicle, an “eligible taxpayer” is the lessor of the motor vehicle, who owns the motor vehicle for which the ad valorem property tax has been timely paid during the corporation net income tax taxable year or the personal income tax taxable year, as applicable. The lessor must pass on to the lessee the value of the tax credit asserted by the lessor by causing a decreasing in the amount of rent or lease payment payable by the lessee on the leased motor vehicle.
3.1.3. Pass-through entities. The term “eligible taxpayer” includes any owner, interest holder, partner or S corporation shareholder that derives conduit income from a pass-through entity.
3.1.4. Motor vehicle dealers. The term “eligible taxpayer” does not include any motor vehicle dealer, motor vehicle dealership, retailer or any business that sells new or used motor vehicles at the retail level, other than a lessor of motor vehicles. In circumstances where any such motor vehicle dealer, motor vehicle dealership, retailer or business that sells new or used motor vehicles at the retail level is engaged in both retail sales of motor vehicles, and leasing of motor vehicles as lessor, the tax credit authorized by this article may only be asserted by such business based upon the ad valorem property tax paid on leased motor vehicles, and only to the extent that the lessor has passed on, to the lessee, the value of the tax credit asserted by the lessor by causing a decreasing in the amount of rent or lease payment payable by the lessee on the leased motor vehicle. No credit may be asserted or applied by the business based upon ad valorem property tax paid on motor vehicle retail inventories, not actively leased to lessees. To the extent that motor vehicle retail inventories may be held as both motor vehicle retail inventories, and as motor vehicles potentially subject to lease during the taxable year, ad valorem property tax paid on such motor vehicles is excluded from eligibility for the tax credit authorized by this rule.
3.2. Amount of credit. -- The amount of the credit is the amount of West Virginia ad valorem property tax timely paid on the value of a motor vehicle owned by the eligible taxpayer during the taxpayer’s personal income tax taxable year or corporation net income tax taxable year, whichever is applicable. The payment must have been timely made, meaning that it must be received by the county sheriff on or before the due date for paying the tax. Payments made that are untimely, delinquent, or for “back taxes” are not allowed to be used for purposes of the credit.
3.3. Refundable nature of the credit. -- If the amount of the annual tax credit exceeds the amount of the applicable income tax, then the taxpayer may claim the excess amount as a refundable tax credit. A taxpayer must file a personal income tax return or corporation net income tax return to claim the refundable credit, even if the taxpayer owes no income tax for the relevant income tax year. However, any refundable tax credit amount is subject to offset, meaning that the amount refunded may be reduced by the amount of any other tax owed by the same taxpayer, pursuant to W. Va. Code §11-10-11(j).
3.4. Transfer or sale of the motor vehicle. -- When there is a sale or transfer of a motor vehicle from an eligible taxpayer to any other person or entity, the consequences are:
3.4.1. The transferor of the motor vehicle retains entitlement to the tax credit for the timely paid ad valorem property tax paid on the motor vehicle by the transferor during the transferor’s applicable income tax year.
3.4.2. If the transferee of the motor vehicle qualifies as an eligible taxpayer for purposes of the motor vehicle property tax adjustment credit, then the transferee is entitled to the tax credit for the timely paid ad valorem property tax paid by the transferee on the motor vehicle during the transferee’s applicable income tax year.
3.4.3. The transferor and transferee cannot both take the tax credit for the same taxable year.
3.5. For purposes of claiming the tax credit, the taxpayer is required to prepare and file an annual schedule in a form prescribed by the Tax Commissioner that shows: (1) the amount of personal income tax or corporation net income tax for the taxpayer’s taxable year, (2) the amount of ad valorem property tax paid on the motor vehicle during the income taxable year, and (3) the amount of credit allowed.
W. Va. Code R. § 110-21H-4 Disabled Veteran Real Property Tax Credit
4.1. Disabled veterans or an eligible widowed spouse is entitled to a tax credit against their personal income tax in the amount of the timely paid West Virginia ad valorem real property tax paid on the disabled veteran’s homestead during the personal income tax year.
4.2. For purposes of the disabled veteran real property tax credit, a “qualified disabled veteran” is both:
4.2.1. Honorably discharged from any branch of the armed services of the United States. For purposes of this requirement, the term “any branch of the armed services of the United States” means the Army, Navy, Air Force, Marine Corps and Coast Guard, the reserve components thereof, and the National Guard of the United States or the National Guard of a state or territory when members of the same have served on full-time active duty pursuant to Title 10 or Title 32 of the United States Code. To claim this credit, the taxpayer must provide documentation of honorable discharge.
4.2.2. Determined by the federal Department of Veterans Affairs to be at least 90 percent totally and permanently disabled due solely to service-connected disabilities. To claim the credit, the taxpayer must provide documentation of the determination by the Department of Veterans Affairs.
4.3. Once the taxpayer has provided documentation regarding discharge status and disability under subsections 4.2.1., and 4.2.2., the taxpayer does not need to provide that documentation for subsequent tax years unless the discharge status or disability has changed, or additional information is requested by the Tax Commissioner.
4.4. For purposes of this credit, a “qualified veteran’s homestead” is used and occupied exclusively for residential purposes by the qualified disabled veteran or an eligible widowed spouse that owns it and is Class II property as described in W.Va. Code §11-8-5. The homestead must be used as an abode, dwelling, or habitat for more than six consecutive months of the calendar year; and the property must be used only as an abode, dwelling or habitat to the exclusion of any commercial use. The requirement that the property is used as an abode, dwelling or habitat for more than six consecutive months of the calendar year means that the disabled veteran can claim only one property as their homestead during any taxable year.
4.5. Amount of credit. The amount of the credit is the amount of West Virginia ad valorem real property tax timely paid on the qualified veteran’s homestead or an eligible widowed spouse during the veteran’s personal income tax year. The payment must have been timely made, meaning that it must be received by the county sheriff on or before the due date for paying the tax. Payments made that are untimely, delinquent, or for “back taxes” are not allowed to be used for purposes of the disabled veteran real property tax credit.
4.6. Refundable nature of the credit. If the amount of the annual tax credit exceeds the amount of the qualified disabled veteran’s or an eligible widowed spouse’s income tax, then the taxpayer may claim the excess amount as a refundable tax credit. A qualified disabled veteran taxpayer or an eligible widowed spouse must file a personal income tax return to claim the refundable credit, even if the taxpayer owes no income tax for the relevant income tax year. However, any refundable tax credit amount is subject to offset, meaning that the amount refunded may be reduced by the amount of any other tax owed by the same taxpayer, pursuant to W. Va. Code §11-10-11(j).
4.7. Termination of the credit. The disabled veteran real property tax credit is terminated upon the occurrence of any of the following:
4.7.1. Death of the qualified disabled veteran owner of the property for which property taxes were paid: Provided, That an eligible widowed spouse may continue to receive the tax credit until his or her death or remarriage;
4.7.2. Sale of the qualified veteran’s homestead;
4.7.3. A determination from the Department of Veterans Affairs that the disabled veteran owner no longer qualifies; or
4.7.4. A determination by the county assessor that the property for which the tax credit was approved no longer qualifies for the tax credit.
W. Va. Code R. § 110-21H-5 Small Business Property Tax Adjustment Credit
5.1. Definitions. For the purposes of the small business property tax adjustment credit, the following terms are defined:
5.1.1. “Aggregate appraised value” means the true and actual value of all property in the state owned by the eligible taxpayer including the true and actual value of all property in the state owned by any related entity. For the purpose of this definition, all appraised property will be included into the appraised value including all real property and all personal property, including all property eligible for the credits granted under subsection 3.2 of this rule;
5.1.2. “Related entity” means:
5.1.2.a. An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof controlled by the taxpayer;
5.1.2.b. An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof that is in control of the taxpayer;
5.1.2.c. An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof controlled by an individual, corporation, partnership, affiliate, association or trust or any combination or group thereof that is in control of the taxpayer; or
5.1.2.d. A member of the same controlled group as the taxpayer.
5.1.3. For purposes of this rule, “control,” with respect to a corporation, means ownership, directly or indirectly, of stock possessing 50 percent or more of the total combined voting power of all classes of the stock of the corporation which entitles its owner to vote. “Control”, with respect to a trust, means ownership, directly or indirectly, of 50 percent or more of the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) of the United States Internal Revenue Code, as amended: Provided, That paragraph (3) of section 267(c) of the United States Internal Revenue Code shall not apply.
5.1.4. “Small business” means a business with personal property located in this state with an aggregate appraised value of $1 million or less. For the purposes of this rule, “small business” does not include any person holding a working interest in any oil, natural gas, or natural gas liquid producing property or any public service company that is centrally assessed by the state for property tax purposes.
5.2. Amount of credit. A small business is allowed a tax credit in the amount of 50 percent of the amount of West Virginia ad valorem personal property tax timely paid during its applicable income tax year, less the amount of any credit granted under subsection 3.2 of this rule. The payment must have been timely made, meaning that it must be received by the county sheriff on or before the due date for paying the tax. Payments made that are untimely, delinquent, or for “back taxes” are not allowed to be used for purposes of the small business property tax adjustment credit.
5.3. Application of credit.
5.3.1. If the small business taxpayer is subject to the corporation net income tax imposed in W. Va. Code §11-24-1 et seq., then the amount of the credit may be taken against the corporation net income tax liability of the small business for the current corporation net income tax taxable year.
5.3.2. If the small business taxpayer is (1) an electing small business corporation as defined in 26 U.S.C. § 1361, (2) a partnership, (3) a limited liability company that is treated as a partnership for federal income purposes, or (4) a sole proprietorship, then the amount of the credit may be taken against the personal income tax liability imposed under W. Va. Code §11-21-1 et seq.
5.3.3. Electing small business corporations, limited liability companies treated as partnerships for federal income tax purposes, partnerships, and other unincorporated organizations shall allocate the small business property tax adjustment credit among its members in the same manner as profits and losses are allocated for the taxable year.
5.4. Refundable nature of the credit. If the amount of the annual tax credit exceeds the amount of the applicable income tax, then the taxpayer may claim the excess amount as a refundable tax credit. A taxpayer must file a personal income tax return or corporation net income tax return to claim the refundable credit, even if the taxpayer owes no income tax for the relevant income tax year. However, any refundable tax credit amount is subject to offset, meaning that the amount refunded may be reduced by the amount of any other tax owed by the same taxpayer, pursuant to W. Va. Code §11-10-11(j).
5.5. Annual schedule. Taxpayers claiming the small business property tax adjustment credit must prepare and file with the Tax Division an annual schedule showing: (1) the aggregate appraised value of all property in the state owned by the eligible taxpayer and of any related entity, (2) the amount of the applicable income tax paid for the taxable year, (3) the amount of West Virginia ad valorem personal property tax paid during the taxable year, and (4) the amount of small business property tax adjustment credit allowed for the taxable year.
110CSR21H
Series 22 Property Transfer Tax
W. Va. Code R. § 110-22-1 General
1.1. Scope. -- These regulations establish general operating procedures for the Property Transfer Tax.
1.2. Authority. -- W. Va. Code §§11-10-5 and 11-22-5.
1.3. Filing Date. -- April 24, 2023.
1.4. Effective Date. -- April 24, 2023.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2028.
W. Va. Code R. § 110-22-2 Definitions
2.1. "Person" includes firms, associations and corporations.
2.2. "Commissioner" means the State Tax Commissioner.
2.3. “Office of the Chief Inspector” means the State Auditor’s Chief Inspection Division.
2.4. "Transaction" means the delivering, accepting or presenting for recording of a document.
2.5. "Value" means in the case of any document not a gift, the amount of the full consideration paid or to be paid, including any liens to be assumed; in the case of a gift or any other document without consideration, the actual monetary value of the property conveyed or transferred.
2.6. "Document" means any deed or any other written instrument which transfers real property, or any interest in real property, within this State from one person to another.
2.6.1. "Document" does not mean or include the following, which are, therefore, not subject to the property transfer tax, to wit:
2.6.1.1. A Will.
2.6.1.2. A deed or other written instrument which transfers real property, or any interest therein, having a value of one hundred dollars ($100) or less. Thus, a deed transferring real property values at one hundred dollars and one cent ($100.01) is taxable, while a deed transferring real property valued at one hundred dollars ($100) or less is not taxable.
2.6.1.3. A testamentary trust. -- This is a transfer of property to a trustee for the benefit of a third party and which becomes effective upon death of the person making the transfer.
2.6.1.4. Intervivos trust. -- This is a transfer of property to a trustee for the benefit of a third party which is effective during the life of the person making the transfer.
2.6.1.5. A deed of partition. -- A division of land between co-owners.
2.6.1.6. A deed made pursuant to mergers of corporations.
2.6.1.7. A deed made by a subsidiary corporation to its parent corporation for no consideration other than the cancellation or surrender of subsidiary's stock. Such a transaction would be taxable if any consideration involved would exceed one hundred dollars ($100).
2.6.1.8. A lease.
2.6.1.9. Any transfer between husband and wife.
2.6.1.10. Any transfer between parent and child and his or her spouse, without consideration, or between child and parent. A parent can give his child and his or her spouse real property and the transfer is not taxable, but if he sells it to the child and his or her spouse, the transfer is taxable if the selling price exceeds one hundred dollars ($100).
2.6.1.11. A transfer between any person and a "straw" party for any purpose when the transfer is without consideration.
2.6.1.12. Gifts to, or transfers from or between voluntary charitable or educational associations or trustees thereof and like nonprofit corporations having the same, or similar, purposes. Transfers with consideration to such associations by a third party are subject to the tax.
2.6.1.13. A quit claim or corrective deed without consideration. Either of this type deed with a consideration of over one hundred dollars ($100) is subject to the tax.
2.6.1.14. A transfer to or from the United States, the State of West Virginia, or to or from any of their instrumentalities, agencies or political subdivision by gift, dedication deed or condemnation proceeding.
2.6.1.15. Deeds of Trust or mortgage given as security for a debt.
2.6. A figurative exemption exists in the case of a deed conveying real estate situated in more than one county, in that stamps representing the total value or consideration may be attached to only one of the deeds and the other documents are, therefore, not subject to the tax. A declaration stating such a situation must be attached to all documents concerned.
2.7. The law imposes the primary tax liability upon the grantor. In the event the grantee accepts a document without the tax having been paid or the stamps affixed, such tax shall be paid by the grantee. Likewise, the grantee shall pay the tax on any transfer of real property from a trustee or a county clerk transferring real property sold for taxes.
2.8. A transfer of real estate when a life estate is retained is subject to the property transfer tax on the present day market value of said property less the computed value of the estate of the life tenant as set forth in the Statutory formula of life tenancy. (West Virginia Code article 2, chapter forty-three.)
Suggested Declaration:
I hereby declare: the true and actual value of the property transferred by the document to which this declaration is appended, is to the best of my knowledge and belief $_______; said true and actual value having been determined by subtracting the computed value of the estate of the life tenant from the present day market value of said property.
W. Va. Code R. § 110-22-3 Taxation Rate
3.1. A state excise tax is levied and imposed on and after midnight of June 30, 1959, upon the privilege of transferring title to real estate by every person who delivers, accepts, or presents for recording, any document referred to in Section 2 of these regulations, or in whose behalf any document is delivered, accepted, or presented for recording.
3.1.1. The rate of tax is one dollar and ten cents ($1.10) for each five hundred dollars ($500) value or fraction thereof as represented by such document as stated in the declaration of value appended thereto, which is a state tax. In addition, by an Act of the 1967 Regular Session of the West Virginia Legislature, on and after January 1, 1968, and additional county excise tax for the privilege of transferring title to real estate is imposed at the rate of fifty-five cents (.55) for each five hundred dollars ($500) or fraction thereof as represented by such document, for a total tax of one dollar and sixty-five cents ($1.65), which shall be payable by the grantor unless the grantee accepts the same without the tax having been paid, in which case the tax shall be paid by grantee at the time of delivery or presenting for recording of such document.
3.1.2. On and after July 1, 1989, the county excise tax of fifty-five cents (55) for each five hundred dollars ($500) of value, or fraction thereof, may be increased to an amount equal to the State excise tax of one dollar and ten cents ($1.10) for each five hundred dollars ($500) of value, or fraction thereof: Provided, that on and after July 1, 2017, the county may increase the excise tax to an amount not to exceed one dollar and sixty-five cents for each five hundred dollars’ value, or fraction thereof: Provided, however, That such county excise tax may only be either fifty-five cents (55) or one dollar and ten cents ($1.10) or one dollar and sixty-five cents ($1.65) for each five hundred dollars ($500) of value, or fraction thereof. No such increase in the county excise tax may occur unless approved by a majority vote of the members of the county commission: Provided, That no vote may occur unless the county commission published a notice of its intention to increase such tax, and the proposed effective date of such increase, at least sixty (60) days prior to the meeting where the matter will be considered, the notice was published as a Class I legal advertisement in accordance with W. Va. Code §59-3-1 et seq., and the publication area is the county in which the county commission is located.
W. Va. Code R. § 110-22-4 Stamps, Affixation And Cancellation
4.1. Evidence of Payment. -- The payment of the tax imposed upon the privilege of transferring title to real estate shall be evidenced by the affixing of the documentary stamp, or stamps, to every document by the person executing, delivering, or presenting for recording such document.
4.2. Affixing Stamps. -- Each stamp shall be affixed in such a manner that its removal will require the continued application of steam or water.
4.3. Cancellation of Stamps.
4.3.1. The person using or affixing such stamps shall write or stamp, or cause to be written or stamped thereon, the initials of his name and the date upon which stamps were affixed or used so that stamps may not again be used.
4.3.2. In the event the person presenting the document for recording has failed to cancel the stamps affixed thereto, the county clerk must then cancel the stamps by writing the date on the face of each stamp.
4.3.3. Where recorded documents are not microfilmed or otherwise photographically reproduced for recordation, the clerk shall write or stamp on the recorded copy of each such document the amount of tax stamps which were affixed thereto and the date of cancellation of such stamps.
4.4. Availability. -- Stamps shall be offered for sale by the clerks of the various county courts. The stamps must be purchased from the county clerk and the tax collected in the county where the document is first admitted to record. Such stamps to be furnished to the county clerk by the State Tax Commissioner.
4.5. Denominations and Description.
4.5.1. Documentary adhesive stamps, as prepared and furnished the county clerks by the Commissioner, are 1-1/8 x 1-1/4 inches with roulette perforations, slightly larger than a standard U.S. postage stamp. The top center bears a facsimile of the obverse side of the West Virginia State Seal. Immediately under the seal is imprinted "Property Transfer Tax"; and immediately under the caption are the words "state and county"; and immediately under this caption is the denomination of the stamp printed in the same color ink as the stamp; immediately under the denomination is the serial number for each individual stamp with the letter prefix indicating the denomination. Just above and to the right of the "y" in the word "Property", is the symbol for copyright and "W. Va.".
4.5.2. Stamps are issued by the Commissioner to the county clerks in sheets of 50 (fifty) stamps. The "A" series are gray in color and one dollar and sixty-five cents $1.65 denomination; the "B" series are red in color and four dollars and ninety-five cent ($4.95) denomination; the "C" series are blue in color and thirteen dollars and twenty cent ($13.20) denomination; the "D" series are green in color and twenty-one dollar and forty-five cent ($21.45) denomination; the "E" series are purple in color and fifty-one dollars and fifteen cents ($51.15) denomination; the "F" series are brown in color and ninety-four dollars and five cents ($94.05) denomination. An additional denomination, series "H" will be issued in quantities of less than sheets fifty (50) stamps to be used on property transfers with a value of ninety-nine thousand five hundred dollars and one cent ($99.500.1) to one hundred thousand dollars ($100,000); the "H" series are olive green in color and three hundred thirty dollars ($330) denomination.
4.6. Issuance and Receipt. -- Upon request by the county clerk, stamps are issued by the Commissioner, accompanied with two, of three, typewritten copies of the following receipt. One copy is for the records of the county clerk and one copy for signature of acknowledgement of the clerk and returned to the Commissioner. The Commissioner sends the third copy to the Office of the Chief Inspector for future audit.
W. Va. Code R. § 110-22-5 Reports
5.1. Proceeds from Sale of Stamps. -- The clerk shall, at the end of the month, pay all of the proceeds collected from the sale of stamps for the State excise tax to the State Auditor in the manner provided by law. The proceeds shall be credited to the state general revenue fund. The clerk shall, at the end of the month pay all of the proceeds from the sale of stamps for the county excise tax into the county general fund for the use of the county.
5.2. Inventory Report. -- The county clerk shall prepare and submit to the Office of the Chief Inspector a semi-annual inventory of Documentary Stamps on a form available from the tax commissioner.
§11-22-6. Penalties.
6.1. Recording Without Stamps. -- Any clerk who shall record any document without the proper documentary stamp or stamps affixed thereto, as is indicated in such document or accompanying declaration, shall, upon conviction in a court of competent jurisdiction, be fined fifty dollars. Whenever an instrument, claimed to be not a document subject to the tax, is presented for recording, the clerk shall require the instrument to contain a declaration stating why such instrument is not a taxable document within the meaning of the property transfer tax statute. No taxable document may be recorded without the proper amount of stamps affixed, but if recorded without said stamps, it cannot be used as the basis for any legal proceedings or as evidence in any legal proceeding until the proper amount of stamps are affixed.
6.2. Unlawful Acts. -- It is unlawful for any person to knowingly or willfully violate any of the provisions of the property transfer law and upon conviction of any violations, a person shall be fined not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000) or be imprisoned for not more than five (5) years or both.
W. Va. Code R. § 110-22-7 Refunds And Credits
7.1. Credit to Clerk for Lost, Destroyed, or Mutilated Stamps. -- The Commissioner will credit the account of the county clerk for stamps issued; for mutilated, but identifiable, stamps, or stamps lost or destroyed by fire or flood, when the clerk makes and forwards to the Commissioner, an affidavit setting forth information in detail, to the satisfaction of the Commissioner, regarding the loss or destruction by fire, flood, or otherwise. In the case of mutilated stamps, the affidavit shall set forth the circumstances of the mutilation in detail - the number and denominations involved, and the fact that the mutilated stamps are being returned to the Tax Commissioner. Such affidavits and mutilated stamps shall be returned to the Tax Commissioner, who will maintain a file of such mutilated stamps and affidavits in order that proper credit and consideration be given the clerks in subsequent audits by the Office of the Chief Inspector.
7.2. Refunds by County Clerk or State Auditor.
7.2.1. Any person who may have been required to pay the Property Transfer Tax because of any mistake of law or fact, or because the tax was improperly collected, may apply for a refund thereof either to the county clerk receiving such payment, or to the State Auditor for the state excise tax portion of the Property Transfer Tax and to the county clerk who had received such payment for the county excise tax portion of the Property Transfer Tax.
7.2.2. If the erroneous payment is discovered within the calendar year that the tax was paid, the petition for refund shall be filed with the county clerk where the tax was paid.
7.2.3. If the erroneous payment was made in a calendar year preceding its discovery, then the petition for refund should be filed with the State Auditor for the state excise tax portion and to the county clerk where the payment was made for the county excise tax portion.
7.2.4. The following instruments should be filed with all applications for refund:
7.2.4.1. A "Petition for Refund," making a full detailed disclosure of the factual situation, claims for refund, the statutory authority, prayer for refund, and be properly attested to by a Notary Public.
7.2.4.2. A "Declaration of Consideration or Value" signed by the grantor and attested to by a Notary Public, incorporating by reference either the cancelled documentary stamps, or photostatic copies thereof.
7.2.4.3. Relevant information or written instruments may be attached to the petition, such as cancelled checks, deeds of trust, charters or by-laws of voluntary charitable or educational associations and like nonprofit corporations having the same, or similar purposes, etc.
7.2.4.4. If the application for refund is being filed with the State Auditor, Capitol Building, Charleston, West Virginia, there must also be filed an affidavit signed by the county clerk and attested to by Notary Public, warranting the county clerk collected the amount of money prayed for in the petition which has been paid to the State Auditor and vouching for the authenticity of the documentary stamps attached to the "Declaration of Consideration or Value."
110CSR22
Series 24 Corporation Net Income Tax
W. Va. Code R. § 110-24-1 General
1.1. Scope. -- This legislative rule is intended to explain and clarify the West Virginia Corporation Net Income Tax as set forth in W. Va. Code §§11-24-1, et seq.
1.2. Authority. -- W. Va. Code §§29A-3-1, et seq., 11-10-5.
1.3. Filing date. -- July 1, 2022.
1.4 Effective date. -- July 1, 2022.
1.5 Sunset Provision. -- This rule shall terminate and have no further force or effect on August 1, 2027.
W. Va. Code R. § 110-24-2 Introductory Statement
The West Virginia Corporation Net Income Tax became effective July 1, 1967, and is a conformity tax in that it utilizes federal taxable income as a starting point to determine West Virginia taxable income and in that it adopts federal definitions wherever possible.
W. Va. Code R. § 110-24-3 Definitions
3.1. Meaning of terms - general rule. -- Any term used in W. Va. Code §§11-24-1, et seq., and in this rule have the same meaning as when used in a comparable context in the laws of the United States of America, as those laws relate to federal income taxation, unless a different meaning is clearly required by the context or by specific definition in article twenty-four, or in this rule.
3.1.a. Any reference in W. Va. Code §§11-24-1, et seq., and in this rule, to the laws of the United States means the provisions of the Internal Revenue Code, as amended, and any other provisions of the laws of the United States of America as those laws relate to the determination of income for federal income tax purposes. West Virginia Code §11-24-3 contains the most recent updating of terms used in W. Va. Code §§11-24-1, et seq.
3.2. Additional Terms Defined.
3.2.a. "Combined group" and "unitary group" are used interchangeably in this rule and mean the group of all persons whose income and apportionment factors are required to be taken into account pursuant to W. Va. Code §§11-24-1, et seq. in determining the taxpayer's share of the net business income or loss apportionable to this state.
3.2.b. "Combined report" means a schedule or schedules, as required by W. Va. Code §§11-24-1, et seq. and this rule or any other rules or procedures established by the Tax Commissioner, which are to be attached to a taxpayer's annual corporation net income tax return and which report the income and apportionment information of all corporations that are members of the taxpayer's combined group, as well as any supporting information required by the Commissioner.
3.2.c. "Commonly owned" or "Common ownership" mean, in general, that more than 50% of the voting control of one or more corporations or other entities, as applicable in the context, is directly or indirectly owned by one or more common owners, whether corporate or non-corporate, subject to the following specific rules and examples.
3.2.c.1. Direct and Indirect Voting Control, and Tiered Ownership. - If the same person or any related persons holds directly or indirectly more than 50% of the voting control of a corporation (e.g., a parent corporation), that person is considered to hold indirectly any stock or other interest in ownership or control in a lower-tier corporation (e.g., a subsidiary corporation) that is directly or indirectly held by the parent corporation. Accordingly, by way of illustration, a parent corporation and any one or more corporations, whether or not in a direct chain, connected through direct or indirect stock ownership, where more than 50% of the voting control of each subsidiary corporation is directly or indirectly owned by a corporation or any related persons, are treated as commonly owned or under common ownership, and subject to inclusion in a combined group.
Example 1. Corporation A, a widely held publicly-traded corporation, owns 51% of the stock of Corporation B; B owns 51% of Corporation C; and C owns 60% of Corporation D. Corporations A, B, C, and D are all treated as commonly owned or under common ownership, and subject to inclusion in a combined group.
Example 2. Same facts as in Example 1, except Corporation C owns 40% of Corporation D, with another 20% of D being owned by an individual who owns 100% of Corporation A. All of Corporations A, B, C, and D are, again, treated as commonly owned or under common ownership, and subject to inclusion in a combined group. Corporation D is treated as commonly owned through the aggregation of C's 40% ownership in D and the related individual's 20% ownership in D.
3.2.c.2. Related Versus Unrelated Owners.
3.2.c.2.A. Two or more corporations, where stock representing more than 50% of the voting control of each corporation is owned directly or indirectly by the same person or any related persons, whether corporate or non-corporate, are treated as commonly owned or under common ownership, and subject to inclusion in a combined group. A common owner or owners need not be members of the combined group.
Example 3. Individual X owns 51% of Corporation A, 60% of Corporation B, and 100% of Corporation C. Corporations A, B, and C are all treated as commonly owned or under common ownership, and subject to inclusion in a combined group. This same conclusion would be reached if X owned 35% of B and X's wife, a related person, owned 25% of B, so that together X and his wife owned 60% of B.
Example 4. Foreign Corporation F owns 100% of the stock of Corporation A which is organized in the U.S. and of Corporation B which is also organized in the U.S. Corporations A and B each directly or indirectly own various corporate subsidiaries in separate chains leading up to A and B, where the voting control of each subsidiary is more than 50% owned by a higher-tier corporation in the chain. Corporations A and B and all of their respective direct and indirect subsidiaries are treated as commonly owned or under common ownership, and subject to inclusion in a single combined group. Assuming that no worldwide election is made, and that F is not a foreign corporation that would be included in a "water's edge" combined group under W. Va. Code §11-24-13f(a), F itself would not be subject to inclusion in the combined group.
3.2.c.2.B. Two or more corporations are not treated as commonly owned or under common ownership, and subject to inclusion in a combined group, solely because the corporations have one or more unrelated owners in common, where aggregation of the ownership of the unrelated owners would be necessary in order to represent more than 50% of the voting control of any of the corporations.
Example 5. Individual I-1 owns stock representing 40% of the voting control of Corporation A and stock representing 20% of the voting control of Corporation B. Individual I-2. owns 30% of A and 45% of B. I-1 and I-2. are not related persons, and A and B are not otherwise related persons. A and B are not treated as commonly owned or under common ownership, and thus are not subject to inclusion in a combined group.
3.2.c.3. Stapled entities. -- Two or more corporations that are "stapled entities" are treated as commonly owned or under common ownership, and subject to inclusion in a combined group. Stapled entities are entities where, by reason of their form of ownership, or restrictions on transfer of ownership, or other terms or conditions, whether existing by operation of law, by written contract, or otherwise, in the case of a transfer of one or more ownership interests, require more than 50% of the voting control of each entity to be transferred.
3.2.c.4. Corporations under common ownership. -- A group of corporations under common ownership may be engaged in one or more unitary businesses.
Example 6. Assuming the same facts as in Example 4 of this subdivision, both A and B and all of their direct and indirect subsidiaries are engaged in unitary business X. In addition, A and all of its subsidiaries are engaged in unitary business Y, but B and its subsidiaries are not engaged in unitary business Y. A and B and all of their respective direct and indirect subsidiaries would be included in a combined group with respect to unitary business X, and A and all of its direct and indirect subsidiaries would be included in a combined group with respect to unitary business Y. Corporation A and all of its respective direct and indirect subsidiaries need to divide their respective adjusted federal taxable incomes to properly assign the portion thereof fairly attributable to each unitary business. This example assumes that the corporations have no other business or nonbusiness income.
3.2.c.5. Related Parties; Constructive Ownership. - In determining whether a person is a related person or is considered to hold stock or other ownership or control interests in an entity that is directly held by another person, the constructive ownership rules described in Internal Revenue Code §318 generally apply, except that:
3.2.c.5.A. In applying IRC §318(a)(2), if a partnership, estate, trust, or corporation owns, directly or indirectly, more than 50% of the voting control of a corporation, it is considered to own all of the stock or other ownership or control interests in the corporation; and
3.2.c.5.B. If a person has an option to acquire stock or other ownership interests in an entity, the stock or other ownership interests are treated as owned by that person only to the extent determined by the Tax Commissioner to be necessary to prevent tax avoidance.
3.2.c.6. Common ownership. -- In determining common ownership, the Tax Commissioner may take into account any plan or arrangement, whether existing by operation of law, by contract, or otherwise, for bestowing or shifting ownership or voting control, in addition to the terms of any actual stock ownership or control.
3.2.d. "Combined return" means the annual return filed by a combined group member under W. Va. Code §§11-24-1, et seq., or the single annual return filed by the taxable members of a combined group pursuant to the annual election made under W. Va. Code §11-24-13e.
3.2.e. “Intercompany transaction” means a transaction between corporations which are members of the same combined reporting group immediately after the transaction.
3.2.f. “Principal member” means the member of the combined reporting group whose accounting period is used as a reference period for all members of the combined reporting group to aggregate and apportion combined report business income of the group. A principal member need not be a taxpayer member.
3.2.g. “Unitary business” means a single economic enterprise that is made up either of separate parts of a single business entity or of a commonly controlled group of business entities that are sufficiently interdependent, integrated and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts.
3.2.h. "Water's-edge combined report" means a combined report that includes all of the entities described in W. Va. Code §§11-24-13f(a)(1) through (7) that are members of the combined group.
3.2.i. "Worldwide election" means an election by a taxable member of the combined group on behalf of all of the members of the group engaged in a unitary business to treat as its combined group, for purposes of W. Va. Code §11-24-13f, all members that are engaged in the unitary business, wherever located, on such terms and in keeping with the requirements of the corporation net income tax that are further explained in rules of the Tax Commissioner and any forms and instructions or other notices that are issued by the Tax Commissioner.
W. Va. Code R. § 110-24-4 Effect of Rate Changes During Taxable Year
4.1. If any rate of tax imposed in W. Va. Code §§11-24-1, et seq. changes to become effective before December 31 of a calendar year, and if the taxable year included the effective date for the change of rate, then:
4.1.a. Tentative tax due is computed by applying the rate for the period before the effective date of the change of rate, and the rate for the period on and after that date, to the taxable income of the corporation for the entire taxable year; and
4.1.b. The tax for that taxable year shall be the sum of that proportion of each tentative tax which the number of months in each period bears to the number of months in the entire taxable year.
4.1.c. The procedure in this subsection may only be used when the date of the rate change is other than the first day of the taxable year.
4.2. For purposes of this section:
4.2.a. If the rate changes for taxable years "beginning after" or "ending after" a certain date, the following day shall be considered the effective date of the change; and
4.2.b. If the rate changes for taxable years "beginning on or after" a certain date, that date shall be considered the effective date for the change of rate.
4.2.c. However, if W. Va. Code §11-10-5p applies with relation to the effective date for a corporation net income tax rate change, then the rate change shall first apply to a particular taxpayer for taxable years beginning on or after the effective date of the act of the Legislature containing the rate change amendment.
4.3. Example. -- The West Virginia Legislature enacts a rate change for the corporation net income tax beginning after June 30. West Virginia Code §11-10-5p does not apply. The corporation net income tax liability for a calendar year taxpayer is computed by applying the former rate for the months January through June, and the new rate for July and succeeding months. A fiscal year taxpayer would use the former rate for those periods of its tax year occurring before June 30.
4.4. Example. -- The West Virginia Legislature enacts a rate change for the corporation net income tax beginning after June 30 of year 1. West Virginia Code §11-10-5p applies. The corporation net income tax liability for a calendar year taxpayer is computed by applying the former rate for the tax year of January 1, year 1 through December 31, year 1, and the new rate for the tax year beginning January 1, year 2. and succeeding years. A fiscal year taxpayer would use the former rate for those periods of its tax year occurring before June 30 and through the end of its fiscal year, and the new rate for the next succeeding fiscal year beginning on or after the effective date of the act of the Legislature containing the rate change amendment.
W. Va. Code R. § 110-24-5 Corporations Exempt From Tax
5.1. Corporations exempt from the corporation net income tax in accordance with the provisions of W. Va. Code §§11-24-1, et seq., including, but not limited to, W. Va. Code §11-24-5, or exempt from the corporation net income tax under any other provision of the W. Va. Code or under any provision of superseding federal code or federal law are exempt from the corporation net income tax. However regulated investment companies and real estate investment trusts subject to the provisions of W. Va. Code §11-24-4b are subject to tax as specified in that section.
5.1.a. Corporations which by reason of their purposes or activities are exempt from federal income tax are exempt from the corporation net income tax. However regulated investment companies and real estate investment trusts subject to the provisions of W. Va. Code §11-24-4b are subject to tax as specified in that section.
5.1.a.1. This exemption shall not apply to the unrelated business income, as defined in the Internal Revenue Code, of any corporation if the income is subject to federal income tax.
5.1.a.1.1. Example. -- A corporation exempt from federal income taxation under IRC 501(c)(3) receives $1,000,000 in cash donations and is bequeathed an unrelated business during the year. The tax-exempt corporation operates the business for the remainder of its tax year. The income from operating this business is considered unrelated business taxable income by the Internal Revenue Service. The income would also be taxed under the West Virginia Corporation Net Income Tax. However, the donations would be exempt.
5.1.a.2. Insurance companies which pay this State a tax upon premiums, and insurance companies that pay the surcharge imposed by W. Va. Code §§23-2C-3(f)(1) or (3) are exempt from the corporation net income tax.
5.1.a.2.1. This exemption is available if an insurance company actually paid an insurance premium tax imposed by West Virginia law or the surcharge imposed by W. Va. Code §§23-2C-3(f)(1) or (3) for any year in which an exemption is claimed or would have paid the premium tax but for the use by the taxpayer of any tax credits allowed or allowable against the premium tax.
5.1.a.3. Corporations otherwise exempted from the corporation net income tax by superseding state or federal law are exempt from the corporation net income tax, (e.g. racing associations, W. Va. Code §19-23-12; hospital service corporations, W. Va. Code §33-24-4; farmer's mutual fire insurance companies, W. Va. Code §33-22-16; and licensed fraternal benefit societies, W. Va. Code §33-23-29).
W. Va. Code R. § 110-24-6 Allocation and Apportionment for tax years beginning on and after January 1, 2022
6.1. This section heading will apply to all tax years beginning on and after January 1, 2022. C corporations having a fiscal tax year ending after January 1, 2022, and before December 31, 2022, will fall under the transition rules under section heading 6a. Tax years ending before January 1, 2022, will fall under allocation and apportionment rules under section heading 7.
6.2. "Business activities" include all activities engaged in by the corporation, and includes those activities giving rise to both business income and nonbusiness income.
6.2.1. If the business activities of a taxpayer take place entirely within this state, then the taxpayer does not allocate its nonbusiness income or apportion its business income using the apportionment methodologies prescribed by the statute, and the entire net income of the corporation is subject to the corporation net income tax.
6.2.1.a. The business activities of a taxpayer are considered to have taken place in their entirety within this state if the taxpayer is not taxable in another state.
6.2.1.b. "Not taxable in another state" means the taxpayer is not subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporation stock tax in another state, and another state has no jurisdiction to subject the taxpayer to a net income tax.
6.2.2. A combined group apportions the group's adjusted federal taxable income from unitary business when one or more of the members of the combined group engage in business only within the State of West Virginia, but one or more other members of the combined group engage in business activities partially in West Virginia and partially outside of West Virginia.
6.2.3. If all business activities of all combined group members take place entirely within West Virginia, then the entire net income of each combined group member is subject to the West Virginia corporation net income tax without apportionment.
6.3. Allocation of non-business income -- Pursuant to W. Va. Code §11-24-7(d), if the business activities of a taxpayer take place partially within and partially without this state and the taxpayer is also taxable in another state, then rents and royalties from real or tangible personal property, capital gains, interest, dividends or patent or copyright royalties shall be allocated to the extent that they constitute nonbusiness income of the taxpayer.
6.3.1. The extent of use of tangible personal property in a state is determined by multiplying the nonbusiness rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the taxpayer, tangible personal property is used in the state in which the property was located at the time the rental or royalty payer obtained possession.
6.3.2. If property is in this state for any part of a day, that time shall be counted as a full day.
6.3.3. Examples.
Example 1. Corporation A was formed in Ohio and has its main offices there. Corporation A owns an apartment complex in West Virginia and leases computers to users located in West Virginia. The nonbusiness net rental income from the rental of the apartment complex is allocated to West Virginia for purposes of the West Virginia Corporation Net Income Tax. Likewise, the nonbusiness net rental income received by Corporation A as a lessor of computers in this state is allocated to this state.
Example 2. Corporation Z was formed in State X and has its commercial domicile in the State of West Virginia. Corporation Z leases tangible personal property to customers in State K and derives nonbusiness income from that activity. State K has no corporation net income tax. The net receipts from leasing tangible personal property in State K are allocated entirely to the State of West Virginia.
Example 3. Corporation Alpha, organized and headquartered in California, leases coal mining equipment in West Virginia. Alpha began leasing equipment in West Virginia on April 1 and is a calendar year taxpayer. The coal mining equipment was not in this state until April 1, the date the lease commenced. The property is leased in this state for 275 of the 365 days in the year. If rental income from the coal mining equipment located in the State of West Virginia is nonbusiness income, and if Alpha Corporation netted $15,000 for leasing this equipment for the entire year, Alpha would include in West Virginia income the following amount: 275/365 x $15,000 = $11,301.37.
If Alpha Corporation has adequate records to show the net rental income from the equipment while the equipment was leased in this state, then it may use the actual net rental income and not "apportion" its allocation of net rental income.
6.4. Apportionment -- Business activities partially within and partially without this state.
6.4.1. Where a corporation has business activities partially within and partially without this state, all income of the corporation is apportioned, except nonbusiness income specifically identified in W. Va. Code §11-24-7(d), which is allocated. Where a corporation has business activities that are in West Virginia and other states, its other net nonbusiness income that was not allocated under W. Va. Code §11-24-7(d) and all of its net business income will be apportioned.
6.4.1.a. Where a corporation has income from business activities partially within this state and partially outside of this state, all net income, after deducting those items specifically allocated under W. Va. Code §11-24-7(d), shall be apportioned to this state by multiplying the net income by a fraction, the numerator of which is the gross receipts of the taxpayer derived from transactions and activity in the regular course of its trade or business in this state during the taxable year, less returns and allowances attributable to the gross receipts from the West Virginia activity. The denominator of the fraction is the total gross receipts derived by the taxpayer from transactions and activity in the regular course of its trade or business during the taxable year and reflected in its gross income reported and as appearing on the taxpayer's Federal Form 1120 and consisting of those certain pertinent portions of the elements of gross income set forth. This fraction is known as the “sales factor.” Note that this subdivision does not apply if the corporation is subject to a special apportionment method under W. Va. Code §§11-24-7a or 7b, or is authorized to use a special apportionment method pursuant to W. Va. Code §11-24-7(h).
6.4.1.b. The only sales to be included in the sales factor are those which produce business income.
6.4.1.c. If either the numerator or the denominator includes interest or dividends from obligations of the United States government which are exempt from taxation by this state, the amount of the interest and dividends, if any, shall be subtracted from the numerator or denominator in which it is included.
6.4.2. Sales factor denominator. -- The denominator of the sales factor includes the total gross receipts derived by the taxpayer from transactions and activity in the regular course of its trade or business, unless otherwise excluded in this rule.
6.4.3. Sales factor numerator. -- The numerator of the sales factor shall include gross receipts attributable to this state and derived by the taxpayer from transactions and activity in the regular course of its trade or business. All interest income, service charges, carrying charges, or time-price differential changes incidental to the gross receipts shall be included regardless of the place where the accounting records are maintained or the location of the contract or other evidence of indebtedness.
6.4.4. Rules for determining what is included in the gross receipts of a sale in certain circumstances --
6.4.4.a. In the case of a taxpayer engaged in manufacturing and selling or purchasing and reselling goods or products, "sales" includes all gross receipts from the sales of such goods or products (or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the tax period) held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business. Gross receipts for this purpose mean gross sales less returns and allowances, and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to such sales. Federal and state excise taxes (including sales taxes) shall be included as part of such receipts if such taxes are reflected in the taxpayer’s gross income reported and as appearing on the taxpayer's Federal Form 1120.
6.4.4.b. In the case of cost fixed fee contracts, such as the operation of a government-owned plant for a fee, "sales" includes the entire reimbursed cost, plus the fee.
6.4.4.c. In the case of a taxpayer engaged in providing services, such as the operation of an advertising agency, or the performance of equipment service contracts, or research and development contracts, "sales" includes the gross receipts from the performance of the services including fees, commissions, and similar items.
6.4.4.d. In the case of a taxpayer engaged in renting real or tangible personal property, "sales" includes the gross receipts from the rental, lease, or licensing of the use of the property.
6.4.4.e. In the case of a taxpayer engaged in the sale, assignment, or licensing of intangible personal property such as patents and copyrights, "sales" includes the gross receipts therefrom.
6.4.5. Example -- General Apportionment Formula:
The following is an example of how the apportionment formula works in the context of the corporation net income tax:
A hypothetical corporation has facilities and operations in Pennsylvania, West Virginia, New York, and California.
The corporation has sales in 47 of the 50 states of the USA.
The apportionment formula is as follows:
Sales in WV Sales in USA Federal Taxable Income -- The corporation has $10,000,000 in federal adjusted gross income from all operations in the USA after West Virginia modifications and adjustments. These modifications and adjustments are for certain items that are required to be added to, or subtracted from, federal taxable income before apportionment.
Sales in the USA -- The total sales of the corporation in the entire USA (all of the 47 states in which the corporation has sales) are $435,009,000.
Sales in West Virginia -- The total sales of the corporation in West Virginia are $104,000.
The apportionment formula, using these values, would be as follows: 104,000 435,009,000 OR
0.000239 -- This is the apportionment factor.
Assuming that the corporation has no allocable West Virginia income, out of all of the operations in the USA, 0.000239 of the operations of the corporation are attributable to West Virginia operations and activity.
Net federal taxable income from all operations in the USA, after WV modifications and adjustments is $10,000,000.
Applying the apportionment formula, West Virginia taxable income is:
Federal Taxable Income (After Adjustments)
Apportionment Factor WV Taxable Income $10,000,000 x
0.000239 = $2,390.00 The final computation of the tax is as follows. The hypothetical corporation has federal taxable income after modifications and adjustments allocated and apportioned to West Virginia in the amount of $2,390.00. The tax rate for the given year is 8.75%.
Tax is .0875 x $2,390.00 = $209.13 (rounded).
Tax is $209.13.
6.4.6. In filing returns with this state, if the taxpayer departs from or modifies the basis for excluding or including gross receipts in the sales factor used in returns for prior years, the taxpayer shall disclose that information by attaching a statement, setting forth the nature and effect of the change, to the corporation net income tax return for the current year.
6.4.7. Determining what gross receipts are attributable to this state: Sales from a unitary member that does not have nexus with West Virginia. -- West Virginia is a “Joyce State.” The Joyce case (Appeal of Joyce, Inc., 66 SBE 069, 1966 WL 1411 (Cal. St. Bd. Eq.) (Nov. 23, 1966)) and the Finnegan case (Appeal of Finnigan Corp., 88- SBE-022-A, 1990 WL 15164 (Cal. St. Bd. Eq.) (Jan. 24, 1990)) were tax matters brought before the California State Board of Equalization. States that follow the decision in the Joyce case are known as “Joyce States.” 6.4.7.a.. The issue for which these cases have become known relates to the determination of the sales that are included in the numerator of the sales factor.
In synopsis, the basic distinction is as follows:
Joyce -- If a unitary group member has nexus with the state, then “in state” gross receipts of that member are included in the sales factor numerator, but not if the member does not have nexus with the state, determined on a “stand alone” basis.
Finnigan -- If one or more unitary group members has nexus with the state, then “in state” gross receipts of all unitary group members are included in the sales factor numerator, including “in state” gross receipts of a unitary group member that, itself, does not have nexus with the state, determined on a “stand alone” basis.
6.4.7.b. Because West Virginia is a “Joyce State,” if the unitary member does not have nexus with West Virginia, or if the unitary member is not taxable under the protections of PL 86-272, then that unitary member's gross receipts derived from transactions and activity in the regular course of its trade or business in West Virginia are not included in the numerator of the sales factor when the tax return is prepared, and for combined group members, when the combined report is prepared.
6.4.8. Determining what gross receipts are attributable to this state: Allocation of sales of tangible personal property. --
6.4.8.a. Sales of tangible personal property are in this state if the property is received in this state by the purchaser, other than the United States government, regardless of the f.o.b. point or other conditions of the sale. In the case of delivery by common carrier or other means of transportation, the place at which the property is ultimately received after all transportation has been completed shall be considered as the place at which the property is received by the purchaser, regardless of where title passes or other conditions of sale. Direct delivery in this state, other than for purposes of transportation, to a person or firm designated by the purchaser, constitutes delivery to the purchaser in this state, and direct delivery outside this state to a person or firm designated by the purchaser does not constitute delivery to the purchaser in this state, regardless of where title passes or other conditions of sale. The sales of tangible personal property are also in this state if the property is shipped from an office, store, warehouse, factory, or other place of storage in this state and the purchaser is the United States government.
6.4.8.b. Where tangible personal property is sold and the terms of the sale require the purchaser to pick up the property or otherwise receive the property in this state, the sale is to be treated as a sale taking place in this state.
6.4.8.c. In the case of sales requiring by their terms the delivery of tangible personal property by common carrier, contract carrier or by other means of transportation excluding pickup by the customer in this state, whether directly or indirectly, the place at which the property is ultimately received after all transportation has been completed shall be considered as the place at which the property is received by the purchaser.
6.4.8.d. Direct delivery in this state, other than for purposes of transportation, to a person or firm designated by a purchaser constitutes delivery to the purchaser in this state regardless of where title passes, or other conditions of sale.
6.4.8.e. Direct delivery outside this state to a person or firm designated by a purchaser does not constitute delivery to the purchaser in this state, regardless of where title passes, or other conditions of sale.
6.4.8.f. Examples. -- Example 1. Baubles, Inc. is located in Huntington, West Virginia, and makes sales of tangible personal property to an Ohio company. The terms of sale require the Ohio company to pick up the merchandise from the loading dock at Baubles. The sale is to be treated by Baubles as a sale taking place in this state.
Example 2. Alpha Corporation, which manufactures a highly sophisticated device used in mining, purchases certain tangible personal property from a company located in Virginia. Alpha Corporation, located in Bergoo, West Virginia is required by the terms of the sales contract to pick up the merchandise at the Virginia company's loading dock in Virginia. The sale is to be treated as not occurring in West Virginia by the Virginia company, absent other nexus with West Virginia.
Example 3. RPS, Inc., is located in Morgantown, West Virginia and makes sales of tangible personal property. Some of the sales contracts require RPS to ship the goods to companies located outside of this state via common carrier. The sales of the tangible personal property shipped by the carrier are not included as West Virginia sales.
6.4.8.g. Special rules. --
6.4.8.g.1. Where substantial amounts of gross receipts arise from an incidental or occasional sale of a fixed asset used in the regular course of the taxpayer's trade or business, the gross receipts shall be excluded from the sales factor. For example, gross receipts from the sale of a factory or plant will be excluded.
6.4.8.g.2. Insubstantial amounts of gross receipts arising from incidental or occasional transactions or activities may be excluded from the sales factor unless the exclusion would materially affect the amount of income apportioned to this state. For example, the taxpayer ordinarily may include or exclude from the sales factor gross receipts from such transactions as the sale of office furniture, business automobiles, etc.
6.4.8.g.3. Where the income producing activity of a taxpayer other than a banking or financial institution, in respect to business income from intangible personal property, can be readily identified, the income is included in the denominator of the sales factor and, if the income producing activity occurs in this state, the numerator of the sales factor as well. For example, usually the income producing activity can be readily identified in respect to interest income received on deferred payments on sales of tangible personal property and income from the sale, licensing, or other use of intangible personal property.
6.4.8.g.4. Where the business income from intangible property cannot readily be attributed to any particular income producing activity of a taxpayer other than a banking or financial institution, the income cannot be assigned to the numerator of the sales factor for any state and shall be excluded from the denominator of the sales factor. For example, where business income in the form of dividends received on stock, royalties received on patents or copyrights, or interest received on bonds, debentures, or government securities results from the mere holding of the intangible personal property by the taxpayer, the dividends, royalties, and interest shall be excluded from the denominator of the apportionment factor.
6.4.9. No Throw Rule -- All other sales of tangible personal property delivered or shipped to a purchaser within a state in which the taxpayer is not taxed are excluded from the numerator of the sales factor, but remain in the denominator. This is commonly known as the no throw rule.
6.4.9.a. "Not taxed in another state" means that, in another state, the taxpayer is not subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporation stock tax, and another state has no jurisdiction to subject the taxpayer to a net income tax.
6.4.9.b. Application of the no throw rule when computing the unitary group's apportionment factor numerator in the group's combined report. The use of a combined report does not disregard the separate identities of the taxpayer members of the combined group. Consequently, the no throw rule is applied on a corporation-by-corporation basis and is not applied as if the combined group were a single taxpayer. The separate corporation apportionment factor numerators are then aggregated to determine the numerator of the apportionment factor of the combined group.
6.4.9.c. Examples. -- Example 1. When all sales of tangible personal property produce income from unitary group business activity. -- A combined group engaged in unitary business activity consists of Corporations A, B, and C. The combined group makes sales to customers in West Virginia and in State 1 and 2. But not every member of the combined group makes sales to customers in all of those states and, in some of the states, the member is not subject to an income tax because of Public Law 86-272. When computing the numerator of the combined group's apportionment factor for purposes of the West Virginia combined report, the no throw rule will be applied separately to each member of the combined group and the aggregate adjusted numerator will be the sales factor numerator for the combined group engaged in unitary business activity.
Sales Factor Determination under No Throw Rule Total Sales = Denominator Numerator WV State 1 State 2 WV State 1 State 2 Corporation A $6 million Corporation B $10 million, but $5 million not taxable $ 7 million No Sales Corporation C $ 3 million, but not taxable $4 million, but $2 million not taxable Sub-total: $20 million $15 million $10 million $15 million Total $45 million in Denominator $15 million in Numerator Example 2. When some but not all sales of tangible personal property produce income from unitary group business activity. -- A combined group engaged in unitary business activity consists of Corporations A, B, C and D. Corporations A and C also have income from business activity that is not unitary business activity. The combined group makes sales to customers in States 1, 2, 3, 4, 5 and 6. But not every member of the combined group makes sales to customers in all of those states and, in some of the states, the member is not subject to an income tax because of Public Law 86-272. Because Corporations A and C have receipts from sales of tangible personal property that produce business income from unitary business activity and receipts from sales of tangible personal property that produces business income from other business activities that are not unity business activities, the apportionment factor numerators and denominators of Corporations A and C shall be further analyzed so that only sales of tangible personal property from unitary business activity are included when apportioning the business income from unitary business activity.
Example 3. -- When a partnership owned in part by a corporation has taxable nexus in one or more states into which the corporation sells tangible personal property, but the corporation does not otherwise have taxable nexus with those states. A combined group engaged in unitary business activity consists of Corporations A, B, C and D. The combined group makes sales to customers in States 1, 2, 3, 4, 5 and 6. However, Corporations A and C do not sell tangible personal property to customers in all of those states or, in some of the states, Corporations A and C are not subject to an income tax because of application of Public Law 86-272. Corporations A and C each own an interest in partnerships engaged in unitary business activity with the combined group. These partnerships have taxable nexus with states into which Corporations A and C sell tangible personal property and in which Corporations A and C do not have taxable nexus if their partnership interests are disregarded. Each corporation's share of sales reflected in the apportionment factors of the partnerships are included in the apportionment factors of Corporation A and C, which are the corporate owners of the partnerships. As a consequence, all members of the combined group have taxable nexus with all of the states into which they sell tangible personal property, and the no throw does not apply to this combined group.
6.4.10. Determining what gross receipts are attributable to this state: Allocation of sales of intangible property. -- West Virginia uses market-based sourcing to determine if the gross receipts from the sales of intangible property are attributable to West Virginia, as discussed in subsection 6.5 of this rule.
6.5 Market-Based Sourcing. -- Receipts, other than receipts described in W. Va. Code §11-24-7(e)(11) (from sales of tangible personal property) are in West Virginia within the meaning of W.Va. Code §11-24-7(b) and this rule if and to the extent that the taxpayer's market for the sales is in West Virginia. In general, the provisions in this subsection establish uniform rules for (1) determining whether and to what extent the market for a sale other than the sale of tangible personal property is in West Virginia, (2) reasonably approximating the state or states of assignment where the state or states cannot be determined, and (3) excluding receipts from the sale of intangible property from the numerator and denominator of the apportionment factor pursuant to W.Va. Code §11-24-7(e)(13)(B).
6.5.1. Definitions. -- For the purposes of section heading 6 of this Rule:
6.5.1.a. “Billing address” means the location indicated in the books and records of the taxpayer as the primary mailing address relating to a customer's account as of the time of the transaction, as kept in good faith in the normal course of business and not for tax avoidance purposes.
6.5.1.b. “Broadcast customer” means a person, corporation, partnership, limited liability company, or other entity, such as an advertiser or a platform distribution company, that has a direct connection or contractual relationship with the broadcaster under which revenue is derived by a broadcaster.
6.5.1.c. “Broadcaster” means a taxpayer that is a television broadcast network, a cable program network, or a television distribution company. The term “broadcaster” does not include a platform distribution company.
6.5.1.d. “Business customer” means a customer that is a business operating in any form, including a sole proprietorship. Sales to a non-profit organization, to a trust, to the U.S. Government, to a foreign, state, or local government, or to an agency or instrumentality of that government are treated as sales to a business customer and must be assigned consistent with the rules for those sales.
6.5.1.e. “Individual customer” means a customer that is not a business customer.
6.5.1.f. “Intangible property” generally means property that is not physical or whose representation by physical means is merely incidental and includes, without limitation, copyrights; patents; trademarks; trade names; brand names; franchises; licenses; trade secrets; trade dress; information; know-how; methods; programs; procedures; systems; formulae; processes; technical data; designs; licenses; literary, musical, or artistic compositions; information; ideas; contract rights including broadcast rights; agreements not to compete; goodwill and going concern value; securities; and, except as otherwise provided in this rule, computer software.
6.5.1.g. “Place of order” means the physical location from which a customer places an order for a sale other than a sale of tangible personal property from a taxpayer, resulting in a contract with the taxpayer.
6.5.1.h. “Film programming” means one or more performances, events, or productions (or segments of performances, events, or productions) intended to be distributed for visual and auditory perception, including but not limited to news, entertainment, sporting events, plays, stories, or other literary, commercial, educational, or artistic works.
6.5.1.i. “Population” means the most recent population data maintained by the U.S. Census Bureau for the year in question as of the close of the taxable period.
6.5.1.j. “Related party” means:
6.5.1.j.1. A stockholder who is an individual, or a member of the stockholder's family set forth in section 318 of the Internal Revenue Code if the stockholder and the members of the stockholder's family own, directly, indirectly, beneficially, or constructively, in the aggregate, at least 50 percent of the value of the taxpayer's outstanding stock;
6.5.1.j.2. A stockholder, or a stockholder's partnership, limited liability company, estate, trust, or corporation, if the stockholder and the stockholder's partnerships, limited liability companies, estates, trusts, and corporations own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50 percent of the value of the taxpayer's outstanding stock; or
6.5.1.j.3. A corporation, or a party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of the Internal Revenue Code if the taxpayer owns, directly, indirectly, beneficially, or constructively, at least 50 percent of the value of the corporation's outstanding stock. The attribution rules of the Internal Revenue Code apply for purposes of determining whether the ownership requirements of this definition have been met.
6.5.1.j.4. The provisions of this rule regarding sales between related parties do not apply to sales that are treated as intercompany transactions between affiliated corporations filing a consolidated West Virginia return which are deferred as provided in section heading 13d of this Rule.
6.5.1.k. “State where a contract of sale is principally managed by the customer” means the primary location at which an employee or other representative of a customer serves as the primary contact person for the taxpayer with respect to the day-to-day execution and performance of a contract entered into by the taxpayer with the customer.
6.5.2. General Principles of Application; Contemporaneous Records. -- In order to satisfy the requirements of this rule, a taxpayer's assignment of receipts other than receipts from sales of tangible personal property must be consistent with the following principles:
6.5.2.a. This rule provides various assignment rules that apply sequentially in a hierarchy. For each sale to which a hierarchical rule applies, a taxpayer must make a reasonable effort to apply the primary rule applicable to the sale before seeking to apply the next rule in the hierarchy (and must continue to do so with each succeeding rule in the hierarchy, where applicable). For example, in some cases, the applicable rule first requires a taxpayer to determine the state or states of assignment, and if the taxpayer cannot do so, the rule requires the taxpayer to reasonably approximate the state or states. In these cases, the taxpayer must attempt to determine the state or states of assignment (i.e., apply the primary rule in the hierarchy) in good faith and with reasonable effort before it may reasonably approximate the state or states.
6.5.2.b. A taxpayer's method of assigning its receipts, including the use of a method of approximation, where applicable, must reflect an attempt to obtain the most accurate assignment of receipts consistent with the regulatory standards set forth in this rule, rather than for tax avoidance purposes. A method of assignment that is reasonable for one taxpayer may not necessarily be reasonable for another taxpayer, depending upon the applicable facts.
6.5.3. Rules of Reasonable Approximation. --
6.5.3.a. In General. -- In general, this rule establishes uniform rules for determining whether and to what extent the market for a sale other than the sale of tangible personal property is in West Virginia. This rule also sets forth rules of reasonable approximation, which apply if the state or states of assignment cannot be determined. In some instances, the reasonable approximation must be made in accordance with specific rules of approximation prescribed in this rule. In other cases, the applicable rule permits a taxpayer to reasonably approximate the state or states of assignment using a method that reflects an effort to approximate the results that would be obtained under the applicable rules or standards set forth in this rule.
6.5.3.b. Approximation Based Upon Known Sales. In an instance where, applying the applicable rules set forth in §110-24-6.5.7 (Sale of a Service), a taxpayer can ascertain the state or states of assignment of a substantial portion of its receipts from sales of substantially similar services (“assigned receipts”), but not all of those sales, and the taxpayer reasonably believes, based on all available information, that the geographic distribution of some or all of the remainder of those sales generally tracks that of the assigned receipts, it must include receipts from those sales which it believes track the geographic distribution of the assigned receipts in its sales factor in the same proportion as its assigned receipts. This rule also applies in the context of licenses and sales of intangible property where the substance of the transaction resembles a sale of goods or services.
6.5.3.c. Related-Party Transactions. -- Information Imputed from Customer to Taxpayer. Where a taxpayer has receipts subject to this rule from transactions with a related-party customer, information that the customer has that is relevant to the sourcing of receipts from these transactions is imputed to the taxpayer.
6.5.4. Rules with Respect to Exclusion of Receipts from the Sales Factor. --
6.5.4.a. The apportionment factor only includes those amounts defined as sales under W. Va. Code §11-24-7(e) and applicable rules.
6.5.4.b. Certain receipts arising from the sale of intangibles are excluded from the numerator and denominator of the sales factor pursuant to W.Va. Code §11-24-7(e)(13)(B).
6.5.5. Sale, Rental, Lease, or License of Real Property. -- In the case of a sale, rental, lease, or license of real property, the receipts from the sale are in West Virginia if and to the extent that the property is in West Virginia.
6.5.6. Rental, Lease, or License of Tangible Personal Property. -- In the case of a rental, lease, or license of tangible personal property, the receipts from the sale are in West Virginia if and to the extent that the property is in West Virginia.
6.5.6.a. The rental, lease, licensing or other use of tangible personal property in this state is a separate income producing activity from the rental, lease, licensing or other use of the same property while located in another state; consequently, if property is within and without this state during the rental, lease, or licensing period, gross receipts attributable to this state shall be measured by the ratio which the days the property was physically present or was used in this state bears to the total days of the physical location or use of the property everywhere during that period, including the days it was physically located or used in a state in which the taxpayer is not taxed within the meaning of that term as provided in §110-24-6.4.10 of this rule.
6.5.6.b. Example. -- The taxpayer is the owner of ten railroad cars. During the current tax year, the total of the days each railroad car was present in this state was 60 days. The receipts attributable to the use of each of the railroad cars in this state are a separate item of income and shall be determined as follows: 10 cars X 60 days each X Total receipts = Receipts attributable to this state. 365 days in 1 year X 10 cars
6.5.7. Sale of a Service. --
6.5.7.a. General Rule. The receipts from a sale of a service are in West Virginia if and to the extent that the service is delivered to a location in West Virginia. In general, the term “delivered to a location” refers to the location of the taxpayer's market for the service, which may not be the location of the taxpayer's employees or property. The rules to determine the location of the delivery of a service in the context of several specific types of service transactions are set forth in §110-24-6.5.7.b through §110-24-6.5.7.d of this rule.
6.5.7.b. In-Person Services. --
6.5.7.b.1. In General. Except as otherwise provided in §110-24-6.5.7.b of this rule, in-person services are services that are physically provided in person by the taxpayer, where the customer or the customer's real or tangible property upon which the services are performed is in the same location as the service provider at the time the services are performed. This rule includes situations where the services are provided on behalf of the taxpayer by a third-party contractor. Examples of in-person services include, without limitation, warranty and repair services; cleaning services; plumbing services; carpentry; construction contractor services; pest control; landscape services; medical and dental services, including medical testing, x-rays, and mental health care and treatment; childcare; hair cutting and salon services; live entertainment and athletic performances; and in-person training or lessons. In-person services include services within the description above that are performed at (1) a location that is owned or operated by the service provider or (2) a location of the customer, including the location of the customer's real or tangible personal property. Various professional services, including legal, accounting, financial and consulting services, and other similar services as described in §110-24-6.5.7.d of this rule, although they may involve some amount of in-person contact, are not treated as in-person services within the meaning of §110-24-6.5.7.b of this rule.
6.5.7.b.2 Assignment of Receipts. --
6.5.7.b.2.A. Rule of Determination. Except as otherwise provided in §110-24-6.5.7.b.2 of this rule, if the service provided by the taxpayer is an in-person service, the service is delivered to the location where the service is received. Therefore, the receipts from a sale are in West Virginia if and to the extent the customer receives the in-person service in West Virginia. In assigning its receipts from sales of in-person services, a taxpayer must first attempt to determine the location where a service is received, as follows:
6.5.7.b.2.B. If the service is performed with respect to the body of an individual customer in West Virginia (e.g., hair cutting or x-ray services) or in the physical presence of the customer in West Virginia (e.g., live entertainment or athletic performances), the service is received in West Virginia.
6.5.7.b.2.C. If the service is performed with respect to the customer's real estate in West Virginia or if the service is performed with respect to the customer's tangible personal property at the customer's residence or in the customer's possession in West Virginia, the service is received in West Virginia.
6.5.7.b.2.D. If the service is performed with respect to the customer's tangible personal property and the tangible personal property is to be shipped or delivered to the customer, whether the service is performed within or outside West Virginia, the service is received in West Virginia if the property is shipped or delivered to the customer in West Virginia.
6.5.7.b.3. Rule of Reasonable Approximation. -- If the state or states where a service is actually received cannot be determined, the taxpayer must reasonably approximate such state or states.
6.5.7.b.4. Examples. -- For purposes of the examples, it is irrelevant whether the services are performed by an employee of the taxpayer or by an independent contractor acting on the taxpayer's behalf.
Example 1: Salon Corp has retail locations in West Virginia and in other states where it provides hair cutting services to individual and business customers, the latter of whom are paid for through the means of a company account. The receipts from sales of services provided at Salon Corp's in-state locations are in West Virginia. The receipts from sales of services provided at Salon Corp's locations outside West Virginia, even when provided to residents of West Virginia, are not receipts from in-state sales.
Example 2: Landscape Corp provides landscaping and gardening services in West Virginia and in neighboring states. Landscape Corp provides landscaping services at the in-state vacation home of an individual who is a resident of another state and who is located outside West Virginia at the time the services are performed. The receipts from sale of services provided at the in-state location are in West Virginia.
Example 3: Same facts as Example 2, except that Landscape Corp provides the landscaping services to Retail Corp, a corporation with retail locations in several states, and the services are with respect to those locations of Retail Corp that are in West Virginia and in other states. The receipts from the sale of services provided to Retail Corp are in West Virginia to the extent the services are provided in West Virginia.
Example 4: Camera Corp provides camera repair services at an in-state retail location to walk-in individual and business customers. In some cases, Camera Corp actually repairs a camera that is brought to its in-state location at a facility that is in another state. In these cases, the repaired camera is then returned to the customer at Camera Corp's in-state location. The receipts from sale of these services are in West Virginia.
Example 5: Same facts as Example 4, except that a customer located in West Virginia mails the camera directly to the out-of-state facility owned by Camera Corp to be fixed and receives the repaired camera back in West Virginia by mail. The receipts from sale of the service are in West Virginia.
Example 6: Teaching Corp provides seminars in West Virginia to individual and business customers. The seminars and the materials used in connection with the seminars are prepared outside the state, the teachers who teach the seminars include teachers that are resident outside the state, and the students who attend the seminars include students that are resident outside the state. Because the seminars are taught in West Virginia, the receipts from sales of the services are in West Virginia.
6.5.7.c. Services Delivered to the Customer or on Behalf of the Customer or Delivered Electronically Through the Customer. --
6.5.7.c.1. In General. If the service provided by the taxpayer is not an in-person service within the meaning of §110-24-6.5.7.b of this rule or a professional service within the meaning of §110-24-6.5.7.d of this rule, and the service is delivered to or on behalf of the customer, or delivered electronically through the customer, the receipts from a sale are in West Virginia if and to the extent that the service is delivered in West Virginia. For purposes of §110-24-6.5.7.c of this rule, a service that is delivered “to” a customer is a service in which the customer and not a third party is the recipient of the service. A service that is delivered “on behalf of” a customer is one in which a customer contracts for a service but one or more third parties, rather than the customer, is the recipient of the service, such as fulfillment services, or the direct or indirect delivery of advertising to the customer's intended audience (see §110-24-6.5.7.c.2.A of this rule and Example 4 under §110-24-6.5.7.c.2.A.3 of this rule). A service can be delivered to or on behalf of a customer by physical means or through electronic transmission. A service that is delivered electronically “through” a customer is a service that is delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to an end user or other third-party recipient.
6.5.7.c.2. Assignment of Receipts. -- The assignment of receipts to a state or states in the instance of a sale of a service that is delivered to the customer or on behalf of the customer, or delivered electronically through the customer, depends upon the method of delivery of the service and the nature of the customer. Separate rules of assignment apply to services delivered by physical means and services delivered by electronic transmission. (For purposes of §110-24-6.5.7.c of this rule, a service delivered by an electronic transmission is not a delivery by physical means). If a rule of assignment set forth in §110-24-6.5.7.c of this rule depends on whether the customer is an individual or a business customer, and the taxpayer acting in good faith cannot reasonably determine whether the customer is an individual or business customer, the taxpayer must treat the customer as a business customer.
6.5.7.c.2.A. Delivery to or on Behalf of a Customer by Physical Means Whether to an Individual or Business Customer. -- Services delivered to a customer or on behalf of a customer through a physical means include, for example, product delivery services where property is delivered to the customer or to a third party on behalf of the customer; the delivery of brochures, fliers, or other direct mail services; the delivery of advertising or advertising-related services to the customer's intended audience in the form of a physical medium; and the sale of custom software (e.g., where software is developed for a specific customer in a case where the transaction is properly treated as a service transaction for purposes of corporate taxation) where the taxpayer installs the custom software at the customer's site. The rules in §110-24-6.5.7.c.2.A of this rule apply whether the taxpayer's customer is an individual customer or a business customer.
6.5.7.c.2.A.1. Rule of Determination. -- In assigning the receipts from a sale of a service delivered to a customer or on behalf of a customer through a physical means, a taxpayer must first attempt to determine the state or states where the service is delivered. If the taxpayer is able to determine the state or states where the service is delivered, it must assign the receipts to that state or states.
6.5.7.c.2.A.2. Rule of Reasonable Approximation. -- If the taxpayer cannot determine the state or states where the service is actually delivered, it must reasonably approximate the state or states.
6.5.7.c.2.A.3. Examples:
Example 1: Direct Mail Corp, a corporation based outside West Virginia, provides direct mail services to its customer, Business Corp. Business Corp contracts with Direct Mail Corp to deliver printed fliers to a list of customers that is provided to it by Business Corp. Some of Business Corp's customers are in West Virginia and some of those customers are in other states. Direct Mail Corp will use the postal service to deliver the printed fliers to Business Corp's customers. The receipts from the sale of Direct Mail Corp's services to Business Corp are assigned to West Virginia to the extent that the services are delivered on behalf of Business Corp to West Virginia customers (i.e., to the extent that the fliers are delivered on behalf of Business Corp to Business Corp's intended audience in West Virginia).
Example 2: Ad Corp is a corporation based outside West Virginia that provides advertising and advertising-related services in West Virginia and in neighboring states. Ad Corp enters into a contract at a location outside West Virginia with an individual customer who is not a West Virginia resident to design advertisements for billboards to be displayed in West Virginia and to design fliers to be mailed to West Virginia residents. All of the design work is performed outside West Virginia. The receipts from the sale of the design services are in West Virginia because the service is physically delivered on behalf of the customer to the customer's intended audience in West Virginia.
Example 3: Same facts as Example 2, except that the contract is with a business customer that is based outside West Virginia. The receipts from the sale of the design services are in West Virginia because the services are physically delivered on behalf of the customer to the customer's intended audience in West Virginia.
Example 4: Fulfillment Corp, a corporation based outside West Virginia, provides product delivery fulfillment services in West Virginia and in neighboring states to Sales Corp, a corporation located outside West Virginia that sells tangible personal property through a mail order catalog and over the Internet to customers. In some cases when a customer purchases tangible personal property from Sales Corp to be delivered in West Virginia, Fulfillment Corp will, pursuant to its contract with Sales Corp, deliver that property from its fulfillment warehouse located outside West Virginia. The receipts from the sale of the fulfillment services of Fulfillment Corp to Sales Corp are assigned to West Virginia to the extent that Fulfillment Corp's deliveries on behalf of Sales Corp are to recipients in West Virginia.
Example 5: Software Corp, a software development corporation, enters into a contract with a business customer, Buyer Corp, which is physically located in West Virginia, to develop custom software to be used in Buyer Corp's business. Software Corp develops the custom software outside West Virginia, and then physically installs the software on Buyer Corp's computer hardware located in West Virginia. The development and sale of the custom software is properly characterized as a service transaction, and the receipts from the sale are assigned to West Virginia because the software is physically delivered to the customer in West Virginia.
Example 6: Same facts as Example 5, except that Buyer Corp has offices in West Virginia and several other states but is commercially domiciled outside West Virginia and orders the software from a location outside West Virginia. The receipts from the development and sale of the custom software service are assigned to West Virginia because the software is physically delivered to the customer in West Virginia.
6.5.7.c.2.B. Delivery to a Customer by Electronic Transmission. Services delivered by electronic transmission include, without limitation, services that are transmitted through the means of wire, lines, cable, fiber optics, electronic signals, satellite transmission, audio or radio waves, or other similar means, whether or not the service provider owns, leases, or otherwise controls the transmission equipment. In the case of the delivery of a service by electronic transmission to a customer, the following rules apply.
6.5.7.c.2.B.1. Services Delivered by Electronic Transmission to an Individual Customer. --
6.5.7.c.2.B.1.a. Rule of Determination. -- In the case of the delivery of a service to an individual customer by electronic transmission, the service is delivered in West Virginia if and to the extent that the taxpayer's customer receives the service in West Virginia. If the taxpayer can determine the state or states where the service is received, it must assign the receipts from that sale to that state or states.
6.5.7.c.2.B.1.b. Rules of Reasonable Approximation. -- If the taxpayer cannot determine the state or states where the customer actually receives the service but has sufficient information regarding the place of receipt from which it can reasonably approximate the state or states where the service is received, it must reasonably approximate the state or states. If a taxpayer does not have sufficient information from which it can determine or reasonably approximate the state or states in which the service is received, it must reasonably approximate the state or states using the customer's billing address.
6.5.7.c.2.B.2. Services Delivered By Electronic Transmission to a Business Customer. --
6.5.7.c.2.B.2.a. Rule of Determination. -- In the case of the delivery of a service to a business customer by electronic transmission, the service is delivered in West Virginia if and to the extent that the taxpayer's customer receives the service in West Virginia. If the taxpayer can determine the state or states where the service is received, it must assign the receipts from that sale to the state or states. For purposes of §110-24-6.5.7.c.2.B.2 of this rule, it is intended that the state or states where the service is received reflect the location at which the service is directly used by the employees or designees of the customer.
6.5.7.c.2.B.2.b. Rule of Reasonable Approximation. -- If the taxpayer cannot determine the state or states where the customer actually receives the service but has sufficient information regarding the place of receipt from which it can reasonably approximate the state or states where the service is received, it must reasonably approximate the state or states.
6.5.7.c.2.B.2.c. Secondary Rule of Reasonable Approximation. -- In the case of the delivery of a service to a business customer by electronic transmission where a taxpayer does not have sufficient information from which it can determine or reasonably approximate the state or states in which the service is received, the taxpayer must reasonably approximate the state or states as set forth in this rule. In these cases, unless the taxpayer can apply the safe harbor set forth in §110-24-6.5.7.c.2.B.2.d of this rule, the taxpayer must reasonably approximate the state or states in which the service is received as follows: first, by assigning the receipts from the sale to the state where the contract of sale is principally managed by the customer; second, if the state where the customer principally manages the contract is not reasonably determinable, by assigning the receipts from the sale to the customer's place of order; and third, if the customer's place of order is not reasonably determinable, by assigning the receipts from the sale using the customer's billing address; provided, however, if the taxpayer derives more than five percent of its receipts from sales of services from any single customer, the taxpayer is required to identify the state in which the contract of sale is principally managed by that customer.
6.5.7.c.2.B.2.d. Safe Harbor. -- In the case of the delivery of a service to a business customer by electronic transmission, a taxpayer may not be able to determine, or reasonably approximate under §110-24-6.5.7.c.2.B.2.b of this rule, the state or states in which the service is received. In these cases, the taxpayer may, in lieu of the rule stated at §110-24-6.5.7.c.2.B.2.c of this rule apply the safe harbor stated in this subsection. Under this safe harbor, a taxpayer may assign its receipts from sales to a particular customer based upon the customer's billing address in a taxable year in which the taxpayer (1) engages in substantially similar service transactions with more than 250 customers, whether business or individual, and (2) does not derive more than five percent of its receipts from sales of all services from that customer. This safe harbor applies only for purposes of services delivered by electronic transmission to a business customer, and not otherwise.
6.5.7.c.2.B.2.e. Related-Party Transactions. -- In the case of a sale of a service by electronic transmission to a business customer that is a related party, the taxpayer may not use the secondary rule of reasonable approximation in §110-24-6.5.7.c.2.B.2.c of this rule but may use the rule of reasonable approximation in §110-24-6.5.7.c.2.B.2.b of this rule, and the safe harbor in §110-24-6.5.7.c.2.B.2.d of this rule, provided that the department may aggregate sales to related parties in determining whether the sales exceed five percent of receipts from sales of all services under that safe harbor provision if necessary or appropriate to prevent distortion.
6.5.7.c.2.B.3. Examples. -- In these examples, unless otherwise stated, assume that the taxpayer is not related to the customer to which the service is delivered. Also, assume if relevant, unless otherwise stated, that the safe harbor set forth at §110-24-6.5.7.c.2.B.2.d of this rule does not apply.
Example 1: Support Corp, a corporation that is based outside West Virginia, provides software support and diagnostic services to individual and business customers that have previously purchased certain software from third-party vendors. These individual and business customers are located in West Virginia and other states. Support Corp supplies its services on a case-by-case basis when directly contacted by its customer. Support Corp generally provides these services through the Internet but sometimes provides these services by phone. In all cases, Support Corp verifies the customer's account information before providing any service. Using the information that Support Corp verifies before performing a service, Support Corp can determine where its services are received, and therefore must assign its receipts to these locations. The receipts from sales made to Support Corp's individual and business customers are in West Virginia to the extent that Support Corp's services are received in West Virginia.
Example 2: Online Corp, a corporation based outside West Virginia, provides web-based services through the means of the Internet to individual customers who are resident in West Virginia and in other states. These customers access Online Corp's web services primarily in their states of residence, and sometimes, while traveling, in other states. For a substantial portion of its receipts from the sale of services, Online Corp can either determine the state or states where the services are received, or, where it cannot determine the state or states, it has sufficient information regarding the place of receipt to reasonably approximate the state or states. However, Online Corp cannot determine or reasonably approximate the state or states of receipt for all of the sales of its services. Assuming that Online Corp reasonably believes, based on all available information, that the geographic distribution of the receipts from sales for which it cannot determine or reasonably approximate the location of the receipt of its services generally tracks those for which it does have this information, Online Corp must assign to West Virginia the receipts from sales for which it does not know the customers' location in the same proportion as those receipts for which it has this information.
Example 3: Same facts as 2, except that Online Corp reasonably believes that the geographic distribution of the receipts from sales for which it cannot determine or reasonably approximate the location of the receipt of its web-based services do not generally track the sales for which it does have this information. Online Corp must assign the receipts from sales of its services for which it lacks information as provided to its individual customers using the customers' billing addresses.
Example 4: Net Corp, a corporation based outside West Virginia, provides web-based services to a business customer, Business Corp, a company with offices in West Virginia and two neighboring states. Particular employees of Business Corp access the services from computers in each Business Corp office. Assume that Net Corp determines that Business Corp employees in West Virginia were responsible for 75 percent of Business Corp's use of Net Corp's services, and Business Corp employees in other states were responsible for 25 percent of Business Corp's use of Net Corp's services. In this case, 75 percent of the receipts from the sales are received in West Virginia. Assume alternatively that Net Corp lacks sufficient information regarding the location or locations where Business Corp's employees used the services to determine or reasonably approximate the location or locations. Under these circumstances, if Net Corp derives five percent or less of its receipts from sales to Business Corp, Net Corp must assign the receipts under §110-24-6.5.7.c.2.B.2.c of this rule to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable, to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable, to the state of Business Corp's billing address. If Net Corp derives more than five percent of its receipts from sales of services to Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state.
Example 5: Net Corp, a corporation based outside West Virginia, provides web-based services through the means of the Internet to more than 250 individual and business customers in West Virginia and in other states. Assume that for each customer Net Corp cannot determine the state or states where its web services are actually received and lacks sufficient information regarding the place of receipt to reasonably approximate the state or states. Also assume that Net Corp does not derive more than five percent of its receipts from sales of services to a single customer. Net Corp may apply the safe harbor stated in §110-24-6.5.7.c.2.B.2.d of this rule and may assign its receipts using each customer's billing address.
6.5.7.c.2.C. Services Delivered Electronically Through or on Behalf of an Individual or Business Customer. -- A service delivered electronically “on behalf of” the customer is one in which a customer contracts for a service to be delivered electronically but one or more third parties, rather than the customer, is the recipient of the service, such as the direct or indirect delivery of advertising on behalf of a customer to the customer's intended audience. A service delivered electronically “through” a customer to third-party recipients is a service that is delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to end users or other third-party recipients.
6.5.7.c.2.C.1. Rule of Determination. -- In the case of the delivery of a service by electronic transmission, where the service is delivered electronically to end users or other third-party recipients through or on behalf of the customer, the service is delivered in West Virginia if and to the extent that the end users or other third-party recipients are in West Virginia. For example, in the case of the direct or indirect delivery of advertising on behalf of a customer to the customer's intended audience by electronic means, the service is delivered in West Virginia to the extent that the audience for the advertising is in West Virginia. In the case of the delivery of a service to a customer that acts as an intermediary in reselling the service in substantially identical form to third-party recipients, the service is delivered in West Virginia to the extent that the end users or other third-party recipients receive the services in West Virginia. The rules in this subsection apply whether the taxpayer's customer is an individual customer or a business customer and whether the end users or other third-party recipients to which the services are delivered through or on behalf of the customer are individuals or businesses.
6.5.7.c.2.C.2. Rule of Reasonable Approximation. -- If the taxpayer cannot determine the state or states where the services are actually delivered to the end users or other third-party recipients either through or on behalf of the customer, it must reasonably approximate the state or states.
6.5.7.c.2.C.3. Select Secondary Rules of Reasonable Approximation. --
6.5.7.c.2.C.3.a. If a taxpayer's service is the direct or indirect electronic delivery of advertising on behalf of its customer to the customer's intended audience, and if the taxpayer lacks sufficient information regarding the location of the audience from which it can determine or reasonably approximate that location, the taxpayer must reasonably approximate the audience in a state for the advertising using the following secondary rules of reasonable approximation. If a taxpayer is delivering advertising directly or indirectly to a known list of subscribers, the taxpayer must reasonably approximate the audience for advertising in a state using a percentage that reflects the ratio of the state's subscribers in the specific geographic area in which the advertising is delivered relative to the total subscribers in that area. For a taxpayer with less information about its audience, the taxpayer must reasonably approximate the audience in a state using the percentage that reflects the ratio of the state's population in the specific geographic area in which the advertising is delivered relative to the total population in that area.
6.5.7.c.2.C.3.b. If a taxpayer's service is the delivery of a service to a customer that then acts as the taxpayer's intermediary in reselling that service to end users or other third-party recipients, and if the taxpayer lacks sufficient information regarding the location of the end users or other third-party recipients from which it can determine or reasonably approximate that location, the taxpayer must reasonably approximate the extent to which the service is received in a state by using the percentage that reflects the ratio of the state's population in the specific geographic area in which the taxpayer's intermediary resells the services, relative to the total population in that area.
6.5.7.c.2.C.3.c. When using the secondary reasonable approximation methods provided above, with regard to the relevant specific geographic area, include only the areas where the service was substantially and materially delivered or resold. Unless the taxpayer demonstrates the contrary, it will be presumed that the area where the service was substantially and materially delivered or resold does not include areas outside the United States.
6.5.7.c.2.C.4. Examples:
Example 1: Cable TV Corp, a corporation that is based outside of West Virginia, has two revenue streams. First, Cable TV Corp sells advertising time to business customers pursuant to which the business customers' advertisements will run as commercials during Cable TV Corp's televised programming. Some of these business customers, though not all of them, have a physical presence in West Virginia. Second, Cable TV Corp sells monthly subscriptions to individual customers in West Virginia and in other states. The receipts from Cable TV Corp's sale of advertising time to its business customers are assigned to West Virginia to the extent that the audience for Cable TV Corp's televised programming during which the advertisements run is in West Virginia. If Cable TV Corp is unable to determine the actual location of its audience for the programming and lacks sufficient information regarding audience location to reasonably approximate the location, Cable TV Corp must approximate its West Virginia audience using the percentage that reflects the ratio of its West Virginia subscribers in the geographic area in which Cable TV Corp's televised programming featuring the advertisements is delivered relative to its total number of subscribers in that area. To the extent that Cable TV Corp's sales of monthly subscriptions represent the sale of a service, the receipts from these sales are properly assigned to West Virginia in any case in which the programming is received by a customer in West Virginia. In any case in which Cable TV Corp cannot determine the actual location where the programming is received and lacks sufficient information regarding the location of receipt to reasonably approximate the location, the receipts from these sales of Cable TV Corp's monthly subscriptions are assigned to West Virginia where its customer's billing address is in West Virginia. Whether and to the extent that the monthly subscription fee represents a fee for a service or for a license of intangible property does not affect the analysis or result as to the state or states to which the receipts are properly assigned.
Example 2: Network Corp, a corporation that is based outside of West Virginia, sells advertising time to business customers pursuant to which the customers' advertisements will run as commercials during Network Corp's televised programming as distributed by unrelated cable television and satellite television transmission companies. The receipts from Network Corp's sale of advertising time to its business customers are assigned to West Virginia to the extent that the audience for Network Corp's televised programming during which the advertisements will run is in West Virginia. If Network Corp cannot determine the actual location of the audience for its programming during which the advertisements will run and lacks sufficient information regarding audience location to reasonably approximate the location, Network Corp must approximate the receipts from sales of advertising that constitute West Virginia sales by multiplying the amount of advertising receipts by a percentage that reflects the ratio of the West Virginia population in the specific geographic area in which the televised programming containing the advertising is run relative to the total population in that area.
Example 3: Web Corp, a corporation that is based outside West Virginia, provides internet content to viewers in West Virginia and other states. Web Corp sells advertising space to business customers pursuant to which the customers' advertisements will appear in connection with Web Corp's internet content. Web Corp receives a fee for running the advertisements that is determined by reference to the number of times the advertisement is viewed or clicked upon by the viewers of its website. The receipts from Web Corp's sale of advertising space to its business customers are assigned to West Virginia to the extent that the viewers of the internet content are in West Virginia, as measured by viewings or clicks. If Web Corp is unable to determine the actual location of its viewers and lacks sufficient information regarding the location of its viewers to reasonably approximate the location, Web Corp must approximate the amount of its West Virginia receipts by multiplying the amount of receipts from sales of advertising by a percentage that reflects the West Virginia population in the specific geographic area in which the content containing the advertising is delivered relative to the total population in that area.
Example 4: Retail Corp, a corporation that is based outside of West Virginia, sells tangible personal property through its retail stores located in West Virginia and other states and through a mail order catalog. Answer Co, a corporation that operates call centers in multiple states, contracts with Retail Corp to answer telephone calls from individuals placing orders for products found in Retail Corp's catalogs. In this case, the phone answering services of Answer Co are being delivered to Retail Corp's customers and prospective customers. Therefore, Answer Co is delivering a service electronically to Retail Corp's customers or prospective customers on behalf of Retail Corp and must assign the proceeds from this service to the state or states from which the phone calls are placed by the customers or prospective customers. If Answer Co cannot determine the actual locations from which phone calls are placed and lacks sufficient information regarding the locations to reasonably approximate the locations, Answer Co must approximate the amount of its West Virginia receipts by multiplying the amount of its fee from Retail Corp by a percentage that reflects the West Virginia population in the specific geographic area from which the calls are placed relative to the total population in that area.
Example 5: Web Corp, a corporation that is based outside of West Virginia, sells tangible personal property to customers via its internet website. Design Co designed and maintains Web Corp's website, including making changes to the site based on customer feedback received through the site. Design Co's services are delivered to Web Corp, the proceeds from which are assigned pursuant to §110-24-6.5.7.c.2.B of this rule. The fact that Web Corp's customers and prospective customers incidentally benefit from Design Co's services and may even interact with Design Co in the course of providing feedback, does not transform the service into one delivered “on behalf of” Web Corp to Web Corp's customers and prospective customers.
Example 6: Wholesale Corp, a corporation that is based outside West Virginia, develops an internet-based information database outside West Virginia and enters into a contract with Retail Corp whereby Retail Corp will market and sell access to this database to end users. Depending on the facts, the provision of database access may be either the sale of a service or the license of intangible property or may have elements of both, but for purposes of analysis it does not matter. Assume that on the particular facts applicable in this example Wholesale Corp is selling database access in transactions properly characterized as involving the performance of a service. When an end user purchases access to Wholesale Corp's database from Retail Corp, Retail Corp in turn compensates Wholesale Corp in connection with that transaction. In this case, Wholesale Corp's services are being delivered through Retail Corp to the end user. Wholesale Corp must assign its receipts from sales to Retail Corp to the state or states in which the end users receive access to Wholesale Corp's database. If Wholesale Corp cannot determine the state or states where the end users actually receive access to Wholesale Corp's database and lacks sufficient information regarding the location from which the end users access the database to reasonably approximate the location, Wholesale Corp must approximate the extent to which its services are received by end users in West Virginia by using a percentage that reflects the ratio of the West Virginia population in the specific geographic area in which Retail Corp regularly markets and sells Wholesale Corp's database relative to the total population in that area. It does not matter for purposes of the analysis whether Wholesale Corp's sale of database access constitutes a service or a license of intangible property, or some combination of both.
6.5.7.d. Professional Services. --
6.5.7.d.1. In General. Except as otherwise provided in §110-24-6.5.7.d of this rule, professional services are services that require specialized knowledge and in some cases require a professional certification, license, or degree. These services include the performance of technical services that require the application of specialized knowledge. Professional services include, without limitation, management services, bank and financial services, financial custodial services, investment and brokerage services, fiduciary services, tax preparation, payroll and accounting services, lending services, credit card services (including credit card processing services), data processing services, legal services, consulting services, video production services, graphic and other design services, engineering services, and architectural services. Nothing in this rule applies to services provided by a financial institution that must apportion and allocate its income under W. Va. Code §11-24-7b.
6.5.7.d.2. Overlap with Other Categories of Services.
6.5.7.d.2.A. Certain services that fall within the definition of “professional services” set forth in §110-24-6.5.7.d of this rule are nevertheless treated as “in-person services” within the meaning of §110-24-6.5.7.b of this rule and are assigned under the rules of that subdivision. Specifically, professional services that are physically provided in person by the taxpayer such as carpentry, certain medical and dental services, or childcare services, where the customer or the customer's real or tangible property upon which the services are provided is in the same location as the service provider at the time the services are performed, are “in-person services” and are assigned as such, notwithstanding that they may also be considered “professional services.” However, professional services where the service is of an intellectual or intangible nature, such as legal, accounting, financial, and consulting services, are assigned as professional services under the rules of §110-24-6.5.7.d of this rule, notwithstanding the fact that these services may involve some amount of in- person contact.
6.5.7.d.2.B. Professional services may in some cases include the transmission of one or more documents or other communications by mail or by electronic means. In some cases, all or most communications between the service provider and the service recipient may be by mail or by electronic means. However, in these cases, despite this transmission, the assignment rules that apply are those set forth in (4)(d) of this rule, and not those set forth in §110-24-6.5.7.c of this rule, pertaining to services delivered to a customer or through or on behalf of a customer.
6.5.7.d.3. Assignment of Receipts. -- In the case of a professional service, it is generally possible to characterize the location of delivery in multiple ways by emphasizing different elements of the service provided, no one of which will consistently represent the market for the services. Therefore, the location of delivery in the case of professional services is not susceptible to a general rule of determination and must be reasonably approximated. The assignment of receipts from a sale of a professional service depends in many cases upon whether the customer is an individual or business customer. In any instance in which the taxpayer, acting in good faith, cannot reasonably determine whether the customer is an individual or business customer, the taxpayer must treat the customer as a business customer. For purposes of assigning the receipts from sale of a professional service, a taxpayer's customer is the person that contracts for the service, irrespective of whether another person pays for or also benefits from the taxpayer's services.
6.5.7.d.3.A. General Rule. Receipts from sales of professional services other than those services described in §110-24-6.5.7.d.3.B of this rule (architectural and engineering services) and §110-24-6.5.7.d.3.C of this rule (transactions with related parties) are assigned in accordance with §110-24-6.5.7.d.3.A of this rule.
6.5.7.d.3.A.1. Professional Services Delivered to Individual Customers. -- Except as otherwise provided in §110-24-6.5.7.d of this rule, in any instance in which the service provided is a professional service and the taxpayer's customer is an individual customer, the state or states in which the service is delivered must be reasonably approximated as set forth in §110-24-6.5.7.d.3.A.1 of this rule. In particular, the taxpayer must assign the receipts from a sale to the customer's state of primary residence, or, if the taxpayer cannot reasonably identify the customer's state of primary residence, to the state of the customer's billing address; provided, however, in any instance in which the taxpayer derives more than five percent of its receipts from sales of all services from an individual customer, the taxpayer must identify the customer's state of primary residence and assign the receipts from the service or services provided to that customer to that state.
6.5.7.d.3.A.2. Professional Services Delivered to Business Customers. -- Except as otherwise provided in §110-24-6.5.7.d of this rule, in any instance in which the service provided is a professional service and the taxpayer's customer is a business customer, the state or states in which the service is delivered must be reasonably approximated as set forth in this subparagraph. In particular, unless the taxpayer may use the safe harbor set forth at §110-24-6.5.7.d.3.A.3 of this rule, the taxpayer must assign the receipts from the sale as follows: first, by assigning the receipts to the state where the contract of sale is principally managed by the customer; second, if the place of customer management is not reasonably determinable, to the customer's place of order; and third, if the customer place of order is not reasonably determinable, to the customer's billing address; provided, however, in any instance in which the taxpayer derives more than five percent of its receipts from sales of all services from a customer, the taxpayer is required to identify the state in which the contract of sale is principally managed by the customer.
6.5.7.d.3.A.3. Safe Harbor; Large Volume of Transactions. -- Notwithstanding the rules set forth in §110-24-6.5.7.d.3.A.1 and §110-24-6.5.7.d.3.A.2 of this rule, a taxpayer may assign its receipts from sales to a particular customer based on the customer's billing address in any taxable year in which the taxpayer (1) engages in substantially similar service transactions with more than 250 customers, whether individual or business, and (2) does not derive more than five percent of its receipts from sales of all services from that customer. This safe harbor applies only for purposes of §110-24-6.5.7.d.3.A of this rule and not otherwise.
6.5.7.d.3.B. Architectural and Engineering Services with respect to Real or Tangible Personal Property. -- Architectural and engineering services with respect to real or tangible personal property are professional services within the meaning of §110-24-6.5.7.d of this rule. However, unlike in the case of the general rule that applies to professional services, (1) the receipts from a sale of an architectural service are assigned to a state or states if and to the extent that the services are with respect to real estate improvements located, or expected to be located, in the state or states; and (2) the receipts from a sale of an engineering service are assigned to a state or states if and to the extent that the services are with respect to tangible or real property located in the state or states, including real estate improvements located in, or expected to be located in, the state or states. These rules apply whether or not the customer is an individual or business customer. In any instance in which architectural or engineering services are not described in §110-24-6.5.7.d.3.B of this rule, the receipts from a sale of these services must be assigned under the general rule for professional services.
6.5.7.d.3.C. Related-Party Transactions. -- In any instance in which the professional service is sold to a related party, rather than applying the rule for professional services delivered to business customers in §110-24-6.5.7.d.3.A.2 of this rule, the state or states to which the service is assigned is the place of receipt by the related party as reasonably approximated using the following hierarchy: (1) if the service primarily relates to specific operations or activities of a related party conducted in one or more locations, then to the state or states in which those operations or activities are conducted in proportion to the related-party's payroll at the locations to which the service relates in the state or states; or (2) if the service does not relate primarily to operations or activities of a related party conducted in particular locations, but instead relates to the operations of the related party generally, then to the state or states in which the related party has employees, in proportion to the related-party's payroll in those states. The taxpayer may use the safe harbor provided by §110-24-6.5.7.d.3.A.3 of this rule provided that the department may aggregate the receipts from sales to related parties in applying the five percent rule if necessary or appropriate to avoid distortion.
6.5.7.d.3.D. Examples. -- Unless otherwise stated, assume in each of these examples, where relevant, that the customer is not a related party and that the safe harbor set forth at §110-24-6.5.7.d.3.A.3 of this rule does not apply.
Example 1: Broker Corp provides securities brokerage services to individual customers who are residents in West Virginia and in other states. Broker Corp is not a financial institution required to report under W.Va. Code §11-24-7b. Assume that Broker Corp knows the state of primary residence for many of its customers, and where it does not know the state of primary residence, it knows the customer's billing address. Also assume that Broker Corp does not derive more than five percent of its receipts from sales of all services from any one individual customer. If Broker Corp knows its customer's state of primary residence, it must assign the receipts to that state. If Broker Corp does not know its customer's state of primary residence, but rather knows the customer's billing address, it must assign the receipts to that state.
Example 2: Same facts as Example 1, except that Broker Corp has several individual customers from whom it derives, in each instance, more than five percent of its receipts from sales of all services. Receipts from sales to customers from whom Broker Corp derives five percent or less of its receipts from sales of all services must be assigned as described in Example 24. For each customer from whom it derives more than five percent of its receipts from sales of all services, Broker Corp is required to determine the customer's state of primary residence and must assign the receipts from the services provided to that customer to that state. In any case in which a five percent customer's state of primary residence is West Virginia, receipts from a sale made to that customer must be assigned to West Virginia; in any case in which a five percent customer's state of primary residence is not West Virginia, receipts from a sale made to that customer are not assigned to West Virginia.
Example 3: Architecture Corp provides building design services as to buildings located, or expected to be located, in West Virginia to individual customers who are resident in West Virginia and other states, and to business customers that are based in West Virginia and other states. The receipts from Architecture Corp's sales are assigned to West Virginia because the locations of the buildings to which its design services relate are in West Virginia or are expected to be in West Virginia. For purposes of assigning these receipts, it is not relevant where, in the case of an individual customer, the customer primarily resides or is billed for the services, and it is not relevant where, in the case of a business customer, the customer principally manages the contract, placed the order for the services, or is billed for the services. Further, these receipts are assigned to West Virginia even if Architecture Corp's designs are either physically delivered to its customer in paper form in a state other than West Virginia or are electronically delivered to its customer in a state other than West Virginia.
Example 4: Law Corp provides legal services to individual clients who are resident in West Virginia and in other states. In some cases, Law Corp may prepare one or more legal documents for its client as a result of these services and/or the legal work may be related to litigation or a legal matter that is ongoing in a state other than where the client is resident. Assume that Law Corp knows the state of primary residence for many of its clients, and where it does not know this state of primary residence, it knows the client's billing address. Also assume that Law Corp does not derive more than five percent of its receipts from sales of all services from any one individual client. If Law Corp knows its client's state of primary residence, it must assign the receipts to that state. If Law Corp does not know its client's state of primary residence, but rather knows the client's billing address, it must assign the receipts to that state. For purposes of the analysis it is irrelevant whether the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or the litigation or other legal matter that is the underlying predicate for the services is in another state.
Example 5: Law Corp provides legal services to several multistate business clients. In each case, Law Corp knows the state in which the agreement for legal services that governs the client relationship is principally managed by the client. In one case, the agreement is principally managed in West Virginia; in the other cases, the agreement is principally managed in a state other than West Virginia. If the agreement for legal services is principally managed by the client in West Virginia, the receipts from sale of the services are assigned to West Virginia; in the other cases, the receipts are not assigned to West Virginia. In the case of receipts that are assigned to West Virginia, the receipts are so assigned even if (1) the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or (2) the litigation or other legal matter that is the underlying predicate for the services is in another state.
Example 6: Consulting Corp, a company that provides consulting services to law firms and other customers, is hired by Law Corp in connection with legal representation that Law Corp provides to Client Co. Specifically, Consulting Corp is hired to provide expert testimony at a trial being conducted by Law Corp on behalf of Client Co. Client Co pays for Consulting Corp's services directly. Assuming that Consulting Corp knows that its agreement with Law Co is principally managed by Law Corp in West Virginia, the receipts from the sale of Consulting Corp's services are assigned to West Virginia. It is not relevant for purposes of the analysis that Client Co is the ultimate beneficiary of Consulting Corp's services, or that Client Co pays for Consulting Corp's services directly.
Example 7: Advisor Corp, a corporation that provides investment advisory services and is not a financial institution required to report under W. Va. Code §11-24-7b, provides investment advisory services to Investment Co. Investment Co is a multistate business client of Advisor Corp that uses Advisor Corp's services in connection with investment accounts that it manages for individual clients, who are the ultimate beneficiaries of Advisor Corp's services. Assume that Investment Co's individual clients are persons that are resident in numerous states, which may or may not include West Virginia. Assuming that Advisor Corp knows that its agreement with Investment Co is principally managed by Investment Co in West Virginia, receipts from the sale of Advisor Corp's services are assigned to West Virginia. It is not relevant for purposes of the analysis that the ultimate beneficiaries of Advisor Corp's services may be Investment Co's clients, who are residents of numerous states.
Example 8: Advisor Corp, a corporation that provides investment advisory services and is not a financial institution required to report under W. Va. Code §11-24-7b, provides investment advisory services to Investment Fund LP, a partnership that invests in securities and other assets. Assuming that Advisor Corp knows that its agreement with Investment Fund LP is principally managed by Investment Fund LP in West Virginia, receipts from the sale of Advisor Corp's services are assigned to West Virginia. Note that it is not relevant for purposes of the analysis that the partners in Investment Fund LP are residents of numerous states.
Example 9: Design Corp is a corporation based outside West Virginia that provides graphic design and similar services in West Virginia and in neighboring states. Design Corp enters into a contract at a location outside West Virginia with an individual customer to design fliers for the customer. Assume that Design Corp does not know the individual customer's state of primary residence and does not derive more than five percent of its receipts from sales of services from the individual customer. All of the design work is performed outside West Virginia. Receipts from the sale are in West Virginia if the customer's billing address is in West Virginia.
6.5.8. License or Lease of Intangible Property. --
6.5.8.a. General Rules. --
6.5.8.a.1. The receipts from the license of intangible property are in West Virginia if and to the extent the intangible is used in West Virginia. In general, the term “use” is construed to refer to the location of the taxpayer's market for the use of the intangible property that is being licensed and is not to be construed to refer to the location of the property or payroll of the taxpayer. The rules that apply to determine the location of the use of intangible property in the context of several specific types of licensing transactions are set forth at §110-24-6.5.8.b through §110-24-6.5.8.e of this rule. For purposes of the rules set forth in §110-24-6.5.8 of this rule, a lease of intangible property is to be treated the same as a license of intangible property.
6.5.8.a.2. In general, a license of intangible property that conveys all substantial rights in that property is treated as a sale of intangible property for purposes of this rule. Note, however, that for purposes of §110-24-6.5.8 and §110-24-6.5.9 of this rule, a sale or exchange of intangible property is treated as a license of that property where the receipts from the sale or exchange derive from payments that are contingent on the productivity, use, or disposition of the property.
6.5.8.a.3. Intangible property licensed as part of the sale or lease of tangible property is treated under this rule as the sale or lease of tangible property.
6.5.8.a.4. Nothing in §110-24-6.5.8 of this rule is to be construed to allow or require inclusion of receipts in the sales factor that are not included in the definition of “sales” pursuant to W. Va. Code §11-24-3a or related rules, or that are excluded from the numerator and the denominator of the sales factor pursuant to West Virginia §11-24-7(e)(13)(B)(ii)(III). So, to the extent that the transfer of business “goodwill” or similar intangible property, including, without limitation, “going concern value” or “workforce in place,” may be characterized as a license or lease of intangible property, receipts from such transaction must be excluded from the numerator and the denominator of the taxpayer's sales factor.
6.5.8.b. License of a Marketing Intangible. -- Where a license is granted for the right to use intangible property in connection with the sale, lease, license, or other marketing of goods, services, or other items (i.e., a marketing intangible) to a consumer, the royalties or other licensing fees paid by the licensee for that marketing intangible are assigned to West Virginia to the extent that those fees are attributable to the sale or other provision of goods, services, or other items purchased or otherwise acquired by consumers or other ultimate customers in West Virginia. Examples of a license of a marketing intangible include, without limitation, the license of a service mark, trademark, or trade name; certain copyrights; the license of a film, television, or multimedia production or event for commercial distribution; and a franchise agreement. In each of these instances the license of the marketing intangible is intended to promote consumer sales. In the case of the license of a marketing intangible, where a taxpayer has actual evidence of the amount or proportion of its receipts that is attributable to West Virginia, it must assign that amount or proportion to West Virginia. In the absence of actual evidence of the amount or proportion of the licensee's receipts that are derived from West Virginia consumers, the portion of the licensing fee to be assigned to West Virginia must be reasonably approximated by multiplying the total fee by a percentage that reflects the ratio of the West Virginia population in the specific geographic area in which the licensee makes material use of the intangible property to regularly market its goods, services, or other items relative to the total population in that area. If the license of a marketing intangible is for the right to use the intangible property in connection with sales or other transfers at wholesale rather than directly to retail customers, the portion of the licensing fee to be assigned to West Virginia must be reasonably approximated by multiplying the total fee by a percentage that reflects the ratio of the West Virginia population in the specific geographic area in which the licensee's goods, services, or other items are ultimately and materially marketed using the intangible property relative to the total population of that area. Unless the taxpayer demonstrates that the marketing intangible is materially used in the marketing of items outside the United States, the fees from licensing that marketing intangible will be presumed to be derived from within the United States.
6.5.8.c. License of a Production Intangible. -- If a license is granted for the right to use intangible property other than in connection with the sale, lease, license, or other marketing of goods, services, or other items, and the license is to be used in a production capacity (a “production intangible”), the licensing fees paid by the licensee for that right are assigned to West Virginia to the extent that the use for which the fees are paid takes place in West Virginia. Examples of a license of a production intangible include, without limitation, the license of a patent, a copyright, or trade secrets to be used in a manufacturing process, where the value of the intangible lies predominately in its use in that process. In the case of a license of a production intangible to a party other than a related party where the location of actual use is unknown, it is presumed that the use of the intangible property takes place in the state of the licensee's commercial domicile (where the licensee is a business) or the licensee's state of primary residence (where the licensee is an individual). If the department can reasonably establish that the actual use of intangible property pursuant to a license of a production intangible takes place in part in West Virginia, it is presumed that the entire use is in this state except to the extent that the taxpayer can demonstrate that the actual location of a portion of the use takes place outside West Virginia. In the case of a license of a production intangible to a related party, the taxpayer must assign the receipts to where the intangible property is actually used.
6.5.8.d. License of a Mixed Intangible. -- If a license of intangible property includes both a license of a marketing intangible and a license of a production intangible (a “mixed intangible”) and the fees to be paid in each instance are separately and reasonably stated in the licensing contract, the department will accept that separate statement for purposes of this rule. If a license of intangible property includes both a license of a marketing intangible and a license of a production intangible and the fees to be paid in each instance are not separately and reasonably stated in the contract, it is presumed that the licensing fees are paid entirely for the license of the marketing intangible except to the extent that the taxpayer or the department can reasonably establish otherwise.
6.5.8.e. License of a Broadcasting Intangible. -- Where a broadcaster grants a license to a broadcast customer for the right to use film programming, the licensing fees paid by the licensee for such right are assigned to West Virginia to the extent that the broadcast customer is located in West Virginia. In the case of business customers, the broadcast customer’s location shall be determined using the broadcast customer’s commercial domicile. In the case of individual customers, the broadcast customer’s location shall be determined using the address of the broadcast customer listed in the broadcaster’s records.
6.5.8.f. License of Intangible Property where Substance of Transaction Resembles a Sale of Goods or Services. --
6.5.8.f.1. In general. In some cases, the license of intangible property will resemble the sale of an electronically delivered good or service rather than the license of a marketing intangible or a production intangible. In these cases, the receipts from the licensing transaction are assigned by applying the rules set forth in §110-24-6.5.7.c.2.B and §110-24-6.5.7.c.2.C of this rule, as if the transaction were a service delivered to an individual or business customer or delivered electronically through an individual or business customer, as applicable. Examples of transactions to be assigned under §110-24-6.5.8.e of this rule include, without limitation, the license of database access, the license of access to information, the license of digital goods, and the license of certain software (e.g., where the transaction is not the license of pre-written software that is treated as the sale of tangible personal property).
6.5.8.f.2. Sublicenses. -- Pursuant to §110-24-6.5.8.e.1 of this rule, the rules of §110-24-6.5.7.c.2.B of this rule may apply where a taxpayer licenses intangible property to a customer that in turn sublicenses the intangible property to end users as if the transaction were a service delivered electronically through a customer to end users. In particular, the rules set forth at §110-24-6.5.7.c.2.B of this rule that apply to services delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to end users or other recipients may also apply with respect to licenses of intangible property for purposes of sublicense to end users. For this purpose, the intangible property sublicensed to an end user shall not fail to be substantially identical to the property that was licensed to the sublicensor merely because the sublicense transfers a reduced bundle of rights with respect to that property (e.g., because the sublicensee's rights are limited to its own use of the property and do not include the ability to grant a further sublicense), or because that property is bundled with additional services or items of property.
6.5.8.f.3. Examples. -- In these examples, unless otherwise stated, assume that the customer is not a related party.
Example 1: Crayon Corp and Dealer Co enter into a license contract under which Dealer Co as licensee is permitted to use trademarks that are owned by Crayon Corp in connection with Dealer Co's sale of certain products to retail customers. Under the contract, Dealer Co is required to pay Crayon Corp a licensing fee that is a fixed percentage of the total volume of monthly sales made by Dealer Co of products using the Crayon Corp trademarks. Under the contract, Dealer Co is permitted to sell the products at multiple store locations, including store locations that are both within and without West Virginia. Further, the licensing fees that are paid by Dealer Co are broken out on a per store basis. The licensing fees paid to Crayon Corp by Dealer Co represent fees from the license of a marketing intangible. The portion of the fees to be assigned to West Virginia are determined by multiplying the fees by a percentage that reflects the ratio of Dealer Co's receipts that are derived from its West Virginia stores relative to Dealer Co's total receipts.
Example 2: Program Corp, a broadcaster that is based outside West Virginia, licenses programming that it owns to business customers, such as cable networks, that in turn will offer the programming to their customers on television or other media outlets in West Virginia and in all other U.S. states. License fees received by Program Corp are assigned to West Virginia to the extent that the business customer is commercially domiciled in West Virginia. Each of these licensing contracts constitutes the license of a marketing intangible. For each licensee, assuming that Program Corp lacks evidence of the actual number of viewers of the programming in West Virginia, the component of the licensing fee paid to Program Corp by the licensee that constitutes Program Corp's West Virginia receipts is determined by multiplying the amount of the licensing fee by a percentage that reflects the ratio of the West Virginia audience of the licensee for the programming relative to the licensee's total U.S. audience for the programming. Note that the analysis and result as to the state or states to which receipts are properly assigned would be the same to the extent that the substance of Program Corp's licensing transactions may be determined to resemble a sale of goods or services, instead of the license of a marketing intangible.
Example 3: Network Corp, a broadcaster that is based outside of West Virginia, delivers programming that it owns to individual customers in West Virginia and in other U.S. States. Network Corp’s receipts from each individual broadcast customer will be assigned to West Virginia if the address of the broadcast customer listed in the broadcaster’s records is in West Virginia.
Example 4: Moniker Corp enters into a license contract with Wholesale Co. Pursuant to the contract, Wholesale Co is granted the right to use trademarks owned by Moniker Corp to brand sports equipment that is to be manufactured by Wholesale Co or an unrelated entity, and to sell the manufactured equipment to unrelated companies that will ultimately market the equipment to consumers in a specific geographic region, including a foreign country. The license agreement confers a license of a marketing intangible, even though the trademarks in question will be affixed to property to be manufactured. In addition, the license of the marketing intangible is for the right to use the intangible property in connection with sales to be made at wholesale rather than directly to retail customers. The component of the licensing fee that constitutes the West Virginia receipts of Moniker Corp is determined by multiplying the amount of the fee by a percentage that reflects the ratio of the West Virginia population in the specific geographic region relative to the total population in that region. If Moniker Corp is able to reasonably establish that the marketing intangible was materially used throughout a foreign country, then the population of that country will be included in the population ratio calculation. However, if Moniker Corp is unable to reasonably establish that the marketing intangible was materially used in the foreign country in areas outside a particular major city, then none of the foreign country's population beyond the population of the major city is include in the population ratio calculation.
Example 5: Formula, Inc and Appliance Co enter into a license contract under which Appliance Co is permitted to use a patent owned by Formula, Inc to manufacture appliances. The license contract specifies that Appliance Co is to pay Formula, Inc a royalty that is a fixed percentage of the gross receipts from the products that are later sold. The contract does not specify any other fees. The appliances are both manufactured and sold in West Virginia and several other states. Assume the licensing fees are paid for the license of a production intangible, even though the royalty is to be paid based upon the sales of a manufactured product (i.e., the license is not one that includes a marketing intangible). Because the department can reasonably establish that the actual use of the intangible property takes place in part in West Virginia, the royalty is assigned based to the location of that use rather than to location of the licensee's commercial domicile, in accordance with §110-24-6.5.8.a of this rule. It is presumed that the entire use is in West Virginia except to the extent that the taxpayer can demonstrate that the actual location of some or all of the use takes place outside West Virginia. Assuming that Formula, Inc can demonstrate the percentage of manufacturing that takes place in West Virginia using the patent relative to the manufacturing in other states, that percentage of the total licensing fee paid to Formula, Inc under the contract will constitute Formula, Inc's West Virginia receipts.
Example 6: Axel Corp enters into a license agreement with Biker Co in which Biker Co is granted the right to produce motor scooters using patented technology owned by Axel Corp, and also to sell the scooters by marketing the fact that the scooters were manufactured using the special technology. The contract is a license of both a marketing and production intangible, i.e., a mixed intangible. The scooters are manufactured outside West Virginia. Assume that Axel Corp lacks actual information regarding the proportion of Biker Co.'s receipts that are derived from West Virginia customers. Also assume that Biker Co is granted the right to sell the scooters in a U.S. geographic region in which the West Virginia population constitutes 25 percent of the total population during the period in question. The licensing contract requires an upfront licensing fee to be paid by Biker Co to Axel Corp and does not specify what percentage of the fee derives from Biker Co's right to use Axel Corp's patented technology. Because the fees for the license of the marketing and production intangible are not separately and reasonably stated in the contract, it is presumed that the licensing fees are paid entirely for the license of a marketing intangible, unless either the taxpayer or the department reasonably establishes otherwise. Assuming that neither party establishes otherwise, 25 percent of the licensing fee constitutes West Virginia receipts.
Example 7: Same facts as Example 5, except that the license contract specifies separate fees to be paid for the right to produce the motor scooters and for the right to sell the scooters by marketing the fact that the scooters were manufactured using the special technology. The licensing contract constitutes both the license of a marketing intangible and the license of a production intangible. Assuming that the separately stated fees are reasonable, the department will: (1) assign no part of the licensing fee paid for the production intangible to West Virginia, and (2) assign 25 percent of the licensing fee paid for the marketing intangible to West Virginia.
Example 8: Better Burger Corp, which is based outside West Virginia, enters into franchise contracts with franchisees that agree to operate Better Burger restaurants as franchisees in various states. Several of the Better Burger Corp franchises are in West Virginia. In each case, the franchise contract between the individual and Better Burger provides that the franchisee is to pay Better Burger Corp an upfront fee for the receipt of the franchise and monthly franchise fees, which cover, among other things, the right to use the Better Burger name and service marks, food processes, and cooking know-how, as well as fees for management services. The upfront fees for the receipt of the West Virginia franchises constitute fees paid for the licensing of a marketing intangible. These fees constitute West Virginia receipts because the franchises are for the right to make West Virginia sales. The monthly franchise fees paid by West Virginia franchisees constitute fees paid for (1) the license of marketing intangibles (the Better Burger name and service marks), (2) the license of production intangibles (food processes and know-how), and (3) personal services (management fees). The fees paid for the license of the marketing intangibles and the production intangibles constitute West Virginia receipts because in each case the use of the intangibles is to take place in West Virginia. The fees paid for the personal services are to be assigned pursuant to §110-24-6.5.7 of this rule.
Example 9: Online Corp, a corporation based outside West Virginia, licenses an information database through the means of the Internet to individual customers that are resident in West Virginia and in other states. These customers access Online Corp's information database primarily in their states of residence and sometimes while traveling in other states. The license is a license of intangible property that resembles a sale of goods or services and are assigned in accordance with §110-24-6.5.8.e of this rule. If Online Corp can determine or reasonably approximate the state or states where its database is accessed, it must do so. Assuming that Online Corp cannot determine or reasonably approximate the location where its database is accessed, Online Corp must assign the receipts made to the individual customers using the customers' billing addresses to the extent known. Assume for purposes of this example that Online Corp knows the billing address for each of its customers. In this case, Online Corp's receipts from sales made to its individual customers are in West Virginia in any case in which the customer's billing address is in West Virginia.
Example 10: Net Corp, a corporation based outside West Virginia, licenses an information database through the means of the Internet to a business customer, Business Corp, a company with offices in West Virginia and two neighboring states. The license is a license of intangible property that resembles a sale of goods or services and are assigned in accordance with §110-24-6.5.8.e of this rule. Assume that Net Corp cannot determine where its database is accessed but reasonably approximates that 75 percent of Business Corp's database access took place in West Virginia, and 25 percent of Business Corp's database access took place in other states. In that case, 75 percent of the receipts from database access is in West Virginia. Assume alternatively that Net Corp lacks sufficient information regarding the location where its database is accessed to reasonably approximate the location. Under these circumstances, if Net Corp derives five percent or less of its receipts from database access from Business Corp, Net Corp must assign the receipts under §110-24-6.5.7.c.2.B.2 of this rule to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable, to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable, to the state of Business Corp's billing address. If Net Corp derives more than five percent of its receipts from database access from Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state.
Example 11: Net Corp, a corporation based outside West Virginia, licenses an information database through the means of the Internet to more than 250 individual and business customers in West Virginia and in other states. The license is a license of intangible property that resembles a sale of goods or services, and receipts from that license are assigned in accordance with §110-24-6.5.8.e of this rule. Assume that Net Corp cannot determine or reasonably approximate the location where its information database is accessed. Also assume that Net Corp does not derive more than five percent of its receipts from sales of database access from any single customer. Net Corp may apply the safe harbor stated in §110-24-6.5.7.c.2.B.2.d of this rule and may assign its receipts to a state or states using each customer's billing address.
Example 12: Web Corp, a corporation based outside of West Virginia, licenses an internet-based information database to business customers who then sublicense the database to individual end users that are resident in West Virginia and in other states. These end users access Web Corp's information database primarily in their states of residence and sometimes while traveling in other states. Web Corp's license of the database to its customers includes the right to sublicense the database to end users, while the sublicenses provide that the rights to access and use the database are limited to the end users' own use and prohibit the individual end users from further sublicensing the database. Web Corp receives a fee from each customer based upon the number of sublicenses issued to end users. The license is a license of intangible property that resembles a sale of goods or services and are assigned by applying the rules set forth in §110-24-6.5.7.c.2.B of this rule. If Web Corp can determine or reasonably approximate the state or states where its database is accessed by end users, it must do so. Assuming that Web Corp lacks sufficient information from which it can determine or reasonably approximate the location where its database is accessed by end users, Web Corp must approximate the extent to which its database is accessed in West Virginia using a percentage that represents the ratio of the West Virginia population in the specific geographic area in which Web Corp's customer sublicenses the database access relative to the total population in that area.
6.5.9. Sale of Intangible Property; Assignment of Receipts. -- The assignment of receipts to a state or states in the instance of a sale or exchange of intangible property depends upon the nature of the intangible property sold. For purposes of §110-24-6.5.9 of this rule, a sale or exchange of intangible property includes a license of that property where the transaction is treated for tax purposes as a sale of all substantial rights in the property and the receipts from transaction are not contingent on the productivity, use, or disposition of the property. For the rules that apply where the consideration for the transfer of rights is contingent on the productivity, use, or disposition of the property.
6.5.9.a. Contract Right or Government License that Authorizes Business Activity in Specific Geographic Area. -- In the case of a sale or exchange of intangible property where the property sold or exchanged is a contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area, the receipts from the sale are assigned to a state if and to the extent that the intangible property is used or is authorized to be used within the state. If the intangible property is used or may be used only in this state, the taxpayer must assign the receipts from the sale to West Virginia. If the intangible property is used or is authorized to be used in West Virginia and one or more other states, the taxpayer must assign the receipts from the sale to West Virginia to the extent that the intangible property is used in or authorized for use in West Virginia, through the means of a reasonable approximation.
6.5.9.b. Sale that Resembles a License (Receipts are Contingent on Productivity, Use, or Disposition of the Intangible Property). -- In the case of a sale or exchange of intangible property where the receipts from the sale or exchange are contingent on the productivity, use, or disposition of the property, the receipts from the sale are assigned by applying the rules set forth in §110-24-6.5.8 of this rule (pertaining to the license or lease of intangible property).
6.5.9.c. Sale that Resembles a Sale of Goods and Services. -- In the case of a sale or exchange of intangible property where the substance of the transaction resembles a sale of goods or services and where the receipts from the sale or exchange do not derive from payments contingent on the productivity, use, or disposition of the property, the receipts from the sale are assigned by applying the rules set forth in §110-24-6.5.8.e. of this rule (relating to licenses of intangible property that resemble sales of goods and services). Examples of these transactions include those that are analogous to the license transactions cited as examples in §110-24-6.5.8.e of this rule.
6.5.9.d. Excluded Receipts. -- Receipts from the sale of intangible property are not included in the sales factor in any case in which the transaction does not give rise to sales within the meaning of W. Va. Code §11-24-3a. In addition, in any case in which the sale of intangible property does result in sales within the meaning of West Virginia §11-24-7(e)(13)(B), those sales are excluded from the numerator and the denominator of the taxpayer's sales factor. The sale of intangible property that is excluded from the numerator and denominator of the taxpayer's sales factor under this provision includes, but is not limited to, the sale of business “goodwill,” the sale of an agreement not to compete, or similar intangible property.
6.5.9.e. Examples. -- Example 1: Sports League Corp, a corporation that is based outside West Virginia, sells the rights to broadcast the sporting events played by the teams in its league in all 50 U.S. states to Network Corp. Although the games played by Sports League Corp will be broadcast in all 50 states, the games are of greater interest in the northwest region of the country, including West Virginia. Because the intangible property sold is a contract right that authorizes the holder to conduct a business activity in a specified geographic area, Sports League Corp must attempt to reasonably approximate the extent to which the intangible property is used in or may be used in West Virginia. For purposes of making this reasonable approximation, Sports League Corp may rely upon audience measurement information that identifies the percentage of the audience for its sporting events in West Virginia and the other states.
Example 2: Inventor Corp, a corporation that is based outside West Virginia, sells patented technology that it has developed to Buyer Corp, a business customer that is based in West Virginia. Assume that the sale is not one in which the receipts derive from payments that are contingent on the productivity, use, or disposition of the property. Inventor Corp understands that Buyer Corp is likely to use the patented technology in West Virginia, but the patented technology can be used anywhere (i.e., the rights sold are not rights that authorize the holder to conduct a business activity in a specific geographic area). The receipts from the sale of the patented technology are excluded from the numerator and denominator of Inventor Corp's sales factor.
6.5.10. Special Rules. --
6.5.10.a. Software Transactions. -- A license or sale of pre-written software for purposes other than commercial reproduction (or other exploitation of the intellectual property rights) transferred on a tangible medium is treated as the sale of tangible personal property, rather than as either the license or sale of intangible property or the performance of a service. In these cases, the receipts are in West Virginia as determined under the rules for the sale of tangible personal property set forth under W. Va. Code §11-24-7(e)(11) and related rules. In all other cases, the receipts from a license or sale of software are to be assigned to West Virginia as determined otherwise under this rule (e.g., depending on the facts, as the development and sale of custom software, see §110-24-6.5.7.c of this rule, as a license of a marketing intangible, see §110-24-6.5.8.b of this rule, as a license of a production intangible, see §110-24-6.5.8.c of this rule, as a license of intangible property where the substance of the transaction resembles a sale of goods or services, see §110-24-6.5.8.e of this rule, or as a sale of intangible property, see §110-24-6.5.9 of this rule).
6.5.10.b. Sales or Licenses of Digital Goods or Services. -- In general. In the case of a sale or license of digital goods or services, including, among other things, the sale of various video, audio, and software products, or similar transactions, the receipts from the sale or license are assigned by applying the same rules as are set forth in §110-24-6.5.7.c.2.B and §110-24-6.5.7.c.2.C of this rule, as if the transaction were a service delivered to an individual or business customer or delivered through or on behalf of an individual or business customer. For purposes of the analysis, it is not relevant what the terms of the contractual relationship are or whether the sale or license might be characterized, depending upon the particular facts, as, for example, the sale or license of intangible property or the performance of a service.
W. Va. Code R. § 110-24-6a Transition Rules for C Corporations having a Fiscal Tax Year ending after January 1, 2022, and before December 31, 2022. 6a.1. Amendments to W. Va. Code §11-24-7 enacted by House Bill 2026, during the 2021 Regular Legislative Session, made several changes to how income is apportioned and sourced: 6a.1.1. For tax years beginning on or after January 1, 2022, income apportionment formula method is changed from the 4-factor formula set forth in section heading 7 to a single sales factor formula set forth in section heading 6. 6a.1.2. For sales made on or after January 1, 2022, HB 2026 voids the “throw out rule” set forth in section heading 7. Sales made after that date are subject to the “no throw rule” set forth in section 6. 6a.1.3. For sales of services and intangible property made on or after January 1, 2022, HB 2026 voids the former “cost of performance” sales allocation rule set forth in section heading 7. Sales made after that date are subject to the market-based sourcing sales allocation rule set forth in section heading 6. 6a.2. For taxpayers having a fiscal tax year ending after January 1, 2022, and before December 31, 2022, some of these changes straddle that fiscal tax year: 6a.2.1. Sales made during any portion of the fiscal tax year before January 1, 2022, are still subject to the “throw out rule.” Sales made after January 1, 2022, of the same fiscal tax year, are subject to the “no throw rule.” 6a.2.2. Sales of services and intangible property for the portion of the fiscal tax year before January 1, 2022, are subject to the “cost of performance” rule. Sales after January 1, 2022, of the same fiscal tax year, are subject to the “market-based sourcing” rule. 6a.3. Filing Option Election. -- For C corporations having a taxable year ending after January 1, 2022, and before December 31, 2022, the taxpayer may elect one of two filing options: 6a.3.1. Option 1. -- The taxpayer may file its West Virginia corporation net income tax return based upon the above-described changes for throw out rule and market based sourcing becoming effective for the taxpayer’s tax year beginning on or after January 1, 2022. 6a.3.2. Option 2. -- The taxpayer may file: 6a.3.2.a. A short period West Virginia corporation net income tax return for the period beginning with the beginning date of the taxpayer’s fiscal tax year immediately preceding January 1, 2022, and ending on December 31, 2022, and 6a.3.2.b. A second short period tax return for the period beginning January 1, 2022, and ending on the date that the taxpayer’s fiscal tax year closes. 6a.3.2.c. The taxpayer would prepare its first short period tax return based on terms, conditions, and requirements of the corporation net income tax statute prior to the effective dates mandated by HB 2026. The taxpayer would prepare its second short period tax return based on terms, conditions, and requirements of the corporation net income tax statute effective on those dates mandated by HB 2026. 6a.3.3. There is no option regarding the apportionment formula. For taxpayers having a fiscal tax year ending after January 1, 2022, and before December 31, 2022, the taxpayer must use the 4-factor formula set forth in section heading 7 for that fiscal year. The single sales factor formula set forth in section heading 6 would apply in the next fiscal year
W. Va. Code R. § 110-24-7 Allocation and Apportionment for tax years ending prior to January 1, 2022
7.1. Net rents and royalties from tangible personal property are allocable to this state in accordance with W. Va. Code §11-24-7, if they are nonbusiness income.
7.2. The extent of use of tangible personal property in a state is determined by multiplying the nonbusiness rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the taxpayer, tangible personal property is used in the state in which the property was located at the time the rental or royalty payer obtained possession.
7.2.a. If the property is in this State for any part of a day, that time shall be counted as a full day.
Examples.
7.2.b. Corporation A was formed in Ohio and has its main offices there. Corporation A owns an apartment complex in West Virginia and leases computers to users located in West Virginia. The nonbusiness net rental income from the rental of the apartment complex is allocated to West Virginia for purposes of the West Virginia Corporation Net Income Tax. Likewise, the nonbusiness net rental income received by Corporation A as a lessor of computers in this State is allocated to this State.
7.2.c. Corporation Z was formed in State X and has its commercial domicile in the State of West Virginia. Corporation Z leases tangible personal property to customers in State K and derives nonbusiness income from that activity. State K has no corporation net income tax. The net receipts from leasing tangible personal property in State K are allocated entirely to the State of West Virginia.
7.2.d. Corporation Alpha, organized and headquartered in California, leases coal mining equipment in West Virginia. Alpha began leasing equipment in West Virginia on April 1 and is a calendar year taxpayer. The coal mining equipment was not in this State until April 1, the date the lease commenced. The property is leased in this State for 275 of the 365 days in the year. If rental income from the coal mining equipment located in the State of West Virginia is nonbusiness income, and if Alpha Corporation netted $15,000 for leasing this equipment for the entire year, Alpha would include in West Virginia income the following amount: 275/365 x $15,000 = $11,301.37.
7.2.d.1. If Alpha Corporation has adequate records to show the net rental income from the equipment while the equipment was leased in this State, then it may use the actual net rental income and not "apportion" its allocation of net rental income.
7.3. Business activities partially within and partially without this State.
7.3.a. Where a corporation has income from business activities partially within this State and partially outside of this State, all net income, after deducting those items specifically allocated under W. Va. Code §11-24-7(d), shall be apportioned to this State by multiplying the net income by a fraction, the numerator of which is the property factor plus the payroll factor plus two times the sales factor, and the denominator of which is four, reduced by the number of factors, if any, having no denominator except if the sales factor has a denominator of zero, the denominator of the apportionment fraction shall be reduced by two. Note that this subdivision does not apply if the corporation is subject to a special apportionment method under W. Va. Code §11-24-7a or 7b or is authorized to use a special apportionment method pursuant to W. Va. Code §11-24-7(h).
7.3.a.1. Under W. Va. Code §11-24-7(c), if 100% of the business activities of a corporation take place in West Virginia, then the corporation does not apportion its income using the apportionment methodologies prescribed by the statute, and the entire net income of the corporation is subject to the corporation net income tax.
7.3.a.1.A. A combined group apportions the group's adjusted federal taxable income from unitary business when one or more of the members of the combined group engage in business only within the State of West Virginia, but one or more other members of the combined group engage in business activities partially in West Virginia and partially outside of West Virginia.
7.3.a.1.B. If all business activities of all combined group members take place entirely within West Virginia, then the entire net income of each combined group member is subject to the West Virginia corporation net income tax without apportionment.
7.3.a.2. Example -- General Apportionment Formula:
The following is an example of how the apportionment formula works in the context of the corporation net income tax:
A hypothetical corporation has facilities and operations in Pennsylvania, West Virginia, New York, and California.
The corporation has sales in 47 of the 50 states of the USA.
The apportionment formula is as follows:
Average value of property in WV Payroll in WV 2x Sales in WV Average value of property in USA Payroll in USA Sales in USA Federal Taxable Income -- The corporation has $10,000,000 federal taxable income from all operations in the USA after West Virginia modifications and adjustments. These modifications and adjustments are, for certain items that are required to be added to, or subtracted from, federal taxable income before apportionment.
Average value of property in the USA -- The total average value of property owned and leased by the corporation during the tax year in the USA (including property in Pennsylvania, West Virginia, New York, and California) is $517,050,000.
Average value of property in the West Virginia -- The total average value of property owned and leased by the corporation during the tax year in West Virginia is $15,000,000.
Payroll in the USA -- The total annual payroll paid to all employees of the corporation in the USA (including payroll paid in Pennsylvania, West Virginia, New York, and California) during the tax year is $65,628,000.
Payroll in West Virginia -- The total annual payroll paid to all employees of the corporation in West Virginia is $2,499,000.
Sales in the USA -- The total sales of the corporation in the entire USA (all of the 47 states in which the corporation has sales) are $435,009,000.
The corporation sells almost all of its production outside of West Virginia.
Sales in West Virginia -- The total sales of the corporation in West Virginia are $4,000.
The apportionment formula, using these values, would be as follows:
Avg. property in WV $15,000,000.
WV Payroll $2,499,000 2x Sales in WV $4,000 Avg. property in USA $517,050,000 USA Payroll $65,628,000 Sales in USA $435,009,000 The math works out as follows:
Property factor 0.029011 Payroll factor 0.038078 2x Sales factor
0.000009 OR
Property factor 0.029011 Payroll factor 0.038078 Double weighted sales factor
0.000018 OR
0.067107 OR
0.016777 -- This is the apportionment factor.
Assuming that the corporation has no allocable WV income, out of all of the operations in the USA, slightly over one percent (i.e., 0.016777) of the operations of the corporation are attributable to West Virginia operations and activity.
Net federal taxable income from all operations in the USA, after WV modifications and adjustments is $10,000,000.
Applying the apportionment formula, West Virginia taxable income is:
Federal Taxable Income (After Adjustments)
Apportionment Factor WV Taxable Income $10,000,000 x
0.016777 = $167,770.00 The final computation of the tax is as follows. The hypothetical corporation has federal taxable income after modifications and adjustments allocated and apportioned to West Virginia in the amount of $167,770.00. The tax rate for the given year is 8.75%.
Tax is .0875 x $167,770.00 = $14,679.88 (rounded)
Tax is $14,679.88.
7.3.b. Example. -- Pro Inc. is a service corporation doing business in several states, including West Virginia. Pro Inc. owns no property anywhere. In this case, the allocation formula for Pro Inc. will be:
WV Payroll + 2. (WV Sales) + 0 WV Property Total Payroll (Total Sales) 0 Total Property If, for some unusual reason, a corporation has no sales anywhere, since the sales factor is double weighted, the overall denominator would be reduced by 2.
7.4. "Business activities" include all activities engaged in by the corporation, and includes those activities giving rise to both business income and nonbusiness income.
7.4.a. All income of a corporation, including both business income and nonbusiness income, is apportioned, except nonbusiness income specifically identified in W. Va. Code §11-24-7(d), which is allocated.
7.4.a.1. All other nonbusiness income and all business income shall be apportioned.
7.4.b. Where a corporation has business activities that are in West Virginia and other states, its other net nonbusiness income that was not allocated under W. Va. Code §11-24-7(d) and all of its net business income will be apportioned.
7.5. Property factor.
7.5.a. Property factor. -- The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used by it in this State during the taxable year and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used by the taxpayer during the taxable year, which is reported on Schedule L of Federal Form 1120, plus the average value of all real and tangible personal property leased and used by the taxpayer during the taxable year.
7.5.a.1. The common law definition of real and personal property shall be used, (i.e., real property is land and all things firmly and permanently attached to the land, and personal property is all other property).
7.5.a.2. Only real and tangible personal property is counted in the property factor. The common law definition of tangible personal property shall be used. Examples of tangible personal property include, but are not limited to, books, equipment, supplies, inventories and virtually any other form of personalty that can be held or touched. Tangible personal property does not include money, chooses in action, or any other intangibles.
7.5.a.3. The average value of real and tangible personal property means the beginning and ending year balances of the relevant accounts reported on Schedule L of Federal Form 1120, or its successor. However, the Tax Commissioner may require use of a monthly average of the accounts or any other determination of the average value of the property that is appropriate for an accurate determination of the factor.
7.5.b. Value of property.
7.5.b.1. Property owned by the taxpayer shall be valued at its original cost, adjusted by subsequent capital additions or improvements to the property and by partial or total disposition of the property by reason of sale, exchange, abandonment, loss or destruction or other alienation of, or loss of, the property. Where records of original cost are unavailable or cannot be obtained without unreasonable expense, property shall be valued at current market value. Property rented by the taxpayer from others shall be valued at eight times the net annual rental rate. The term "net annual rental rate" is the annual rental paid, directly or indirectly, by the taxpayer, or for its benefit in money or other consideration for the use of the property.
7.5.b.1.A. Net annual rental rate includes any amount payable for the use of real or tangible personal property, or any part of the property, whether designated as a fixed sum of money or as a percentage of sales, profits or otherwise.
7.5.b.1.B. Any amount payable as additional rent or in lieu of rents, such as interest, taxes, insurance, repairs, or any other items which are required to be paid by the terms of the lease or other arrangement, not including amounts paid as service charges, such as utilities, janitor services and the like are also included in the term "net annual rental rate." If a payment includes rent and other charges which are not separately set forth, the amount of rent shall be determined by consideration of the relative values of the rent and the other items.
7.5.b.1.C. Real or personal property owned by one corporation which is used in this State by another corporation to which the property is rented is to be included in the property factor by both corporations unless the rental income is nonbusiness income to the receiving corporation.
7.5.b.1.C.1. Example. -- X Corporation owns certain real property located in West Virginia, which is leased by Y Corporation for the entire taxable year of both corporations. Rental income received by X Corporation is allocated to the State of West Virginia and the value of the property is not included in the apportionment factor for X Corporation's apportionable income in either the numerator of the property factor (value of taxpayer's West Virginia real and tangible personal property) and in the denominator of the property factor (value of taxpayer's real and tangible personal property owned or rented by the taxpayer for the taxable year). Eight times the annual rental rate of the property will be included in both the numerator and the denominator of the property factor for Y Corporation.
7.5.c. Movable property.
7.5.c.1. The value of movable tangible personal property used both within and outside of this State shall be included in the numerator to the extent of its use in this State. The extent of use in this State is determined by multiplying the original cost of the property by a fraction, the numerator of which is the number of days of physical location of the property in this State during the taxable period, and the denominator of which is the number of days of physical location of the property everywhere during the taxable period. The number of days of physical location of the property may be determined on a statistical basis or by any other reasonable method acceptable to the Tax Commissioner.
7.5.d. Leasehold improvements.
7.5.d.1. For purposes of the property factor, leasehold improvements are treated as property owned by the taxpayer regardless of whether the taxpayer is entitled to remove the improvements or whether the improvements revert to the lessor upon expiration of the lease. Leasehold improvements are included in the property factor at their original cost.
7.5.d.1.A. Example. -- Alpha Corporation leases a building to Beta Corporation. The building is located in West Virginia. Beta Corporation makes certain leasehold improvements to the property totaling $100,000 some of which the lease permits Beta Corporation to remove. The entire value of the leasehold improvements is included in Beta Corporation's property factor. The value of the leasehold improvements is also included in Alpha Corporations property factor.
7.5.e. Average value of property.
7.5.e.1. The average value of property is determined by averaging the values of the property at the beginning and the ending of the taxable year.
7.5.e.1.A. If there are substantial fluctuations in the values of property during the taxable year, or where property is acquired or disposed of after the beginning of the taxable year, or where the rental or lease contract ceases before the end of a taxable year, the Tax Commissioner may require the averaging of monthly values of the property during the taxable year or the pertinent part of the taxable year.
7.5.e.1.A.1. If a unitary member does not have nexus with the state of West Virginia, or if the unitary member is not taxable by West Virginia under the protections of Public Law 86-272. (15 U.S.C.A. §381), then that unitary member’s income shall be included in the combined report of the combined group. However, that unitary member’s factor attributes shall not be included in the numerator of the property factor but shall be included in the denominator of the property factor when the tax return is prepared, and for combined group members, when the combined report is prepared.
7.6. Payroll factor.
7.6.a. The payroll factor is a fraction, the numerator of which is the total compensation paid in this State during the taxable year by the taxpayer for compensation, and the denominator of which is the total compensation paid by the taxpayer during the taxable year, as shown on the taxpayer's federal income tax return filed with the Internal Revenue Service, as reflected in the schedule of wages and salaries and that portion of cost of goods sold which reflects compensation, or as shown on a pro forma return.
7.6.b. Compensation.
7.6.b.1. The term "compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services. Payments made to an independent contractor or to any other person not properly classified as an employee shall be excluded. Only those amounts paid directly to employees are included in the payroll factor. Amounts considered as paid directly to employees include the value of board, rent, housing, lodging and other benefits or services furnished to employees by the taxpayer in return for personal services, provided the amounts constitute income to the recipient for federal income tax purposes. Compensation for each employee shall be the amount of wages and salary shown on the Federal Form W-2. for the employee, in accordance with federal income tax law.
7.6.b.2. Employee.
7.6.b.2.A. For purposes of determining the payroll factor, an employee is any officer of a corporation or any individual who, under the usual common-law rule applicable in determining the employer-employee relationship, has the status of an employee.
7.6.b.2.B. An employee is a person in the service of another under any contract of hire, express or implied, oral, or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed.
7.6.c. When compensation is paid in this State.
7.6.c.1. Compensation is paid or accrued in this State if an employee's services are performed entirely within this State or if an employee's services are performed both within this State and outside of this State, but the services performed outside of this State are incidental to that employee's services within this State. The converse is not true. In all circumstances, services performed in this State are to be included in the payroll factor as services performed in this State. "Incidental", as used in this paragraph, means any service which is temporary or transitory in nature, or which is rendered in connection with an isolated transaction. Compensation is also paid or accrued in this State if some of the employee's service is performed in this State and the employee's base of operation, or if there is no base of operation, the place from which the service is directed or controlled is in this State, or the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the employees residence is within this State.
7.6.c.2. As used in this subdivision, the term "base of operations" is the place of more or less permanent nature from which the employee starts his or her work and to which he or she customarily returns in order to receive instructions from the taxpayer or communications from his or her customers or with other persons or to replenish stock or other materials, repair equipment, or perform any other functions necessary to the exercise of his or her trade or profession at some other point or points. The term "place from which the service is directed or controlled" refers to the place from which the power to direct or control is exercised by the taxpayer.
7.6.c.3. Example. -- P Corporation has salesmen in several states. West Virginia customers are serviced by a salesman living in Ohio. The salesmen are directed from a regional office located in Pennsylvania. Compensation attributable to the time spent in West Virginia on employer business would be included in the taxpayer's West Virginia payroll factor.
7.6.c.4. If a unitary member does not have nexus with the state of West Virginia, or if the unitary member is not taxable by West Virginia under the protections of Public Law 86-272. (15 U.S.C.A. §381), then that unitary member’s income shall be included in the combined report of the combined group. However, that unitary member’s factor attributes shall not be included in the numerator of the payroll factor but shall be included in the denominator of the payroll factor when the tax return is prepared, and for combined group members, when the combined report is prepared.
7.7. Sales factor.
7.7.a. The sales factor is a fraction, the numerator of which is the gross receipts of the taxpayer derived from transactions and activity in the regular course of its trade or business in this State during the taxable year, less returns, and allowances attributable to the gross receipts from the West Virginia activity. The denominator of the fraction is the total gross receipts derived by the taxpayer from transactions and activity in the regular course of its trade or business during the taxable year and reflected in its gross income reported and as appearing on the taxpayer's Federal Form 1120, and consisting of those certain pertinent portions of the elements of gross income set forth. If either the numerator or the denominator includes interest or dividends from obligations of the United States government which are exempt from taxation by this State, the amount of the interest and dividends, if any, shall be subtracted from the numerator or denominator in which it is included.
7.7.a.1. The only sales to be included in the sales factor are those which produce business income.
7.7.a.2. Rules for determining sales in certain circumstances.
7.7.a.2.A. In the case of a taxpayer engaged in manufacturing and selling or purchasing and reselling goods or products, "sales" includes all gross receipts from the sales of such goods or products (or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the tax period) held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business. Gross receipts for this purpose means gross sales less returns and allowances, and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to such sales. Federal and state excise taxes (including sales taxes) shall be included as part of such receipts if such taxes are reflected in the taxpayer’s gross income reported and as appearing on the taxpayer's Federal Form 1120.
7.7.a.2.B. In the case of cost fixed fee contracts, such as the operation of a government-owned plant for a fee, "sales" includes the entire reimbursed cost, plus the fee.
7.7.a.2.C. In the case of a taxpayer engaged in providing services, such as the operation of an advertising agency, or the performance of equipment service contracts, or research and development contracts, "sales" includes the gross receipts from the performance of the services including fees, commissions, and similar items.
7.7.a.2.D. In the case of a taxpayer engaged in renting real or tangible property, "sales" includes the gross receipts from the rental, lease, or licensing of the use of the property.
7.7.a.2.E. In the case of a taxpayer engaged in the sale, assignment, or licensing of intangible personal property such as patents and copyrights, "sales" includes the gross receipts therefrom.
7.7.b. In filing returns with this State, if the taxpayer departs from or modifies the basis for excluding or including gross receipts in the sales factor used in returns for prior years, the taxpayer shall disclose that information by attaching a statement, setting forth the nature and effect of the change, to the corporation net income tax return for the current year.
7.7.c. Sales factor denominator.
7.7.c.1. The denominator of the sales factor includes the total gross receipts derived by the taxpayer from transactions and activity in the regular course of its trade or business, unless otherwise excluded in this rule.
7.7.d. Sales factor numerator.
7.7.d.1. The numerator of the sales factor shall include gross receipts attributable to this State and derived by the taxpayer from transactions and activity in the regular course of its trade or business. All interest income, service charges, carrying charges, or time-price differential changes incidental to the gross receipts shall be included regardless of the place where the accounting records are maintained or the location of the contract or other evidence of indebtedness.
7.7.d.2. Joyce or Finnegan.
The Joyce case and the Finnegan case were tax matters brought before the California State Board of Equalization B Appeal of Joyce, Inc., 66 SBE 069, 1966 WL 1411 (Cal. St. Bd. Eq.) (Nov. 23, 1966).
Appeal of Finnigan Corp., 88- SBE-022-A, 1990 WL 15164 (Cal. St. Bd. Eq.) (Jan. 24, 1990).
The issue for which these cases have become known relates to the determination of the sales that are included in the numerator of the sales factor for purposes of the apportionment formula.
In synopsis, the basic distinction is as follows:
Joyce -- If a unitary group member has nexus with the state, then “in state” gross receipts of that member are included in the sales factor numerator, but not if the member does not have nexus with the state, determined on a “stand alone” basis.
Finnigan -- If one or more unitary group members has nexus with the state, then “in state” gross receipts of all unitary group members are included in the sales factor numerator, including “in state” gross receipts of a unitary group member that, itself, does not have nexus with the state, determined on a “stand alone” basis.
West Virginia is a “Joyce State.”
If the unitary member does not have nexus with West Virginia or if the unitary member is not taxable under the protections of PL 86-272, then that unitary member's gross receipts derived from transactions and activity in the regular course of its trade or business in West Virginia are not included in the numerator of the sales factor when the tax return is prepared, and for combined group members, when the combined report is prepared.
7.7.e. Dock sales.
7.7.e.1. Where tangible personal property is sold and the terms of the sale require the purchaser to pick up the property or otherwise receive the property in this State, the sale is to be treated as a sale taking place in this State for purposes of the sales factor.
7.7.e.2. In the case of sales requiring by their terms delivery of tangible personal property by common carrier, contract carrier or by other means of transportation excluding pickup by the customer in this State, whether directly or indirectly, the place at which the property is ultimately received after all transportation has been completed shall be considered as the place at which the property is received by the purchaser.
7.7.e.3. Direct delivery in this State, other than for purposes of transportation, to a person or firm designated by a purchaser constitutes delivery to the purchaser in this State regardless of where title passes or other conditions of sale.
7.7.e.4. Direct delivery outside this State to a person or firm designated by a purchaser does not constitute delivery to the purchaser in this State, regardless of where title passes or other conditions of sale.
7.7.e.5. Examples.
7.7.e.5.A. Baubles, Inc. is located in Huntington, West Virginia, and makes sales of tangible personal property to an Ohio company. The terms of the sale require the Ohio company to pick up the merchandise from the loading dock at Baubles. The sale is to be treated by Baubles as a sale taking place in this State.
7.7.e.5.B. Alpha Corporation, which manufactures a highly sophisticated device used in mining, purchases certain tangible personal property from a company located in Virginia. Alpha Corporation, located in Bergoo, West Virginia is required by the terms of the sales contract to pick up the merchandise at the Virginia company's loading dock in Virginia. The sale is to be treated as not occurring in West Virginia by the Virginia company absent other nexus with West Virginia.
7.7.e.5.C. RPS, Inc., is located in Morgantown, West Virginia and makes sales of tangible personal property. Some of the sales contracts require RPS to ship the goods to companies located outside of this State via common carrier. The sales of the tangible personal property shipped by the carrier are not included as West Virginia sales.
7.7.f. Special rules.
7.7.f.1. Where substantial amounts of gross receipts arise from an incidental or occasional sale of a fixed asset used in the regular course of the taxpayer's trade or business, the gross receipts shall be excluded from the sales factor. For example, gross receipts from the sale of a factory or plant will be excluded.
7.7.f.2. Insubstantial amounts of gross receipts arising from incidental or occasional transactions or activities may be excluded from the sales factor unless the exclusion would materially affect the amount of income apportioned to this State. For example, the taxpayer ordinarily may include or exclude from the sales factor gross receipts from such transactions as the sale of office furniture, business automobiles, etc.
7.7.f.3. Where the income producing activity of a taxpayer other than a banking or financial institution in respect to business income from intangible personal property can be readily identified, the income is included in the denominator of the sales factor and, if the income producing activity occurs in this State, the numerator of the sales factor as well. For example, usually the income producing activity can be readily identified in respect to interest income received on deferred payments on sales of tangible property and income from the sale, licensing, or other use of intangible personal property.
7.7.f.4. Where the business income from intangible property cannot readily be attributed to any particular income producing activity of a taxpayer other than a banking or financial institution, the income cannot be assigned to the numerator of the sales factor for any state and shall be excluded from the denominator of the sales factor. For example, where business income in the form of dividends received on stock, royalties received on patents or copyrights, or interest received on bonds, debentures, or government securities results from the mere holding of the intangible personal property by the taxpayer, the dividends and interest shall be excluded from the denominator of the sales factor.
7.7.g. Allocation of sales of tangible personal property.
7.7.g.1. Sales of tangible personal property are in this State if the property is received in this State by the purchaser, other than the United States government, regardless of the f.o.b. point or other conditions of the sale. In the case of delivery by common carrier or other means of transportation, the place at which the property is ultimately received after all transportation has been completed shall be considered as the place at which the property is received by the purchaser, regardless of where title passes or other conditions of sale. Direct delivery in this State, other than for purposes of transportation, to a person or firm designated by the purchaser, constitutes delivery to the purchaser in this State, and direct delivery outside this State to a person or firm designated by the purchaser does not constitute delivery to the purchaser in this State, regardless of where title passes or other conditions of sale. The sales of tangible personal property are also in this State if the property is shipped from an office, store, warehouse, factory, or other place of storage in this State and the purchaser is the United States government.
7.7.g.2. Throw-out rule -- All other sales of tangible personal property delivered or shipped to a purchaser within a state in which the taxpayer is not taxed are excluded from the denominator of the sales factor. This is commonly known as the throw-out rule.
7.7.g.2.A. "Not taxed in another state" means in that state the taxpayer is not subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporation stock tax or that a state has no jurisdiction to subject the taxpayer to a net income tax.
7.7.g.2.B. Application of throw out rule when computing the unitary group's sales factor denominator in the group's combined report. - W. Va. Code §11-24-13a(a) provides that the use of a combined report does not disregard the separate identities of the taxpayer members of the combined group. Consequently, the throw-out rule is applied on a corporation-by-corporation basis and is not applied as if the combined group were a single taxpayer, to determine the denominator of the sales factor for each member of the combined group included in the combined report. The separate corporation sales factor denominators are then aggregated to determine the denominator of the sales factor of the combined group.
7.7.g.2.B.1. Example 1. When all sales of tangible personal property produce income from unitary group business activity. - A combined group engaged in unitary business activity consists of Corporations A, B, C and D. The combined group makes sales to customers in States 1, 2, 3, 4, 5 and 6. But not every member of the combined group makes sales to customers in all of those states and, in some of the states, the member is not subject to an income tax because of Public Law 86-272. When computing the denominator of the combined group's sales factor for purposes of the West Virginia combined report, the throw-out rule will be applied separately to each member of the combined group and the aggregate adjusted denominator will be the sales factor denominator for the combined group engaged in unitary business activity.
Sales Factor Denominator Before Throw-out After Throw-out Corporation A Corporation B $ 4 million Corporation C $ 4.5 million Corporation D $ 3 million Total $20 million $16.5 million
7.7.g.2.B.2. Example 2. When some but not all sales of tangible personal property produce income from unitary group business activity. - A combined group engaged in unitary business activity consists of Corporations A, B, C and D. Corporations A and C also have income from business activity that is not unitary business activity. The combined group makes sales to customers in States 1, 2, 3, 4, 5 and 6. But not every member of the combined group makes sales to customers in all of those states and, in some of the states, the member is not subject to an income tax because of Public Law 86-272. Because Corporations A and C have receipts from sales of tangible personal property that produce business income from unitary business activity and receipts from sales of tangible personal property that produces business income from other business activities that are not unity business activities, the sales factor numerators and denominators of Corporations A and C shall be further analyzed so that only sales of tangible personal property from unitary business activity are included when apportioning the business income from unitary business activity. When computing the denominator of the combined group's sales factor for purposes of the West Virginia combined report, the throw-out rule will be applied separately to each member of the combined group and the aggregate adjusted denominator will be the sales factor denominator for the combined group engaged in unitary business activity.
7.7.g.2.B.3. Example 3. - When a partnership owned in part by a corporation has taxable nexus in one or more states into which the corporation sells tangible personal property, but the corporation does not otherwise have taxable nexus with those states. C A combined group engaged in unitary business activity consists of Corporations A, B, C and D. The combined group makes sales to customers in States 1, 2, 3, 4, 5 and 6. However, Corporations A and C do not sell tangible personal property to customers in all of those states or, in some of the states, Corporations A and C are not subject to an income tax because of application of Public Law 86-272. Corporations A and C each own an interest in partnerships engaged in unitary business activity with the combined group. These partnerships do have taxable nexus with states into which Corporations A and C sell tangible personal property and in which Corporations A and C do not have taxable nexus if their partnership interests are disregarded. For taxable years beginning after December 31, 2008, each corporation's share of the property, payroll and sales factors of the partnerships are included in the property, payroll, and sales factors of their corporate owners. As a consequence, all members of the combined group have taxable nexus with all of the states into which they sell tangible personal property, and the throw-out rule does not apply to this combined group.
7.7.h. Allocation of other sales.
7.7.h.1. Sales, other than sales of tangible personal property are in this State if the income-producing activity is performed in this State or the income-producing activity is performed both in and outside this State and a greater proportion of the income-producing activity is performed in this State than in any other state, based on costs of performance, or the sale constitutes business income to the taxpayer, or the taxpayer is a financial organization not having its commercial domicile in this State, and in either case the sale is a receipt described as attributable to this State in W. Va. Code '11-24-7b.
7.7.i. If a unitary member does not have nexus with the State of West Virginia, or if the unitary member is not taxable by West Virginia under the protections of Public Law 86-272. (15 U.S.C.A. §381), then the unitary member’s income shall be included in the combined report of the combined group. However, that unitary member’s sales factor attributes shall not be included in the numerator of the combined group’s sales factor, but subject to the provisions of paragraph 7.7.g.2. of this rule, may be included in the denominator of the payroll sales factor of the combined group. However, if the member has sales of tangible personal property subject to the throw-out rule, then its sales factor attributes for those sales of tangible personal property not taxed in another state are excluded from both the numerator and the denominator of the sales factor of the combined group.
7.7.j. The term "income-producing activity" applies to each separate item of income and means the transactions and activity directly engaged in by the taxpayer in the regular course of its trade or business for the ultimate purpose of obtaining gain or profit. The activity does not include transactions and activities performed on behalf of the taxpayer, such as those conducted on its behalf by an independent contractor. "Income-producing activity" includes, but is not limited to:
7.7.j.1 Rendering of personal services by employees with use of tangible and intangible property by the taxpayer in performing a service;
7.7.j.1.A. The sale, rental, leasing, licensing, or other use of real property;
7.7.j.1.B. The sale, rental, leasing, licensing, or other use of tangible personal property; or
7.7.j.1.C. The sale, licensing, or other use of intangible personal property. The mere holding of intangible property is not, in itself, an income-producing activity: Provided, That the conduct of the business of a financial organization shall constitute an income-producing activity.
7.7.k. The term "cost of performance" means direct costs determined in a manner consistent with generally accepted accounting principles and in accordance with accepted conditions or practices in the trade or business of the taxpayer.
7.7.l. Application and special rules.
7.7.l.1. Gross receipts from the sale, lease, rental, or licensing of real property are located in this State if the real property is located in this State.
7.7.l.2. Gross receipts from the sale, rental, lease, or licensing of tangible personal property are in this State if the property is located within this State. The rental, lease, licensing or other use of tangible personal property in this State is a separate income producing activity from the rental, lease, licensing or other use of the same property while located in another state; consequently, if property is within and without this State during the rental, lease, or licensing period, gross receipts attributable to this State shall be measured by the ratio which the days the property was physically present or was used in this State bears to the total days of the physical location or use of the property everywhere during that period, including the days it was physically located or used in a state in which the taxpayer is not taxed within the meaning of that term as provided in subparagraph 7.7.g.2.A of this rule.
7.7.l.3. Example. -- The taxpayer is the owner of ten railroad cars. During the current tax year, the total of the days each railroad car was present in this State was 60 days. The receipts attributable to the use of each of the railroad cars in this State are a separate item of income and shall be determined as follows: 10 cars X 60 days each X Total receipts = Receipts attributable to this State. 365 days in 1 year X 10 cars
7.7.l.4. Gross receipts for the performance of personal services are attributable to this State to the extent the services are performed in this State. If services relating to a single item of income are performed partly within and partly outside of this State, the gross receipts for the performance of the services shall be attributable to this State only if a greater proportion of the services was performed in this State, based upon costs of performance. Usually, where services are performed partly within and partly outside of this State, the services performed in each state constitute a separate income producing activity; in that case the gross receipts for the performance of services attributable to this State shall be measured by the ratio which the time spent in performing the services in this State bears to the total time spent in performing such services everywhere, including the time spent in performing the services in a state in which the taxpayer was not taxed within the meaning of that term as provided in subparagraph 7.7.g.2.A. of this rule.
7.7.l.5. Example. -- Taxpayer, a road show, gave theatrical performances at various locations in State X and in this State during the tax period. All gross receipts from performances given in this State are attributable to this State as each performance is a separate income producing activity.
7.7.l.6. Example. -- Taxpayer, a public opinion survey corporation, conducted a poll by its employees in State F and in this State for the sum of $10,000. The project required 800-man hours to obtain the basic data and to prepare the survey report. Three hundred of the 800-man hours were expended in this State. The receipts attributable to this State are: 300/800 X $10,000 = $3,750.
7.7.l.7. Example. -- Boil Laboratories, Inc. performs certain medical tests. Boil Laboratories is located in Virginia, where all analysis is performed. Boil Labs also has a location in this State where tissue specimens are collected, as well as a truck and routeman in this State who collects samples from various doctor's offices and hospitals. Boil Labs has a similar set-up in Virginia. It costs Boil Labs $18 to analyze each specimen. All but $5 of the $18 of these costs are incurred in the State of Virginia. Each sample or specimen is a separate income-producing activity and is not the sale of tangible personal property. Since the income-producing activity is performed both in and outside of this State, and a greater proportion of the income producing activity is not performed in this State, then none of the charges for the analysis of samples or specimens drawn in this State will be included as sales in this State for purposes of the sales factor.
7.8. Termination Date. -- This section heading 7 will terminate and have no force or effect for tax years beginning on or after January 1, 2022, except for those taxpayers using the transition rules set forth in section heading 6a.
W. Va. Code R. § 110-24-7a Special Apportionment Rules. 7a.1. For purposes of this rule, any member of a unitary group that is required or permitted to use an apportionment formula or apportionment method other than an apportionment formula or apportionment method prescribed by W. Va. Code §11-24-7 is a “special apportionment member.” 7a.1.a. Unitary groups which include some members which are required to use the apportionment formula set forth in W. Va. Code §11-24-7 and other members which are required to use a special apportionment method are subject to apportionment as described in the following paragraph. 7a.1.a.1. In the absence of a method otherwise authorized or required by the Tax Commissioner, as described in subdivision 7a.1.b of this rule, a special apportionment member shall report and file its tax based on designation of a combined reporting group limited to unitary group members who are required or permitted to use a special apportionment formula or method, and who do in fact use the same special apportionment formula or method as the special apportionment member. The income and the factors of a special apportionment member shall not be included in the combined reporting group comprised of the remainder of the unitary group that are not special apportionment members that use an apportionment formula other than the apportionment formula of the particular special apportionment member. 7a.1.b. In lieu of the method described in paragraph 7a.1.a.1 of this rule, a special apportionment member may seek authorization of the Tax Commissioner to report and file its tax on a separate return basis, pursuant to accounting and allocation and apportionment requirements prescribed by the Tax Commissioner on a case-by-case basis. 7a.1.c. Motor carriers -- Motor carries required to use the apportionment formula or apportionment method specified in W. Va. Code §11-24-7a(b) are special apportionment members. 7a.1.d. Financial organizations -- Financial organizations required to use the apportionment formula or apportionment method specified in W. Va. Code §11-24-7b are special apportionment members. 7a.1.e. The Tax Commissioner may designate a Taxpayer that is using allocation methods and an apportionment formula or apportionment methods required by the Tax Commissioner pursuant to the provisions of W. Va. Code §11-24-7(h) to be a special apportionment member. However, unless specifically designated by the Tax Commissioner to be a special apportionment member, a corporation using an allocation method and an apportionment formula or apportionment methods required by the Tax Commissioner pursuant to the provisions of W. Va. Code §11-24-7(h) is considered to be a Taxpayer which uses an allocation method and an apportionment formula or apportionment methods prescribed by W. Va. Code §11-24-7, and shall not be designated or considered to be a special apportionment member
W. Va. Code R. § 110-24-8 Accounting Periods And Methods Of Accounting
8.1. Period of computation of West Virginia taxable income.
8.1.a. For purposes of the tax imposed by this article, a taxpayer's taxable year shall be the same as the taxpayer's taxable year for federal income tax purposes.
8.2. Change of taxable year.
8.2.a. If a taxpayer's year is changed for federal income tax purposes, the taxpayer's taxable year for purposes of this rule shall be similarly changed.
8.3. Methods of accounting.
8.3.a. Same as federal.
8.3.a.1. A taxpayer's method of accounting under this rule shall be the same as the taxpayer's method of accounting for federal income tax purposes. In the absence of any method of accounting for federal income tax purposes, West Virginia taxable income for purposes of this rule shall be computed under a method that in the opinion of the Tax Commissioner clearly reflects the income.
8.3.b. Change of accounting methods.
8.3.b.1. If a taxpayer's method of accounting is changed for federal income tax purposes, his or her method of accounting for purposes of this rule shall be changed so that it conforms to the method used for federal income tax purposes.
8.4. Adjustments.
8.4.a. In computing a taxpayer's West Virginia taxable income for any taxable year under a method of accounting different from the method under which the taxpayer's West Virginia taxable income for the previous year was computed, there shall be taken into account those adjustments which are determined to be necessary solely by reason of the change in order to prevent amounts from being duplicated or omitted.
8.5. Limitation on additional tax.
8.5.a. Change other than to installment method.
8.5.a.1. If a taxpayer's method of accounting is changed, other than from an accrual to an installment method, any additional tax which results from adjustments determined to be necessary solely by reason of the change shall not be greater than if the adjustments were ratably allocated and included for the taxable year of the change and the preceding taxable years, not in excess of two, during which the taxpayer used the method of accounting from which the change is made.
8.5.a.2. The procedures for determining tax liability under the provisions of W. Va. Code §11-24-8(e) are as follows:
8.5.a.2.A. Compute the tax for the current year using the regular method, including determination of the effective tax rate.
8.5.a.2.B. Multiply the dollar amount of the income adjustment included in the West Virginia taxable income by the current year effective tax rate.
8.5.a.2.C. Prorate the adjustments over the current tax year and over no more than two of the preceding tax years.
8.5.a.2.D. Multiply the dollar amount of the adjustments allocated to each of the years, to the extent the adjustments were included in West Virginia taxable income, by the effective tax rate applicable to each of the years.
8.6. Change from accrual to installment method.
8.6.a. If a taxpayer's method of accounting is changed from an accrual to an installment method, any additional tax for the year of the change of method and for any subsequent year which is attributable to the receipts of installment payments properly accrued in a prior year shall be reduced by the portion of tax for any prior taxable year attributable to the accrual of the installment payments.
8.7. Coordination of reporting year among combined reporting unitary group members having diverse tax years.
8.7.a. Principal member. For purposes of this rule, "Principal member" is the member of the combined reporting group whose accounting period is used as a reference period for all members of the combined reporting group to aggregate and apportion combined report business income of the group. A principal member need not be a taxpayer member.
8.7.a.1. Corporations Described. Once a principal member has been determined under this subsection, that member shall remain the principal member for all succeeding periods that it is a member of the combined reporting group. However, the Tax Commissioner may authorize designation of a different principal member. Except as otherwise provided, the "principal member" is the corporation first described in subparagraphs 8.7.a.1.A, 8.7.a.1.B, 8.7.a.1.C and 8.7.a.1.D of this paragraph:
8.7.a.1.A. The parent corporation to all members of the combined reporting group. For purposes of this determination, a corporation which owns on average during the taxable year more than fifty percent of the stock of all classes of another corporation is defined to be the "parent corporation" of the corporation which is so owned.
8.7.a.1.B. If the group does not have a parent corporation which is a member of the combined reporting group, as so defined, the "principal member" is a corporation which is a lower tier parent to all members of the combined report. A "lower tier parent" is the first corporation, down the chain of corporations, which is a member of the combined reporting group and which would have constituted a "parent corporation" to all members of the combined group if all corporations which own or constructively own that corporation were disregarded.
8.7.a.1.C. If the group does not have a "lower tier parent" corporation which is a member of the combined reporting group, the "principal member" is the taxpayer member of the combined reporting group expected to have, on a recurring basis, the largest amount, by value, of real and tangible personal property in West Virginia. The value of real and tangible personal property shall be determined pursuant to the property factor provisions of W. Va. Code §§11-24-1, et seq. and this rule.
8.7.a.1.D. Election to Designate Principal Member. Notwithstanding the provisions of paragraph 8.7.a.1, in the first income year in which a combined report is required, the taxpayer members of the combined reporting group may elect to treat any other member of the combined reporting group as the "principal member," so long as it is consistently treated as such for the year of the election and thereafter. Thereafter, the taxpayer members may change their principal member only with consent of the Tax Commissioner.
8.7.b. Inconsistent Principal Member. In the event that members of a combined reporting group have filed with inconsistent principal members (including cases where two or more groups of corporations erroneously filed as distinct combined reporting groups) the determination of the appropriate principal member shall be made in accordance with the provisions of subdivision 8.7.a. of this section, unless, in the discretion of the Tax Commissioner, selection of another principal member is authorized or mandated by the Tax Commissioner.
8.8. Fiscalization to Principal Member's Year. "Fiscalization" is the process under which a member of a combined reporting group aligns the income and apportionment data from its accounting period to the accounting period of the principal member. If the accounting period of the principal member and one or more of the other members of the combined reporting group do not begin and end on the same dates, adjustments shall be made to fiscalize the other members' combined report business income and apportionment data in order to assign an appropriate amount of those values to the accounting period of the principal member.
8.8.a. Combined report business income of a taxpayer member, determined under W. Va. Code §§11-24-1, et seq. and this rule, is proportionately assigned to the applicable portion of that member's income year, based on the number of months falling within the common accounting period of the principal member. The resulting income from those portions is then aggregated (or netted) together for the member's income year to determine that member's business income attributable to the combined reporting group.
8.8.a.1. If the accounting period of a principal member and one of the other members of a combined reporting group do not begin and end on the same dates, adjustments shall be made to the other members' combined report business income and apportionment data to assign an appropriate amount of those values to the accounting period of the principal member in order for total group combined report business income to be apportioned. Each member of the group should generally use combined report business income and apportionment data from its books of account earned during the accounting period of the principal member. This will require an interim closing of the books for members whose normal accounting period differs from the principal member. However, a pro rata method of converting income to the principal member's accounting period will be accepted as long as the method does not produce a material misstatement of income apportioned to this state. Unless otherwise permitted or required by the Tax Commissioner, the treatment of both the income and the apportionment data of any particular member shall use the same method. If one method was used to account for a member's income and apportionment data in the combined report for the principal member's preceding accounting period and another method will be used in the combined report for the principal member's next accounting period, adjustments to income and apportionment data of the member shall be made to prevent income and apportionment data from being omitted or duplicated.
8.8.a.2. Interim closing method.
8.8.a.2.A. The combined report business income and expense of a member of the combined reporting group is determined by reference to the sum (or net) of that income from the actual books and records of that member for each of the partial accounting periods of the member shared with the principal member. For example, if the principal member has an accounting period ending on December 31, 2010, and another member has an accounting period ended March 31, 2011, the other member determines its income from its actual books and records for the partial accounting periods beginning January 1, 2010, and ending March 31, 2010, and from April 1, 2010 and ending December 31, 2010.
8.8.a.2.B. The apportionment data for West Virginia, and everywhere shall also be determined by reference to the member's books and records, W. Va. Code §§11-24-1 et seq. and this rule, for the appropriate partial accounting year. Under the interim method, if the tax years fall under the apportionment formula set forth in section heading 7, the property factor computation should reflect the actual, not prorated, property owned and rented during the principal member's accounting period. For tax years beginning on or after January 1, 2022, income is apportioned as set forth in section heading 6 of this rule and property is no longer a factor in the apportionment formula.
8.8.a.2.B.1. Example. If the principal member has an accounting period ending on December 31, 2010, and another member has an accounting period ended March 31, 2011, the other member will determine its total property and its West Virginia property from its actual books and records on the basis of the period from January 1, 2010 to December 31, 2010.
8.8.a.2.C. Interim combined report business income and apportionment data from the respective partial periods is then combined with the income and apportionment data of the accounting period of the principal member, along with business income and apportionment data of other members of the combined reporting group for the same period, using, if applicable, the methods prescribed in W. Va. Code §§11-24-1, et seq. and this rule.
8.8.b. Pro rata method.
8.8.b.1. At the election of the members of a combined reporting group and with the express authorization of the Tax Commissioner, fiscalization of combined report business income of one or more members of the group to the accounting period of the principal member may be determined by use of a pro rata method. However, the election is not available if that method produces a material misstatement of income. Under the pro rata method, the apportionment data and combined report business income from the member's adjusted separate books of account (i.e., adjusted to reflect the determination of income under W. Va. Code §§11-24-1, et seq. and this rule) is assigned to the respective portion of the principal member's accounting period based on the ratio of months in common with that member. For example, if the principal member's accounting period ends on December 31, 2010, a member whose income year ends on March 31 will reflect 3/12ths of its adjusted separate combined report business income and its property, payroll and sales for its income year ended March 31, 2010 in the December 31, 2010 accounting period of the principal member. That member will then reflect 9/12ths of its adjusted separate combined report business income and its apportionment data for its income year ended March 31, 2011 in the December 31, 2010 accounting period of the principal member.
8.8.b.2. The combined report business income and apportionment data from the respective partial periods is then combined with the income and apportionment data of the accounting period of the principal member, along with business income and apportionment data of other members of the combined reporting group for the same period, using, if applicable, the methods prescribed in W. Va. Code §§11-24-1, et seq. and this rule. The combined business income is then apportioned to each of the taxpayer members of the group.
8.8.b.3. In the event that the pro rata method requires the determination of income and apportionment data of a corporation whose accounting period has not yet closed, and the information cannot be obtained in time for the other members to file an accurate return, the income and apportionment data for that period shall be estimated based on available information. If the use of actual income and apportionment data results in a material change in the tax liabilities of the taxpayer members of the group, the taxpayer members shall file an amended return to reflect the change.
8.8.c. After the combined reporting group's income is apportioned to West Virginia, West Virginia combined report business income of a taxpayer member is then proportionately assigned to the applicable portion of that member's income year, based on the number of months falling within the common accounting period of the principal member. For example, if the principal member's accounting period year ends on December 31, 2010, a taxpayer member whose income year ends on March 31 will reflect 3/12ths of its share of apportioned income from the principal member's December 31, 2010 accounting period in its income year ended March 31, 2010, and 9/12ths of its share of that income in its income year ended March 31, 2011. The resulting income from the segments is then aggregated (or netted) together for the member's income year to determine that member's West Virginia business income attributable to the combined reporting group.
8.9. Partial Combined Reporting Periods.
8.9.a. If a member of a combined reporting group is not a member of the combined reporting group during the entire accounting period of the principal member (e.g., because of lack of a unitary relationship, or termination of a unitary relationship), modified combined reporting procedures apply as provided in this rule. Business income and apportionment data of a member is included in the combined report of the remaining members only for the period (or partial period) for which all of the members are in the combined reporting group. Thus, if a member of a combined reporting group enters or leaves the group at a time during the middle of the accounting period of the principal member, a separate combined report determination is required to be made only for the partial period of combination. The partial period combination is made using the same combined reporting procedures for a 12-month period, except that income, and apportionment data will reflect only the amounts applicable to the partial period. With express permission of the Tax Commissioner, a pro rata method may be used to determine each member's income and apportionment data for the partial period, unless it results in a material misstatement of income. If so, the interim closing method shall be used. Establishment or termination of a combined reporting relationship will not, by itself, cause a short period filing requirement.
8.9.a.1. Example: Corporations A, B, and C are members of a combined reporting group. Corporation A is the principal member and has a calendar year accounting period. On May 1, Corporation A acquires Corporation D. Because of substantial preexisting business relationships, Corporation D immediately becomes a member of the combined reporting group on that date. Only Corporations B and C are West Virginia taxpayers. As provided in this paragraph, two combined report calculations are required. The first combined report calculation includes the combined report business income and apportionment data of Corporations A, B, and C from January 1 through April 30. The combined report business income for that period is then apportioned to West Virginia taxpayer members B and C, for the period January 1 through April 30. The second combined report calculation includes the combined report business income and apportionment data of Corporations A, B, C, and D from May 1 through December 31. The combined report business income for that period is then apportioned to West Virginia taxpayer members B and C for the period May 1 through December 31.
8.9.b. If a taxpayer member's income year does not begin and end on the same dates as the partial period combination (e.g., a short-period return is not required), the taxpayer member's West Virginia income earned during that portion of the income year before and after the partial period combination is aggregated (or netted) with the taxpayer member's West Virginia combined report income from the partial period combination. On occasion, the West Virginia income described will include income from two or more partial period combinations.
8.9.b.1. Example: Corporation P owns all of the stock of Corporation S for the 12. month period ended December 31, 2011. Corporations P and S are unitary and are obligated to file a combined report for the entire period. Corporation P acquires 51% of the stock possessing voting power of Corporation A on March 7, 2011. The acquisition does not compel the filing of a short period return by Corporation A. All of the Corporations have a calendar year accounting period. Corporation A becomes unitary with Corporations P and S on July 1, 2011 and is obligated to file a combined report with Corporations P and S for the partial period beginning on July 1, 2011. The income and apportionment data of Corporation A for the period prior to July 1, 2011, cannot be included in a combined report with Corporations P and S. Under W. Va. Code §§11-24-1, et seq. and this rule, two separate partial period combined report calculations are required. One is for the P-S group for the partial period ended June 30, 2011, and the other is for the P-S-A group for the partial period from July 1, 2011, to December 31, 2011.
If Corporation P's West Virginia combined report income is $ 250,000 for the partial period ended June 30, 2011 and P has a $ 60,000 West Virginia net operating loss for the partial period ended December 31, 2011, Corporation P's West Virginia combined reporting income for its income year ended December 31, 2011, is $ 190,000. If Corporation A has West Virginia income from its unaffiliated and non-unitary partial period (or from another combined reporting group, if applicable) of $ 50,000 and A has a West Virginia net operating loss of $ 30,000 for the combined report partial period after it joined the combined reporting group, Corporation A's West Virginia income for its income year that ended December 31, 2011, is $ 20,000.
8.9.c. In lieu of partial period combination method described by subdivisions 8.9.a and 8.9.b of this rule, the taxpayer members of the commonly controlled group may elect to use the method provided in this subdivision. The election shall be consistently used by all taxpayer members. The election may not be used if the results of that method, compared with the provisions of subdivisions 8.9.a and 8.9.b of this rule, results in a material misstatement of the taxpayer member's West Virginia income. Under the method described in this subdivision, the partial period combined reporting income of a member, which is not in a combined reporting relationship with the principal member for the entire accounting period of the principal member, is considered to be reflected by the relative weighting of the apportionment data of the partial period member to the apportionment data of the rest of the combined reporting group for the accounting period of the principal member. The method applies as follows:
8.9.c.1. The principal member's income and apportionment data are determined for its entire accounting period (usually a 12. month period). All other members which were members of the combined reporting group during the entire period of the principal member shall also include their income and apportionment data for that period, using fiscalization methods, if appropriate.
8.9.c.2. Members who were not members of the combined reporting group for the entire accounting period of the principal member shall include in the combined report only their income for the partial period during which they were a member. Normally this income will be determined by an interim closing of the member's books of account. Similarly, the apportionment data of that member is included only for that same partial period.
8.9.c.3. Property factor data for the partial period member (both West Virginia property and total property) shall be adjusted to reflect the fact that the property was not used in the combined reporting group for the entire period of the principal member. For example, if the partial period member was in the combined reporting group for only 7 months of the 12-month accounting period of the principal member, only 7/12's of the member's average West Virginia and total property for the period shall be reflected in the combined report. For tax years beginning on or after January 1, 2022, income is apportioned as set forth in section heading 6 of this rule and property is no longer a factor in the apportionment formula.
8.9.c.4. Apportionment shall be computed using the amounts included in paragraphs 8.9.c.1 through 8.9.c.3 of this rule, as if the partial period members were members for the entire accounting period of the principal member. The amounts apportioned to the individual taxpayer members then reflects the member's West Virginia combined reporting income for the partial period. That member then shall aggregate (or nets) West Virginia combined reporting income with its West Virginia income from other activity to compute income subject to taxation for the entire income year.
8.9.c.4.A. Example: For tax year 2011, using the same facts as provided in paragraph 8.9.a.1. of this subsection, except that the members of the group elect to report under subdivision 8.9.c. of this rule, Corporation A, B, and C determine their income and apportionment data for the entire 12 months of the calendar year. Corporation D determines its income and apportionment data for the period May 1 - December 31. However, because Corporation D was not a member of the combined reporting group for the entire calendar year, the property factor values for the combined reporting period shall be multiplied by 8/12ths to reflect a weighted average value of that property in the principal member's accounting period. The West Virginia combined report income of Corporations B and C are then determined as if Corporation D's income and apportionment data were entirely earned in the principal member's accounting period.
8.9.c.4.B. Example: For tax year 2022, using the same facts as provided in paragraph 8.9.a.1 of this subsection, except that the members of the group elect to report under subdivision 8.9.c of this rule, Corporation A, B, and C determine their income and apportionment data for the entire 12 months of the calendar year. Corporation D determines its income and apportionment data for the period May 1 - December 31. The West Virginia combined report income of Corporations B and C are then determined as if Corporation D's income and apportionment data were entirely earned in the principal member's accounting period.
8.9.c.4.C. Example: Using the same facts provided in subparagraph 8.9.c.4.A. of this rule, except that Corporation D is a calendar year West Virginia taxpayer, and its addition to the combined reporting group did not cause a short period filing requirement, Corporation D's West Virginia combined report income, determined under this subdivision, would be treated as earned for the period May 1 through December 31. That West Virginia income would be aggregated (or netted) with its other West Virginia income for the entire calendar year, as provided in subdivision 8.9.b of this rule. §§110-24-9 through 13. Reserved for Future Use.
W. Va. Code R. § 110-24-13a Combined Reporting. 13a.1. For tax years beginning on and after the January 1, 2009, any taxpayer engaged in a unitary business with one or more other corporations shall file a combined report which includes the income, determined under W. Va. Code §§11-24-13c or 13d, and the allocation and apportionment of income provisions of W. Va. Code §§11-24-1, et seq., of all corporations that are members of the unitary business. 13a.1.a. The income of an insurance company shall not be included in a combined report filed under W. Va. Code §§11-24-1, et seq. and the allocation or apportionment of income related to the insurance company shall not be included in and the apportionment factors of an insurance company shall not be included in the combined report, unless specifically required to be included by the Tax Commissioner. 13a.1.b. An insurance company, unless otherwise exempt from or excluded from tax under W. Va. Code §§11-24-1, et seq. or other provisions of the W. Va. Code, shall file a separate corporation net income tax return. 13a.2. Determination of unitary business. The term "unitary business" is defined in W. Va. Code §§11-24-1, et seq. as a single economic enterprise that is made up either of separate parts of a single business entity or of a commonly controlled group of business entities that are sufficiently interdependent, integrated and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. 13a.2.a. For purposes of W. Va. Code §§11-24-1, et seq. and W. Va. Code §§11-23-1, et seq. a partnership shall be treated as conducted by its partners, whether directly held or indirectly held through a series of partnerships, to the extent of the partner's distributive share of the partnership's income, regardless of the percentage of the partner's ownership interest or the percentage of its distributive or any other share of partnership income. A business conducted directly or indirectly by one corporation through its direct or indirect interest in a partnership is unitary with that portion of a business conducted by one or more other corporations through their direct or indirect interest in a partnership if there is a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts and the corporations are members of the same commonly controlled group. 13a.2.b. More than fifty percent ownership rule -- For purposes of this rule, the term commonly controlled group, with reference to any Taxpayer, means and includes all related entities as defined in this rule, in the aggregate. 13a.2.b.1. The term “related entity" means: 13a.2.b.1.1. An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof controlled by the taxpayer; 13a.2.b.1.2. An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof that is in control of the taxpayer; 13a.2.b.1.3. An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof controlled by an individual, corporation, partnership, affiliate, association or trust or any combination or group thereof that is in control of the taxpayer; or 13a.2.b.1.4. A member of the same controlled group as the taxpayer, as the term “controlled group” is defined in Section 267 of the Internal Revenue Code of 1986, as amended. 13a.2.b.2. For purposes of this section, "control," with respect to a corporation, means ownership, directly or indirectly, of stock possessing more than fifty percent of the total combined voting power of all classes of the stock of the corporation entitled to vote. "Control," with respect to a trust, means ownership, directly or indirectly, of more than fifty percent of the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in Section 267(c) of the United States Internal Revenue Code of 1954, as amended, other than paragraph (3) of that section. 13a.3. Unitary business. 13a.3.a. Determination of a unitary or separate Business. 13a.3.a.1. A corporation subject to taxation may be engaged in more than one "trade or business." In those cases, it is necessary to determine the business income attributable to each separate trade or business. The income of each business is then apportioned by a formula which takes into consideration the in-state and out-of-state factors which relate to the respective trade or business subject to apportionment. 13a.3.a.2. In addition, a corporation may be engaged in a single trade or business in combination with another commonly owned and controlled corporation or corporations. In those cases, it is necessary to determine the total business income of all corporations attributable to the single trade or business. The combined income of the single trade or business shall be apportioned by formula which takes into consideration the in-state and out-of-state factors of each corporation which relate to that single trade or business. 13a.3.a.3. When business segments of a single corporation or the business activities of more than one corporation constitute a single trade or business, the single trade or business is said to constitute a "unitary business." 13a.3.a.4. A unitary business exists when the operations of the business segments of a corporation or group of commonly owned and controlled corporations contribute to or depend on each other in such a way as to result in functional integration between the segments. Functional integration refers to transfers between or pooling among business segments of such items as products or services, technical information, marketing information, distribution systems, purchasing and intangibles (such as patents, copyrights, formulas, processes, trade secrets, and the like) in a manner which substantially affects the segments' business operations related to such activities as development, manufacture, production, extraction, distribution or sale of its products or services. 13a.3.a.5. Evidence of functionally integrating factors. -- The determination of whether or not the operations of business segments are functionally integrated will turn on the facts and circumstances of the case. Several factors may evidence that the operations of business segments are functionally integrated. A non-exclusive list of those factors is found in subparagraph 13a.3.a.6.A. Generally, several functionally integrating factors will exist in a unitary business, although a unitary business may exist as a result of few factors or even one factor if the factor or factors involved are particularly significant. In determining whether a unitary business exists, factors should not be examined in isolation. Instead, it should be determined whether the factors which are present, in combination, result in a functionally integrated business. In addition, the presence or absence of any one factor or any particular factors is not necessarily determinative as to whether a unitary business exists, although absence of all of the factors described in this subsection will generally result in a finding that a unitary business does not exist. 13a.3.a.6. Functionally integrating factors. -- A non-exclusive listing of factors to be considered in determining whether business segments are functionally integrated appears in subparagraph 13a.3.a.6.A. 13a.3.a.6.A. The existence or non-existence of the following factors will assist in the determination of whether "unity of operations" exits with respect to an affiliated group. The existence or non-existence of any one factor, by itself, is normally not determinative of whether the element has or has not been satisfied. Nor is this list a limitation on the factors that may be considered in determining whether unity of operations exists: 13a.3.a.6.A.1. Common or centralized purchasing; 13a.3.a.6.A.2. Common or centralized advertising; 13a.3.a.6.A.3. Common or centralized employees, including sales force; 13a.3.a.6.A.4. Common or centralized accounting; 13a.3.a.6.A.5. Common or centralized legal support; 13a.3.a.6.A.6. Common or centralized retirement plan; 13a.3.a.6.A.7. Common or centralized insurance coverage; 13a.3.a.6.A.8. Common or centralized marketing; 13a.3.a.6.A.9. Common or centralized cash management; 13a.3.a.6.A.10. Common or centralized research and development; 13a.3.a.6.A.11. Common or centralized offices; 13a.3.a.6.A.12. Common or centralized manufacturing facilities; 13a.3.a.6.A.13. Common, centralized, or intercompany financing; 13a.3.a.6.A.14. Common or centralized computer systems and support; 13a.3.a.6.A.15. Common or centralized management; 13a.3.a.6.A.16. Common or centralized labor relations; 13a.3.a.6.A.17. Common or centralized pension plans; 13a.3.a.6.A.18. Common or centralized personnel recruitment; 13a.3.a.6.A.19. Intercompany sales, exchanges, or transfers; 13a.3.a.6.A.20. Common, centralized, or intercompany transfer or pooling of technical information; 13a.3.a.6.A.21. Common or centralized distribution system, including but not limited to common or centralized transportation facilities, or common or centralized warehousing facilities, or common or centralized order fulfillment systems, inventory control systems or other distribution systems or subsystems, or any combination thereof. 13a.3.a.7. Intercompany sales, exchanges, or transfers. 13a.3.a.7.A. Sales, exchanges, or transfers (hereinafter "sales") of products, services, intangibles, or the like between business segments are important indicia of functional integration. The significance of intercompany sales will be a function of both the character of the items sold and percentage of total sales or purchases represented by the intercompany sales. Intercompany sales at a given level take on greater significance if there is a limited sales or purchasing market for the items or if valuable trade name or other intangibles are associated with the sales, or both. 13a.3.a.7.B. The fact that intercompany sales are at a readily determinable market price does not negate the importance of the sales as a functionally integrating factor, because the sales generally represent an assured market for the seller and a guaranteed source of supply for the purchaser. 13a.3.a.7.C. As the percentage of intercompany sales to the total sales of the selling segment increases or as the percentage of intercompany purchases of the purchasing segment's total purchases increases, the more important the purchases and sales become as a unitary factor. 13a.3.a.7.C.1. For purposes of this rule, where goods, services, or intangibles are transferred without charge, percentages of cost (or cost of goods sold) may be used in lieu of percentage of sales or purchases. For purposes of this rule, management stewardship activities are not considered an intercompany sale or transfer of services. Generally, intercompany sales or purchases in excess of 10% will be considered a significant, although not necessarily determinative, unitary factor. Sales of less than 10% become relatively less significant as the percentage of sales declines, but a small percentage of sales may nevertheless be considered significant if the sales represent goods or services which are particularly important to the purchaser's operations. 13a.3.a.7.C.2. Example. - Business segments A and B are commonly owned and controlled. Segment A grows citrus and other fruit. Segment B manufactures soft drinks. A sells to B oils extracted from the skin of a special variety of fruit for use in B's soft drinks. This oil is not significantly available from other sources. The sales represent only a small portion of A's total sales and B's total purchases. The unusual flavor produced by the oil is a major factor in the character of the soft drink. Consumer taste tests demonstrate a strong preference for the soft drink with this oil as an ingredient. The intercompany sales between A and B would be considered a significant unitary factor. 13a.3.a.7.D. Sales, exchanges, or transfers between business segments may be disregarded where intercompany sales are used as a device to assert unitary combination for tax avoidance purposes. 13a.3.a.7.D.1. Example: Company A is a West Virginia corporation with operations in West Virginia and other states. These operations are non-unitary with sister Corporations B and D, which operate entirely outside of West Virginia. B and C have had significant net operating losses for many years. 13a.3.a.7.D.1.(a). A’s apportionment factors cause 90% of A’s net income to be apportioned to West Virginia. 13a.3.a.7.D.1.(b). A enters into a fraudulent collusive tax avoidance scheme with its sister corporations to cause A to sell to B and C office supplies valued at less than $500 that are simply purchased and resold by A. A, B and C are not in the office supply business, and office supplies have nothing to do with A, B or C’s regular business operations, except as simple consumable items used in their respective offices. 13a.3.a.7.D.1.(c). B and C each sell two used office computers to A which would have otherwise been sold for salvage value. A, B and C are not in the computer business, and computers have nothing to do with A, B or C’s regular business operations, except as simple consumable items used in their respective offices. A does not use the computers and sells them less than one week after receiving them for salvage value. 13a.3.a.7.D.1.(d). A, B and C falsely assert that they are unitary businesses by reason of the intercompany sales. Because B and C have no operations in West Virginia and no nexus with West Virginia, and because of the dilutive effect of the inclusion of B’s and C’s denominator numbers in A’s apportionment factors for A’s combined unitary tax return, A now apportions less than 30% of A’s income to West Virginia, thereby decreasing taxable income for West Virginia tax purposes. 13a.3.a.8. Common marketing. 13a.3.a.8.A. When business segments share substantial common marketing features, the features can be an important characteristic of functional integration when the marketing results in significant mutual advantage. For this purpose, common marketing exists when a substantial portion of the business segments' products, services, intangibles, or the like are distributed or sold to a common customer, or the business segments use a common trade name or other common identification, and the common identification is a significant factor in purchasers' decisions to purchase the respective products or services. 13a.3.a.8.A.1. Example. - Business segments A and B are commonly owned and controlled. A manufactures small tools and garden implements. B manufactures auto replacement parts and accessories. Both A and B jointly sell a substantial portion of both segment's total production to various hardware store chains, which then sell both product lines to the public. As a result of the common sales, both segments are able to obtain preference on shelf space and greater merchant participation in product promotion of each segment. The common sales would be considered a functionally integrating factor. 13a.3.a.8.A.2. Example. - Commonly owned and controlled segments A, B, and C manufacture furniture, carpeting, and household appliances, respectively. All three product lines are sold under the name "Alpha" which is a nationally recognized trade name. A, B and C jointly participate in advertising to portray the "Alpha" name as a symbol of quality and value. Based on consumer studies, the "Alpha" name is a significant factor in the consumer's decision to purchase the respective products. The common use of the trade name "Alpha" would be considered a functionally integrating factor. 13a.3.a.8.B. Common use of an advertising agency does not constitute common marketing, absent circumstances described in paragraph 13a.3.a.8.A. In addition, shared use of a commonly owned and controlled business segment which provides advertising services is not common marketing described by this subparagraph, absent circumstances described in paragraph 13a.3.a.8.A. 13a.3.a.9. Common, centralized, or intercompany transfer or pooling of technical information. -- Evidence of functional integration may be indicated by transfers or pooling of technical information, know-how, or research and development, if the transfer or pooling represents a significant economy of scale or the information shared is particularly important to the segments' operations. 13a.3.a.10. Common distribution system. -- Business segments may demonstrate evidence of functional integration by use of a common distribution system, under which inventory control and accounting, storage, trafficking, and transportation are controlled through a common network. 13a.3.a.11. Common purchasing. -- Evidence of functional integration may be indicated by common purchasing of substantial quantities of products, services intangibles, or the like from the same source, where the purchasing results in a significant economy of scale, or where the products, services, intangibles, or the like are not readily available from other sources and are particularly important to each segment's operations or sales. 13a.3.a.12. Centralized management. 13a.3.a.12.A. Centralization of management exists when directors, officers or management employees jointly participate in management decisions which significantly affect the respective business segments. Transfer of officers or management employees between business segments may also provide evidence of centralization of management. 13a.3.a.12.B. The presence of centralized management may support a finding that the operations of commonly owned and controlled business segments are unitary. 13a.3.a.12.C. Centralization of management is more significant as a unitary factor when business segments are engaged in the same general line of business or constitute steps in a vertically integrated enterprise than in other business contexts, because of the opportunity the respective segments have in making use through the central management of readily transferable knowledge and expertise of the operations of the other segment and developing coordination between the business segments. 13a.3.a.12.D. Factors accorded little weight. -- Factors such as common legal services, accounting, tax administration, and financial reporting will generally be accorded little weight in the determination of whether business segments are functionally integrated. 13a.3.a.12.E. The presence of a unitary business will be presumptively shown by the presence of the following: 13a.3.a.12.E.1. Same general line of business: There is a strong presumption that a corporation or a commonly owned and controlled group of corporations is engaged in a unitary business when its activities are in the same general line. For example, a corporation which operates a chain of retail grocery stores will almost always be engaged in a unitary business. 13a.3.a.12.E.2. Steps in a vertical process: A corporation or a commonly owned or controlled group of corporations is almost always engaged in a unitary business when its various divisions or segments are engaged in different steps in a vertically structured enterprise. For example, a corporation which explores for and mines copper ores; concentrates, smelts, and refines the copper ores; fabricates the refined copper into consumer products and distributes the products (whether by intercompany fee or purchase, or without charge) is engaged in a unitary business, regardless of the fact that the various steps in the process are operated substantially independently of each other with only general supervision from the corporation's executive offices. 13a.3.a.12.F. Business segments which are neither in the same general line of business nor steps in a vertical process are presumptively engaged in separate businesses, absent a determination that the respective segments are functionally integrated. 13a.3.a.12.F.1. In the event that a business segment is functionally integrated with a second business segment and the second business segment is functionally integrated with a third business segment, the first, second and third business segments constitute a unitary business notwithstanding the fact that the first and third business segments are not functionally integrated with each other. In the event a second business segment’s functional integration is not substantially viewed from the perspective of either a first or third business segment, the first, second and third business segments shall not constitute a unitary business. 13a.3.a.12.F.1.(a). Example. -- Business segments A, B, and C are commonly owned and controlled. A is an architectural firm. B is a construction company which builds office and apartment buildings. C is a manufacturer of finished steel. A provides architectural services to B, representing half of the total architectural services it provides. C designs, fabricates, and sells the superstructures used in the construction of B's office and apartment buildings. The steel superstructures constitute 20% of B's construction purchases. A and C have no intercompany sales, common marketing, pooling of technical knowledge, common distribution system or common purchases. Nevertheless, A, B, and C constitute a unitary business because B is functionally integrated with both A and C. 13a.3.a.12.F.1.(b). Example. -- Business segments A, B, and C are commonly owned and controlled. A is in the business of oil exploration, extraction, and refining. B is a charter air transportation company. C produces motion pictures. A and C have no intercompany sales, common marketing, pooling of technical knowledge, or common distribution system. A uses B's service for transporting oil executives, engineers and geologists to remote oil exploration and drilling sites. C uses B's services for flying movie executives and actors to movie locations and business meetings. A and C's common purchases are limited to the transportation services provided by B. A's use of B's service constitutes 20% of B's total charter sales. C's use of B's service constitutes 40% of B's total charter sales. However, B's service represents less than a hundredth of a percent of A's total purchases and only two tenths of a percent of C's total purchases. Despite the fact that B is functionally integrated with both A and C, A, B, and C do not constitute a unitary business. 13a.3.a.12.G. Where the taxpayer asserts that business segments are or are not unitary, the taxpayer has the burden of proof. Failure by the taxpayer to produce requested evidence which lies within the control of the taxpayer gives rise to a presumption that the evidence would be unfavorable if provided. 13a.3.a.12.H. No divisional segregation or separation for purposes of determining unitary group member status, income, or attributes. The determining factor in designation of a unitary activity is the character of the activity engaged in and not the organizational structure of the business components engaging in the activity. If a corporation or other entity is organized into divisions or other functional units or business segments not constituting separate legal entities, the corporation or entity so organized shall, as a whole, be presumed to be the unitary member if it is engaged in unitary business activity. However, if the corporation is engaged in more than one trade or business, then the determination of income attributable to each separate trade or business, authorized under paragraph 13a.3.a.1. of this rule shall be made, and the determination of income attributable to each separate trade or business engaged in with another commonly owned and controlled corporation or corporations, authorized under paragraph 13a.3.a.2. of this rule shall be made. No operations, income, or apportionment factor attributes of any such division, functional unit or business segment shall otherwise be subtracted, segregated or separated from those of the combined group. 13a.3.b. Establishment of unity for acquired entities and newly formed entities. 13a.3.b.1. Newly Acquired Corporations. When a corporation that is a member of a unitary group acquires another corporation, a presumption exists against a finding of a unitary relationship during the first reporting period unless a unitary relationship already existed at the time of the acquisition. The presumption may be rebutted by proving that the corporations are unitary. If the presumption is rebutted, then the corporations shall be considered unitary as of the date of acquisition, unless the evidence shows that unity was established as of another date. 13a.3.b.1.A. In the next succeeding reporting period after the first reporting period subsequent to an acquisition whereby a corporation that is a member of a unitary group acquires another corporation, and for all reporting periods thereafter, a presumption of a unitary relationship exists. The presumption may be rebutted by proving that the corporations are not unitary. 13a.3.b.2. Newly Formed Corporations or entities. When a corporation that is a member of a unitary group forms another corporation, a presumption exists in favor of finding unity between the two corporations or entities as of the date of formation. Any party may rebut the presumption by proving that the corporations or entities are not unitary or became unitary at a later date 13a.3.b.2.A. For purposes of this rule, a newly formed corporation or entity includes but is not limited to: a corporate reorganization whereby a corporate divestiture, split-up or split off occurs, or one or more new subsidiaries is formed, or one or more new subsidiaries is acquired and substantially all of the assets and operations of an existing division or operation are placed into or under the administrative or operational responsibility of the acquired entity, or a partnership is created or formed, or an existing corporation changes its form of doing business from one organizational structure to one or more new organizational structures or merges several subsidiary entities into an existing or newly formed entity. 13a.3.b.3. Unitary members compute their liability relating to a year when a member is added to or departs from the unitary group as follows: 13a.3.b.3.A. If a corporation becomes a member of a unitary group during the group's common accounting period, or ceases to be a member during that period, the other members shall take into account the appropriate portion of the part year member’s income and the apportionment data of the part-year member in computing their tax liabilities. 13a.3.b.3.A.1. A part-year unitary member shall compute its liability as follows: 13a.3.b.3.A.1.(a). Business income attributable to the portion of the year during which the part-year unitary member was a unitary group member is combined with business income of the other unitary group members for the same portion of the year, and the total income is apportioned to West Virginia on a combined apportionment basis; and 13a.3.b.3.A.1.(b). Business income attributable to the portion of the year during which the part-year unitary member was not a unitary member is apportioned to West Virginia on the basis of the part year member’s separate apportionment data for the part of the year during which the part-year unitary member was not a unitary member. The corporation shall file a separate return for this portion of its income. 13a.3.c. Holding Companies. A passive parent holding company that directly or indirectly controls one or more operating company subsidiaries engaged in a unitary business shall be considered to be engaged in a unitary business and includable in a combined report with the subsidiary or subsidiaries. An intermediate passive holding company shall be considered to be engaged in a unitary business with the parent and subsidiary or subsidiaries and includable in a combined report with them. 13a.3.d. Statute of limitations. If the statute of limitations applicable to refund claims and assessments is open with respect to a particular member of the combined group, the statute of limitations is open with respect to that particular Taxpayer notwithstanding the fact that the statute of limitations may have expired for one or more other members of the combined group. 13a.3.d.1. The statute of limitations applicable to refund claims and assessments for members of a combined reporting group which have filed their tax return based on a fiscalized reporting period matched to the accounting period of a principal member shall be the statute of limitations determined and computed based on the fiscalized accounting period. 13a.3.d.2. If a return is filed pursuant to a combined report, the Tax Commissioner may examine and audit that return, and collect any deficiency from a combined group member for whom the statute of limitations for assessments has not expired, even if the statute of limitations for other members which filed pursuant to the same combined report has expired. Any deficiency assessed pursuant to the audit or examination will not cause a reopening of the statute of limitations for those other members for which the statute of limitations has expired who filed pursuant to the same combined report. §§110-24-13b. Reserved for Future Use
W. Va. Code R. § 110-24-13c Net operating loss (NOL) carryovers earned during a year in which the Taxpayer filed a consolidated tax return. 13c.1. West Virginia computes net operating losses on a post-apportionment basis, including business and non-business income adjustments. NOLs can only be carried forward (or backwards) to be applied against West-Virginia source income of the combined group member to which it is attributable. NOLs cannot be used by other members of the combined group. There is an exception for NOLs earned when the Taxpayer was filing on a consolidated basis for West Virginia corporation net income tax purposes for a taxable year that began before January 1, 2009. Those NOLs can be carried over and applied against the income of any former member of the consolidated (controlled) group. 13c.1.a. West Virginia Code §11-24-13c(b)(1)(G) reads in relevant part as follows:
§11-24-13c. Determination of taxable income or loss using combined report.
(a) . . . .
(b) Components of income subject to tax in this State; application of tax credits and post-apportionment deductions.
(1) Each taxpayer member is responsible for tax based on its taxable income or loss apportioned or allocated to this State, which shall include: . . . .
(F) Its income or loss allocated or apportioned in an earlier year, required to be taken into account as state source income during the income year, other than a net operating loss; and (G) Its net operating loss carryover. If the taxable income computed pursuant to this section and section thirteen-d of this article results in a loss for a taxpayer member of the combined group, that taxpayer member has a West Virginia net operating loss, subject to the net operating loss limitations, and carryover provisions of this article. This West Virginia net operating loss is applied as a deduction in a prior or subsequent year only if that taxpayer has West Virginia source positive net income, whether or not the taxpayer is or was a member of a combined reporting group in the prior or subsequent year: Provided, That net operating loss carryovers that were earned during a tax year in which the taxpayer filed a consolidated return under this article may be applied as a deduction from the West Virginia taxable income of any member of the taxpayer's controlled group until the net operating loss carryover is used or expires pursuant to the net operating loss provisions of this article. 13c.1.a.1. West Virginia Code §11-24-13c(b)(1)(G) specifies that there is an exception for NOLs earned when the Taxpayer filed its annual West Virginia corporation net income tax return on a consolidated basis. 13c.1.a.2. An attempt to amend a pre-2009 separate return and file a consolidated return for that year, and to use an NOL on that return that was earned in a year when the Taxpayer was filing separately will be disallowed. And the Taxpayer cannot claim those NOLs on the 2009 and forward combined return. 13c.2. Economic Development Tax Credits.
West Virginia Code §11-24-13c(b)(2) reads as follows:
(2) Except where otherwise provided, no tax credit or post-apportionment deduction earned by one member of the group, but not fully used by or allowed to that member, may be used, in whole or in part, by another member of the group or applied, in whole or in part, against the total income of the combined group; and a post-apportionment deduction carried over into a subsequent year as to the member that incurred it, and available as a deduction to that member in a subsequent year, will be considered in the computation of the income of that member in the subsequent year regardless of the composition of that income as apportioned, allocated or wholly within this state: Provided, That unused and unexpired economic development tax credits that were earned during a tax year in which the taxpayer filed a consolidated return under this article may, if otherwise allowed within the statutory limitations applicable to the tax credit, be used, in whole or in part, against taxes imposed by this article on any member of the taxpayer's combined group to the extent the credits would have been allowed had the taxpayer continued to file a consolidated return. For purposes of this section, the term "economic development tax credit" means, and is limited to, a tax credit asserted on a tax return under article thirteen-c [§§11-13C-1, et seq.], thirteen-d [§§11-13D-1, et seq.], thirteen-e [§§11-13E-1, et seq.], thirteen-f [§§11-13F-1, et seq.], thirteen-g [§§11-13G-1, et seq.], thirteen-j [§§11-13J-1, et seq.], thirteen-q [§§11-13Q-1, et seq.], thirteen-r [§§11-13R-1, et seq.] or thirteen-s [§§11-13S-1, et seq.] of this chapter or under article one [§§5E-1-1, et seq.], chapter five-e of this code.
Emphasis added. 13c.2.a. General; No Sharing of Credits Within a Combined Group; Exception C In general, an economic development tax credit generated by a taxpayer belongs to that taxpayer and can be applied against the corporation net income tax and business franchise tax liabilities of that taxpayer subject to the rules that govern the use of the particular credit. 13c.2.b. Possible Sharing of Credits Within a Combined Group. - For tax years beginning after December 31, 2008, an economic development tax credit that may be validly claimed by a taxable member of a combined group and that is attributable to the combined group's unitary business may not be shared with the other taxable members of the combined group. However, where entitlement to the credit arose prior to any taxable year beginning after December 31, 2008, and was taken on a consolidated West Virginia corporation net income tax return for a taxable year that began before January 1, 2009, the amount of the annual credit allowable may be claimed, in whole or in part, by any member of the combined group that was included in the consolidated West Virginia corporation net income tax return for the taxable year in which the investment was made giving rise to the credit, subject to the rules that govern use of the credit. West Virginia Code §11-24-13c(b)(2). 13c.2.c. "Economic development tax credit defined." - For purposes of this section, the term "economic development tax credit" means, and is limited to, a tax credit asserted on a tax return under W. Va. Code §§11-13C-1, et seq. (business investment and jobs expansion tax credit), W. Va. Code §§11-13D-1, et seq. (credit for industrial expansion and revitalization), W. Va. Code §§11-13E-1, et seq. (credit for coal loading facilities), W. Va. Code §§11-13F-1. et seq. (credit for reducing electric and natural gas rates for low-income residential customers), W. Va. Code §§11-13G-1, et seq. (credit for reducing telephone utility rates for certain low-income residential customers), W. Va. Code §§11-13J-1, et seq. (neighborhood investment program), W. Va. Code §§11-13Q-1, et seq. (economic opportunity credit), W. Va. Code §§11-13R-1, et seq. (strategic research and development tax credit), W. Va. Code §§11-13S-1, et seq. (manufacturing investment tax credit) or W. Va. Code §§5E-1-1, et seq. (capital company credit). 13c.2.d. Application of current year credits. - In any case where a taxpayer’s credit can be shared among the taxable members of the taxpayer's combined group, the credit shall first be applied against the taxes of the taxpayer that generated the credit consistent with the requirements and limitations that apply to the credit. If the taxpayer has more credit than it may use against its own taxes, the excess credit may be applied against the taxes of the other taxable members that are eligible to share the credit, again consistent with the requirements and limitations that apply to the credit. 13c.2.e. Economic development tax credit and recapture: recapture in general. - Where a taxpayer generates an economic development tax credit, as defined in subdivision 13c.2.c, for a taxable year and then subsequently disposes of the property, or where the property otherwise ceases to be in qualified use within the meaning of the applicable tax credit statute, recapture of the credit is determined pursuant to the article of the Code governing the tax credit, based upon the total credit previously taken by the taxpayer, and its consolidated group when the credit was first claimed on a consolidated West Virginia corporation net income tax return for a taxable year that began before January 1, 2009. This rule applies even if the taxpayer first leaves the combined group, then in a subsequent year disposes of the qualified property or otherwise causes recapture, and therefore in the subsequent tax year is no longer included in a combined group with the corporations whose use of the credit shall be considered for purposes of recapture.
W. Va. Code R. § 110-24-13d Intercompany Transactions 13d.1. In general. 13d.1.a. Purpose. This section provides rules for reporting intercompany transactions of members of a combined reporting group in order to clearly reflect the taxable income (and tax liability) of the taxpayer members that is allocated or apportioned to West Virginia. The general rule is that business income from intercompany transactions (composed of both gains or losses) will be deferred in order to produce the effect of transactions between divisions of a single corporation in a manner similar to Title 26, Code of Federal Regulations, section 1.1502-13 (26 C. F. R. 1.1502-13 or Treasury Regulation section 1.1502-13). West Virginia Code §11-24-13d(e) 13d.1.b. Conformity to Treasury Regulation section 1.1502-13. Intercompany transactions. Except as otherwise provided, this section incorporates Treasury Regulation section 1.1502-13, as amended through June 30, 2009, to the extent possible consistent with combined reporting principles to enable ease of administration and compliance. This section does not restate all the provisions of the federal regulation in full. However, the methodology adopted under the federal regulation applies except as otherwise provided in this section. Exceptions will arise due to the differences between the composition of the federal consolidated group and the combined reporting group, the requirements of West Virginia's allocation and apportionment provisions, jurisdictional limitations, and treatment of members of a combined reporting group as separate entities for many purposes under the W. Va. Code. Exceptions may also arise in those instances when Treasury Regulation section 1.1502-13 incorporates by reference provisions of the Internal Revenue Code to which West Virginia has not conformed. Unless explicitly provided otherwise, conformity to Treasury Regulation section 1.1502-13 in no way implies conformity to any other regulation under section 1502. of the Internal Revenue Code. 13d.1.c. Timing rules as a method of accounting. This section applies the provisions of Treasury Regulation section 1.1502-13(a)(3), except for the reference to Treasury Regulation section 1.1502-17. The rules apply to all members of the combined reporting group. 13d.1.d. Other Law. Other applicable law (including nonstatutory authorities) applies in addition to this section to the extent that this section does not exclude the application. 13d.1.d.1. Non-applicability of section 304 of the Internal Revenue Code. As provided in Treasury Regulation section 1.1502-80, section 304 of the Internal Revenue Code, to which West Virginia conforms pursuant to W. Va. Code §11-24-3, does not apply to any acquisition of stock of a corporation in an intercompany transaction occurring on or after January 1, 2009. 13d.1.d.2. Non-applicability of section 163(e)(5) of the Internal Revenue Code. As provided in Treasury Regulation section 1.1502-80, section 163(e)(5) of the Internal Revenue Code, to which West Virginia conforms pursuant to W. Va. Code §11-24-3, does not apply to any intercompany obligation within the meaning of subsection 13d.7. issued in a tax year beginning on or after January 1, 2009. 13d.1.d.3. Non-applicability of section 1031. of the Internal Revenue Code. As provided in Treasury Regulation section 1.1502-80, section 1031. of the Internal Revenue Code, to which West Virginia conforms pursuant to W. Va. Code §11-24-3, does not apply to any intercompany transaction occurring in income years beginning on or after January 1, 2009. 13d.1.e. Sourcing. In the income year that intercompany items are taken into account, their source shall be determined as if the selling member (S) and the buying member (B) are divisions of a single corporation. Therefore, the intercompany items are treated as current apportionable business income and are apportioned to West Virginia in accordance with W. Va. Code §§11-24-1, et seq. West Virginia law does not conform to the federal sourcing rules provided or referenced in Treasury Regulation section 1.1502-13, with relation to worldwide unitary reporting and with relation to activity in a tax haven, as specified in W. Va. Code §§11-24-1, et seq. 13d.1.e.1. Sales Factor. 13d.1.e.1.A. Sales attributable to intercompany items are not included in S's sales factor either in the year of the transaction or in the years in which the intercompany items are taken into account. 13d.1.e.1.B. Gross receipts from the sale generating B's corresponding item will be included in B's sales factor in the year of the sale if otherwise included under W. Va. Code §§11-24-1, et seq., unless the gross receipts are excluded under an “other method of allocation and apportionment,” as authorized by W. Va. Code §11-24-7(h). 13d.1.e.1.C. Considered sales under Treasury Regulation section 1.1502-13(d)(1)(ii) will be disregarded for purposes of the sales factor. 13d.1.e.2. Property factor. 13d.1.e.2.A. On the date of the intercompany transaction, the property transferred from S to B will be included in B's property factor at the original cost to S. 13d.1.e.2.B. Intercompany rent expense is not included in the property factor. 13d.1.e.2.C. Intercompany obligations shall not be included in the property factor. 13d.1.e.2.D. If S's intercompany item is accelerated as a result of S or B no longer being members of the same combined reporting group, the value of B's property acquired from S in an intercompany transaction will be adjusted immediately after the acceleration event to reflect B's original cost (the purchase price paid by B to S). 13d.1.e.2.E. Paragraphs 13d.1.e.2.A through 13d.1.e.2.D. of this rule relating to the property factor apply regardless of whether an election is made under this section to treat an intercompany transaction on a separate entity basis. 13d.1.f. Overview. The principal provisions of this section that implement single entity treatment are the matching rule of subsection 13d.3. and the acceleration rule of subsection 13d.4. Under the matching rule, Seller (S) and Buyer (B) are generally treated as divisions of a single corporation for purposes of taking into account their items from intercompany transactions. The acceleration rule provides rules for taking the items into account if the effect of treating S and B as divisions cannot be achieved (for example, if S or B leave the combined reporting group or if the asset transferred in the intercompany transaction is converted to nonbusiness use). Intercompany items will be treated as current apportionable business income for the years) in which the item is taken into account. Subsection 13d.2. provides definitions used in the application of this section. Subsection 13d.5. provides simplifying rules for certain transactions. Subsections 13d.6. and 13d.7. provide additional rules for stock and obligations of members. Subsections 13d.8 and 13d.9 provide anti-avoidance rules and miscellaneous operating rules. 13d.2. Definitions. For purposes of this rule: 13d.2.a. Intercompany transactions. 13d.2.a.1. Except as provided in paragraph 13d.2.a.2. of this rule, the term "intercompany transaction" means a transaction between corporations which are members of the same combined reporting group immediately after the transaction. "S" is the member transferring property or providing services, and "B" is the member receiving the property or services. Intercompany transactions include, but are not limited to -- 13d.2.a.1.A. S's sale of property (or other transfer, such as an exchange or contribution) to B; 13d.2.a.1.B. S's performance of services for B, and B's payment or accrual of its expenditures for S's performance; 13d.2.a.1.C. S's licensing of technology, rental of property, or loan of money to B, and B's payment or accrual of its expenditures; and 13d.2.a.1.D. S's distribution to B with respect to S stock. 13d.2.a.2. The term intercompany transaction does not include transactions which produce nonbusiness income or loss to the selling member or income attributable to a separate business activity of the selling member. The term intercompany transaction also does not apply when the asset transferred in the transaction is acquired for the buyer's non-business use or for the use of a separate business activity of the buyer. For purposes of this section, the transactions shall be considered as if between corporations that are not members of a combined reporting group. 13d.2.b. "Combined reporting group" means a group of corporations, that is permitted or required to be included in a particular combined report under W. Va. Code §§11-24-1, et seq. and any non-corporate entities permitted or required to be included. For purposes of this rule, the members of the combined reporting group include: 13d.2.b.1. Both S and B, when the income and apportionment factors of those corporations are properly included in the same combined report for the income year of the intercompany transaction; and 13d.2.b.2. Any affiliated corporation (or portion thereof) whose income and apportionment factors are properly included in the same combined report in combination with the income and apportionment factors of S and B for that income year. 13d.2.c. "Combined reporting group member" means any corporation or entity that is permitted or required to be included in a particular combined report under W. Va. Code §§11-24-1, et seq. 13d.2.d. Intercompany items. 13d.2.d.1. In general. S's income, gain, deduction, and loss from an intercompany transaction are its intercompany items. For example, S's gain from the sale of property to B is an intercompany gain. An item is an intercompany item whether it arises directly or indirectly from an intercompany transaction. 13d.2.d.2. Related costs or expenses. S's costs or expenses related to an intercompany transaction are included in determining its intercompany items. 13d.2.d.3. Amounts not yet recognized or incurred. S's intercompany items include amounts from an intercompany transaction that are not yet taken into account in computing its net income under its separate entity method of accounting. 13d.2.e. Corresponding items. B's income, gain, deduction, and loss from an intercompany transaction, or from property acquired in an intercompany transaction, are its corresponding items. If B buys property from S and sells it to a nonmember, B's gain or loss from the sale to the nonmember is a corresponding gain or loss. An item is a corresponding item whether it is directly or indirectly from an intercompany transaction (or from property acquired in an intercompany transaction). 13d.2.f. Recomputed corresponding items. The recomputed corresponding item is the corresponding item that B would take into account if S and B were divisions of a single corporation and the intercompany transaction was between those divisions. For example, if S sells property with a $ 70 basis to B for $ 100, and B later sells the property to a nonmember for $ 90, B's corresponding item is its $ 10 loss, and the recomputed corresponding item is $ 20 of gain (determined by comparing the $ 90 sales price with the $ 70 basis the property would have had if S and B were divisions of a single corporation). 13d.2.g. Treatment as a separate entity. Treatment as a separate entity means treatment without application of the provisions of this section (other than the provisions of subdivision 13d.1.d.), but with the application of the other provisions of this rule. "Treatment as a separate entity" does not operate to prevent the income or loss taken into account under applicable rules for separate entity treatment from being properly characterized as combined report business income of the combined reporting group. 13d.2.h. Divisions of a single corporation. When S and B are treated as divisions of a single corporation for purposes of this section, the divisional treatment applies only to the unitary, apportionable trade or business operations included in the combined report. For example, neither nonbusiness income of S or B, nor income from activities of S or B that are excluded from a water's-edge combined report, will be considered for purposes of treating S and B as divisions of a single corporation. 13d.2.i. Deferred Intercompany Stock Account ("DISA"). DISA is the accounting mechanism that a distributee corporation, which is a member of the combined reporting group, shall use to report and track non-dividend distributions in excess of its adjusted basis in the stock of the distributing subsidiary corporation, which is a member of the same combined reporting group, until this intercompany item is required to be taken into account pursuant to this section. The balance of each DISA account shall be disclosed annually on the taxpayer's return. 13d.2.j. Attributes. The attributes of an intercompany item or corresponding item are all of the item's characteristics, except amount, location, and timing, necessary to determine the item's effect on taxable income (and tax liability). For purposes of this section, "location" does not refer to geographical location, but instead refers to location within the combined reporting group, i.e., which member of the combined reporting group realizes the item. 13d.3. Matching rule. S shall take its intercompany items into account in any year where there is a difference between B's corresponding item and the recomputed corresponding item. The separate entity attributes of S's intercompany items and B's corresponding items are redetermined to the extent necessary to produce the same effect on total group combined report business income as if S and B were divisions of a single corporation, and the intercompany transaction was a transaction between divisions. Unless otherwise provided, this section applies the matching rule provisions of Treasury Regulation section 1.1502-13(c). Exceptions will arise due to the reasons stated in subdivision 13d.1.b of this rule. 13d.3.a. Redetermination of separate entity attributes does not apply to the sourcing of the combined report business income. Sourcing of income is described in subdivision 13d.1.e of this rule. 13d.3.b. Examples: For purposes of the examples in this subdivision, 13d.3.b, unless otherwise stated, P, S and B are members of a combined reporting group. P owns all of the stock of S and B. Y is a person (as defined in W. Va. Code §11-24-3a) unrelated to any member of the combined reporting group. The income year of all persons is the calendar year
Example 1: Intercompany sale of land followed by sale to a nonmember.
Treasury Regulation §1.1502-13(c)(7)(ii), example 1. provides a similar example.
Facts. S holds land with a basis of $ 70 for use in the trade or business of the combined reporting group. On January 1. of Year 1, S sells the land to B for $ 100. B also holds the land for use in the trade or business of the combined reporting group. On July 1 of Year 3, B sells the land to Y for $ 110.
Definitions. S's sale of the land to B is an intercompany transaction. S's $ 30 gain from the sale to B is its intercompany item, and B's $ 10 gain from its sale to Y is its corresponding item. The total gain of $ 40 is the recomputed corresponding item.
Timing. Under the matching rule, S takes its intercompany item into account in the income years in which there is a difference between B's corresponding item and the recomputed corresponding item. If S and B were unitary divisions of a single corporation and the intercompany sale was a transfer between the divisions, B would succeed to S's $ 70 basis in the land and would have a $ 40 gain from the sale to Y in Year 3, instead of a $ 10 gain. Consequently, S takes no gain into account in Years 1 and 2, and takes the entire $ 30 gain into account in Year 3, to reflect the $ 30 difference in that year between the $ 10 gain B takes into account and the $ 40 recomputed gain (the recomputed corresponding item). In accordance with subdivision 13d.9.d. of this rule, the earnings and profits of S will not reflect S's $ 30 gain until the gain is taken into account in Year 3.
Apportionment. As would be the case if S and B were unitary divisions of a single corporation and the intercompany sale was a transfer between the divisions, that transfer will not be reflected in the sales factor in Year 1. In Year 3, the $ 110 gross receipts from B's sale of the land to Y will be included in B's sales factor unless the receipts are excluded pursuant to W. Va. Code §11-24-7(h). The land is attributable to B after the intercompany sale, and it will be reflected in B's property factor at S's $ 70 original cost basis until it is sold outside the combined reporting group in Year 3. This is the result that would have occurred had the intercompany transaction been a transfer between unitary divisions. Both S's $ 30 gain and B's $ 10 gain will be treated as current apportionable business income in Year 3.
Example 2: Intercompany sale of depreciable property.
Treasury Regulation §1.1502-13(c)(7)(ii), example 4 provides a similar example.
Facts. On January 1. of Year 1, S buys property with a 10-year useful life for $ 100 and begins to depreciate it under the straightline method. On January 1. of Year 3, S sells the property to B for $ 130. B determines that the useful life of the property is 10 years from the date of B's acquisition, and also uses the straightline method. Both S and B used the property in their unitary trade or business.
Depreciation through Year 3; intercompany gain. S claims $ 10 of depreciation for each of Years 1. and 2. and has an $ 80 basis at the time of the sale to B. Thus, S has a $ 50 intercompany gain from its sale to B ($ 130 sales price - $ 80 adjusted basis). For Year 3, B has $ 13 of depreciation with respect to its $ 130 basis.
Timing. If S and B were divisions of a single entity, that entity would modify its useful life of the property based upon the same change in facts and circumstances that caused B to determine that the useful life would exceed the original 10-year period. Therefore, the recomputed depreciation for Years 3 through 12. would be $ 8 per year ($ 80 remaining basis/redetermined 10-year life). S’s $ 50 gain is taken into account to reflect the difference for each income year between B’s $ 13 depreciation (B’s corresponding item) and the $ 8 recomputed depreciation. Thus, S takes $ 5 of gain into account in each of Years 3 through 12.
Apportionment. As would be the case if the intercompany sale was a transfer between unitary divisions of a single corporation, the transfer will not be reflected in the sales factor. The property will be included in B’s property factor at S’s $ 100 original cost basis regardless of the subsequent depreciation or intercompany gain taken into account. In each year, S’s intercompany gain and B’s depreciation deduction will be included in the computation of combined report business income and apportioned using the current apportionment percentage for that year.
Example 3: Intercompany sale followed by installment sale.
Treasury Regulation §1.1502-13(c)(7)(ii), example 5 provides a similar example.
Facts. S holds land with a basis of $ 70 for use in the trade or business of the combined reporting group. On January 1 of Year 1, S sells the land to B for $ 100. B also holds the land for use in the trade or business of the combined reporting group. On July 1 of Year 3, B sells the land to Y in exchange for Y’s $ 110 note. The note provides for 24 monthly interest payments beginning August 1. of Year 3, and for principal payments of $ 55 in Year 4 and $ 55 in Year 5. The West Virginia apportionment percentage for the combined reporting group was 10% in Year 3, 90% in Year 4, and 93% in Year 5. The amount of the installment note is substantial in relation to the business activities of the combined reporting group. Therefore, because the deferral of gain recognition under the installment sale provisions should not substantially change the ultimate amount of income apportioned to West Virginia, the installment income shall be apportioned using the apportionment percentage from the year in which the installment sale occurred.
Timing and attributes. Under section 453 of the Internal Revenue Code, B’s corresponding items are its $ 5 gain in Year 4, and its $ 5 gain in Year 5. B’s recomputed gain, computed as if the intercompany sale were a transfer between unitary divisions, would be $ 20 in Year 4 and $ 20 in Year 5. Thus, S takes $ 15 of intercompany gain into account in each of Years 4 and 5 to reflect the difference between B’s $ 5 corresponding gain and $ 20 recomputed gain. B’s interest income on the installment note is not a corresponding item, and is taken into account when accrued in Years 3 through 5.
Apportionment. As would be the case if the intercompany sale was a transfer between divisions, there will be no effect on the sales factor in Year 1, and the $ 110 gross receipts from the sale to Y will be included in B’s sales factor in Year 3 (assuming that the receipts were not excluded pursuant to W. Va. Code §11-24-7(h). Because the installment sale income is being apportioned to West Virginia using the apportionment percentage from the year of the sale to Y under section 453 of the Internal Revenue Code, both S’s $ 15 intercompany gain and B’s $ 5 corresponding gain for each of Years 4 and 5 will be apportioned to West Virginia using the 10% apportionment percentage from Year 3. The property will be included in B’s property factor at S’s $ 70 cost basis until it is sold to Y in Year 3. B’s interest income accrued in Years 3, 4 and 5 is current period income and will be apportioned using the current apportionment percentages for those years (10%, 90% and 93%, respectively).
Example 4: Intercompany sale of installment obligation.
Treasury Regulation §1.1502-13(c)(7)(ii), example 6 provides a similar example.
Facts. S holds land with a basis of $ 70. On January 1 of Year 1, S sells the land to Y in exchange for Y’s $ 100 note, and S reports its gain on the installment method under section 453 of the Internal Revenue Code. Y’s note bears interest at a market rate of interest in excess of the applicable federal rate and provides for principal payments of $ 50 in Year 5 and $ 50 in Year 6. On July 1 of Year 3, S sells Y’s note to B for $ 100, resulting in a $ 30 gain from S’s prior sale of the land to Y. Both S’s and B’s income would be considered business income. The West Virginia apportionment percentage for the combined reporting group was 8% in Year 1, 15% in Year 3, and 90% in Years 5 and 6. The amount of the installment note is substantial in relation to the business activities of the combined reporting group. Therefore, because the deferral of gain recognition under the installment sale provisions should not substantially change the ultimate amount of income apportioned to West Virginia, the installment income will be apportioned pursuant to W. Va. Code §11-24-7(h) using the apportionment percentage from the year in which the installment sale occurred.
Timing and attributes. S’s sale of Y’s note to B is an intercompany transaction, and S’s $ 30 gain is an intercompany gain. S takes $ 15 of the gain into account in each of Years 5 and 6 to reflect the difference between B’s $ 0 corresponding gain and B’s $ 15 recomputed gain. S’s gain continues to be treated as its gain from the sale to Y, and the deferred tax liability of each taxpayer member remains subject to the interest charge under section 453A(c) of the Internal Revenue Code.
Apportionment. The $ 100 gross receipts from the sale of the land to Y will be included in S’s sales factor in Year 1. When S’s gain is taken into account in Years 5 and 6, it should be apportioned to West Virginia using the 8% apportionment percentage from Year 1. This is the same result that would have occurred had the intercompany sale of the installment note been a transfer between unitary divisions.
Worthlessness. Assume that Y’s note becomes worthless on December 1. of Year 3 and B has a $ 100 loss on a separate entity basis (a $ 100 corresponding loss). S takes its $ 30 gain into account in Year 3 to reflect the difference between B’s $ 100 corresponding loss and B’s $ 70 recomputed loss. On a separate entity basis, S’s $ 30 gain would be an installment gain. However, there would be no net installment income if S and B were divisions of a single corporation. Therefore, when the separate entity attributes of S’s intercompany items and B’s corresponding items are redetermined under Treasury Regulation section 1.1502-13(c)(1)(I) to produce the same effect as if S and B were divisions of a single corporation, both S’s $ 30 gain and B’s $ 100 loss will be apportioned to West Virginia using the 15% apportionment percentage from Year 3.
Example 5: Performance of services by a member for a member.
Treasury Regulation §1.1502-13(c)(7)(ii), example 7 provides a similar example.
Facts. S is a driller of water wells. B operates a ranch and requires water to maintain its cattle. During Year 1, B pays S $ 100 to drill an artesian well on B’s ranch, and S incurs $ 80 of expenses related to drilling the well. B capitalizes its $ 100 cost for the well and takes into account $ 10 of depreciation deductions in each of Years 2. through 11. If S and B were divisions of a single corporation, the $ 80 costs incurred in drilling the well would be capitalized and the depreciation deduction would be $ 8 in each of Years 2. through 11.
Timing. S has intercompany income of $ 20 ($ 100 receipts less $ 80 expenses). In each of Years 2. through 11, S takes $ 2. of its intercompany income into account to reflect the annual difference between B’s $ 10 corresponding depreciation deduction and the $ 8 recomputed depreciation deduction.
Apportionment. As would be the case if the services were performed between unitary divisions of a single corporation, the transaction will not be reflected in the sales factor. If S’s expenses related to drilling the well included payroll expenses, those expenses would be included in the payroll factor in Year 1. When the well is placed in service, it will be included in B’s property factor at its capitalized cost to S of $ 80. In each year, S’s $ 2. intercompany income and B’s $ 10 depreciation deduction will be included in current apportionable business income for that year.
Example 6: Intercompany rental of property.
Treasury Regulation §1.1502-13(c)(7)(ii), example 8 provides a similar example.
B operates a ranch that requires grazing land for cattle. S owns land adjoining B’s ranch. On January 1 of Year 1, S leases grazing rights for one year to B for $ 100. S takes its $ 100 rental income into account in Year 1. to reflect the $ 100 difference between B’s $ 100 corresponding rental deduction and the $ 0 recomputed rental deduction. To achieve the effect of the rental transaction occurring between unitary divisions of a single corporation, the intercompany rental income will not be included in S’s sales factor. The land will continue to be included in S’s property factor at its original cost, and B’s property factor will not reflect B’s rent expense related to the land.
Example 7: Source of income subject to section 863 of the Internal Revenue Code.
Treasury Regulation §1.1502-13(c)(7)(ii), example 14 provides a similar example.
Facts. S manufactures inventory in the United States and recognizes $ 75 of income on sales to B in Year 1. B resells the inventory in Country F and recognizes $ 25 of income on sales to Y, also in Year 1.
Timing. Under the matching rule, S’s $ 75 intercompany income and B’s $ 25 corresponding income are taken into account in Year 1.
Apportionment. West Virginia law does not conform to the federal sourcing rules under section 863 of the Internal Revenue Code except that section 863 of the Internal Revenue Code is adopted pursuant to this rule for purposes of determining the extent to which a corporation’s income and apportionment factors are included in a combined report. Furthermore, subdivision 13d.3.a. of this rule provides that the redetermination of attributes described in Treasury Regulation section 1.1502-13(c)(1)(I) does not apply to the sourcing of West Virginia combined report business income. In order to achieve the results that would occur if S and B were divisions of a single corporation, B’s receipts from its sales to Y will be reflected in B’s sales factor in Year 1. Both S’s $ 75 intercompany income and B’s $ 25 corresponding item will be treated as current apportionable business income in Year 1. 13d.4. Acceleration rule. S’s intercompany items and B’s corresponding items are taken into account to the extent they cannot be taken into account to produce the effect of treating S and B as divisions of a single corporation. For example, except as provided in paragraph 13d.4.a.2. of this rule, such effect cannot be produced if S and B are no longer in the same combined reporting group. Unless otherwise provided, this section applies the acceleration rule provisions of Treasury Regulation section 1.1502-13(d). Exceptions will arise due to the reasons stated in subdivision 13d.1.b. of this rule. 13d.4.a. Additional circumstances which will cause the acceleration rule to be applied include: 13d.4.a.1. the asset which was transferred in the intercompany transaction is converted to nonbusiness use; or 13d.4.a.2. see subdivision 13d.9.c. for additional acceleration rules applicable for corporations partially included in a water’s-edge combined reporting group. 13d.4.b. Circumstances not known by end of year. In the event that circumstances which would cause the acceleration rule to be triggered during an income year are not known or have not occurred in time for the taxpayer members to file an accurate return, it may be necessary to make an estimate based on available information and amend the return at a later date. 13d.4.c. Examples. The acceleration rule of this subsection is illustrated by the following examples.
Example 1: Becoming a nonmember.
Treasury Regulation §1.1502-13(d)(3), example 1. provides a similar example.
Facts. S owns land with a basis of $ 70, which it uses in the trade or business of the combined reporting group. On January 1 of Year 1, S sells the land to B for $ 100. B also uses the land for unitary business purposes. On July 1 of Year 3, P sells 60% of S’s stock to Y and, as a result, S becomes a nonmember of the combined reporting group.
Matching rule. Under the matching rule, none of S’s $ 30 intercompany gain is taken into account in Years 1. through 3 because there is no difference between B’s $ 0 gain or loss taken into account and the recomputed gain or loss.
Acceleration of S’s intercompany items. Once the stock of S is sold, S is no longer a member of the combined reporting group and the effect of treating the unitary operations of S and B as divisions of a single corporation cannot be produced. Therefore, under the acceleration rule of this subsection, S’s $ 30 gain is taken into account in Year 3 immediately before S becomes a nonmember.
West Virginia does not conform to the stock basis adjustments required for federal consolidated filing purposes by Treasury Regulation section 1.1502-32. P’s basis in S’s stock will be P’s original cost, increased by any capital contributions and decreased by any returns of capital.
Apportionment. The intercompany sale is not reflected in the sales factor in Year 1. In Year 3, P’s receipts from the sale of S stock may be included in the sales factor if not otherwise excluded under W. Va. Code §§11-24-1, et seq. or this rule. The land will be included in B’s property factor at S’s $ 70 original cost until S’s intercompany gain is accelerated. Immediately after S’s gain is taken into account, the $ 70 value of the land in B’s property factor will be stepped up to reflect B’s $ 100 cost. S’s intercompany gain will be treated as current apportionable business income in Year 3.
Example 2: Conversion to nonbusiness use.
Facts. S owns land with a basis of $ 70 which it holds for use in the trade or business of the combined reporting group. On January 1 of Year 1, S sells the land to B for $ 100. B also uses the land in its trade or business. On July 1 of Year 3, B converts the land to a nonbusiness use.
Acceleration of S’s intercompany items. Because the effect of treating the unitary operations of S and B as divisions of a single corporation cannot be achieved once the land is removed from the unitary trade or business, the acceleration rule causes S to take its $ 30 gain into account immediately before the conversion to non-business use takes place.
Apportionment. If the land had been transferred between divisions of a single corporation and then converted to nonbusiness use, those transactions would have no effect on the sales factor. Thus, neither the intercompany sale in Year 1 nor the acceleration of S’s intercompany gain in Year 3 will be reflected in the sales factor. The land will be included in B’s property factor at S’s $ 70 original cost until it is converted to nonbusiness use, at which time it will be removed from the property factor. S’s accelerated intercompany gain will be treated as current apportionable business income in Year 3. 13d.5. Simplifying rules. 13d.5.a. Unless otherwise provided, this section applies the simplifying rules of Treasury Regulation section 1.1502-13(e), unless differences occur due to non-conformity of W. Va. Code §§11-24-1, et seq. with federal treatment. 13d.5.b. Election to treat intercompany transactions on a separate entity basis. 13d.5.b.1. If members of the combined reporting group make a federal election to treat intercompany transactions on a separate entity basis under Treasury Regulation section 1.1502-13(e)(3), the taxpayer members will be treated as having made a similar election for West Virginia purposes, unless an election to the contrary is made for West Virginia purposes. A separate West Virginia election shall be made by the taxpayer members to prevent the federal election from applying for West Virginia purposes. The election shall be subject to the approval of the Tax Commissioner, and approval or disapproval of an election is within the sole discretion of the Tax Commissioner. A taxpayer which is qualified to request federal consent to treat intercompany transactions on a separate entity basis under Treasury Regulation section 1.1502-13(e)(3) but does not so request or is not granted consent by the Internal Revenue Service, may not elect such treatment for West Virginia purposes. 13d.5.b.2. If the members of the combined reporting group properly report transactions on a separate entity basis for federal or foreign national tax purposes and paragraph 13d.5.b.1. of this rule does not apply, the taxpayer members may elect to treat those transactions on a separate entity basis for West Virginia purposes. The election is subject to the approval of the Tax Commissioner, and approval or disapproval of an election is within the sole discretion of the Tax Commissioner. The election may be made for all items, or for items from a class or classes of transactions. For example, intercompany sales of inventory to a controlled foreign corporation included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f may be considered a class of transactions for which a separate state election may be made. 13d.5.b.3. Elections described by subdivision 13d.5.b. of this rule are made by reporting the intercompany transactions in the manner required by the election on a timely filed original tax return (not an amended return) for the first year to which the election is to apply. An election under this subsection shall be treated as an accounting method and shall be effective for all intercompany transactions occurring in the year to which the election is first applied, and for each year thereafter. The election is subject to the approval of the Tax Commissioner, and approval or disapproval of an election is within the sole discretion of the Tax Commissioner. 13d.5.b.4. An election made under subdivision 13d.5.b of this rule does not apply for purposes of taking into account: 13d.5.b.4.A. Losses and deductions deferred under section 267(f) of the Internal Revenue Code; or 13d.5.b.4.B. Items from intercompany transactions with respect to stock or obligations of members. 13d.6. Stock of members. 13d.6.a. Unless otherwise provided, this section applies the provisions of Treasury Regulation section 1.1502-13(f) relating to stock of members; however, the provisions of subsection (f)(6) of that section shall not apply. 13d.6.a.1. Exception for distributee member. Treasury Regulation section 1.1502-13(f)(2)(ii) shall not apply to exclude intercompany distributions from the gross income of the distributee member. Intercompany dividend distributions described by section 301(c)(1) of the Internal Revenue Code are included in the income of the distributee member unless subject to elimination or deduction under other applicable federal law or West Virginia law. The treatment of intercompany distributions described by section 301(c)(3) of the Internal Revenue Code is provided by paragraph 13d.6.a.2. of this rule. 13d.6.a.2. Deferred intercompany stock account (DISA). That portion of an intercompany distribution which exceeds West Virginia earnings and profits and P’s basis in S’s stock (the portion of a distribution described by section 301(c)(3) of the Internal Revenue Code) will create a DISA. In this subsection, P is treated like the Buyer (B) for purposes of calculating corresponding and recomputed items.
The DISA will be treated as deferred income. To the extent of a sale, liquidation, or any other disposition of shares of the stock, the balance of the DISA with respect to the shares will be taken into account as income or gain to P even if S and P remain members of the same combined reporting group. The disposition shall be treated as a sale or exchange for purposes of determining the character of the DISA income or gain. The DISA is held by the distributee. 13d.6.a.2.A. A disposition of all the shares shall be considered to have occurred if either S or P becomes a non-member of the combined reporting group or if the stock of S becomes worthless. 13d.6.a.2.B. Because P’s DISA is deferred income and not negative basis, the DISA is taken into account upon liquidation, including complete liquidation into the parent. The deferred income restored as a result of the liquidation will be taken into account ratably over 60 months unless the taxpayer elects to take the income into account in full in the year of liquidation. For example, if S liquidates and the exchange of P’s S stock is subject to section 332. of the Internal Revenue Code, P’s DISA income taken into account under paragraph 13d.6.a.2. of this rule is recognized over 60 months unless an election is made to recognize the deferred income in the year of liquidation. Nonrecognition or deferral shall not apply to DISA income or gain taken into account as a result of an event described in subparagraph 13d.6.a.2.A. of this rule 13d.6.a.2.C. If P transfers the stock of S to another member of the combined reporting group, P’s DISA income will be an intercompany item and deferred under the provisions of this section. 13d.6.b. Examples. The application of this section to intercompany transactions with respect to stock of members is illustrated by the following examples.
Example 1: Dividend exclusion and property distribution.
Treasury Regulation §1.1502-13(f)(7), example 1. provides a similar example.
Facts. S owns land that is used in the trade or business of the combined reporting group with a $ 70 basis and $ 100 value. On January 1 of Year 1, P’s basis in S’s stock is $ 100, and S has accumulated earnings and profits of $ 500 from prior years’ combined reports of S and P.
During Year 1, S declares and makes a dividend distribution of the land to P. P also uses the land in the unitary business. Under section 311(b) of the Internal Revenue Code, S has a $ 30 gain. Under section 301(d) of the Internal Revenue Code, P’s basis in the land is $ 100. West Virginia law generally conforms to Internal Revenue Code sections 301-385. On July 1 of Year 3, P sells the land to Y for $ 110.
Dividend treatment. S’s distribution of the land is an intercompany distribution to P in the amount of $ 100. Because the distribution is paid out of earnings and profits of S, which have been included in a combined report of S and P, it will be eliminated from P’s income pursuant to W. Va. Code §11-24-13d. The payment of the dividend has no effect on P’s basis in the stock of S.
Matching rule. Under the matching rule (treating P as the buying member and S as the selling member), S takes its $ 30 intercompany gain into account in Year 3 to reflect the $ 30 difference between P’s $ 10 corresponding gain ($ 110-$ 100 basis in the land) and the $ 40 recomputed gain ($ 110-$ 70 basis that the land would have had if S and P were divisions).
Apportionment. The intercompany distribution is not reflected in the sales factor in Year 1. In Year 3, unless otherwise excluded, the $ 110 gross receipts from P’s sale of the land will be included in P’s sales factor. After the distribution in Year 1, the land will be included in P’s property factor at S’s $ 70 original cost basis. Both S’s $ 30 gain and P’s $ 10 gain relative to the distributed land will be treated as current apportionable business income in Year 3.
Example 2: Dividends paid from pre-unitary earnings and profits.
Facts. The facts are the same as in Example 1. except that S’s earnings and profits from prior combined reports of S and P is only $ 10. S also has $ 490 of earnings and profits that arose in years before a unitary relationship existed between S and P.
Dividend treatment. Because only $ 10 of S’s distribution was paid from earnings and profits attributable to business income included in a combined report of S and P, only $ 10 is eliminated under W. Va. Code §11-24-13d. The remaining $ 90 of the dividend will be taken into account by P in Year 1, subject to any applicable deductions under W. Va. Code §§11-24-1, et seq.
Matching rule. P’s corresponding item is not its dividend income, but its income, gain, deduction, or loss from the property acquired in the intercompany distribution. Therefore, none of S’s intercompany gain will be taken into account in Year 1. As in Example 1, S will take its $ 30 intercompany gain into account in Year 3 to reflect the $ 30 difference between P’s $ 10 corresponding gain and the $ 40 recomputed gain.
Apportionment. The apportionment results are the same as in Example 1, except that to the extent that the Year 1. dividend is not eliminated under W. Va. Code §11-24-13d or deducted for purposes of W. Va. Code §§11-24-1, et seq., P’s dividend income will be treated as current apportionable business income in Year 1. The intercompany distribution is not included in the sales factor in Year 1.
Example 3: Deferred intercompany stock accounts.
Treasury Regulation §1.1502-13(f)(7), example 2. provides a similar example.
Facts. S owns all of T’s stock with a $ 10 basis and $ 100 value. S has substantial earnings and profits which are attributable to business income included in a combined report of S, T and P. T has $ 10 of accumulated earnings and profits, all of which are attributable to business income included in a combined report of S, T and P. On January 1 of Year 1, S declares and distributes a dividend of all of the T stock to P. Under section 311(b) of the Internal Revenue Code, S has a $ 90 gain. Under section 301(d) of the Internal Revenue Code, P’s basis in the T stock is $ 100. During Year 3, T borrows $ 90 from an unrelated party and declares and makes a $ 90 distribution to P to which section 301. of the Internal Revenue Code applies. During Year 6, T has $ 5 of current earnings which is attributable to business income included in the combined report of S, T and P. On December 1. of Year 9, T issues additional stock to Y and, as a result, T becomes a nonmember.
Dividend elimination. P’s $ 100 of dividend income from S’s distribution of the T stock, and its $ 10 dividend income from T’s $ 90 distribution, are eliminated from income under W. Va. Code §11-24-13d.
Matching and acceleration rules. P has no deferred intercompany stock account (DISA) with respect to T stock because T’s $ 90 distribution did not exceed T’s $ 10 of earnings and profits and $ 100 stock basis. Therefore, P’s corresponding item in Year 9 when T becomes a nonmember is $ 0. Treating S and P as divisions of a single corporation, the T stock would continue to have a $ 10 basis after the distribution from S to P. T’s $ 90 distribution in Year 3 would first reduce T’s $ 10 earnings and profits to zero, then reduce the $ 10 recomputed basis in T stock to zero and create a $ 70 recomputed DISA. T’s $ 5 of earnings in Year 6 does not affect the amount of the DISA. Because the recomputed DISA would be taken into account upon T becoming a nonmember in Year 9, P will have a $ 70 recomputed corresponding item. Under the matching rule, S takes $ 70 of its intercompany gain into account in Year 9 to reflect the difference between P’s $ 0 corresponding gain and the $ 70 recomputed gain. S’s remaining $ 20 of gain will be taken into account under the matching and acceleration rules based on subsequent events (for example, under the matching rule if P subsequently sells its T stock, or under the acceleration rule if S becomes a nonmember or if the stock of T becomes a nonbusiness asset.)
Apportionment. Neither the distributions in Years 1. and 3, nor T becoming a nonmember in Year 9, have any effect on the sales factor. S’s $ 70 intercompany gain will be treated as current apportionable business income in Year 9.
Example 4: Deferred intercompany stock accounts, reverse sequence.
Treasury Regulation §1.1502-13(f)(7), example 2(d) provides a similar example.
Facts. The facts are the same as in Example 3, except that T borrows the $ 90 and makes its $ 90 distribution to S before S distributes T’s stock to P. To the extent of T’s $ 10 earnings and profits, T’s distribution to S is a dividend and is eliminated under section 25106 of the Revenue and Taxation Code. The remaining distribution reduces S’s $ 10 basis in T stock to $ 0 and creates a $ 70 DISA. The fair market value of T’s stock after T incurs the $ 90 debt and distributes the proceeds is $ 10. Under section 311(b) of the Internal Revenue Code and the provisions of this section, S has an $ 80 gain from the distribution of T stock to P ($ 10 value less $ 0 basis, plus $ 70 DISA recaptured). Under section 301(d) of the Internal Revenue Code, P’s initial basis in the T stock is the $ 10 fair market value of the stock. T’s $ 5 of earnings in Year 6 has no effect on P’s basis in the T stock.
Matching and acceleration rule. P’s corresponding item in Year 9, when T becomes a nonmember, is $ 0. Treating S and P as divisions of a single corporation, the T stock would continue to have a $ 0 basis after the distribution from S to P, and a $ 70 balance would remain in the DISA. When T becomes a nonmember in Year 9, P shall include the amount of its DISA in recomputed income, and therefore has a $ 70 recomputed corresponding item. Under the matching rule, S takes $ 70 of its intercompany gain into account in Year 9 to reflect the difference between P’s $ 0 corresponding gain and the $ 70 recomputed gain. S’s remaining $ 10 of gain will be taken into account under the matching and acceleration rules based on subsequent events.
Apportionment. Neither the distributions in Year 1. nor T becoming a nonmember in Year 9 have any effect on the sales factor. S’s $ 70 intercompany gain taken into account in Year 9 is treated as current apportionable business income in Year 9.
Example 5: Partial stock sale.
Treasury Regulation §1.1502-13(f)(7), example 2(e) provides a similar example.
Facts. The facts are the same as in Example 3, except that P sells 10% of T’s stock to Y on December 1. of Year 9 for $ 1.50 (rather than T issuing additional stock and becoming a nonmember). T’s $ 90 distribution to P in Year 3 reduced T’s $ 10 of earnings and profits to $ 0, then reduced P’s $ 100 basis in T stock to $ 20. Under the matching rule, S takes $ 9 of its gain into account in Year 9 to reflect the difference between P’s $ .50 loss taken into account ($ 1.50 sale proceeds minus $ 2. basis) and the $ 8.50 recomputed gain ($ 1.50 sales proceeds minus $ 0 basis plus $ 7 recomputed DISA).
Apportionment. If not excluded pursuant to W. Va. Code §11-24-7(h), the $ 1.50 gross receipts from P’s sale of the T stock to Y is included in P’s sales factor in Year 9. Both S’s $ 9 gain and P’s $ .50 loss are treated as current apportionable business income in Year 9.
Example 6: Loss, rather than cash distribution.
Treasury Regulation §1.1502-13(f)(7), example 2(f) provides a similar example.
Facts. The facts are the same as in Example 3, except that T retains the loan proceeds and incurs a $ 90 operating loss in Year 3. The loss results in an earnings and profits deficit of $ 80 for T, but has no effect on P’s basis in T’s stock. Therefore, no DISA is created. T’s $ 5 of earnings in Year 6 reduces its earnings and profits deficit to $ 75, but also has no effect on the stock basis. Because there is no DISA balance to take into account when T becomes a nonmember in Year 9, P’s corresponding item and the recomputed item are both $ 0. Consequently, S’s entire $ 90 intercompany gain continues to be deferred pending subsequent events.
Example 7: Intercompany reorganization.
Treasury Regulation §1.1502-13(f)(7), example 3 provides a similar example.
Facts. P forms S and B by contributing $ 200 to the capital of each. During Years 1. through 4, S and B each accumulate earnings and profits of $ 50, which is attributable to business income included in the combined reports of S, B and P. On January 1 of Year 5, the fair market value of S’s assets and its stock is $ 500, and S merges into B in a tax-free reorganization. Pursuant to the plan of reorganization, P receives new B stock with a; fair market value of $ 350 and $ 150 cash.
Treatment as a distribution under section 301. of the Internal Revenue Code. Under Treasury Regulation section 1.1502-13(f)(3), P is treated as receiving additional B stock with a fair market value of $ 500. Under section 358 of the Internal Revenue Code, P’s basis of the additional B stock is $ 200 (P’s basis in the relinquished S stock). Immediately after the merger, $ 150 of the stock received is treated as redeemed, and the redemption is treated under section 302(d) of the Internal Revenue Code as a distribution to which section 301. applies. Under section 381(c)(2) of the Internal Revenue Code, B is treated as receiving S’s $ 50 of earnings and profits in addition to its own $ 50 of earnings and profits. Therefore, $ 100 of the determined distribution is treated as a dividend and is eliminated from income for West Virginia tax purposes. The remaining $ 50 of the distribution reduces P’s basis in the B stock from $ 400 to $ 350.
Apportionment. The reorganization has no effect on the sales factor. After the reorganization, S’s property will be reflected in B’s property factor at S’s original cost. 13d.7. Obligations of members. 13d.7.a. Unless otherwise provided, this section follows Treasury Regulation section 1.1502-13(g) relating to the obligations of members. 13d.7.b. Example: The application of this section to obligations of members is illustrated by the following example.
Example: Interest on intercompany debt.
Treasury Regulation §1.1502-13(g)(5), Example 1. provides a similar example.
Facts. On January 1 of Year 1, B borrows $ 100 from S in return for B’s note providing for $ 10 of interest annually at the end of each year, and repayment of $ 100 at the end of Year 5. Under their separate entity methods of accounting, B accrues a $ 10 interest deduction annually, and S accrues $ 10 of interest income annually.
Matching rule. Under subdivision 13d.7.a. of this rule, the accrual of interest on B’s note is an intercompany transaction. Under the matching rule, S takes its $ 10 of income into account in each of Years 1. through 5 to reflect the $ 10 difference between B’s $ 10 of interest expense taken into account and the $ 0 recomputed expense.
Interest offset. Neither S’s intercompany interest income nor B’s corresponding interest expense are taken into account for purposes of determining the interest offset or foreign investment interest offset under W. Va. Code §§11-24-1, et seq.
Apportionment. S’s interest income is not included in the sales factor in any of Years 1. through 5. The intercompany loan is excluded from S’s property factor, even if S is required to include loan balances in its property factor for West Virginia tax purposes. 13d.8. Anti-avoidance rules. If a transaction is engaged in or structured with the principal purpose of avoiding the purposes of this section (including, for example, avoiding treatment as an intercompany transaction, or manipulating the sourcing of income or the occurrence of acceleration events), adjustments may be made to carry out the purposes of this section. 13d.9. Miscellaneous operating rules.
Except as otherwise provided, this section applies the provisions of Treasury Regulation section 1.1502-13(j) relating to miscellaneous operating rules. However, the provisions of subsections (j)(5), (j)(6), and (j)(7) of Treasury Regulation section 1.1502-13 shall not apply for West Virginia tax purposes. 13d.9.a. Subgroups. 13d.9.a.1. If a change occurs in the composition of the combined reporting group, but both S and B either remain members of the same combined reporting group or leave the combined reporting group together and remain unitary with each other, that change alone will not cause S’s intercompany items to be taken into account under the acceleration rule contained in subsection 13d.4 of this rule. 13d.9.a.2. If the event which causes the combined reporting group to change as described in paragraph 13d.9.a.1. also causes S’s intercompany items to be taken into account in a federal consolidated return, then S may make an irrevocable election to take those intercompany items into account in the same period for West Virginia purposes. The election is made by reporting the income, gain, deduction, or loss on a timely filed original tax return. If this election is not made, then S and B shall maintain sufficient records to track the intercompany gain or loss which has been taken into account for federal purposes but which remains deferred for state purposes. The election is subject to the approval of the Tax Commissioner, and approval or disapproval of an election is within the sole discretion of the Tax Commissioner. 13d.9.a.3. Examples. The application of subdivision 13d.9.a. of this rule is illustrated by the following examples.
Example 1: S and B sold.
P is the principal corporation in a combined reporting group in which S and B are members. P sells S and B to Y, an unrelated entity. S and B remain unitary after the sale. The sale of S and B does not cause S’s intercompany items to be taken into account under the acceleration rule. Therefore S’s intercompany items will remain deferred until subsequent events cause those intercompany items to be taken into account under either the matching rule or the acceleration rule. However, if the sale of S and B caused S’s intercompany items to be taken into account in the federal consolidated return, the taxpayer may elect the same treatment under paragraph 13d.9.a.2. of this rule by taking the intercompany items into account on its timely filed original West Virginia return. 13d.9.b. Recognition of income from intercompany transactions occurring prior to entering the state. 13d.9.b.1. Intercompany transactions as defined in subdivision 13d.2.a. of this rule shall include those transactions which occur prior to any member becoming taxable in this State if S and B would have been members of the same combined reporting group had any unitary member been taxable in this State in the year of the transaction. 13d.9.b.2. To the extent that intercompany transactions would have qualified for an election to be treated on a separate entity basis under subdivision 13d.5.b. of this rule but for the fact that no member of the combined reporting group was a West Virginia taxpayer in the year in which an election would have been required to be made, a retroactive election under subdivision 13d.5.b. of this rule will be made. The election shall apply to all intercompany transactions described by subdivision 13d.9.b. 13d.9.b.3. Examples. The application of this section to transactions occurring prior to entering the state is illustrated by the following examples.
Example 1: Sale outside of group after member enters the state.
Facts. S and B are members of a unitary group which conduct all of their business activity in the U.S. Both are members of a federal consolidated return group. In Year 1, when no member of the group is a West Virginia taxpayer, S sells land with a basis of $ 100 to B for $ 110. S’s $ 10 gain is treated as a deferred intercompany item in S and B’s consolidated return. The land is used in the unitary business. In Year 2, a member of the unitary group becomes taxable in West Virginia. Prior to the member becoming taxable in this state, no event occurred which would have caused the intercompany item to be taken into account. In Year 3, B sells the land to Y for $ 130.
Matching rule. S’s sale of the land to B is an intercompany transaction, and S’s $ 10 gain is its intercompany item. S takes its intercompany gain into account in Year 3 to reflect the $ 10 difference between B’s corresponding item of $ 20 from the sale to Y, and the recomputed corresponding item of $ 30 ($ 130-$ 100). This is the same result that would have occurred if S and B were unitary divisions of a single corporation and the transaction had been a transfer between divisions prior to the corporation becoming taxable within this state.
Apportionment. The land is included in B’s property factor at S’s $ 100 original cost basis. In Year 3, the $ 130 gross receipts from B’s sale to Y, unless otherwise excluded by W. Va. Code §11-24-7(h), will be included in B’s sales factor. S’s gain will be treated as current apportionable business income in Year 3.
Example 2. Retroactive election under subdivision 13d.5.b. of this rule Facts. The facts are the same as in Example 1, except that S and B do not file a consolidated federal return. The Year 1. intercompany transaction between S and B is reported as a $ 10 gain on S’s separate return for federal purposes. An election to treat intercompany transactions between S and B on a separate entity basis could have been made if any member of the unitary group was a West Virginia taxpayer in the year of the transaction. Therefore, a retroactive election is made under this subsection in Year 3, which is the year that S’s intercompany item would otherwise be taken into account.
Example 3. S leaves the combined reporting group after a member enters the state.
Facts. The facts are the same as in Example 1, except that instead of B selling the land, the stock of S is sold in Year 3 and S becomes a nonmember of the combined reporting group.
Acceleration rule. Once the stock of S is sold, the effect of treating the unitary operations of S and B as divisions of a single corporation cannot be achieved. Therefore, under the acceleration rule of subsection 13d.4 of this rule, S’s $ 10 gain is taken into account in Year 3 immediately before S becomes a nonmember.
Apportionment. The land will be included in B’s property factor at S’s $ 100 original cost basis until S’s intercompany gain is accelerated. Immediately after S’s gain is taken into account, the $ 100 value of the land in B’s property factor will be increased to reflect B’s $ 110 cost. S’s intercompany gain will be treated as current apportionable business income in Year 3. 13d.9.c. Partially included water’s-edge corporations. 13d.9.c.1. Coordination with W. Va. Code §11-24-13f. 13d.9.c.1.A. If S is a corporation partially included in a water’s-edge combined reporting group, and S enters into a transaction with another member of the water’s-edge combined reporting group, the transaction is an intercompany transaction if the resulting income, gain, deduction, or loss would, but for the provisions of this section, be included as apportionable business income in the water’s-edge combined report under W. Va. Code §11-24-13f. 13d.9.c.1.B. Except as provided in subparagraph 13d.9.c.1.C. of this rule, intercompany transactions include transactions where B is a corporation partially included in the combined reporting group immediately after the transaction pursuant to W. Va. Code §11-24-13f(4), but only to the extent that the object of the intercompany transaction gives rise to income, gain, deduction, or loss which would be included as apportionable business income in the water’s-edge combined report under W. Va. Code §11-24-13f(4). 13d.9.c.1.C. The sale, exchange, or other transfer of stock of an affiliated corporation to a corporation partially included in the combined reporting group pursuant to W. Va. Code §11-24-13f(4) will not be treated as an intercompany transaction unless the stock is considered to be a United States real property interest as defined in section 897(c) of the Internal Revenue Code. 13d.9.c.1.D. Where either S or B was partially included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(4), the intercompany item will be taken into account under the acceleration rule immediately before any income year in which either S or B has no includable income pursuant to W. Va. Code §11-24-13f(4) and is therefore excluded from the water’s-edge combined reporting group. If, for any year, the includable income of S or B pursuant to W. Va. Code §11-24-13f(4) is insubstantial, the Tax Commissioner may permit or require the intercompany item to be taken into account under the acceleration rule immediately before that year. 13d.9.c.1.E. Where B is partially included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(4), the acceleration rule will apply to take an intercompany item into account to the extent the object of the intercompany transaction ceases to give rise to income, gain, loss, or deductions which would be included as apportionable business income in the water’s-edge combined report under W. Va. Code §11-24-7(h). For example, if intangible property gives rise to income includible in the water’s-edge combined report under W. Va. Code §11-24-7(h) while held by B, but a disposition of the property results in foreign-source gain or loss under sections 861. through 865 of the Internal Revenue Code which is not included in the water’s-edge combined report, then the disposition will trigger application of the acceleration rule to take into account S’s intercompany items with respect to the property. 13d.9.c.1.F. Where a sale, exchange, or other transfer of stock to a corporation included in the water’s-edge combined reporting group, pursuant to W. Va. Code §11-24-13f(a)(4), has been treated as an intercompany transaction under subparagraph 13d.9.c.1.C. of this rule, the acceleration rule will apply to take into account intercompany items arising from that intercompany transaction if the stock ceases to be a United States real property interest as defined in section 897(c) of the Internal Revenue Code. 13d.9.c.2. Coordination with W. Va. Code §11-24-13f(a)(5). 13d.9.c.2.A. Definition. For purposes of this section, the term "partial inclusion ratio" means a fraction not to exceed one, the numerator of which is the "Subpart F income, as defined in section 952 of the Internal Revenue Code " of that corporation for that taxable year and the denominator of which is the "earnings and profits," as defined in Section 964 of the Internal Revenue Code of that corporation for that taxable year. The partial inclusion ratio shall be used for determining the includable amount of income and apportionment factors for a partially included corporation described in W. Va. Code §11-24-13f(a)(5). 13d.9.c.2.B. A transaction between a corporation included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(a)(5) and another member of the combined reporting group will be an intercompany transaction to the extent of that corporation’s partial inclusion ratio for the income year. 13d.9.c.2.C. If both S and B are corporations included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(a)(5), the partial inclusion ratios of both S and B shall be applied to determine the portion of the transaction that will be treated as an intercompany transaction. 13d.9.c.2.D. Where either S or B is included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(a)(5), the intercompany item will be taken into account under the acceleration rule immediately before the first income year in which the partial inclusion ratio for either S or B is an amount equal to or lower than 50% of its partial inclusion ratio for the year of the intercompany transaction. Regardless of whether the ratio decreases 50% or more below the intercompany transaction year partial inclusion ratio, the acceleration rule will apply to take the intercompany item into account if the partial inclusion ratio is less than 10%. 13d.9.c.2.E. If subparagraph 13d.9.c.2.D. of this rule applies, then, as an alternative to the application of the acceleration rule provided by that subparagraph, the taxpayer may elect to have the acceleration rule apply to take into account only a proportionate share of the intercompany item relative to the amount of the decrease in the partial inclusion ratio. If further decreases in the partial inclusion ratio occur in subsequent years, additional portions of the intercompany item shall be taken into account under the acceleration rule in proportion to the decreases. However, if in any income year the partial inclusion ratio is below 10%, any remaining intercompany items shall be taken into account and the election provided by this subparagraph shall not apply. The election shall be made by reporting the proportionate share of the intercompany item on a timely filed original tax return for the first year in which the partial inclusion ratio decreases 50% or more below the intercompany transaction year partial inclusion ratio. As a condition of this election, the taxpayer shall maintain books and records sufficient to identify the amounts of intercompany items, the annual partial inclusion ratios, and the application of this provision to the intercompany items. 13d.9.c.2.F. Where both S and B are included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(a)(5), and the partial inclusion ratios of both S and B decrease 50% or more below their respective intercompany transaction year partial inclusion ratios, the acceleration methodology of subparagraph 13d.9.c.2.E. of this rule shall be applied in proportion to the greater of either (1) the amount of decrease attributable to S or (2) the amount of decrease attributable to B. 13d.9.c.3. Separate entity election for transactions with partially included entities. Paragraph 13d.5.b.2. of this rule sets forth procedures for application of the election to treat transactions on a separate entity basis with respect to transactions with partially included entities. 13d.9.c.4. Examples. The application of this subdivision to partially included entities in a water’s-edge combined report is illustrated by the following examples.
Example 1: Intercompany sale of land by an entity included pursuant to W. Va. Code §11-24-13f(a)(4).
Facts. S is a foreign corporation with U.S. branches that are included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(a)(4). S has a basis of $ 70 in land which it uses in its U.S. trade or business operations. On January 1 of Year 1, S sells the land to domestic corporation B for $ 100. On July 1 of Year 3, B sells the land to Y for $ 110.
Matching rule. But for the provisions of this section, S’s $ 30 gain from the sale to B would be treated as U.S. source income and included in the water’s-edge combined report under W. Va. Code §11-24-13f. However, the transaction is an intercompany transaction and S’s $ 30 gain is an intercompany item. S takes its intercompany item into account under the matching rule in Year 3 to reflect the $ 30 difference for the year between B’s corresponding item of $ 10 and the recomputed corresponding item of $ 40.
Apportionment. To produce the result that would occur if S and B were unitary divisions of a single corporation, the intercompany sale of land will not be reflected in the sales factor in Year 1. In Year 3, unless otherwise excluded, the $ 110 gross receipts from B’s sale will be included in B’s sales factor. The land is attributable to B after the sale, and it will be reflected in B’s property factor at S’s $ 70 original cost basis until it is sold outside the water’s-edge combined reporting group in Year 3. Both S’s $ 30 gain and B’s $ 10 gain will be treated as current apportionable business income in Year 3.
Example 2: Intercompany transaction where buyer is an entity included pursuant to W. Va. Code §11-24-13f(a)(4).
Facts. B is a foreign corporation with a U.S. branch which is included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(a)(4). In Year 1, domestic corporation S incurs expenses of $ 300 to provide engineering services to B in connection with the renovation of B’s U.S. facility. B capitalizes the $ 500 fee which it pays to S for the services and computes depreciation on that basis. If S and B were divisions of a single corporation, only the $ 300 in expenses would be capitalized, which would result in smaller depreciation deductions.
Matching Rule. Because the engineering services are attributable to a facility used in the operation of U.S. business activities which give rise to income, gain, deduction, or loss included in the combined report under W. Va. Code §11-24-13f, the performance of those services is treated as an intercompany transaction. S has intercompany income of $ 200 ($ 500 receipts less $ 300 expenses). S’s intercompany income will be taken into account in subsequent years based upon the difference between B’s corresponding depreciation (based on a $ 500 basis) and the depreciation recomputed as though S and B were divisions of a single corporation (based on a $ 300 basis).
Apportionment. As would be the case if the services were performed between unitary divisions of a single corporation, the transaction will not be reflected in the sales factor. If S’s expenses with respect to the engineering services include payroll expenses, those expenses would be included in S’s payroll factor in Year 1. When the renovated facility is placed into service in the unitary business, the $ 300 capitalized cost of the engineering services will be included in B’s property factor. In each subsequent year, S’s intercompany income taken into account and B’s corresponding depreciation deduction will be treated as current apportionable business income for that year.
Example 3: Transaction not related to U.S. activities.
Facts. Using the same facts as in Example 2, except that the engineering services relate to the construction of a plant in Brazil.
Matching rule. Although B is partially included in the water’s-edge combined reporting group under W. Va. Code §11-24-13f(a)(4), the engineering services do not relate to an asset which will give rise to income, gain, deduction, or loss which will be included in the water’s-edge combined report under W. Va. Code §11-24-13f. Therefore, the performance of services is not treated as an intercompany transaction. S’s income of $ 500 and expenses of $ 300 are taken into account in Year 1.
Apportionment. Gross receipts of $ 500 are included in S’s sales factor.
Example 3a: Transaction allocated between U.S. activities and foreign activities.
Facts. Using the same facts as in Example 2, except that the engineering services relate to the construction of two plants, one in the U.S. and one in Brazil. S’s expenses with respect to the engineering services are allocated 55% to the U.S. activities under the rules in Treasury Regulation section 1.861. Therefore, 55% of the transaction will be treated as an intercompany transaction.
Matching Rule. S has intercompany income of $ 110 ($ 500 receipts less $ 300 expenses, multiplied by 55%). S’s intercompany income will be taken into account in subsequent years based upon the difference between B’s corresponding depreciation deduction and the depreciation deduction recomputed as though S and B were divisions of a single corporation.
Apportionment. Because 45% of the transaction is not treated as an intercompany transaction, S’s $ 90 of non-intercompany income ([$ 500-$ 300] x 45%) will be treated as current apportionable business income in Year 1. Likewise, receipts from engineering services of $ 225 ($ 500 x 45%) will be included in S’s sales factor in Year 1. The capitalized cost of the engineering services allocated to the U.S. plant is $ 165 ($ 300 total cost x 55%). When the U.S. plant is placed into service in the unitary business, the $ 165 capitalized cost will be included in B’s property factor. In each subsequent year, S’s intercompany income taken into account and B’s corresponding depreciation deduction will be treated as current apportionable business income for that year.
Example 4: Asset ceases to give rise to U.S. source income.
Facts. Using the same facts as in Example 2, except that the engineering services relate to the design of specialized equipment which is placed in service in B’s U.S. facility by the end of Year 1. On December 31. of Year 4, the equipment is shipped to Germany for use in another plant owned and operated by B.
Matching rule. S has intercompany income of $ 200 (sets forth computations in Example 2), a portion of which is taken into account in Years 2. through 4 to reflect the difference between B’s corresponding depreciation deduction and the depreciation recomputed as though S and B were divisions of a single corporation.
Acceleration rule. In Year 4, the equipment ceases to give rise to income, gain, loss, or deductions included in the water’s-edge combined report under W. Va. Code §11-24-13f. Under the acceleration rule and subparagraph 13d.9.c.1.E. of this rule, S’s remaining intercompany income is taken into account in Year 4.
Apportionment. The apportionment results of the transactions in Years 1. through 4 are the same as in Example 2. Because no gross receipts related to the transaction are generated in Year 4, the accelerated income is not reflected in the sales factor.
Example 5. Both Seller and Buyer partially included under W. Va. Code §11-24-13f(a)(4).
S and B are both foreign corporations with U.S. branches that are included in a water’s-edge combined reporting group pursuant to W. Va. Code §11-24-13f(a)(4). S sells equipment which it uses in its U.S. trade or business operations to B for a gain. Thereafter, the equipment is used in B’s U.S. trade or business operations. Except for the provisions of this section, S’s gain from the sale of equipment would be treated as U.S. source income and included in the water’s-edge combined report under W. Va. Code §11-24-13f. B’s use of the equipment gives rise to income, gain, deduction, or loss which will be included in the water’s-edge combined report under W. Va. Code §11-24-13f. Therefore, because the requirements of subparagraph 13d.9.c.1.A. and 13d.9.c.1.B. of this rule are both satisfied, S’s sale of the equipment to B is treated as an intercompany transaction and subject to the provisions of this section.
Example 6. Seller excluded from the water’s-edge combined reporting group.
Facts. S is a foreign corporation which owns 100% of the stock of affiliated domestic corporations B and RP. RP is a United States Real Property Holding Corporation as defined in section 897(c) of the Internal Revenue Code. In Year 1, S has no income from U.S. activities, and is excluded from the water’s-edge combined reporting group of B and RP.
In Year 2, S sells its stock in RP to B for a gain of $ 1,000. Because S’s sale of RP is treated as a disposition of a United States real property interest as defined by section 897 of the Internal Revenue Code, S’s income, and apportionment factors attributable to that sale would, but for the provisions of this section, be included in the water’s-edge combined report in Year 2. Therefore, the transaction is treated as an intercompany transaction. S’s intercompany item is its $ 1,000 gain.
In Year 3, S has no income from U.S. activities, and is again excluded from the water’s-edge combined reporting group of B and RP.
Acceleration Rule. The effect of treating the operations of S and B as divisions of a single corporation cannot be achieved once S is excluded from the water’s-edge combined reporting group. Therefore, under the acceleration rule, S’s $ 1,000 intercompany; gain is taken into account in Year 2. (immediately before the income year in which S is excluded from the combined reporting group).
Apportionment. Neither the intercompany sale of RP stock nor the acceleration of the intercompany gain is reflected in the sales factor in Year 2. S’s accelerated gain will be treated as current apportionable business income in Year 2.
Example 7: Seller included under W. Va. Code §11-24-13f(a)(5).
Facts. Corporation S is a controlled foreign corporation as defined in section 957 of the Internal Revenue Code and is included in the water’s-edge combined reporting group under W. Va. Code §11-24-13f(a)(5) to the extent of its partial inclusion ratio. In Year 1, S sells land with a basis of $ 500 to domestic corporation B for $ 600. S’s partial inclusion ratio for Year 1. is 66%. In Year 5, when S’s partial inclusion ratio is 75%, B sells the land to Y for $ 650. At no time in Years 2. through 4 did S’s partial inclusion ratio fall to 33% or lower (50% of the Year 1. ratio; see subparagraph 13d.9.c.2.D.).
Matching rule. $ 66 of S’s $ 100 gain is an intercompany item and is deferred ($ 100 x 66%). The remaining $ 34 of S’s gain is not included in the water’s-edge combined report. In Year 5, B has a corresponding gain of $ 50 ($ 650-$ 600). For purposes of calculating the recomputed gain, S’s original cost of $ 500 is increased by the amount of S’s $ 34 non-intercompany gain. Therefore, the recomputed gain would be $ 116 ($ 650-$ 534). S’s $ 66 intercompany gain is taken into account in the water’s-edge combined report in Year 5 to reflect the $ 66 difference between B’s $ 50 corresponding gain and the $ 116 recomputed gain.
Apportionment. Gross receipts of $ 396 from S’s sale to B are included in the water’s-edge combined report ($ 600 x 66%). If S and B were divisions of a single corporation, the transaction would not be reflected in the sales factor. Therefore, the $ 396 intercompany gross receipts shall be eliminated from S’s sales factor under paragraph 13d.1.e.1. of this rule. For purposes of B’s property factor, the land will be reflected at S’s cost basis under subparagraph 13d.1.e.2.A. of this rule, adjusted by any gain or loss recognized by S as a result of the non-intercompany portion of the transaction. The net value assigned to the land in B’s property factor will be $ 534 ($ 500 cost basis to S + $ 34 non-intercompany gain).
Example 8: Buyer included under W. Va. Code §11-24-13f(a)(5).
Facts. On December 31. of Year 1, domestic corporation S sells land with a basis of $ 500 to corporation B for $ 600. Corporation B is a controlled foreign corporation as defined in section 957 of the Internal Revenue Code and is included in the water’s-edge combined reporting group under W. Va. Code §11-24-13f(a)(5) to the extent of its partial inclusion ratio. B’s partial inclusion ratio for Year 1. is 66%. On December 31. of Year 5, when B’s partial inclusion ratio is 75%, B sells the land to Y for $ 650. At no time in Years 2. through 4 did B’s partial inclusion ratio fall to 33% or lower (50% of the Year 1. ratio).
Matching rule. $ 66 of S’s $ 100 gain ($ 100 x 66%) is an intercompany item and is deferred. S’s remaining $ 34 gain is taken into account currently in Year 1. In Year 5, B has a corresponding gain of $ 50 ($ 650-$ 600). For purposes of calculating the recomputed gain, S’s original cost of $ 500 is increased by the amount of the $ 34 non-intercompany gain taken into account by S. Therefore, the recomputed gain would be $ 116 ($ 650-$ 534). S’s $ 66 intercompany gain is taken into account in the water’s-edge combined report in Year 5 to reflect the $ 66 difference between B’s $ 50 corresponding gain and the $ 116 recomputed gain.
Apportionment. Unless otherwise excluded, S’s sales factor in Year 1. will reflect gross receipts of $ 204 from the non-intercompany portion of the sale to B. The remaining $ 396 ($ 600 sales price x 66%) will be eliminated from S’s sales factor under paragraph 13d.1.e.1. of this rule. The valuation of the land for purposes of B’s property factor is S’s cost basis adjusted by any gain or loss recognized by S as a result of the non-intercompany portion of the transaction. The net value assigned to the land will be $ 534 ($ 500 cost basis to S + $ 34 non-intercompany gain). The $ 534 valuation will be included in B’s property factor to the extent of B’s partial inclusion ratio for that year. For example, if B’s partial inclusion ratio was 50% in Year 2, the land would be reflected in B’s property factor for Year 2. at $ 267 ($ 534 x 50%). In Year 5, unless otherwise excluded, $ 487.50 gross receipts from B’s sale of the land to Y will be reflected in B’s sales factor ($ 650 sales price to Y x 75% Year 5 partial inclusion ratio).
Example 9: Both Seller and Buyer included under W. Va. Code §11-24-13f(a)(5).
Facts. Assume the same facts as in Example 8, except that S is also a controlled foreign corporation as defined in section 957 of the Internal Revenue Code and is included in the water’s-edge combined reporting group under W. Va. Code §11-24-13f(a)(5) to the extent of its partial inclusion ratio. S’s partial inclusion ratio for Year 1. is 80%. On December 31. of Year 5, when S’s partial inclusion ratio is 60%, B sells the land to Y for $ 650. At no time in Years 2. through 4 did S’s partial inclusion ratio fall to 40% or lower (50% of S’s 80% Year 1. ratio).
Matching rule. $ 52.80 of S’s $ 100 gain ($ 100 x S’s 80% Year 1. ratio x B’s 66% Year 1. ratio) is an intercompany item and is deferred. Of S’s remaining $ 47.20 non-intercompany gain, $ 27.20 is currently taken into account in Year 1. ($ 100 total gain x S’s 80% Year 1. ratio ‘ $ 80 of total gain includable in water’s-edge combined report; less $ 52.80 deferred intercompany portion); $ 20 of non-intercompany gain is not included in the water’s-edge combined report. In Year 5, B has a corresponding gain of $ 50 ($ 650-$ 600). For purposes of calculating the recomputed gain, S’s original cost of $ 500 is increased by the amount of S’s $ 47.20 non-intercompany gain. Therefore, the recomputed gain would be $ 102.80 ($ 650 sales price - $ 547.20 recomputed basis). S’s $ 52.80 intercompany gain is taken into account in the water’s-edge combined report in Year 5 to reflect the $ 52.80 difference between B’s $ 50 corresponding gain and the $ 102.80 recomputed gain.
Apportionment. Gross receipts of $ 480 from S’s sale to B ($ 600 x S’s 80% Year 1. ratio) are included in the water’s-edge combined report. Of that amount, $ 316.80 ($ 480 x B’s 66% Year 1. ratio) is attributable to the intercompany transaction and will be eliminated from S’s sales factor under paragraph 13d.1.e.1. of this rule. Unless otherwise excluded, S’s sales factor will continue to reflect the remaining gross receipts of $ 163.20. In Year 5, unless otherwise excluded, $ 487.50 gross receipts from B’s sale of the land to Y ($ 650 x B’s 75% Year 5 ratio) will be reflected in B’s sales factor.
The valuation of the land for purposes of B’s property factor is S’s cost basis in the land adjusted by any gain or loss recognized by S as a result of the non-intercompany portion of the transaction. The net value assigned to the land will be $ 547.20 ($ 500 cost basis to S + $ 47.20 non-intercompany gain). The $ 547.20 valuation will be included in B’s property factor to the extent of B’s partial inclusion ratio for that year. For example, if B’s partial inclusion ratio was 50% in Year 2, the land would be reflected in B’s property factor for Year 2. at $ 273.60 ($ 547.20 x 50%).
Example 10: Intercompany transaction between Seller included under W. Va. Code §11-24-13f(a)(4) and Buyer included under W. Va. Code §11-24-13f(a)(5).
Facts. S is a foreign corporation with a U.S. branch which is included in the water’s-edge combined reporting group under W. Va. Code §11-24-13f(a)(4). B is a controlled foreign corporation as defined in section 957 of the Internal Revenue Code and is included in the water’s-edge combined reporting group under W. Va. Code §11-24-13f(a)(5) to the extent of its partial inclusion ratio. In Year 1, S sells land with a basis of $ 800 which it used in its U.S. trade or business activities to B for $ 1,000. B’s partial inclusion ratio in Year 1. is 60%. In Year 4, when B’s partial inclusion ratio is 65%, B sells the land to Y for $ 1,100. At no time in Years 2. or 3 did B’s partial inclusion ratio fall to 30% or lower (50% of B’s 60% Year 1. ratio).
Matching rule. Except for the provisions of this section, S’s $ 200 gain from the sale to B would be treated as U.S. source income and included in the water’s-edge combined report; therefore, the requirements of subparagraph 13d.9.c.1.A. of this rule are satisfied. $ 120 of S’s gain ($ 200 total gain x B’s 60% partial inclusion ratio) is an intercompany item and is deferred. S’s remaining $ 80 non-intercompany gain is taken into account in the water’s-edge combined report in Year 1. In Year 4, B has a corresponding gain of $ 100 ($ 1,100-$ 1,000). For purposes of calculating the recomputed gain, S’s original cost of $ 800 is increased by the amount of the $ 80 non-intercompany gain taken into account by S. Therefore, the recomputed gain would be $ 220 ($ 1,100 sales price - $ 880 recomputed basis). S’s $ 120 intercompany gain is taken into account in the water’s-edge combined report in Year 4 to reflect the $ 120 difference between B’s $ 100 corresponding gain and the $ 220 recomputed gain.
Apportionment. Unless otherwise excluded, S’s sales factor in Year 1. will reflect gross receipts of $ 400 from the non-intercompany portion of the sale to B. The remaining $ 600 ($ 1,000 sale price x 60%) will be eliminated from S’s sales factor under paragraph 13d.1.e.1. of this rule. The valuation of the land for purposes of B’s property factor is S’s cost basis adjusted by any gain or loss recognized by S as a result of the non-intercompany portion of the transaction. The net value assigned to the land will be $ 880 ($ 800 cost basis to S + $ 80 non-intercompany gain). The $ 880 valuation will be included in B’s property factor to the extent of B’s partial inclusion ratio for that year. For example, if B’s partial inclusion ratio was 55% in Year 2, the land would be reflected in B’s property factor for Year 2. at $ 484 ($ 880 x 55%). In Year 4, unless otherwise excluded, $ 715 gross receipts from B’s sale of the land to Y ($ 1,100 sales price to Y x B’s 65% Year 4 partial inclusion ratio) will be reflected in B’s sales factor.
Example 11: Depreciable asset sold to buyer partially included under W. Va. Code §11-24-13f(a)(5).
Facts. On January 1 of Year 1, domestic corporation S buys equipment with a 10-year useful life for $ 100 and begins to depreciate it using the straightline method. On January 1 of Year 6, S sells the equipment to B for $ 60. B is a controlled foreign corporation partially included in the combined reporting group under W. Va. Code §11-24-13f(a)(5). B’s partial inclusion ratio is 40% in Year 6. B determines that the useful life of the equipment is 5 years from the date it was acquired by B.
Depreciation through Year 5, intercompany gain in Year 6. S claims $ 10 of depreciation for each of Years 1. through 5, and has a $ 50 basis at the time of the sale to B. Thus, S has a $ 10 gain from its $ 60 sale to B in Year 6. $ 4 of S’s gain is an intercompany gain ($ 10 gain x B’s 40% partial inclusion ratio) and is deferred. S’s remaining $ 6 non-intercompany gain is taken into account currently in Year 6.
Matching rule. In each of Years 6 through 10, B’s corresponding item is its $ 12. depreciation deduction ($ 60 basis / 5-year life). If S and B were divisions of a single corporation, the recomputed depreciation deduction would be the $ 10 annual depreciation for Years 6 through 10 based on S’s $ 100 basis, plus an additional $ 1.20 of depreciation attributable to the $ 6 increase in basis resulting from S’s non-intercompany gain ($ 6 non-intercompany gain / 5-year remaining life). Thus, in each of Years 6 through 10, S will take $ .80 of its intercompany gain into account to reflect the difference between B’s $ 12. corresponding depreciation and the $ 11.20 recomputed depreciation.
Apportionment. Unless otherwise excluded, S’s sales factor in Year 6 will reflect gross receipts of $ 36 from the non-intercompany portion of the sale to B. The remaining $ 24 ($ 60 x B’s 40% partial inclusion ratio) will be eliminated from S’s sales factor under paragraph 13d.1.e.1. of this rule. The valuation of the equipment for purposes of B’s property factor is S’s cost basis of $ 100. (Because S’s $ 10 total gain from the sale to B does not exceed the depreciation already deducted by S with respect to the equipment, the basis is not adjusted by the non-intercompany gain. If the total gain had exceeded the amount of depreciation already deducted by S, then the valuation of the property in B’s property factor would be increased by the 60% non-intercompany portion of the excess gain.) The $ 100 valuation will be included in B’s property factor in each year to the extent of B’s partial inclusion ratio for that year. For example, the equipment would be reflected in B’s property factor in Year 6 at $ 60 ($ 100 x 60%). In each of Years 6 through 10, S’s $ .80 intercompany gain will be treated as current apportionable business income. B’s $ 12. depreciation deduction will be included in combined report business income in each year to the extent of B’s partial inclusion ratio for that year. For example, $ 7.20 of B’s depreciation deduction would be included in combined report business income in Year 6 ($ 12. depreciation deduction x 60% partial inclusion ratio).
Example 12: Decreasing partial inclusion ratio.
Facts. Assume the same facts as in Example 8, except that B does not sell the land to Y in Year 5. In Year 6, B’s partial inclusion ratio is 25%, a 62% decrease from B’s Year 1. ratio of 66% (41% difference between 66% Year 1 ratio and 25% Year 6 ratio, divided by 66% Year 1 ratio, equals 62%).
Acceleration rule. Under subparagraph 13d.9.c.2.D. of this rule, the acceleration rule applies to take S’s intercompany gain of $ 66 into account in Year 5 (immediately before the income year in which B’s partial inclusion ratio falls below the 50% threshold).
Example 13: Election made under subparagraph 13d.9.c.2.E. of this rule Facts. Using the same facts as in Example 12, except that the taxpayer elects under subparagraph 13d.9.c.2.E. of this rule to have the acceleration rule apply to take into account only a proportionate share of the intercompany item. B’s partial inclusion ratio is 33% in Year 7, 16% in Year 8, and 8% in Year 9.
Acceleration rule. In Year 6, $ 40.92. of S’s intercompany gain would be taken into account ($ 66 intercompany gain multiplied by the 62% proportionate decrease between B’s 66% Year 1. ratio and B’s 25% Year 6 ratio). B’s partial inclusion ratio rose in Year 7; but the Year 8 partial inclusion ratio represented a new low point. At 16%, the Year 8 partial inclusion ratio was 76% below the Year 1. ratio of 66% (50% difference between 66% Year 1 ratio and 16% Year 8 ratio, divided by 66% Year 1 ratio, equals 76%). Accordingly, $ 9.24 of S’s intercompany gain would be taken into account in Year 8 ($ 66 intercompany gain x 14% incremental difference between 76% decrease and the 62% decrease that was previously recognized). In Year 9, B’s partial inclusion ratio fell below the 10% floor, so S’s remaining intercompany gain of $ 15.84 is taken into account. 13d.9.d. Earnings and profits. The timing provisions of this section apply to the calculation of West Virginia earnings and profits. Therefore, the West Virginia earnings and profits of S will not reflect S’s intercompany items until those items are taken into account under this section. 13d.9.e. Foreign country operations. To the extent that foreign country operations are included in the combined report, and the corporations engaging in those operations are not required to report intercompany transactions under a similar deferral method for federal income tax purposes or any other purposes, then intercompany transactions involving those foreign operations may be reported using the method used for consolidated financial reporting purposes if that method reasonably reflects income and approximates the result that would be obtained from use of the provisions of this section. However, adjustments may be permitted or required for any transaction or series of transactions for which the financial reporting method does not produce a result which reasonably approximates the results that would have been obtained under this section. 13d.9.f. If the taxpayer fails to disclose its DISA balance on its annual tax return, the Tax Commissioner may, in the Tax Commissioner’s discretion, require the amounts in the undisclosed DISA accounts to be taken into account in part or in whole in any year of the failure. 13d.9.g. Recordkeeping. Intercompany and corresponding items shall be reflected on permanent books and records (including work papers). 13d.10. Effective date. This section applies to intercompany transactions occurring on or after January 1, 2009. 13d.11. For tax years beginning on or after January 1, 2022, income is apportioned as set forth in section heading 6 of this rule. Payroll and property are no longer factors in the apportionment formula and, therefore, any references to the payroll or property factor in this section have no longer any force or effect for tax years beginning on or after January 1, 2022.
W. Va. Code R. § 110-24-13e Election To File A Group Return; Designation Of Surety. 13e.1. General. -- Every taxpayer subject to the West Virginia corporation net income tax is required to file its own tax return, including taxpayers that are members of a combined reporting group. Taxpayers subject to the West Virginia corporation net income tax that are members of a combined reporting group are required to attach a combined report to their annual tax returns. Members of a combined reporting group may annually elect to designate one taxpayer member of the combined group to file a single return in the form and manner prescribed by the Tax Department, in lieu of filing their own respective returns, without changing the respective liability of the group members. The group member taxpayer designated to file the single return shall consent to act as surety with respect to the tax liability of all other taxpayers properly included in the combined report and shall agree to act as agent on behalf of those taxpayers for the year of the election for tax matters relating to the combined report for that year. All combined group members required to file in West Virginia shall be included in the group tax return filed pursuant to this section and W. Va. Code §11-24-13e. 13e.1.a. Combined report. -- “Combined report” refers to the schedules that are required to be filed by W. Va. Code §11-24-13a, which are attached to the West Virginia Form 120 of a taxpayer member of the combined reporting group, which reports the taxpayer member’s income from sources within this State under the combined reporting method and other information required by law. 13e.1.b. Combined reporting group. -- “Combined reporting group” refers to those corporations and entities with business income that are permitted or required to be included in a particular combined report under W. Va. Code §11-24-13a. A combined reporting group includes those partnerships and limited liability companies treated as partnerships for federal income tax purposes whose incomes are required to be included in a combined report. 13e.1.c. Group return. -- “Group return” means a single composite tax return filed under W. Va. Code §11-24-13e on behalf of members of a combined reporting group, and includes, but is not limited to annual returns and quarterly and other periodic returns, declarations of estimated tax and the forms for making installment payments of estimated tax. The group return reflects the aggregate total tax of the tax liabilities of all of the Taxpayer members, computed on the basis of the separate tax liability of each Taxpayer member. 13e.1.d. Key corporation or key member. -- “Key corporation” or “key member” means the taxpayer member which files a group return described under this section on behalf of the taxpayer members of the combined reporting group as agent and surety for the taxpayer members of the combined reporting group pursuant to W. Va. Code §11-24-13e. 13e.1.e. Taxpayer member. -- “Taxpayer member” means a corporation or entity which is required to file a tax return under W. Va. Code §§11-24-1, et seq. in this State, and which is a member of a combined reporting group. 13e.1.f. The term “corporation” as used in this section means and includes any entity required to file a tax return under W. Va. Code §§11-24-1, et seq., and any entity whose income, expenses, capital, or activities are required to be included on or as a part of a combined report under W. Va. Code §§11-23-1, et seq. or W. Va. Code §§11-24-1, et seq. 13e.2. Requirements. 13e.2.a. In order to be eligible to make the election provided under this section, the electing key corporation shall meet the definition of a “key corporation” as defined in this section in addition to meeting the following requirements, by either being: 13e.2.a.1. The parent corporation of the combined reporting group as defined in subparagraph 8.7.a.1.A. of this rule; or 13e.2.a.2. If the parent corporation of the combined reporting group is not a taxpayer member, the taxpayer member with the largest West Virginia property factor numerator; and 13e.2.a.3. The key corporation’s powers, rights and privileges must not be forfeited or suspended by the West Virginia Secretary of State and it must not have a petition with the United States Bankruptcy Court pending on the last day of the taxable year. 13e.2.b. If the entity that would have otherwise been designated as the key corporation under this section is disqualified due to the parent corporation not being a taxpayer member, or due to rights and privileges having been forfeited or suspended by the West Virginia Secretary of State, or due to a pending bankruptcy petition, then the members of the combined reporting group may not elect to designate one taxpayer member of the combined group to file a single return under W. Va. Code §11-24-13e. 13e.3. Manner for making the election. -- An election to file a group return is made by the key corporation by the filing of an Election to File Unitary Taxpayers’ Group Return, filed in conjunction with its West Virginia Form 120, which sets forth the information prescribed by the Tax Commissioner. This election shall be made with an original, timely filed return, determined by including any authorized extensions for filing the return. 13e.4. Consequences of making an election. 13e.4.a. The election is binding on all the taxpayer members of the combined group and the key corporation for all matters for the taxable year of the election. 13e.4.b. The key corporation shall file the group return. -- The group return satisfies the requirement for filing a West Virginia form 120 by each taxpayer member listed on the key corporation’s Election to File Unitary Taxpayers’ Group Return, filed in conjunction with its West Virginia Form 120, listing of members included in the group return. 13e.4.b.1. A combined group member having income or gain not required to be reported on the combined return and having no income that is required to be reported on the combined return, need not be included in the group return, but may either file a separate return or may be included on the group return, and, if included shall report income or gain not required to be reported on the combined return in the group return. A combined group member having income that is required to be reported on the combined return, shall be included in the group return, and the group return shall report both income that is required to be reported on the combined return for that combined group member and any income or gain not required to be reported on the combined return for that combined group member shall also be reported on the group return. 13e.4.b.2. By signing the West Virginia Form 120, an officer of the key corporation is attesting that he or she has the legal authority to bind the key corporation to all of its duties. 13e.4.b.3. Failure of a taxpayer member, properly included in a group return, to file its own return shall be considered to be an acknowledgement that the officer of the key corporation possesses the authority to fulfill the taxpayer member’s return filing obligation. 13e.4.b.4. A taxpayer member asserting that it is not properly included in a group return shall independently satisfy its obligation to file a return. 13e.4.c. The key corporation is a surety for each taxpayer member properly included in a group return for payments owed under the West Virginia corporation net income tax law for the tax year for which the election applies. 13e.4.d. The key corporation is an agent for each taxpayer member. 13e.4.e. Extensions for filing tax returns or waivers to extend the statute of limitations for issuing notices of assessments shall be executed by the key corporation and shall be effective for all taxpayer members properly included in a group return for the tax year for which the election applies. 13e.4.f. All Tax Department notices, assessments, legal documents and administrative documents relating to or regarding the business franchise tax or corporation net income tax liability of a taxpayer member properly included in a group return, may be sent to the key corporation and additional amounts due with respect to any taxpayer member properly included in a group return, may be assessed and billed to the key corporation, which shall be liable for payment of those amounts. The key member may file a petition for reassessment on behalf of a taxpayer member properly included in a group return, in response to a notice of assessment. The key member may also file claims for refund or credit and petitions for refund or credit on behalf of a taxpayer member properly included in a group return. Any refund or credit due to a taxpayer member properly included in a group return may be paid or credited to the key corporation. Any levy, any notice of a lien, or any other proceeding to collect the amount of any assessment, after an assessment has become final, shall name the corporation or entity from which the collection is to be made. A taxpayer member properly included in a group return from which collection is to be made and the key corporation, as surety and agent of the taxpayer, are jointly and severally liable for any amount due. 13e.4.g. If some or all of the corporations included in the election to file a group return are subsequently determined not to be members of the combined reporting group of the key corporation, then the key corporation and the electing taxpayer members shall be considered to agree that any subsequent adjustment for any and all members included in the original group return may still be billed to or paid by the key corporation in the case of assessments and refunded to the key corporation in the case of overpayments. 13e.5. Duration of election to file group return. -- The election to file a group return for all matters for the taxable year of the election will remain in effect until 30 days following the receipt by the Tax Commissioner of a written notice of termination of the election by any of the taxpayer members. The taxpayer member that is terminating the election shall also notify the previously designated key corporation that the election is being terminated. The termination shall only be applied prospectively. If the key corporation is terminating the election, it shall notify all of the taxpayer members that were included in the group return election. If an employee, agent, or representative of the Tax Commissioner is conducting an examination of a combined group return at the time when any of the taxpayer members or a key corporation sends a written notice of termination to the Tax Commissioner, the terminating taxpayer member or terminating key corporation shall provide the employee, agent or representative of the Tax Commissioner that is conducting the examination with a copy of the written notification of termination of the election. 13e.6. Failure or inability of key corporation to perform its duties. -- If the key corporation does not fulfill its obligation to pay any tax liability or to act on behalf of the taxpayer members, or if its powers, rights, and privileges are forfeited or suspended at any time with respect to a tax year, each taxpayer member may be independently assessed or billed for its own tax liability for that tax year. In that event, each taxpayer member will be credited with taxes previously paid in accordance with the taxpayer member’s tax liability as indicated in the return data as filed. In the event that the liabilities of the taxpayer members cannot be derived from the return data as filed, the individual liabilities of the each of the respective members may be determined by the Tax Commissioner from data obtained during audit or supplied by the taxpayer members, using the best available information. If insufficient information is available to determine individual liabilities, the Tax Commissioner may credit taxes paid in a manner that is reasonable under the circumstances. 13e.7. Curing an invalid election. 13e.7.1. In the event that a taxpayer fails to satisfy one or more of the conditions of this section, the Tax Commissioner may, at the request of the taxpayer and at the Commissioner’s discretion, treat the W. Va. Code §11-24-13e election to designate one taxpayer member of the combined group to file a single return, as being valid. 13e.7.2. In lieu of disallowing a W. Va. Code §11-24-13e election to designate one taxpayer member of the combined group to file a single return, the Tax Commissioner may allow the taxpayer members to designate another taxpayer member in substitution for the key corporation originally designated in the election. 13e.8. Appointment of designated agent for purposes of resolving disputes over membership in a combined group. -- If the Tax Commissioner determines that one or more corporations which did not join in the filing of a group return are members of a combined group, or that one or more corporations which did join in the filing of a group return are not members of the combined group which filed the return, then, for purposes of resolving disputes over the membership of the combined group and any separate company item of any corporation, the Tax Commissioner may take other actions as outlined in subdivisions 13e.8.1, 13e.8.2. and 13e.8.3.: 13e.8.1. Notification of deficiency or assessment to corporation which has ceased to be a member of the combined group. -- If a corporation that made the election to file or was required to join in the filing of a group return has ceased to be a member of the combined group, and if the corporation files written notice of the cessation with the Tax Commissioner, then the Commissioner upon request of the corporation shall furnish the corporation with a copy of any notice of deficiency or notice of assessment in respect of the tax for a group return year for which it was a member of the combined group and information regarding any notice and demand for payment of the deficiency. The written notice of cessation should be mailed to the address stated in the instructions to the West Virginia corporation net income tax return. The filing of the written notification and request by a corporation shall not have the effect of limiting the scope of the agency of the key member provided for in this section with respect to those tax years during which the corporation was a member of the combined group for which a group return was filed, and a failure by the Tax Commissioner to comply with the written request shall not have the effect of limiting the liability of the corporation. 13e.8.2. If no group return was filed, the corporations may appoint a member of the combined group as the designated agent solely for purposes of contesting the Tax Commissioner’s determination. The Commissioner may accept a written representation made by any member of the combined group that it has been appointed the designated agent. The appointment of a designated agent under this provision shall not be construed as a concession by either the corporations or the Tax Commissioner regarding the proper composition of the combined group. The designated agent appointed under this provision shall have all rights and responsibilities of a key corporation under this section, including the responsibility to file a group return for all tax periods beginning on or after the appointment of the key member. The designated agent appointed under this subsection, shall meet the qualifications of a key member as provided in this rule, and shall continue to act as designated agent for the combined group under the provisions this section for all tax periods beginning on or after the appointment of the key member, until the appointment of the key member is lawfully revoked. 13e.8.3. If a group return was filed, the key member which filed the return shall represent all corporations which joined in the filing of the group return and all corporations which the Tax Commissioner asserts are members of the combined group, except that the Commissioner may allow any corporation which the Commissioner asserts should be added to or eliminated from the combined group included in the return to represent itself after receipt of a written request from the corporation. And in that case, any corporation shall be bound by any action taken by the designated agent (including, for example, extensions of the statute of limitations, settlements, stipulations, or concessions of fact) before the request of the corporation to represent itself has been accepted by the Tax Commissioner. 13e.9. Liability for combined tax, additions to tax, penalty, and interest. 13e.9.1. Joint and several liability of members of a combined group. -- The taxpayer members who elected to file a group return are jointly and severally liable for the combined tax, addition to tax, penalty and interest computed in accordance with the West Virginia Tax Procedure and Administration Act codified in W. Va. Code §§11-10-1, et seq.. 13e.9.2. Effect of intercompany agreements. -- No agreement entered into by one or more members of a combined group with any other member of the group or with any other person shall in any case have the effect of reducing the liability prescribed under this Section, or this rule or W. Va. Code §§11-24-1, et seq. 13e.9.3. Additions to tax, penalties, and interest. -- If additions to tax, penalties or interest are imposed under W. Va. Code §§11-10-1, et seq., with respect to a group return year, the amount shall be based on the combined tax liability or deficiency for the common taxable year. 13e.9.3.a. For purposes of applying the addition to tax for failure to file a return: 13e.9.3.a.1. A corporation which erroneously fails to join in the filing of a group return, but which timely files a separate West Virginia corporation net income tax return or joins in the timely filing of a group return for another combined group, shall not be subject to any addition to tax for failure to timely file the return. In determining whether the separate or group return is timely filed, the separate taxable year of the corporation or the common taxable year of the taxpayer members included in the group return the corporation erroneously joined shall be used, rather than the common taxable year of the group with which the corporation should have filed. Provided that the Tax Commissioner may disallow the group return under which the Taxpayer should have filed, but failed to file, and require all group members to each file separately. The Tax Commissioner may disallow the group return under which the Taxpayer filed, in circumstances where the Taxpayer erroneously filed under the group return of a different combined group and require all group members of the group under which the Taxpayer erroneously filed to each file separately. Also the Tax Commissioner may disallow both group returns and require separate filings for each member of both groups. 13e.9.3.a.2. A corporation which erroneously fails to join in the filing of a group return, and which fails, without reasonable cause, to timely file a separate West Virginia corporation net income tax return or to join in the timely filing of a group return for another combined group, shall be subject to additions to tax for failure to timely file a return computed on the amount of tax shown (or required to be shown) due on the group return for its proper combined group. Because it is the duty of the key member, acting on behalf of the combined group, to include the corporation in the group return, the members of the combined groups are jointly and severally liable for the amount of the addition to tax. 13e.9.3.a.3. A corporation which erroneously joins in the timely filing of a group return shall not be subject to additions to tax for failure to file a return but depending on the facts and circumstances of the case, may be subject to applicable sanctions for failure to pay tax, late filing, tax evasion, fraud or other applicable administrative or criminal sanctions. 13e.9.3.b. For purposes of applying the addition to tax for failure to timely pay tax: 13e.9.3.b.1. In a case where a corporation or entity erroneously fails to join in the filing of a group return for a common taxable year, neither that corporation or entity nor the combined group shall be subject to any failure-to-pay addition to tax under the West Virginia Tax Procedure and Administration Act, if timely payment is made of the tax shown on a separate return filed by the corporation or on a group return in which it erroneously joins in filing for each taxable year ending with or within the common taxable year. Unless there is reasonable cause for the failure of the corporation or entity to join in the filing of the group return, the corporation or entity and the combined group may be jointly and severally liable for the addition to tax for failure to pay any additional amount which would have been shown on the group return had the corporation or entity been included. Depending on the facts and circumstances of the case the Taxpayer may be subject other applicable administrative or criminal sanctions. 13e.9.3.b.2. A corporation or entity which erroneously fails to join in the filing of a group return for a common taxable year or which joins in the filing of a group return, for the taxable year ending with or within the common taxable year, and which also fails to timely pay the tax shown on the return, shall be subject to additions to tax under the West Virginia Tax Procedure and Administration Act only for failure to pay the tax shown on the return it actually files or joins in filing. Unless there is reasonable cause for the failure of the corporation or entity to join in the filing of the group return, the corporation and the combined group may be jointly and severally liable for an addition to tax under the West Virginia Tax Procedure and Administration Act for failure to pay any additional amount which would have been shown on the group return had the corporation been included. Depending on the facts and circumstances of the case, the Taxpayer may be subject other applicable administrative or criminal sanctions. 13e.9.3.b.3. If a corporation erroneously joins in the filing of a group return, neither the corporation nor the combined group shall be subject to the addition to tax under the West Virginia Tax Procedure and Administration Act for failure to pay any tax required to be shown on a separate company return and the combined group shall not be subject to addition to tax under the Act for failure to pay any increase in tax resulting from the exclusion of the corporation from the combined group if the tax timely paid with the original group return exceeds the total tax required to be shown on the correct returns. Depending on the facts and circumstances of the case, the Taxpayer may be subject to other applicable administrative or criminal sanctions. 13e.9.3.c. For purposes of applying the addition to tax for negligence imposed by the West Virginia Tax Procedure and Administration Act or the addition to tax for fraud imposed by that Act, in any case in which a corporation erroneously joins or fails to join in the filing of a group return, the addition may be imposed on any deficiency resulting from the error, without taking into account any overpayment which may have resulted from the error
Example. Corporations A, and B meet all the requirements of a unitary business combined group. Corporations A and B cannot be included in the same unitary business group as their non-unitary affiliate Corporation C. On a separate-return basis, Corporation A has a West Virginia net loss of $500, Corporation B has West Virginia net income of $300 and Corporation C has West Virginia net income of $700. Corporations A and C file a group return reporting combined West Virginia net income of $200, while Corporation B files a separate return reporting West Virginia net income of $300. On audit, the Tax Commissioner corrects the liabilities by combining Corporations A and B, which eliminates Corporation B’s separate return income and entitles them to a refund of the taxes paid by Corporation B, and by determining a separate return deficiency for Corporation C. If the combination of Corporations B and C on the original return was due to negligence or an intent to defraud, Corporation C will be subject to the applicable addition to tax on its entire deficiency without regard to the overpayment made by Corporation B. 13e.9.4. Interest. -- If interest is imposed under the West Virginia Tax Procedure and Administration Act, with respect to a group return year, the amount shall be based on the separate tax liability, deficiency underpayment or overpayment of the group return members for the common taxable year. 13e.9.5. Combined amended returns. 13e.9.5.a. If an election to file a group return is in effect for a taxable year and that election is subsequently revoked for that year because the group is not a unitary business, the key member may not file a group amended return. If a group files what it believes to be a correct group return and it is later determined that the group is not engaged in a unitary business, the key member shall not file a group amended return. Instead, in either instance, the key member and each corporation which joined in the filing of the group return shall file a separate amended return. In computing the tax due on any amended return, the filer shall take into account all payments, credits, and other amounts (including refunds) actually paid by, or to, the filer, or applied by, or for, the filer under the erroneously filed group return. 13e.9.6. Ineligible member. -- If a change in liability relates to the removal from the group return of a member that was not eligible to be included in the group return, or of a taxpayer which could not be required to be a part of the group (e.g., a corporation which was not engaged in a unitary business with the combined group members), the key member shall file a group amended return and the ineligible taxpayer member shall file a separate amended return. 13e.9.7. If a corporation erroneously fails to join in the filing of a group return, the key member shall file an amended group return adding the corporation and, if a separate return was filed by the corporation, the corporation shall file an amended separate return showing no net income, overpayment, or underpayment, and stating that the corporation has joined in the filing of a group return. 13e.10. Application. -- This section applies to taxable years beginning after December 31, 2008.
W. Va. Code R. § 110-24-13f Reserved for future use
W. Va. Code R. § 110-24-13g Treatment Of Certain Charitable Expenses. 13g.1. When a charitable expense is incurred by a member of a combined group, the threshold question is whether the charitable contribution was paid from nonbusiness income, from business income that is unitary group business income, or from business income that is not unitary group business income. If the contribution was of property other than money, the question becomes whether the property was an asset that generated nonbusiness income, unitary group business income, or other business income from a separate line of business. In the event the property generated no income, the preceding sentence shall be applied as if the property generated income. Only when the charitable expense, or any part of the expense, was not paid from nonbusiness income or from business income that is not unitary business income, may the expense, or the portion of the expense, not paid from nonbusiness income, or from business income that is not unitary group business income, be applied against unitary group business income as provided in subsection 13g.2. of this section. 13g.2. When the charitable expense incurred by a member of a combined group was paid from unitary group business income then, to the extent allowable as a deduction pursuant to IRC §170, it shall be subtracted first from the business income of the combined group, subject to the income limitations of IRC §170 applied to the entire business income of the group and any remaining amount shall then be treated as a nonbusiness expense allocable to the member that incurred the expense, subject to the income limitations of IRC §170 applied to the nonbusiness income of that specific member. If nonbusiness income is less than the nonbusiness charitable expenses, the difference may be carried forward. Any charitable deduction disallowed under the foregoing rule but allowed as a carryover deduction in a subsequent year, shall be treated as originally incurred in the subsequent year by the same member this subsection shall apply in the subsequent year in determining the allowable deduction in that year. 13g.3. This section applies to contributions made during a taxable year beginning after December 31, 2008. §§110-24-14 through 19. Reserved for future use
W. Va. Code R. § 110-24-20 Report of Change In Federal Taxable Income
20.1. General rule.
20.1.a. If the amount of a taxpayer’s federal taxable income reported on its federal income tax return for any taxable year is changed or corrected by the United States Internal Revenue Service or other competent authority, or as the result of a renegotiation of a contract or subcontract with the United States, the taxpayer shall file an amended West Virginia return to report the change or correction in federal taxable income within the time specified in W. Va. Code §11-24-20, after the final determination of the change, correction or renegotiation, or as otherwise required by the Tax Commissioner, and shall concede the accuracy of the determination or state in which it is erroneous, except as otherwise provided in this section.
20.1.b. Any taxpayer filing an amended federal income tax return shall also file an amended corporation net income tax return within the time specified in W. Va. Code §11-24-20 and shall give the information as required by the Tax Commissioner.
20.2. Amended combined report. -- When the taxpayer files an amended return as provided in this section, and the taxpayer is a member of a combined group engaged in unitary business activity in this State, the taxpayer shall file with the amended return an amended combined report for the combined group.
20.3. Amended group return. -- The general rule provided in subsection 20.1. of this section applies when the taxpayer files its annual return on a separate company basis. For a taxable year beginning after December 31, 2009, a taxpayer engaged in unitary business activity in this State that shall file an amended return as provided in W. Va. Code §11-24-20 and in this section, which filed under a group return as provided in W. Va. Code §11-24-13e for the tax year at issue, may not file a separate amended return. Instead, the key member which filed the group return which included the taxpayer as one of the group filers, shall file an amended group corporation net income tax return for the tax year at issue. The key member shall attach to the amended group return an amended combined report for the combined group engaged in unitary business activity in this State. §§110-24-21. through 25. Reserved for future use.
W. Va. Code R. § 110-24-26 Priority Of Tax In Distributions Of Property And Estates
26.1. In the distribution, voluntary or compulsory, in receivership, bankruptcy or otherwise, of the property or estate of any person, all taxes due and unpaid under W. Va. Code §11-24-1, et seq. shall be paid from the first money available for distribution in priority to all claims and liens except taxes and debts due the United States which under federal law are given priority over the debts and liens created by W. Va. Code §§11-24-1, et seq. Any person charged with the administration or distribution of the property or estate who violates the provisions of this section shall be personally liable for any taxes accrued and unpaid under W. Va. Code §11-24-1, et seq. which are chargeable against the person whose property or estate is in administration or distribution.
26.2. There is a priority for all unpaid corporation net income tax in distributions of the property or estate of any person, and the tax shall be paid from the first money available for distribution in priority to all other claims and liens, except taxes and debts due the United States.
26.2.a. The distribution of property subject to federal tax liens is subject to the priority of the liens provided in the Internal Revenue Code.
26.2.b. The distribution of property in federal bankruptcy proceedings is subject to the priorities of debts and liens provided in the United States Bankruptcy Code (11. U.S.C. §101, et seq.).
26.2.c. This priority applies to the amount of tax, interest, additions to tax, and penalties.
26.3. The priority applies to all distributions of the property or estate of any person. A "distribution" of property of an estate is the sale or transfer of the property, or the disbursement of money resulting from the sale or transfer of the property or estate of any person. Distributions include, but are not limited to, the transfer of property or disbursement of proceeds of sales of property by any executor, administrator, receiver, trustee, fiduciary, special commissioner, or any public officer under judicial process; and distributions in any proceedings such as bulk sale, liquidation sale, estate sale, assignment for the benefit of creditors, interpleader action, and administrative or judicial proceeding for the dissolution of a partnership or corporation.
26.4. The priority does not apply to transactions that do not constitute distributions of property. These transactions include: the sale or transfer of property in the ordinary course of the business of the owner of the property; the sale or transfer of any property by the owner; or consideration payable to the owner by the purchaser or transferee.
26.5. This priority applies to the distribution of all property, including but not limited to real property or any interest in the real property; tangible personal property, including fixtures, equipment, machinery, furniture, and vehicles; intangible property, including accounts receivable, contract rights, bank accounts, stocks, bonds; and the proceeds from the sale or liquidation of the property.
26.6. This priority requires payment of the tax from the first money that is available for distribution to lienors, creditors, beneficiaries, or any other person, after payment of costs, commissions, fees, and any other expenses incurred in the preservation, storage, liquidation, or transportation of the property or estate.
26.7. The debt or claim for taxes has priority over all claims and liens, except debts due the United States.
26.7.a. Claims subject to this priority include any debt or obligation, liquidated or unliquidated, that does not constitute a lien upon the property or estate.
26.7.b. Liens subject to this priority include any charge or encumbrance on the property or estate for payment of any claim, debt or obligation, such as a deed of trust, judgment lien, security interest, vendors lien, execution lien, tax lien, mechanics lien, landlords lien and municipal lien.
26.7.c. The priority of the corporation net income tax debt in these distributions is not determined by the presence or absence of a perfected notice of tax lien, by the presence or absence of a perfected lien securing any competing claim or debt, or by the order in which any competing liens were perfected.
W. Va. Code R. § 110-24-27 "Safety Zones" Bar Imposition Of Additions To Tax For Underpayment Of Estimated Tax
27.1. In General. - Additions to tax will not be imposed for any underpayment of any installment of estimated tax if, on or before the date prescribed for payment of the installment (determined with regard to any authorized extension of time for payment), the total amount of all payments of estimated tax made equals or exceeds the least of the amounts due under "Safety zones" set forth in this section.
27.1.a. Safety zone 27.1.a.. - The amount of tax due with the annual return is five hundred dollars ($500) or less.
27.1.b. Safety zone 27.1.b.- The amount of tax due with the annual return is ten percent (10%) or less of the tax liability for the taxable year.
27.1.c. Safety zone. B For tax years beginning on or after January 1, 2010 -- The amount of tax which would be due if computed using current year rates, exemptions, and credits rather than being based on the facts and law applicable to the West Virginia corporation net income tax return for the preceding year. This safety zone avoids additions to tax if the total payments of estimated tax already made by the installment date are at least equal to an amount which would have been required on that installment date if the estimated tax was determined based on the facts shown on the previous year’s return and the previous year’s law, but using current year rates, exemptions, and credits. In this safety zone, the following rules apply:
27.1.c.1. Nonrecurring items of income and deductions are not to be excluded; and
27.1.c.2. An entity that did not file a West Virginia corporation net income tax return for the preceding tax year cannot use this safety zone.
27.1.d. Application of safety zones to short tax years. B For purposes of this subsection and subsection 27.2. of this rule, additions to tax for an underpayment of estimated tax are equally applicable to short tax years where a declaration of estimated tax is required to be filed. In computing the safety zones for short taxable years, the estimated tax (whether based on that shown on the previous year’s return, based on the previous year’s facts, or based on annualized current income) is reduced by multiplying the estimated tax for a full year by the percentage which the number of months in the short tax year bears to twelve (12).
27.1.e. For purposes of this subsection and subsection 27.2. of this rule, if the tax rates for the current year have changed from those in effect for the preceding year, the estimated tax shall be computed using current rates.
27.1.f. Safety zone requirements. - For purposes of this subsection and subsection 27.2. of this rule, safety zone requirements shall be satisfied on each installment date to avoid the imposition of additions to tax on an underpayment of estimated tax as of the installment date. For purposes of this rule, it is presumed that a taxpayer’s West Virginia taxable income is received in equal installments throughout the taxable year. The taxpayer bears the burden of proof to establish that the West Virginia taxable income was received during the taxable year in some other manner.
27.2. Transition period safety zones. The combined reporting requirements of W. Va. Code §§11-24-1, et seq. apply for tax years beginning on and after January 1, 2009. Safety zones set forth in this subsection apply only with relation to estimated payments made for the first tax year beginning on or after January 1, 2009.
27.2.a. For purposes of safety zones set forth in this subsection, the terms “a previous tax year” or “a previous year” mean the tax year immediately preceding the first tax year beginning on or after January 1, 2009.
27.2.a.1. Additions to tax will not be imposed for any underpayment of any installment of estimated tax if, on or before the date prescribed for payment of the installment (determined with regard to any authorized extension of time for payment), the total amount of all payments of estimated tax made equals or exceeds the least of the amounts due under "Transition period safety zones" set forth in this subsection.
27.2.b. Transition period safety zone 27.2.b B This safety zone applies for a Taxpayer who filed separately for the tax year immediately preceding the first tax year beginning on or after January 1, 2009, but not on a combined reporting basis. This safety zone is available only for the first tax year beginning on or after January 1, 2009:
27.2.b.1. For any entity who filed separately for the tax year immediately preceding the first tax year beginning on or after January 1, 2009:
27.2.b.2. If the previous tax year was a full 12 month tax year;
27.2.b.3. If the amount of tax shown for the previous year has not been adjusted, redetermined or the subject of an assessment or other challenge by the Tax Commissioner; and
27.2.b.4. If total payments of estimated tax made by each installment date for the first tax year beginning on or after January 1, 2009, are at least equal to the amount which would have been required on that installment date if the estimated tax was the amount of tax shown on the previous year’s West Virginia corporation net income tax return, then this safety zone applies, except that:
27.2.b.5. If the annual return for the preceding year is not filed on or before the due date, including extensions of time to file, of the annual return for the preceding year, then the declaration of estimated tax for the current tax year cannot be based on last year’s tax, and this safety zone does not apply; and
27.2.b.6. If the preceding taxable year was a short year, estimated tax for the current year will be computed on an annualized basis. For purposes of this safety zone, the pro forma amount of tax that would have been shown on the preceding tax year’s West Virginia corporation net income tax return, on a recomputed separate filing basis, shall be computed on an annualized basis. The requirements of paragraphs 27.2.b.3. through 27.2.b.5 of this rule shall be met for the short year in order for this safety zone to apply. The annual tax payable for the current year and the estimated tax for the current year will not be reduced because the previous year was a short year.
27.2.c. Transition period safety zone 27.2.c -- This safety zone applies for a Taxpayer who filed as part of a consolidated filing unit, composite filing unit or group filing unit other than a combined reporting or unitary group for the tax year immediately preceding the tax year beginning on or after January 1, 2009. This safety zone is available only for the first tax year beginning on or after January 1, 2009:
27.2.c.1. For any entity that filed corporation net income tax as a component member of a consolidated, composite or group filing unit other than a combined or unitary filing group:
27.2.c.2. If the previous tax year was a full 12 month tax year; and
27.2.c.3. If the previous year amount of tax shown has not been adjusted, or redetermined or the subject of an assessment or other challenge by the Tax Commissioner; and
27.2.c.4. If total payments of estimated tax made by each installment date are at least equal to the amount which would have been required on that installment date if the estimated tax was determined based on the pro forma amount of tax that would have been shown on the pro forma previous year’s West Virginia corporation net income tax return, determined on a recomputed separate filing basis for the Taxpayer but not on a combined reporting basis, then this safety zone applies, except that:
27.2.c.5. If the annual return for the preceding year is not filed on or before the due date, including extensions of time to file, of the annual return for the preceding year, then the declaration of estimated tax for the current tax year cannot be based on last year’s tax, and this safety zone does not apply; and
27.2.c.6. If the preceding taxable year was a short year, estimated tax for the current year will be computed on an annualized basis. For purposes of this safety zone, the pro forma amount of tax that would have been shown on the preceding tax year’s West Virginia corporation net income tax return, on a recomputed separate filing basis, but not on a combined reporting basis, shall be computed on an annualized basis. The requirements of paragraphs 27.2.c.3 through 27.2.c.5 of this rule shall be met for the short year in order for this safety zone to apply. The annual tax payable for the current year and the estimated tax for the current year will not be reduced because the previous year was a short year.
27.2.d. Transition period safety zone 27.2.d -- This safety zone applies for a Taxpayer who filed a separate tax return, but as a component member of a unitary, or combined reporting group for the tax year immediately preceding the first tax year beginning on or after January 1, 2009. This safety zone is available only for estimated payments made for the first tax year beginning on or after January 1, 2009.
27.2.d.1. This safety zone applies with relation to taxpayers that filed a separate tax return, but as a component member of a unitary, or combined reporting group, for the tax year immediately preceding the tax year beginning on or after January 1, 2009:
27.2.d.2. For any entity that filed corporation net income tax as a component member of a unitary, composite or group filing unit:
27.2.d.3. If the previous tax year was a full 12 month tax year;
27.2.d.4. The amount of tax shown for the previous year has not been adjusted, redetermined or the subject of an assessment or other challenge by the Tax Commissioner;
27.2.d.5. If the unitary or combined reporting group remains the same for the first tax year beginning on or after January 1, 2009, as the previous tax year, and
27.2.d.6. If total payments of estimated tax made by each installment date are at least equal to the amount which would have been required on that installment date if the estimated tax was computed based on the amount of tax shown on the previous year’s West Virginia corporation net income tax return, then this safety zone applies, except that:
27.2.d.7. If the annual return for the preceding year is not filed on or before the due date, including extensions of time to file, of the annual return for the preceding year, then the declaration of estimated tax for the current tax year cannot be based on last year’s tax, and this safety zone does not apply; and
27.2.d.8. If the preceding taxable year was a short year, estimated tax for the current year will be computed on an annualized basis. The requirements of paragraphs 27.2.d.4. through 27.2.d.7 of this rule shall be met for the short year in order for this safety zone to apply. The annual tax payable for the current year and the estimated tax for the current year will not be reduced because the previous year was a short year.
27.2.e. Transition period safety zone 27.2.e -- This safety zone applies for a Taxpayer who filed as a component member of a composite tax return or group tax return, and as a component member of a unitary, or combined reporting group for the tax year immediately preceding the first tax year beginning on or after January 1, 2009, and who will likewise file as a component member of a composite tax return or group tax return, and as a component member of a unitary, or combined reporting group for the first tax year beginning on or after January 1, 2009. This safety zone is available only for estimated payments made for the first tax year beginning on or after January 1, 2009.
27.2.e.1. This safety zone applies with relation to Taxpayers that did not file a separate return in the previous year, and who instead filed as a component member of a composite tax return or group tax return filing unit, and as a component member of a unitary, or combined reporting group for the tax year immediately preceding the tax year beginning on or after January 1, 2009:
27.2.e.2. For any entity that filed corporation net income tax as a component member of a composite tax return or group tax return, and as a component member of a unitary, or combined reporting group filing unit for the tax year immediately preceding the tax year beginning on or after January 1, 2009:
27.2.e.3. If the previous tax year was a full 12 month tax year;
27.2.e.4. The amount of tax shown for the previous year has not been adjusted, redetermined or the subject of an assessment or other challenge by the Tax Commissioner;
27.2.e.5. If the unitary or combined reporting group remains the same for the first tax year beginning on or after January 1, 2009, as the previous tax year;
27.2.e.6. If the component membership of the composite tax return or group tax return remains the same for the first tax year beginning on or after January 1, 2009, as the previous tax year; and
27.2.e.7. If total payments of estimated tax made by each installment date are at least equal to the amount which would have been required on that installment date if the estimated tax was computed based on the amount of tax shown on the previous year’s West Virginia corporation net income tax return, then this safety zone applies, except that:
27.2.e.8. If the annual return for the preceding year is not filed on or before the due date, including extensions of time to file, of the annual return for the preceding year, then the declaration of estimated tax for the current tax year cannot be based on last year’s tax, and this safety zone does not apply;
27.2.e.9. If the preceding taxable year was a short year, estimated tax for the current year will be computed on an annualized basis. The requirements of paragraphs 27.2.e.4. through 27.2.d.8 of this rule shall be met for the short year in order for this safety zone to apply. The annual tax payable for the current year and the estimated tax for the current year will not be reduced because the previous year was a short year.
27.2.f. Transition period safety zone 27.2.f. -- This safety zone applies for a Taxpayer who filed as a component member of a composite tax return or group tax return, and as a component member of a unitary, or combined reporting group for the tax year immediately preceding the first tax year beginning on or after January 1, 2009, and who will file separately as a component member of a unitary, or combined reporting group for the first tax year beginning on or after January 1, 2009. This safety zone is available only for estimated payments made for the first tax year beginning on or after January 1, 2009.
27.2.f.1. This safety zone applies with relation to Taxpayers who filed as a component member of a composite tax return or group tax return filing unit, and as a component member of a unitary, or combined reporting group for the tax year immediately preceding the tax year beginning on or after January 1, 2009, and who will file separately as a component member of a unitary, or combined reporting group for the first tax year beginning on or after January 1, 2009;
27.2.f.2. For any entity that filed corporation net income tax as a component member of a composite tax return or group tax return, and as a component member of a unitary, or combined reporting group filing unit, and who will file separately as a component member of a unitary, or combined reporting group for the first tax year beginning on or after January 1, 2009:
27.2.f.3. If the previous tax year was a full 12 month tax year;
27.2.f.4. The amount of tax shown for the previous year has not been adjusted, redetermined or the subject of an assessment or other challenge by the Tax Commissioner;
27.2.e.5. If the unitary or combined reporting group remains the same for the first tax year beginning on or after January 1, 2009, as the previous tax year; and
27.2.f.6. If total payments of estimated tax made by each installment date are at least equal to the amount which would have been required on that installment date if the estimated tax was determined based on the pro forma amount of tax that would have been shown on the pro forma previous year’s West Virginia corporation net income tax return, determined on a recomputed separate filing basis for the Taxpayer and on a combined reporting basis, then this safety zone applies, except that:
27.2.f.7. If the annual return for the preceding year is not filed on or before the due date, including extensions of time to file, of the annual return for the preceding year, then the declaration of estimated tax for the current tax year cannot be based on last year’s tax, and this safety zone does not apply; and
27.2.f.8. If the preceding taxable year was a short year, estimated tax for the current year will be computed on an annualized basis. The requirements of paragraphs 27.2.f.4. through 27.2.f.7. of this rule shall be met for the short year in order for this safety zone to apply. The annual tax payable for the current year and the estimated tax for the current year will not be reduced because the previous year was a short year.
110CSR24
110CSR24
Series 26 Municipal Business And Occupational Tax
W. Va. Code R. § 110-26-1 General
1.1. Scope. -- These regulations explain and clarify the West Virginia Municipal Business and Occupation Tax, W. Va. Code '8-13-5. The regulations provide municipalities with guidance as to how the municipal business and occupation tax is to be administered.
1.2. Authority. -- W. Va. Code ''8-13-5 and W. Va. Code 11-10-5.
1.3. Filing Date. -- April 15, 1992.
1.4. Effective Date. -- April 15, 1992.
W. Va. Code R. § 110-26-1a Definitions
For purposes of these rules and regulations, the following terms are hereby defined. 1a.1. "Tax Year" or "taxable year" means the one year period adopted by the municipal ordinance providing for a municipal business and occupation tax authorized under W. Va. Code '8-13-5. Such tax year may be the calendar year, the municipality's fiscal year, the taxpayer's fiscal year, or any other year as determined under the ordinance imposing the municipal business and occupation tax. Where no tax year is specified, and no provision is made for determining the taxpayer's tax year under the ordinance, the "tax year" shall be the calendar year. 1a.2. "Municipality" is a word of art and shall mean and include any Class I, Class II and Class III city and any Class IV town or village, heretofore or hereafter incorporated as a municipal corporation under the laws of this State. 1a.3. "Town or village" is a term of art and shall, notwithstanding the provisions of W. Va. Code '2-2-10 mean, include and be limited to any Class IV town or village, as classified in W. Va. Code '8-1-3 heretofore or hereafter incorporated as a municipal corporation under the laws of this State, however created and whether operating under (1) a special legislative charter, (2) general law, or (3) a combination of the foregoing. 1a.5. "Governing body" shall mean the mayor and council together, the council, the board of directors, the commission, or other board or body of any municipality, by whatever name called, as the case may be, charged with the responsibility of enacting ordinances and determining the public policy of such municipality; and in certain articles dealing with intergovernmental relations shall also mean the county court [county commission] of any county or governing board of other units of government referred to in said articles. 1a.6. "Councilmen" shall mean the members of a governing body, by whatever name such members may be called. 1a.7. "Mayor" shall mean the individual called mayor unless as to a particular municipality a commissioner (in a commission form of government) or the city manager (in a manager form of government) is designated or constituted by charter provision as the principal or chief executive officer or chief administrator thereof, in which event the term "mayor" shall mean as to such municipality such commissioner or city manager unless as to any particular power, authority, duty or function specified in this chapter to be exercised, discharged or fulfilled by the mayor it is provided by charter provision or ordinance that such particular power, authority, duty or function shall be exercised, discharged or fulfilled by the individual called mayor and not by a commissioner or city manager, in which event such particular power, authority, duty or function shall in fact be exercised, discharged or fulfilled in and for such municipality by the individual called mayor: Provided, That in the exercise and discharge of the ex officio justice of the peace [magistrate], conservator of the peace and mayor's court functions specified in this chapter, the term "mayor" shall always mean the individual called mayor. 1a.8. "Recorder" shall mean the recorder, clerk or other municipal officer, by whatever name called, charged with the responsibility of keeping the journal of the proceedings of the governing body of the municipality and other municipal records. 1a.9. "Treasurer" shall mean the treasurer or other municipal officer, by whatever name called, exercising the power and authority commonly exercised by a treasurer. 1a.10. "Administrative authority" shall mean the officer, commission or person responsible for the conduct and management of the affairs of the municipality in accordance with the charter, general law and the ordinances, resolutions and orders of the governing body thereof. 1a.11. "Charter" shall mean, except where specific reference is made to a particular type of charter, either a special legislative charter (whether or not amended under the provisions of former W. Va. Code '8A-1-1 et seq. or under W. Va. Code '8-4-1 et seq., and although so amended, such special legislative charter shall, for the purposes of these regulations, remain a special legislative charter), or a home rule charter framed and adopted or revised as a whole or amended by a city under the provisions of former W. Va. Code '8A-1-1 et seq. or under the provisions of W. Va. Code '8-3-1 et seq. or 8-4-1 et seq. 1a.12. "Ordinances" shall mean the ordinances and laws enacted by the governing body of a municipality in the exercise of its legislative power. 1a.13. "County court" ["county commission"] shall mean the governmental body created by Section 22, article VIII of the Constitution of this State, or any existing tribunal created in lieu of a county court [county commission]. 1a.14. "Code" shall mean the Code of West Virginia, one thousand nine hundred thirty-one, as heretofore and hereafter amended. 1a.15. The term "Person" or the term "Company", herein used interchangeably, includes any individual, firm, partnership, co-partnership, joint adventure, association, corporation, trust, or any other group or combination acting as a unit, and the plural as well as the singular number, unless the intention to give a more limited meaning is disclosed by the context. 1a.16. "Taxpayer" means any person liable for any tax hereunder. 1a.17. "Sale", "Sales" or "Selling" includes any transfer of ownership of, or title to, property, whether for money or in exchange for other property. When property is exchanged for other property rather than for money, the taxpayer must place a value on the property received and report the same for municipal business and occupation tax purposes as if money were received. 1a.18. The term "Sale Price" means the consideration whether money, credits, price, or other property expressed in the terms of money, paid or delivered by a buyer to a seller, all without any deduction, on account of the cost of tangible property sold, the cost of materials used, labor cost, interest, discount, delivery cost, taxes or any other expenses whatsoever paid or accrued, and without any deduction on account of losses. 1a.19. The term "Gross Proceeds of Sales" means the value proceeding or accruing from the sale of tangible property without any deduction on account of cost of property sold, the cost of materials used, labor costs, interest, discount paid, delivery cost, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses. 1a.20. "Gross Income" means all income from whatever source derived, unless excluded by law. Gross income shall include income realized in any form, whether in money, property, or services. Gross income means the gross receipts of the taxpayer, other than a banking or financial business, received as compensation for personal services and the gross receipts of the taxpayer derived from trade, business, commerce, or sales and the value proceeding or accruing from the sale of tangible property (real or personal), or service, or both. Gross income includes all receipts by the reason of the investment of the capital of the business engaged in and shall include rents, royalties, fees, reimbursed cost or expenses or other emoluments however designated. Gross income includes all interest, carrying charges, fees or other like income, however denominated, derived by the taxpayer from repetitive carrying of accounts, in the regular course and conduct of his business, and extension of credit in connection with the sale of any tangible property or service. 1a.20.1. If services or property are paid for other than in money, the fair market value of the property or service taken in payment must be included in gross income. 1a.20.2. No deduction shall be allowed against gross income for the cost of property sold, the cost of materials used, labor costs, taxes, royalties paid in cash or in kind or otherwise, interest or discount paid or any other expense whatsoever. 1a.20.3. For the definition of gross income of a banking or financial business, See Section 2k.2 of these rules and regulations. 1a.20.4. Examples of gross income are: 1a.20.4.1. A construction company, which desires to purchase a piece of heavy equipment, does not have available capital to make such purchase and, therefore, transfers title to a parcel of real estate to the heavy equipment dealer in return for the piece of heavy equipment. The fair market value of the real estate received by the heavy equipment dealer will be included in the dealer's gross income for purposes of the municipal business and occupation tax. An indicator as to the value of the real estate received by the dealer would be the price of the heavy equipment if it had been purchased for cash. This indicator does not conclusively establish the amount of gross receipts which inured to the dealer. If the article (real estate) received has a greater value than the article (heavy equipment) exchanged, then it is necessary that the dealer report the greater value for municipal business and occupation tax purposes. 1a.20.4.2. A person in the business of selling and servicing home appliances has income for the taxable year in the following manner: ninety-seven thousand dollars ($97,000) from the retail sale of appliances; thirteen thousand dollars ($13,000) received from servicing and repairing appliances; and ten thousand dollars ($10,000) received from the rental of the building. Even though the rental income is not directly related to the business of selling and servicing home appliances, it is an item of gross income as defined by the municipal business and occupation tax law. All three are items of gross income which the taxpayer must report on his municipal business and occupation tax return. Each item of gross income must be reported under its proper business classification. 1a.20.4.3. B agrees to construct an apartment building for R. The contract entered into by the parties stipulates that B's remuneration shall be his cost plus twenty percent (20%) thereof. B constructs said building and his cost aggregate one hundred fifty thousand dollars ($150,000) for which R makes reimbursement to B. B receives also thirty thousand dollars ($30,000) from R as his twenty percent (20%) of costs as stipulated by the contract. On his municipal business and occupation tax return, B will report, as gross income, one hundred eighty thousand dollars ($180,000). B will receive no deduction against gross income for monies received as reimbursement cost or expenses. 1a.20.4.4. M, who is in the business of drilling for and producing natural gas and oil, agrees with L, a landowner, to sink a well on L's land. The parties agree that if gas or oil is discovered, L will be entitled to a one-eighth (1/8) royalty therefrom, either in cash or in kind at L's option. The well is successful and L decides to accept, in payment (as his one-eighth (1/8) royalty) from M, two thousand (2,000) barrels of oil and thirty-five thousand dollars ($35,000) in cash. M, on his municipal business and occupation tax return, must report the entire gross income received from the production of oil and is not allowed a deduction therefrom for either the royalty paid in cash or in kind to L. M must also place a value on the two thousand (2,000) barrels of oil paid to L as a royalty and report said value for purposes of this tax. 1a.20.5. The term "Gross Income" and "Gross Proceeds of Sales" shall not include cash discounts allowed and taken on sales. When a contract of sale is made subject to cancellation at the option of one of the parties to revision in the even goods sold are defective or if the sale is made subject to discount upon cash payment, the gross proceeds actually derived from the contract and the selling price are determined by the transaction as finally completed. The selling price of a service or article of property does not include the amount of bona fide cash discount actually taken by the purchaser and the amount of such discount may be deducted from gross proceeds of sales providing such amount has been included in the gross amount column on the municipal business and occupation tax return. 1a.20.5.1. Cash discount deductions will be allowed under the production and manufacturing classifications only when the value of the products is determined from the gross proceeds of sales. 1a.20.5.2. The cost to the retailer of business stimulants and promotions is not considered cash discounts; nor is the value of such stimulants and promotions cash discounts. The expense incurred by the merchant in purchasing and distributing such items is a cost of doing business and is not deductible or excludible from gross income or gross proceeds of sales. 1a.20.5.3. X, a retail grocer, to stimulate business, purchases trading stamps and dispenses the same, based upon the amount of each individual order, to his customers. In preparing his municipal business and occupation tax return, X is not permitted to deduct the cost or value of the trading stamps from his gross proceeds of sales to arrive at his taxable income. 1a.20.6. The term "Gross Income" and "Gross Proceeds of Sales" shall not include the proceeds of sale of goods, ware or merchandise returned by the customers when the sale price is refunded either in cash or by credit. 1a.20.6.1. When sales are made either upon approval or upon a sale and return basis, and the purchaser returns the property purchased and the entire selling price is refunded or credited to the purchaser, the vendor may deduct an amount equal to the selling price from gross proceeds of sales in computing tax liability; if the gross income from said sale has been previously reported or entered in the gross amount column on the municipal business and occupation tax return. 1a.20.7. The term "Gross Income" and "Gross Proceeds of Sales" shall not include the amount allowed as trade-in value for any article accepted as part of payment for any article sold. 1a.20.7.1. This particular situation is prevalent in the automobile business. For example, X sells Y a new automobile for three thousand two hundred dollars ($3,200). In payment for the new automobile, X accepts Y's used automobile which has a trade-in value of seven hundred dollars ($700). X must report, on his municipal business and occupation tax return, the amount of two thousand five hundred dollars ($2,500) as gross income. When X sells the used automobile, the amount received from said sale will also be subject to municipal business and occupation tax. 1a.20.8. The terms "Gross Income" and "Gross Proceeds of Sales" shall not include excise tax imposed by the State of West Virginia. 1a.20.8.1. Excise taxes imposed by the State of West Virginia are not to be included in gross income to determine the amount of municipal business and occupation tax payable. For purposes of this deduction or exclusion from gross income, the following constitute West Virginia excise taxes: gasoline tax, diesel fuel tax, cigarette tax, beer barrel tax and soft drink tax. 1a.20.8.2. Exclusions or deductions from gross income for West Virginia excise taxes will be disallowed unless the taxpayer provides necessary information on his annual municipal business and occupation tax return to support the claimed deduction. On his tax return, the taxpayer claiming this exclusion or deduction must itemize the quantity of gasoline, diesel fuel, cigarettes and soft drinks sold. Adequate records must be maintained to properly establish the deductions claimed. 1a.20.9. The term "Gross Income" and "Gross Proceeds of Sales" shall not include certain excise taxes imposed by the United States of America. 1a.20.9.1. All excise taxes levied by the federal government are not deductible from gross income or from gross proceeds of sales. The test as to whether or not a particular federal excise tax is to be included in or excluded from gross income for municipal business and occupation tax purposes is whether the particular excise tax is a tax on the manufacturing process or a tax which attaches at the time of sale and not before. Therefore, to qualify as a deduction from gross income, the burden of said tax must rest upon the customer. 1a.20.9.2. Federal excise taxes which are taxes upon the process of manufacturing are not deductible or excludible from gross income or gross proceeds of sales for municipal business and occupation tax purposes. This includes, but is not limited to, federal excise taxes on alcohol and distilled spirits, tobaccos, cigars, cigarettes, matches, automobiles, tires, et cetera. 1a.20.9.3. Federal excise taxes which are taxes upon the consumer and which are held in trust by the vendor as agent for the federal government may be deducted from gross income or gross proceeds of sales in determining the amount of municipal business and occupation tax liability. This includes federal excise paid on gasoline, diesel fuel and lubricants. 1a.20.9.4. Persons claiming deductions for federal excise taxes must itemize on the annual municipal business and occupation tax form and provide necessary information to support said deduction. Deductions claimed for federal excise taxes will be disallowed in those cases where the taxpayer fails to provide an itemization. 1a.20.9.5. An example pertaining to state and federal excise taxes is presented below: Example -- John Doe owns and operates a service station. During the calendar year 1972, he sold, at retail, gasoline, oil, cigars, cigarettes, and soft drinks. His retail sales for the taxable year totaled one hundred fifty-seven thousand dollars ($157,000) and his service income from repairing and washing of automobiles totaled twenty-three thousand dollars ($23,000).
The taxpayer must report and pay tax under two (2) business classifications, retail and service. He is allowed a deduction from gross income, reported under the retail classification on the tax form, for State excise taxes on cigarettes, soft drinks and powders and gasoline. The taxpayer is also permitted a deduction for federal excise taxes on gasoline and oil. No deduction is permitted for the federal excise tax on cigars and cigarettes. 1a.20.10. The terms "Gross Income" or "Gross Proceeds of Sales" shall not include money or other property received or held by a professional person for the sole use and benefit of a client or another person or money received by the taxpayer on behalf of a bank or other financial institution for the repayment of a debt of another. The manner in which the attorney keeps his books and records must clearly and properly reflect this situation. Money or property received for the benefit of a client should be credited to a trustee or escrow account so that the State's tax examiners do not credit and include said funds in the trustee's gross income. For example, X, an attorney, institutes suit on behalf of a client and receives a favorable verdict. As a result therefore, the defendant, rather than making restitution directly to the plaintiff, pays the amount of the verdict to X. Therefore, X has received money for the benefit of a client and said amount shall not constitute gross income to X. X, the attorney, will include in gross income for municipal business and occupation tax purposes only his fee. 1a.21. The municipal business and occupation tax act imposes taxes upon persons engaged in business. The term "Business" shall include all activities engaged in or caused to be engaged in with the object of gain or economic benefit, either direct or indirect. The term "Business" shall include the production of natural resources or manufactured products which are used or consumed by the producer or manufacturer. Business shall also include the activities of a banking business or a financial organization. 1a.21.1. In determining whether a business is engaged in for "Direct or Indirect Economic Gain or Benefit", the lack of profit suffered in said activity is not relevant; nor is it material that the business was engaged in without profit as the primary motivation. In order to further clarify this situation, two (2) examples are presented below. 1a.21.1.1. The D E Company provides, for employee use, a cafeteria in the basement of its office building. The cost of operating the cafeteria, for a year, is one hundred ten thousand dollars ($110,000) and the gross income derived therefrom is ninety-three thousand dollars ($93,000). Even though the cafeteria operation reflected a loss for the taxable year, the gross amount of income derived therefrom, ninety-three thousand dollars ($93,000), is subject, under the retail classification, to municipal business and occupation tax; because the cafeteria business was engaged in for indirect economic benefit or gain. By providing a direct benefit to its employees, the company has incurred an indirect benefit which places the operation within the definition of "Business" for the purpose of this tax. 1a.21.1.2. The D E Company decides to provide safety equipment to its industrial employees. It decides to provide said equipment at below cost prices to its employees; therefore, said activity is engaged in without profit motivation. The gross amount received from the sale of such equipment is subject to municipal business and occupation tax; for the company receives an indirect economic benefit by providing its employees with such equipment. It can be expected that employees who take advantage of the safety equipment will be safer, have less loss of time accidents and will perform better than previously. 1a.21.2. "Business" shall not include a casual sale by a person who is not engaged in the business of selling the type of property involved in such casual sale. Sales are deemed to be casual or isolated when made by a person who is not engaged in the business of selling the type of property involved. Examples of casual sales are the following: 1a.21.2.1. Sale of any property which is of a type not regularly sold by the taxpayer; e.g., sale of an automobile or radio by a person engaged in the business of plumbing. 1a.21.2.2. Sale of household goods or personal effects by a person who is not engaged in the business of selling; e.g., sale of used furniture and a used automobile by a retired individual. 1a.21.2.3. Sale of property by a person who is engaged in a business but who is not engaged in the business of selling; e.g., sale of a parcel of realty by a doctor, who is not engaged in the business of selling real property.
Persons who hold themselves out to the public as making sales at retail or wholesale are deemed to be engaged in the business of selling, and sales made by them of the type of property which they hold themselves out as selling, are not casual sales even though sales are made infrequently. 1a.22. The term "Banking Business" or "Financial Organization" shall mean any bank, banking association, trust company, industrial loan company, small loan company or licensee, building and loan association, savings and loan association, finance company, investment company, investment broker or dealer, and any other similar business organization at least ninety per centum of the assets of which consists of intangible personal property and at least ninety per centum of the gross receipts of which consists of dividends, interest and other charges derived from the use of money or credit. 1a.23. The term "Service Business" or "Calling" shall include all activities engaged in by a person for other persons for a consideration, which involve the rendering of a service as distinguished from sale of tangible property. 1a.23.1. "Service Business" or "calling" shall include, but not be limited to: 1a.23.1.1. Persons engaged in manufacturing, compounding or preparing for sale, profit or commercial use, articles, substances or commodities which are owned by another person. A Company manufactures plastic toys on orders received from B Company. B Company retains title to and supplies the raw materials. The payment received by A Company for manufacturing said articles shall be reported under the service classification on the municipal business and occupation tax return. In this particular situation, B Company is deemed to be the manufacturer. 1a.23.2. Persons acting as independent contractors in producing natural resource products owned by other persons, as personal property, immediately after the same are served, extracted, reduced to possession and produced. For example, C owns a large tract of standing timber and enters into a contract with D for the severance of the same. The income received by D for serving C's timber must be reported under the service classification on the municipal business and occupation tax return. In this particular situation, C is deemed to be the producer of the natural resource product. 1a.23.3. The repetitive carrying of accounts, in the regular course and conduct of business, and extension of credit in connection with the sale of any tangible personal property or service, except as to persons engaged in banking and other financial businesses. For example, the E F Furniture Company sells furniture with a retail price of three hundred dollars ($300.00) to an individual and agrees to allow the purchaser to make time payments on the account. For carrying the account, the seller stipulates a charge of one percent (1%) per month on the unpaid balance of said account. At the end of the six (6) months, the purchaser has paid his account in full and the seller has received three hundred ten dollars ($310.00) therefrom. Therefore, the additional ten dollars ($10.00) over and above the sale price of the furniture must be reported by the seller under the service classification on the municipal business and occupation tax return; for the ten dollars ($10.00) was received for providing a service rather than for the sale of merchandise. 1a.23.4. The term "Service Business or Calling" shall not include the services rendered by an employee to his employer. The municipal business and occupation tax law imposes upon persons engaged in business but not upon persons acting solely in the capacity of employees or servants. 1a.23.4.1. The question of whether a person is engaged in business or is acting in the capacity of an employee is dependent upon the facts in each case. The following rules may be accepted as a guide but do not necessarily control individual cases. 1a.23.4.2. An employee or servant is an individual whose entire compensation is fixed at a certain rate per day, week or month, or at a certain percentage of the business obtained by such employee or servant, payable in all events; one who has no direct interest in the income or profits of the business other than a wage or commission; one who has no liability for the expense of maintaining an office or place of business, one who has no liability for loss or indebtedness incurred in the conduct of the business; one whose conduct with respect to services rendered, or business transacted, is supervised or controlled by another. A corporation, joint venture, or any group of individuals acting as a unit, is not an employee or servant. 1a.23.4.3. Persons who furnish equipment on a rental basis and also furnish operators therefore, are presumed to be engaging in business and not to be employees or servants. Likewise, persons who furnish materials and the labor necessary in the placing or fabricating thereof are also presumed to be engaging in business and not to be employees or servants. The burden of proof will be upon such persons to show otherwise. 1a.23.4.4. The fact that a person is construed to be an employee under the provisions of the State Unemployment Compensation Law or the Federal Social Security Act, does not conclusively establish such person as an employee within the provisions of the municipal business on occupation tax law. 1a.23.4.5. Persons regularly performing odd job carpentry, painting or paper hanging, plumbing, bricklaying, electrical work, etc., for the public generally are presumed to be engaging in business. The burden of proof is upon such persons to show otherwise. It is immaterial whether the workman is paid by the job, by the day or by the hour. It is likewise immaterial that the workman may supply labor only, any materials used being supplied by the property owner. 1a.23.4.6. A person engaging in business is generally one who holds himself out to the public as engaging in business either in respect to dealing in real or personal property or in respect to the rendition of services; one to whom gross income of the business inures; one upon whom liability for losses lies or who bears the expenses of conducting a business; one, generally acting in an independent capacity, whether or not subject to immediate control and supervision by a superior, or one who acts as an employer and his employees are subject to his control and supervision. 1a.24. "Selling at Wholesale" or "Wholesale Sales" shall mean and include: 1a.24.1. Sales of any tangible personal property for the purpose of resale in the form of tangible personal property. 1a.24.2. Sales of machinery, supplies or materials which are to be directly consumed or used by the purchaser in the conduct of any business or activity which is subject to the municipal business and occupation tax. 1a.24.3. Sales of any tangible personal property to the United States of America, its agencies and instrumentalities or to the State of West Virginia, its institutions or political subdivisions.
Price and quantity are not relevant in determining wholesale sale for municipal business and occupation tax purposes. The fact that an item is discounted or is sold in large quantities does not make a transaction wholesale. It is the status and intention of the customer of the vendor which determines whether the gross proceeds received by the vendor from the sale are taxable under the retail classification or the wholesale classification. For example: 1a.24.4. H, who owns and operates a furniture store, is going out of business and is therefore liquidating his entire inventory. V, who is a retail furniture dealer, purchases part of H's inventory for twenty thousand dollars ($20,000). H, must report, on his municipal business and occupation tax return, twenty thousand dollars ($20,000) payment under the wholesale classification rather than the retail classification; for V, a furniture dealer whose activities are subject to the municipal business and occupation tax law, purchased the stock for the purpose of resale. In order that H's method of accounting will reflect the sale at wholesale, it is necessary that he receive and have on record a consumers sales tax exemption certificate. The certificate, prepared and signed by V, must certify that V is a merchant who purchased tangible personal property for the purpose of resale. Of course, in this particular situation, the exemption certificate is not primarily prepared and signed to assist H in determining taxable classification but to relieve H from the responsibility of paying West Virginia consumers sales tax on the purchase. 1a.24.5. V also purchased (for three hundred dollars ($300)) a color television set from H. V intends to make personal use of the set, therefore, the amount of this sale must be reported under the retail classification by H. Inasmuch as the sale of the television set was not a sale for the purpose of resale, V will not prepare a consumers sales tax exemption certificate. 1a.24.6. G, who owns and operates a grocery store, occasionally makes sales of groceries to a State hospital which is near his place of business. These sales are wholesale sales for municipal business and occupation tax purposes. All sales of tangible personal property made to the State, its institutions or political subdivisions are sales at wholesale. This would include sales to boards of education, municipalities, counties, penal institutions, et cetera. 1a.25. The term "Contracting" shall include the furnishing of work, or both materials and work, in the fulfillment of a contract for the construction, alteration, repair, decoration or improvement of a new or existing building or structure, or any part thereof. The term "Contracting" shall also include the alteration improvement or development of real property. 1a.25.1. A person performing any activity described in the preceding paragraph shall report his gross income therefrom under the contracting classification of the municipal business and occupation tax return and shall receive no deduction from gross income on account of any expenses incurred. All income derived from said activity shall be reported under the contracting classification, and the form of contract entered into by the parties shall not be determinative of taxable classification. 1a.25.2. The term "Prime Contractor" means a person engaged in the business of preforming for others, contracts for the construction, repairing, decorating or improving of new or existing buildings or other structures under, upon or above real property, either for the work or for a specific portion thereof. 1a.25.3. The word "Subcontractor" means a person engaged in the business of preforming a like or similar service for persons other than consumers, either for the entire work or for a specific portion thereof. 1a.25.4. The terms "Prime Contractor" and "Subcontractor" include persons preforming labor and services in respect to the moving of earth or clearing of land, razing or moving existing buildings or structures even though such services may not be done in connection with a contract involving the constructing, repairing, or altering of a new or existing building or structure. 1a.25.5. The term "Buildings or Structures" means and includes, but is not limited to, everything artificially built up or composed of parts joined together in some definite manner and attached to real property. It includes not only buildings in the general and ordinary sense, but also tanks, fences, conduits, culverts, railroad tracks, overhead and underground transmission systems, tunnels, monuments, retaining walls, bridges, trestles, parking lots and pavement for foot or vehicular traffic. 1a.25.6. The term "Contracting, Repairing, Decorating or Improving" of a new part of an existing building or structure or any part thereof, in addition to its ordinary meaning, includes the installing or attaching of any article of tangible personal property in or to real property, whether or not such personal property becomes a part of the realty by virtue of such installation. 1a.26. The term "Speculative Builder" means and includes one who constructs improvements upon real property owned by him for sale or rental. The gross income derived by the speculative builder from the sale of real property upon which the speculative builder has constructed improvements shall be reported under the retail classification on the municipal business and occupation tax form. The sales price is the measure of the tax.
W. Va. Code R. § 110-26-2 Imposition Of Privilege Tax
2.1. The municipal business and occupation tax is a tax imposed upon persons for the act or privilege of engaging in business activities. The tax is measured by the application of rates against values of products, gross proceeds of sale or gross income of the business, as the case may be.
2.1.1. All persons engaging in business activities in a municipality which has ordinances providing for a municipal business and occupation tax pursuant to the authority granted by the Legislature in W. Va. Code '8-13-5 are subject to the municipal business and occupation tax unless specifically exempted by statute or by these rules and regulations.
2.1.2. Certain occupations and business activities are classified, and the classifications are significant inasmuch as the tax liability varies because of the different rates established for the types of business activities engaged in by the taxpayer. The business activity usually determines the taxable classification, and where different business activities are conducted, the taxpayer is liable for tax under each taxable classification involved.
2.1.3. The various business classifications and the maximum tax rates a municipality may apply thereto are presented in Table 110-26A at the end of this regulation. For a definitive treatment of each particular business classification, See Sections 2A through 2K of these rules and regulations.
2.2. Determination of values, general.
2.2.1. The following rules for determining the taxable value of natural resource products or articles manufactured within the State shall apply equally to producers and manufacturers engaged in such activities within the State. The values determined under these rules will be uniformly applied in computing the taxes imposed by statute.
2.2.2. The term "Value of Products", includes the value of by- products, and except as provided herein, shall be determined by gross proceeds of sales whether such sales are at wholesale or at retail, to which shall be added all subsidies and bonuses received with respect to the production, manufacturing, or sale thereof. Under the production and manufacturing classifications of the municipal business and occupation tax, the value of products extracted or manufactured shall be determined by the gross proceeds of sales in every instance in which a bona fide sale of products is made, and whether sold at wholesale or at retail.
2.2.3. If any person who is liable for any tax under the production classification (See Section 2A of these rules and regulations) or the manufacturing classification (See Section 2B of these rules and regulations) ships or transports his products or any part thereof out of a municipality without making sale of such products, the value of the products in the condition or form in which they exist immediately before transportation out of the municipality shall be the basis for the assessment of the tax, except in those instances in which another measure of the tax is expressly provided.
2.2.4. In determining the value of natural resources or manufactured products delivered to purchasers, there may be deducted from the gross proceeds of sales so much thereof as the taxpayer can show to be outgoing freight charges from the point at which the shipment originates in a municipality to the point of delivery. Freight charges, to be deductible, must actually be paid by the manufacturer or producer. However, no deduction will be allowed for expenses incurred by the taxpayer through the use of his own equipment in transporting items produced or manufactured.
2.3. Determination of values, manufacturing. - There are certain instances in which persons who manufacture, process or prepare products for sale are not readily able to determine the value of the products for purposes of the municipal business and occupation tax. In these instances, the following rules for determining taxable value shall apply.
2.3.1. Transportation outside the municipality without sale thereof. If any person manufactures, compounds or prepares for sale, within a municipality, products or articles which are shipped or transported outside the municipality without making sale of such products or articles, the value of the products in the condition in which they exist immediately before transportation outside the municipality shall be the basis for the assessment of tax imposed under the manufacturing classification (See W. Va. Code '11-13-2b (1987) and Section 2B of these rules and regulations) of the municipal business and occupation tax law. Whenever the situation, as described in the preceding sentence, arises, the taxpayer, to determine the value of said products for purposes of this tax, shall apply the following rules in the order stated:
2.3.1.1. The value of such products shall be determined by the actual gross proceeds of the subsequent sale of the products, whether such sale is at wholesale or at retail, as if such sale had been made at the time of shipment.
2.3.1.2. If no sale or shipment is made in the tax year in which the manufacture occurs, the gross value shall be reported for the tax year in which the subsequent sale of the products is made and shall be determined by the actual gross proceeds of the subsequent sale of the products, whether such sale is at wholesale or at retail.
2.3.2. Transported outside the municipality with sale thereof. If any person manufactures, compounds or prepares for sale, within a municipality, products or articles which are shipped or transported outside the municipality as a result of a bona fide sale of such products or articles, the value of such products or articles shall be determined in accordance with the following rules.
2.3.2.1. The actual gross proceeds of such sale, whether such sale was at retail or wholesale, to which shall be added all subsidies and bonuses received to manufacture or make sale of the product, shall be the value of such product for purposes of the municipal business and occupation tax. The full amount received from such sale shall be reported under the manufacturing classification of the municipal business and occupation tax return.
2.3.2.2. In determining value set forth and defined in subsection 2.3.2.1 above, the taxpayer shall be permitted to deduct from gross proceeds of sale the amount actually paid by him to transport the products outside the municipality, but no deduction will be allowed for expenses incurred by him through the use of his own equipment in transporting items manufactured.
2.3.3. Sales to affiliates. In determining value in regard to sales from one to another of affiliated companies or persons, or under other circumstances where the relation between the vendor and vendee is such that gross proceeds from the sale are not indicative of the true value of the subject matter of the sale, the following rules shall be applied in the order stated.
2.3.3.1. Whenever sales are made to affiliates, the value shall correspond to the gross proceeds from the sale of similar products of like quality and character and in similar quantities between persons of no common interest.
2.3.3.2. If there are no sales between parties of no common interest by which the taxpayer may value his sales to affiliates, the value shall correspond to the gross proceeds from sales by the taxpayer to nonrelated purchasers of similar products of like quality and character and in similar quantities and shall include all subsidies and bonuses.
2.3.3.3. In the absence of sales of similar products as a guide to value, such value may be determined by a cost basis. In such cases there shall be included every item of cost attributable to the particular article manufactured, including direct and indirect overhead costs. There shall be added to this total manufacturing cost the average markup realized by the taxpayer on all products manufactured, compounded or prepared for sale.
2.3.4. Manufactured products consumed by the manufacturer.
2.3.4.1. Whenever a person manufactures, compounds or prepares final completed products, and such products are commercially consumed or used by such person, a value must then be reported under the manufacturing classification for purposes of the municipal business and occupation tax. This is to effect equality of municipal business and occupation tax liability between manufacturers who sell their entire output and those who use all or a portion of their output themselves. In other words, the tax liability is based upon the total value of the manufactured products, and it is immaterial that a portion or the whole of the output may be used by the manufacturer and is not sold.
2.3.4.2. The article or product manufactured by the taxpayer and consumed in his business, to be taxable under the manufacturing classification of the municipal business and occupation tax act, must be a final completed product which is not subject to additional preparing, processing or compounding by the same manufacturer.
2.3.4.3. In other words, a manufactured product which is used to become a component of another product manufactured by the same manufacturer and which, of course, loses its identity therein, is not subject to the rule imposed by this subsection. To illustrate: Certain chemical compounds are manufactured or prepared and are consumed by the same manufacturer in the process of manufacturing a completely new or final completed chemical substance. In this instance the originally manufactured chemical compound which is consumed in and becomes a part of the substance is not required to have a value placed thereon for purposes of this tax because the tax is exacted therefrom when a value is placed on the new substance. Chemicals used in processing include chemical substances which are manufactured by the taxpayer to unite with other chemical substances or which produce a chemical reaction therewith, as contrasted with merely a physical change therein.
2.3.4.4. However, if a manufactured product which is to become a component part of another product and lose its identity therein is shipped outside the municipality for additional processing, a value must be placed on each product and reported under manufacturing classification. (For apportionment of sales price of such article, See Section 2b of these rules.)
2.3.4.5. A final completed product which is manufactured by the taxpayer and used or consumed in his business must have a value placed thereon and must be reported under the manufacturing classification for tax purposes. Such product would be one which does not become a component part of another product or one which does not lose its identity. To illustrate: Saws, jigs, cutting tools, etc. that are manufactured by a furniture manufacturer are final completed products subject to tax. Partially manufactured products sold within or without the municipality are final completed products subject to this tax. The taxpayer is relieved from placing a value on and reporting for tax purposes only those products manufactured within the municipality which become component parts of other products within the municipality and lose their identity in the other products.
2.3.4.6. In those cases where a person partially or wholly consumes or makes use of his final completed manufactured, compounded or prepared products, a value must be placed on such products, in accordance with the following rules in the order stated. In all instances where products or articles are consumed by the manufacturer and are consumed at a point distant from the place of manufacturing, no freight charges paid by the manufacturer will be allowed as a deduction in determining value under these rules, unless consideration has been given such charges in the method by which the values were determined.
2.3.4.6.a. The value of the article consumed or used shall be determined according to the selling price at the place of use or consumption of similar products of like quality or character.
2.3.4.6.b. In absence of sales of similar products as a guide to value, such value may be determined by applying to the consumed product the average price at which sales are made during the taxable year to customers of the manufacturer.
2.3.4.6.c. In the absence of sales to customers as a guide to value, such value may be determined upon a cost basis, in which case there shall be included every item of cost attributable to that particular article, including all direct and indirect overhead costs and by adding thereto the average markup realized by the manufacturer on his products.
2.4. Determining of values, production of natural resources.
2.4.1. Under the production classification of the municipal business and occupation tax law (See W. Va. Code '13-11-2(a) (1987) and Section 2.2 of these rules and regulations) the value of natural resources products produced shall be determined by the gross proceeds of sales in every instance in which a bona fide sale of such products is made, and whether sold at wholesale or retail. In determining the value of natural resource products delivered to purchasers, there may be deducted from the gross proceeds of sales so much thereof as the taxpayer can prove to be actual outgoing freight charges (paid by him) from the point at which the shipment originates in the municipality to the point of delivery. However, no deduction is permitted for expenses incurred by him through the use of his own equipment in transporting items produced.
2.4.2. There are certain instances in which persons who produce natural resource products are not readily able to determine the value of said products for purposes of the municipal business and occupation tax. In these instances the rules which follow are to be applied. Whenever possible, and unless otherwise provided in these rules, the value of natural resource products produced within the municipality shall be determined by actual gross proceeds derived from said sale thereof (whether at retail or at wholesale) by the producer.
2.4.3. Transportation outside the municipality without sale thereof. If any person produces within a municipality natural resource products which are shipped or transported outside the municipality without making sale of such products, the value of the natural resource products in the condition in which they exist immediately before transportation outside the municipality shall be the basis for the assessment of tax under the production classification of the municipal business and occupation tax law (See Section 2A of these rules and regulations). Whenever the situation, as described in the preceding sentence, arises, the taxpayer, to determine the value of his natural resource products for the purposes of this tax, shall apply the following rules in the order stated.
2.4.3.1. The value of such natural resource products shall be determined by the actual gross proceeds of the subsequent sale of the products, whether such sale is at wholesale or retail, as if such sale had been made at the time of shipment.
2.4.3.2. If no sale or shipment is made in the tax year in which the manufacture occurs, the gross value shall be reported for the tax year in which the subsequent sale of the products is made and shall be determined by the actual gross proceeds of the subsequent sale of the products, whether such sale is at wholesale or at retail.
2.4.4. Transportation outside the municipality with sale thereof. If any person severs, extracts, reduces to possession or produces for sale, profit or commercial use, within a municipality, any natural resource products which are shipped or transported outside the municipality as a result of a sale of such products, the value of such natural resource products shall be determined in accordance with the following rules.
2.4.4.1. The actual gross proceeds of such sale, whether such sale was at retail or wholesale, to which shall be added all subsidies and bonuses received with respect to the production or sale of the product, shall be the value of such product for the purposes of the municipal business and occupation tax. The full amount received from such sale shall be reported under the production classification on the municipal business and occupation tax return.
2.4.4.2. In determining value as set forth and defined in subsection 2.4.4.1, the taxpayer shall be permitted to deduct from the gross proceeds of sale the amount actually paid by him to transport the products outside the municipality, but no deduction will be allowed for expenses incurred by him through the use of his own equipment in transporting natural resources produced.
2.4.5. Sales to affiliates. In determining the value in regard to sales from one to another affiliated companies or persons, or other circumstances where the relationship between the vendor and vendee is such that the gross proceeds from the sale are not indicative of the true value of the subject matter of the sale, the following rules shall be applied in the order stated.
2.4.5.1. Whenever sales are made to affiliates, the value shall correspond to the gross proceeds from the sale of similar products of like quality and character and in similar quantities between persons of no common interest.
2.4.5.2. If there are no sales between parties of no common interest by which the taxpayer may value his sales to affiliates, the sales shall correspond to the gross proceeds from sales by the taxpayer to nonrelated purchasers of similar products of like quality and character and in similar quantities and shall include all subsidies and bonuses.
2.4.5.3. In the absence of sales of similar natural resource products as a guide to value, such value may be determined by a cost basis. In such cases there shall be included every item of cost attributable to the particular natural resource product produced, including direct and indirect overhead costs. There shall be added to this total production cost the average markup realized by the taxpayer on all natural resource products produced.
2.4.6. Natural resource products consumed by the producer. Whenever a person produces natural resource products, and such products are commercially consumed or used by such person, a value must be placed upon the consumed natural resource products. This value must then be reported under the production classification for purposes of the municipal business and occupation tax. In other words, the tax liability is based upon the total value of the produced natural resources, and is immaterial that a portion or the whole of the output may be used by the producer and is not sold. Whenever natural resource products produced within a municipality are used or consumed by the producer in his business, whether within or without the municipality, the value of such products shall be determined by the following rules in the order stated. In all instances where natural resources are consumed by the producer and are consumed at a point distant from the point of production no freight charges paid by the producer will be allowed as a deduction in determining value under these rules, unless due consideration has been given such charges in the method by which the values were determined.
2.4.6.1. The value of the natural resource product consumed or used shall be determined according to the selling price at the place of use or consumption of similar products of like quality and character by other taxpayers.
2.4.6.2. In the absence of sales of similar natural resource products as a guide to value, value shall be determined by applying to the used or consumed product the average price at which sales are made during the taxable year to customers of the producer.
2.4.6.3. In the absence of sales to customers as a guide to value, such value may be determined upon cost basis, in which case there shall be included every item of cost attributable to that particular natural resource product, including all direct or indirect overhead costs and by adding thereto the average markup realized by the producer on his natural resource products.
2.5. Manufacturing and selling articles within the state. -- Persons who manufacture, compound or prepare, within a municipality, products or articles for sale, profit or commercial use and make sale of the same within the municipality, must place a value on said products or articles and report the same under the manufacturing classification on the municipal business and occupation tax return. Said value shall be determined in accordance with the following rules.
2.5.1. Sales at wholesale.
2.5.1.1. If any person manufactures, compounds or prepares within a municipality, products or articles and makes sale thereof at wholesale within or without the municipality, the entire gross proceeds derived therefrom shall be reported under the manufacturing classification on the municipal business and occupation tax return.
2.5.1.2. Where the manufacturer makes sale thereof at wholesale within the municipality, the entire gross proceeds derived from such wholesale sales must also be required to be reported under the wholesale classification on the municipal business and occupation tax return.
2.5.2. Sales at retail.
2.5.2.1. If any person manufactures, compounds or prepares, within a municipality, products or articles and makes sale thereof at retail within or without the municipality, the sales value of such products shall be reported under the manufacturing classification on the municipal business and occupation tax return.
2.5.2.2. The entire gross proceeds derived from such retail sale shall also be reported under the retail sales classification of the municipal business and occupation tax return where the manufacturer makes sale thereof at retail within the municipality.
2.6. Producing and selling natural resource products within the State. - Persons who produce, within a municipality, natural resource products and make sale of the same within or without the municipality, must place a value on the natural resource products and report the same under the production classification on the municipal business and occupation tax return. Said value shall be determined in accordance with the following rules.
2.6.1. Sales at wholesale.
2.6.1.1. If any person produces, within a municipality, natural resource products and makes sale thereof at wholesale within or without the municipality, the entire gross proceeds derived therefrom shall be reported under the production classification on the municipal business and occupation tax return.
2.6.1.2. The amount derived from such sale at wholesale shall be reported under the wholesale sales classification on the municipal business and occupation tax return if sale of the natural resource product is made within the municipality.
2.6.2. Sales at retail.
2.6.2.1. If any person produces, within a municipality, natural resource products and makes sale thereof at retail within or without the municipality, the sales value of such products shall be reported under the production classification on the municipal business and occupation tax return.
2.6.2.2. The entire gross proceeds derived from the sale at retail shall also be reported under the retail classification on the municipal business and occupation tax return if sale of the natural resource products is made within the municipality.
W. Va. Code R. § 110-26-2a Production Of Natural Resource Products. 2a.1. Producers of natural resource products. - For purposes of these rules and regulations, the word "Producer" shall mean and include, but not be limited to, every person who engages in the business of severing, extracting, mining, quarrying, reducing to possession or producing for sale, profit or commercial use any natural resource products from his own land or from the land of another under the right or license granted by lease or contract, either directly or by contracting with others for the necessary labor or mechanical services. A person who produces natural resource products for the use or consumption in his own business whether located within or without the municipality is a producer for the purposes of the municipal business and occupation tax. 2a.1.1. Persons who are producers, as described in the preceding paragraph, shall report the gross proceeds derived therefrom under the applicable production classification on the municipal business and occupation tax return. If it is not possible for the producer to determine gross proceeds of sale, he must determine the value of his produced natural resource products by employing one of the rules set forth in Section 2 of these rules and regulations. The measure of the municipal business and occupation tax shall be the value (said value, whenever possible, shall be determined by gross proceeds of sale) of the entire production within the municipality, regardless of the place of sale or the fact that delivery may be made to points outside the municipality. 2a.1.2. A person who produces natural resource products and does not make sale of the same but uses or consumes the resources in his business shall report the value of such resources under applicable production classification on the municipal business and occupation tax return. In determining the value of the natural resource products, the taxpayer must adhere to Section 2 of these rules and regulations. 2a.1.3. Where the relationship between the producer of the natural resource products and the purchaser thereof is such that the gross proceeds derived from the sale are not indicative of the true value of the natural resources, the taxpayer shall determine value by application of one of the rules set forth in Section 2 of these rules and regulations. 2a.2. Producing natural resource products for others. 2a.2.1. A "Contract Miner" shall mean and include a person who has no title to or ownership in the natural resource products which he is producing for others. Persons performing under contract, either as prime contractors or subcontractors, labor or mechanical services for others who are engaged in the business of producing natural resources, are performing a service for the producer and are therefore taxable under the service classification rather than the production classification. All gross income received by the contract miner from the producer for such service is taxable under the municipal municipal business and occupation tax law in the municipality in which the service is rendered if the service is rendered within a municipality. 2a.2.2. The producer of the natural resource products that are extracted by the contract miner is taxable under the production classification on the municipal business and occupation tax form. 2a.3. Determination of producer and contract miner. 2a.3.1. Generally, a producer is one who has title to or an economic interest in mineral deposits or standing timber, and a contract miner is one who does not possess an economic interest but performs services for producers by contract. This contractual relationship will not affect the status of the parties in regard to municipal business and occupation tax liability. For example, a person who has ownership, title in or right by contract or lease in the mineral deposit or standing timber does not possess an economic interest merely because through a contractual relationship he possesses an economic advantage derived from production. In other words, an agreement between the owner of an economic interest and another entitling the latter to purchase or process the product upon production or entitling the latter to compensation for producing, extracting or cutting does not convey an economic interest. 2a.3.2. If a dispute should arise as to which party is the producer and which is the contract miner, the Tax Department shall consider, in addition to the substance of agreement between the parties, other elements which shall include, but not be limited to the following: 2a.3.2.1. Which person is entitled to claim a depletion allowance for federal income tax purposes. 2a.3.2.2. Is the person mining, cutting or extracting the natural resource product obligated to pay royalty to another. 2a.3.2.3. By lease or contract, does one person have the exclusive right to sever, mine, cut or extract the natural resource product. 2a.3.2.4. Does the contract between the parties contain an exclusive and mandatory sales/purchase agreement. 2a.4. Preparing natural resource products for others. - Any person who makes charges to the producer or to another for preparing natural resource products for sale or use is determined to be engaged in a service activity and shall report all gross income from such activity under the service classification on the municipal business and occupation tax return. Such person preparing the products in this instance is not deemed a manufacturer for he has no title to or ownership in the products but is only performing a service on products owned by another. As to the applicability of the municipal business and occupation tax statute to persons who prepare their own natural resource products, See Section 2b of these rules and regulations. 2a.5. Royalties derived from natural resources. 2a.5.1. Persons who receive payments, as royalties, from producers of natural resource products are not deemed to be producers thereof but shall report all payments under the rental and royalty classification on the municipal business and occupation tax return. The fact that the payment is called by a name other than royalty shall not alter the taxation of such payment if the recipient thereof has furnished real property which has a situs in the municipality and which includes minerals in place, or any interest therein, for hire, loan, lease or otherwise. 2a.5.2. Lessees, sublessees or other denominated lessees are producers of all the natural resources produced, regardless of any payment, in kind or otherwise, to lessors, sublessors or other denominated lessors of a part of such natural resources as rents or royalties. 2a.6. Treatment of freight charges incurred by producers. 2a.6.1. In certain instances, producers of natural resource products are permitted to deduct outgoing freight charges from the gross proceeds of sales to arrive at taxable value under the applicable production classification. 2a.6.2. In order to determine the value within the municipality and at the place where production ends, there may be deducted from gross proceeds of sales certain outgoing freight charges actually paid by the producer, but no deduction will be allowed for expenses incurred by him through the use of his own equipment in transporting item produced. 2a.6.3. In all instances where products are used or consumed by the producer at a point distant from the place of production, outgoing freight charges paid by the producer will not be allowed as a deduction, unless due consideration has been given to them also in the method by which the values were determined. 2a.6.4. Generally, freight charges to be deductible from gross proceeds of sales must be paid by the producer to a common carrier to deliver natural resources to a bona fide purchaser. To illustrate: Coal, at the place where production ends, has a value of ten dollars ($10.00) per ton. If a purchaser buys the coal production at the mine for said price, the producer will report under the coal production classification the gross proceeds of sale, ten dollars ($10.00). However, if the purchaser buys the same coal delivered at eleven dollars ($11.00) per ton, and the producer pays a common carrier to make such delivery, the producer may deduct such freight charges one dollar ($1.00) from the gross proceeds of sale eleven dollars ($11.00) reported under the coal production classification to arrive at the taxable value of ten dollars (10.00). 2a.6.5. If the producer of natural resource products sells his products to a purchaser and agrees to deliver such products in his own equipment for a fee, the fee may be deducted from the gross proceeds of sale in arriving at taxable value under the production classification. The fee charged for transportation by the producer is not taxable under the service classification because this activity had been taxed under the carrier income tax up until July 1, 1987. 2a.6.6. Producers may not deduct expenses incurred in the transportation of coal or other natural resource products from the mining operation to the tipple for preparation. 2a.6.7. If hauling or transportation charges are incurred by the producer and have been absorbed by the producer, such charges are outgoing freight charges and are deductible from gross proceeds of sale to arrive at taxable value. 2a.6.8. A contract miner may not deduct any transportation charges incurred by him for hauling or transporting natural resource products whether in his equipment or in the equipment of another. 2a.6.9. The severance and production of natural gas shall be valued for purposes of the municipal business and occupation tax at the well-mouth immediately preceding transportation and transmission. In order to arrive at the well-mouth value of such severance and production, transportation or transmission expenses incurred by producers of natural gas shall be allowed a deduction from the gross proceeds of the sale of gas. For these purposes, one of the following alternative methods shall be used for obtaining the well-mouth value of the severance and production of natural gas. 2a.6.9.1. From the gross proceeds of the sale of the production of natural gas, there shall be allowed a deduction in the amount of the costs of transportation or transmission of such gas through the system of the producer from the well-mouth point of severance and production to the point of sale, limited to actual costs of transportation or transmission incurred without reference to items unrelated to such transportation or transmission such as general administrative, overhead, or return investment. Such deduction must be supported by schedules and statements of cost by the producer. 2a.6.9.2. As a alternative to the method presented at Subsection 2a.6.9.1, supra, the well-mouth value of such severance and production may be determined by the average purchase price of natural gas from the same pool or field, or, in the event no gas is purchased from the same pool or field, by the average purchase price of natural gas from the most proximate pool or field and of the same quality and characteristics as that severed and produced, Provided, That in either case the purchase price shall accurately represent the well-mouth value of the gas severed or produced. This determination shall be supported by a statement of the pool or field from which the gas severed or produced is obtained. 2a.6.9.3. As an alternative to the methods presented at Subsections 2a.6.9.1 and 2a.6.9.2, the well-mouth value of such severance and production may be determined by a deduction of transportation and transmission costs in the amount of 15 percent (15%) of the gross proceeds of the natural gas severed and produced, and a computation of the deduction therefrom. 2a.6.10. Producers, other than utilities, must report under the service classification the difference between the gross proceeds of sale from the gas and the tangible well-mouth value reported under the natural gas production classification. 2a.7. Reserved for Future Use. 2a.8. Business of producing timber. 2a.8.1. General. -- A person engaged in a municipality in the business of severing, reducing to possession and producing timber for sale, profit or commercial use is subject to municipal business and occupation tax under the production of timber classification. A timber producer will also be taxable under other classifications of the municipal business and occupation tax when the activity engaged in is not taxable under this classification. The privilege of producing timber ends once the tree is severed from its root structure and its limbs and top are removed. R.S. Burruss, d.b.a. R.S. Burruss Lumber Co., et. al. v. Tax Commissioner, W. Va., 297 S.E.2d 836, 839 (1982). All cuts thereafter are taxable under the manufacturing classification. The value taxed under this classification which is attributable to the production of timber privilege will not again be taxable to the producer of the timber products under the manufacturing classification. W. Va. Code '11-13-2b (1987). Beginning April 13, 1985, however, manufacturers of timber products are required to report gross proceeds derived from wholesale sales made in the municipality under the wholesale classification if the municipal business and occupation tax ordinance so provides. 2a.8.2. Taxable value. -- The measure of tax under this classification is the gross value of the timber at the point where the production privilege ends. This is an amount equal to the fair market value of the timber production at that point. When a sale occurs at the point, taxable value is gross proceeds of sale. In the absence of such a sale, taxable value is that amount which corresponds as nearly as possible to the gross proceeds from the sale of similar products of like quality or character determined under the following uniform and equitable rules. 2a.8.2.1. Rule 1. 2a.8.2.1.a. In the absence of sales at the point where the timber production privilege ends, gross value must be determined in light of the most reliable and accurate information available. Such factors as the following are to be given due consideration. 2a.8.2.1.a.1. Character and quality of the timber as determined by species, age, size, condition, etc.; 2a.8.2.1.a.2. The quantity of timber per acre, the total quantity under consideration, and the location of the timber in question with reference to other timber. 2a.8.2.1.a.3. Accessibility of the timber (location with reference to distance from a common carrier, the topography and other features of the ground upon which the timber stands and over which it must be transported in process of exploitation, the probable cost of exploitation and the climate and the state of industrial development of the locality); and 4. The freight rates charged by common carriers to important markets
The timber in each particular case will be valued on its own merits. The Tax Commissioner will give weight and consideration to any and all facts and evidence having a bearing on the market value such as cost, actual sales and transfers of similar timber products, the margin between cost of production and the price realized for timber products, and royalties and rentals paid to the owner of the standing timber. The taxpayer bears the burden of keeping such records as may be necessary to prove the fair market value of his timber at the point where production ends. In the absence of such substantiation, fair market value shall be determined under Rule 2 of this subsection. 2a.8.2.2. Rule 2. 2a.8.2.2.a. At the election of the taxpayer, or in the absence of books and records to substantiate fair market value determined under Rule 1, above, the following rule shall be used to determine the gross value of timber at the point where production ends. 2a.8.2.2.a.1. A person who produces timber and sells his logs, and by-products of timber production and bucking operations, on the ground, either where the trees were felled in the forest or at a central collection point, shall report seventy-five (75%) of the gross proceeds of sale under the timber production classification and the remaining twenty-five percent (25%) shall be reported under the manufacturing classification. Additionally, one hundred percent (100%) of gross proceeds of sales shall be reported under the appropriate sales classification after April 13, 1985. 2a.8.2.2.a.2. A person who produces timber, sells and delivers his timber products, in the same condition that they leave the forest, to a saw mill, other manufacturer or consumer, shall report fifty percent (50%) under the manufacturing classification, regardless of whether the sale is made within or without the municipality. Additionally, if the sale is made in the municipality, one hundred percent (100%) of the gross proceeds of sales shall be reported under its appropriate sales classification after April 13, 1985. 2a.8.2.2.a.3. A person who produces timber and further saws, mills or otherwise manufactures the same into lumber, cross ties, timbers, veneer and other products for sale, profit or commercial use shall report twenty-five percent (25%) of his gross proceeds of sale under the timber production classification and seventy-five percent (75%) under the manufacturing classification. Where no sale is made, the fair market value of lumber, cross ties, timbers, veneer or other products must nevertheless be determined as provided in Section 2.4 and twenty-five percent (25%) of that amount shall be reported under the production classification. Additionally, if a sale is made in the municipality, one hundred percent (100%) of gross proceeds of sales shall be reported under the appropriate sales classification after April 13, 1985. 2a.8.3. Who is the producer. -- Whenever standing timber is cut, someone is the producer of that timber for purposes of the municipal business and occupation tax. Not every person who cuts timber from the stump, however, is the producer of that timber. Under the municipal business and occupation tax law, the person who owns the timber immediately after its severance is the producer. 2a.8.3.1. A person who hires another to cut timber for him is generally the producer of that timber. 2a.8.3.2. A person who cuts timber for another, to which he does not take title, reports the gross income from his cutting activity under the service classification. See Section 2h of these regulations. 2a.8.4. Taxability of person who severs and uses or consumes timber in his business. -- A person exercising the privilege of producing timber who uses or consumes the same in his business is deemed to be engaged in the business of producing timber for sale, profit or commercial use and is required to make municipal business and occupation tax returns on account of the production of the business showing the gross value of the timber production determined in accordance with Subsection 2a.8.2. Source: W. Va. Code '11-13-2(1985). See Owens-Illinois Glass Company v. Battle, 151 W. Va. 655, 154 S.E.2d 854 (1967): Gilbert Imported Hardwoods, Inc. v. Dailey, W. Va., 280 S.E.2d 260 (1981). 2a.8.5. Contract right to cut. -- The holder of a contract right to cut timber, who has both the right to cut the timber and to use the products from the cutting for his own account, is the producer of that timber for purposes of the municipal business and occupation tax. Comment. -- A quick test for differentiating between a holder of a contract right to cut and a logging contractor is that the former qualifies for depletion under Section 631(a) of the Internal Revenue Code of 1954, as amended, whereas a logging contractor does not qualify. 2a.8.6. Logging contractor. 2a.8.6.1. A logging contractor may have the right under a contract to cut certain timber, but is required to deliver the logs, that he never owned, to the mill or log yard designated by the owner of the timber. The contract in this instance is merely a service agreement. The logging contractor reports his gross income under the service classification of the municipal business and occupation tax. See Section 2h of these regulations. The owner of the timber reports the gross value of the timber, at the point where production ends, under the production classification, and the balance under the manufacturing classification. Additionally, one hundred percent (100%) of the gross proceeds of sale are reportable under the wholesale classification, if sale is made in the municipality after April 13, 1985. 2a.8.6.2. Although the base contract may not require the logger to deliver the logs to the owner, another contract entered into simultaneously may require it. If the two contracts are, in substance, part of one transaction, the logger has not acquired a contract right to cut and sell the timber in his own behalf. 2a.8.7. Wholesale sales. -- Prior to April 13, 1985, A producer who sells his timber products to producers of natural resources, manufacturers, wholesalers, jobbers, retailers or commercial or industrial consumers for use or consumption in the purchaser's business is not required to pay tax again under the wholesale sales classification. W. Va. Code '11-13-2 (1978). Sales of timber products to the United States of America, its agencies and instrumentalities or to the State of West Virginia, its institutions or political subdivisions are also classified as wholesale sales and similarly treated. Beginning April 13, 1985, however, persons who manufacture timber or timber products are also required to report the gross proceeds of sale of wholesale sales made in the municipality under the wholesale classification. W. Va. Code '11-13-2(1985). 2a.8.8. Retail sales. -- A timber producer who sells his timber products at retail in this State is required to report his gross value of his timber products under the production classification and his gross proceeds of sale under the retail sales classification. W. Va. Code '11-13-2(1978). 2a.8.9. Definitions. -- As used in this regulation, the term: 2a.8.9.1. "Bucking" means the process of cutting the tree into log lengths which is generally, but not always, done prior to skidding. 2a.8.9.2. "Bumping" means the process of removing limbs from the trees after they have been severed. Depending upon the particular job, this is sometimes done at the place of severance, but is also often done after the tree has been removed to the collection and loading point. 2a.8.9.3. "By-product" means any additional product, other than the principal or intended product, which results from production or manufacturing activities and which has a market value, regardless of whether or not the additional product was an expected or intended result of the production or manufacturing activities. 2a.8.9.4. "Christmas trees" means evergreen trees commonly known as Christmas trees, including fir, hemlock, spruce and pine trees, which are sold for use as Christmas trees. 2a.8.9.5. "Commercial use" means the use or consumption of a produced or manufactured product, including any by-product, in a business activity of the producer or manufacturer. "Commercial use" also means the use or consumption of a product in a business activity of the purchaser. 2a.8.9.6. "Consumer" means any person who purchases, acquires, owns, holds, or uses any article of tangible personal property irrespective of the nature of his business. 2a.8.9.7. "Contract right to cut".-A contract right to cut timber is the right to cut timber under a binding contract and to sell the timber cut for the holder's own account or to use such cut timber in his trade or business. Not all cutting contracts give a contract right to cut. If the holder does not own the timber immediately after severance, then the cutting contract is a service contract under which the holder is performing services for compensation. 2a.8.9.8. "Fair market value of timber production" is the amount which would induce a willing seller to sell and a willing buyer to purchase timber products at the point where the timber production privilege ends. 2a.8.9.9. "Logs" refers to the section or sections of a tree which have been cut or sawed from the trunk after the same has been severed from the stump. 2a.8.9.10. "Orchard" means a systematic planting of fruit trees as opposed to individual plantings for ornamental purposes. 2a.8.9.11. "Owner of timber" means any person who owns an interest in timber, including a sublessor and an owner of a contract right to cut timber. Such owner of timber must have a right to cut timber for sale on his own account or for use in his trade or business in order to own an interest in timber within the meaning of W. Va. Code '11-13-2a. 2a.8.9.12. "Producing timber" includes the severing and bumping or delimbing of the tree. All cuts thereafter which ultimately result in a timber product are taxed under the manufacturing classification. 2a.8.9.13. "Pulpwood" means wood cut or prepared primarily to manufacture into wood pulp, for subsequent manufacture into paper, fiber board or other products, depending largely on the species, cut and the pulping process. 2a.8.9.14. "Sapling" means young trees with trunks not over four inches in diameter. 2a.8.9.15. "Skidding" means to pull logs from the stump to the skidway, landing or sawmill. 2a.8.9.16. "Timber" means and includes trees of any marketable species, whether planted or of natural growth, standing or down, located on public or privately owned land, which are suitable for commercial or industrial use. The term "timber" does not include: 2a.8.9.16.a. Trees marketed as Christmas trees, 2a.8.9.16.b. Saplings, brush and undergrowth, 2a.8.9.16.c. Fruit trees planted in an orchard, 2a.8.9.16.d. Other trees which are usable only for firewood or for decoration, except when the wood of such is sold for a commercial or industrial use other than for use as fuel or decoration, or 2a.8.9.16.e. Trees lifted from the soil and sold with roots intact for transplanting. 2a.8.9.17. "Timber producer" means every person who from his own land or from the land of another under a right or license granted by lease or contract, either directly or by contracting with others for the necessary labor or mechanical services, fells, cuts and takes timber for sale, profit or commercial or industrial use. This does not include a person who is under contract to provide the necessary labor or mechanical services to a timber producer. 2a.8.9.18. "Timber products" includes tree tops, tree limbs, logs, wood chips and stumps, etc., produced from "timber". 2a.8.9.19. "Trees of marketable species" means those species of trees growing in West Virginia which have a commercial use. 2a.8.9.20. "Undergrowth" and "underbrush" include shrubs, bushes, small trees, etc., growing beneath standing timber having no commercial value.
W. Va. Code R. § 110-26-2b Manufacturing, Compounding Or Preparing Products; Processing Of Food Excepted. 2b.1. Manufacturers of products. 2b.1.1. For purposes of these rules and regulations, the word "Manufacturer" shall mean and include, but not limited to, every person engaging within this State in the business of manufacturing, compounding or preparing for sale, profit or commercial use any article, substance or commodity. The term "To Manufacture" embraces all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different or useful substance or article of tangible personal property is produced for sale, profit or commercial or industrial use, and shall include the production or fabrication of special made or custom made articles. To manufacture also means producing articles from raw materials or prepared materials by giving these matters new forms, quantities, properties, or combinations. It includes such activities as making, fabricating, processing, refining, mixing, compounding, etc. The term to manufacture does not include activities which are merely incidental to nonmanufacturing activities. Therefore, the following do not constitute manufacturing, compounding, or preparing for sale: cooking and serving of food by a restaurant, repairing and reconditioning of tangible personal property owned by others, etc. 2b.1.2. The phrase "Manufacturing, Compounding or Preparing for Sale" means a process whereby a person from his own materials or ingredients manufactures for sale, or for commercial or industrial use any article, substance or commodity either directly, or by contracting with others for the necessary labor and mechanical services. 2b.1.3. Persons engaged in manufacturing compounding or preparing products shall report the gross proceeds derived therefrom under the manufacturing classification on the municipal business and occupation tax returns. If it is not possible for the manufacturer to determine gross proceeds of sale, he must determine the value of his products by employing the applicable rule set forth in Section 2.3 of these rules and regulations. The measure of the municipal business and occupation tax shall be the value (said value, whenever possible, shall be determined by gross proceeds of sale) of the entire production within the municipality, regardless of the place of sale or the fact that delivery may be made to points outside the municipality. 2b.1.4. A person who manufactures final completed products and does not make sale of the same but uses or consumes said products in his business shall report the value of such products under the manufacturing classification on the municipal business and occupation tax return. In determining the value of such final completed products, the taxpayer must adhere to Section 2.3 of these rules. 2b.1.5. Where the relationship between the manufacturer of products and the purchaser thereof is such that the gross proceeds of sale are not indicative of the true value of the manufactured articles, the taxpayer shall determine value by application of the proper rule set forth in Section 2.3 of these rules and regulations. 2b.1.6. Persons engaged in the business of manufacturing, compounding or preparing for sale, profit or commercial use, any article, substance or commodity and the same is sold at retail within the municipality shall report the gross proceeds derived from such sale under the retail classification, and the value of the same shall be also reported under the manufacturing classification. 2b.1.7. Where a person manufactures, compounds or prepares for sale, profit or commercial use, products, substances or commodities and makes sale of the same at wholesale within the municipality, such person shall report the gross income derived from the sale at wholesale under the manufacturing classification, and the value of the same shall be also reported under the wholesale sales classification if the sale is made in the municipality and the municipal business and occupation tax ordinance so requires. 2b.2. Manufacturing products for others. 2b.2.1. The term "Manufacturing Products for Others" means the performance of labor and mechanical services upon materials belonging to others so that as a result thereof a new, different or useful article of tangible personal property is produced. 2b.2.2. Persons engaged in the business of manufacturing, compounding or preparing for sale, profit or commercial use, any article, substance or commodity, title to which is vested in another, and the article, substance or commodity is returned, not sold, by the person performing the manufacturing service to the owner, the person performing the service shall report the gross income derived therefrom under the service classification on the business and occupation tax form. In this case, the person performing the manufacturing service is not vested with title to the goods; therefore, he reports his gross income under the service classification. The owner of these goods, for whom the manufacturing service was performed, must report the income from such goods under the manufacturing classification of the municipal business and occupation tax return because he is manufacturing through the activities of others. 2b.2.3. Persons performing manufacturing services for others often add materials to make a desired product for the owner. In those cases where the person rendering a manufacturing service furnishes or sells tangible personal property to complete the article for the owner, the gross income derived from the rendition of the service is taxable under the service classification and the gross income derived from furnishing or selling tangible personal property is taxable under retail or wholesale classification, as the case may be. 2b.3. Manufacturing electric power. -- If any person produces electric power within this State and is not deemed taxable under the public service or public utility section of the municipal business and occupation tax law on such electric power, such person is a manufacturer of electric power and shall report gross income derived therefrom under the manufacturing classification. In other words, the manufacture of electric power which is not taxable under public utilities classification is taxable under the manufacturing classification. 2b.4. Dressing and processing of food. 2b.4.1. Persons who dress and process food shall not be considered as manufacturing or compounding for the purposes of the municipal business and occupation tax law. The sale of these food products on a wholesale or retail basis shall be subject only to the tax imposed under these respective classifications. 2b.4.2. Dressing and Processing of Food for purposes of this Section shall mean those instances where the taxpayer begins with what is usually considered a food substance and ends with a food product. See Ballard's Farm Sausage Inc. v. Dailey, 246 S.E.2d 265 (W. Va. 1978). 2b.5. Partially manufactured within and without the municipality. 2b.5.1. In those instances in which the same person partially manufactures products within the municipality and partially manufactures such products outside the municipality, only a portion of the gross proceeds of sale of such products is taxable under the municipal business and occupation tax. 2b.5.2. To determine that portion of the sale price that is applicable to municipal business and occupation tax, under the manufacturing classification, the taxpayer, at his option, shall elect and apply one of the following methods of apportionment: 2b.5.2.1. That portion of the sale price of the manufactured product that the payroll cost of manufacturing such product within the municipality bears to the entire payroll cost of manufacturing such product; or 2b.5.2.2. That portion of the sale price of the manufactured product that the cost of operation to manufacture such products within the municipality bears to the entire cost to manufacture such products. 2b.5.3. A taxpayer is not permitted to report one partially manufactured product under the payroll cost option and another partially manufactured product under the manufacturing cost option within the same taxable year. Once an option or method is chosen, the option shall apply to all of the taxpayer's manufactured articles or products for the particular taxable year. 2b.5.4. If option 2b.5.2.1 is elected by the taxpayer, only direct payroll costs are to be considered in the formula to compute the percentage of sales price attributable to the municipality. Direct payroll costs do not include the value of or expenses of employee benefits, such as, pension plans, insurance programs, employer contribution of FICA taxes, etc. 2b.5.5. If option 2b.5.2.2 is elected by the taxpayer, only manufacturing costs are to computed. Selling expenses, administrative expenses, advertising expenses, etc., whether incurred within or without the municipality, are not considered a cost of operation to manufacture, nor are research expenses, home office overhead, marketing expenses, etc. 2b.6. Treatment of freight charges incurred by manufacturers. 2b.6.1. In certain instances, persons who manufacture, compound or prepare products within the municipality are permitted to deduct outgoing freight charges from the gross proceeds of sales to arrive at taxable value under the manufacturing classification on the municipal business and occupation tax form. 2b.6.2. To determine the value of manufactured articles within the municipality, there may be deducted from gross proceeds of sale certain outgoing freight charges actually paid by the manufacturer, but no deduction will be allowed for expenses incurred by him through the use of his own equipment in transporting items manufactured. 2b.6.3. In all instances where manufactured products are used or consumed by the manufacturer at a point distant from place of manufacture, outgoing freight charges paid by the manufacturer will not be allowed as deductions unless due consideration was given to them also in the method by which value was determined. 2b.6.4. Generally, freight charges to be deductible from gross proceeds of sale must be paid by the manufacturer to a common carrier to deliver manufactured products to a bona fide purchaser. To illustrate: Glassware, at the place where manufacturing end, has a value of twenty-five dollars ($25.00) per gross. If a purchaser buys the glassware at the glass plant for said price, the manufacturer will report under the manufacturing classification the gross proceeds of sale, twenty-five dollars ($25.00). However, if the purchaser buys the same glassware delivered at twenty-seven dollars ($27.00) per gross, and the manufacturer pays a common carrier to make such delivery, the manufacturer may deduct such freight charges, two dollars ($2.00) from the gross proceeds of sale, twenty-seven dollars ($27.00) reported under the manufacturing classification to arrive at the taxable value of twenty-five dollars ($25.00). 2b.6.5. If the manufacturer sells his articles to a purchaser and agrees to deliver such articles in his own equipment for a fee, the fee may be deducted from gross proceeds of sale in arriving at taxable value under the manufacturing classification. However, the amount of deduction must be reported under the service classification. 2b.6.6. If hauling or transportation charges are incurred by the manufacturer and have been absorbed by the manufacturer, such charges are outgoing freight charges and are deductible from gross proceeds of sale to arrive at a taxable value. 2b.7. Problems and solutions relating to the manufacturing, compounding or preparing of products, articles, substances or commodities. -- Presented below are several examples, problems and solutions thereto regarding the proper taxation of manufacturing activities. 2b.7.1. Example. -- A B manufactures clothing within the municipality and sells the same, at wholesale, for three hundred thousand dollars ($300,000). A B will report this sale at wholesale under the manufacturing classification as well as under the wholesale classification, unless the sale is made outside the municipality or unless the municipal business and occupation tax ordinance excepts such sales, in which case it would be reported only under the manufacturing classification
A B also sells some of his manufactured product at a retail factory outlet and derives fifteen thousand dollars ($15,000) from such sales. A B will report this amount fifteen thousand dollars ($15,000) under the retail classification and will also report such amount under the manufacturing classification. A B receives no deduction from the gross proceeds of sales at retail to arrive at manufactured value, for the retail sales were made at the factory where production ended. 2b.7.2. Example. -- C D, the owner of materials and fabrics, contracts with A B to have A B manufacture sweaters from the goods. The contract stipulates that A B will manufacture twenty-five thousand (25,000) sweaters from C D's goods for a fee of one hundred thirty-five thousand dollars ($135,000), and that A B will furnish any thread or buttons necessary to complete the garments. A B is to invoice C D separately for any tangible personal property furnished by A B.
A B completes the manufacturing service and delivers the sweaters to C D and invoices C D for four thousand dollars ($4,000) for materials furnished.
A B will report one hundred thirty-five thousand dollars ($135,000) under the service classification and four thousand dollars ($4,000) under the wholesale classification. The one hundred thirty-five thousand dollars ($135,000) is not reported under the manufacturing classification by A B since he was performing services upon materials belonging to another. The sale of the furnished tangible personal property is reported at wholesale rather than at retail for the sale was made to a manufacturer C D).
C D sells a portion of these sweaters at wholesale for four hundred thousand dollars ($400,000). This amount must be reported by C D under the manufacturing classification, regardless of the place of sale, and he may deduct therefrom any outgoing freight charges paid to a common carrier to deliver these goods to the purchaser.
The remainder of the sweaters are sold at retail by C D for one hundred thousand dollars ($100,000). Of such retail sales, eighty thousand dollars ($80,000) worth occurred outside the municipality and twenty thousand dollars worth occurred within the municipality. Therefore, C D must report only twenty thousand dollars ($20,000) under the retail classification for those retail sales within the municipality and must place a sales value on this portion of the goods and report the same under the manufacturing classification. C D will determine such value in accordance with the applicable rules set forth in Section 2.3 of these rules.
The eighty thousand dollars ($80,000) of retail sales which occurred outside the municipality are not reportable under the retail classification, but a sales value must be placed on this portion of the goods and must be reported under the manufacturing classification in accordance with Section 2.3 of these rules. These are sales of manufactured products for delivery outside the municipality and are reportable under manufacturing only. It is assumed that the taxpayer had no outgoing freight charges, in this example, and that the value of his articles was reflected by the gross proceeds of sales; therefore, he will report the one hundred thousand dollars ($100,000) (of retail sales) under the manufacturing classification.
C D's municipal business and occupation tax return will reflect five hundred thousand dollars ($500,000) reported under the manufacturing classification and twenty thousand dollars ($20,000) under the retail classification. 2b.7.3. Example. -- XY, a coal broker, purchases coal from Kentucky and has it transported to his tipple and preparation plant within the municipality. XY purchased one hundred thousand (100,000) tons at five dollars ($5.00) per ton. The coal is tippled, prepared, screened, graded, washed, etc. by XY and sold by him for delivery outside the municipality for eight dollars ($8.00) per ton, or a total of eight hundred thousand dollars ($800,000). In the purchase contract, it is stipulated that XY will pay all outgoing freight charges to deliver such coal. The freight charges in the amount of ten thousand dollars ($10,000) were paid by XY to a railroad, which is, of course, a common carrier.
XY will report the gross proceeds of sale eight hundred thousand dollars ($800,000) of the coal described in the preceding paragraph less the preparers outgoing freight charges ten thousand dollars ($10,000) as taxable income, seven hundred ninety thousand dollars ($790,000) under the manufacturing classification; for the activities of screening, grading, washing, etc., are deemed to be preparing articles for sale, which activities come under the manufacturing classification. Inasmuch as this was a sale made of manufactured products for delivery outside the municipality, the taxpayer has no responsibility to report gross proceeds therefrom under either the retail or wholesale classes.
During the taxable period, XY tippled, prepared, screened, graded, etc., coal, title to which was vested in others, for a fee of two dollars ($2.00) per ton. Gross income from this activity, performing manufacturing services on goods owned by others amounted to three hundred fifty thousand dollars ($350,000). Inasmuch as title to this coal was vested in others, XY is deemed to be performing activities taxable under the service classification and will report accordingly.
The taxpayer purchased West Virginia coal and other natural resource products which he sold for six hundred thousand dollars ($600,000). XY performed no activities on these products and sold the same in the condition in which they were purchased. The sale of such products occurred outside of the municipality. The transaction was negotiated and consummated without the municipality, and it was provided that title passed to the purchaser only upon delivery.
On the transaction described in the preceding paragraph, XY is not subject to municipal business and occupation tax. He did not produce, manufacture or prepare the goods for sale. The goods were purchased by him within West Virginia and sold by him outside the municipality in the form in which he purchased them. Therefore, XY performed no activities within the municipality subject to the municipal business and occupation tax. In this situation the burden of proof is on the taxpayer to show that the sale was consummated without the municipality and therefore not subject to tax. A detailed list of all such transactions must be maintained by the taxpayer and must show the shipping point, the purchaser's name, the delivery point, the mode of delivery and the date of shipment.
Exemption for sales consummated outside the municipality does not apply to persons subject to tax under the production classification (Section 2a of these rules) or under the manufacturing, compounding or preparing for sale classification (Section 2b of these rules). Persons subject to tax under the production classification or the manufacturing, compounding or preparing for sale classification are producing, manufacturing, compounding or preparing for sale products within the municipality for sale without the municipality and are taxable on the privileges engaged in within the municipality. The measure of the tax is the value of the entire production or entire product manufactured within the municipality, regardless of the place of sale or the fact that the delivery may be made to points outside the municipality. 2b.7.4. Example. -- At a site within the municipality, EF manufactures component parts for radios and television sets and ships the parts to its assembly factory outside the municipality where additional manufacturing is performed to make radios and televisions ready for sale. Therefore, the same person (EF) is partially manufacturing a product within the municipality and partially manufacturing such product outside the municipality.
Whereas the municipal business and occupation tax law can reach only those activities or privileges which occurred within the municipality, the taxpayer must elect a method of apportionment to determine his municipal gross income from manufacturing. (See Section 2b.5 of these rules.) The taxpayer elects to use, in this example, the payroll method of apportionment.
The payroll cost of manufacturing the parts within the municipality totaled one hundred thousand dollars ($100,000). The entire payroll cost of manufacturing the radio and television sets was five hundred thousand dollars ($500,000), including the municipal payroll. Therefore, the municipal payroll cost is twenty percent (20%). In computing payroll cost, only direct payroll cost in manufacturing the item in question is included. No other expenses are included.
Assuming that EF sells the radios and television sets for one million, six hundred thousand dollars ($1,600,000), its municipal gross income reported under the manufacturing classification is three hundred twenty thousand dollars ($320,000); (twenty percent (20%) X one million, six hundred thousand dollars ($1,600,000) = three hundred twenty thousand dollars ($320,000)).
Persons who perform a manufacturing service on goods owned by another must report their entire gross income derived from activity under the service classification and are not permitted to employ an apportionment method. The rule stated in the preceding sentence shall apply even if the owner (manufacturer) of the goods ships the same outside the municipality for additional manufacturing or preparing. Only the owner-manufacturer is entitled to prorate his income under one of the apportionment methods.
If the owner-manufacturer pays another to perform services on his goods within the municipality and ships those goods outside the municipality for additional processing, the owner-manufacturer must elect the cost of operations method of apportionment. He is not eligible to use the payroll method since he has no municipal payroll in these particular goods (the goods were partially manufactured by another). 2b.7.5. Example. -- ST manufactures chemicals and related items within the municipality. In order to manufacture house paint, ST must manufacture certain chemical compounds which become component parts of the paint and which lose their identity therein. These manufactured chemical compounds consumed by the manufacturer within the municipality are not subject to the municipal business and occupation tax in that such compounds become component parts of the product, lose their identity therein and increase the taxable value of the product (house paint) manufactured within the municipality which is reported under this tax act.
ST ships a portion of the chemical compound to its operation outside of the municipality. ST must place a manufactured value on this portion of the compound and report the same under the manufacturing classification on the municipal business and occupation tax return; because this product becomes a final complete product for purposes of this tax once it is shipped outside the municipality, with or without sale thereof. Any manufactured product which is shipped outside the municipality, whether for consumption or use or for sale, becomes a final completed product subject to this tax.
ST consumes a portion of its manufactured paint to paint its factory. A value, in accordance with Section 2.3 of these rules, must be placed on the consumed product and reported under the manufacturing classification of the municipal business and occupation tax return. In this situation, the taxpayer is consuming final completed products. Final completed products manufactured within the municipality are taxable under the manufacturing classification, regardless of where consumed or used by the manufacturer. 2b.7.6. Example -- A business rebuilds engines owned by others and also purchases engines which it rebuilds and later sells.
Where the business rebuilds engines owned by others it would report its gross receipts under the service classification. Where the owner of the rebuilt engine is in the business of rebuilding engines it would report the value of the rebuilt engine under the manufacturing classification. Where the owner of the rebuilt engine is an individual not engaged in a related business activity no business and occupation tax is due from the owner of the rebuilt engine because he is not engaging in business.
Where the business purchased the engines which it rebuilds and later sells, gross receipts from rebuilding the engines shall be taxable under the manufacturing classification in the municipality in which the engine rebuilding activity is conducted, and also under the appropriate sales classification if the sale occurs in the municipality or is otherwise attributable to the municipality. 2b.8. Business of manufacturing timber products. 2b.8.1. General. -- A person engaged in a municipality in the business of manufacturing, compounding or preparing delimbed trees, logs or timber products for sale, profit or commercial use, either direct or by contracting services from others is subject to municipal business and occupation tax under the manufacturing classification and shall determine his municipal business and occupation tax liability in accordance with these regulations. He is also taxable under other classifications of the municipal business and occupation tax when the activity engaged in is not taxable under the manufacturing classification. 2b.8.2. Measure of tax. -- The measure of tax under this classification is the adjusted gross value of all timber products, including by- products, manufactured, compounded or prepared in the municipality for sale, profit or commercial use, regardless of places of sale or the fact that delivery may be made to points outside the municipality. 2b.8.3. Gross value. -- The term "gross value" means gross proceeds of sales in every instance where a bona-fide, arms-length sale of product(s) is made, regardless of whether the sale is at wholesale or retail. This amount shall include all subsidies and bonuses received with respect to the manufacture or sale of the timber products. In the absence of a bona-fide, arms-length sale, gross value is that amount which corresponds as nearly as possible to gross proceeds from the sale of similar products of like quality or character in an arms-length transaction under similar circumstances and conditions. This gross value shall be determined under the rules set forth in Section 2.3 of these regulations. 2b.8.4. Adjusted gross value. -- The term "adjusted gross value" is determined under Subsection 2b.8.3 above, minus the following: 2b.8.4.1. The cost of timber or timber products which are used as ingredients, components or elements in the manufacture of timber products that are taxed under the manufacturing classification. 2b.8.4.1.a. Effective beginning April 1, 1982, taxable value of timber products manufactured in the municipality, which are sold or commercially used, does not include the cost of any timber or timber products purchased and used as an ingredient, component or element of a timber product manufactured in the municipality. Only the cost of timber or timber products that become a recognizable, integral part of the timber product is deductible. The following are examples of tangible personal property which are not deductible. 2b.8.4.1.a.1. A manufacturer of timber products purchases pallets. The pallets do not become an ingredient, component or element of the manufactured timber products. The cost of the pallets is not deductible. 2b.8.4.1.a.2. A manufacturer of timber products purchases paper cups, straws, napkins, plates, towels and toilet tissue. Their cost is not deductible. 2b.8.4.1.a.3. A manufacturer of timber products purchases wooden crates, cardboard boxes, excelsion and wrapping materials for shipping his manufactured timber products. Their cost is not deductible. 2b.8.4.1.b. An integrated producer/manufacturer of timber products may deduct the gross value of the timber at the point where the production privilege ends. When the timber is produced in this State, the amount that may be deducted is the value of the timber reported under the production classification. See, Section 2a.8 of these regulations. 2b.8.4.1.b.1. Example. -- XYZ Lumber Company produces timber which it then manufactures into lumber in the municipality. The gross value of the timber at the point where the production privilege ended was two thousand five hundred dollars ($2,500). The manufactured lumber was sold for ten thousand dollars ($10,000). The adjusted gross value of the manufactured timber products subject to the manufacturing tax is seven thousand five hundred dollars ($7,500). 2b.8.4.1.b.2. Example. -- XYZ Lumber Company also purchases logs from other producers of timber for five thousand dollars ($5,000). The timber products manufactured from the purchased logs is sold for fifteen thousand dollars ($15,000). The adjusted gross value of the timber products subject to the manufacturing tax is ten thousand dollars ($10,000). 2b.8.4.1.b.3. Example. -- L & M Lumber Company produces timber in Kentucky and manufactures it into lumber at its saw mill in the municipality. The lumber is sold for fifty thousand dollars ($50,000). To determine the adjusted gross value of the lumber subject to the manufacturing tax, the taxpayer must first determine the gross value of its timber at the point when production ended. Following regulations Section 2a.8.3, this amount is determined to be thirty thousand dollars ($30,000), and is allowable as a deduction from the fifty thousand dollars ($50,000) selling price of the manufactured lumber to determine the adjusted gross value of twenty thousand dollars ($20,000). Adjusted gross value must then be apportioned since manufacturing began in Kentucky and ended in the municipality. 2b.8.4.2. Transportation charges actually paid by the manufacturer. In determining the adjusted gross value of timber products manufactured in the municipality, the manufacturer may deduct from "gross value" the amount of outgoing freight charges paid by him, from the point at which the shipment originates in the municipality to the point of delivery to the customer, to the extent included in gross value. For freight charges to be deductible, they must actually be paid by the manufacturer. No deduction shall be allowed for expenses incurred by the manufacturer in transporting or delivering items manufactured to the purchaser, through the use of his own equipment, regardless of whether the equipment is owned, borrowed or leased by him. 2b.8.4.3. Bad debts. -- No deduction is allowed for bad debts because the measure of the tax is the value of the entire product manufactured, compounded or prepared for sale in the municipality. 2b.8.4.4. Cash discounts. -- Cash discounts allowed and taken may be deducted. 2b.8.4.5. Returned goods. -- The proceeds of sales which have been refunded, either in cash or by credits, upon return of the manufactured product may be deducted, if previously included in gross income. 2b.8.4.6. Trade-ins. -- The amount allowed as "trade-in value" for any article accepted as part payments for any manufactured product sold is not allowed as a deduction unless the article will be remanufactured in the municipality by the taxpayer for sale, profit or commercial use. 2b.8.4.7. Excise taxes. 2b.8.4.7.a. Excise taxes other than consumers sales and service tax imposed by this State and paid by the taxpayer may be deducted. 2b.8.4.7.b. Excise taxes imposed by the Federal government which the manufacturer is required to collect from the customer and hold in trust may be deducted. (See Section 1a.20.9). 2b.8.5. Manufactured products sold at retail. -- A manufacturer who sells products manufactured in the municipality "at wholesale" reports his adjusted gross proceeds of sale under the manufacturing classification. Gross proceeds of sale would also be reported under the wholesale classification, for sales made in the municipality if the municipal business and occupation tax ordinance so provides. A manufacturer who sells products "at retail" reports his adjusted gross proceeds of sale under the manufacturing classification, W. Va. Code '11-13-2b (1987), and gross proceeds of sale under the retail sales classification, W. Va. Code '11-13-2c (1987). The term "selling at wholesale" is defined in W. Va. Code '11-13-1 (1987) to mean and include: 2b.8.5.1. Sales of any tangible personal property for the purpose of resale in the form of tangible personal property. 2b.8.5.2. Sales of machinery, supplies or materials which are to be directly consumed or used by the purchaser in the conduct of any business or activity subject to municipal business and occupation tax. 2b.8.5.3. Sales of tangible personal property to the United States of America including its agencies and instrumentalities, or to the State of West Virginia, including its agencies, institutions and political subdivisions.
All other sales are "sales at retail." 2b.8.6. Definitions. -- As used in this regulation, the term: 2b.8.6.1. "By-product" means any additional product, other than the principal or intended product, which results from production or manufacturing activities and which has a market value, regardless of whether or not the additional product was an expected or intended result of the production or manufacturing activities. 2b.8.6.2. "Chipboard" is a timber product manufactured from small particles of waste wood. 2b.8.6.3. "Commercial use" means the use or consumption of a produced or manufactured product, including any by-product, in a business activity of the producer or manufacturer. "Commercial use" also means the use or consumption of a product in a business activity of the purchaser. 2b.8.6.4. "Fiberboard" is a timber product manufactured from forest thinings and saw mill waste. 2b.8.6.5. "Manufacturer" means a person engaged in the business of manufacturing, compounding or preparing timber or timber products for sale, profit or commercial use. 2b.8.6.6. "Manufacturer of timber products" means a person who: 2b.8.6.6.a. bucks delimbed trees into log lengths 2b.8.6.6.b. operates a sawmill for the sawing of logs into rough lumber in its various sizes and forms; or 2b.8.6.6.c. operates a cooperage mill, veneer mill, excelsior mill, paper mill, chipmill, plant or other industrial facility for the manufacture of timber or timber products into other timber or products. 2b.8.6.7. "Paper, paper products, printing and publishing industry" is defined as the manufacture of pulp from wood, rags and other fibers; the conversion of such pulp into paper, paperboard and building board; the manufacture of paper, paperboard and building board; the manufacture of paper, paperboard, and pulp into bags, boxes, containers, tags, cards, envelopes, pressed and molded pulp goods, and all other converted paper products; the printing performed on the foregoing and on allied products; the printing or publishing of newspapers, books, periodicals, maps and music; and all manufacturing and service operations performed by typesetters, advertising typographers, electrotypers, stereotypers, photoengravers, steel and copper plate engravers, commercial printers, lithographers, gravure printers, private printing plants of concerns engaged in other businesses, binderies, and news syndicates. 2b.8.6.8. "Pulpwood" is generally manufactured from timber. It can also be manufactured from other products such as cotton, flax, or paper. Only the cost of timber and timber products used to manufacture wood pulp is deductible. 2b.8.6.9. "Seasoning" means to bring the wood into condition for use by exposure in open air or in kilns. 2b.8.6.10. "Timber products" include bark, billets, bolts, chemical wood, cooperate products, crating, cross ties, excelsior, fuelwood, logs, lumber, mine ties and props, piles, poles, ports, pulpwood, shingles, switch ties, timber, wood and related materials, wood chips, wood flour, wooden furniture and fixtures, and all other products usually considered a timber product, but does not include any paper or paper product, newspaper, books, magazines or periodicals. 2b.8.6.11. "Timber products industry" is defined as those industries which manufacture products from lumber, wood and related materials; and logging and wood preserving. It does not include any product or activity in the metal, machinery, transportation equipment and allied products industry; the jewelry and miscellaneous products manufacturing industry; the construction industry; or the paper, paper products, printing or publishing industry. 2b.8.6.12. "Veneer mill" means a mill which manufactures logs into very thin sheets of wood called veneer, veneer is either used for making plywood or, if the wood has good grain and color, it is used for decorative purposes. 2b.8.6.13. "Wall panelling" may be composed of any material or combinations of materials including, but not limited to, solid wood, plywood, wood products, plastics, metals, etc., and may be textured, prefinished, partially finished, or unfinished. For example, a hardboard panel may have an imitation marble finish or a fiberboard panel may have an imitation burlap finish. 2b.8.7. Trees not wanted for their wood, "waste branches," bark and saw dust can be used to extract oils, resins, tanning dyes and different chemicals which are important to other industries. The cost to the manufacturer of the trees, "waste branches", bark and saw dust is not deductible when determining the taxable value of oils, resins, tanning dyes and different chemicals which are extracted or manufactured from them. Similarly, the cost of oils, resins, tanning dyes and different chemicals extracted or manufactured from timber is not deductible when they are used or become an ingredient or component or element of a timber or forest product. 2b.8.8. Contractors. -- A contractor who builds houses, buildings and other structures using timber products may not deduct the cost of the timber products when determining his municipal business and occupation tax liability.
W. Va. Code R. § 110-26-2c Selling Tangible Property; Exempt Sales. 2c.1. Every person who engages or continues within a municipality in the business of selling any tangible property whatsoever, real or personal, is subject to the municipal business and occupation tax and shall report the gross income therefrom under either the retail or wholesale classification, depending upon the type of sale. Any vendor who receives income from extending credit to vendees or from the repetitive carrying of accounts in connection with the sale of any tangible personal property shall report such income under the service classification on the municipal business and occupation tax form. See Section 1a.1 of these rules and regulations. 2c.2. It is important that the taxpayer maintain books and records to accurately reflect the distinction between sales at retail and sales at wholesale. The rates of tax for these two classifications are different. If the books and records do not make a readily identifiable distinction, the municipality, upon audit, will consider that all sales were made at retail and the burden of proof will be on the taxpayer to show otherwise. 2c.3. Sales at wholesale. 2c.3.1. "Selling at Wholesale" and "Wholesale Sales" shall mean and include: 2c.3.1.1. Sales of any tangible personal property for the purpose of resale (by the vendee) in the form of tangible personal property; 2c.3.1.2. Sales of machinery, supplies or materials which are to be directly consumed or used by the purchaser in conduct of any business or activity which is subject to the municipal business and occupation tax; 2c.3.1.3. Sales of any tangible personal property to the United States, its agencies and instrumentalities or to this State and its institutions or political subdivisions. 2c.3.2. Sales of tangible personal property made to purchasers who are going to resell property in the form of tangible personal property are sales at wholesale by the vendor, regardless of where the purchaser sells such property. To illustrate: A distributor in the municipality sells kitchen products (pots, pans, knives, etc.) to a vendee who intends to resell such products without the municipality. The distributor shall report the gross income from such sale under the wholesale classification; for it is immaterial that the vendee intends to make sale of the property outside the municipality. To qualify as a wholesale sale for the taxable status of the vendor, it is only necessary that the vendor be appraised by the vendee that he (the vendee) is purchasing tangible personal property to be resold in the form of tangible personal property. 2c.3.3. Sales of tangible personal property which property is not resold in the same form by the vendee are also sales at wholesale if the vendee directly uses or consumes such property in a business or activity which is subject to municipal business and occupation tax. To illustrate: A vendor sells pens, paper, etc., to a manufacturer who will consume such products in the conduct of his manufacturing operation. Said sale is deemed to be at wholesale for purposes of the vendor's municipal business and occupation tax liability for the purchaser intends to use the purchased goods in a business activity subject to municipal business and occupation tax. If the vendor had made such sale to an Ohio manufacturer who has no business activity within this State subject to this State's municipal business and occupation tax, such sale, for the vendor's tax status, is nevertheless at wholesale. 2c.4. Sales at retail. 2c.4.1. All sales made to ultimate consumers and sales that are not wholesale sales are sale made at retail, and the gross income therefrom must be reported under the retail classification of the municipal business and occupation tax form. 2c.4.2. An ultimate consumer is one who purchases goods for his own personal use and who does not engage in the business of selling such goods in the form of tangible personal property and who does not consume such goods in the conduct of a business which would be subject to this States municipal business and occupation tax if it were carried on in a municipality imposing such a tax. 2c.4.3. All sales of real estate (such as by a speculative builder) are sales at retail and must be reported accordingly. On sales of realty, the status of the purchaser or the intention or use made of the property by the purchaser is of no consequence to the vendor's tax status. To illustrate: A speculative builder constructs apartment buildings which he later sells to a West Virginia municipality, such sale must be reported at retail on the tax return of the speculative builder. 2c.4.4. Casual sales of real estate are not taxable to the vendor. 2c.4.5. Sales of tangible personal property made by vendors to persons engaging in exempt business activities (agriculture, horticulture, grazing) are not exempt sales and the gross income derived from such sales must be reported by the vendor under the retail classification. This rule results from the fact that the purchaser (farmer, etc.) is not engaged in a business subject to the municipal business and occupation tax. 2c.4.6. All sales made through vending machines are sales at retail. The term "Vending Machines" means and includes only those machines which, through the insertion of a coin of a specified amount, will return to the vendee a predetermined specific article of merchandise. It includes, but is not limited to, machines which vend cigarettes, toilet articles, sandwiches, beverages, candies, confections, et cetera. 2c.5. Exempt sales. 2c.5.1. Sales by any person engaging in the business of horticulture, agriculture or grazing are not taxable under either the wholesale or retail classification. These sales, to be exempt from municipal business and occupation tax, must be made by the taxpayer of products he has grown and produced in the business of horticulture, agriculture or grazing and not of products which he purchases from others. To illustrate: A florist who purchases flowers and shrubbery from a horticulturist and resells the same to the public is deemed to be making sales at retail and such sales do not fall within this exemption. The sales made by the horticulturist (one who grows his own) to the florist are not taxable sales and, of course, come within this exemption. If the florist grows any of his own stock and makes sale of the same, he is not taxable on such sales. 2c.5.2. The exemption contained herein does not extend to all business activities of the person making exempt sales but is limited to sales of his own products. The gross income from any other business activities of such person must be reported under the applicable classification on the municipal business and occupation tax return. To illustrate: A farmer who leases or rents his equipment to other farmers must report his gross rental income under the rental classification. Also, persons who manufacture, compound or prepare their own products (before sale thereof) into new, useful or different products become liable under the manufacturing classification on the tax return. For example, A raises dairy cows and produces milk therefrom which he sells to supermarkets. The sale of such milk is an exempt sale since the milk was produced by A from his own herd. (Pasteurization and homogenization are not manufacturing processes under this tax.) If A, rather than selling a portion of his milk, makes butter, cheese or ice cream from such milk, he is engaged in the business of manufacturing and must report the gross income from such products under the manufacturing classification. 2c.5.3. Sales of stocks, bonds or other evidences of indebtedness are not sales at either wholesale or retail and are therefore exempt from such classifications. However, income, fees or commissions derived from buying and selling the same for others must be reported under the appropriate classification
W. Va. Code R. § 110-26-2d Public Service Or Utility Business. 2d.1. Certain persons engaged within this State in any public service or utility business are taxable on such business and shall report the gross income from such business activities under the appropriate classification on the municipal business and occupation tax form. Only gross income derived from the supplying of public services shall be reported under the public service classifications. All income received by a public service or public utility taxpayer from activities other than the supplying of public services shall be reported under the appropriate classification on the municipal business and occupation tax return. For example, a light and power company engaged in operating a generating plant and system for distribution of electrical energy for sale, may also be engaged in selling various electrical appliances at retail. Such company would be taxable under the electric light and power company classification with respect to the sale of electric energy and also taxable under the retail classification with respect to the sale of electric appliances. 2d.2. There are certain persons who are not subject to the tax imposed under the public utility section even though such persons may be subject to the control of this State's Public Service Commission. These statutorily exempt persons are railroads, railroad car companies, express companies, pipeline companies, motor carriers, telephone and telegraph companies and water carriers by steamboat or steamship. Municipally-owned water companies and municipally-owned electric distributions systems are not subject to the tax imposed under this Section
W. Va. Code R. § 110-26-2e Contracting. 2e.1. The business of contracting is taxable under the municipal business and occupation tax law and the gross income derived therefrom must be reported under the contracting classification. See Section 1a of these rules as to definition of "Contracting," "Prime Contractor," "Subcontractor," "Buildings or Structures," "Contracting, Repairing, Decorating or Improving" and "Speculative Builder". 2e.2. Prime and subcontractors, taxable on gross income with no deductions therefrom. -- A prime contractor, one who furnishes work or both materials and work under a written or oral contract, for the construction, alteration, repair, decoration or improvement of a new or existing building or structure or any part thereof, or for the alteration, improvement or development of realty, must report his gross income under the contracting classification without any deduction on account of any expenses incurred. If the prime contract executes a contract with another for a portion of the job or project, the prime contractor receives no deduction from gross income on account of any payments made to the subcontractor. The subcontractor will also be taxable on his gross income under the contracting classification. 2e.3. Contract entered into with governments. -- Gross income received by a person for contracting activities performed for the State of West Virginia, the federal government or any of their instrumentalities, agencies, boards, commissions or political subdivisions, etc., or performed for nonprofit organizations is taxable and shall be reported under the contracting classification. The fact that the owner is a governmental unit or a nonprofit organization does not relieve the contractor, subcontractor, suppliers or any other person from liability for municipal business and occupation tax on the full amount of gross income. 2e.4. Form of contract. 2e.4.1. Persons engaged in the contracting business shall report the entire gross income under the contracting classification, regardless of whether the contract is a turnkey contract, lump sum contract, per unit contract, cost plus fixed fee contract, or other contract having a similar basis. Gross income received from a contracting activity must be reported under the contracting classification and the manner of performance, basis of determining cost, fee or income or form of contract shall not alter the definition of contractor or of contracting and shall not change the taxability of such income from the contracting classification to another classification. A contracting activity remains a contracting activity regardless of what the parties may name it and regardless of the manner in which the parties may make payment and perform the work. 2e.4.2. The measure of the tax under the contracting classification is gross income and includes all items of cost where the contractor has incurred liability. The cost of materials and labor can only be exempted from the measure of the tax in those cases where the contractor is not liable to vendors or workmen for payment. In those cases where the contractor contends that he has not incurred a municipal business and occupation tax liability because he acted solely as agent for the owner, the burden of proving alleged principal-agency relationship shall be upon the contractor. 2e.5. Separate contracts for labor and materials. 2e.5.1. In cases where the contractor enters into a separate contract for the furnishing of materials by the contractor and a separate contract for erection of such materials by the contractor, the gross income from both contracts is taxable under the contracting classification, unless it can be proved by the contractor that passage of title of the materials was not dependent upon the erection of the materials by the contractor and that the sale of such materials is, in fact, a separate and distinct transaction, taxable under the municipal business and occupation tax law, as a retail or wholesale sale, as the case may be. The contract to furnish materials shall not be considered a separate and distinct transaction from the contract to erect the same, unless it is established by the contractor to be a complete arm's length transaction with no dependency existing between the contract for materials and the contract for erection. The burden of proving any alleged arm's length transaction shall be upon the contractor. 2e.5.2. A separate purchase order for the furnishing of work or labor and a separate purchase order for the furnishing of materials which constitute the contract(s) between the parties shall be treated in the same manner as set forth in the paragraph above
W. Va. Code R. § 110-26-2f Reserved For Future Use
W. Va. Code R. § 110-26-2g Business Of Operating Amusements. 2g.1. Any person who derives income from engaging in the business of operating amusements shall report such income under the amusement classification on the municipal business and occupation tax form. Amusements shall include, but shall not be limited to, dance halls, theaters, skating rinks, moving picture shows, radio broadcasting stations, bowling alleys, golf courses, golf driving ranges, racetracks, carnivals, billiard parlors, etc. Any other place at which amusements are offered to the public shall constitute amusements for the purpose of this classification. 2g.2. Persons engaged in the business of radio broadcasting and who provide amusements or entertainment at the broadcasting station or at a public place for which an admission is charged shall report such income under the amusement classification. As to gross income derived by radio broadcasting stations from advertising activities, See Section 2h of these rules and regulations. 2g.3. In the case of operators of places of amusement doing business on a percentage basis, the operator is subject to the municipal business and occupation tax on the total amount of admissions, regardless of whether, under the terms of agreement, he is required to pay a percentage of the admissions as part of the cost of operating. Moving picture show operators who rent film on a percentage basis are required to report the total admissions without any deduction on account of the proportion of admissions paid out for the use of the film. 2g.4. Persons who operate places of amusement and who also sell tangible property in connection therewith; such as, sale of popcorn by theatre owner, shall report the gross income from such sales under the applicable sales classification on the municipal business and occupation tax return. 2g.5. Also, persons engaged in the amusement business may be subject to tax under the rental classification on a certain portion of their gross income. This situation occurs when amusement operators rent personal property such as lockers or bowling shoes to their patrons
W. Va. Code R. § 110-26-2h Service Business Or Calling. 2h.1. Persons engaged in any service business or calling not otherwise specifically taxed under the municipal business and occupation tax law shall report the gross income derived therefrom under the service classification on the municipal business and occupation tax form. 2h.1.1. "Service Business or Calling" shall include all activities engaged in for other persons for a consideration, which involve the rendering of a service as distinguished from the sale of tangible property, but shall not include the services rendered by an employee to his employer. This term shall include persons engaged in manufacturing, compounding or preparing for sale, profit or commercial use, articles, substances or commodities which are owned by another or others, as well as persons engaged as independent contractors in producing natural resource products for persons required to pay the tax imposed under the production classification. 2h.1.2. Persons engaged in the business of television broadcasting and/or radio broadcasting are exempt from tax on gross income derived from advertising services. 2h.2. Services to personal property. 2h.2.1. Where a person renders a service to personal property belonging to others, e.g., mechanics repairing another's automobile, the gross income derived from the work or labor performed in rendering the service shall be reported under the service classification. 2h.2.2. There are many cases where a person in rendering a service, sells tangible personal property, e.g., parts used in automotive repairs. In such instances, the gross income derived from the rendition of the service, usually labor charges, is taxable under the service classification and the gross income derived from the sale of tangible personal property is taxable under the retail or wholesale classification, as the case may be. However, in those cases where the taxpayer renders a service to personal property owned by another and sells personal property to such person to complete the repair of the article, the taxpayer may apportion the gross income between the classifications only if his books and records accurately reflect a separation and if the invoice presented to the customer shows the separation between the services and sales. If the taxpayer fails to maintain adequate records, the entire gross income will be taxed under the service classification and the burden will be upon the taxpayer to prove the proper segregation of receipts. 2h.3. Personal and professional services. -- Personal services and professional services are not exempt from the municipal business and occupation tax, and the gross income from these services must be reported under the service classification. 2h.4. Problems, solutions and examples relating to service businesses or callings. -- Presented below are several examples, problems and solutions thereto regarding the proper taxation of service activities. Any person engaged in any service business or calling within this State not otherwise taxed under the municipal business and occupation tax law is taxable under the service classification. In general service business or calling includes, but is not limited to, advertising agents, appraisers, architects, attorneys, barbers, beauticians, collection agents, court reporters, dentists, doctors, detectives, engineers, employment agents, funeral directors, janitors, kennel operators, laundries, teachers, school operators, laboratory operators, veterinarians, window cleaners, and others. It also includes persons engaged in the business of cleaning, repairing, improving, etc., the personal property of others. The term does not include persons who render services to others in the capacity of employees as distinguished from independent contractors. (See Section 1a of these rules.) 2h.4.1. Example
AB, a dentist, operating within West Virginia, has gross income derived from repairing teeth and furnishing dentures, bridge work, etc. All of AB's gross income is to be reported under the service classification; because persons such as dentists primarily render professional services and do not make sales. The furnishing of dentures, bridge work, etc., is indispensable to and in furtherance of the professional services rendered by the taxpayer.
If AB should sell dentures to an individual without the dentures being indispensable to or in furtherance of professional dental services rendered to the individual, then the sale would qualify as a sale at retail or wholesale for purposes of this tax. This would certainly be an unusual situation and the burden of proof would be upon the taxpayer to show that such transaction was in no way connected to his primary business of rendering professional services. 2h.4.2. Example.
CD is a funeral director within the municipality and commonly quotes a lump sum price for a standard funeral service, which includes the furnishing of a casket, services, care of the body, funeral coach, preparation of the grave site, flowers, etc. where CD quotes a lump sum price such as twelve hundred dollars ($1,200), which includes both the sale of tangible personal property and the charge for rendition of services, he must separate his gross income and report each portion thereof under the applicable classification. His books and records and invoices to customers must reflect the segregation of receipts or he will be required to report all income under the service classification.
In the instant case, of the twelve hundred dollars ($1,200) lump sum fee, he invoices five hundred dollars ($500) as sales of property and seven hundred dollars ($700) as his fee for services rendered. Therefore, he may report five hundred dollars ($500) under the retail classification and seven hundred dollars ($700) under the service classification. 2h.4.3. Example.
RE, a licensed real estate broker within the municipality, accepts a listing to sell an office building for the owner. Upon sale of the building, RE will receive seven percent (7%) of the selling price as his commission. RE employs XY, a license real estate salesman (not a broker). XY is to receive twenty percent (20%) of RE's commission for any realty he sells which is listed by the broker. XY finds a purchaser for the office building listed by the broker and the agreed upon sales price is eight hundred thousand dollars ($800,000). The broker's commission from the owner is fifty-six thousand dollars ($56,000) (seven percent (7%) X eight hundred thousand dollars ($800,000) = fifty-six thousand dollars ($56,000)). The broker pays XY a commission of eleven thousand, two hundred dollars ($11,200) (twenty percent (20%) X fifty-six thousand dollars ($56,000) = eleven thousand two hundred dollars ($11,200).
The broker will report his entire commission fifty-six thousand dollars ($56,000) with no deductions whatsoever under the service classification. The real estate salesman (XY) is liable for municipal business and occupation tax on his income only if he is an independent real estate salesman and is not an employee of the broker. Real estate salesman licensed under W. Va. Code '47-12-1 et seq. are subject to specific regulatory controls. Consequently, regardless of how they may be classified for other purposes, licensed real estate salesmen are considered employees of brokers for purposes of the municipal business and occupation tax and are not taxable on their activities on behalf of brokers.
W. Va. Code R. § 110-26-2i Furnishing Property For Hire; Rental And Royalty. 2i.1. Any person engaged in the business of furnishing any real or tangible personal property, which has a tax situs in a municipality, or any interest therein for hire, loan, lease or otherwise, whether the return be in the form of rentals, royalties, fees or otherwise, shall report the gross income derived therefrom under the rental and royalty classification. The term tangible personal property as used herein shall not include money or public securities. The terms "Rental and Royalty Classification", "Rental Classification" and "Royalty Classification," when used within these regulations, are synonymous. 2i.2. The owner or operator of a store or an establishment in which leased departments are conducted must include on his return the rental income received by him from the lessee. The lessor must file a municipal business and occupation tax return and pay tax under this applicable classification
W. Va. Code R. § 110-26-2j Small Loan And Industrial Loan Business. 2j.1. Persons engaged in the business of making loans of money, credit goods, or things in action, who because of such activity are required under the provisions of W. Va. Code '47-7A-1 et seq. as amended, to obtain a license from the West Virginia Commissioner of Banking, and persons engaged in business as an industrial loan company, shall report all gross income received before April 1, 1971, under the small loan and industrial loan classification. The measure of the tax for persons engaged in this type of business shall not include the return of capital or return of principal in making loans of money, credit goods or things in action. 2j.2. All gross income received by such persons, as described in the preceding paragraph, received on or after April 1, 1971, shall be reported under the banking classification on the municipal business and occupation tax return. (See Section 2k of these rules and regulations.)
W. Va. Code R. § 110-26-2k Banking And Other Financial Business. 2k.1. Any person who engages, within this State, in a banking or financial business shall report gross income derived therefrom under the banking classification on the municipal business and occupation tax return. The preceding rule is applicable only to income received on or after April 1, 1971. For a definition of "Banking Business" or "Financial Organization", See Section 1a, of these rules and regulations. 2k.2. The term "Gross Income" of a banking or financial business shall mean interest, premiums, discounts, dividends, service fees or charges, commissions, fines, rents from real or tangible personal property, royalties, charges for bookkeeping or data processing, receipts from check sales, charges or fees, and receipts from the sale of tangible personal property. 2k.3. "Gross Income" of a banking or financial business shall not include: 2k.3.1. interest received on the obligations of the United States, its agencies and instrumentalities; 2k.3.2. interest received on obligations of this or any other State, territory or possession of the United States, or any political subdivision of any of the foregoing or of the District of Columbia; or 2k.3.3. interest received on investments or loans primarily secured by first mortgages or deeds of trust on residential property occupied by nontransients. 2k.4. All interest derived on activities exempt under Section 2K.3 shall be reported separately, as to amounts, on the municipal business and occupation tax return of a person taxable under the banking classification. In other words, a full disclosure must be made by such person as to the amount of exempt income he received on investments or loans primarily secured by first mortgages or deeds of trust on residential property occupied by nontransients. This exempt income must be explained in detail and separately shown on the exemptions schedule of the municipal business and occupation tax return. 2k.5. Banks and other financial businesses shall report gross income and pay tax under the banking classification only. For example, a financial organization which makes retail sales of tangible personal property shall not report the gross proceeds from sales under the retail classification but shall report the proceeds under the banking classification. Banking and financial businesses, unlike all other businesses, do not have to segregate their income or receipts into the various taxable classifications. 2k.6. Where a banking business or financial organization has several business locations, a municipality shall impose its business and occupation tax only upon gross income received at banks and branch offices located within the municipality. The presence of an automated teller machine "ATM" in a municipality shall not be treated as a business location giving rise to business and occupation tax liability in the municipality
W. Va. Code R. § 110-26-3 Exemptions
3.1. Business exempt from tax. -- The municipal business and occupation tax law exempts from the tax the following businesses:
3.1.1. Insurance companies which pay the State of West Virginia a tax upon premiums: Provided, however, That this exemption shall not extend to that part of the gross income of insurance companies which is received for the use of real property, other than property in which the insurance company maintains its office or offices, in this State, whether the income be in the form of rentals or royalties.
3.1.2. Nonprofit cemetery companies organized and operated for the exclusive benefit of their members.
3.1.3. Fraternal societies, organizations and associations, which are organized and operated for the exclusive benefit of their members and not for profit. However, this exemption shall not extend to that part of the gross income arising from sale of alcoholic liquor, food and related services, of such societies, organizations and associations which are licensed as private clubs under the provisions of W. Va. Code '60-7-1 et seq.
3.1.4. Corporations, associations and societies organized and operated exclusively for religious or charitable purposes.
3.1.5. Production credit associations, organized under the provisions of the federal "Farm Credit Act of 1933".
3.1.6. Any credit union organized under the provisions of W. Va. Code '31-1-1 et seq. or any other chapter of the West Virginia Code. However, the exemptions of this Section shall not apply to corporations or cooperative associations organized under the provisions of W. Va. Code '19-4-1 et seq.
3.1.7. Gross income derived from providing advertising services rendered in the business of radio and television broadcasting.
3.1.8. The gross income or gross proceeds of sale of a gasification or liquification of coal project in the demonstration, pilot or research stages. To qualify for this exemption the Tax Commissioner must first certify the project as eligible. Such exemption shall expire seven years from the date the project first receives gross income or gross proceeds from sales.
3.2. Business exempt by specific statutes.
3.2.1. Public service district for water and sewage services. -- Public service districts providing water and sewage services organized in compliance with the provisions of W. Va. Code '16-13A-1 et seq., are exempt from the payment of the municipal business and occupation tax. This is an exemption provided by specific statute and is only available to those public service districts that have complied with all the requirements as set forth in the above cited provisions of the Code.
3.2.2. Municipal waterworks. -- Waterworks in the State of West Virginia which are organized and/or operated by a municipal corporation in compliance with the provision of W. Va. Code '8-12-1 et seq., entitled, "Waterworks", are exempt from the payment of the municipal business and occupation tax. This is an exemption provided by specific statute and is only available to those municipal waterworks that have complied with all requirements as set forth in the aforecited provisions of the Code.
3.2.3. Municipal combined waterworks and sewage systems. -- Waterworks and sewage systems in the State of West Virginia which are organized and/or operated by a municipal corporation in compliance with the provisions of W. Va. Code '8-13-1 et seq., as amended, entitled, "Combine Waterworks and Sewage Systems", are exempt from the payment of the municipal business and occupation tax. This is an exemption provided by specific statute and is only available to those municipal waterworks and sewage systems that have complied with all the requirements as set forth in the above cited provisions of the Code.
3.2.4. Municipal and sanitary district sewage works. -- Sewage works in the State of West Virginia are organized and/or operated by any municipal corporation and/or sanitary district in compliance with the provisions of W. Va. Code '16-13-1 et seq., are exempt from the payment of the municipal business and occupation tax. This is an exemption provided by specific statute and is only available to those sewage works of municipal corporations and sanitary districts that have complied with all the requirements as set forth in the aforecited provisions of the Code.
3.2.5. Horse racing and dog racing. -- Persons engaged in the business of horse racing or dog racing and organized in compliance with the provisions of W. Va. Code '19-23-1 et seq., are exempt from the payment of the municipal business and occupation tax. This is an exemption provided by specific statute and is only available to those persons that have complied with all the requirements as set forth in the provisions of the Code. However, those public conveniences, such as golf courses and other recreational activities and motel or hotel operations from which persons engaged in horse racing or dog racing derive income, are subject to the municipal business and occupation tax under the appropriate classifications.
3.2.6. West Virginia business development corporations. -- Business development corporations organized in compliance with the provisions of W. Va. Code '31-14-1 et seq., are exempt from payment of the municipal business and occupation tax.
W. Va. Code R. § 110-26-4 Compilation Of Tax; Payment
4.1. Every person liable for municipal business and occupation taxes shall pay the same in quarterly estimated installments. Such estimated payments are due on or before the last day of the month following the taxable quarter. In other words, if a taxpayer keeps records and pays tax on a calendar year basis he will file quarterly estimated payments for his municipal business and occupation taxes. The installments and annual return shall be due on or before the dates provided by municipal ordinance.
4.2. If the municipal ordinance so provides and a taxpayer can reasonably expect his tax liability to be less than one hundred dollars ($100.00) for the taxable year, he does not have to file quarterly estimated installments and may file only an annual return.
4.3. The municipality, if it deems it necessary to ensure payment of the tax, may require estimated payments for periods of shorter duration than quarter year periods.
W. Va. Code R. § 110-26-5 Return And Remittance By Taxpayer
5.1. Annual return.
5.1.1. Every taxpayer shall, on or before the expiration of one month after the end of the tax year, file a municipal business and occupation tax return for the entire taxable year. The return must show the gross proceeds of sales or gross income of business, trade or calling, and the taxpayer must compute the amount of tax chargeable against him. Such return must be signed by the taxpayer.
5.1.2. For a taxpayer maintaining records and paying taxes on a calendar year basis unless otherwise provided by municipal ordinance, the annual return is due on or before January 31 of the following year. The annual return is filed at the close of the taxable year and replaces the fourth quarterly estimate. The annual return is a recompilation of the three quarterly estimates and the fourth quarter's business. It provides a medium for making such adjustments on the quarterly estimates as may be necessary.
5.2. Extension of time.
5.2.2. No extensions of time may be granted for filing of quarterly returns or making estimated payments.
W. Va. Code R. § 110-26-6 through '110-26-9. Reserved For Future Use
W. Va. Code R. § 110-26-10 Taxability Of Specific Businesses
10.1. Presented below are certain specific types of business activities and brief explanations as to the applicable classification under which each should report gross income. If any taxpayer is in doubt as to the proper class or classes under which he is required to file, he should forward an inquiry to the municipality.
10.1.1. Accountants. -- Persons who are certified public accountants, public accountants, bookkeepers or who provide accounting services to others for a consideration are taxable on the gross income derived from such activities under the service classification on the municipal business and occupation tax form.
10.1.2. Automobiles and other motor vehicles. -- Persons engaged in the business of selling automobiles and other motor vehicles shall report the gross receipts therefrom under the retail or wholesale classification, depending upon the type of sale. No deduction is allowed such persons for sales made to nonresidents of this State or the municipality unless it can be conclusively established by the dealer that such sale was consummated outside the boundaries of the municipality. Gross income received for repairing automobiles of others shall be reported under the service classification.
10.1.3. Advertising agencies.
10.1.3.1. Advertising agencies are primarily engaged in the business of rendering services, but may also make sales of tangible personal property to their clients or others or make purchases of such articles as agents in behalf of their clients. Articles acquired or produced by advertising agencies may be for their own use in connection with the rendition of an advertising service or may be for resale as tangible personal property to their clients.
10.1.3.2. The gross income received for advertising services, including commissions or discounts received upon articles purchased as agents in behalf of clients, is taxable under the service classification. Included in this classification are amounts attributable to sales of tangible personal property, unless charges for such articles are separately stated in billings rendered to clients.
10.1.4. Barbers and beauticians. -- Gross income received from barbering and beautician services shall be reported under the service classification. Any gross income received from sales of tangible personal property such as hair tonic, hair spray, etc. shall be reported under the retail classification.
10.1.5. Doors, windows and awnings. -- Persons engaged in the business of manufacturing doors, windows and awnings shall report the gross income from such activities under the manufacturing classification. Persons who manufacture and make sale of such products at retail must also report the gross proceeds of sale under the retail classification. Persons who install these products must report the gross income derived therefrom under the contracting classification.
10.1.6. Laundries and dry cleaners. -- Persons who derive gross income from a laundry or dry cleaning business shall report said income under the service classification. However, sales of tangible personal property to the general public are taxable under the retail sales classification.
10.1.7. Hospitals. -- Generally, the gross income derived by hospitals for services rendered to patients shall be reported under the service classification. Some of the gross income derived from such business may be subject to tax under the retail or wholesale classification, as the case may be, if the rendition of the service involves the sale of tangible personal property.
10.1.8. Hotels and motels. -- Gross income received by hotels and motels for the renting of rooms or sleeping quarters shall be reported under the service classification. A hotel, motel, boarding house, rooming house, apartment hotel, resort lodge, or tourist camp includes all establishments which are held out to the public as a hotel, public lodging house, or places where sleeping accommodations may be obtained, whether with or without meals or facilities for preparing the same. The foregoing does not include establishments in the business of renting real estate, such as apartments, nor does it include hospitals, sanitariums, nursing homes, rest homes and similar institutions. Gross income from meals sold to the public by hotels or motels, etc. shall be reported under the retail classification.
10.1.9. Photography, photo printing, etc. -- Persons engaged in the business of photoprinting, photostating, photography, photoengraving, blueprinting, etc., are required to report the gross income from such activities as follows:
10.1.9.1. Gross income from the developing of films owned by others, is to be reported under the service classification.
10.1.9.2. Gross income from making prints, photostats, blueprints, etc., shall be reported under the manufacturing classification.
10.1.9.3. Persons who develop film owned by others and make prints therefrom shall, when a charge is made for the development process, report under the service classification the gross income derived from developing the film and under the manufacturing classification the wholesale value of the prints manufactured.
10.1.9.4. Persons engaged in the photography business who take pictures, make prints and sell the finished product at retail shall report the value of the product under manufacturing and in addition to this, shall report the gross proceeds derived from the sale under the retail classification.
10.1.10. Trading stamps. -- Persons engaged in the business of trading stamps and who have redemption centers or stores within this State shall report the gross income derived therefrom under the retail classification. Gross income received from the sale of trading stamps to merchants who dispense stamps to their customers shall be reported under the wholesale classification.
10.1.11. Coin operated machines.
10.1.11.1. Gross income received by an individual who is the owner of coin operated vending machines shall be reported under the retail classification. If the owner splits the gross income with the individual within whose establishment the vending machine is located, the operator of the establishment shall report his portion of the gross income under the service classification. The owner of the vending machines receives no deduction or exclusion from gross income for the portion paid to the establishment operator.
10.1.11.2. Gross income received by an individual who is the owner of coin operated amusement devices shall be reported under the amusement classification. If the owner splits the gross income with the individual within whose establishment the amusement device is located, the operator of the establishment shall report his portion of the gross income under the service classification. The owner of the amusement devices receives no deduction or exclusion from gross income for the portion paid to the establishment operator.
10.1.12. Wall covering and floor covering. -- Persons engaged in the business of selling and installing wall covering and floor covering shall report the gross income therefrom in the following manner:
10.1.12.1. If the sale of the product is separate and distinct from the agreement to install the product and separate charges are made for each, the vendor may report the sale under the retail or wholesale classification, as the case may be, and the installation under the contracting classification. The method by which the installation charge is computed will not alter the fact that such installation is contracting. See Section 2e of these rules.
W. Va. Code R. § 110-26-11 Doing Business Within And Without The Municipality
11.1. Persons domiciled outside a municipality who (a) lease tangible personal property to lessees in the municipality, or (b) perform construction or installation contracts in the municipality, or (c) render services to others therein, are doing business in the municipality, irrespective of the domicile of such persons and irrespective of whether or not such persons maintain a permanent place of business in the municipality.
11.2. Persons domiciled outside a municipality who sell tangible personal property to persons in the municipality, may be doing business in the municipality, irrespective of the domicile of such persons and irrespective of whether or not such persons maintain a permanent place of business in the municipality.
11.3. Persons domiciled in and having a place of business in a municipality, who (a) sell or lease personal property to buyers or lessees outside the municipality, or (b) perform construction or installation contracts outside the municipality, or (c) render services to others outside the municipality, are doing business both within and without the municipality. Whether or not such persons are subject to municipal business and occupation tax under the law depends upon the kind of business and the manner in which it is transacted. The following general principles govern in determining tax liability under the municipal business and occupation tax.
11.3.1. When the business involves a construction or installation contract in the municipality, no deduction from the measure of the tax is permitted, even though the contractor is domiciled outside the municipality and maintains a place of business outside the municipality which may contribute to the contract performed in the municipality.
11.3.2. When the business involves a construction or installation contract outside the municipality, the tax does not apply to any part of the income derived therefrom (except such part of the income as may be applicable to the manufacturer in the municipality by the contractor of articles used or incorporated in such construction or installation), even though the contractor is domiciled in the municipality and maintains a place of business therein which may contribute to the contract performed outside the municipality.
11.3.3. When the business involves a transaction taxable under the service classification, the tax does not apply upon any part of the gross income received for services incidentally rendered to persons in the municipality by a person who does not maintain a place of business in the municipality and who is not domiciled therein. However, the tax applies upon the income received for services incidentally rendered to persons outside the municipality by a person domiciled therein who does not maintain a place of business within the jurisdiction of the place of domicile of the person to whom the service is rendered.
11.3.4. For example, persons domiciled in a municipality, but having no place of business outside the municipality, are taxable upon the following types of income:
11.3.4.1. An insurance agency upon commissions received for insurance placed outside the municipality;
11.3.4.2. An attorney upon fees received from persons outside the municipality, even though a portion of his services were necessarily performed without the municipality;
11.3.4.3. A collection agency upon income received from clients without the municipality or with respect to collections made from persons without the municipality;
11.3.4.4. An accountant upon income received from persons for services performed without the municipality;
11.3.4.5. An investment company upon income received from loans placed without the municipality;
11.3.4.6. A commodity broker upon commissions received from persons without the municipality;
11.3.4.7. An advertising agency upon income received from advertising solicited and secured from firms without the municipality;
11.3.4.8. An employment agency upon income received for securing employees for firms without the municipality;
11.3.4.9. A physician upon income received from the treatment of patients without the municipality;
11.3.4.10. A purchasing agency upon commissions received from clients without the municipality or with respect to purchases made without the municipality.
11.3.5. Conversely, persons engaged in business without the municipality, but having no place of business within the municipality, are not taxable with respect to the reverse of the above situations. It is assumed, of course, that such services, to avoid taxation, are rendered only incidentally to persons within the municipality.
11.3.6. Persons engaged in a business taxable under the service classification and who maintain places of business both within and without the municipality which contribute to the performance of a service, shall apportion to the municipality that portion of gross income derived from services rendered by them in that municipality. Where it is not practical to determine such apportionment by separate accounting methods, the taxpayer shall apportion to each the proportion of total income which the cost of doing business within each bears to the total cost of doing business within and without each municipality.
W. Va. Code R. § 110-26-12 Jurisdiction To Impose A Municipal Business And Occupation Tax
12.1. Authority to impose tax. -- The governing body of a municipality shall have plenary power and authority to enact an ordinance imposing a municipal business and occupation tax upon any business activity or occupation for which the State imposed its business and occupation tax prior to July 1, 1987, which is engaged in or carried on within the corporate limits of the municipality pursuant to the provisions of W. Va. Code '8-13-5.
12.2. Nexus. -- Generally, for a municipality to impose its municipal business and occupation tax upon a particular taxpayer, that taxpayer must have sufficient contacts within the corporate limits of the municipality to sustain the municipality's taxing jurisdiction over the taxpayer.
For example, in instances where services are performed entirely within a municipality or where contracting activities are engaged in within a municipality sufficient nexus exists for a municipality to impose its municipal business and occupation tax.
12.3. Activity must take place inside municipality. -- In addition to the nexus requirement, the taxpayer must engage in the business activity within the municipal limits for the municipality to impose its municipal business and occupation tax.
12.3.1. Production of natural resources is deemed to occur in the municipality if the natural resource is severed within the municipal limits. Severance is deemed to occur as follows:
12.3.1.1. Coal being surface mined is severed at its physical location prior to removal.
12.3.1.2. Coal from an underground mine is severed at the portal where it is reduced to possession at the surface.
12.3.1.3. Limestone or sandstone which is quarried is severed at the physical location prior to removal.
12.3.1.4. Limestone or sandstone which is mined from underground is severed at the portal where it is reduced to possession at the surface.
12.3.1.5. Oil and gas are severed at the wellhead.
12.3.1.6. Timber, sand and gravel, and other natural resource products are severed at their physical location prior to removal, except in the case of underground mining in which circumstance severance occurs at the portal where it is reduced to possession at the surface.
12.3.2. Manufacturing occurs where activities of a commercial or industrial nature are undertaken which involve labor or skill being applied, by hand or machinery, to materials so that as a result thereof, a new, different or useful substance or article of tangible personal property is produced for sale, profit or commercial or industrial use. Where the manufacturing process occurs both within and without a municipality, the municipality may subject that portion of the value derived therefrom as provided in Sections 2.3 and 2b of these regulations.
12.3.3. Sales of tangible personal property are deemed to occur in the municipality where the sale is made. Whenever a customer physically enters a store within a municipality and makes a purchase or signs a contract for the purchase of tangible personal property such sales are subject to that municipality's business and occupation tax regardless of where that tangible personal property is delivered. Additionally, a municipality may impose its municipal business and occupation tax pursuant to W. Va. Code '8-13-5(e), if the sale of tangible personal property was directed from a business location within the municipality or if the business of making the sale of such tangible personal property has its principal office in the municipality and the sale was not directed from another business location. In no case shall the taxing authority extended under W. Va. Code '8-13-5(e) apply to sales of tangible personal property which is subject to municipal business and occupation tax in another municipality.
12.3.3.1. Where orders are placed by mail or by some form of telecommunication without the customer physically coming to a location within the municipality, or where orders are accepted by a representative traveling outside the municipality, the following rules shall apply:
12.3.3.1.a. If the sale is made conditioned upon delivery outside of West Virginia no municipal business and occupation tax may be imposed upon the sale.
12.3.3.1.b. If the order is placed based upon solicitation by a representative (regardless of whether there is an employment or agency relationship or whether acting as an independent contractor) who solicits orders within a municipality imposing a municipal business and occupation tax of its own, and the tangible personal property is to be delivered in that municipality, then that municipality and no other may tax the value of the sale.
12.3.3.1.c. Where the tangible personal property is delivered in West Virginia to a location which is not subject to a municipal business and occupation tax, the municipality may impose its municipal business and occupation tax upon such sale pursuant to W. Va. Code '8-13-5(e).
12.3.3.2. In those instances where orders for tangible personal property are filled from a truck or warehouse located within a municipality and those orders are placed with the truck driver or at the warehouse such sales are taxable entirely by that municipality and no other.
12.3.3.3. Where the tangible personal property is picked up by the customer at a store or warehouse in another municipality, the municipality in which the store or warehouse where the tangible personal property is picked up is entitled to tax the value of such sale.
12.3.4. Municipalities may tax public service or utility businesses upon sales of services to locations within the municipality.
12.3.5. Municipalities may tax contracting activities if the building or structure upon which contracting activities are being performed are located within the municipality. The place of business or office location from which a contractor operates is not entitled to any municipal business and occupation tax upon contracting receipts from projects located outside of that municipality. Where only a portion of the contract is performed within the municipality the taxpayer must apportion the receipts from that contract to reflect that portion of the work performed within the municipality. This may be done upon a reasonable basis such as a proportion based on square footage or actual cost at the option of the taxpayer provided accurate supporting documentation is maintained to demonstrate the reasonableness of the apportionment.
12.3.6. In those instances where a service business or calling is primarily engaged in within a municipality that municipality may impose its municipal business and occupation tax pursuant to W. Va. Code '8-13-5(e), if the provision of the service has its principal office in the municipality and the provision of the service was not directed from another business location. In no instance shall the taxing authority extended under W. Va. Code '8-13-5(e) apply to sales of services performed in another municipality which imposes a municipal business and occupation tax or performed outside of West Virginia unless such services are incidental to the basic provision of a service as indicated under Sections 11.3.3 and 11.3.4 of these regulations.
12.3.7. Amusements are subject to the municipal business and occupation tax in the municipality in which the amusement is located.
12.3.8. Rentals, royalties, fees or other gross receipts shall be subject to municipal business and occupation tax in the municipality in which the real or tangible personal property giving rise to a rental, royalty, fee or other gross receipts is located, or in the municipality in which the production of natural resources occur giving rise to the rental, royalty, fee or other gross receipts.
12.3.9. Banking and other financial business is subject to municipal business and occupation tax in the municipality in which the banking or other financial business has a business location. For purposes of these regulations a business location shall not include an automated teller machine.
W. Va. Code R. § 110-26-13 Business Activity Subject To Municipal Business And Occupation Tax In More Than One Municipality
13.1. In those instances where manufacturing occurs at a facility which is located in two or more municipalities, the gross proceeds of sale subject to the municipal business and occupation tax shall be divided between the municipalities in which the facility is located by applying a ratio corresponding to the square footage of the facility and its attendant real property, including but not limited to, parking, warehouses, offices, etc., located in the respective municipalities. This rule shall apply only in those instances where a single facility is situated astride municipal boundaries.
In these instances where the manufacturing process is conducted at multiple facilities the taxpayer is to apply the apportionment formula in Section 2b.5.2.1 or Section 2b.5.2.2 of these regulations for determining the amount of gross proceeds of sale subject to a municipality's business and occupation tax where a product is only partially manufactured in a municipality.
13.2. In those instances where sales of tangible personal property or the provision of services occur at a business location which is located astride a municipal boundary, each municipality is entitled to tax the gross proceeds of sale in a ratio corresponding to the square footage of the business location's real property located in the respective municipalities. The square footage of all real property of the business location shall include but not be limited to, parking, showrooms, warehouses, offices, etc., at a particular business location.
13.3. In those instances where a project subject to the privilege on contracting is located astride a municipal boundary each municipality may impose its business and occupation tax only upon that portion of the gross proceeds of sale, as is represented by the ratio of the square footage of the project located within each municipality.
W. Va. Code R. § 110-26-14 Procedure And Administration
A municipality shall assess the amount of tax, penalties and interest within three years of the date the return was filed. In the case of a false or fraudulent return filed with intent to evade tax, or in case no return is filed, the municipality may assess at any time.
Claim for refund must be filed within three years after the due date of the return in respect of which the return was filed, or within two years of the date the tax was paid, whichever period expires later. Should no return have been filed by the taxpayer, the claim for refund must be filed within two years from the time the tax was paid.
The ordinance of a municipality imposing a business and occupation or privilege tax shall provide procedures for the assessment and collection of such tax, similar to those procedures in W. Va. Code '11-10-1 et seq. and shall conform with such provisions as they relate to waiver of penalties and additions to tax.
W. Va. Code R. § 110-26-15 Maximum Rates
Municipalities are not permitted to create their own classifications of business activities but instead must rely on those in existence on July 1, 1987 prior to the expiration of the State of West Virginia's business and occupation tax. The municipality is authorized to impose its municipal business and occupation tax at any rate the governing body chooses within such classifications up to the following maximums within each classification:
(See Table 1 at the end of this regulation.)
W. Va. Code R. § 110-26-16 Reciprocal Exchange Agreements
Pursuant to the authority granted in W. Va. Code '11-10-5d(i), the Department of Tax and Revenue may enter into a reciprocal exchange agreement with a municipality providing for the disclosure to the municipality of State sales tax information, primarily consisting of liquor sales tax and sales tax information from single location businesses. This information is similar to the information necessary for the municipality to determine municipal business and occupation tax on sales by such businesses. The reciprocal exchange agreement shall provide for disclosure only for the purpose of, and only to the extent necessary in, the administration of the tax laws, and shall be disclosed only to those individuals listed in the agreement. State officers and employees include municipal officers and employees, who shall be subject to those penalties provided for unlawful disclosures by officers and employees of the State as set forth in W. Va. Code 11-10-5d(c). Such disclosures shall in no case include federal tax returns.
TABLE 1:
RATE
Production ('11-13-2a) $100 Coal $ 1.00 Sand & gravel (not mined or quarried) 3.00 Oil, blast furnace slag 3.00 Natural gas in excess of $5,000 6.00 Limestone or sandstone quarried or mined 1.50 Timber 1.50 Other natural resource products 2.00 Manufacturing ('11-13-2b) .30 Business of selling tangible property ('11-13-2c)
Retailers .50 Wholesalers .15 Public service or utility business ('11-13-2d)
Electric light and power companies (sales and demand charges, domestic purposes and commercial lighting) 4.00 Water companies 4.00 Electric light and power companies (all other sales and demand charges) 3.00 Natural gas companies, Toll bridges 3.00 All other public service or utility business 2.00 Contracting ('11-13-2e) 2.00 Amusements ('11-13-2g) .50 Service business or calling ('11-13-2h) 1.00 Rentals, royalties, fees or otherwise ('11-13-2i) 1.00 Small loan and industrial loan businesses ('11-13-2j) 1.00 Banking and other financial business ('11-13-2k) 1.00 110CSR26
Series 27 Service Of Notice
W. Va. Code R. § 110-27-1 General
1.1. Scope. -- This rule sets forth the interpretation, practice and procedure established by the West Virginia State Tax Department concerning service of notice, electronically or by certified mail, of particular assessments, notices, statements of account or other Tax Department documents administered under Chapter 11, Article 10 of the West Virginia Code.
1.2. Authority. -- W. Va. Code §11-10-5.
1.3. Filing Date. -- Oct 14, 2010.
1.4. Effective Date. -- Nov 1, 2010.
W. Va. Code R. § 110-27-2 Service of Notice
2.1. Subject to Service Rules. The following Tax Department Documents are subject to the service of notice requirements outlined in this rule.
2.1.a. Notice of Assessments. All notices of assessments shall be subject to the notice requirements of this rule.
2.1.b. Certain Business Registration Certificate Documents. All denials, revocations, and refusals to renew a Business Registration Certificate shall be subject to the notice requirements of this rule.
2.1.c. Certain Refund Documents. All denials of refunds, denials of interest, denials of claims for refund, and rejections of refund shall be subject to the notice requirements of this rule.
2.1.d. Amended Return Not Processed. All notices of Amended Returns that are not processed shall be subject to the notice requirements of this rule.
2.1.e. Other Required Documents. All documents required by the United States, or any agency, authority, commission or instrumentality of the United States, to be sent by certified mail shall be subject to the notice requirements of this rule to the extent this rule is in compliance with such requirements.
2.2. Method of Service. All documents outlined in Section 2.1. of these regulations shall be served upon the taxpayer by personal or substituted service or by certified mail, unless such mail is refused or not claimed, upon which it may be served by regular mail. Each of these methods of service may be used at the discretion of the Tax Department and have no preference over the other method of service.
2.2.a. Service by personal or substituted service shall be valid if made by any method authorized by Rule 4 of the West Virginia Rules of Civil Procedure.
2.2.b. Service by certified mail shall be valid if accepted by the taxpayer, or if addressed to and mailed to the taxpayer’s usual place of business or usual place of abode or last known address on record with the Tax Department and accepted by any agent, officer, partner, employee, spouse, parent, stepparent, or child of the taxpayer over the age of eighteen.
2.2.b.1. Any document addressed and mailed in the above manner and accepted by any person shall be presumed to be accepted by such person unless proven otherwise by the taxpayer.
2.2.b.2. Any document addressed in the above manner, and which is refused or not claimed may then be served by regular mail if such notice is subsequently mailed by first class mail, postage prepaid, to the same address; and date of posting in the United States mail shall be the date of service.
2.3. Optional Method of Service. In lieu of the method of service of notice provided in Section 2.2. of this rule, the person to be audited may agree in writing to have all documents outlined in Section 2.1. of this rule served electronically.
2.3.a. To facilitate the electronic service of the various notices described in this rule, the Tax Department shall develop a secure paperless audit source web site.
2.3.a.1. The Tax Department shall develop and provide to the Taxpayer appropriate written instructions to assist the Taxpayer in using the secure paperless audit source web site.
2.3.b. Prior to the electronic service of any documents, the person to be audited and the authorized representative of the Tax Department shall sign the State Tax Department Agreement Consenting to Service of Notice of Tax Audit(s) Documents by Electronic Service.
2.3.c. At the time the person to be audited signs the State Tax Department Agreement Consenting to Service of Notice of Tax Audit(s) Documents by Electronic Service, the person to be audited shall provide to the Tax Department representative the name, title, telephone number and e-mail address of the individual or individuals authorized to receive all electronic communications.
2.3.d. The 60 day period for appealing the assessment, or amended or supplemental assessment, provided in W. Va. Code §11-10-8 shall commence on the day immediately following the day that the audit clerk by e-mail notifies the person designated in section 2.3.c. of this rule that the audit is complete, and that the work papers are on the web site and ready to be downloaded.
110CSR27
110CSR27
Series 28 Municipal Sales and Use Tax Administration
W. Va. Code R. § 110-28 Municipal Sales and Use Tax Administration
TITLE 110
LEGISLATIVE RULE
DEPARTMENT OF TAX AND REVENUE
SERIES 28
MUNICIPAL SALES AND USE TAX ADMINISTRATION §110‑28‑1. General.
1.1. Scope. -- This legislative rule explains and clarifies administrative and procedural requirements and characteristics of municipal sales and use taxes imposed under the provisions of W. Va. Code §8‑1‑5a and W. Va. Code §8‑13C‑1, et seq. This rule also incorporates the changes to administration fees and administration funds set forth in W. Va. Code §11-10-27, as amended by Enrolled CS HB 4461 during the 2022 Regular Legislative Session.
1.1.1. In recognition of:
1.1.1.a. The experience, knowledge, and technical, and legal expertise of the Tax Department;
1.1.1.b. The computer and logistical systems currently operated and maintained by the Tax Department;
1.1.1.c. The auditing and revenue processing resources of the Tax Department; and
1.1.1.d. The obvious cost efficiency and operational efficiencies of placing municipal sales and use tax administration under the exclusive authority of the Tax Department.
1.1.1.e. The Legislature has determined that the preeminent interest of all municipal sales and use tax jurisdictions is best served by empowerment of the Tax Commissioner, by law, to hold, maintain and exercise sole authority to administer the municipal sales and use tax.
1.1.2. Pursuant to Legislative intent that the Tax Department administer the municipal sales and use tax, this rule sets forth procedures and requirements for its administration.
1.1.3. Pursuant to Legislative intent to not burden the General Fund with costs of administration of the municipal sales and use tax, this rule sets forth procedures and requirements for statutorily mandated recovery of Tax Department costs incurred in its administration.
1.2. Authority. ‑‑ W. Va. Code §§11‑10‑11c and 11-10-5.
1.3. Filing Date. -- April 24, 2023.
1.4. Effective Date. -- April 24, 2023.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2028. §110‑28‑2. Definitions.
2.1. “Allocation numerator” means revenues of a specific revenue generating municipality for the period under the provisions, as applicable, of W. Va. Code §8‑1‑5a (Home Rule Pilot Plan) or W. Va. Code §8‑13C‑1, et seq. (Municipal sales and use tax), net of refunds and net of adjustments for filing errors, payment errors, and similar adjustments for the period, but before offset by the periodic cost recovery fee.
2.2. “Allocable revenues” means total net tax revenues, as defined in section 2.5. of this section heading, after offset by the periodic cost recovery fee. Allocable revenues are periodically distributed to each revenue generating municipality in proportion to the amount that each allocation numerator, as defined in section 2.1. of this section heading, for the period, bears to total net tax revenues for the period.
2.3. “District Excise tax” means collectively the special district excise tax authorized under W.Va. Code §7‑22‑1, et seq., and W.Va. Code §8‑38‑1, et seq.
2.4. “Municipal consumers sales and service tax and use tax” and “municipal consumers sales tax” and “municipal sales and service tax,” “municipal use tax,” “municipal sales tax” and “municipal sales and use tax” mean and refer to, collectively, any sales and use tax adopted by a municipality pursuant to the provisions of W.Va. Code §8‑1‑5a (Home Rule Pilot Plan) or W. Va. Code §8‑13C‑1, et seq. (Municipal sales and use tax).
2.5. “Net tax revenues” means the total pooled amount of all revenues under the provisions, as applicable, of W.Va. Code §8‑1‑5a (Home Rule Pilot Plan) or W.Va. Code §8‑13C‑1, et seq. (Municipal sales and use tax), of all revenue generating municipalities, for the period, net of refunds and net of adjustments for filing errors, payment errors, and similar adjustments for the period, but before offset by the periodic cost recovery fee.
2.6. “Period,” “the period” or “periodic” means and refers to the tax period or accounting period, applicable in the context of the usage of the term, and may refer to a monthly, quarterly, semi‑annual or annual time period, or any other time period prescribed by the Tax Commissioner.
2.7. “Periodic cost recovery fee” -- The periodic cost recovery fee is retained by the Tax Department and shall equal one percent (1%) of net tax revenues.
2.8. “Program municipalities” means all municipalities that have achieved full legal authorization to impose and implement municipal sales and use taxes under the provisions of W. Va. Code §8‑1‑5a (Home Rule Pilot Plan) or §8‑13C‑1, et seq. (Municipal sales and use taxes). A municipality becomes a program municipality only when actual tax collections have begun.
2.9. “Revenue generating municipalities” means those municipalities that have generated tax revenues for the period under the provisions, as applicable, of W. Va. Code §8‑1‑5a (Home Rule Pilot Plan) or W. Va. Code §8‑13C‑1, et seq. (Municipal sales and use taxes), net of refunds and net of adjustments for filing errors, payment errors, and similar adjustments for the period, but before offset by the periodic cost recovery fee. §110‑28‑3. Tax Base.
3.1. Any municipal sales and use tax imposed under the authority granted by W. Va. Code §8‑1‑5a and W. Va. Code §8‑13C‑1, et seq., is subject to the following:
3.1.1. The base of a municipal sales and use tax imposed shall be identical to the base of the consumers sales and service tax imposed pursuant to W. Va. Code §11‑15‑1, et seq., on sales made and services rendered and on the use of tangible personal property, custom software or taxable services within the boundaries of the municipality, subject to the following:
3.1.1.a. Except for the exemption provided in W. Va. Code §11‑15‑9f, all exemptions and exceptions from consumers sales and service tax apply to a municipal sales and use tax;
3.1.1.b. Sales of gasoline and special fuel are not subject to a municipal sales and use tax;
3.1.1.c. Sales of motor vehicles taxable under W. Va. Code §11‑15‑3c are not subject to a municipal sales and use tax; and
3.1.1.d. Sales that are exempt, as otherwise provided by law, are not subject to the municipal sales and use tax.
3.1.2. Any municipal sales and use tax imposed applies solely to sales and uses of tangible personal property, custom software and taxable services that are sourced to the municipality. The sourcing rules set forth in W. Va. Code §11‑15B‑1, et seq., including any amendments thereto, apply to any municipal sales and use tax levied.
3.1.3. Whenever the state sales and use tax base and definitions in the West Virginia Code are amended by the Legislature, the updated base and terms will automatically apply to a municipality’s sales and use tax ordinance, as required by W. Va. Code §8‑13C‑6(h).
3.1.4. Credit for sales taxes paid to another municipality. -- A municipality’s ordinance imposing a sales and use tax must allow for a credit against sales and use taxes that have been lawfully paid to another municipality, as required by W. Va. Code §8‑13C‑5a: Provided, That the credit allowed may not exceed the sales and use taxes otherwise due to the municipality allowing the credit. §110‑28‑4. Administration and Collection of Tax.
4.1. A municipality that imposes a municipal sales and use tax may not administer or collect the tax but shall use the services of the Tax Commissioner to administer, enforce and collect the municipal tax imposed in the same manner as the state consumers sales and service tax and use tax. All legislative, interpretive and procedural rules promulgated by the Tax Commissioner to administer and enforce the provisions of articles fifteen, fifteen‑a and fifteen‑b, chapter eleven of the West Virginia Code and the provisions of W. Va. CSR §110‑15‑1, et seq., apply to the implementation, administration, collection and enforcement of any municipal sales and use tax imposed and all provisions of those enactments shall be read in extenso herein.
4.2. Any municipal sales and use tax shall be imposed in addition to the consumers sales and service tax and use tax imposed pursuant to articles fifteen and fifteen‑a, chapter eleven of the West Virginia Code on sales made and services rendered and on the use of tangible personal property, custom software or taxable services within the boundaries of the municipality and, except as exempted or excepted, all sales made and services rendered and on the use of tangible personal property, custom software or taxable services within the boundaries of the municipality shall remain subject to the tax levied by those articles.
4.3. A municipal sales and use tax is imposed in addition to any tax lawfully imposed, including but not limited to those imposed pursuant to W. Va. Code §7‑18‑1 (hotel occupancy taxes), W. Va. Code §7-22-12 (county economic opportunity district tax), W. Va. Code §8‑13‑5a (public utility tax), W. Va. Code §8‑13‑6 (amusement tax), W. Va. Code §8‑13‑7 (tax on purchases of intoxicating liquor) and W. Va. Code §8‑38‑12 (municipal economic opportunity district tax).
4.4. Collection by Vendor. -- Each vendor shall collect from the purchaser municipal sales and use tax imposed upon each sale of tangible personal property and taxable service made or furnished in the municipality at the same time and in the same manner as each vendor collects from the purchaser the state consumers sales and service tax and use tax. Municipal sales and use tax shall be added to and constitute a part of the sales price.
4.5. Collection by Retailer. -- Every retailer engaging in business in this state and making sales of tangible personal property or taxable services for delivery into a municipality that has imposed a municipal sales and use tax or with knowledge, directly or indirectly, that the property or services are intended for use in such municipality, shall, at the time of making such sales, whether within or without the state, collect the municipal use tax from the purchaser at the same time and in the same manner that the retailer collects the state use tax from the purchaser. The tax shall be added to and constitute a part of the sales price and the retailer must give to the purchaser a sales receipt with the tax separately stated on the receipt.
4.6. Exceptions to Collection Requirements. -- Notwithstanding sections 4.4 and 4.5 of this section heading, a municipal sales and use tax need not be collected by the vendor or retailer with respect to a transaction if the state consumers sales and service and use tax need not be collected under the provisions of the state consumers sales and service and use tax laws, as if the provisions of those laws were set forth herein in extenso.
4.7. Payment of Use Tax. -- When the purchaser of tangible personal property, custom software or a taxable service is required to pay state use tax measured by the purchase price and the use is in a municipality that imposes a municipal sales and use tax, municipal use tax must be paid on the purchase price to the Tax Commissioner at the same time that the state use tax is paid.
4.7.1. Exception. -- Situations will exist where a vendor located in West Virginia collects state sales tax at the time the sale is made but does not collect municipal sales tax because the sale took place at the vendor’s store, which is not located in a municipality, or is not located in a municipality that imposes a sales tax. When the purchaser then uses or consumes the products in a municipality that does impose a sales and use tax, the user owes municipal sales and use tax based on the purchase price of the products used or consumed within the municipality.
Example 1. -- A contractor purchases building materials for $500 from a seller located outside a municipality. The contractor pays state sales tax at the time of purchase. The contractor then uses the building materials in a construction project located within a municipality that imposes a municipal sales and use tax. The contractor must remit the municipal sales and use tax to the Tax Commissioner based on the $500 purchase price and the tax rate imposed by the municipality where the materials are used.
Example 2. -- A business located in a municipality that imposes a municipal sales and use tax buys office supplies for $500 from a business located outside the municipality. The business pays state sales tax at the time of purchase. The business then uses the office supplies at its place of business in a municipality that imposes a sales and use tax. The business must remit municipal sales and use tax to the Tax Commissioner based on the $500 purchase price and the tax rate imposed by the municipality where the materials are used.
4.8. The Tax Commissioner may prescribe any processes, procedures, forms, schedules and other administrative requirements as determined to be useful or convenient for the efficient administration of the municipal consumers sales and service tax and use taxes addressed under this rule.
4.9. The Tax Commissioner may require the following documents and information to administer the municipal sales and use tax:
4.9.1. Certified copies of the ordinance imposing the taxes, or changing the rate in a tax, along with a certified description of the boundaries of the municipality,
4.9.2. The nine‑digit zip codes for addresses located within the boundaries of the municipality,
4.9.3. The certified designation of a municipal official to whom all notices and communications are to be sent and from whom all notices and communications are to be sent, and
4.9.4. Certified documentation of other information the Tax Commissioner may need to administer, collect and enforce the taxes administered under this rule.
4.10. The Tax Commissioner may, within his or her discretion, solicit comments or recommendations regarding projections, determinations and data for a period of approximately 30 days, and in response to the comments or recommendations, may reissue the notice, as amended, on or about the July 1 next succeeding the initial publication date.
4.11 The periodic cost recovery fee is an amount equal to one percent (1%) that is retained from municipal consumers sales and service tax and use tax proceeds by the Tax Department in exchange for administration services. §110‑28‑5. Remittance of Tax.
5.1. No profit shall accrue to any person as a result of the collection of the municipal sales and use taxes regardless of the fact that the total amount of taxes collected may be in excess of the amount for which a person would be liable by the application of the levy set forth in the municipal ordinance imposing the tax, not to exceed one percent, to the gross proceeds of that person’s sales. The total of all municipal sales and use taxes collected by any person shall be returned and remitted to the Tax Commissioner.
5.2. Any person who is required to collect and remit the state consumers sales and service tax or the use tax and who was also required to pay the taxes on purchases of tangible personal property or services for use or consumption in that person’s business may use one of the following procedures when paying the municipal sales and use tax collected to the Tax Commissioner. The person:
5.2.1. May separately remit the amount collected and pay the amount due and owing on purchases made using the direct pay permit procedure.
5.2.2. May credit the amount of tax paid on purchases for which an exemption is claimed against the amount of tax collected and
5.2.2.a. If the amount collected is greater than the amount of tax paid on exempt purchases, the person shall remit the difference to the Tax Commissioner; or
5.2.2.b. If the amount of tax paid on exempt purchases is greater than the amount collected, the person may seek a refund or credit for the difference as provided by law.
5.2.3. Shall use the same means to collect and remit municipal sales and use tax as the person uses to collect and remit the state consumers sales and service tax and use tax.
5.3. Municipal Sales and Use Tax Return and Payment. -- Any municipal sales and use tax that a person is required to remit to the State Tax Commissioner shall be reported in the same return that the person is required to file under the state consumers sales and service tax and use tax law and the municipal sales and use tax due shall be remitted when the state tax is remitted.
5.4. When no state tax liability. -- Any person subject to the municipal sales and use tax that has no liability for the state consumers sales and service and use tax for the reporting period, shall still remit the municipal sales and use tax in a manner consistent with this rule. §110‑28‑6. Appeals, Standards and Jurisdiction.
6.1. The Office of Tax Appeals has exclusive and original jurisdiction to hear appeals arising from issues set forth in section 6.3 of this rule for which the Tax Commissioner has administration, enforcement and collection responsibility under W. Va. Code §8‑1‑5a, et seq., W. Va. Code §8‑13C‑1, et seq., W. Va. Code §11‑10‑11c and W. Va. Code §11-10-27.
6.1.1. The Office of Tax Appeals may not hear challenges, disputes or other issues relating to the periodic cost recovery fee or any aspect of the Tax Commissioner’s fee imposition authorized by statute and addressed in this rule.
6.1.2. The Office of Tax Appeals may not hear challenges, disputes or other issues relating to the amount of money distributed to any municipality pursuant to W. Va. Code §8‑1‑5a and W. Va. Code §8‑13C‑1, et seq., or the provisions of this rule or to the methodology of calculating, determining or allocating any such money.
6.1.3. The Office of Tax Appeals may not hear challenges, disputes or other issues relating to the methodology for calculating or determining the periodic cost recovery fee, or the amount of the periodic cost recovery fee, or application of the periodic cost recovery fee as an offset against net tax revenues.
6.2. A municipality or county has no standing before the Office of Tax Appeals in any dispute arising under any municipal sales and use tax or any district excise tax.
6.3. Any review of a municipal sales and use tax or district excise tax by the Office of Tax Appeals is limited to the following:
6.3.1. Appeals from tax assessments issued by the Tax Commissioner pursuant to W.Va. Code §11‑10‑1, et seq., and this rule;
6.3.2. Appeals from decisions or orders of the Tax Commissioner denying refunds or credits for a municipal sales and use tax or district excise tax.
6.4. A municipality or county may not engage in or participate in any audit performed by the Tax Commissioner for compliance with a municipal sales and use tax or a district excise tax: Provided, That when the municipality imposes a business and occupation tax and employs auditors that audit books and records of businesses for compliance with its business and occupation tax, the Tax Commissioner and the mayor or city manager of that municipality may enter into a memorandum of understanding that allows the municipality to either review the books and records of the business for state and municipal sales and use tax compliance when auditing the books and records for business and occupation tax compliance, or audit the books and records for state and municipal sales and use tax compliance when it audits the books and records of the business for compliance with the business and occupation tax. The businesses reviewed or audited for state and municipal sales and use tax compliance by municipal auditors are limited to those businesses that primarily do business in the municipality and do not have an office or other place of business located outside the municipality. The results of a review or audit must be provided to the Tax Commissioner, who in his or her sole discretion decides whether the Tax Commissioner should take any follow‑up action, including, but not limited to, having the State Tax Department make an audit of the books and records of the business, or issuing a deficiency assessment.
6.5. A municipality or county may not hold the Tax Commissioner responsible for any unpaid or unrealized municipal sales and use tax or district excise tax. §110‑28‑7. Quarterly distribution of collections; Periodic cost recovery fee; Fund administration.
7.1. The Tax Commissioner shall distribute allocable revenues collected during each calendar quarter to each revenue generating municipality no later than the 15th business day of the month following the close of the quarter in which the tax was remitted to the Tax Department. Timely distribution has occurred when the Tax Department issues the request for transfer to the State Treasurer. The Tax Commissioner has fulfilled the responsibility for distribution of allocable revenues upon issuance of the request for transfer to the State Treasurer.
7.1.1. Each municipality shall record and account for distributions of the taxes administered under this rule on the books and records of the municipality as a single discrete payment. No expenditure, cost or offset shall be recorded or accounted for by the municipality for refunds, the periodic cost recovery fee, adjustments for filing errors, adjustments for payment errors, and similar adjustments. The municipality effectuates the municipal sales and use tax only pursuant to statutory authorization. Under that statute, the Tax Commissioner is designated as the sole administrator of the taxes collected and distributed under this rule. Therefore, all costs, charges, refunds, offsets, adjustments and fees are considered to be administered at the Tax Department level of the process.
7.2. A fee, to be retained by the Tax Commissioner, is authorized by statute for collecting, enforcing and administering the municipal sales and use tax. That fee is equal to the periodic cost recovery fee calculated under the provisions of this rule and W. Va. Code §§11-10-11c and 11-10-27. Recoverable cost accrual commences on July 1, 2013. The fee shall be retained by the Tax Commissioner from proceeds of municipal sales and use tax collected for program municipalities. The Tax Commissioner shall deposit all the proceeds from municipal sales and use taxes collected for program municipalities, minus any fee authorized by W. Va. Code §§11-10-11c and 11-10-27 for collecting, enforcing and administering taxes, in the appropriate subaccount for the municipality. However, the periodic cost recovery fee discussed in this rule does not apply to the collection by the Tax Commissioner of the District Excise Tax provided for in W.Va. Code §7‑22‑1, et seq., and W.Va. Code §8‑38‑1, et seq., because the fee for collection of the District Excise tax is provided for in W. Va. Code §11‑10‑11b rather than in W.Va. Code §11‑10‑11c.
7.3. On and prior to June 30, 2022, the Treasurer shall deposit the following items in the “Local Sales Tax and Excise Tax Administration Fund” created by W. Va. Code §11‑10‑11c:
7.3.1. The periodic cost recovery fee, calculated pursuant to this rule;
7.3.2. Any amounts received on and after July 1, 2013, from fees retained by the Tax Commissioner pursuant to the authorization provided in W.Va. Code §8‑13C‑6;
7.3.3. Amounts deducted and retained by the Tax Commissioner under W.Va. Code §11‑10‑11b;
7.3.4. Any future amounts appropriated by the Legislature or transferred by any public agency as contemplated or permitted by applicable federal or state law;
7.3.5. All moneys in the Tax Department “Municipal Sales and Use Tax Operations Fund” established under W.Va. Code §8‑13C‑6 that were transferred to the “Local Sales Tax and Excise Tax Administration Fund” on July 1, 2013 as provided in W.Va. Code §11‑10‑11c;
7.3.6. All moneys in the "Special District Excise Tax Administration Fund" established under W.Va. Code §11‑10‑11b that were transferred to the “Local Sales Tax and Excise Tax Administration Fund” on July 1, 2013 as provided in W.Va. Code §11‑10‑11c; and
7.3.7. Any accrued interest or other return on the moneys in the fund.
7.4. On and after July 1, 2022, the Treasurer shall deposit any moneys that would have been deposited into the Local Sales Tax and Excise Tax Administration fund under section 7.3 of this Rule into the “Tax Administration Services Fund,” which shall be a revolving fund for the use of the Tax Division of the Department of Revenue for general tax administration in accordance with the provisions of W. Va. Code §11-10-27. Moneys remaining in such fund on the last day of the fiscal year shall carry over and remain in the fund in the next succeeding fiscal year for use by the Tax Division of the Department of Revenue. §110‑28‑8. Notification; Effective Date of tax
8.1. A municipality that imposes a municipal sales and use tax, and any municipality that changes the rate of the tax shall notify the Tax Commissioner at least 180 days before the date the municipal sales and use tax takes effect or the change in the rate of tax takes effect. However, the effective date for payment and collection of the tax shall begin either on the July 1 next succeeding the 180 days’ notice to the Tax Commissioner of the imposition of the taxes or the change in the rate of the taxes, or on the January 1 next succeeding the 180 days’ notice to the Tax Commissioner of the imposition of the taxes or the change in the rate of the taxes.
8.1.1. For example, if the information required by section 8.2. of this section heading is provided to the Tax Commissioner at the end of December of 2023, the sales and use tax adopted by the municipality will be collected by the Tax Commissioner beginning July 1, 2024.
8.1.2. For example, if the information required by section 8.2 of this section heading is provided to the Tax Commissioner at the end of May of 2023, the sales and use tax adopted by the municipality will be collected by the Tax Commissioner beginning January 1, 2024.
8.2. The notification shall include:
8.2.1. A certified copy of the ordinance imposing the taxes, or changing the rate in a tax;
8.2.2. A description of the boundaries of the municipality;
8.2.3. A database in an Excel spreadsheet showing the nine‑digit zip codes for addresses located within the boundaries of the City or Municipality and the tax rate applicable to each 9‑digit zip code; and
8.2.4. Any other information the Tax Commissioner may need to administer, collect and enforce the taxes administered under this rule.
8.2.5. Failure to comply with the requirements of this section will result in a delay in the collection of the municipal sales and use tax until after there is compliance with this 180‑day rule.
8.3. Rates and boundaries database. -- The rates and boundaries database required by section 8.2 of this section heading shall be prepared by the municipality in accordance with guidance provided by the Streamlined Sales Tax Governing Board, Inc., for preparation of a rates and boundary database.
8.4. Changes in municipal boundaries. -- Any municipality that imposes a municipal sales and use tax that changes or alters its boundaries, shall provide a certified copy of the ordinance adding to, or detaching from, the territory of the municipality to the Tax Commissioner. The notice must include the effective date of the change. The notice to the Tax Commissioner must include:
8.4.1. A map of the city or municipality clearly showing the territory added or detached;
8.4.2. A list showing the names and physical addresses of businesses located in the annexed or detached area; and
8.4.3. The information specified in section 8.2. of this section heading.
8.5. When a city or municipality is currently imposing a municipal sales and use tax that is being collected by the Tax Commissioner, the municipal sales and use tax will not apply to catalogue, Internet or telemarketing sales to persons residing in the annexed area until the January 1st or the July 1st date following the 180 days’ notice to the Tax Commissioner of the change in the municipal boundary.
8.5.1. Businesses doing business in the annexed area must begin collecting municipal sales and use taxes on transactions sourced to the annexed area as of the day the annexation takes effect.
8.5.2. Businesses doing business in the detached area of the municipality must stop collecting municipal sales and use taxes on transactions sourced to the detached area as of the day the detachment takes effect.
Note: Under W. Va. Const. Art. X, §9, municipal taxes must be uniform. It would be unconstitutional to allow businesses in territory newly annexed to a municipality that imposes a municipal sales and use tax to avoid having to collect the tax until the July 1st or January 1st after the 180‑days’ notice required by section 8.1 of this section heading has been given.
8.5.3. If a municipality that imposes a sales and use tax later de‑annexes some of its territory, businesses in the de‑annexed area have no authority after the de‑annexation takes effect to collect that municipality’s sales and use tax.
8.6. Designated agent. ‑‑ When providing the notification required by this section heading, the municipality and county must provide the Tax Commissioner with the following information:
8.6.1. Name,
8.6.2. Mailing address,
8.6.3. Telephone number and
8.6.4. Email address of a designated agent to send and receive all information relating to the administration, enforcement, collection and distribution of the municipality’s municipal sales and use tax or county’s or municipality’s district excise tax.
8.7. The municipality or county shall promptly inform the Tax Commissioner of any change in the name of the designated agent or the agent’s contact information that is required in section 8.6 of this section heading.
Series 29 Special Reclamation Tax Credit
W. Va. Code R. § 110-29-1 General
1.1. Scope. - This legislative rule sets forth the procedures and requirements for administration of the special reclamation tax credit as authorized by W. Va. Code §22-3- 11(g)(2)(A).
1.2. Authority. - West Virginia Code §§22-3-11(h).
1.3. Filing Date. -
1.4. Effective Date. -
1.5. Applicability. - The special reclamation tax credit is available to qualified operators for taxable years beginning on or after July 12, 2013.
W. Va. Code R. § 110-29-2 Definitions
2.1. Unless the context in which used clearly requires a different meaning, the definitions contained in W. Va. Code §§ 22-3-3 and 38 C.S.R. 2 § 2 apply to this rule, in addition to those definitions set forth below.
2.2. "Act." - means the West Virginia Surface Coal Mining and Reclamation Act codified at W. Va. Code §22-3-1 et seq. and the rules promulgated under it. 2 .. 3. "Bond forfeited mine site" means a mine site at which the Department of Environmental Protection has revoked a mine permit and forfeited the associated bond in accordance with W. Va. Code § 22-3-17(b).
2.4. "Qualified operator" means the person that obtains a permit under the Act to mine coal and perform reclamation on a bond forfeited mine site and that qualifies for the special reclamation tax credit.
2.5. The "Secretary" means the Secretary of the Department of Environmental Protection or his or her designee.
2.6. "Tax Commissioner" means the chief executive officer of the State Tax Division or his or her designee.
W. Va. Code R. § 110-29-3 Tax Credit Authorized; Effective Date; Administration
3.1. Effective July 12, 2013, W. Va. Code §22-3-11 authorizes a tax credit for reclamation and remediation at bond forfeiture sites when performed to the standards of the permit and the Act.
3.2. In accordance with W. Va. Code §§22-3-11a and 23-3-11(g)(2)(C), the tax imposed by West Virginia Code §22-3-11 and the tax credit authorized under it are administered under W. Va. Code §11-10-1 et seq.
3.3. The special reclamation tax credit shall first apply to a particular taxpayer for the first taxable year (as determined for federal income tax purposes) beginning on or after July 12, 2013.
3.3. The tax credit may only be taken against the special reclamation tax imposed under W. Va. Code §22-3-11.
3.3.a. The credit may not be applied to offset any other tax. §110-29- 4. Application for and Amount of Tax Credit.
4.1. If an operator applies for an Article 3 permit or enters into a reclamation agreement with the Department of Environmental Protection for a bond forfeited mine site, the Secretary shall certify to the Tax Commissioner the project costs, as shown in the records of the Secretary, that would have been spent from the Special Reclamation Fund and the Special Reclamation Water Trust Fund on the subject bond forfeited mine site.
4.2. At the conclusion of each calendar year the qualified operator reclaims the bond forfeited mine site pursuant to either an Article 3 permit or a reclamation agreement, the qualified operator may apply to the Tax Commissioner for the special reclamation tax credit. Before the qualified operator can receive the tax credit, the Secretary shall certify to the Tax Commissioner the amount of reclamation work completed pursuant to the Article 3 permit or reclamation agreement and the resultant amount of credit to be granted.
4.3. The amount of tax credit granted to the qualified operator shall be determined using the project costs the Secretary previously certified to the Tax Commissioner for the subject bond forfeited mine site.
4.4. The application for the tax credit by the authorized operator will be on a form approved by the Tax Commissioner and filed at the same time and manner as the special reclamation tax.
§110-26-5. Ineligibility for Tax Credit; Limitation of Tax Credit.
5.1 The qualified operator must be in good standing with the Tax Commissioner before receiving or claiming any credit. For the purposes of this rule, "good standing" means that the qualified operator has filed all required tax returns and related reports and that every tax administered under the West Virginia Tax Procedure and Administration Act imposed on the qualified operator has been provided for or paid.
5.2 A qualified operator that held an Article 3 permit for the bond forfeited mine site that was revoked by the Secretary and its bond forfeited, is not eligible for the special reclamation tax credit earned as a result of performing reclamation on the subject bond forfeited mine site.
5.3 Beginning in the year in which the Tax Commissioner issues a certification of tax credit to a qualified operator, the following rules apply:
5.3.a The qualified operator may use the credit to offset its payment of or liability for the special reclamation tax for the tax year.
5.3.b If any credit remains after application of the credit as provided in subsection 5.3.a., the remaining credit may be claimed only by any related entity, as that term is defined in W.Va. Code §11-24-3a, that engages in a unitary business, as that term is defined in W.Va. Code §11-24-3a, with the qualified operator. Provided, that the qualified operator is in good standing as provided in section 5.1. of this rule.
5.3.c If any credit remains after application of subsections 5.3.a and 5.3.b, the credit may be carried forward for use in future tax years in the same manner as provided in this subsection, until no credit is remaining.
5.3.d The credit is not refundable, it may not be carried back to a prior tax year and may not be transferred except as provided in subdivision 5.3.b. of this rule
W. Va. Code R. § 110-29-6 General Procedure and Administration
6.1. Requirements to Claim the Tax Credit. -- To claim a tax credit, the qualified operator shall comply with The Act and this rule and shall timely provide complete and accurate forms, returns, schedules and other information required by the Tax Commissioner or the Secretary.
6.2. Applicability of Various Tax Laws. -- Application of this credit and eligibility for this credit shall not affect or abrogate application of the provisions of the Act; and the following articles of chapter eleven of the Code of West Virginia: Article 10, "The West Virginia Tax Procedure and Administration Act;" Article 12, "Business Registration Tax;"
Article 12B, "Minimum Severance Tax," Article 13A, "Severance and Business Privilege Tax Act;" Article 13V, "Workers' Compensation Debt Reduction Act;" Article 21, "Personal Income Tax;" Article 24, "Corporation Net Income Tax," and rules issued pursuant to those statutes, with respect to any qualified operator to the extent that it is subject to the provisions of those laws.
6.3. Maintenance of Records. A qualified operator shall maintain the records required to verify the validity of its eligibility for the tax credit and the accuracy of the amount of the tax credit claimed. The Tax Commissioner may deny the tax credit to a qualified operator who fails to maintain the records provided in this subsection.
6.4. The qualified operator is subject to audit by the Tax Commissioner or his or her designee.
Series 35 Charitable Raffle Boards And Games
W. Va. Code R. § 110-35-1 General
1.1. Scope. -- These regulations clarify and implement state law as it relates to the sale of charitable raffle boards and games authorized by W. Va. Code '47-23-1 et seq.
1.2. Authority. -- W. Va. Code '47-23-11.
1.3. Filing Date. -- April 20, 1994
1.4. Effective Date. -- May 1, 1994
W. Va. Code R. § 110-35-2 Definitions
As used in these regulations and unless the context clearly requires a different meaning. The following terms shall have the meaning ascribed herein, and shall apply in the singular or in the plural.
2.1. "Commissioner" means Tax Commissioner of the State of West Virginia, or his delegate.
2.2. "Retail value" means the actual consideration paid to the wholesaler by the retailer for any charitable raffle board or game.
2.3. "Person" means any individual, association, society, incorporated or unincorporated organization, firm, partnership, limited liability company or other nongovernmental entity or institution.
2.4. "Retailer" means every person engaged in the business of making retail sales in the State of West Virginia of raffle chances except a charitable or public service organization authorized to conduct raffles pursuant to W. Va. Code '47-21-3.
2.4.1. An organization conducting raffles pursuant to W. Va. Code '47-21-3 is one that is prohibited from awarding any single prize with a value in excess of one thousand dollars ($1,000.00). Additionally, the cumulative total gross proceeds from all raffle occasions held by such an organization during any calendar year may not exceed seven thousand five hundred dollars ($7,500.00).
2.5. "Charitable raffle board" or "charitable raffle game" means:
2.5.1. A board or other device that has many folded printed slips to be pulled from or punched out of the board or otherwise distributed without a board on payment of a nominal sum in an effort to obtain a slip or chance that entitles the player to a designated prize;
2.5.2. A series of paper cards with perforated break-open tabs, a face value of which is covered or hidden from view to conceal one or more numbers, letters or symbols, which, on payment of a nominal sum, entitles the players to obtain a chance to a designated prize; or
2.5.3. Such other similar game which may be defined by the Tax Commissioner. The activities which are covered by this definition are commonly referred to as tips, tip boards, tip jugs, jar tickets, punch boards, pull tabs, seal cards, as well as the many variations of those games.
2.5.4. Not included in this definition are slips of paper or other printed tickets which may be purchased from an office supply store or printing company sold or distributed as chances on a prize. For example, a raffle licensee may hold a raffle and sell chances which are printed on slips of paper by the licensee. In such a situation, the slips of paper would not fall within the definition of "charitable raffle board" or "charitable raffle game" as provided in Article 47-23. However, if the raffle licensee purchased a tip board for the purpose of conducting a raffle occasion, the tip board would fall within the definition.
2.6. "Sale" means the transfer of the ownership of tangible personal property for a consideration.
2.7. "Verification" means a unique manufacturer identifiable serial number which is required to be printed on each ticket in a charitable raffle board or charitable raffle game or such other form of identification as may be prescribed by the Tax Commissioner upon a showing of undue hardship by the taxpayer under Section 11 of these regulations.
2.7.1. A unique manufacturer identifiable serial number is a serial number unique to the specific game being sold which is printed on each ticket in a charitable raffle board or charitable raffle game along with the name or logo of the manufacturer of the game.
2.8. "Wholesaler" or "distributor" means any person or entity engaged in the wholesale distribution of charitable raffle boards or games or similar boards or devices, as defined by the Commissioner, and licensed under the provisions of Article 47-23, to distribute said devices to charitable raffle boards or games retailers. Also included is anyone who is engaged in the manufacturing, packaging, preparing or repackaging of charitable raffle boards or games for distribution in this State.
W. Va. Code R. § 110-35-3 Fees
3.1. Wholesalers or distributors of charitable raffle boards and games to retailers shall be licensed and a license fee in the amount of five hundred dollars ($500.00) shall be paid to the Commissioner by each wholesaler or distributor for an annual license.
3.1.1. A single license fee of five hundred dollars ($500.00) shall be paid to the Commissioner regardless of whether a person is engaged in multiple activities, e.g. manufacturing, packaging, preparing, repackaging, wholesaling and distributing charitable raffle boards and games.
3.2. Wholesalers and distributors shall pay a fee in the amount of 20% of retail value of each charitable raffle board or game sold to a retailer. This fee shall be in addition to the Consumers Sales and Service Tax imposed by W. Va. Code '11-15-1 et seq.
3.2.1. A wholesaler or distributor must pay the twenty percent (20%) fee and collect six percent (6%) consumers sales and service tax from a retailer unless:
3.2.1.a. The wholesaler or distributor obtains from the retailer a West Virginia sales tax exemption certificate (CST-280) in which case only the twenty percent (20%) fee is paid.
3.2.1.b. The wholesaler or distributor obtains from the retailer a copy of the exemption document (RAF-3) authorized under W. Va. Code '47-21-3 in which case only the six percent (6%) consumers sales and service tax is collected (unless a West Virginia Sales Tax Exemption Certificate (CST-280) is obtained, in which case no six percent (6%) consumers sales and service tax is collected).
3.2.2. Manufacturers who sell charitable raffle boards and games to wholesalers or distributors who are not retailers will not pay the twenty percent (20%) fee on the retail value of such charitable raffle boards and games. However, manufacturers must collect the six percent (6%) consumers sales and service tax unless a West Virginia sales tax exemption certificate (CST-280) is obtained from the wholesaler or distributor, or unless the sale does not occur in West Virginia.
3.3. All revenue from the foregoing fees shall be placed in the special revenue account established under the authority of W. Va. Code '11-9-2a.
W. Va. Code R. § 110-35-4 No Fee on Charitable Raffle Boards and Games by Municipalities or Other Governmental Subdivisions
No municipality or governmental subdivision may levy any excise or other tax or fee requiring charitable raffle boards or games to be stamped, or requiring licenses for sale thereof, other than licenses which may be imposed as a result of licenses provided for in W. Va. Code '11-12-1 et seq.
W. Va. Code R. § 110-35-5 Reserved
W. Va. Code R. § 110-35-6 Reserved
W. Va. Code R. § 110-35-7 Surety Bonds Required; Release of Surety; New Bond
7.1. Wholesalers and distributors will be required to file a continuous surety bond when ordered to do so by the Tax Commissioner.
7.1.1. The Tax Commissioner may order the filing of a continuous surety bond where non-compliance with the requirements of article twenty-three, chapter forty seven of the West Virginia Code has occurred or the financial instability of the wholesaler or distributor has been documented.
7.1.2. Upon notification of the completion of the filing of a surety bond an annual notice of renewal, only, is required. The surety must be authorized to engage in business within this State. The bond shall be conditioned upon faithfully complying with the provisions of W. Va. Code '47-23-1 et seq. and these regulations, and the filing of the returns and payment of all fees prescribed by said W. Va. Code '47-23-1 et seq.
7.3. Any surety on a bond furnished hereunder shall be released and discharged from all liability accruing on such bond after the expiration of sixty (60) days from the date the surety submitted by certified mail, to the Tax Commissioner, a written request to be discharged. The request shall not relieve, release or discharge the surety from liability already accrued or which shall accrue before the expiration of the sixty (60) day period. Whenever any surety shall seek release from liability, it shall be the duty of the wholesaler or distributor to supply the Commissioner with another bond which shall become effective on or before the expiration of the aforementioned sixty (60) day period or seek discharge from the order of the Commissioner mandating such surety bond.
W. Va. Code R. § 110-35-7a Requirement of Wholesalers and Distributors to be Licensed to do Business in State; Resident Agent Requirement. 7a.1. In addition to being licensed in accordance with W. Va. Code '47-23-3 and Section 3 of these regulations, any wholesaler or distributor supplying charitable raffle boards or games to retailers in this State must be registered to do business in this State pursuant to the provisions of W. Va. Code '11-12-1 et seq. 7a.2. Nonresidents otherwise complying with the provisions of Article 47-23 may be licensed as wholesalers or distributors of charitable raffle boards or games upon designating to the Tax Commissioner a resident agent upon whom notices, orders or other communications issued pursuant to such article may be served and upon whom process may be served
W. Va. Code R. § 110-35-8 How Fee Paid; Reports Required; Due Date; Records to be Kept; Inspection of Records and Stocks; Examination of Witnesses, Summons, etc
8.1. The retail value fee imposed by W. Va. Code '47-23-3 and these regulations shall be paid by each licensed wholesaler or distributor to the Commissioner on or before the twentieth day of April, July, October and January for the immediately preceding three calendar months.
8.2. The measure of the fee on the retail value of charitable raffle boards and games shall be determined by multiplying the total amount of the retail value of all charitable raffle boards and games sold by wholesalers or distributors to retailers during the said three-month period by twenty percent (20%).
8.3. The fee imposed on the retail value of charitable raffle boards and games shall be in addition to the Consumers Sales and Service Tax imposed by W. Va. Code '11-15-1 et seq. and collected by wholesalers or distributors on sales to retailers who do not furnish a West Virginia sales tax exemption certificate (CST-280) to the wholesaler or distributor.
8.4. All fees due and owing to the Commissioner by reason of W. Va. Code '47-23-1 et seq. and these regulations, if paid after the due dates required by Section 47-23-8 and this section, shall be subject to the provisions of W. Va. Code '11-10-1 et seq., (the West Virginia Tax Administration and Procedures Act).
8.5. Each wholesaler or distributor shall provide with each quarterly payment of fees a return covering the business transacted in the previous three calendar months and providing such other information as the Commissioner may deem necessary for the ascertainment or assessment of the required fee. Such return shall be signed under penalty of perjury on such forms as the Tax Commissioner may prescribe and the wholesaler or distributor shall at the time of filing remit all fees owed or due.
8.5.1. All returns prescribed in W. Va. Code '47-23-8 and this section are required, although a fee might not be due nor any business transacted for the period covered by the return.
8.6. Each person required to file a return shall make and keep such records as are necessary to substantiate the required returns. Necessary records include, but are not limited to, invoices, serial numbers or other verification, inventories, receipts, disbursements, and sales tax exemption certificate, for a period of not less than three (3) years, or the period open to review in the case of waiver of the statute of limitations, whichever is longer.
8.7. Unless otherwise authorized in writing by the Commissioner pursuant to Section 11 of these regulations, each delivery ticket or invoice for each purchase or sale, whether in cash or otherwise, of charitable raffle boards or games must be recorded upon a serially numbered original invoice showing the name and address of the seller and the purchaser, the point of delivery, the date, quantity, description, serial number and price of the product sold, and such other reasonable information as the Commissioner may require. The fee must be stated separately from the quantity and price of the product sold.
8.7.1. Manufacturers who sell charitable raffle boards and games to West Virginia wholesalers and distributors are required to generate such invoices.
8.7.2. Such original invoice must remain with the charitable raffle boards or games while the product is in the possession of the distributor, wholesaler or retailer, or while the product is being transported to a destination in the State of West Virginia.
8.8. The Commissioner is authorized by W. Va. Code '47-23-8 and these regulations to inspect or examine the stock of charitable raffle boards and games kept in and upon the premises of any person where charitable raffle boards and games are placed, stored or sold. Furthermore he or she is authorized to inspect or examine the records, books, papers and any equipment or records of manufacturers, wholesalers and distributors or any other person for the purpose of determining the quantity of charitable raffle boards and games acquired or disbursed to verify the truth and accuracy of any statement or return and to ascertain whether the required fee has been properly paid.
8.9. To assist in obtaining records, books and papers and ascertaining the amount of fees and returns due, the Commissioner has the power to examine witnesses under oath; and if the witness fails or refuses to grant the Commissioner access to the books, records or papers, the Commissioner shall certify the facts and names to the circuit court of the county having jurisdiction of the party and such court shall thereupon issue summons to such party to appear before the Commissioner, at a place designated within the jurisdiction of such court, on a day fixed, to be continued as the occasion may require for good cause shown and give such evidence and lay open for inspection such books and papers as may be required for the purpose of ascertaining the amount of any fee and returns due.
W. Va. Code R. § 110-35-9 Penalty for Failure to File Return When No Fee Due; Crimes; Other Offenses; Penalties; Seizures of Illegal Boards and Games; Disposition
9.1. In the case of any failure to make or file a return on the date prescribed when no fee is due, unless it be shown that such failure was due to reasonable cause and not due to willful neglect, W. Va. Code '47-23-9 imposes a penalty of twenty-five dollars ($25.00) for each month or fraction thereof that the failure continues.
9.2. If any person:
9.2.1. Makes any false entry upon an invoice or with intent to evade the fee presents any such false entry for the inspection of the Commissioner;
9.2.2. Prevents or hinders the Commissioner from making a full inspection of any place where charitable raffle boards or games subject to the fee are sold or stored or prevents or hinders the full inspection of any required invoices, books, records or papers;
9.2.3. Sells any charitable raffle boards or games in this State on which the applicable fee or tax has not been paid;
9.2.4. Being a retailer in this State, fails to produce on demand by the Commissioner invoices of all charitable raffle boards and games purchased or received by him within three years prior to such demand, unless upon satisfactory proof it is shown that such nonproduction is due to providential or other causes beyond his control;
9.2.5. Being a retailer in this State, purchases or acquires charitable raffle boards and games from any person other than a licensed wholesaler or distributor;
That person shall in accordance with the terms of W. Va. Code '47-23-9 be guilty of a misdemeanor.
9.3. Any person convicted of violating the provisions of W. Va. Code '47-23-9(b) shall be confined in the county jail or regional jail for not less than one year, or fined not less than one thousand dollars ($1000.00) nor more than ten thousand dollars ($10,000.00), or both fined and imprisoned.
9.4. Any person who falsely or fraudulently makes, forges, alters or counterfeits any invoice or serial number prescribed by the provisions of W. Va. Code '47-23-1 et seq. for the purpose of evading the fee, shall be guilty of a felony, and, upon conviction thereof, shall be sentenced to pay a fine of not less than five thousand dollars ($5,000.00) nor more than ten thousand dollars ($10,000.00), or imprisoned in the penitentiary for a term of not less than one year nor more than five years, or both fined and imprisoned.
9.5. Whenever the Commissioner or any peace officer of this State discovers any charitable raffle boards or games subject to the fee and upon which the fee has not been paid, such charitable raffle boards and games shall be deemed to be contraband, and the Commissioner or peace officer of this State, is authorized and empowered to seize and take possession of such charitable raffle boards or games, without a warrant. Such charitable raffle boards and games shall be forfeited to the State, and the Commissioner shall retain the forfeited charitable raffle boards and games until they are no longer needed as evidence in any prosecution of the person from whom the raffle boards and games were seized. The Commissioner may within a reasonable time thereafter destroy such charitable raffle boards and games or sell said boards or games at public auction to the highest bidder: Provided, That such seizure and destruction or public auction shall not be deemed to relieve any person from fine or imprisonment. Such destruction may be made in any county the Commissioner deems most convenient and economical. All revenue from the fee shall be deposited in the special revenue account established under the authority of W. Va. Code '11-9-2a and used to support the investigatory activities provided for therein.
9.6. Magistrates shall have concurrent jurisdiction with any other courts having jurisdiction for the trial of all misdemeanors arising under W. Va. Code '47-23-1 et seq.
W. Va. Code R. § 110-35-10 Transportation of Charitable Raffle Boards and Games; Forfeitures and Sales of Charitable Raffle Boards, Charitable Raffle Games and Equipment; Criminal Sanctions
10.1. Every person who knowingly transports charitable raffle boards or games upon the public highways, waterways, airways, roads or streets of this State and to a destination in this State must have in his actual possession invoices or delivery tickets for such charitable raffle boards or games which show the true name and the complete and exact address of the manufacturer, the true name and complete and exact address of the wholesaler or distributor who is the purchaser, the quantity and description of the charitable raffle boards and games being transported and the true name and complete and exact address of the person who has or shall assume payment of the West Virginia state fee. In the absence of such invoices, delivery tickets or bills of lading, as the case may be, the charitable raffle boards or games so transported, the vehicle or vessel in which the charitable raffle boards or games are being transported and any paraphernalia or devices used in connection with such, are declared to be contraband goods and may be seized by the Commissioner or by any peace officer of the State without a warrant.
10.2. Anyone who transports charitable raffle boards or games in violation of W. Va. Code '47-23-10 shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not less than three hundred dollars ($300.00) nor more than five thousand dollars ($5000.00), or imprisoned in the county jail not more than one year, or both fined and imprisoned.
10.3. Charitable raffle boards and games seized under the authority of W. Va. Code '47-23-10 and Section 10.4 of these regulations shall be forthwith destroyed in the manner provided for in W. Va. Code '47-23-10 and Section 10.4 of these regulations. The destruction of such charitable raffle games and boards shall not relieve the owner thereof of any action by the Commissioner for violations of W. Va. Code '47-23-1 et seq.
10.4. The Commissioner shall immediately after any seizure institute a proceeding for the confiscation thereof in the circuit court of the county in which the seizure is made. The court may proceed in a summary manner and may direct confiscation by the Commissioner. Any person claiming to be the holder of a security interest in any vehicle or vessel, the disposition of which is provided for above, may present his petition so alleging and be heard. In the event it appears to the court that the property was unlawfully used by a person other than the claimant, and if the said claimant acquired his security interest in good faith and without knowledge that the vehicle or vessel, was going to be so used, the court shall waive forfeiture in favor of such claimant and order the vehicle or vessel returned to such claimant.
W. Va. Code R. § 110-35-11 Administration; Rule-Making, Required Verification
11.1. Every charitable raffle board or game printed for use in this State is required to bear on each ticket in each such board or game verification as defined in Section 2 of these regulations. The Commissioner may waive this requirement on a temporary basis and for a stated period of time for any such manufacturer that can clearly establish that substantial hardship will result from immediate compliance: Provided, That such a manufacturer must also obtain from the Commissioner approval to use an agreed-upon alternate form of verification for the period of time of the waiver.
11.2. The Commissioner shall deny an application for a license if he finds that the issuance thereof would be in violation of the provisions of W. Va. Code '47-23-1 et seq. or these regulations.
11.3. The Commissioner may suspend, revoke or refuse to renew any license issued hereunder for a material failure to maintain required records or file required reports required if the Commissioner finds that said failure will substantially impair the Commissioner's ability to administer the provisions of laws and regulations relating to charitable raffle boards and games.
11.4. The burden of proof in any administrative or court proceeding is on the applicant to show cause why a charitable raffle boards or games wholesaler's or distributor's license should be issued or renewed and on the licensee to show cause why its license should not be revoked or suspended.
W. Va. Code R. § 110-35-12 Severability
If any provision of these regulations or the application thereof shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder of these regulations, but shall be confined in its operation to the provision thereof directly involved in the controversy in which such judgment shall have been rendered and the applicability of such provision to other persons or circumstances shall not be affected thereby.
W. Va. Code R. § 110-35-13 General Procedure and Administration
Each and every provision of W. Va. Code '11-10-1 et seq. shall apply to the fees imposed by W. Va. Code '47-23-1 et seq. with like effect as if applicable only to those fees.
110CSR35
Series 36 Preneed Cemetery Companies
W. Va. Code R. § 110-36-1 General
1.1. Scope. -- These regulations clarify and implement state law as it relates to property, goods and services purchased by preneed cemetery companies and contracts for services to be rendered by such companies.
1.2. Authority. -- W. Va. Code §5F-2-2(a)(12).
1.3. Filing Date. -- April 28, 2026.
1.4. Effective Date. -- April 28, 2026.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect after August 1, 2031.
W. Va. Code R. § 110-36-2 Definitions
As used in these regulations and unless the context clearly requires a different meaning, the following terms shall have the meaning ascribed herein, and shall apply in the singular and in the plural.
2.1. "Burial vault" means a protective container for a casket which is used to prevent a grave from sinking.
2.2. "Cemetery" means and includes all land and appurtenances including roadways, office buildings, outbuildings and other structures used or intended to be used for or in connection with the interment of human remains: Provided, That this definition shall have no effect on the determination of whether real property is exempt from ad valorem property taxation pursuant to W. Va. Code §11-3-9 and 110 C.S.R. 3. The sprinkling of ashes or their burial in a biodegradable container on church grounds or their placement in a columbarium on church property does not constitute the creation of a cemetery.
2.3. "Cemetery company" or "seller" means any person, partnership, firm or corporation engaged in the business of operating a cemetery or selling property, goods or services used in connection with interring or disposing of the remains or commemorating the memory of a deceased human being, where delivery of the property or goods or performance of the service may be delayed later than one hundred twenty (120) days after receipt of the initial payment on account of such sale. Such property, goods or services include, but are not limited to, burial vaults, mausoleum crypts, lawn crypts, memorials, marker bases and opening and closing and/or interment services, but do not include graves or incidental additions such as dates, scrolls or other supplementary matter representing not more than ten percent (10%) of the total contract price.
2.4. "Commissioner" or "Tax Commissioner" means the Secretary of the West Virginia Department of Tax and Revenue or his delegate.
2.5. "Compliance agent" means a natural person who owns or is employed by a cemetery company to assure the compliance of the cemetery company with the provisions of W. Va. Code §35-5B-1 et seq. and these regulations.
2.6. "Cost requirement" means the total cost to the seller of the property, goods or services subject to the deposit requirements of W. Va. Code §35-5B-4 and these regulations and as required by that seller's total contracts.
2.7. "Delivery" means that the seller has transferred physical possession of the identified goods, has attached or installed such goods at the designated interment space or has actually furnished preneed cemetery company contract services. In the case of preneed goods which are identified with the name of the buyer or other contract beneficiary, "delivery" may also occur when:
2.7.1. The seller pays for and stores the goods at the cemetery where they are intended to be used; or
2.7.2. The seller has paid the supplier of such goods and the supplier has caused such merchandise to be manufactured and stored, has caused title to such merchandise to be transferred to the buyer or other contract beneficiary and has agreed to ship such merchandise upon his or her request.
2.8. "Grave" means a below-ground right of interment.
2.9. "Interment" means the disposition of human remains by earth burial, entombment or inurnment.
2.10. "Lawn crypt" means a burial receptacle, usually constructed of reinforced concrete, installed underground in a quantity of gravel or with tile underlay. Each crypt becomes an integral part of the given garden area and is considered real property.
2.11. "Marker base" means the visible part of the base or foundation upon which the memorial, marker or monument rests and is considered personal property.
2.12. "Mausoleum crypt" means a burial receptacle usually constructed of reinforced concrete and usually constructed or assembled above the ground and is considered real property.
2.13. "Memorials, markers or monuments" means the object used to identify the deceased including the base and is considered personal property.
2.14. "Opening and closing or interment service" means any service associated with the excavation and filling in of a grave in a manner which will not disturb or invade adjacent grave sites: Provided, That even if adjacent grave sites are unintentionally disturbed or invaded, the excavation and filling in of a grave shall fall within the meaning of this definition.
2.15. "Person" includes any state, and its political subdivisions or an agency of either, the State of West Virginia and its political subdivisions or an agency of either, and any individual, firm, partnership, joint venture, joint stock company, any public or private corporation, municipal corporation, cooperative, estate, trust, business trust, receiver, executor, administrator, any other fiduciary, any representative appointed by order of any court or otherwise acting on behalf of other, or any other group or combination acting as a unit.
2.16. "Preneed" means at any time other than either at the time of death or while death is imminent.
2.17. "Preneed cemetery company contract" or "contract" means a contract for the sale of real and personal property, goods or services used in connection with interring or disposing of the remains or commemorating the memory of a deceased human being, where delivery of the property or performance of the service may be delayed for more than one hundred twenty (120) days after the receipt of initial payment on account of such sale. Such property, goods or services include, but are not limited to, burial vaults, mausoleum crypts, lawn crypts, memorials, marker bases and opening and closing and/or interment services, but do not include graves or incidental additions such as dates, scrolls or other supplementary matter representing not more than ten percent (10%) of the total contract price.
2.18. "Seller's trust account" means the trust account established for the specific seller and into which is deposited the total specific funds from all of a specific seller's contracts, plus income on such funds allotted to that seller.
2.19. "Specific trust funds" means funds identified with a certain preneed cemetery company contract for personal property, goods or services.
2.20. "Trustee" means any natural person, partnership or corporation, including any bank, trust company, broker-dealer, foreign state chartered trust, savings and loan association or credit union which receives money in trust pursuant to any agreement or contract made pursuant to the provisions of W. Va. Code §35-5B-1 et seq. and these regulations.
W. Va. Code R. § 110-36-3 Information Filing; Fees, Compliance Agent
3.1. On or after July 1, 1993, and to the extent one of the exemptions in Section 4 of these regulations does not apply, no person, partnership, firm or corporation may engage in the business of operating a cemetery company in this state without having first paid to the Tax Commissioner an annual registration fee in the amount of two hundred dollars ($200.00), and filing with the Tax Commissioner on the form specified certain information which shall include the names and addresses of all officers, owners and directors of the cemetery company and the name of the designated compliance agent. The cemetery company shall notify the Tax Commissioner of any changes in the information required to be filed within ninety (90) days of the date on which the change occurs.
3.2. A new filing shall also be required if there is a change in the ownership of the cemetery company or if there is a change in the name of the compliance agent designated by the cemetery company. The cemetery company shall pay to the Tax Commissioner an additional fee of one hundred dollars ($100.00) when reporting any such changes.
3.3. All fees collected under the authority of W. Va. Code §35-5B-1 et seq. and these regulations shall be deposited in the "Cemetery Company Account" created in the State Treasury.
3.3.1. Amounts collected which are found from time to time to exceed the funds needed may be transferred to other accounts or funds and redesignated for other purposes by appropriation of the Legislature.
3.3.2. Funds in this account shall be expended upon appropriation of the Legislature by the Secretary of Tax and Revenue in connection with the administration of W. Va. Code §35-5B-1 et seq. and these regulations.
W. Va. Code R. § 110-36-4 Exemptions
The provisions of W. Va. Code §35-5B-1 et seq. and the regulations do not apply to:
4.1. Sales of property, goods and services subject to the provisions of W. Va. Code §47-14-1 et seq.;
4.2. Sales of services by perpetual care cemeteries subject to the provisions of W. Va. Code §35-5A-1 et seq.;
4.3. Sales of property, goods and services by cemeteries owned and operated by a county, municipal corporation, church or nonstock corporation not operated for profit if the cemetery:
4.3.1. Does not compensate any officer or director except for reimbursement of reasonable expenses incurred in the performance of official duties;
4.3.2. Does not sell or construct or directly or indirectly contract for the sale or construction of vaults or lawn or mausoleum crypts; and
4.3.3. Uses proceeds from the sale of all graves and entombment rights for the sole purpose of defraying the direct expenses of maintaining the cemetery;
4.4. Sales of property, goods and services by community cemeteries not operated for profit if the cemetery:
4.4.1. Does not compensate any officer, owner or director except for reimbursement of reasonable expenses incurred in the performance of official duties; and
4.4.2. Uses the proceeds from the sale of the graves for the sole purpose of defraying the direct expenses of maintaining its facilities; and
4.5. Sales of property, goods and services by family cemeteries wherein lots or spaces are neither offered for public sale nor sold to the public.
4.6. Any person which otherwise would be exempt from the provisions of W. Va. Code §35-5B-1 et seq. and these regulations ceases to retain such exemption when selling preneed cemetery company contracts.
W. Va. Code R. § 110-36-5 Deposit in Preneed Trust Required; Who May Serve as Trustee
5.1. Each cemetery company shall deposit into an interest bearing trust fund forty percent (40%) of the receipts from the sale of property, goods or services purchased pursuant to a preneed cemetery company contract, including sales of opening and closing or interment services, when the anticipated delivery thereof will be delayed more than one hundred twenty (120) days from the initial payment on said contract. However, should the proceeds from the sale be financed through a lending institution, it shall be considered a cash sale. Deposits are required to be made by the cemetery company within thirty (30) days after the close of the month in which said receipts are paid to it.
5.1.1. When depositing sales receipts into the trust fund, the seller may combine the receipts from different contracts into one deposit: Provided, That the seller shall maintain appropriate records which specify the amounts deposited relative to the identified contracts and that the trustee is provided with such information.
5.2. If payment is made on an installment or deferred payment basis, the seller shall have the option of initially depositing into the trust fund forty percent (40%) of the amount of the principal, or in the alternative, depositing forty percent (40%) of the principal of each payment within thirty (30) days after the close of the month in which said payments are received.
5.3. The trustee of the trust fund shall be appointed by the person owning, operating, or developing a preneed cemetery company. If the trustee is other than a bank, savings and loan or other federally insured investment banking institution, the trustee shall be approved by the Tax Commissioner. A trustee that is not a bank, savings and loan or other federally insured investment banking institution shall apply to the Tax Commissioner for approval. The Tax Commissioner shall approve the trustee when satisfied that:
5.3.1. The applicant employs and is directed by persons who are qualified by character, experience, and financial responsibility to care for and invest the funds of others; and
5.3.2. The applicant will perform its duties in a proper and legal manner and the trust funds and interest of the public generally will not be jeopardized.
5.4. If the trustee is other than a bank, savings and loan or other federally insured investment banking institution, the trustee shall furnish a fidelity bond with the corporate surety thereon licensed to do business in this state, payable to the trust established, in a sum equal to but not less than one hundred percent (100%) of the value of the principal of the trust estate at the beginning of each calendar year, which bond shall be deposited with the Tax Commissioner: Provided, That the amount of such bond shall not be less than one hundred thousand dollars ($100,000.00).
5.4.1. If the trustee is other than a bank, savings and loan or other federally insured investment banking institution, and if it appears that an officer, director or employee of the trustee is dishonest, incompetent or reckless in the management of a trust fund required by the provisions of W. Va. Code §35-5B-1 et seq. and these regulations, the Tax Commissioner may bring an action in the circuit courts of this state to remove the trustee and to impound the property and business of the trustee as may be reasonably necessary to protect the trust funds.
W. Va. Code R. § 110-36-6 Requirements for Preneed Cemetery Company Contracts
A preneed cemetery company contract shall:
6.1. Be written in clear understandable language and printed in easy-to-read type, size and style;
6.2. Identify the seller, the contract buyer and the person for whom the contract is purchased if other than the contract buyer;
6.3. Contain a complete description of the property, goods or services purchased;
6.4. Clearly disclose whether the price of the property, goods or services purchased is guaranteed;
6.5. Provide that if the particular property, goods and services specified in the contract are unavailable at the time of delivery, the seller shall be required to furnish property, goods and services similar in size and style and at least equal in quality of material and workmanship and that the representative of the deceased has the right to reasonably choose the property, goods or services to be substituted; and
6.6. Be executed in duplicate and a signed copy given to the buyer.
W. Va. Code R. § 110-36-7 Identification of Funds
Any funds deposited in the seller's trust account shall be identified in the records of the trustee and the seller by the contract number and by the name of the buyer. The trustee may commingle the deposits in any preneed trust account for the purposes of the management thereof and the investment of funds therein.
W. Va. Code R. § 110-36-8 Corpus of Trust Account and Income to Remain in Preneed Trust Account; Exception
The corpus of the seller's trust account shall remain intact until the property or goods are delivered or services performed as specified in the contracts which comprise such trust account: Provided, That the net income from the preneed trust account may be used to pay any appropriate trustee and auditor fees, commissions and costs. The net income from the preneed trust account, after payment of any appropriate trustee and auditor fees, commissions and costs, shall remain in the account and be reinvested and compounded. Any trustee fees, commissions and costs in excess of income shall be paid by the cemetery company and not from the trust. However, the trustee shall, as of the close of the cemetery company's fiscal year, upon the written assurance to the trustee by a certified public accountant employed by the seller, return to the seller any income in the seller's account which, when added to the corpus of the trust account is in excess of the current cost requirements for all undelivered property, goods or services included in the seller's preneed cemetery company contracts including all outstanding preneed cemetery company contracts entered into prior to July 1, 1993. The seller's cost requirements shall be based upon wholesale cost to the seller and shall be certified in its records by a sworn affidavit by the compliance agent and determined by the seller as of the close of the cemetery company's fiscal year.
W. Va. Code R. § 110-36-9 Disbursement of Trust Funds Upon Performance of Contract; Mausoleum Construction Required
9.1. Upon performance of the preneed cemetery company contract, the seller shall certify to the trustee by affidavit the amount of specific funds in the trust, identified with the contract performed, which the trustee shall pay to the seller. The seller may in its records itemize the property, goods or services and the consideration paid or to be paid therefore, to which the established deposit requirements apply. In such case the seller may, upon certification to the trustee of performance or delivery of such property, goods or services and of the amount of specific trust funds identified in its records with such items, request disbursement of that portion of the specific funds deposited pursuant to the contract, which the trustee shall pay to the seller.
9.1.1. When disbursing funds to the seller for payment on more than one preneed cemetery company contract, the trustee may combine all such payments into one payment: Provided, That the trustee maintains appropriate records which specify that portion of the total payment which is applied to the identified preneed cemetery company contract and such information is provided to the seller, Provided, however, That the seller may net out funds received from sales and funds to be paid for expenses incurred by depositing only the amount in excess of the disbursements and utilizing the remaining funds for payment of contract expenses: Provided further, That when utilizing the netting out method for recording activities, complete documentation of the transactions must be retained by the seller and provided to the trustee.
9.1.2. When disbursing funds received from the trustee, the seller may combine into one payment the amounts to be paid to a single payee: Provided, That the seller maintains appropriate records which specify that portion of the payment which is applied to the identified preneed cemetery company contract and such information is provided to the payee.
9.2. If the preneed contract provides for two (2) or more persons, the seller may, at its option, designate in its records the consideration paid for each individual in the preneed cemetery company contract. In such case, upon performance of that portion of the contract identified with a particular individual, the seller may request, by certification in the manner described above, the disbursement of trust funds applicable to that portion of the contract, which the trustee shall pay to the seller.
9.3. Any cemetery company that sells space in an unconstructed mausoleum must commence construction within seven (7) years from the date of the first sale or when eighty percent (80%) of the spaces in the original mausoleum plan are sold, whichever occurs first.
9.3.1. Because the preneed cemetery company contract is purchased from the seller and not from the contractor constructing the mausoleum, the cemetery company is the person that contracts with and pays the contractor for construction of the structure.
9.3.2. The cost of constructing a mausoleum shall be borne by the cemetery company: Provided, That if preneed cemetery company contracts are used to sell space in the mausoleum, the proceeds from such sales must be accounted for in the same manner as the proceeds from the sale of other contracts.
9.3.3. Once mausoleum construction has commenced, the cemetery company is authorized to draw down progress payments from the trust funds received from the sale of the mausoleum space funds to pay for the construction: Provided, That such progress payments are according to a schedule incorporated into the construction contract: Provided, however, That the cemetery company must bear any construction expense in excess of the trust funds available from the sale of spaces in the mausoleum being constructed.
W. Va. Code R. § 110-36-10 Seller Required to Keep Records
Each seller of a preneed cemetery company contract shall record and keep detailed accounts of each and every contract and of all transactions regarding each preneed cemetery company contract. All such records shall be subject to examination by the Tax Commissioner.
W. Va. Code R. § 110-36-11 Financial Report and Written Assurance Required
11.1. The cemetery company shall report the following information to the Tax Commissioner within four (4) months following the close of the cemetery company's fiscal year:
11.1.1. The total amount of principal in the seller's trust account;
11.1.2. The securities in which the seller's trust account is invested;
11.1.3. The income received from the trust and the source of that income during the preceding fiscal year;
11.1.4. An affidavit executed by the compliance agent that all provisions of W. Va. Code §35-5B-1 et seq. and these regulations which are applicable to the seller and which relate to the seller's trust accounts have been complied with;
11.1.5. The total receipts required to be deposited in the seller's trust account;
11.1.6. All expenditures from the seller's trust account; and
11.1.7. If the trustee is other than a bank, savings and loan or other federally insured investment banking institution, proof, in a manner determined by the Tax Commissioner, that the required fidelity bond has been secured and that it is in effect.
11.1.8. Appropriate documentation provided by the trustee may be utilized to support the foregoing information.
11.2. The cemetery company shall employ an independent certified public accountant who is to audit the account and provide assurance, which assurance shall be forwarded with the foregoing required report, that forty percent (40%) of the cash receipts from the sale of preneed property, goods or services which is not anticipated to be delivered or performed within one hundred twenty (120) days after receipt of the initial payment on account has been deposited in the account within thirty (30) days after the close of the month in which such payments were received.
W. Va. Code R. § 110-36-12 Inclusion of Property, Goods and Services to be Delivered Within One Hundred Twenty (120) Days
The contract may include the sale of preneed property, goods or services to be delivered within one hundred twenty (120) days after the receipt of the initial payment on account of such sale. Contracts may specify separately the total consideration paid or to be paid for preneed property, goods or services not anticipated to be delivered or provided within one hundred twenty (120) days after receipt of initial payment. If a contract does not specify the preneed property, goods or services not anticipated to be delivered or provided within the one hundred twenty (120) day period, the seller shall deposit forty percent (40%) of the total consideration for the entire contract.
W. Va. Code R. § 110-36-13 Breach of Contract by Seller; Trust to be Single Purpose Trust
13.1. If, after a written request, the seller fails to perform its contractual duties, the purchaser, executor or administrator of the estate, or heirs, or assigns or duly authorized representative of the purchaser shall be entitled to maintain a proper legal or equitable action in any court of competent jurisdiction. No other purchaser need be made a party to or receive notice of any proceeding brought relating to the performance of any other contract.
13.2. The seller's trust shall be a single purpose trust. The trust funds shall not be available to any creditors as assets of the seller, nor may the seller encumber any portion of the trust funds.
W. Va. Code R. § 110-36-14 Trustee May Rely on Certifications and Affidavits
The trustee may rely upon all certifications and affidavits which have been made pursuant to the provisions of W. Va. Code §35-5B-1 et seq. and these regulations and is not liable to any person for such reasonable reliance.
W. Va. Code R. § 110-36-15 Transfer of Trust Funds to Another Trustee
15.1. The seller may, upon notification in writing to the trustee, and upon such other terms and conditions as the agreement between them may specify, transfer its account funds to another qualified trustee. The trustee may, upon notification in writing to the seller, and upon such other terms and conditions as the agreement between them may specify, transfer the trust funds to another qualified trustee.
15.2. Notwithstanding any terms or conditions of any agreement between the seller and the trustee to the contrary, if either the seller or the trustee transfers the seller's trust account to another qualified account, the trustee may not retain and the seller may not pay any portion of the trust funds as payment for any penalty or for any other reason related to such transfer.
W. Va. Code R. § 110-36-16 Use of Trustee's Name in Advertisements
No person subject to the provisions of W. Va. Code §35-5B-1 et seq. or these regulations may use the name of the trustee in any advertisement or other public solicitation without written permission of the trustee.
W. Va. Code R. § 110-36-17 Cemetery Property Maintained by Cemetery Company
With respect to cemetery property maintained by a cemetery company, the cemetery company is responsible for the performance of:
17.1. The care and maintenance of the cemetery property it owns; and
17.2. The opening and closing of all graves, crypts or niches for human remains in any cemetery property it owns.
W. Va. Code R. § 110-36-18 Waiver of Article Void
Any provision of any contract which purports to waive any provision of W. Va. Code §35-5B-1 et seq. or these regulations is void.
W. Va. Code R. § 110-36-19 Violation a Misdemeanor
19.1. Any person who violates any of the provisions of W. Va. Code §35-5B-1 et seq. is guilty of a misdemeanor, and, upon conviction thereof, shall be fined not less than one hundred dollars ($100.00) nor more than one thousand dollars ($1,000.00) for each occurrence, or incarcerated in the county or regional jail for a term not to exceed one year, or both fined and incarcerated.
19.2. Any person who violates any of the provisions of W. Va. Code §35-5B-1 et seq. shall for a second offense be guilty of a felony and, upon conviction thereof, shall be fined not less than five hundred dollars ($500.00) nor more than three thousand dollars ($3,000.00), or incarcerated in the penitentiary not less than one nor more than three years, or, in the discretion of the court, be incarcerated in the county jail for a term not to exceed one year.
Series 37 Charitable Raffles
W. Va. Code R. § 110-37-1 General
1.1. Scope. -- W. Va. Code '47-21-1 et seq. allows individual or joint raffle occasions to be lawfully operated by licensed qualified charitable or public service organizations under certain specified restrictions and conditions. The purpose of this legislative rule is to provide the clarification and guidance necessary for lawful implementation and application of the law.
1.2. Authority. -- W. Va. Code ''47-21-21, 11-10-5 and 29A-3-1 et seq.
1.3. Filing Date. -- April 30, 2001.
1.4. Effective Date. -- May 1, 2001.
W. Va. Code R. § 110-37-2 Definitions
2.1. When used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
2.1.1. "Bona Fide Senior Citizen Organization" means any nonprofit organization that is organized and operated solely to provide service to persons who are fifty-five (55) years of age or older. An organization shall be described, and qualified under Internal Revenue Code Section 501(c)(3) and have a determination letter to that effect from the Internal Revenue Service.
2.1.2. "Charitable or Public Service Activity or Endeavor" means any bona fide activity or endeavor which directly benefits a number of people by:
2.1.2.1. assisting them to establish themselves in life as contributing members of society through education or religion;
2.1.2.2. relieving them from disease, distress, suffering, constraint, or the effects of poverty;
2.1.2.3. increasing their comprehension of and devotion to the principles upon which this nation was founded and to the principles of good citizenship;
2.1.2.4. making them aware of or educating them about issues of public concern so long as the activity or endeavor is not aimed at influencing legislation or supporting or participating in the campaign of any candidate for public office;
2.1.2.5. lessening the burdens borne by government or voluntarily supporting, augmenting, or supplementing services which government would normally render to the people;
2.1.2.6. providing or supporting nonprofit community activities for youth, senior citizens or the disabled;
2.1.2.7. providing or supporting nonprofit cultural or artistic activities; or
2.1.2.8. providing or supporting any political party executive committee.
2.1.3. "Charitable or public service organization" or "major organization" means a bona fide, nonprofit, tax exempt organization which is either benevolent, educational, philanthropic, humane, patriotic, civic, religious, fraternal or eleemosynary. These organizations shall obtain an Internal Revenue Code Section 501 tax exempt status determination letter from the Internal Revenue Service finding that they are exempt from the federal income taxes under section 501(c)(3), 501(c)(4), 501(c)(8), 501(c)(10), 501(c)(19), or 501(d) of the Internal Revenue Code of 1986, as amended. However, organizations which are subdivisions of the federal, state and local governments do not need to obtain an Internal Revenue Code Section 501 tax exempt status determination letter from the Internal Revenue Service. "Charitable or public service organizations" also includes volunteer fire departments, rescue units or other similar volunteer community service organizations. These organizations do not need to obtain an Internal Revenue Code Section 501 tax exempt status determination letter from the Internal Revenue Service. The term "charitable or public service organization" does not include social or political organizations.
2.1.3.1. Test for determining tax exempt status. - In every instance, charitable organizations wishing to obtain a raffle license shall file with their application a copy of their current determination letter from the Internal Revenue Service stating that the organization is exempt from taxes under certain Internal Revenue Code provisions. Requirements for each tax exempt status are set in this paragraph.
2.1.3.1.a. Internal Revenue Code Section 501(c)(3) exempts from federal taxation corporations, community chests, funds or foundations which are organized and operated only for:
2.1.3.1.a.1. religious purposes;
2.1.3.1.a.2. charitable purposes;
2.1.3.1.a.3. scientific purposes;
2.1.3.1.a.4. testing for public safety purposes;
2.1.3.1.a.5. literary or educational purposes;
2.1.3.1.a.6. the fostering of national or international amateur sports competition (no part of these organizations' activities can involve the provision of athletic equipment or facilities); or
2.1.3.1.a.7. the prevention of cruelty to children or animals; and,
2.1.3.1.a.8. no portion of its net earnings be given to or benefit any shareholder or individual; no substantial propagandizing may be carried on; no attempts to influence legislation may be carried on; and no participation or intervention in political campaigns for candidates may be maintained.
2.1.3.1.b. Internal Revenue Code Section 501(c)(4) exempts from federal taxation nonprofit civic leagues or organizations operated solely for the promotion of social welfare. It also exempts local employee associations in which:
2.1.3.1.b.1. membership is limited to employees of a designated person in a particular municipality; and
2.1.3.1.b.2. all net earnings are given or used solely for charitable, educational or recreational purposes.
2.1.3.1.c. Internal Revenue Code Section 501(c)(8) exempts from federal taxation fraternal beneficiary societies that operate under the lodge system, such as a parent organization which charters local branches, or societies operating for the sole benefit of members of a lodge system fraternity. These organizations shall also provide for the payment of benefits such as life, sick, or accident insurance benefits, to the members or their dependents.
2.1.3.1.d. Internal Revenue Code Section 501(c)(10) exempts from federal taxation domestic fraternal societies that operate under the lodge system, do not pay benefits and devote their net earnings solely to charitable, religious, scientific, literary, educational and fraternal purposes.
2.1.3.1.e. Internal Revenue Code Section 501(c)(19) exempts from federal taxation organizations, auxiliary units, trusts of foundations for war veterans. These entities shall be organized in the United States, and no part of their net earnings may benefit any shareholder or individual. Seventy-five percent (75%) of the members shall be war veterans and substantially all of the other members shall be veterans, cadets or spouses, widowers or widows of war veterans.
2.1.3.1.f. Internal Revenue Code Section 501(d) exempts from federal taxation religious or apostolic associations if they have a common treasury. These associations may engage in business which commonly benefits all members if the members include their share as gross income on their income tax returns. These amounts are to be considered dividends received.
2.1.3.2. Further references and explanations are contained in Appendix B of this rule.
2.1.4. "Charitable raffle" means a raffle held by a charitable or public service organization of a bona fide senior citizen organization to raise money for a charitable or public service endeavor.
2.1.5. "Charitable raffle board" or "charitable raffle game" means:
2.1.5.1. a board or other device that has many folded printed slips to be pulled from the board or otherwise distributed without a board on payment of a nominal sum in an effort to obtain a slip or chance that entitles the player to a designated prize;
2.1.5.2. a series of paper cards with perforated break-open tabs, a face value of which is covered or otherwise hidden from view to conceal one or more numbers, letters or symbols, which, on payment of a nominal sum, entitles the player to obtain a chance to a designated prize; or,
2.1.5.3. any other similar game which may be defined by the State Tax Commissioner by legislative rule.
2.1.6. "Commissioner" or "Tax Commissioner" means the West Virginia State Tax Commissioner or his or her duly appointed representative, except as otherwise required by law.
2.1.7. "Concession" means any stand, booth, cart, counter or other facility, whether stationary or movable, where beverages, both alcoholic and nonalcoholic, food, snacks, cigarettes or other tobacco products, newspapers, souvenirs or any other items are sold to patrons by an individual or individuals operating the concession.
2.1.8. "Conduct" means to direct the actual holding of a raffle and the playing of raffle games by activities including, but not limited to, selling raffle tickets, selling tip boards or pull tabs, collecting money, drawing winning raffle ticket stubs, verifying winners and awarding prizes.
2.1.9. ADe minimis violation@ includes a violation the Commissioner finds to not be a material violation if, having regard to the nature of the conduct charged to constitute a violation, and the nature of the attendant circumstances, the Commissioner finds that the violator's conduct:
2.1.9.1. Was within a customary license or tolerance, neither expressly negated by the Commissioner nor inconsistent with the purpose of the law defining the violation;
2.1.9.2. Did not actually cause or threaten the harm or evil sought to be prevented by the law defining the violation or did so only to an extent too trivial to warrant the condemnation of the law;
2.1.9.3. Considered with regard to the totality of the facts and circumstances, cannot reasonably be regarded as envisaged by the Legislature in forbidding the violation; or
2.1.9.4. Resulted from mistake or inadvertent omissions, and was not deliberately committed for the purpose of evading the statutory requirements and restrictions applicable to licensees.
2.1.10. "Employee" means an individual who is an "employee" for purposes of federal income tax withholding, as defined in 26 U.S.C. '3401.
2.1.11. "Expend net proceeds for charitable or public service purposes" means to devote the net proceeds of a raffle occasion to a qualified recipient organization.
2.1.12. "Immediate family member" means a person=s spouse, mother, father, son, daughter, brother, sister, grandchild, grandparent, mother-in-law, father-in-law or step-child. A legally adopted child of a person is treated for these purposes as a child of the individual by birth.
2.1.13. "Joint raffle occasion" means a single gathering or session at which a series of one or more successive raffles is conducted by two or more licensees. It is also an occasion at which raffle tickets, together with "pull tabs" or "tip boards" are sold and purchased and the winning numbers are revealed. For raffle tickets it also means the occasion of the drawing for the anticipated prize or prizes. For a joint raffle occasion authorized under W. Va. Code '47-21-1 et seq., it means and includes the selling of raffle tickets, but not pull tabs or tip boards, on one day when the drawing for prizes will not be held until a later date; however, joint raffle occasion does not mean the selling of pull tabs and tip boards on one day when the drawing for prizes will not be held until a later date.
2.1.14. "Licensee" means any organization or association granted an annual or limited occasion raffle license.
2.1.15. AMaterial violation@ includes any of the following listed acts or omissions, set forth in W. Va. Code '47-21-1, et seq., (except violations found to be de minimis violations by the Commissioner in accordance with this section), committed by a licensee, or an officer, director, employee, designee, agent or representative of a licensee:
2.1.15.1. Conducting charitable raffle occasions at times or at a location inconsistent with the license application;
2.1.15.2. Failing to timely amend or modify the charitable raffle license in accordance with section 9 of this rule;
2.1.15.3. Not having the raffle license posted at the occasion;
2.1.15.4. Allowing charitable raffle workers to play raffle;
2.1.15.5. Utilizing charitable raffle workers who fail to qualify under W. Va. Code '47-21-1 et seq and this rule;
2.1.15.6. Expending or using charitable raffle proceeds for unauthorized expenses;
2.1.15.7. Distributing charitable raffle net proceeds for purposes other than qualified charitable or public service purposes or for unauthorized purposes;
2.1.15.8. Continuing failure to maintain accurate records;
2.1.15.9. Continuing violations of any nature, subsequent to the licensee having been notified in writing of a violation;
2.1.15.10. Conducting fraudulent charitable raffle occasions; or
2.1.15.11. Obtaining a charitable raffle license under false pretenses or deceptive or fraudulent circumstances.
2.1.16. AMeaningfully associated with the licensee@ means persons who are members of the licensee organization, family members of members of the licensee organization, clients of the licensee organization, supporters of the licensee organization, volunteers and employees of the licensee organization.
2.1.17. "Member" means a person who, under the rules or practices of the licensee, may participate in the selection of persons authorized to manage the affairs of the licensee or in the development of policy of the licensee.
2.1.18. "Net proceeds" means the gross receipts (i.e. all moneys connected with participation in raffle games, the sale of supplies and other miscellaneous receipts) from all raffle occasions held during a license period minus the reasonable, necessary and actual expenses of holding the raffle occasions. The expenses of holding the game may not exceed twenty-five percent (25%) of the gross proceeds collected during the entire license period.
2.1.19. "Non-membership organization" or "organization that is not a bona fide membership organization" means an organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, but does not have bona fide members, or which has bona fide members, the majority of whom cannot operate charitable raffle games over a sustained period of time by reason of physical disability or legal disability or any other bona fide disability.
2.1.19.1. Example 1: An organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, has only a board of directors. The organization carries out its operations through volunteer workers. The organization is a non-membership organization for purposes of this definition.
2.1.19.2. Example 2: A young persons club (appropriately supported and sponsored by adults, parents and others) is a section 501(c)(3) organization which has members, all of whom are young persons under the age of 16. The members are prevented by law from participating in charitable raffle operations because of their ages (W. Va. Code '47-21-1 et seq.). This young persons club is an organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, and the organization's bona fide members cannot operate charitable raffle games by reason of a legal disability. This organization qualifies as a "non-membership" organization or an organization that is "not a bona fide membership organization" for the limited purposes of this definition.
2.1.20. "Person" means any individual, association, society, incorporated or unincorporated organization, firm, partnership or other nongovernmental entity or institution.
2.1.21. "Qualified recipient organization" means a charitable or public service organizations as defined in Subdivision 2.1.4 of this rule, which is organized and functions solely to benefit people by charitable or public service activities or endeavors.
2.1.22. "Raffle" means a game authorized by W. Va. Code '47-21-1 et seq., involving the selling of tickets to participate in the game which entitles the holder or holders to a chance on a prize or prizes. It includes a game authorized by W. Va. Code '47-23-1 et seq., involving the selling of so called "tip boards" or "pull tabs" which when opened or separated reveal a winning prize or combination of numbers or symbols which when read together designate a winning ticket; Provided, That, the selling of "tip boards" and "pull tabs" may only occur in conjunction with a charitable raffle occasion authorized under W. Va. Code '47-21-1 et seq.
2.1.23. "Raffle Occasion" means a single gathering or session at which a series of one or more successive raffles is conducted by a single licensee. It includes an occasion at which raffle tickets, and in conjunction therewith "tip boards" or "pull tabs" are sold and purchased and the winning numbers are revealed. For raffle tickets it also means the occasion for the drawing for the anticipated prize or prizes. For a raffle occasion authorized under W. Va. Code '47-21-1 et seq., raffle occasion means and includes the selling of raffle tickets, but not pull tabs or tip boards, on one day when the drawing for prizes will not be held until a later date; however, raffle occasion does not mean the selling of pull tabs or tip boards on one day when the drawing for prizes will not be held until a later date.
2.1.24. "Residents of this State meaningfully associated with a licensee" means persons that are residents of West Virginia, who are associated with a licensee that is a non-membership organization, who are age eighteen years or older and who are:
2.1.24.1. Clients of the licensee that, for one or more years prior to the date of the applicant=s application for a raffle license, or for renewal of a raffle license, whichever is the latter, have regularly or routinely utilized the services of the licensee organization, or
2.1.24.2. regular financial supporters of the licensee organization, or
2.1.24.3. employees of the licensee organization, or
2.1.24.4. volunteers that regularly assist the licensee in delivering its services, and includes
2.1.24.5. the immediate family members of any resident of this State meaningfully associated with a licensee, as defined in this section, provided that the family members are residents of West Virginia.
2.1.25. ASupporters@ of the licensee organization includes persons who promote the charitable interests of a licensee through monetary or volunteer assistance, and who uphold and advocate the charitable interests and charitable causes of the licensee.
2.1.26. "Tax-exempt association or organization" means a charitable or public service organization which has received an Internal Revenue Service letter designating them as a tax-exempt organization or association under Internal Revenue Code Section 501.
2.1.27. "Tip board" or "pull tab" means a charitable raffle board or charitable raffle game as defined in this section.
2.1.28. AVolunteers@ of a licensee organization means persons who give their services of their own free will to accomplish the charitable purposes of the organization, to furnish the services provided by the licensee organization or to support the charitable raffle operations of the licensee without any express or implied promise of direct or indirect payment, remuneration or gratuity, and having no direct or indirect monetary or legal interest or concern in the licensee organization=s charitable purposes, services or charitable raffle operations. For purposes of this definition, a person does not qualify as a volunteer if that individual's services are rendered pursuant to any mandate decision or action of a court, appeals board, parole board or other judicial or administrative body as part of an alternative sentencing program, parole program, sentence, judgement, settlement, plea bargain, or other administrative or judicial action or judgement as if that person=s services are rendered pursuant to any state, local, county or administrative requirement for graduation from any high school or other school or institution of learning.
2.1.29. All other terms defined in the W. Va. Code '47-21-1 et seq., have the same meaning when used in this rule.
W. Va. Code R. § 110-37-3 Raffle Operations
3.1. The following restrictions are imposed upon licensees for the conduct of a raffle occasion.
3.1.1. Persons may not solicit gifts or donations during the conduct of a raffle occasion.
3.1.2. No games of chance other than a raffle authorized in W. Va. Code '47-20-1 et seq., and charitable raffles as defined in this rule may be conducted or allowed at any raffle occasion.
3.1.3. "Tip boards", "pull tabs" or other authorized games of chance shall be sold to the licensee by a distributor which has registered with the Department of Tax and Revenue to sell and distribute those games of chance under W. Va. Code '47-23-1 et seq. This provision does not apply to perforated raffle tickets printed for an organization by a local printing company.
3.1.4. The licensee shall possess a valid raffle license at the time of the raffle occasion and the license shall be present throughout the duration of any and all occasions that the licensee sponsors.
3.1.5. Operators and raffle workers may not play in or participate in the raffle games or occasions in which they are working or assisting.
3.1.6. All raffle material shall possess a serial number given by a distributor which is licensed to operate in this State.
3.1.7. A licensee may cash checks out of raffle funds not exceeding $100.00 per occasion per person. The check shall be made payable to the licensee and clearly marked on the face of the check with the term "raffle."
3.1.8. All winning raffle tickets, "pull tabs" or "tip boards" shall be verified by a worker from the licensee organization before any prize money may be distributed.
3.1.9. All raffle occasions shall be open to the general public.
3.1.10. Any player may request a verification of the numbers drawn or the winning tickets at the time a winner is determined.
3.1.11. Every player shall be given an equal opportunity to win.
W. Va. Code R. § 110-37-4 Licensing
4.1. Who may hold raffle occasions.
4.1.1. Except as provided in Subdivision 4.1.4 of this subsection, only persons, as defined in Section 2 of this rule, who are residents of this State and who are active members of any charitable or public service organization, as defined in Section 2 of this rule, may hold raffle occasions under a valid license if the organization has been in existence in this State for two (2) year prior to filing for a raffle license.
4.1.2. If the applicant is a charitable organization, it shall have an Internal Revenue Code Section 501 determination letter before it may file for a raffle license.
4.1.3. Before any organization may hold a raffle or joint raffle occasion, it shall register with the Secretary of State under the Solicitation of Charitable Funds Act. (See, Section 28 of this rule).
4.1.4. Any charitable or public service organization which has been in existence in this State for at least two years may conduct raffle occasions without a license if the following provisions are met:
4.1.4.1. The gross proceeds derived by that organization from all raffle occasions does not exceed $7500 during any calendar year; and
4.1.4.2. No prize awarded in any single raffle occasion exceeds $1000.
4.1.5. Any charitable or public service organization which is not required to obtain a raffle license is not subject to the record keeping provisions of W. Va. Code '47-21-16, but shall maintain its own records for raffle. These records shall be kept open for inspection by the Tax Commissioner for at least three (3) years.
4.2. Application for raffle license.
4.2.1. Application is to be made to the Tax Commissioner on the proper form.
4.2.2. Filing of applications.
4.2.2.1. An applicant shall file its completed applications with the State Tax Commissioner. "Filing" means that the complete application is delivered to the West Virginia Department of Tax and Revenue, Criminal Investigation Division, Raffle and Raffle Licensing Unit, P.O. Box 1143, Charleston, West Virginia 25143, by regular mail, certified mail or in-person delivery. The filing date of an application is the date of its receipt at the place designated by the Tax Commissioner.
4.2.2.2. Each application, in order to be considered filed shall be complete, have all required documentation and have the appropriate license fee attached.
4.2.2.3. The applicant may not hold a raffle or sell any raffle tickets until the raffle application has been approved by the Commissioner and the license has been received by the applicant. Additionally, no raffle occasion may be held and no tickets may be sold until the expiration of the sixty day filing period, which is the time period between the Tax Commissioner's receipt of the application and the first raffle occasion.
4.2.2.3.a. Within five (5) days after the application has been approved, the Tax Commissioner shall send the license to the applicant. Any decision to deny an application shall be made known to the applicant before the sixty (60) day filing period expires.
4.2.2.3.b. If the Tax Commissioner fails to deny the application or send a license within the sixty day period, that failure will constitute approval of the application and the applicant may proceed to sell tickets and hold the raffle occasion. If the application has not been denied, the Tax Commissioner shall send the license to the applicant within five (5) days after expiration of the filing period.
4.3. Transferability - A raffle license issued under W. Va. Code '47-21-1 et seq. may not be transferred.
W. Va. Code R. § 110-37-5 Annual License
5.1. A charitable or public service organization may apply for an annual license which is valid for one (1) year from the date of issuance.
5.2. Only one (1) license per year may be issued to a charitable or public service organization and all of its auxiliaries, affiliates, chapters or lodges. If an organization does not obtain a license, the auxiliaries, affiliates, chapters or lodges may obtain a license.
5.2.1. Example 1 - X is a national charitable organization with its headquarters in another state. Chapter B is located in Beckley. This Chapter wishes to hold raffle occasions. Chapter B may apply for and obtain a license so long as X is not licensed.
5.2.2. Example 2 - X is a national charitable organization with its headquarters in another state. X applies for and obtains a raffle license. X also has two (2) chapters in this State. Chapter A is located in Beckley and Chapter B in Wheeling. Both Chapter A and Chapter B wish to hold raffle occasions. Neither may obtain a license as long as X is licensed.
5.2.3. Example 3 - C is a West Virginia volunteer fire department with two (2) auxiliaries in the state. If C applies for and obtains a raffle license, neither of the auxiliaries may obtain a license. However, the auxiliaries may hold raffles under C's license if they comply with all provisions of the W. Va. Code and this rule.
5.3. Branches, chapters or lodges of any national organization are not considered affiliates or auxiliaries of each other. Nor are local churches of a nationally organized church considered to be affiliates or auxiliaries of each other. In addition every school is considered a separate organization for purposes of W. Va. Code '47-21-1 et seq..
5.4. No two (2) or more organizations may hold a joint raffle occasion under any annual license.
5.5. The licensee shall conspicuously display its raffle licenses at the location where the raffle occasions are held.
5.6. All raffle occasions shall be open to the public.
W. Va. Code R. § 110-37-6 Limited Occasion License
6.1. A charitable or public service organization may apply for a limited occasion license which is valid only for the time period specified in the application. This time period may not exceed six (6) months from the date of issuance and the number of raffle occasions may not exceed two (2) during this time period.
6.2. Only three (3) limited occasion licenses a year may be granted to the parent organization and all of its auxiliaries, affiliates, chapters or lodges. If the major organization does not obtain a limited occasion license, the auxiliary, affiliate, chapter or lodge may apply for one. A charitable or public service organization which applies for a limited occasion license is not required to possess an annual license.
6.3. For purposes of this section, branches, chapters or lodges of any national organization are not considered affiliates or auxiliaries of each other. Nor are local churches of a nationally organized church considered to be affiliates or auxiliaries of each other. In addition, every school is considered a separate organization for purposes of the W. Va. Code and this rule.
6.4. A licensee which holds an annual license may obtain more than one (1) limited occasion license per annual license period.
6.5. Two (2) or more organizations may hold a joint raffle occasion if each organization has a valid limited occasion license for the jointly held occasion.
6.6. The licensee shall conspicuously display its limited occasion licenses at the location where the limited occasion raffle occasions are held.
W. Va. Code R. § 110-37-7 License Fees and Exemptions From Taxes
7.1. License fees.
7.1.1. Annual License - $500.00.
7.1.2. Limited Occasion License - $50.00.
7.1.3. State Fair License - $500.00.
7.1.4. Exempt - Those organizations exempt from licensure under subdivision 4.1.4 of this rule are exempt from the fees imposed in this section.
7.1.5. All fees shall be paid to the Tax Commissioner and shall accompany the application for license. If no license fee accompanies the application, the application shall not be considered to be filed. License fee amounts, if mailed, shall be remitted in the form of a check or money order except the license fee for the State Fair shall be made either by certified check or money order. Payment may be made in person to the West Virginia State Tax Department, Criminal Investigation Division, Raffle and Raffle Licensing Unit, at 1001 Lee Street, Charleston, West Virginia.
7.2. Exemption from taxes.
7.2.1. Franchise taxes.
7.2.1.1. The license fee imposed in Subsection 7.1 of this rule is in lieu of all other license or franchise taxes or fees of this State.
7.2.1.2. No political subdivision of this State may impose any license or franchise fees or taxes in regard to any raffle occasion.
7.2.2. Consumers sales taxes.
7.2.2.1. The licensee is not required to pay consumers sales tax on purchases to be used or consumed in the conduct of a raffle occasion.
7.2.2.2. The licensee is not required to collect consumers sales tax on any admission fees or any sales of raffle tickets, pull tabs or tip boards.
7.2.3. Other taxes. - The gross proceeds derived from the conduct of raffle occasions are exempt from:
7.2.3.1. state and local business and occupation taxes;
7.2.3.2. income taxes;
7.2.3.3. excise taxes; and
7.2.3.4. all special taxes.
W. Va. Code R. § 110-37-8 Information Required in Applications
8.1. All applications for a raffle license shall contain:
8.1.1. The name of the applicant and whether the applicant is the major organization, such as, for example, a national headquarters of a fraternal or religious association, or an affiliate, subsidiary, chapter or lodge of a major organization;
8.1.2. The name of the state or national organization;
8.1.3. The headquarters' address of the state or national organization;
8.1.4. The address of the applicant organization;
8.1.5. The telephone number of the applicant organization. If there is no telephone number for the applicant organization, then the address and telephone number of the person applying on behalf of the organization shall be listed;
8.1.6. The address or location where raffle occasions are to be conducted;
8.1.7. For charitable organizations, a copy of an Internal Revenue Service determination letter which states that the organization is exempt from taxation under Internal Revenue Code Section 501(a) and is described in Internal Revenue Code Section 501(c)(3), 501(c)(4), 501(c)(8), 501(c)(10), 501(c)(19), or 501(d);
8.1.8. A copy of the organization's charter, articles of incorporation or other evidence showing that the organization has been in existence for at least one (1) year prior to the making of the application;
8.1.9. The day or days of the week and the time or times when the raffle occasions will be held. The date of the first raffle occasion shall be included;
8.1.10. The name of the owner of the premises where the raffle occasions are to be held;
8.1.11. A copy of all rental agreements involved if the premises are leased or subleased;
8.1.12. A statement as to whether the applicant has ever had a previous application for any raffle license refused, or whether any previous license has been revoked or suspended. This subdivision applies to raffle licenses applied for or issued by other states;
8.1.13. A detailed statement of the charitable or public service purpose or purposes for which the raffle proceeds will be spent;
8.1.14. A list and description of all expenses estimated to be incurred in connection with the holding of raffle occasions and any concessions operated. The name and address of each payee shall be included;
8.1.15. A copy of any written agreement or an explanation of any oral agreement, as well as any agreement providing for any type of remuneration to be received by the concession operator, if a concession is to be operated by an individual or organization other than the applicant organization;
8.1.16. A statement that the individuals specified in Subdivisions 8.1.18, 8.1.19 or 8.1.20 of this Subsection and the officers of the applicant organization understand that:
8.1.16.1. Allowing anyone, other than authorized individuals, to conduct any portion of the raffle occasion or operate any concessions is a violation of the West Virginia Code;
8.1.16.2. Reports shall be filed and records shall be kept as required by the West Virginia Code;
8.1.16.3. It is a crime to violate any provision of the West Virginia Code; and
8.1.16.4. That any violations may result in suspension or revocation of the organization=s license and denial of applications for subsequent licenses;
8.1.17. A sworn statement by an authorized representative of the applicant organization that the information contained in the application is true to the best of his or her knowledge; and
8.1.18. A list of the names and addresses of all officers and members of the board of directors, governors or trustees of the applicant organization.
8.2. Limited occasion licenses - In addition to the requirements provided in Subsection 8.1 of this Section, the application for a limited occasion license shall also include:
8.2.1. The names and addresses of two (2) or more bona fide active members of the applicant organization. These members shall have the overall responsibility for the organization's raffle operations. One (1) of these members shall be present at all times when limited occasion raffle is being conducted; and
8.2.2. The names and addresses of the highest elected officer of the applicant organization and his or her officially appointed designee. One (1) of these members shall also be present at all times when a limited occasion raffle is conducted.
8.3. Annual licenses - In addition to the requirements provided in Subsection 8.1 of this Section, the application for an annual license shall also include:
8.3.1. The names, addresses and telephone numbers of three (3) or more bona fide active members of the organization. These members shall have the overall responsibility for the organization's raffle operations. One (1) of these members shall be present when the winning numbers or names are drawn, announced, posted and verified and the prizes awarded; and
8.3.2. The names, addresses and telephone numbers of the highest elected officer of the licensee and his or her officially appointed designees. One (1) of these members shall also be present at all times when the winning numbers or names are drawn, announced, posted and verified and the prizes are awarded.
W. Va. Code R. § 110-37-9 Amendment of License
9.1. If any circumstances, which are beyond the licensee's control, arise that make the information in the original application inaccurate or prevent the licensee from holding a raffle occasion in accordance with the information in the application, the licensee shall request approval from the Tax Commissioner to amend or modify its license.
9.2. Application for amendment or modification of the organization's license shall be made to the Tax Commissioner. The Commissioner shall provide application forms for this purpose.
9.3. Notification by the Tax Commissioner of approval of amendments or modifications to the license shall be made to the licensee by regular mail.
W. Va. Code R. § 110-37-10 Licensee Rules
10.1. Each licensee may adopt rules so long as they are not inconsistent with or in violation of W. Va. Code '47-21-1 et seq. or this rule.
10.2. Any rules adopted by a licensee shall be made available for public inspection at all raffle occasions.
10.3. Tip boards and pull tabs shall be bought, sold and opened only within the area designated for the holding of a raffle occasion.
10.4. Any rules adopted by the licensee are a part of the records required to be maintained by the licensee.
10.5. A licensee shall file a copy of licensee promulgated rules with the Tax Commissioner.
W. Va. Code R. § 110-37-11 Limits on Prizes Awarded: General Provisions
11.1. Prizes shall be valued at fair market value at the time of the acquisition for the raffle or at the time of purchase.
11.2. Prizes may be money, real or personal property or merchandise other than beer, wine, spirits or alcoholic liquor.
W. Va. Code R. § 110-37-12 Compensation of Raffle Operator
12.1. A raffle licensee is authorized under certain circumstances to pay a salary to operators of charitable raffle games who, as members of the licensee organization, have been active members in good standing for at least two (2) years prior to the date of filing the application for a charitable raffle license or the most recent filing of an application for renewal of the license. The salary may be no less than the federal minimum wage and no more than $6.50 per hour worked at the charitable raffle occasion.
12.2. The number of operators which a licensee may pay for working at a charitable raffle occasion is dependent upon the licensee's gross receipts from the raffle occasions as indicated on the licensee's most recently filed annual financial report.
12.2.1. The licensee may pay no more than fifteen (15) operators when a raffle occasion is held in conjunction with a Super Raffle occasion.
12.2.2. The licensee may pay no more than eight (8) operators if its gross receipts as indicated in this Subsection equal or exceed $100,000.
12.2.3. The licensee may pay no more than five (5) operators if its gross receipts as indicated in this Subsection is less than $100,000 but equals or exceeds $50,000.
12.2.4. The licensee may pay no more than three (3) operators if its gross receipts as indicated in this Subsection are less than $50,000.
12.3. If a licensee lawfully holds a charitable raffle occasion simultaneously with a charitable raffle occasion, the number of paid charitable raffle operators allowed is in addition to the number of charitable raffle operators allowed under W. Va. Code '47-20-12a. When simultaneous raffle and raffle occasions occur, the raffle operators may be paid only from the raffle proceeds and the raffle operators may be paid only from the raffle proceeds. The charitable raffle and charitable raffle receipts and payments may not be commingled.
12.4. The terms "operator," "raffle operator" and "raffle operator" do not include concession stand workers. Additionally, concession workers may not be paid more than $6.50 per hour.
W. Va. Code R. § 110-37-13 Compensation for Concession Operator; Concession Operated by Charitable or Public Service Organization
13.1. Any licensee may allow any person to operate concessions as a part of a raffle occasion and be compensated for that operation: Provided, That:
13.1.1. the licensee organization holds regular functions other than raffle occasions on a regular basis;
13.1.2. the concession is regularly operated at these regular meetings;
13.1.3. the person which operates the concession at regular meetings is the concessionaire for raffle occasions;
13.1.4. the terms of the agreement, as provided for in Subdivision 8.1.15 of this rule, are the same for both regular meetings and for raffle occasions. The licensee shall file the agreement with the application for license and if any changes are made in the agreement those changes shall be filed with the Tax Commissioner within ten (10) days of being agreed upon;
13.1.5. the cost of compensating any individual who participates in the conduct of raffle or related concessions shall not exceed $6.50 per hour.
13.2. A licensee may also allow any charitable or public service organization to operate a concession at any raffle occasion held by a licensee; Provided, That the net proceeds received by the charitable or public service organization from the concession are used solely for the charitable or public service purposes of that organization.
W. Va. Code R. § 110-37-14 Payment of Reasonable Expenses from Proceeds: Net Proceeds Disbursements
14.1. The licensee may pay reasonable, necessary and actual expenses incurred in connection with the conduct of raffle occasions from the proceeds of the conduct of raffle. Payments for the expenses may not exceed twenty-five percent (25%) of the gross proceeds collected during a license period, and are to be measured at the end of the license period and not at the end of any single raffle occasion or at the end of any quarterly reporting period. These payments may be made for:
14.1.1. rent paid for the use of any premises that does not exceed the fair market value rent for the premises; Provided, That the rent shall be prorated for the days on which raffle occasions are held. A copy of the rental agreement shall be filed with the application and any changes to that agreement shall be filed within ten (10) days of being made;
14.1.2. custodial services;
14.1.3. costs to the licensee for equipment and supplies used to hold the raffle occasion;
14.1.4. costs to the licensee for advertising the raffle occasion, but only to the extent the advertising is authorized in W. Va. Code '47-21-17 and Section 16 of this rule;
14.1.5. hiring security personnel but only if the personnel are licensed in accordance with W. Va. Code '30-18-1 et seq;
14.1.6. the cost of providing child care services to raffle patrons: Provided, That any proceeds received from the provision of child care services shall be handled in the same manner as raffle proceeds;
14.1.7. the actual cost to the licensee for the purchase of the prizes awarded at the raffle occasions; and
14.1.8. other reasonable, necessary and actual expenses such as the reasonable legal fees incurred to obtain raffle licensing, accounting fees incurred to provide reports required by virtue of holding raffle occasions, license fees, authorized salaries paid to raffle operators and the prorata cost of utilities.
14.2. The cost of refreshments, souvenirs or any other items sold or provided through any concession may not be paid out of the raffle proceeds.
14.3. The net raffle proceeds, including any interest earned on those proceeds, shall be expended for the charitable or public service purpose(s) stated in the raffle license application within one (1) year after the expiration of the license.
14.4. None of the raffle proceeds may be used for construction, acquisition or improvement of real or personal property unless the property is used exclusively for charitable or public service purposes. The Tax Commissioner, where appropriate, may disapprove contracts affecting real or personal property used exclusively for charitable or public service purposes when the contracts are not reflective of the fair market value of the services provided under the contacts.
14.4.1. Example 1 - Raffle proceeds may not be used to build a barbecue pit for a charitable organization.
14.4.2. Example 2 - Raffle proceeds may be used to build a playground for the underprivileged.
14.4.3. Example 3 - Raffle proceeds may not be used to finance major structural improvements or additions to premises owned by a charitable or public service organization, when the premises are used for activities outside of the charitable or public service purposes of the charitable organization.
14.4.3.1. The term "major structural improvements or additions" means activities such as installing extensive plumbing, electrical, electronic, heating or cooling systems. It may also include, but not be limited to, replacing a roof, building a recreational deck, paving a parking lot or building a boat dock.
14.5. The Tax Commissioner may disapprove any contract for the sale of goods or services to any raffle licensee to be used in or to be related to any raffle occasion or operation if the contract is unreasonable or is not representative of fair market value. The Tax Commissioner may also disapprove any lease of real or personal property to a raffle licensee to be used in or to be related to any raffle occasion or operation if the lease is unreasonable or is not representative of fair market value.
14.5.1. Disapproved contracts and leases are void in accordance with W. Va. Code '47-21-15(e).
14.5.2. The Tax commissioner may suspend a raffle license or refuse to renew a raffle license if a raffle licensee engages in transactions under a disapproved lease or contract.
14.6. If a licensee, in good faith, finds that it cannot meet or comply with any of the requirements set forth in this Section or wishes to use the proceeds of raffle occasions for a long range charitable or public service purpose, then the licensee shall apply to the Tax Commissioner for permission to:
14.6.1. spend the net proceeds for charitable or public service purpose not listed in the raffle license application; or
14.6.2. spend the net proceeds later than the one (1) year time period. If The Tax Commissioner grants permission to the licensee to spend the net proceeds after the expiration of the one (1) year time period, the licensee shall file periodic reports with the Tax Commissioner until the proceeds are spent. The licensee shall apply for permission no later than sixty (60) days prior to the end of the one (1) year time period.
W. Va. Code R. § 110-37-15 Records
15.1. Separate accounting and bookkeeping procedures for raffle operations shall be maintained by each licensee. This means, at a minimum, that a separate bank account shall be maintained for raffle proceeds and only the preprinted serially numbered checks used in conjunction with this account may be used for the payment of expenses. The checks shall be payable to a specific person, firm or corporation and at no time may a check be made payable to cash. Detailed books of receipts and disbursements shall also be maintained.
15.2. All records shall be maintained for at least three (3) years or for a longer time period as the Tax Commissioner shall, in writing, order. The records shall be held open for reasonable inspection by the Commissioner. Results of these inspections may be used as grounds for performing an audit of the licensee's books.
15.3. Audits of the licensee's books may be performed by the Tax Commissioner if he or she has reasonable cause to believe that the licensee has violated W. Va. Code '47-21-1 et seq.
15.4. The Tax Commissioner shall perform, or cause to be performed, an audit of the books and records of any licensee that has awarded total prizes in excess of one hundred seventy-five thousand dollars ($175,000) during the previous license year. The Tax Commissioner shall file a copy of the completed audit with the county commission of the county in which the licensee holds raffle occasions.
W. Va. Code R. § 110-37-16 Advertising
16.1. A licensee may advertise its raffle occasions in a reasonable manner: Provided, That the advertisements shall include the name of the licensee holding the raffle occasion. However, a licensee may not hire or pay any person to develop or conduct an advertising campaign to promote any raffle occasion.
W. Va. Code R. § 110-37-17 Fraud; Penalties
17.1. In accordance with W. Va. Code '47-21-18, any person or licensee that knowingly conducts or participates in a fraudulently or deceptively conducted raffle game with intent to defraud is guilty of a felony.
17.2. As provided in W. Va. Code '47-21-18, the penalties upon conviction are:
17.2.1. A fine of not less than five hundred ($500) or more than ten thousand dollars ($10,000); or
17.2.2. imprisonment in the penitentiary for not less than one (1) or more than five (5) years; or both fined and imprisoned.
W. Va. Code R. § 110-37-18 Obtaining License Fraudulently; Penalties
18.1. In accordance with W. Va. Code '47-21-19, any individual, association, organization or corporation that knowingly uses false, deceptive or fraudulent methods to obtain a license for themselves or others is guilty of a misdemeanor.
18.2. As provided in W. Va. Code '47-21-19, the penalty upon conviction is a fine of not less than five hundred dollars ($500) or more than ten thousand dollars ($10,000).
W. Va. Code R. § 110-37-19 Violation of Provisions; Penalties
19.1. In accordance with W. Va. Code '47-21-20, any person who violates the provisions of W. Va. Code '47-21-1 et seq. (other than the provisions concerning fraud and fraudulently obtaining a license) is guilty of a misdemeanor.
19.2. The penalty upon conviction is a fine of not less than one hundred dollars ($100) or more than one thousand dollars ($1000). The penalties upon a second conviction are:
19.2.1. a fine of not less than one hundred ($100) or more than one thousand dollars ($1000); and/or
19.2.2. imprisonment for not more than one (1) year.
W. Va. Code R. § 110-37-20 Proceeds of State Fair
20.1. All proceeds which accrue to the West Virginia State Fair are considered used for charitable or public service purposes. Proceeds that the State Fair Board pays to or allows the licensee to retain are expenses incurred by the State Fair Board.
W. Va. Code R. § 110-37-21 State Fair
21.1. A charitable raffle license must first be issued to the State Fair Board in order for charitable raffles to be held at the State Fair. The State Fair Board shall have those charitable raffle occasions occurring at the State Fair conducted by one (1) or more persons who:
21.1.1. have held regular raffle games for a period of one (1) year prior to the filing of the State Fair Board=s application;
21.1.2. file an application for a license which shall include a copy of any license or agreement entered into between the State Fair Board or its licensee and the applicant; and
21.1.3. pay a license fee of five hundred dollars ($500.00). This fee shall be paid by certified check or money order, or, if the payment is made in person at the State Tax Division, it may be made in cash.
21.2. The State Fair Board may adopt reasonable rules to govern the holding of raffle games at the State Fair. These rules may not be inconsistent with or in violation of the W. Va. Code or this rule.
W. Va. Code R. § 110-37-22 Administration
22.1. The Tax Commissioner may:
22.1.1. deny an application for a license if the issuance of the license would be in violation of the West Virginia Code.
22.1.1.1. The applicant may protest the denial of the application. Any protest shall be made in writing and shall state the reason for the protest. This protest shall be filed with the Tax Commissioner within sixty (60) days of the receipt of the denial of the license.
22.1.1.2. When protest is received, the Commissioner shall set a time and place for a hearing on the matter.
22.1.1.3. The Commissioner shall send to the applicant a notice containing the date of hearing, the time of hearing, the place where the hearing will be held, and a short, plain statement of the matters asserted.
22.1.1.4. Service of the notice shall be by personal or substituted service.
22.1.1.5. At the hearing the applicant may produce evidence on its behalf and be represented by counsel.
22.1.1.6. A decision by the Commissioner upholding the denial of the license is subject to judicial review on appeal by the applicant.
22.1.1.7. The burden of proof is on the applicant;
22.1.2. revoke, suspend or refuse to renew a license if:
22.1.2.1. The licensee or any member of the licensee's organization has been convicted under W. Va. Code ''47-21-18 or 47-21-19, and the Commissioner finds it would be in the public interest to revoke, suspend or refuse to renew a license;
22.1.2.2. the licensee has violated any of the other provisions of the W. Va. Code; or
22.1.2.3. the licensee has failed to maintain records or file reports as required. Licenses shall only be revoked, suspended or refused under this section if the Commissioner finds that the failure to record or report will impair the Commissioner's ability to administer W. Va. Code '47-21-1 et seq.: Provided,
22.1.2.3.a That before revoking or suspending a license, the Commissioner shall give ten (10) days notice to annual licensees or three (3) days notice to limited occasion licensees of the suspension or revocation. This notice shall be written, shall state reasons for the action and shall specify a time and place where the licensee may show why the action should not be taken. Notice may be served by personal or substituted service on the person who applied for the license on behalf of the organization.
22.1.2. 3.b That at the time designated for any hearing the licensee may produce evidence on its behalf and be represented by counsel.
22.1.2.3.c That a decision of the Commissioner suspending or revoking a license is subject to judicial review on appeal by the licensee;
22.1.3. conduct hearings according to the provisions of the State Administrative Procedures Act (W. Va. Code '29A-5-1 et seq.). The burden of proof in the hearings is upon the licensee; and
22.1.4. issue emergency orders suspending a raffle license when
22.1.4.1 the Commissioner believes that a criminal violation of the W. Va. Code has occurred;
22.1.4.2 the Commissioner believes that the suspension is necessary to prevent a criminal violation of W. Va. Code '47-21-1 et seq.; or
22.1.4.3 the Commissioner believes that the suspension is necessary to preserve the public peace, health, safety, morals, good order or general welfare.
22.1.4 The orders authorized in Subdivision 2.1.4 of this rule shall set forth the grounds for issuance. This includes a statement of facts of the alleged emergency. The order shall be served by personal or substituted service on the licensee or the person who applied for the license on behalf of the licensee.
22.1.5 The orders authorized in Subdivision 2.1.4 of this rule shall are effective immediately upon issuance and service.
22.1.6 After the issuance of an emergency order authorized in Subdivision 2.1.4 of this rule shall the Commissioner shall set a time and place for hearing within five (5) days. At this hearing the licensee may show cause why its license should not be revoked.
W. Va. Code R. § 110-37-23 Filing of Reports
23.1. Annual, limited or state fair licensees shall file annual financial reports on forms provided by the Commissioner. These reports shall summarize the financial activity of the licensee for the full license year. Each annual reports shall be filed no later than (30) days after the end of the license period which it covers. The time period covered by the annual report is the full license year, or at the election of a licensee receiving state or federal funding, the most recently ended state or federal fiscal year. With this report, the licensee shall include its expired license.
23.1.1. Example 1. X organization obtains a license and holds raffle occasions on September 1, 1996. The annual report is due no later than September 30, 1997 (thirty (30) days after the expiration of the license which expires on August 31, 1997).
23.2. All required reports shall contain the name, address and social security number of any person who receives during a raffle occasion prizes with an aggregate value of over one hundred dollars ($100).
23.3. Any licensee failing to file a required report when due is liable for a penalty of twenty-five ($25.00) for each month, or fraction of a month during which the failure continues. The penalty shall not exceed one hundred ($100.00) for each delinquent period.
23.4. The annual financial report required to be filed for each license year shall contain a compilation or review of the financial report, as defined by the American Institute of Certified Public Accountants, if for the license year just completed the licensee's gross receipts exceed fifty thousand dollars ($50,000). The licensee, in lieu of a compilation or review, may file a financial report audited by a certified or licensed public accountant.
W. Va. Code R. § 110-37-24 Filing of Copy of License
24.1. When granting a raffle license, the Tax Commissioner shall file a copy of the license with the clerk of the county commission of the county in which the raffle occasions are to be held. The clerk shall record this copy.
24.2. The Tax Commissioner shall make a copy of the application available for public inspection.
W. Va. Code R. § 110-37-25 County Option Election
25.1. A county commission may call a local option election to determine if the provisions of W. Va. Code '47-21-1 et seq. shall continue in effect in the county. No local option election may be called to disapprove the playing of raffle games at the state fair. Raffles are permitted in all counties unless and until a local option election is held which results in a majority of voters disapproving the conducting of raffle occasions within the county.
25.2. To call the election, a petition for election shall be made. The form shall be substantially as follows:
PETITION ON LOCAL OPTION ELECTION RESPECTING THE CONDUCT OF RAFFLE GAMES FOR CHARITABLE PURPOSES
IN COUNTY WEST VIRGINIA
Each of the undersigned certifies that he or she is a person residing in county, West Virginia, and is duly qualified to vote in that county under the laws of the State, and that his or her name, address, and the date of signing this petition are correctly set forth below.
The undersigned petition the county commission to call and hold a local option election at: (1) a special or (2) the next primary, general or special election (the petition shall specify (1) or (2) upon the following question: Shall the provisions of Article twenty-one (21), Chapter forty-seven (47) of the Code of West Virginia, one thousand nine hundred thirty-one (1931) as amended, continue in effect in county, West Virginia.
NAME ADDRESS DATE
(Each person signing must specify either his post office address or his street number).
At least ten percent (10%) of the persons qualified to vote within the county must shall sign this petition before the county commission may call the election.
25.3. If the petition is filed as specified, the county commission shall enter an order calling a local option election, and shall publicize the notice of the local option election by publication of a Class II-O legal advertisement with the county publication area. This notice shall be published within the fourteen (14) consecutive days immediately preceding the election.
25.4. Any person qualified to vote in the county at any primary, general or special election may vote at the local option election.
25.5. Election officers appointed and qualified to serve at any primary, general or special election shall conduct the local option election. These election officers shall count the ballots and make a return which shall be certified by the commissioners of election to the county commission. The county commission shall canvass the ballots and certify the result without delay.
25.6. A local option election may be held at the same time as any primary, general or special elections, but, it shall be held in connection with and as a part of the primary, general or special election if it is held at the same time.
25.7. The form of the ballot shall be substantially as follows:
"Shall the playing of raffle to raise money for charitable or public service organizations continue in effect in county of West Virginia?" (Place a cross mark in the square opposite your choice). Yes No
25.8. If the majority of the voters vote no, charitable raffles may no longer occur in that county.
25.9. A local option election may be called in a county to resubmit the question to the voters of that county, whether the question was approved or disapproved at the previous local option election, any earlier than five (5) years after the last local option election.
W. Va. Code R. § 110-37-26 Prohibited Acts
26.1. Any person, individual, organization, association or corporation convicted of a felony or misdemeanor for a gambling offense:
26.1.1. may not obtain, either directly or indirectly, a raffle license;
26.1.2. may not conduct a raffle game;
26.1.3. may not operate a concession;
26.1.4. may not lease or provide to any licensee organization any premise where raffle occasions may be held.
26.2. This restriction applies for ten (10) years from the date of conviction.
26.2.1. Example 1. - Y was convicted of a misdemeanor gambling offense in 1982. During the year 1991, Y may not participate in the operation of raffle in any way. But, in 1993, Y may participate, if he has a valid license.
W. Va. Code R. § 110-37-26a Smoking and Nonsmoking Sections. 26a.1. If smoking is permitted during the conduct of any raffle occasion, in coordination with any raffle, super-raffle or limited occasion raffle occasion, any raffle operator who distributes more than one hundred (100) raffle cards and/or raffle sheets at the occasion shall provide smoking and nonsmoking sections
W. Va. Code R. § 110-37-27 Restriction on Use of Raffle Equipment
27.1. A licensee may only use raffle equipment:
27.1.1. which it owns;
27.1.2. which it borrows without compensation from another licensee; or
27.1.3. which it leases from another licensee for a reasonable and customary amount.
27.1.4. Example 1 - John's Raffle Equipment Rental, an organized for profit company, may not rent raffle supplies to licensees in this State.
27.1.5. Example 2 - S organization owns several pieces of raffle equipment. Z organization does not wish to buy what it needs to conduct its raffle, but instead wishes to lease the equipment from S at a reasonable rate. Z may lease from S if both organizations meet the criteria for charitable raffle licensees under Subdivision 2.1.3. of this rule.
27.2. The rental or purchase of raffle equipment shall be considered a reasonable and necessary expense as provided for in Section 14 of this rule.
W. Va. Code R. § 110-37-28 Requirement for a Registration Statement
28.1. Unless exempt, every charitable or public service organization that obtains a raffle license shall file an annual registration statement with the Secretary of State's Office, under the Solicitation of Charitable Funds Act.
28.2. These registration statements shall be filed on forms provided by the Secretary of State before any raffle occasions are held.
'110-16-29. Additional Remedies for the Tax Commissioner, Administrative Procedures; Deposit of Money Penalties.
29.1. For any material violation of W. Va. Code '47-21-1 et seq. or this rule, the Tax Commissioner may:
29.1.1. Revoke or refuse to renew any charitable raffle license;
29.1.2. Suspend the charitable raffle license of any licensee for the period of time the Tax commissioner considers appropriate. A suspension may not be for less than one week nor more than twelve months for each material violation;
29.1.3. Place a charitable raffle licensee on probation for a period of not less than six months nor for more than five years for each material violation;
29.1.3.1. In the event a licensee is placed on probation, then, as a condition of the probation, the licensee shall pay to the Tax Commissioner a Probation Supervision Fee in an amount equal to two thousand dollars or two percent of the gross proceeds derived by the licensee from the conduct of raffle occasions during the period of the probation, whichever is greater.
29.1.3.2. No Probation Supervision Fee paid in accordance with this section may be claimed by the licensee as a reasonable, necessary or actual expense incurred in connection with the conduct of a raffle occasion under the authority of W. Va. Code '47-21-15.
29.1.3.3. The imposition of probation shall be used, when warranted, to insure the charitable raffle licensee's continued adherence to the applicable statutes and legislative rules. After due consideration of the severity of the violation, probationary terms and conditions shall be determined by the Tax Commissioner;
29.1.4. Require a charitable raffle licensee to replace any officer who knew or because of the officer=s responsibilities within the licensee organization should have known of a material violation.
29.1.4.1. The Tax Commissioner shall suspend for a period of not less than one month nor more than twenty-four months the license or licenses of a licensee that refuses to replace any officer as directed by the Tax Commissioner. The Tax Commissioner shall consider the severity of the violation and whether the violation was a one-time or repeated occurrence when implementing this disciplinary action;
29.1.5. Require a charitable raffle licensee to prohibit one or more members, supporters, volunteers or employees of the licensee involved in material violations from participating in, or being present at or on the premises of all future raffle occasions held under the charitable raffle license, or for the period of time specified by the Tax Commissioner.
29.1.5.1. The Tax Commissioner shall suspend for a period of not less than one month nor more than twelve months the license of a licensee that refuses to prohibit the participation of identified members, supporters, volunteers or employees as directed by the Tax Commissioner. The Tax Commissioner shall consider the severity of the violation and whether the violation was a one-time or repeated occurrence when applying this disciplinary action; and
29.1.6. Impose a civil money penalty of not less than one hundred dollars nor more than two times the annual gross proceeds derived by the charitable raffle licensee from the conduct of raffle, for each material violation:
29.1.6.1. In setting any monetary penalty for a first violation, the Tax Commissioner shall take into consideration the ability of the licensee to continue to exist and operate.
29.1.6.2. No money penalty paid in accordance with this section may be claimed by the licensee as a reasonable, necessary or actual expense incurred in connection with the conduct of a raffle occasion.
29.1.6.3. For each material violation that is a second or succeeding violation, the amount of the civil penalty that may be imposed may not be less than five hundred dollars and may not exceed the greater of one hundred thousand dollars or two times the annual gross proceeds of the licensee from the conduct of raffle.
29.1.6.4. Any charitable raffle licensee aggrieved by the amount of the civil penalty may in lieu of paying the penalty surrender its charitable raffle license for a minimum period of twelve consecutive months.
29.1.6.5. The license shall be revoked If the licensee refuses to pay the penalty or surrender its license,
29.1.6.6. After the licensee has exhausted all administrative remedies provided in subsection 29.4 of this rule, the licensee may have the issue of whether a material violation was committed by the licensee reviewed in the circuit court of the county where the violation giving rise to the civil penalty occurred.
29.1.6.7. The imposition of civil penalties shall be implemented in accordance with the criteria set forth in subsection 29.2 of this rule.
29.1.6.8. For purposes of this rule, surrender of the charitable raffle license or surrender of the license means and includes surrender of all regular and limited occasion raffle licenses held by the licensee, unless specifically otherwise directed by the Tax Commissioner.
29.2. The imposition of civil money penalties shall be in accordance with the following criteria:
29.2.1. For conducting charitable raffle occasions at times or at a location inconsistent with the license application, the money penalty is:
First violation $100 Second or succeeding violation $500 but not more than $3,000
29.2.2. For failure to timely amend or modify the charitable raffle license in accordance with section 9 of this rule, the money penalty is:
First violation $100 Second or succeeding violation $500 but not more than $3,000
29.2.3. For not having the raffle license posted at the occasion; and allowing charitable raffle workers to play raffle, the money penalty is:
First violation $100 Second or succeeding violation $500 but not more than $3,000
29.2.4. For utilizing charitable raffle workers who fail to qualify under W. Va. Code '47-21-1 et seq. and this rule, the money penalty is:
First violation $100 but not more than $500 but not more than $2500
29.2.5. For expending or using charitable raffle proceeds for unauthorized expenses, the money penalty is:
29.2.6. For distributing charitable raffle net proceeds for purposes other than qualified charitable or public service purposes or for unauthorized purposes, the money penalty is:
29.2.7. For continuing failure to maintain accurate records, the money penalty is:
29.2.8. For continuing violations of any nature, subsequent to the licensee having been notified in writing of a violation, the monetary penalty is:
29.2.8.1 The penalty for violations occurring subsequent to written notice shall be in addition to the penalty that may be applied for a second or succeeding violation under any other provision of this rule.
29.2.9. For conducting fraudulent charitable raffle occasions, or obtaining a charitable raffle license under false pretenses or deceptive or fraudulent circumstances, the monetary penalty is:
29.2.10. The Tax Commissioner may impose any one or more, or any combination, of the penalties provided for in this subsection 29.2.
29.3. No sanctions or other penalty shall be imposed under subdivision 29.2.4 on a charitable raffle licensee for failure to operate charitable raffle occasions with members when:
29.3.1. The licensee is exempt from federal income taxation under Internal Revenue Code '501 (c)(3) or 501 (c)(4);
29.3.2. The licensee is a non-membership organization that does not have bona fide members; and
29.3.3. The raffle occasions are operated by residents of this State who have been employed by the licensee or who have been meaningfully associated with the licensee for one or more years before the date of the licensee's application for a license under the Act, or for one or more years before the date of the licensee=s most recent application for renewal of a license under the Act, whichever is later.
29.4. Administrative procedures.
29.4.1. An order issued under this section shall be served by certified mail or in the manner provided in rule 4(d) of the West Virginia Rules of Civil Procedures
29.4.2. A charitable raffle licensee may appeal an order of the Tax Commissioner issued under this section by filing a written protest with the Tax Commissioner, either in person or by certified mail, properly addressed and postage prepaid, within twenty days after the licensee is served with a copy of the order. Appeals shall be filed in the form or forms as the Tax Commissioner furnishes with the order.
29.4.3. When a timely written protest is filed, the procedures for contested cases set forth in W. Va. Code '29A-5-1 et seq. apply.
29.4.4. The burden of proof in any administrative or court proceeding is on the charitable raffle licensee to show cause why the order of the Tax Commissioner under this section should be modified, in whole or in part, or set aside.
29.5. Nothing contained in this rule shall be construed to prohibit, limit, alter or amend the Tax Commissioner=s power under W. Va. Code '47-21-23 to issue an emergency order suspending a raffle licensee.
APPENDIX A
UNITED STATES TREASURY REGULATIONS
(Reg. Section 1.501(c)(3)-1)
The regulation below is intended to provide guidance to the public in the determination of what a charitable or public service activity or endeavor is. ' 1.501(c)(3)-1. Organizations organized and operated for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals.
(a) Organization and operational tests.
(1) In order to be exempt as an organization described in section 501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt.
(2) The term "Exempt Purpose or Purposes", as used in this section, means any purpose or purposes specified in section 501(c)(3), as defined and elaborated in paragraph (d) of this section.
(b) Organizational test.
(1) In general.
(A) An organization is organized exclusively for one or more exempt purposes only if its articles of organization (referred to in this section as its "articles") as defined in subparagraph (2) of this paragraph:
(i) Limit the purposes of such organization to one or more exempt purposes; and (ii) Do not expressly empower the organization to engage, otherwise, than as an insubstantial part of its activities, in activities which in themselves are not in furtherance of one or more exempt purposes.
(B) In meeting the organizational test, the organization's purpose, as stated in its articles, may be as broad as, or more specific than, the purposes stated in section 501(c)(3). Therefore, an organization which, by the terms of its articles, is formed "for literary and scientific purposes within the meaning of section 501(c)(3) of the Code shall, if it otherwise meets the requirements in this paragraph, be considered to have met the organizational test. Similarly, articles stating that the organization is created solely "to receive contributions and pay them over to organizations which are described in section 501(c)(3) and exempt from taxation under section 501(a)" are sufficient for purposes of the organizational test. Moreover, it is sufficient if the articles set forth the purpose of the organization to be the operation of a school for adult education and describe in detail the manner of the operation of such school. In addition, if the articles state that the organization is formed for "Charitable Purposes", such articles ordinarily shall be sufficient for purposes of the organizational test (See subparagraph (5) of this paragraph for rules relating to construction of terms).
(C) An organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it to carry on, otherwise than as an insubstantial part of its activities, activities which are not in furtherance of one or more exempt purposes, even though such organization is, by the terms of such articles, created for a purpose that is no broader than the purposes specified in section 501(c)(3). Thus, an organization that is empowered by its articles "to engage in a manufacturing business," or "to engage in the operation of a social club" does not meet the organizational test regardless of the fact that its articles may state that such organization is created "for charitable purposes within the meaning of Section 501(c)(3) of the Code."
(D) In no case shall an organization be considered to be organized exclusively for one or more exempt purposes, if by the terms of its articles, the purposes for which such organization is created are broader than the purposes specified in section 501(c)(3). The fact that the actual operations of such an organization have been exclusively in furtherance of one or more exempt purposes shall not be sufficient to permit the organization to meet the organizational test. Similarly, such an organization will not meet the organizational test as a result of statements or other evidence that the members thereof intend to operate only in furtherance of one or more exempt purposes.
(E) An organization must, in order to establish its exemption, submit a detailed statement of its proposed activities with and as a part of its application for exemption (See paragraph (b) of ' 1.501(a)-1).
(2) Articles of organization. - For purposes of this section, the term "articles of organization" or "articles" includes the trust instrument, the corporate charter, the articles of association, or any other written instrument by which an organization is created.
(3) Authorization of legislative or political activities. - An organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it:
(A) To devote more than an insubstantial part of its activities to attempting to influence legislation by propaganda or otherwise; or (B) Directly or indirectly to participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office; or (C) To have objectives and to engage in activities which characterize it as an "action" organization as defined in paragraph (c)(3) of this section. The terms used in subdivisions (A), (B), and (C) of this subparagraph shall have the meanings provided in paragraph (c)(3) of this section.
(4) Distribution of assets on dissolution. - An organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt purpose. An organization's assets will be considered dedicated to an exempt purpose, for example, if upon dissolution, such assets would, by reason of a provision in the organization's articles or by operation of law, be distributed for one or more exempt purposes, or to the Federal government, or to a State or local government, for a public purpose, or would be distributed by a court to another organization to be used in such manner as in the judgment of the court will best accomplish the general purposes for which the dissolved organization was organized. However, an organization does not meet the organizational test if its articles or the law of the State in which it was created provide that its assets would, upon dissolution, be distributed to its members or shareholders.
(5) Construction of terms. - The law of the State in which an organization is created shall be controlling in construing the terms of its articles. However, any organization which contends that such terms have under State law a different meaning from their generally accepted meaning must establish such special meaning by clear and convincing reference to relevant court decisions, opinions of the State attorney general, or other evidence of applicable State law.
(6) Applicability of the organizational test. - A determination by the Commissioner or a district director that an organization is described in section 501(c)(3) and exempt under section 501(a) will not be granted after July 26, 1959 (regardless of when the application is filed), unless such organization meets the organizational test prescribed by this paragraph. If, before July 27, 1959, an organization has been determined by the Commissioner or district director to be exempt as an organization described in section 501(c)(3) or in corresponding provision of prior law and such determination has not been revoked before such date, the fact that such organization does not meet the organizational test prescribed by this paragraph shall not be a basis for revoking such determination. Accordingly, an organization which has been determined to be exempt before July 27, 1959, and which does not seek a new determination of exemption is not required to amend its articles of organization to conform to the rules of this paragraph, but any organization which seeks a determination of exemption after July 26, 1959, must have articles of organization which meet the rules of this paragraph. For the rules relating to whether an organization determined to be exempt before July 27, 1959, is organized exclusively for one or more exempt purposes, See 26 CFR (1939 39.101(5)-1 (Regulation 118) as made applicable to the Code by Treasury Decision 6091, approved August 16, 1954 (19 F.R. 5167; C.B. 1954-2, 47).
(c) Operational test.
(1) Primary activities. - An organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.
(2) Distribution of earnings. - An organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. For the definition of the words "private shareholders or individual", See paragraph (c) of ' 1.501(a)-1.
(3) "Action" organization.
(A) An organization is not operated exclusively for one or more exempt purposes if it is an "Action" organization as defined in subdivisions (B), (C), or (D) of this subparagraph.
(B) An organization is an "Action" organization if a substantial part of its activities is attempting to influence legislation by propaganda or otherwise. For this purpose, an organization will be regarded as attempting to influence legislation if the organization - (i) Contacts, or urges the public to contact, members of a legislative body for the purpose of proposing, supporting, or opposing legislation; or (ii) Advocates the adoption or rejection of legislation. The term "legislation", as used in this subdivision, includes action by the Congress, by any State legislature, by any local council or similar governing body, or by the public in a referendum, initiative, constitutional amendment, or similar procedure. An organization will not fail to meet the operational test merely because it advocates, as an insubstantial part of its activities, the adoption or rejection of legislation.
(C) An organization is an "Action" organization if it participates or intervenes, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office. The term "Candidate for Public Office" means an individual who offers himself, or is proposed by others, as a contestant for an elective public office, whether such office be national, State or local. Activities which constitute participation or intervention in a political campaign on behalf of or in opposition to a candidate include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.
(D) An organization is an "Action" organization if it has the following two characteristics:
(i) Its main or primary objective or objectives (as distinguished from its incidental or secondary objectives) may be attained only by legislation or a defeat of proposed legislation; and (ii) It advocates, or campaigns for, the attainment of such main or primary objective or objectives as distinguished from engaging in nonpartisan analysis, study, or research and making the results thereof available to the public. In determining whether an organization has such characteristics, all the surrounding facts and circumstances, including the articles and all activities of the organization, are to be considered.
(E) An "Action" organization, described in subdivisions (ii) or (iv) of this subparagraph, though it cannot qualify under section 501(c)(3) may nevertheless qualify as a social welfare organization under section 501(c)(4) if it meets the requirements set out in paragraph (a) of ' 1.501(c)(4)-1.
(d) Exempt purposes.
(1) In general.
(A) An organization may be exempt as an organization described in section 501(c)(3) if it is organized and operated exclusively for one or more of the following purposes:
(i) Religious, (ii) Charitable, (iii) Scientific, (iv) Testing for public safety, (v) Literary, (vi) Educational, or (vii) Prevention of cruelty to children or animals.
(B) An organization is not organized or operated exclusively for one or more of the purposes specified in subdivision (A) of this subparagraph unless it serves a public rather than a private interest. Thus, to meet the requirement of this subdivision, it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organizations, or persons controlled, directly or indirectly, by such private interest.
(C) Since each of the purposes specified in subdivision (A) of this subparagraph is an exempt purpose in itself, an organization may be exempt if it is organized and operated exclusively for any one or more of such purposes. If, in fact, an organization is organized and operated exclusively for exempt purpose or purposes, exemption will be granted to such an organization regardless of the purpose or purposes specified in its application for exemption. For example, if an organization claims exemption on the ground that it is "Educational", exemption will not be denied if, in fact, it is "Charitable".
(2) "Charitable" defined. - The term "Charitable" is used in section 501(c)(3) in its generally accepted legal sense and is, therefore, not to be construed as limited by the separate enumeration in section 501(c)(3) of other tax-exempt purposes which may fall within the broad outlines of "Charity" as developed by judicial decisions. Such term includes: Relief of the poor and distressed or of the underprivileged; advancement of religion; advancement of education or science; erection of maintenance of public buildings, monuments, or works; lessening of the burdens of Government; and promotion of social welfare by organizations designed to accomplish any of the above purposes, or (A) to lessen neighborhood tensions;
(B) to eliminate prejudice and discrimination;
(C) to defend human and civil rights secured by law; or (D) to combat community deterioration and juvenile delinquency.
The fact that an organization which is organized and operated for the relief of indigent persons may receive voluntary contributions from the persons intended to be relieved will not necessarily prevent such organization from being exempt as an organization organized and operated exclusively for charitable purposes. The fact that an organization, in carrying out its primary purpose, advocates social or civic changes or presents opinion on controversial issues with the intention of molding public opinion or creating public sentiment to an acceptance of its views does not preclude such organization from qualifying under section 501(c)(3) so long as it is not an "Action" organization of any one of the types described in paragraph (c)(3) of this section.
(3) "Educational" defined.
(A) In general. - The term "Educational", as used in section 501(c)(3), relates to - (i) The instruction or training of the individual for the purpose of improving or developing his capabilities; or (ii) The instruction of the public on subjects useful to the individual and beneficial to the community.
An organization may be educational even thought it advocates a particular position or viewpoint so long as it presents a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion. On the other hand, an organization is not educational if its principal function is the mere presentation of unsupported opinion.
(B) Examples of educational organizations. - The following are examples of organizations which, if they otherwise meet the requirements of this section, are educational:
Example 1. - An organization, such as a primary or secondary school, a college, or a professional or trade school, which has a regularly scheduled curriculum, a regular faculty, and a regularly enrolled body of students in attendance at a place where the educational activities are regularly carried on.
Example 2. - An organization whose activities consist of presenting public discussion groups, forums, panels, lectures, or other similar programs. Such programs may be on radio or television.
Example 3. - An organization which presents a course of instruction by means of correspondence or through the utilization of television or radio.
Example 4. - Museums, zoos, planetariums, symphony orchestras, and other similar organizations.
(4) "Testing for Public Safety" defined. - The term "Testing for Public Safety", as used in section 501(c)(3), includes the testing of consumer products, such as electrical products, to determine whether they are safe for use by the general public.
(5) "Scientific" defined.
(A) Since an organization may meet the requirements of section 501(c)(3) only if its serves a public rather than a private interest, a "Scientific" organization must be organized and operated in the public interest. Research when taken alone is a word with various meanings; it is not synonymous with "Scientific"; and the nature of particular research upon the purpose which it serves. For research to be "Scientific", within the meaning of section 501(c)(3), it must be carried on in furtherance of a "Scientific" purpose. The determination as to whether research is "Scientific" does not depend on whether such research is classified as "Fundamental" or "Basic" as contrasted with "Applied" or "Practical". On the other hand, for purposes of the exclusion from unrelated business taxable income provided by section 512(b)(9), it is necessary to determine whether the organization is operated primarily for purposes of carrying on "Fundamental", as contrasted with "Applied", research.
(B) Scientific research does not include activities of a type ordinarily carried on as an incident to commercial or industrial operations, as, for example, the ordinary testing or inspection of materials or products or the designing or construction of equipment, buildings, etc.
(C) Scientific research will be regarded as carried on in the public interest - (i) If the results of such research (including any patents, copyrights, processes, or formula resulting from such research) are made available to the public on a nondiscriminatory basis;
(ii) If such research is performed for the United States, or any of its agencies or instrumentalities, or for a State or political subdivision thereof; or (iii) If such research is directed toward benefiting the public. The following are examples of scientific research which will be considered as directed toward benefiting the public, and, therefore, which will be regarded as carried on in the public interest:
(a) Scientific research carried on for the purpose of aiding in the scientific education of college or university students;
(b) Scientific research carried on for the purpose of obtaining scientific information, which is published in a treatise, thesis, trade publication or in any other form that is available to the interested public;
(c) Scientific research carried on for the purpose of discovering a cure for a disease; or (d) Scientific research carried on for the purpose of aiding a community or geographical area by attracting new industry to the community or area or by encouraging the development of, or retention of, an industry in the community or area. Scientific research described in this subdivision (c) will be regarded as carried on in the public interest even though such research is performed pursuant to a contract or agreement under which the sponsor or sponsors of the research have the right to obtain ownership or control of any patents, copyrights, processes, or formula resulting from such research.
(D) An organization will not be regarded as organized and operated for the purpose of carrying on scientific research in the public interest and, consequently, will not qualify under section 501(c)(3) as a "Scientific" organization, if - (i) Such organization will perform research only for persons which are (directly or indirectly) its creators and which are not described in section 501(c)(3), or (ii) Such organization retain (directly or indirectly) the ownership or control of more than an insubstantial portion of the patents, copyrights, processes, or formula resulting from its research and does not make patents, copyrights, processes, or formula available to the public. For purposes of this subdivision, a patent, copyright, process, or formula shall be considered as made available to the public if such patent, copyright, process, or formula is made available to the public on a nondiscriminatory basis. In addition, although one person is granted the exclusive right to the use of a patent, copy right, process, or formula, such patent, copyright, process, or formula shall be considered as made available to the public if the granting of such exclusive right is the only practicable manner in which the patent, copyright, process, or formula can be utilized to benefit the public. In such a case, however, the research from which the patent, copyright, process, or formula resulted will be regarded as carried on in the public interest (within the meaning of subdivision (C) of this subparagraph) only if it is carried on for a person described in subdivision (C)(ii) of this subparagraph of if it is scientific research described in subdivision (C)(iii) of this subparagraph.
(E) The fact that any organization (including a college, university, or hospital) carries on research which is not in furtherance of an exempt purpose described in section 501(c)(3) will not preclude such organization from meeting the requirements of section 501(c)(3) so long as the organization meets the organizational test and is not operated for the primary purpose of carrying on such research (See paragraph (e) of this section, relating to organizations carrying on a trade or business). See paragraphs (a)(5) of ' 1.513-2, with respect to research which constitutes an unrelated trade or business, and section 512(b)(7)(8), and (9), with respect to income derived from research which is excludable from the tax on unrelated business income.
(F) The regulations in this subparagraph are applicable with respect to taxable years beginning after December 31, 1960.
(e) Organizations carrying on trade or business.
(1) In general. - An organization may meet the requirements of section 501(c)(3) although it operates a trade or business as a substantial part of its activities, if the operation of such trade or business is in furtherance of the organization's exempt purpose or purposes and if the organization is not organized or operated for the primary purpose of carrying on an unrelated trade or business, as defined in section 513. In determining the existence or nonexistence of such primary purpose, all the circumstances must be considered, including the size and extent of the trade or business and the size and extent of the activities which are in furtherance of one or more exempt purposes. An organization which is organized and operated for the primary purpose of carrying on an unrelated trade or business is not exempt under section 501(c)(3) even though it has certain religious purposes, its property is held in common, and its profits do not inure to the benefit of individual members of the organization. See, however, section 501(d) and ' 1.501(d)-1, relating to religious and apostolic organizations.
(2) Taxation of unrelated business income. - For provisions relating to the taxation of unrelated business income of certain organizations described in section 501(c)(3), See sections 511 to 515, inclusive, and the regulations thereunder.
(f) Applicability of regulations in this section. - The regulations in this section are, except as otherwise expressly provided, applicable with respect to taxable years beginning after July 26, 1959. For the rules applicable with respect to taxable years beginning before July 27, 1959, See 26 CFR (1939) 39.101(6)-1 (Regulations 118) as made applicable to the Code by Treasury Decision 6091, approved August 16, 1954 (19 F.R. 5167; C. B. 1954-2, 47). Reg. Section 1.501(c)(3)-1.
APPENDIX B
This list of nonprofit charitable organizations which may be exempt from taxation under the Internal Revenue Code is intended to illustrate application of these terms and is not intended to be a comprehensive listing.
(a) 501(c)(3) Organizations.
(1) Religious Churches Church affiliated colleges Sermon publishing organizations that apply proceeds to purchase of materials for theology school libraries.
(2) Educational, literary or scientific.
Primary and secondary schools Colleges or universities Professional or trade schools Private schools (Must have a racially nondiscriminatory admissions policy)
Teachers travel study groups Historical exposition organizations Engineering societies engaged in scientific research Abortion counseling organizations Sterilization information organizations Credit union educational organizations School Accreditation organizations Organizations formed to provide work experience to students Anthropological research organizations Educational, cultural and public interest television programming organizations Training program product sales organizations Educational day care organizations Political educational organizations (must not solicit for or endorse candidates)
(3) Public safety.
Traffic safety organizations Organizations which inspect and test for public safety (4) Prevention of cruelty to children or animals.
(5) Fostering national or international amateur sports competition.
(6) Charitable.
Nonprofit hospitals Health care and maintenance organizations Drug Clinics Alcoholic treatment organizations Organizations that provide aid to the blind Public interest law firms Nonprofit legal aid societies Prisoner rehabilitation organizations Housing organizations which provide specially designed housing for the elderly or handicapped Honor Societies Volunteer fire company Disaster service organizations Racial discrimination prevention organizations Aid to senior citizen organizations Aid to immigrants organizations Organizations formed to promote civic pride (b) 501(c)(4) Organizations.
(1) Civil leagues.
Homeowner's association Garden clubs Women's vacation and rest home Bus transportation organizations (providing relief for regular bus service)
Environmental protection organizations Organization involved in processing of consumer complaints (2) Nonprofit local employees' associations.
(c) 501(c)(8) Organizations. - Fraternal beneficiary societies (must operate) under the lodge system and have an established system for payment of benefits.
(d) 501(c)(10) Organization.
(1) Fraternal beneficiary societies (must operate) under the lodge system and give its net earnings solely for religious, charitable, scientific, literary, educational and fraternal purposes.
(e) 501(C)(19) Organizations. - Veteran's organizations (membership must consist of seventy-five (75%) war veterans and substantially all of the remainder must be veterans, cadets, or spouses, widows or widowers of war veterans. They must also be organized in the United States).
(f) 501(d) Organizations. - Religious and apostolic organizations.
110CSR37
Series 39 Electronic Filing And Payment Of Special District Excise Tax
W. Va. Code R. § 110-39-1 General
1.1. Scope. -- This rule sets forth the procedures established by the West Virginia State Tax Department for the electronic filing of returns and payments for the special district excise tax.
1.2. Authority. -- W. Va. Code §7-22-12, §8-38-12 and §11-10-5.
1.3. Filing Date. -- June 1, 2009.
1.4. Effective Date. -- June 1, 2009.
W. Va. Code R. § 110-39-2 Tax Types Covered
2.1. This rule applies to the special district excise tax for municipalities authorized in W. Va. Code §7-22-12 and the special district excise tax for counties authorized in W. Va. Code §8-38-12.
2.2. This rule also applies to any sales tax collected within the economic opportunity development district on sales of tangible personal property or selected services, as defined in the Department of Tax and Revenue’s Rule, Consumers Sales and Service and Use Tax, 110CSR15.
W. Va. Code R. § 110-39-3 Electronic filing of returns
Returns for the special district excise tax shall be filed on a form provided by the State Tax Department. Returns for any sales tax collected within the special excise district shall also be filed on a form provided by the State Tax Department. The forms shall be filed electronically, in accordance with the procedures set forth in the State Tax Department’s Rule, Use and Acceptance of Electronic Records, 110CSR10D. All of the tax returns covered by this rule shall be filed electronically, regardless of the amounts due.
W. Va. Code R. § 110-39-4 Electronic payment of tax
4.1 Payments of the special district tax shall be by electronic funds transfer, in accordance with the procedures set forth in the State Tax Department’s Rule, Payment of Taxes by Electronic Funds Transfer, 110CSR10F.
4.2 Payments of any sales tax collected within the economic opportunity development district shall be by electronic funds transfer, in accordance with the procedures set forth in the State Tax Department’s Rule, Payment of Taxes by Electronic Funds Transfer, 110CSR10F.
4.3 All of the taxes covered by this rule shall be paid electronically, regardless of the amounts due.
W. Va. Code R. § 110-39-5 Information sharing
5.1. The State Tax Commissioner may enter into written exchange of information agreements with the municipal or county commission responsible for the administration of special district excise taxes to disclose and receive return information. The agreements shall be published in the State Register and shall only be for the purpose of facilitating administration and collection of the special district excise tax. The provisions of this section shall not be construed to preclude or limit disclosure of tax information authorized by any provision of the West Virginia Code. Any confidential return information that is disclosed shall remain confidential in the hands of the other agency to the extent provided by W. Va. Code §11-10-5d and by other applicable federal or State laws.
5.2. Pursuant to W. Va. Code §11-10-5d(f):
5.2.1. As long as bonds are outstanding pursuant to W. Va. Code §§7-22-1 or 8-38-1, the State Tax Commissioner shall provide on a monthly basis to the trustee for bonds issued pursuant to that article, information on returns submitted pursuant to this rule; and,
5.2.2. The State Tax Commissioner or the trustee may share the information with the county commission, municipality or district board and with the bondholders and bond counsel for bonds issued pursuant to W. Va. Code §§7-22-1 or 8-38-1.
5.2.3. The State Tax Commissioner and the trustee may enter into a written agreement in order to accomplish the exchange of information.
110CSR39
110CSR39
Series 40 Withholding or Denial of Personal Income Tax Refunds from Taxpayers Who Owe Municipal or Magistrate Court Costs
W. Va. Code R. § 110-40-1 General
1.1. Scope. -- This rule specifies when the State Tax Commissioner may withhold an income tax refund from a taxpayer for failure to pay municipal or magistrate court fines, the amounts that may be withheld, and the order of priority for refund offsets when there are competing claims.
1.2. Authority. -- W. Va. Code §§8-10-2b, 50-3-2c and 11-10-5.
1.3 Filing Date. --
1.4 Effective Date.
W. Va. Code R. § 110-40-2 Amount to be withheld
2.1. The State Tax Commissioner shall withhold the total of the costs, fines, forfeitures, restitution or penalties due to a municipal or magistrate court, the State Tax Commissioner's administration fee for the withholding, and any and all fees that the municipal or magistrate court would have collected had the taxpayer appeared, except that there shall be no withholding on behalf of a municipal or magistrate court for any amount less than fifty dollars.
W. Va. Code R. § 110-40-3 Priority of competing claims
3.1. In the case of competing claims, the State Tax Commissioner shall allocate the funds received from any personal income tax refund according to the following schedule of priorities:
3.1.a. Overdue child support, as authorized by W. Va. Code §48-18-118;
3.1.b. Overpaid child support, as authorized by W. Va. Code §48-18-118;
3.1.c. Any state tax administered under the provisions of W. Va. Code §11-10-1, et seq., without regard to the particular tax to which the refund or credit is attributable;
3.1.d. Federal tax obligations subject to an agreement with the State Tax Department, without regard to the particular tax to which the refund or credit is attributable;
3.1.e. Municipal costs, fines, forfeitures or penalties, but only if the refund is attributable to overpayment of the personal income tax, according to the following priorities:
3.1.e. 1. The oldest municipal obligation shall be paid first, without regard to whether it is one municipality or more that are owed; and
3.1.e.2. If multiple municipalities are owed, and all liabilities are equally old, and the amount of the refund is not sufficient to pay the entire amount, then the amount available for payment shall be allocated equally among the municipalities.
3.2.e. Magistrate court costs, fines, forfeitures or penalties, but only if the refund is attributable to overpayment of the personal income tax, accord ing to the following priorities:
3.2.e. 1. The oldest magistrate court obligation shall be paid first, without regard to whether it is one magistrate court or more that are owed; and
3.2.e.2. If multiple magistrate courts are owed, and all liabilities are equally old, and the amount of the refund is not sufficient to pay the entire amount, then the amount available for payment shall be allocated equally among the magistrate courts.
W. Va. Code R. § 110-40-4 Spouse relieved of obligation in certain cases
4.1. The spouse of a taxpayer owing an obligation as described in section 2 of this rule shall not be subject to the withholding of refunds under this rule if all of the following conditions apply:
4.1.a. The taxpayer filed an injured spouse claim on a form provided by the State Tax Department;
4.1.b. A joint personal income tax return was made for a taxable year;
4.1.c. The amounts of tax attributable to each spouse may reasonably be ascertained, and each spouse's proportional share of the refund may be allocated accordingly; and,
4.1.d. Taking into account all facts and circumstances, it is inequitable to hold one spouse accountable for the obligation of the other, for which the refund is being withheld.
W. Va. Code R. § 110-40-5 Additional procedures
5.1. To participate in the State Tax Department's refund offset program, the municipal court, magistrate court clerk, or upon a judgment rendered on appeal, the circuit clerk shall submit an "Application to Participate" to the State Tax Department. This application will shall include:
5.1.a. The name and address of the municipal or magistrate court;
5.1.b. The name, address, telephone number and e-mail address of a contact person at the municipal or magistrate court to whom the State Tax Department may refer questions;
5.1.c. The name and address of the municipal or magistrate court's bank;
5.1.d. The bank's routing number;
5.1.e. The municipal or magistrate court's bank account number; and
5.1.f. A positive affirmation by the municipal or magistrate court of its desire to participate in the refund offset program and to comply with the procedures set forth by the State Tax Commissioner for participation.
5.2. Upon receipt of the "Application to Participate", the State Tax Department shall send to the municipal or magistrate court a memorandum of understanding setting forth the duties and responsibilities of the State Tax Department and the municipal or magistrate court under the refund offset program.
5.3. Upon acceptance of the "Application to Participate" by the State Tax Department and execution of the memorandum of understanding, the municipal or magistrate court shall test the file exchange process established by the State Tax Department and, upon successful completion of the test, the State Tax Commissioner shall notify the municipal or magistrate court in writing that it may begin live transmission of data to the State Tax Department.
5.4. During the testing process, the State Tax Department shall provide testing support and training to the municipal or magistrate court to ensure successful participation in the refund offset process.
5.5. To receive refund offsets, the municipal or magistrate court shall provide to the State Tax Commissioner, in an electronic format prescribed by the State Tax Commissioner, a listing, by social security number, of the unpaid municipal or magistrate court costs, fines, forfeitures or penalties eligible to be offset under the provisions of W. Va. Code §§ 8-10-2b or 50-3-2c. This listing shall contain:
5.5.a. The taxpayer's social security number;
5.5.b. The taxpayer's name;
5.5.c. The taxpayer's last known mailing address;
5.5.d. The amount of the unpaid municipal or magistrate court costs, fines, forfeitures or penalties;
5.5.e. An optional external control number used by the court;
5.5.f. The FIPS (Federal Information Processing System) Code for the municipality or county in which the court is located; and,
5.5.g. Any other information required by the State Tax Commissioner.
5.6. The State Tax Commissioner shall remove the taxpayer's name from the list when the municipal or magistrate court costs, fines, forfeitures or penalties have been paid to the municipal or magistrate court. The amount of the unpaid municipal or magistrate court costs, fines, forfeitures or penalties shall be reduced in the next list submitted by the municipal or magistrate court for any partial payments or refund offsets received against the unpaid municipal or magistrate court costs, fines, forfeitures or penalties.
5.7. The State Tax Department will not process any request for an individual refund offset from a municipal or magistrate court that does not contain a social security number.
5.8. Municipal or magistrate courts may submit data to the State Tax Department no more frequently than once a month, unless otherwise specified in the memorandum of understanding.
5.9. The State Tax Department shall make available and provide access to a secure website that the municipal or magistrate courts shall use to send the electronic listing to the department. The State Tax Department shall use this site to send electronic listings of successful refund offsets back to the municipal or magistrate courts.
5.10. Upon receipt of the listing, the State Tax Commissioner shall establish a record in the State Tax Department's computer system that will be used by he State Tax Commissioner to offset any personal income tax refund. This record will be used by the State Tax Commissioner until a replacement listing is received from the municipal or magistrate court.
5.11. The State Tax Commissioner shall notify any taxpayer in writing that his or her refund has been fully or partially offset to satisfy a municipal or magistrate court liability, along with the name and address of the court that has requested the offset. The State Tax Commissioner shall refer the taxpayer to the municipal or magistrate court for any questions regarding the unpaid municipal or magistrate costs, fines, fees, forfeitures, restitution or penalties.
5.12. At least once a month, the State Tax Commissioner shall notify the municipal or magistrate court of the amount of refund offsets set aside since the last offset file was sent to the municipal or magistrate court. The total amount of refund offsets shall be sent to the municipal or magistrate court's bank account by direct deposit. In addition, the State Tax Commissioner shall place a file on the secure website that the municipal or magistrate court may download. This file shall contain:
5.12.a. The taxpayer's social security number;
5.12.b. The taxpayer's name;
5.12.c. The taxpayer's last known mailing address;
5.12.d. The amount of the refund offset;
5.12.e. Any optional external control number provided by the court; and
5.12.f. The FIPS (Federal Information Processing System) Code for the municipality or county in which the court is located.
W. Va. Code R. § 110-40-6 Appeals
6.1. A taxpayer may request a hearing before the West Virginia Office of Tax Appeals challenging the State Tax Commissioner's notice of withholding or denial of the taxpayer's refund or credit. The taxpayer may initiate a proceeding before the Office of Tax Appeals by timely filing a written petition with the Office of Tax Appeals, within 60 days after receiving the State Tax Commissioner's notice, that states:
6.1.a. The nature of the case;
6.1.b. The facts on which the appeal is based; and,
6.1.c. Each question presented for review by the Office of Tax Appeals.
6.2. Because the State Tax Commissioner is required by the W. Va. Code to deny or withhold a tax refund, or, as the case may be, a tax credit, when notified in writing by the appropriate authority of the taxpayer's liability under section two of this rule, the only issue to be determined upon challenge in the Office of Tax Appeals, is whether or not the taxpayer was listed by the appropriate authority as delinquent in paying that obligation at the time the refund or credit was denied or withheld.
Series 41 Railroad Diesel Locomotive Refundable Exemption from the Variable Rate Component of the Motor Fuel Excise Tax
W. Va. Code R. § 110-41-1 General
1.1. Scope. -- This procedural rule sets forth the procedure the State Tax Department will use in administering W. Va. Code §11-14C-9(d)(10), applicable to certain entities operating railroad diesel locomotives in West Virginia. The rule includes requirements to report the variable rate portion of the motor fuel tax, pay the tax, and apply for the refundable exemption within the aggregate cap of $4,300,000. This procedural rule also sets forth the prerequisites and requirements for requesting the credit under W. Va. Code §11-15A-10a.
1.2. Authority. -- W. Va. Code §11-10-5.
1.3. Filing Date. -- November 29, 2018.
1.4. Effective Date. – December 31, 2018.
W. Va. Code R. § 110-41-2 Definitions
2.1. Unless the context in which a term is used clearly requires a different meaning, the definitions contained in W. Va. Code §11-14C-1 et seq. apply to this rule.
2.2. “Taxpayer,” for the purposes of this rule, means the operator, owner or entity operating one or more railroad diesel locomotives which operate in whole or in part in West Virginia.
2.3. “Qualified taxpayer,” for purposes of this rule, means a taxpayer who has properly and timely filed its quarterly report and payment electronically on WV/MFT-USE. The qualified taxpayer must have a current business registration certificate issued by the West Virginia State Tax Department.
W. Va. Code R. § 110-41-3 The refundable exemption from the variable rate component for railroad diesel locomotives
3.1. Beginning January 1, 2018, all gallons of motor fuel sold for use or consumed in the operation of railroad diesel locomotives in West Virginia are subject to a refundable exemption from the variable rate component of the motor fuel excise tax subject to the following:
3.1.a. Only the variable rate tax paid on diesel fuel consumed in West Virginia in the operation of a locomotive is subject to the refundable exemption;
3.1.b. The aggregate amount of the refundable exemption available to all taxpayers in a calendar year is limited to $4,300,000;
3.1.c. If the total amount claimed by all railroad diesel locomotive operators is greater than $4,300,000 in a calendar year, then the amount to be refunded is distributed proportionately to the taxpayers as set forth in this rule; and
3.1.d. The credit allowable under W. Va. Code §11-15A-10a is only allowable to the extent the credit exceeds the allowable refundable exemption amount authorized under this rule for the calendar year.
3.2. The exemption is refundable.
3.2.a. The variable rate component of the motor fuel tax must first be paid as specified in this rule as a prerequisite for applying for the refund. See W. Va. Code §11-14C-9(d).
3.2.b. A taxpayer will receive the portion of the refundable exemption based only on the amount of tax actually paid on the variable component of the motor fuel excise tax.
W. Va. Code R. § 110-41-4 Reporting, payment, and application for refund: due dates, requirements, and limitations
4.1. The exemption is exclusively a refundable exemption for motor fuel used or consumed in railroad diesel locomotives. Therefore, the West Virginia Motor Carrier Quarterly Report, MFT-USE, the WV fuel use tax return, will be used in reporting the use, making the payment and claiming the refund.
4.1.a. MFT-USE is found on the Tax Department web site at http://tax.wv.gov/Documents/ TaxForms/2013/mftuse.quarterly.pdf
4.1.b. The report must be filed and payment must be made electronically.
4.1.b.1. To file and pay electronically go to https://mytaxes.wvtax.gov/_/.
4.1.b.2. Information on filing electronically is found on the Tax Department web site at https://tax.wv.gov/Business/ElectronicFiling/Pages/ BusinessElectronicFiling.aspx.
4.2. W. Va. Code §11-14C-31(c)(3) requires the petition for refund under W. Va. Code §11-14C-9(d)(10) to be filed on or before the last day of January, April, July, and October for purchases of motor fuel during the immediately preceding calendar quarter.
4.2.a. This means that the report, payment and request for refund as reported on MFT-USE must be filed on or before the date indicated below for the corresponding period:
For Periods Filing Due Date January 1 – March 31 April 30 April 1 – June 30 July 31 July 1 – September 30 October 31 October 1 – December 31 January 31
4.2.b. Because the refund amount is capped, and because the refund must be proportionately distributed if refunds are claimed in excess of $4,300,000 per calendar year, the following rules apply to each quarterly report:
4.2.b.1. THERE WILL BE NO EXTENSION OF TIME TO REPORT, PAY, OR FILE A CLAIM FOR REFUND;
4.2.b.2. NO REPORT OR CLAIM FOR REFUND CAN BE AMENDED AFTER IT IS FILED;
4.2.b.3. The restrictions in this section will be enforced even in years where the aggregate amount of refund claimed is equal to or less than $4,300,000.
4.2.b.4. MFT-USE must be complete, signed and electronically sent to the West Virginia State Tax Department on or before the filing due date set forth above. The electronic funds transfer must be submitted on the same day as the report is filed.
4.2.c. The refundable exemption from the variable rate component is effective January 1, 2018, for motor fuel consumed in the operation of a locomotive on or after January 1, 2018. Therefore, the first report, payment and application for the refundable exemption will be due on or before April 30, 2018, for the motor fuel used or consumed in railroad diesel locomotives in the first quarter of 2018.
4.3. When the total amount of refundable exemption claimed by all qualified taxpayers in a calendar year exceeds $4,300,000, then the Tax Commissioner will determine the proportional amount of the aggregate $4,300,000 refund to distribute amongst the qualified taxpayers as set forth in this rule.
4.4. The variable rate of the motor fuel tax, as published in the State Register and in the Administrative Notice or Notices issued by the Tax Commissioner for the relevant calendar year, shall be used to calculate the distribution of the refundable exemption.
4.5. The Tax Commissioner may request further information in writing, including by email. The taxpayer has thirty days from receipt of the request to provide the information.
W. Va. Code R. § 110-41-5 Application for credit for sales tax liability paid to another state, prerequisites, required information and calculation of credit
5.1. The credit under W. Va. Code §11-15A-10a is only applicable for the tax actually paid by the taxpayer which exceeds the taxpayer’s portion of the $4,300,000 cap.
5.1.a. The taxpayer’s portion of the $4,300,000 of motor fuel variable rate component paid and refunded, is not subject to the application for credit under W.Va. Code §11-15A-10a. In other words, only the amount of motor fuel tax actually paid above the $4,300,000 refunded amount is subject to the application for credit.
5.1.b. In years where the cap is not exceeded, no requests for credit for sales tax paid to another state as defined in W. Va. Code §11-15A-10a will be granted.
5.2. As required by W. Va. Code §11-15A-10a, the sales tax must be lawfully paid to another state as a prerequisite for application for the sales tax credit.
5.3. To determine the amount of credit for sales tax actually paid to another state, the Tax Department will apply the following steps:
5.3.a. Multiply all gallons of fuel upon which tax was paid in other states by the taxpayer’s West Virginia apportionment factor.
5.3.b. Multiply gallons upon which credit can be taken by the lesser of the West Virginia fuel tax rate or the amount of tax actually paid per gallon. The product of ((a X b) X Min (c,d)) is the potential credit.
5.3.c. Multiply the potential credit by a factor:
5.3.c.1. The numerator of which is the difference between the total gallons used in West Virginia and the total amount of gallons upon which the railroad diesel locomotive exemption applied.
5.3.c.2. The denominator of which is the total amount of gallons used in WV.
5.3.c. The result is the amount of credit allowed for tax paid to other states.
5.3.d. The result of 5.3.c is the amount of credit allowed for tax paid to other states.
5.3.e. The above four steps are represented algebraically as:
Where: a = Gallons upon which tax was paid to other states b = West Virginia apportionment factor c = West Virginia motor fuel variable tax rate d = Actual rate paid per gallon e = Total Gallons used in West Virginia f = Gallons exempt due to railroad diesel locomotive exemption.
5.4. To apply for the credit for sales tax paid to another state, the information above must be timely filed along with the MFT-USE report and payment for each quarter.
5.4.a. That is, all information for the previous quarter must be provided by the due date of the return for that quarter as set out in section 4.
5.4.b. The number of gallons upon which tax was paid to other states is the actual number of gallons, not an estimate and not an average.
5.4.c. The actual rate paid per gallon is to be reported, not an estimate or average rate.
W. Va. Code R. § 110-41-6 Record keeping and audits
6.1. Documentation verifying the information on MFT-USE for each calendar year, verification of payment of the variable rate component of the motor fuel tax, verification of the sales or use tax paid to other states for the calendar year for those years where such sales tax credit is requested, and verification of any other information requested by the Tax Commissioner, must be kept by the taxpayer for audit and inspection by the Tax Commissioner:
6.1.a. For tax years where there is no application for credit under W. Va. Code §11-15A-10a, the documentation must be kept for a period of three years after January 31, of the year following the calendar tax year.
6.1.b. For those years where a request for credit under W. Va. Code §11-15A-10a, is timely filed, the documentation supporting the information on MFT-USE, payment of the variable rate component of the motor fuel tax, verification of payment of the sales tax actually paid to other states and all information required in section five of this rule, must be kept for a period of three years after the request for credit is filed or January 31 of the year immediately following the taxable year, whichever is later.
6.2. Taxpayer records are subject to audit by the Tax Commissioner during reasonable business hours.
6.3. Persons are to be made available and are subject to interview and questioning during reasonable business hours by the Tax Commissioner or his or her designee concerning the content of the taxpayer’s records, the taxpayer’s methods and means of gathering the information, and the taxpayer’s methods and practices concerning its record keeping.
6.4. The documentation includes, but is not limited to: invoices, sales slips, billing slips, and logs showing mileage the taxpayer’s locomotives operated within and without West Virginia, all to support the information requested in sections four and five of this rule and any additional information the Tax Commissioner requested for the applicable tax year.
Series 42 Personnel Rule for the Tax Division
W. Va. Code R. § 110-42-1 General
1.1. Scope. -- This rule implements the provisions set forth in W. Va. Code §11B-1-8 regarding classification plans, pay plans, open competitive examinations, promotions, layoff and recall, appointments, dismissals, demotions and other matters.
1.2. Authority. -- This rule is issued under the authority of W. Va. Code §11B-1-8.
1.3. Filing Date. – April 24, 2023.
1.4. Effective Date. -- April 24, 2023.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2028.
W. Va. Code R. § 110-42-2 Preamble
2.1. General. -- The general purpose of the Tax Division of the Department of Revenue is to administer, collect, and enforce various tax laws of this State. To successfully meet this objective, the Division needs to attract and retain personnel of the highest ability and integrity by the establishment of a system of personnel administration based on merit principles and scientific methods governing the appointment, promotion, transfer, layoff, removal, discipline, classification, compensation, and welfare of its employees, and other incidents of state employment. All appointments and promotions to positions in the classified service shall be made solely on the basis of merit and fitness and no person shall be in any unlawful way favored or discriminated against with respect to any incident of state employment because of his or her political or religious opinions or affiliations or race, gender, age, disability, ancestry or national origin, or for other reason(s) explicitly provided in federal and/or state law.
2.2. Application of Rule. -- Persons employed by the Tax Division of the Department of Revenue are covered by the classified service or classified exempt service. Division of Personnel rules 143 CSR 1, 143 CSR 4, and 143 CSR 6 apply to personnel covered by the classified service or classified exempt service. Except as specifically set forth in the provisions of this rule promulgated pursuant to enactment of W.Va.Code §11B-1-8, Division of Personnel rules will continue to apply to persons employed by the Tax Division. In case of any conflict between this rule and a provision of 143 CSR 1, 1443 CSR 4, or 143 CSR 6, the provisions of this rule shall control.
W. Va. Code R. § 110-42-3 Definitions
3.1. Accrual Rate. -- The grouping by the cumulative years of eligible employment which is used to determine the rate of accrual of annual leave benefits.
3.2. Accrue. -- To increase or accumulate periodically or by increment.
3.3. Administrator. -- Any person who fills a statutorily created position within or related to an agency or board (other than a board member) and who is designated by statute as the commissioner, deputy commissioner, assistant commissioner, director, chancellor, chief, executive director, executive secretary, superintendent, deputy superintendent or other administrative title, however designated.
3.4. Affiliation. -- Adoption by employees of state agencies or parts of state agencies to the classified service by action of the Legislature, executive order of the Governor with the consent of the Board and the Tax Commissioner.
3.5. Agency. -- The Tax Division of the Department of Revenue.
3.6. Allocation. -- The assignment of a position to a class by the Tax Commissioner on the basis of the duties performed and responsibilities assumed.
3.7. Appeal. -- A request made to the Tax Commissioner or the Board to reconsider a decision.
3.8. Appointing Authority. -- The Tax Commissioner who is authorized by statute to appoint employees in the classified or classified-exempt service of the Tax Division.
3.9. Appointment. -- The act of hiring an applicant for employment.
3.10. Available. -- The indication, by an eligible applicant, of the employment location and conditions under which employment would be accepted including, but not limited to, salary and starting date of employment.
3.11. Board. -- The State Personnel Board as provided for in W. Va. Code §29-6-6 whose members are appointed by the Governor with the advice and consent of the Senate.
3.12. Business Necessity. -- The reason or cause for any of a variety of personnel actions based upon the condition of the agency, in whole or in part, or specific program component(s) which may include but is not limited to lack of funds or work; abolishment of positions; material changes in mission, duties or organization; loss of budgeted, allocated or available positions; reinstatement of eligible employees returning from military duty or temporary total disability; reinstatement of an employee in compliance with a legal order; and for recall of employees previously laid off.
3.13. Certification. -- The official list of eligible applicants given to an appointing authority for filling vacancies in the classified service.
3.14. Class or Class of Positions. -- One or more positions sufficiently similar in duties, training, experience and responsibilities, as determined by class specification, that the same title, the same qualifications, and the same schedule of compensation and benefits may be equitably applied to each position in the class.
3.15. Class Specification. -- The official description of a class of position which describes the nature of work, provides examples of work performed, and knowledges, skills, and abilities, and states the generally accepted minimum qualifications required for employment.
3.16 Classification Action. -- The actions of allocation, reallocation, classification, and reclassification.
3.17. Classification Plan. -- The plan by which positions in the classified service and classified-exempt service have been allocated by class.
3.18. Classified Employee. -- An employee who occupies a position allocated to a class in the classified service.
3.19. Classified-Exempt Service. -- As established by statute, those positions which satisfy the definitions for "class" and "classify" but which are not covered under the Division of Personnel merit system standards or employment standards of the higher education governing boards.
3.20. Classified Service. -- Those positions which satisfy the definitions for "class" and "classify," and which are covered under the Division of Personnel merit system standards.
3.21. Classify. -- The process of ascertaining, analyzing, and evaluating the duties and responsibilities of positions to group the positions in classes and to determine classes utilized by the Tax Division.
3.22. Commissioner. – The Commissioner of the Tax Division of the Department of Revenue or his or her designee.
3.23. Compensation Plan. -- The official schedule of pay rates, the range assigned to each class of positions and the salary regulations used in pay administration in the classified service.
3.24. Date and Time of Separation. -- Last date and time worked by an employee separated from employment due to dismissal, voluntary resignation, voluntary retirement, layoff, or death; the date of death of employees who die while on paid or unpaid leave; the date and time of notification by employees resigning or retiring while on military leave, or while receiving workers’ compensation temporary total disability benefits as a result of a personal injury or illness received in the course of and resulting from covered employment with the State in accordance with W. Va. Code § 23-4-1, or due to disability as verified by a physician.
3.25. Day. -- Unless otherwise specified, the use of "day" means a calendar day.
3.26. Demotion. -- A change in the status of an employee from a position in one class to a position in a lower job class as measured by compensation range, minimum qualifications, or duties, or a reduction in an employee's pay to a lower rate in the compensation range assigned to the class. There are two (2) types of demotion:
3.26.1. Demotion with Prejudice. -- A disciplinary action resulting in the reduction in pay and a change in job class to a lower job class.
3.26.2. Demotion without Prejudice. – A reduction in pay and/or a change in job class to a lower job class due to business necessity or as a result of an employee being selected for a vacant, posted position for which he or she applied.
3.27. Department. – The Department of Revenue established in W. Va. Code § 5F-1-2.
3.28. Director. -- The Director of Personnel, as provided in W. Va. Code §29-6-7 and §29-6-9, who serves as the executive head of the Division of Personnel, or his or her designee.
3.29. Disability. -- A physical or mental impairment which substantially limits one or more of a person's major life activities, a record of such impairment, or regarded as having such an impairment.
3.30. Discretionary. -- Open to individual choice or judgment.
3.31. Dismissal. -- Involuntary separation initiated by an appointing authority ending the employer-employee relationship of a classified employee for good cause or of a classified-exempt employee with or without cause.
3.32. Division – The Tax Division of the Department of Revenue.
3.33. Division of Personnel. -- The division of the Department of Administration responsible for the system of personnel administration for the classified and classified-exempt service.
3.34. Effective Date. -- The established date on which an action takes place.
3.35. Eligible Applicant. -- An applicant accepted for a Division of Personnel examination who receives a final passing score and whose name is listed on the register established for the class of position.
3.36. Employee. -- Any person who lawfully occupies a position in an agency and who is paid a wage or salary and who has not severed the employee-employer relationship.
3.37. Examination. -- The process of assessing or measuring and evaluating the relative skills, abilities and fitness of applicants by job-related procedures. Examples include, but are not limited to: application evaluation, written test, performance test, physical agility test, interview or oral assessment, psychological or behavioral assessment, drug screening, and background evaluation. Examinations may be further defined as follows:
3.37.1. Assembled Examination. – Any assessment procedure requiring applicants to appear at a specified time and place.
3.37.2. Unassembled Examination. – An appraisal of job-related training, experience or any other job qualifications without the necessity for the applicant’s personal appearance at a specified place.
3.38. Exempt Service. -- All positions specifically exempted from the classified service by statute or statutory authority.
3.39. Fitness. -- Suitability to perform all essential duties of a position by virtue of meeting the established minimum qualifications and being otherwise qualified.
3.40. Full-time Employee. -- Any employee who works the full work schedule established for the agency.
3.41. Hourly Rate. -- The total annual salary (excluding annual increment) divided by 2,080 hours for full-time permanent and temporary salaried employees or divided by the actual number of hours worked annually for part-time permanent and temporary salaried employees. For hourly employees, the hourly rate is the actual rate established by the Board.
3.42. Immediate Family. -- Consists of the parents, children, siblings, spouse, parents-in-law, children-in-law, grandparents, grandchildren, step-parents, step-brothers, step-sisters, stepchildren, foster children, individuals in an in loco parentis relationship, and individuals in a legal guardianship relationship.
3.43. Incapacity. -- An illness of or injury to an employee which temporarily prevents him or her from performing the essential duties of his or her position.
3.44. Incumbent. -- Any employee occupying a position.
3.45. Inter-Agency Transfer. -- Any transfer from one agency to another.
3.46. Intra-Agency Transfer. -- Any transfer within a single agency.
3.47. Job Abandonment. -- The absence from work under such conditions as to be synonymous with resignation.
3.48. Last Date and Time on Payroll. -- The calendar date and hour an employee's pay ceases.
3.49. Last Day of Work. -- The last calendar date and hour an employee is physically on the job.
3.50. Lateral Class Change. -- The movement of any employee from one class to another class in the same pay grade.
3.51. Layoff. -- A reduction in the number of employees resulting in involuntary separation from employment or reduction in work schedule due to business necessity.
3.52. Minimum Qualifications. -- The least experience and/or training required by the State Personnel Board for employment in a class of position and admission to an examination for that class of position.
3.53. Month. -- Any of the twelve parts into which the calendar year is divided.
3.54. Occupational Group. -- A category of job classes grouped by similarity of occupation or profession.
3.55. Open Competitive Examination. -- An examination which permits the competition of all persons who meet the publicly announced minimum requirements for a class of position.
3.56. Original Appointment. -- Initial employment of an individual into the classified service as a result of selection from a certification of names from a register established by open competitive examination or from a preference register.
3.57. Part-time Employee. -- Any person who works less than the full-time work schedule established for an agency.
3.58. Part-time Professional. -- Any classified-exempt employee engaged in professional services without administrative duties and who works no more than half the agency's full-time work schedule.
3.59. Pay Differential. -- A type of salary adjustment specifically approved by the Board to address circumstances including, but not limited to, class-wide recruitment and/or retention problems, regionally specific geographic pay disparities, apprenticeship program requirements, shift differentials for specified work periods, and temporary upgrade programs.
3.60. Pay Increment. -- The percentage increase amounts established by the State Personnel Board to implement pay practices including hiring rates, salary advancements, and pay on promotion.
3.61. Pay Plan. – A compensation schedule for the classified service consistent with merit principles.
3.62. Pay Rate. -- One of the monthly or hourly rates within the pay range proposed by the Tax Commissioner and affirmed by the State Personnel Board for each class included in the approved pay plan; the usual rate of pay. Though pay may be expressed in terms of a monthly rate, employees may be paid on a bi-weekly basis.
3.63 Pay Scale. – The official schedule of salaries for the Tax Division approved by the Personnel Board and Governor consisting of multiple pay grades with minimum and maximum rates of pay for each grade that is referred to as the salary schedule by the Division of Personnel.
3.64. Permanent Employee. -- Any classified employee who was hired from a register and who has completed the probationary period prescribed by the State Personnel Board for the job class, or any classified-exempt employee who was hired to fill a position for an unlimited period of time, notwithstanding the Tax Division’s right to terminate the employee for cause or at his or her will.
3.65. Position. -- An authorized and identified group of duties and responsibilities assigned by the Tax Division requiring the full-time or part-time employment of at least one person.
3.66. Position Description. -- The document which describes the officially assigned duties, responsibilities, supervisory relationships and other pertinent information relative to a position. This document is the basic source of official information in position allocation. This document is the basic source of official information in the position allocation.
3.67. Probationary Period. -- A specified trial work period prescribed by the State Personnel Board designed to test the fitness of an employee selected from a competitive list of eligibles for the position for which an original appointment has been received.
3.68. Promotion. -- A change in the status of an employee from a position in one class to a vacant position in another class of higher rank as measured by salary range and increased level of duties and/or responsibilities.
3.69. Provisional Appointment. -- The hiring of an employee to fill a position pending the administration of an open competitive examination and the establishment of a register.
3.70. Reallocation. -- Reassignment by the Tax Commissioner of a position from one class to a different class on the basis of a significant change in the kind or level of duties and responsibilities assigned to the position.
3.71. Recall. – The re-employment from a recall list of a former permanent classified employee separated due to layoff.
3.72. Reclassification. – The revision by the Tax Commissioner of the specification of a class or class series approved by the State Personnel Board which results in a redefinition of the nature of the work performed and a reassignment of positions based on the new definition and may include a change in the title, compensation range, or minimum qualifications for the class involved.
3.73. Register. -- An official list of currently available eligible applicants for a job class ranked in the order of the final score as a result of the Division of Personnel examination for the class of position for competitive appointment or in seniority order for preference hiring of laid-off permanent classified employees.
3.74. Reinstatement. -- A type of re-employment of a former permanent classified employee.
3.75. Resignation. -- Voluntary separation from employment, including job abandonment, by an employee.
3.76. Salary Adjustment. -- A salary change resulting from a revision of the pay plan, the reassignment of a class to a different compensation range, a Board approved pay differential, a temporary classification upgrade, a general wage increase mandated by the Legislature or the Governor, or the correction of payroll errors.
3.77. Salary Advancement. -- A discretionary advancement in salary granted in recognition of the quality of job performance.
3.78. Salary Range. -- The approved monthly and annual salary for a class which includes the minimum, maximum, and intervening steps.
3.79. Salary Schedule. -- The official schedule of salaries approved by the Governor consisting of multiple pay grades with minimum and maximum rates of pay for each grade.
3.80. Tax Commissioner. -- The person appointed Tax Commissioner as provided in W. Va. Code § 11-1-1, or his or her designee.
3.81. Temporary Employment. -- Employment exempt from the classified service for a period not to exceed 1000 work hours per twelve-month period. Retirants may accept temporary full-time or temporary part-time employment from a participating employer without suspending his or her retirement annuity so long as he or she does not receive annual compensation in excess of $20,000.
3.82. Termination. -- Separation from employment by the appointing authority as a result of the expiration of a limited term appointment or at the end of the period of need during limited term employment.
3.83. Transfer. -- The movement of an employee to a different subdivision or geographic location of the same or a different agency.
3.84. Vacancy. -- An unfilled budgetary position in the classified service to be filled by original appointment, promotion, demotion, lateral class change, transfer, or reinstatement.
3.85. Veteran. -- Any person who fulfills the requirements set forth in W. Va. Code § 6-13-1.
3.86. Veterans' Preference Points. -- An additional five (5) points added to the final passing score on an open competitive examination of any veteran as defined by this rule. An additional five (5) points are available to those veterans who also have a current and compensable service connected disability or who have received a Purple Heart award.
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- Work Day. – Unless otherwise specified, the use of “work day” or “working day” means days exclusive of Saturday, Sunday, official holidays in this State, and any day in which the employee’s workplace is legally closed as provided for by statute, rule, policy or practice.
3.88. Work Schedule. -- Designation of the periods of time during which work is performed.
3.89. Workweek. -- The time period of seven (7) consecutive days, beginning and ending at specified days and times, during which work is performed and work hours reported for compliance with applicable federal and state labor laws.
3.90. Year. -- Twelve (12) consecutive month period, unless otherwise specified.
W. Va. Code R. § 110-42-4 Classification Plans
4.1. Preparation of Plans. -- The Tax Commissioner shall prepare, maintain, and revise a comprehensive classification plan for all positions in the classified and the classified-exempt service of the Tax Division. The plan shall be based on an investigation and analysis of the duties and responsibilities of each position. The classification plan shall include an appropriate title for each class.
4.2. Revision of Plans. -- The Tax Commissioner may request approval from the State Personnel Board to eliminate or modify existing classes of positions, or create new classes of positions.
4.3. Class Specifications.
4.3.1. A class specification is a general description of the kinds of work characteristic of positions properly allocated to that class and does not prescribe the duties of any position. It does not limit the expressed or implied authority of the Tax Division to prescribe or alter the duties of any position.
4.3.2. Class specifications are descriptive and are not restrictive. The fact that all the actual tasks performed by the incumbent of a position do not appear in the specifications of a class to which the position has been allocated does not mean that the position is necessarily excluded from the class, nor shall any one example of a typical task taken without relation to the other parts of the specification be construed as determining that a position should be allocated to the class.
4.3.3. The statement of minimum qualifications expresses the lowest acceptable level of education, experience, licensure and/or professional standards generally necessary for an employee to successfully perform the required duties of positions in the job class. The use of a particular expression of qualifications, requirements, or other attributes shall not be held to exclude others not mentioned.
4.3.4. In cases of recruitment difficulties or unique position requirements, the Tax Commissioner in collaboration with the Board may use his or her discretion in interpreting minimum experience, training licensure and/or professional standards.
4.3.5. The Director shall consider class specifications as a primary source of authority for the content of examinations for the class and for the evaluation of qualifications of applicants. Supplemental job information may be used as a further basis for examinations. Provisions for the substitution of related experience, education, or other qualifications for specific education and/or experience requirements may be made in specific examination announcements for particular positions, even though these provisions are not part of the class specification.
In cases of recruitment difficulties or unique position requirements, the Tax Commissioner may use his or her discretion in interpreting minimum experience, training and/or licensure requirements and in accepting equivalent experience, training and/or licensure.
4.4. Classification of Positions. -- The Tax Commissioner has the sole authority for the classification process.
4.4.1. The Tax Commissioner shall consider the class specifications to determine the class to which any position shall be allocated, and give consideration to the general duties, specific tasks, and responsibilities required and relationship to other classes.
4.4.2. The classification of a position shall not be based upon the individual characteristics or performance level of the employee occupying the position nor upon the classification of other positions.
4.4.3. The Tax Commissioner may authorize job audits for the purpose of position classification and for maintaining the integrity of the classification system.
4.5. Position Descriptions.
4.5.1. Position description forms shall be prescribed by the Tax Commissioner.
4.5.2. The position description is an official record of the duties and responsibilities assigned to a position and shall be used by the Tax Commissioner to allocate the position to its proper class.
4.5.3. The position description shall include a current description of specific duties, responsibilities and other pertinent information about the position as assigned by the Tax Commissioner.
4.5.4. The position description shall not be construed in any way to limit the expressed or implied authority of the Tax Commissioner to prescribe or alter the duties of any position.
4.5.5. Position descriptions shall be kept current by the Tax Division for each position under its jurisdiction. When the Tax Division significantly alters the duties and responsibilities of a position, the Tax Division shall provide for a revised position description, certifying with signature its accuracy and completeness.
4.5.6. If the Tax Division initiates significant alterations in the duties and responsibilities of a position, the Tax Division will evaluate a new position description to ensure the employee remains appropriately classified. If the incumbent in the position is not satisfied with the determination of the Tax Division, they may file a request for reconsideration with the Tax Commissioner’s Office within fifteen (15) working days of the change in position description and request a review of his or her position. If the employee is not satisfied with the Tax Commissioner’s Office decision, he or she may file a grievance with the Public Employees Grievance Board as provided for in W. Va. Code §6C-2-1 et seq.
4.5.7. Falsification of information on position description forms may be grounds for disciplinary action.
4.6. Reclassification.
4.6.1. Upon its own initiative, or at the request of the Tax Division, the Board may reclassify positions by the creation or elimination of classes, or the revision of the definition of the work. The Tax Commissioner shall provide to the Board a current description of the duties and responsibilities assigned to each position affected.
4.6.2. The employee in the position at the time of a reclassification is entitled to continue to serve in that position, provided that the employee meets the minimum requirements. If ineligible to continue in the position, he or she may be transferred, promoted, or demoted by appropriate action in accordance with the provisions of this rule as the Tax Commissioner may determine to be applicable. In any case, in which the incumbent is ineligible to continue in the position, and he or she is not transferred, promoted or demoted, the provisions of this rule regarding separations applies.
4.6.3. Any incumbent in a reclassified position, may file a request for reconsideration with the Tax Commissioner’s Office and request a review of his or her position within fifteen (15) working days of the reclassification. If the employee is not satisfied with the Tax Commissioner’s Office decision, he or she may file a grievance with the Public Employees Grievance Board as provided for in W. Va. Code §6C-2-1 et seq.
4.7. Position Reallocation. -- Whenever significant changes occur in the duties and responsibilities permanently assigned to a position, the Tax Commissioner shall reallocate the position to its proper class. The incumbent may seek a reconsideration of the decision by submitting a written request to the Tax Commissioner within fifteen (15) working days of the notification of the decision. If the employee is not satisfied with the Tax Commissioner’s Office decision, he or she may file a grievance with the Public Employees Grievance Board as provided for in W. Va. Code §6C-2-1 et seq.
4.7.1. The Tax Commissioner shall not reallocate a position based on temporary changes in the duties and responsibilities assigned to the position.
4.7.2. When a position is reallocated to a different class, the incumbent shall not be considered eligible to continue in the position unless he or she meets the minimum qualifications for the classification. If ineligible to continue in the position, he or she may be transferred, promoted, or demoted by appropriate action in accordance with the provision of this rule as the Tax Commissioner may determine to be applicable. In any case in which the incumbent is ineligible to continue in the position, and he or she is not transferred, promoted or demoted, the provisions of the Division of Personnel rule regarding separations applies.
4.8. Temporary Classification Upgrade. -- The Tax Commissioner may temporarily upgrade the classification of an employee temporarily performing the duties of a position in a higher pay grade due to a separation or an extended leave of absence, for a short-term project, or in an emergency situation.
4.8.1. A temporary classification upgrade, except for classes allocated to the approved hourly pay schedule, shall be for a continuous period of no less than thirty (30) days and no more than six (6) months.
4.8.2. Classified-exempt employees may only be upgraded within the classified-exempt service. A classified employee may serve in an acting capacity on a temporary basis in an exempt and/or appointive position without loss of his or her classified status.
4.8.3. The Tax Commissioner, at his or her discretion, may extend the period of a temporary classification upgrade.
4.8.4. Employees in the classified service approved for temporary upgrade to a classified position shall have attained permanent status and meet the minimum requirements for the position to which they will be temporarily upgraded.
4.9. Classification Plan for the Classified-Exempt Service. -- All positions not in the classified service are included in a classification plan known as the classified-exempt service.
4.9.1. Upon the recommendation of the Tax Commissioner, the Board shall adopt and make effective a classification plan for employees in the classified-exempt service of the Tax Division.
4.9.2. The Tax Commissioner shall report to the Board the establishment of new positions or any material changes in the duties and responsibilities of existing positions in the classified-exempt service. The Board may at any time require the Tax Commissioner to submit a statement of the duties and responsibilities of incumbents of any position in the classified-exempt service.
4.9.3. The Tax Commissioner shall allocate classified-exempt positions in the same manner as classified positions.
4.9.4. The Tax Commissioner may request names of applicants for consideration for employment in the classified-exempt service. In no event shall a classified service vacancy be filled from a certification prepared for a classified-exempt service vacancy.
4.9.5. An incumbent within the classified-exempt service in an allocated position has the right to appeal the allocation of their position to a classification. The incumbent may seek reconsideration of the decision by submitting a written request to the Tax Commissioner within fifteen (15) working days from the notification of the decision. After filing with the Tax Commissioner a written request for reconsideration, the employee shall be given a reasonable opportunity to be heard by the Tax Commissioner. If the employee is not satisfied with the Tax Commissioner’s Office decision, he or she may file a grievance with the Public Employees Grievance Board as provided for in W. Va. Code §6C-2-1 et seq.
W. Va. Code R. § 110-42-5 Pay Plan and Salary Administration
The following salary regulations in this section apply to classified employees.
5.1. Purpose and Intent. -- The purposes and intent of the pay plan is to attract and retain qualified employees in the classified service, the Board shall provide through the pay plan compensation based on equal pay for equal work and market rates as compared to compensation trends in other public and private sector organizations.
5.2. Preparation of the Plan. -- After consultation with the Secretary of Revenue, the Tax Commissioner and the Board shall prepare and submit to the Governor for his or her approval any revision of the pay plan. The pay plan shall include salary schedules containing multiple pay grades with minimum and maximum rates of pay for each grade and a plan of implementation. The pay plan shall also include a market rate for each grade which shall be established by the Tax Commissioner to approximate the market midpoint pay level among southeastern state governments selected by the Tax Commissioner. The Board may make periodic amendments to the pay plan in the same manner.
5.3. Adoption of the Plan. -- The plan or revised plan becomes effective only after it has been approved by the Governor. The approved pay plan constitutes the official schedule of salaries for the classified service at the Tax Division.
5.4. Implementation of Plan.
5.4.1. Assignment of Classes. -- The Tax Commissioner after approval of the Board shall assign each class of positions to an appropriate range of compensations consistent with the duties outlined in the class specification. No salary shall be approved by the Tax Commissioner unless it conforms to sound compensation practices.
5.4.2. Entry Salary. -- The entry salary for any employee shall be no less than the minimum of the compensation range for the job classification. The Tax Commissioner may authorize appointment above the minimum for an individual possessing pertinent training or experience above the minimum required for the class. The Tax Commissioner may authorize appointment at a rate above the market rate when the Tax Commissioner can substantiate severe or unusual recruiting difficulties for the job class.
5.4.3. Standard Rates of Pay. -- The pay plan provides standard compensation rates for all classes of positions in the classified service unless specifically excepted by statute or statutory authority. The salary or wage paid is determined by the compensation range to which the class of the position has been allocated. All employees, including those serving in positions on a part-time basis, shall be paid in proportion to the actual time worked.
5.4.4. Additional Pay. -- The Tax Commissioner shall make no additions to the regular salary of any employee except for authorized overtime, approved pay differentials and monetary incentives, or other statutorily required and/or authorized payments.
5.4.5. Availability of Funds. -- The Tax Commissioner and the Tax Division’s fiscal officer will certify that funds for salary adjustments are available.
5.4.6. Salary Adjustments.
5.4.6.a. New Plan.
5.4.6.a.1. Upon adoption of a new pay plan by the Tax Division, the Personnel Board shall require and may approve or modify a plan of implementation which assures incumbents in the classified service receive equal treatment based on sound compensation practices.
5.4.6.a.2. An incumbent whose salary falls below the minimum rate of the new range shall have his or her salary adjusted to the new minimum.
5.4.6.a.3. An incumbent whose salary falls above the maximum rate of the new range shall maintain his or her current salary.
5.4.6.b. Pay on Reclassification.
5.4.6.b.1. When a class is reassigned by the Tax Commissioner after approval by the Personnel Board to a compensation range having a higher minimum, the salaries of those incumbents below the new minimum shall be adjusted to the new minimum. Where the salary of the incumbent coincides with a pay rate in the new range, the salary shall remain unchanged. When a class is reassigned by the Tax Commissioner after approval by the Personnel Board to a salary range having a lower minimum, the salaries of those incumbents which are within the new range shall remain unchanged. Where the salary of the incumbent is above the maximum rate of the new range, the salary shall remain unchanged.
5.4.6.b.2. The Board may approve or modify a plan of implementation on reclassification based on documented recruitment and/or retention difficulties or consideration of equal treatment in terms of pay for reclassified employees.
5.4.6.c. Pay on Position Reallocation. -- When a position is reallocated to a different class, the salary of the incumbent shall be adjusted in accordance with the provisions of this rule for promotion, demotion and lateral change.
5.4.6.d. Pay Differentials. -- The Board may approve the establishment of pay differentials to address circumstances which apply to reasonably defined groups of employees.
5.4.6.e. Separation from Employment. -- Employees whose last day of work occurs prior to the effective date of a new pay plan are not eligible for salary adjustments.
5.5. Pay on Promotion. -- When an employee is promoted, the employee's pay shall be adjusted as follows:
5.5.1. Minimum Increase. -- An employee promoted will be compensated to at least the minimum compensation range of the job classification to which he or she is promoted. An employee whose salary is within the range shall receive an increase of one (1) pay increment or a maximum established by the Tax Commissioner, except where an employee accepts a lesser increase within the compensation range to obtain the position. In no case shall any employee receive an increase which causes the employee’s pay to exceed the maximum of the range except as provided in subdivision 5.5.b. of this rule.
5.5.2. Exceptions.
5.5.2.a. If the salary of an employee being promoted is at or above the maximum rate of the compensation range to which the employee is being promoted, or, if his or her salary is within one (1) pay increment, as established by the Tax Commissioner, of the maximum rate of the compensation range to which he or she is being promoted, the employee shall receive an increase of one (1) pay increment with the promotion.
5.5.2.b. If an employee has been demoted or reallocated to a class at a lower pay grade and is promoted or reallocated within the next twenty-four (24) months within the Tax Division, the following procedure shall be used when calculating pay on promotion as provided in subdivisions 5.5.a and 5.5.b of this rule: The promotional increase shall be calculated based on the compensation range of the employee’s position prior to the demotion or reallocation, using the employee’s current rate of pay plus any amount by which the employee’s pay was reduced at the time of the demotion or reallocation. If, based on this procedure, no promotional increase is due, the employee’s pay shall be increased by the amount his or her pay was reduced, if any, at the time of the demotion or reallocation.
5.5.3. Additional Increase. -- The Tax Commissioner may authorize additional incremental increases established by a Board approved pay plan, to an employee being promoted if the employee has sufficient qualifications in excess of the minimum required for the new class. The employee must possess pertinent experience or an equivalent amount of pertinent training for each additional incremental increase granted. In no case shall the additional incremental increase cause the employee’s pay to exceed the maximum for the compensation range.
5.6. Pay on Demotion.
5.6.1. Demotion Without Prejudice. -- The Tax Commissioner has the discretion to reduce or not reduce the pay rate of any employee who is demoted without prejudice if the employee’s pay rate is within the compensation range of the job class to which the employee is demoted.
5.6.2. Demotion With Prejudice. -- The Tax Commissioner shall reduce the pay rate of an employee who is demoted with prejudice by at least one (1) pay increment as established by the Tax Commissioner and the employee’s pay rate shall not exceed the maximum of the new compensation range.
5.7. Pay on Lateral Class Change. -- Any employee who receives a lateral class change shall be paid the same salary received prior to the change except in cases where the change is to an agency or job class for which the Board has approved, or the Legislature has authorized, a higher compensation range for the job class.
5.8. Pay on Reinstatement. -- The salary for an employee who is reinstated shall be established in accordance with subdivision 5.4.b. of this rule.
5.9. Salary Advancements. -- Salary advancements are limited to permanent employees and shall not exceed the increase amount established by the Tax Commissioner.
5.10. Annual Increment Increase. -- The Board may establish uniform procedures for providing an annual increment increase provided for in W. Va. Code §5-5-2.
W. Va. Code R. § 110-42-6 Applications and Examinations
6.1 General – The Division of Personnel will conduct examinations and receive applications on behalf of the Tax Division. The Tax Division will follow the procedures promulgated by the Division of Personnel in matters pertaining to examinations and applications, except for the matters set forth in subdivisions 6.1.1 and 6.1.2 of this rule.
6.1.1. The Tax Division will have the authority to evaluate applicants for employment or promotion within the division to positions within the classified service and classified-exempt service.
6.1.2. The Tax Division shall have the sole authority to determine whether applicants for positions with the Division meet minimum position requirements.
W. Va. Code R. § 110-42-7 Registers
7.1. Establishment of Registers.
7.1.1. Competitive Registers. -- After each examination, the Director shall prepare a register of persons applying for the position within five business days of receipt of a request from the Tax Commissioner. The names of these persons shall be placed on the register in the order of their final ratings starting with the highest.
7.1.2. Preference Registers. -- After the layoff of permanent classified employees, the Director shall prepare registers of qualified permanent classified employees who have been laid off. The names of these employees shall be arranged on the appropriate registers in order of tenure upon which the order of layoffs was based.
7.2. Duration of Registers.
7.2.1. Competitive Registers. -- The life of scores on a register shall be adequate to meet the recruitment needs of the agency. If the Director reduces the life of a register, he or she shall notify each eligible remaining on the register to this effect.
7.2.2. Preference Registers. -- A laid off permanent classified employee is eligible for employment from a preference register for no longer than one (1) year after placement on the preference register and the eligibility ceases immediately upon employment in a classified position.
7.2.3. Notice of Vacancies. -- It is the duty of the Tax Commissioner to notify the Director as far in advance as possible of vacancies which may occur in the agency. The Director is responsible for determining the adequacy of existing registers and for the establishment and maintenance of appropriate registers for all positions to be filled, exclusive of exempt positions.
7.2.4. Nullification of Register. -- The Director shall nullify a register for any of the following reasons:
7.2.4.a. Changes in the minimum qualifications or classification standards of a class of positions;
7.2.4.b. Elimination of the class for which the register was established; or,
7.2.4.c. Substantial revision of the examination used to establish the register.
7.2.5. When a register is declared null and void by the Director, he or she shall notify the affected persons of the action.
7.3. Removal of Names from Registers.
7.3.1. Competitive Registers. -- The Tax Commissioner may request the Division of Personnel remove the name of an eligible from a register for any of the causes stipulated in the subsections below:
7.3.1.a. he or she is found to lack any of the requirements established for the position/class;
7.3.1.b. he or she has a disability and is incapable of performing the essential functions of positions in the class with or without reasonable accommodation;
7.3.1.c. he or she has been convicted of a crime which has a reasonable connection to the position/class for which he or she is applying;
7.3.1.d. he or she has made a false statement or omission of material fact or has misrepresented his or her qualifications in his or her application;
7.3.1.e. he or she has previously been dismissed, or resigned in lieu of dismissal, from any public service for delinquency, misconduct, or other similar cause;
7.3.1.f. he or she has used or attempted to use political pressure or bribery to secure an advantage in the examination or appointment;
7.3.1.g. he or she has directly or indirectly obtained information regarding examinations to which he or she was not entitled;
7.3.1.h. he or she has failed to submit his or her application correctly or within the prescribed time limits;
7.3.1.i. he or she has taken part in the compilation, administration, or correction of the examination;
7.3.1.j. he or she has taken the same exact examination within the prescribed re-test waiting period;
7.3.1.k. at least two (2) former employers state that they would not re-employ him or her, or otherwise indicate that his or her services as an employee were unsatisfactory;
7.3.1.l. the register from which he or she is certified is for a class for which oral skills are essential, and at least two agencies have interviewed him or her and report that he or she is not considered to be suitable for a position in the class for which he or she interviewed;
7.3.1.m. he or she is not eligible to work in the United States;
7.3.1.n. he or she fails to comply with any other reasonable requirements established by the Tax Commissioner for the position;
7.3.1.o. sufficient evidence has revealed that, if employed in the classification or position applied for, the applicant is a significant risk to the safety or security of information or persons; or,
7.3.1.p. On evidence that the eligible cannot be located. An eligible may be considered not available by the Tax Commissioner if he or she fails to reply to electronic communication [i.e., telephone or electronic mail] or a written inquiry by mail after five (5) days in addition to the time required for the transmission of the inquiry to his or her last-known address and the reply to the inquiry.;
7.3.1.q. On receipt of a statement from the eligible declining an appointment and stating that he or she no longer desires consideration for an appointment; or,
7.3.1.r. If he or she declines an offer of a probationary appointment for the class for which the register was established in a location for which he or she has declared himself or herself available.
7.3.2. Preference Registers. -- The Tax Commissioner may request that the Division of Personnel remove the name of an eligible from a preference register:
7.3.2.a. For any of the causes stipulated in subdivision 7.3.1. of this rule;
7.3.2.b. Upon appointment of the eligible to a classified position; or,
7.3.2.c. On evidence that the eligible does not meet the applicable standards of qualifications and fitness for a position.
7.3.3. The Tax Commissioner shall notify the eligible that his or her name has been removed from the register and the reasons for the removal. The applicant is responsible for updating his or her contact information or notifying the Tax Commissioner of changes.
7.3.4. Any person whose name has been removed from a register allegedly for reasons specified in this rule may appeal to the Board for reconsideration. The appeal must be filed in writing with the Tax Commissioner within fifteen (15) calendar days after the date on which notification to the applicant was sent. The appeal shall state the reasons why the applicant should not be removed from the register.
7.3.5. The Board shall review all relevant information to determine if the action appealed was taken in accordance with this rule. Within sixty (60) calendar days after a properly submitted appeal is received, the Tax Commissioner shall report the Board’s decision in writing to the applicant.
7.4. Reinstatement to Register.
7.4.1. A person who has had his or her name withdrawn from a register at his or her request may have his or her name reinstated on the currently effective register for the same position class provided that the original register is still in effect and that his or her examination score is still valid. His or her rank on the register shall be determined by his or her final earned examination score.
7.4.2. Reinstatement to a register as provided for in the previous subdivision is subject to the following conditions:
7.4.2.a. The person petitioning the reinstatement shall make his or her request to the Tax Commissioner in writing and shall furnish whatever information the Tax Commissioner may require.
7.4.2.b. No person may be reinstated to a register who does not satisfy the current minimum qualifications for the position class for which the register is maintained. The Tax Commissioner may require that he or she pass an appropriate examination in the case of position classes requiring special skills.
7.4.2.c. No person may be reinstated to a register from which he or she has been disqualified under subsections 7.3, or 8.2. of this rule.
W. Va. Code R. § 110-42-8 Certification of Eligibles
8.1. Request for Certification. -- If a vacancy occurs in any position in the agency or if new positions are established and new employees are needed, requisitions shall be submitted by the Tax Division to the Director in the manner prescribed by the Director. This requisition shall state the number of positions to be filled in each class, identifying each class title and all other pertinent information.
8.2. Certification Methods.
8.2.1. Nothing in this subdivision shall be construed as altering the exhaustion point of a register as described in subdivision 7.2.1. of this rule.
8.2.1.a. Upon receipt of a requisition, the Director shall first certify and submit the names of all available eligibles from the appropriate preference register. If no appropriate preference register exists or there are no available qualified eligibles on the appropriate preference register, then the Director shall submit the names of any persons applying for the class of position. The Tax Division shall have the sole authority to determine whether applicants for position with the Division meet minimum position requirements.
8.2.1.b. If the competitive register established as a result of an examination for a specific class of position is exhausted, the Director may certify names from the register, or registers, most appropriate.
8.2.1.c. Appointments may be made from a certification anytime within six months of the date of the certification. Six months after the date of the certification, the certification shall be null and void.
8.2.2. If an eligible receives a probationary or permanent appointment, the appointment constitutes for its duration, a waiver of his or her right to certification from any other register on which his or her name appears for a class of position, the salary of which is either equal to or lower than that salary covered by his or her appointment, unless he or she requests in writing that his or her name be retained for certification from the register or registers. If a laid-off permanent classified state employee receives a probationary or permanent appointment to a classified position, that employee is no longer eligible for appointment from any preference register. The name of each employee whose name appears on a register for a class of position with a higher salary range than the salary range of his or her present class of position shall be certified and submitted by the Director and given consideration by the Tax Division for the higher class of position if his or her name is reached.
8.2.3. If in the exercise of his or her choice provided under subsection 9.2 of this rule the Tax Division passes over the name of an eligible on a competitive register in connection with three (3) separate appointments he or she has made from the register, written request may be made of the Director that the name of the eligible be omitted from any subsequent certification of the same agency from the same competitive register for a period of no less than one year from the date of the request. The name of the eligible shall thereafter not be certified to the Tax Division from that register for future vacancies in that class of position, or from subsequent registers established for that class of position. If, after that one (1) year period, the eligible is again certified for the same class of position, and passed over in connection with one appointment, the agency may again request that the name of the eligible be omitted from any subsequent certification as stated above.
8.2.4. An eligible may be considered not available by the Tax Commissioner if he or she fails to reply to electronic communication [i.e., telephone or electronic mail] or a written inquiry by mail after five (5) days in addition to the time required for the transmission of the inquiry to his or her last-known address and the reply to the inquiry.
8.3. Selective Certification. -- Any certification may limit consideration to only those individuals who possess specific qualifications determined to be essential for performance of the duties of a specific position.
8.3.1. If a specific position requires special qualifications that are not common to all positions in that class, the Tax Division may request that certification be limited to candidates possessing those qualifications. Eligibles shall have adequate opportunity for special qualification consideration. The specific criteria for the restriction of certification shall be based on the duties of the position as verified by job analysis or by an official position description and written justification.
8.3.2. The Director may approve a request for selective certification by gender if the Tax Division provides written justification which clearly shows that only persons of the required gender can perform the duties of the position and the Director has conferred with the Human Rights Commission.
8.3.3. The Tax Commissioner may limit certification to candidates available to work at the location of the job. The Tax Commissioner may further limit certification geographically when the duties of the position require rapid response to unscheduled emergencies during off duty hours. The Tax Commissioner shall provide the Director written justification of any geographic selective certification based on essential duties of the position. The Tax Commissioner shall establish the boundaries of the acceptable geographic areas based on the specific location and demands of the job. The Tax Commissioner shall consider candidates living outside the boundary if they are willing to relocate to the area.
8.3.4. Except for preference certifications, the Tax Commissioner may determine, for certain unskilled or semiskilled job classes for which no previous education, training, or experience is required, that eligibles may be selected for certification by lot. In those cases, all eligibles shall have equal opportunity for certification. No rank order shall be established for the register. Selection for certification by lot will be determined as vacancy requests are received. Once the certification has been made for a particular vacancy, a new certification shall not be issued for the same class and location for sixty (60) days. The employing agency shall offer opportunities for interviews to candidates in the order in which they appear on the certification. It is the responsibility of the employing agency to insure, to the extent practicable, that appointments from the certifications are made based on job-related merit and fitness.
8.4. Corrections of Errors.
8.4.1. In the event that a name is certified in error and the error is discovered before a personnel transaction has been finalized and one of the named applicants is notified that he or she is appointed, the Tax Commissioner shall withdraw the erroneous certification and make a correct certification. If a certification is to fill more than one position, the Tax Commissioner shall withdraw only that portion of it pertaining to positions for which applicants have not been notified that they are appointed. The Tax Commissioner shall only make conditional offers of employment to applicants until such time as the personnel transaction to appoint has received all necessary approvals,
8.4.2. In the event a name is certified in error and the error is discovered after one of the named applicants is notified that he or she is appointed but prior to the effective date of the appointment and the applicant is not disqualified for any reason provided in Section 7.3 of this rule other than not meeting minimum qualifications, the Tax Commissioner shall withdraw the certification and the appointment as in subdivision 8.4.a. of this subsection unless the applicant provides verification to the Tax Commissioner that:
8.4.2.a. Acceptance of the appointment caused the named applicant to change his or her place of residence; or,
8.4.2.b. Acceptance of the appointment caused the named applicant to resign from a position that cannot be regained.
8.4.3. In the event a name is certified in error and the error is discovered after the effective date of the appointment of one of the named applicants or the certification could not be withdrawn for reasons provided in subparagraphs 8.4.2.a. and 8.4.2.b., the appointment shall continue. Provided, the applicant or employee is not disqualified for any reason specified in Section 7.3 of this rule other than not meeting minimum qualification and it has been determined by the Tax Commissioner that there is no undue risk in the applicant performing the duties. If the applicant or employee is not qualified to perform the duties of the position, the Tax Commissioner shall assign the applicant to a vacant position for which he or she meets the minimum qualifications, in the same location and agency for which he or she was certified and at the same salary. If continued employment or alternative assignment is deemed inappropriate by the Tax Commissioner, the provisions of the Division of Personnel rule regarding separations shall apply.
W. Va. Code R. § 110-42-9 Appointments
9.1. Original Appointments.
9.1.1. The Tax Division shall make all original appointments to classified positions in accordance with this rule. The Tax Division shall select for each position first from the eligibles on an appropriate preference register. Upon exhaustion of the preference register, the Tax Division shall select for each position from the register certified by the Division of Personnel. The Tax Division may exclude the names of those eligibles who failed to answer or who declined appointment or of those eligibles to whom the Tax Division offers an objection in writing to the Director based on Subsection 7.3 of this rule.
9.1.2. Notwithstanding subdivision 9.1.1. of this rule or any provision of law or rule promulgated under the provisions of the West Virginia State Code, the Tax Division may employ any person listed on the register for employment as a Tax and Revenue Auditor 1, Tax and Revenue Auditor 2, Tax and Revenue Auditor 3, Revenue Agent 1, Revenue Agent 2, Investigator 2 or Investigator 3 without regard to the person’s position on the applicable register.
9.1.3. In selecting persons from among those certified, the Tax Division shall give due consideration, based on job related criteria, to all available eligibles and may examine their applications and reports of investigations and may interview them. Final selection shall be reported in writing by the Tax Division to the Director and shall include a statement by the Tax Division or his or her designee certifying that the person charged with making the selection: complied with the requirements of this subdivision; did not make the selection based on favoritism shown or patronage granted; and, considered all available eligibles for the position.
9.1.4. If the eligible selected declines the appointment, the Tax Division shall transmit evidence of declination and other data to the Director for the permanent record. The Tax Division may consider an eligible as having declined appointment if the eligible fails to reply to electronic communication [i.e., telephone or electronic mail] or a written inquiry by mail after five (5) days in addition to the time allowed for transmission of the letter to his or her last-known address and return of reply. If an eligible accepts an appointment but fails to present himself or herself for duty at the time and place specified without giving reasons for the delay satisfactory to the Tax Division, he or she shall be considered to have declined the appointment.
9.2. Provisional Appointments.
9.2.1. If there are urgent reasons for filling a position and there is no appropriate preference register and there are fewer than three available eligibles on the competitive register established as a result of an examination for the position, and no other appropriate register exists, the Tax Division may submit to the Division of Personnel the name of a person to fill the position pending examination and establishment of a register. If that person's qualifications have been certified by the Tax Commissioner as meeting the minimum qualifications as to training and experience for the position, that person may be provisionally appointed to fill the existing vacancy until an appropriate register is established and appointment made from the register. The position must be classified and minimum qualifications established for the position in accordance with this rule before provisional appointments may be made. No provisional appointment shall be continued for more than 6 months from the date of appointment, nor shall successive provisional appointments of the same person be permitted, nor shall a position be filled by repeated provisional appointments.
9.2.2. Time spent on a leave of absence without pay shall not extend the period of a provisional appointment.
9.3. Temporary Employment. -- The Tax Division may employ individuals for a limited period of time not to exceed 1000 hours in any twelve-month period in accordance with the provisions of this rule and W. Va. Code §29-6-1 et seq. Individuals employed under the provisions of this subsection are exempt from the classified service.
9.4. Posting of Job Openings. -- Whenever a job opening occurs in the classified service, the Tax Division shall post a notice within the building, facility or work area and throughout the agency that candidates will be considered to fill the job opening. Posting of job openings using electronic or other communications media shall satisfy the requirement to post a notice provided that the Tax Division makes regular and convenient access to the media used available to each classified employee in the agency, or otherwise provides notice to each classified employee in the agency. Any position filled internally shall be posted for seven calendar days before the Tax Division my select an applicant. For positions to be filled with applicants from outside of the Tax Division, the public service announcement shall be posted for not less than fourteen calendar days. The notice shall state that a job opening has occurred, describe the duties to be performed, and the class to be used to fill the job opening.
9.4.1. The term “job opening” refers to any vacancy to be filled by original appointment, promotion, demotion, lateral class change, reinstatement, or transfer, except any vacancy filled as a result of an employee exercising his or her bumping rights.
9.4.2. The Tax Division is authorized to declare any positions effectively vacant due to employee separation, which were not processed prior to the division being placed under the wvOASIS system, vacant and subject to being filled.
9.4.3. The Tax Division shall have the flexibility to utilize all vacant position numbers when posting to fill a vacancy and to post vacant positions utilizing multiple classifications with corresponding job descriptions when the Tax Commissioner determines it to be necessary and in the best interest of the Division.
9.4.4. A vacancy created when an employee of the Tax Division separates or goes on terminal leave may be posted upon receipt of the notice that the employee separated or commenced such leave.
9.4.5. The posting notice shall include a description of the duties to be performed by the person selected, the minimum qualifications for the position, the job class to be used in filling the job opening, the salary level or range that will be considered, the full-time equivalent for the position, and the job location.
9.4.6. An established closing date shall allow sufficient time to ensure that the job vacancy circulation has been posted throughout the agency for a minimum of seven (7) days. The naming of an individual to fill the position is the appointment and is not altered by the fact that the individual will not assume the duties until a later date. Therefore, the Tax Division shall not make an appointment to a position prior to the closing date as listed on the posting. The Tax Division may accept applications after the closing date; however, all applications received on or prior to any established cut-off date must be accepted and considered.
9.4.7. The Tax Division shall give due consideration to those employees who apply and are eligible for the posted vacancy.
9.4.8. If a posted vacancy is not filled within twelve (12) months of the established closing date, the Tax Division will re-post the vacancy prior to an appointment to the vacant position.
9.4.9. The vacancy posting requirements in this subdivision shall apply to all classified position vacancies except vacancies filled as a result of employees exercising bumping rights, demotions with prejudice and/or transfers for cause.
9.4.10. If an individual selected for a posted vacancy refuses the offer of employment, fails to report to work, or resigns or otherwise separates from employment within the first two pay periods of employment, the Tax Division is not required to repost the vacancy prior to making another appointment to the position provided that the appointment is made within sixty (60) days of the separation and the appointment is made from the pool of eligible applicants from which the first employee was hired. This time period supersedes the twelve-month limitation specified in subdivision 9.4.8. of this subsection.
W. Va. Code R. § 110-42-10 Promotions, Demotions and Transfers
10.1. Method of Making Promotions.
10.1.1. In filling vacancies, the Tax Commissioner shall make an effort to achieve a balance between promotion from within the classified service and the introduction into the classified service of qualified new employees. Whenever practical and in the best interest of the Tax Division, the Tax Commissioner may fill a vacancy by promotion, after consideration of the eligible permanent employees in the Tax Division or in the classified service based on demonstrated capacity and quality and length of service.
10.1.2. The Tax Commissioner will make the determination whether a candidate for promotion possesses the qualifications for the position as set forth in the specifications for the class of position for which he or she is a candidate, and the Tax Commissioner may require the candidate to qualify for the new position by a promotional competitive or non-competitive examination administered by the Director.
10.2. Promotion by Competitive Examination.
10.2.1. If it is determined by the Tax Commissioner to fill vacancies in a particular class of position by promotion by competitive examination, the examination shall be given under the direction of the Director. To be eligible for promotion, an employee must, at the time the promotion is effective, have permanent status and must meet the minimum qualifications as to training and experience for the class of position as determined by the Tax Commissioner.
10.2.2. The Director shall place the names of all employees who apply on a promotional register for the class of position in order of their examination ratings.
10.2.3. If a promotional and an original register exist, the Director shall certify the same number of names from each register in accordance with Section 8 of this rule. The Tax Commissioner may make his or her selection from the names submitted from either register.
10.3. Promotion by Noncompetitive Examination. -- If it is determined by the Tax Commissioner to fill a vacancy by a non-competitive promotional examination, an employee proposed for promotion shall be examined in accordance with subsection 10.2 of this rule by the Tax Commissioner to determine if he or she meets the minimum qualification as to training and experience for the class of position.
10.4. Demotions. -- The Tax Commissioner may demote an employee with or without prejudice and may demote a probationary employee. The Tax Commissioner shall file the reasons for the demotion and the reply, if any with the Director. Prior to the effective date of the demotion, the Tax Commissioner shall:
10.4.1. Meet with the employee in a predetermination conference and advise the employee of the contemplated demotion, if the conference is not required when the demotion is requested by the employee, voluntarily and without duress, such as to accept a posted position for which the employee has applied;
10.4.2. Give the employee oral notice confirmed in writing within three (3) working days, or written notice of the specific reason or reasons for the demotion; and
10.4.3. Give the employee a minimum of fifteen (15) days’ notice of the demotion to allow the employee a reasonable time to reply to the demotion in writing, or upon request to appear personally and reply to the Tax Commissioner. Provided, that the fifteen (15) days’ notice is not required when the demotion is requested by the employee, voluntarily and without duress, such as to accept a posted position for which the employee has applied.
10.5. Lateral Class Change. -- The Tax Commissioner may move a permanent employee from a position in one class to a vacant position in another class in the same compensation range if the employee is found by the Tax Commissioner to qualify for the vacant position.
10.6 Transfers.
10.6.1. Subject to the posting requirements provided in subsection 9.4. of this rule, the Tax Commissioner may transfer a permanent employee from a position in one organizational subdivision of the Tax Division to a position in another organizational subdivision of the same or another agency at any time. In the case of inter-agency transfers, the Tax Commissioner shall transfer all hours of accumulated annual and sick leave and all service credit with the employee. Transfer within the classified service, without a break in service, shall not be considered a resignation.
10.6.2. The Tax Commissioner shall report all inter and intra-agency transfers within a class to the Director on appropriate forms at the time of the transfer. The Director shall approve transfers to comparable classes prior to the transfers and shall require that the employee meet the minimum qualifications of the new classes.
W. Va. Code R. § 110-42-11 Reconsideration
11.1. General. -- Any applicant or employee may request that the Tax Commissioner reconsider a decision which directly affects the applicant or employee. Unless otherwise specified in this rule, the request must be submitted in writing within fifteen (15) days of the applicant’s or employee’s notification of the decision. Within thirty (30) days of receipt of the applicant’s or employee’s request for reconsideration, the Tax Commissioner shall notify the applicant or employee of his or her decision.
W. Va. Code R. § 110-42-12 Employment Conflicts
12.1. Other Employment and Certain Volunteer Activity. -- No employee shall hold other public office, have conflicting employment, or participate in conflicting volunteer activity while in the classified service. Determination of the conflict shall be made jointly by the Tax Division and the Board, or may be specifically delegated by the Board to the Tax Division, who shall consider whether the other employment or volunteer activity: (1) will be in conflict with the interests of the Tax Division; (2) will interfere with the performance of the employee's official duties; (3) will use or appear to use information obtained in connection with official duties which is not generally available to the public; or, (4) may reasonably be regarded as official action.
12.2. Nepotism. -- The Tax Commissioner shall not influence or attempt to influence the employment or working conditions of his or her immediate family. It is the responsibility of the Tax Commissioner to administer the employment of relatives of any agency employee in a consistent and impartial manner. The Tax Commissioner shall comply with West Virginia and federal law prohibiting nepotism, favoritism, discrimination or unethical practices related to employment and promotion, and the public employee grievance system.
12.3. No employee shall directly supervise a member of his or her immediate family. This prohibition includes reviewing, auditing or evaluating work or taking part in discussions or making recommendations concerning employment, assignment, compensation, discipline or related matters. If an individual, through marriage, adoption, etc. is placed in a prohibited business relationship with a member of his or her immediate family, the situation shall be resolved within thirty (30) calendar days. Resolution may be made by transfer, reassignment, resignation, dismissal, etc. of one of the involved employees or by other accommodation which protects the interests of the public.
W. Va. Code R. § 110-42-13 Records and Reports
13.1. Agency and Division of Personnel Records. – The Tax Division shall comply with all applicable record retention requirements provided by law and shall establish and maintain a personnel record for each employee, showing the employee's name, title, organizational unit, salary, changes in status, performance evaluations, and such other personnel information as may be considered pertinent. The Division of Personnel is not the custodian of records for agency employee personnel files. The Director shall maintain applications for examination for at least one (1) year after the date of the application. All personnel records shall be open to the inspection of the Board but shall otherwise be held confidential by the tax Division and the Director in accordance with Section 20 of this rule. A complete and accurate copy of the employee's personnel file shall be provided by the previous employer upon inter-departmental transfer or other appointment of the employee by another agency.
13.2. Legislature Access. -- Neither this section nor any other provision of this rule shall interfere with the right of the Legislature, its committees, administrative units and staff to have access to agency personnel records under the common law, or pursuant to the provisions of W. Va. Code §§4-2-5, 4-3-4, 4-5-3, 4-10-5, or any other statutory provision giving a legislative agency or subunit access to records of a state or classified agency. The Legislature, its committees, administrative units and staff having access to these records shall maintain the confidentiality of the records, to the extent reasonably possible.
W. Va. Code R. § 110-42-14 Confidentiality
14.1. General. -- The business of the Tax Division shall be conducted in such a manner as to ensure the privacy rights of all applicants and employees, in accordance with W. Va. Code §§29B-1-1 et seq., the State Freedom of Information Act and 5A-8-1et seq., the Public Records Management and Preservation Act. Applicant and employee residential addresses and phone numbers, applicant and employee medical information, and other information which the Tax Commissioner, or the Director may deem confidential shall be maintained under strictest confidentiality and released only upon proper written authorization of the applicant or employee or by order of a court of competent jurisdiction.
W. Va. Code R. § 110-42-15 Duties of State Officers; Legal Proceedings to Secure Compliance; Penalties
15.1. Duties of the Tax Commissioner. -- Pursuant to W. Va. Code §29-6-12, the Tax Commissioner shall comply with and aid in all proper ways in carrying out the provisions of W. Va. Code §29-6-1 et seq., and the rules and orders promulgated thereunder except as set forth in W. Va. Code §11B-1-8 and this rule. The Tax Commissioner shall furnish any records or information which the Director or the Board may request for any purpose of W. Va. Code §29-6-1 et seq . except as provided in W.Va. Code §11B-1-8. The Tax Commissioner shall comply with all rules, policies and orders of the Director or the Board and shall not increase nor diminish any benefits afforded any classified employee by the rules or orders except as set forth in W. Va. Code §11B-1-8.
15.2. Exemption from Regular Application and Appointment Requirements. – When seeking applications or making appointments pursuant to the special procedure authorized by West Virginia Code §11B-1-8(c), the Tax Division is not required to comply with the Division of Personnel procedures for seeking applications and making appointments to classified service positions as provided by the provision of article six, chapter twenty-nine of this code or in any other provision of the West Virginia Code, including those procedures promulgated in procedural or legislative rules promulgated by the Director pursuant to article three, chapter twenty-nine-a of the West Virginia Code, except as provided in this rule, and the Tax Division is not exempted from provisions of the West Virginia Code prohibiting nepotism, favoritism, discrimination or unethical practices related to appointment, or the public employee grievance system.
W. Va. Code R. § 110-42-16 Grievance Procedure
16.1. General. -- An employee hired for permanent employment with the Tax Division may file a grievance with the Public Employees Grievance Board as provided for in W. Va. Code §6C-2-1 et seq.
16.2 Parties to Grievance. --The Division of Personnel shall not be a mandatory party to any public employee grievance filed against the Tax Division. The Division of Personnel shall not be a signatory to, and may not override or otherwise challenge, the Tax Division’s decisions regarding settlement terms and conditions in employee grievances or other legal proceedings.
W. Va. Code R. § 110-42-17 Training and Development
17.1. Tax Division Responsibilities. -- The Tax Division is responsible for providing functional training to employees of the agency based upon the agency's needs and resources and the employee's needs and capabilities. Selection of employees for training and development shall ensure equal opportunity and shall not discriminate on the basis of race, sex, age, religion, national origin, political affiliation, disability or for other reason(s) explicitly prohibited by federal and/or State law.
W. Va. Code R. § 110-42-18 Employee Representative Organization Bulletin Boards
18.1. General. -- A bulletin board of a limited size shall be provided for posting notices of employee representative organizations. The bulletin boards shall be placed in convenient and generally accessible locations in all workplaces where the members of the organizations are employed. Provisions shall be made for separate bulletin boards for each employee representative organization. The cost of the bulletin boards shall be assumed by the requesting employee or the employee's representative organization. The boards shall be used exclusively by the employee representative organization and for organization purposes only.
W. Va. Code R. § 110-42-19 Authority of the Board
19.1 General. --Upon request of the Tax Division, the Board is authorized to establish by formal action programs and projects for a maximum of one (1) year outside of the provisions of this rule, including, but not limited to, programs or projects designed to respond to public disaster or emergency.
W. Va. Code R. § 110-42-20 Amendments
20.1. General. -- If and when it appears desirable in the interests of good administration, the Tax Commissioner, after public notice and public hearing and legislative approval, may amend the rules as it becomes necessary.
Series 43 Special Valuation Method for Certain Wireless Technology Property
W. Va. Code R. § 110-43-1 General
1.1. Scope. – This interpretive rule establishes the valuation method to be used by the Tax Commissioner and the Board of Public Works when determining the assessed value of wireless communications transmission towers for ad valorem property tax purposes that are constructed or erected between July 1, 2019 and July 1, 2024. This rule interprets W. Va. Code § 11-6L-1 et seq. enacted in Senate Bill 3 (2019).
1.2. Authority. -- W. Va. Code § 11-3-33.
1.3. Filing Date. -- April 10, 2020
1.4. Effective Date. -- May 10, 2020
W. Va. Code R. § 110-43-2 Definitions
2.1. “Tower” means a structure which hosts an antenna or other equipment used for the purpose of transmitting cellular or wireless signals for communications purposes, including telephonically, or for computing purposes, including any antenna and all associated equipment, which is constructed or erected between July 1, 2019 and July 1, 2024.
2.1.a. The term “tower” includes any building or structure typically significantly higher than its diameter, and high relative to surrounding terrain and buildings, that is used to provide, transmit or carry personal wireless services, cellular telephone service, data services, internet service, wireless signal capacity for communications purposes, wireless voice communications services or wireless digital signal service.
2.1.b. A tower may be freestanding or may be attached to a building or larger structure, and may be fully sheathed or walled in or of skeleton framework, including, but not limited to lattice construction, monopole construction, guyed construction or sheathed construction, or a similar structure, upon which there is mounted an antenna or other equipment used for the purposes of receiving or transmitting, or both receiving and transmitting, cellular or wireless signal capacity for communications purposes, including personal wireless services, cellular telephone service, data services, internet service, wireless signal capacity for communications purposes, wireless voice communications services or wireless digital signal service.
2.1.c. The term “tower” includes, but is not limited to, any antenna and all associated equipment.
2.2. The terms “communications tower” and “tower” do not include:
2.2.a. Towers used for transmission of commercial broadcast radio or television;
2.2.b. Any building or structure on which the communications tower or tower is mounted that has any use, utility or purpose other than to provide personal wireless services, cellular telephone service, data services, internet service, wireless signal capacity for communications purposes, wireless voice communications services or wireless digital signal service.
2.3. A tower shall not be denied the special valuation method authorized in W. Va. Code § 11-6L-3 and this rule because the tower is used for mounting or positioning communications antennae and telecommunications equipment of multiple users or multiple systems that provide personal wireless services, cellular telephone service, data services, internet service, wireless signal capacity for communications purposes, wireless voice communications services or wireless digital signal service.
2.4. “Salvage value” means five percent of the original cost of the tower.
2.5. The date that a tower is “constructed or erected” means the date that construction or erection is completed, and the tower is placed in operation.
2.6. “Original cost” means the basis of the property for federal income tax purposes for the year the tower is constructed or erected.
W. Va. Code R. § 110-43-3 Valuation of certain wireless technology property
3.1. The Board of Public Works determines the assessed value of all towers constructed or erected between July 1, 2019 and July 1, 2024 regardless of whether the tower is owned by a public service business or is owned by a person or business that is not a public service business.
3.2. The appraised value of any tower, as defined in this rule, for ad valorem property tax purposes, shall be its salvage value, and the correlated value determined under a unit valuation approach shall be reduced by the difference between the original cost and the salvage value of a tower.
3.2.a. Example 1: A tower belonging to an entity which is not a public service business shall be appraised at its salvage value, that is, five per cent of its original cost.
3.2.b. Example 2: Towers belonging to public service businesses subject to unit valuation by the Board of Public Works shall be appraised by subtracting the difference between the original cost of the tower and its salvage value from the unit value of the utility.
3.3. The special valuation method set forth in this rule applies only to towers constructed or erected between July 1, 2019 and July 1, 2024.
3.4. The special valuation method first applies to a tower for the assessment year in which it is constructed or erected and continues for the four ensuing assessment years. In no case shall a tower be eligible for the special valuation method for more than five years.
3.4.a. Cell towers constructed or erected between July 1, 2019 but before January 1, 2020, will be assessed for 2021 taxes.
3.4.b. Cell towers constructed or erected in calendar year 2020 will be assessed for 2022 taxes.
3.4.c. Cell towers constructed or erected in calendar year 2021 will be assessed for 2023 taxes.
3.4.d. Cell towers constructed or erected in calendar year 2022 will be assessed for 2024 taxes.
3.4.e. Cell towers constructed or erected in calendar year 2023 will be assessed for 2025 taxes.
3.4.f. Cell towers constructed or erected in calendar year 2024 but prior to July 1, 2024 will be assessed for 2026 taxes employing the special valuation methodology.
3.4.g. Cell towers constructed or erected in calendar year 2024 after June 30, 2024 will not be assessed using the special valuation methodology, unless use of that methodology is extended by the Legislature.
3.5. This rule does not apply to any property that is exempt from ad valorem property taxation under any other provision of the West Virginia Code. For example, a tower owned by a municipality or other government entity is presumed to be used for a public purpose and is therefore exempt from ad valorem property taxation.
3.6. The presence or placement of a tower on property used primarily for agricultural purposes shall not deprive such property of its eligibility for farm use valuation, but the tower shall be assessed separately, along with the underlying surface property, which shall be appraised and assessed by the square footage that is not being used for farming purposes, and shall be Class III or Class IV, as the case may be. Income derived by the property owner from the presence of the tower shall not be considered income from the surface use of the property for the purpose of determining whether the property qualifies for farm use valuation.
W. Va. Code R. § 110-43-4 Property tax returns
4.1. Owners of cell towers constructed or erected between July 1, 2019 and July 1, 2024 are required to return those cell towers to the Board of Public Works. Property tax returns are due May 1st each year for cell towers erected or constructed during the preceding calendar year, when the cell towers constructed or erected between July 1, 2019 and July 1, 2024.
4.2. The returns shall be prepared in the form prescribed by the Tax Commissioner and filed with the Property Tax Division of the State Tax Department on or before the applicable first day of May.
West Virginia State Tax Department Property Tax Division Special Properties Section P.O. Box 1463 Charleston, WV 25325
W. Va. Code R. § 110-43-5 Appeals
5.1. In September of the calendar tax year, the Tax Commissioner will notify the owner of cell towers constructed or erected between July 1, 2019 and July 1, 2024 of the tentative assessed values of the cell towers for the next calendar tax year.
5.2. If the owner disagrees with the tentative assessed value, the owner may submit information in support of its position to the Property Tax Division, at the address shown in §110-43-4.2 of this rule.
5.3. If the owner still disagrees with the assessed value, the owner may file a protest with the Board of Public Works and appear before the Board, on the date set by the Board to hear objections taxpayers have to the assessed values recommended by the Tax Commissioner.
5.4. The Board of Public Works will then set the assessed values of the cell towers. An owner claiming to be aggrieved by the assessed value may appeal to circuit court as provided in W. Va. Code § 11-6-12.
W. Va. Code R. § 110-43-6 County assessors may not value cell towers valued by Board of Public Works
When a cell tower is valued by the Board of Public Works as provided in W. Va. Code § 11-6L-1 et seq. and this interpretive rule, the cell tower may not be valued by the county assessor of the county in which the cell tower is located.
Series 49 Administration of Tax on Purchases of Wine and Liquor Inside and Outside of Municipalities
W. Va. Code R. § 110-49-3 Tax Base
3.1. The tax under §8-13-7, §60-3-9d and §60-3A-21 of the West Virginia Code, is imposed upon the following entities, as defined under this Rule, the West Virginia Code and the rules and regulations of the West Virginia Alcohol Beverage Control Administration, that make sales of intoxicating liquors and wine:
3.1.a. Retailers, including wine specialty shops;
3.1.b. Wineries and farm wineries;
3.1.c. Direct shippers;
3.1.d. Distributors; and
3.1.e. Distillers and mini-distillers.
3.2. The tax base does not include purchases of intoxicating liquors or wine in the original sealed package for the purpose of resale in the original sealed package if the final purchase of such intoxicating liquors or wine is subject to the tax imposed by W. Va. Code §60-3-9d, §8-13-7 or §60-3A-21. For purposes of this section, the term “original sealed package” means an original sealed package as defined in §8-13-7 of the West Virginia Code.
3.3. The tax base does not include intoxicating liquors sold by or purchased from holders of a license issued pursuant to the provisions of W. Va. Code §60-7-1, et seq.
3.4. The tax shall be levied on the purchase and shall be added to and collected with the price of purchase.
W. Va. Code R. § 110-49-4 Collection of tax
4.1. Retailers -- On a return designed by the Tax Commissioner, any person making sales of wine and liquor at retail, including retailers, wineries, and distilleries, must provide the following information:
4.1.a. The retailer’s physical street address, city and zip code, or, if the retailer has multiple business registration locations, a physical street address, city and zip code for each location where sales are made; and
4.1.b. The retailer must separately report for each location the amount of sales for:
4.1.b.1. Intoxicating liquor;
4.1.b.2. Wine; and
4.1.b.3. Sales of intoxicating liquor and wine to private clubs.
4.1.c. Such other information as the Tax Commissioner may require.
4.2. Direct Shippers and Distributors -- On a return designed by the Tax Commissioner, any person making sales of wine in distribution or direct shipment for final consumption, including wineries, farm wineries, direct shippers and distributors must provide the following information:
4.2.a. A physical street address, city and zip code for each sale made; and
4.2.b. The amount of each sale.
4.2.c. Such other information as the Tax Commissioner may require.
4.3. Wineries and farm wineries -- Wineries and farm wineries may have retailer, direct shipper or distributor sales. If a winery or farm winery makes retail sales of wine, it must comply with Section 4.1. If a winery or farm winery makes direct shipments or distributes wine subject to the tax, it must comply with Section 4.2.
4.4. Distilleries and mini-distilleries -- If a distillery or mini-distillery makes retail sales of intoxicating liquor, it must comply with Section 4.1.
4.5. Based upon the information provided on the return, the Tax Department will determine which county or municipality taxing jurisdiction will receive the tax revenues generated from the sale, using the best information available to the Department, municipality and county boundaries, and the sourcing rules provided in §11-15B-1, et seq., of the West Virginia Code.
W. Va. Code R. § 110-49-5 Remittance to Tax Commissioner
5.1. In recognition of:
The experience, knowledge, and technical, and legal expertise of the Tax Department;
The computer and logistical systems currently operated and maintained by the Tax Department;
The auditing and revenue processing resources of the Tax Department; and The obvious cost efficiency and operational efficiencies of placing administration of the tax imposed by §8-13-7, §60-3-9d and §60-3A-21 of the West Virginia Code under the exclusive authority of the Tax Department.
The Legislature has determined that the preeminent interest of all municipal and county tax jurisdictions is best served by empowerment of the Tax Commissioner, by law, to hold, maintain and exercise sole authority to administer the tax imposed by §8-13-7, §60-3-9d and §60-3A-21 of the West Virginia Code.
5.2. Accordingly, remittance of the tax imposed by §8-13-7, §60-3-9d and §60-3A-21 of the West Virginia Code shall be made to the Tax Commissioner accompanied by return forms designed by the Tax Commissioner.
W. Va. Code R. § 110-49-6 Quarterly Distribution of Collections
The Tax Commissioner shall distribute allocable revenues collected during each calendar quarter to each revenue generating municipality or county no later than the 15th day of the month following the close of the quarter in which the tax was remitted to the Tax Department. Timely distribution has occurred when the Tax Department issues the request for transfer to the State Treasurer. The Tax Commissioner has fulfilled the responsibility for distribution of allocable revenues upon issuance of the request for transfer to the State Treasurer.
Series 50C Exchange of Information Pursuant to Written Agreement
W. Va. Code R. § 110-50C-1 General
1.1. Scope. -- This legislative rule authorizes certain information to be exchanged pursuant to a written interagency agreement between the Commissioner of the Tax Division of the Department of Revenue and the Secretary of the Department of Commerce, the Director of the Division of Forestry of the Department of Commerce, the Commissioners of the Public Service Commission, the Secretary of the Department of Environmental Protection, the Commissioner of the Alcohol Beverage Control Administration of the Department of Revenue, the Commissioner of the Division of Labor of the Department of Commerce, the Commissioner of the Insurance Commission of the Department of Revenue, the Commissioner of the Division of Motor Vehicles of the Department of Transportation, the Executive Director of Workforce West Virginia (Formerly the Bureau of Employment Programs), the Office of the Governor, the Director of the West Virginia Lottery, and, the State Fire Marshal, and the West Virginia Council for Community and Technical College Education.
1.2. Authority. -- This legislative rule is promulgated under authority of W. Va. Code §§11-10-5 and 5s; §§60-9-5(a) and 8(a); §21-1B-3; §29A-1-1 et seq.; and, §47-25-1 et seq.
1.3. Filing Date. -- May 13, 2025.
1.4. Effective Date. -- May 13, 2025.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2030.
W. Va. Code R. § 110-50C-2 Purposes
2.1. W. Va. Code §11-10-5s(b)(4) authorizes the West Virginia State Tax Commissioner to promulgate legislative rules regarding a written exchange of information agreement with another State agency if the purpose of the agreement is to facilitate premium collection, tax collection or licensure requirements directly enforced, administered or collected by the other State agency or the Tax Commissioner.
2.2. The purpose of this legislative rule is to comply with West Virginia Code §11-10-5s(b)(4) in order to permit the Commissioner of the Tax Division of the Department of Revenue and the Secretary of the Department of Commerce, the Director of the Division of Forestry of the Department of Commerce, the Commissioners of the Public Service Commission, the Secretary of the Department of Environmental Protection, the Commissioner of the Alcohol Beverage Control Administration of the Department of Revenue, the Commissioner of the Division of Labor of the Department of Commerce, the Commissioner of the Insurance Commission of the Department of Revenue, the Commissioner of the Division of Motor Vehicles of the Department of Transportation, the Executive Director of Workforce West Virginia (Formerly the Bureau of Employment Programs), the Office of the Governor, the Director of the West Virginia Lottery, and, the State Fire Marshal, and the West Virginia Council for Community and Technical College Education to more efficiently and effectively perform their responsibilities for tax collection and licensing, including determining whether businesses are licensed to do business in West Virginia and that the taxes of those businesses are current.
W. Va. Code R. § 110-50C-3 Disclosure of Certain Information Authorized
The Commissioner of the Tax Division of the Department of Revenue and the Secretary of the Department of Commerce, the Director of the Division of Forestry of the Department of Commerce, the Commissioners of the Public Service Commission, the Secretary of the Department of Environmental Protection, the Commissioner of the Alcohol Beverage Control Administration of the Department of Revenue, the Commissioner of the Division of Labor of the Department of Commerce, the Commissioner of the Insurance Commission of the Department of Revenue, the Commissioner of the Division of Motor Vehicles of the Department of Transportation, the Executive Director of Workforce West Virginia (Formerly the Bureau of Employment Programs), the Office of the Governor, the Director of the West Virginia Lottery, and, the State Fire Marshal, and the West Virginia Council for Community and Technical College Education may, in order to accomplish the purposes set forth in Section two of this legislative rule, exchange information pursuant to a written agreement specifying the type and manner of information to be exchanged and containing appropriate provisions for safeguarding any confidential tax information received pursuant to the agreement.
W. Va. Code R. § 110-50C-4 Consolidation of Rules
4.1. Previously promulgated Legislative Rule 110-50A (Department of Environmental Protection), effective date May 1, 1995, has been consolidated into this rule to promote efficiency and to facilitate the exchange of information in addition to that information provided to the Division of Environmental Protection pursuant to the existing information exchange agreement authorized by Section 9 of the Solid Waste Assessment Fee Regulations, 110 C.S.R. 6A.
4.2. Previously promulgated Legislative Rule 110-50B (Alcohol Beverage Control Administration), effective date May 1, 2001, has been consolidated into this rule to promote efficiency.
4.3. Previously promulgated Legislative Rule 110-50D (Division of Labor, Office of the Insurance Commissioner, Division of Motor Vehicles, and WorkForce (formerly the Bureau of Employment Programs)), effective date May 1, 2008, has been consolidated into this rule to promote efficiency. Additionally, W. Va. Code §21-1B-3 authorizes the Labor Commissioner, or his or her designated representative, to access information maintained by any other State agency (including the Tax Department) for the limited purpose of confirming the validity of a worker’s legal status or authorization to work.
4.4. Previously promulgated Legislative Rule 110-50E (Lottery), effective date June 1, 2011, has been consolidated into this rule to promote efficiency.
4.5. Previously promulgated Legislative Rule 110-50F (State Fire Marshal), effective date June 1, 2011, has been consolidated into this rule to promote efficiency and to facilitate the exchange of information between the State Tax Commissioner and the State Fire Marshal who are jointly responsible for administering and enforcing the provisions of W. Va. Code §47-25-1 et seq., the Reduced Cigarette Ignition Propensity Standards and Fire Prevention Act (“the Act”).
W. Va. Code R. § 110-50C-5 Publication
A copy of any exchange of information agreement entered into pursuant to this rule, including any subsequent revision(s) of the agreement, or amendment(s) to the agreement, shall be filed by the Tax Commissioner in the State Register on or before the effective date of the agreement or any revision or amendment of the agreement.
Series 50G Exchange Of Information Agreement Between The State Tax Department And The Department Of Commerce, The Department Of Transportation And The Department Of Environmental Protection
W. Va. Code R. § 110-50G-1 General
1.1. Scope. -- This rule authorizes certain information to be exchanged pursuant to a written interagency agreement between the State Tax Department and the Department of Commerce, the Department of Transportation and the Department of Environmental Protection.
1.2. Authority. -- This rule is promulgated under the authority of W. Va. Code §§11-10-5 and 11-10-5s.
1.3. Filing Date. -- April 13, 2012.
1.4. Effective Date. -- May 1, 2012.
W. Va. Code R. § 110-50G-2 Purpose
Senate Bill 465, enacted March 12, 2011, amended W. Va. Code §11-13Q-20 to require that on or before February 1, 2013, the Department of Commerce, in consultation with the Tax Commissioner, the Department of Transportation and the Department of Environmental Protection submit to the Governor, the President of the Senate and the Speaker of the House of Delegates a report of the impact of all the tax credits and other economic incentives provided in S.B. 465. The report is to include the impact:
2.1. On economic development in this state, including but not limited to the creation of jobs in this state;
2.2. Upon the state's infrastructure, including but not limited to the need for construction or maintenance of the roads and highways of the state;
2.3. Upon the natural resources of the state; and
2.4. Upon public and private property interests in the state.
This rule will facilitate the consultation process and the provision of any necessary information to the agencies involved.
W. Va. Code R. § 110-50G-3 Disclosure of Certain Information Authorized
3.1. In accordance with W. Va. Code §11-10-5s(b)(4), the State Tax Commissioner and the Department of Commerce, the Department of Transportation and the Department of Environmental Protection may, in order to accomplish the purposes set forth in section two of this rule, exchange information pursuant to a written agreement specifying the type and manner of information to be exchanged and containing provisions for safe guarding any confidential information received pursuant to the agreement.
3.2. The State Tax Commissioner shall file with the Office of Secretary of State a copy of any exchange of information agreement entered into pursuant to this rule, including any subsequent revision of the agreement, or amendment, in order to allow an opportunity for public comment.
110CSR50G
110CSR50G
Series 99 Privilege Tax On Sales Of Hemp-Derived Cannabinoid and Kratom Products
W. Va. Code R. § 110-99-1 General
1.1. Scope. -- This legislative rule establishes procedures for the administration of the tax on retail sales of hemp-derived cannabinoid products and kratom products.
1.2. Authority. -- W. Va. Code §§29A-2-99(c), 19-12E-12 (i)(9), and 19-12F-7(i).
1.3. Filing Date. -- April 30, 2024.
1.4. Effective Date. -- April 30, 2024.
1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect after August 1, 2029.
W. Va. Code R. § 110-99-2 Definitions
2.1. General Rule. -- Unless a specific definition is provided in subsection 2.2 of this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code §§11-10-1 et seq., 19-12E-1 et seq., and 19-12F-1 et seq.
2.2. Terms defined.
2.2.1. "Hemp-derived cannabinoid" means a naturally occurring non-synthetic substance as follows:
2.2.1.a. Delta-9 tetrahydrocannabinol with a concentration level consistent with 7 U.S.C. §5940;
2.2.1.b. Delta-8 tetrahydrocannabinol;
2.2.1.c. Delta-10 tetrahydrocannabinol;
2.2.1.d. Hexahydrocannabinol;
2.2.1.e. Tetrahydrocannabiphorol (THCp); and
2.2.1.f. Tetrahydrocannabivarin (THCv);
2.2.2. “Hemp-derived cannabinoid products” means any product containing a hemp-derived cannabinoid, whether or not the product is marketed for human consumption. Hemp-derived cannabinoid products include, but are not limited to, food, food ingredients, dietary supplements, beverages, lotions, ointments, or shampoos. Any product containing hemp-derived cannabinoids as defined above and intended for ingestion or mastication by humans in any form or concentration shall not be considered food or food ingredients for purposes of W. Va. Code §11-15-3a.
2.2.3. "Kratom" means a psychoactive preparation that is composed of the crushed or powdered dried leaves of the mitragyna speciosa, a yellow-flowered tropical tree which contains the alkaloids mitragynine and 7-hydroxymitragynine.
2.2.4. "Kratom product" means a food product, food ingredient, dietary ingredient, dietary supplement, or beverage intended or marketed for human consumption containing any part of the leaf of the plant mitragyna speciosa. However, products containing kratom in any form or concentration shall not be considered food or food ingredients for purposes of W. Va. Code §11-15-3a. For purposes of this rule, “Kratom product” also includes kratom and any product containing kratom as an ingredient.
2.2.5. "Retailer" means a person that distributes, offers for sale, or sells hemp-derived cannabinoid products or kratom products to persons for personal consumption.
2.2.6. "Person" means a natural person, but also includes corporations, societies, associations and partnerships, and other similar legal business organizations.
2.2.7. "Commissioner" means the State Tax Commissioner, or his or her designee.
W. Va. Code R. § 110-99-3 Imposition of Tax
3.1. For the privilege of engaging or continuing within this state in the business of the retail sale of hemp-derived cannabinoid products, kratom or kratom products, there is levied a privilege tax.
3.2. The amount of tax imposed is 11 percent of the retail sales price of all hemp-derived products and kratom products sold during the reporting period. The tax shall not be added by the retailer as a separate charge or line item on any sales slip, invoice, receipt, other statement, or memorandum of the price paid by the purchaser.
3.3. The privilege tax is in addition to all other taxes imposed by law. Sales of hemp-derived cannabinoid and kratom products are also subject to the following taxes:
3.3.1. All retail sales of hemp-derived cannabinoid products or kratom products are also subject to the sales tax and use tax. Products designed or formulated for human consumption containing cannabinoid products or kratom products are not exempt from the consumers sales and service tax as food or food ingredients.
3.3.2. When sold as an e-cigarette liquid, hemp-derived cannabinoid substances are also subject to the e-cigarette liquids tax.
3.4. The retailer shall be liable for payment of the privilege tax on sales of hemp-derived cannabinoid and kratom products, and any tax, additions to tax, penalties, or interest due and payable under this rule is a debt due this state and is a lien upon the real and personal property of such person.
W. Va. Code R. § 110-99-4 Administration of Tax
4.1. Filing returns. -- The retailer shall file quarterly returns showing gross revenues from all sales of hemp-derived cannabinoid or kratom products on a form prescribed by the Tax Commissioner.
4.1.1. The return shall be filed on the 20th day of the month following the end of each calendar quarter. For example, for the calendar quarter ending March 31, the return must be filed by the following April 20.
4.1.2. Returns shall be filed electronically.
4.2. Payment of tax.
4.2.1. The privilege tax on sales of hemp-derived cannabinoid and kratom products is due and payable at the time the return is filed.
4.2.2. The measure of tax shall be the gross revenues from all sales of hemp-derived cannabinoid or kratom products during the previous calendar quarter.
4.2.3. Payment of the tax shall be by electronic funds transfer, unless prohibited by federal law.
4.3. Products containing both hemp-derived cannabinoids and kratom. -- Products containing both hemp-derived cannabinoids and kratom are not subject to both the tax on hemp-derived cannabinoids products and the tax on kratom products. If a product contains both hemp-derived cannabinoids and kratom, the retailer shall treat the product as a kratom product for the purposes of this rule and pay the tax on kratom products.
4.3.1. If a product contains both hemp-derived cannabinoids and kratom and is subject to tax on kratom, the retailer shall treat the product as a kratom product for the purposes of this rule and pay the tax on kratom products. Example: Gummies contain both Delta-9 and kratom. Because the gummies are for human consumption, they are subject to tax on kratom products. The retailer should report and pay the privilege tax as a kratom product.
4.3.2. If the product contains both hemp-derived cannabinoids and kratom, but is not subject to the tax on kratom, then the retailer may treat the product as a hemp-derived cannabinoid product. Example: A lotion contains both Delta-9 and kratom. Because the lotion is not for human consumption, it is not subject to the tax on kratom products. The retailer should report and pay the privilege tax.
W. Va. Code R. § 110-99-5 Record-Keeping Requirement
5.1. The retailer shall keep and maintain records sufficient to allow verification of the information reported on returns. On audit, the retailer must be able to provide invoices, sales contracts, and bills of receipt documenting:
5.1.1. Vendor name;
5.1.2. Invoice date;
5.1.3. Invoice number;
5.1.4. Item description;
5.1.5. Invoice amount; and
5.1.6. Amount of hemp-derived cannabinoid or kratom tax paid.
5.2. The Tax Commissioner has the authority to inspect or examine the records, books and papers, and any inventories of hemp-derived cannabinoid products or kratom products kept on the premises of the retailer to verify the truth and accuracy of any return or report filed by the retailer to ascertain whether all applicable taxes are being properly paid.
5.3. A retailer must retain the appropriate books and records for at least three (3) years, or for so long as the taxable period remains open for assessment or refund, whichever is greater.
W. Va. Code R. § 110-99-6 Violations and Penalties
6.1. Each and every provision of the “West Virginia Tax Procedure and Administration Act” set forth in §11-10-1 et seq., of this code applies to the tax on hemp-derived cannabinoid products and the tax on kratom products authorized under §19-12E-1 et seq., and §19-12F-1 et seq., of this code, except as otherwise expressly provided in this article, with like effect as if that act were applicable only to the taxes authorized by §19-12E-1 et seq., and §19-12F-1 et seq., of this code and were set forth in extenso in this article.
6.2. Each and every provision of the “West Virginia Tax Crimes and Penalties Act” set forth in §11-9-1 et seq., of this code applies to the tax on hemp-derived cannabinoid products and the tax on kratom products authorized under §19-12E-1 et seq., and §19-12F-1 et seq., of this code with like effect as if that act were applicable only to the taxes authorized by §19-12E-1 et seq., and §19-12F-1 et seq., of this code and were set forth in extenso in this article.
6.3. Failure to pay tax or file return. -- Any person required to pay the privilege tax on sales of hemp-derived cannabinoid and kratom products, or to file any return or report, who willfully fails to pay the tax, or willfully fails to file the return or report, more than 30 days after the date the tax is required to be paid, is guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than $100 nor more than $2,500. Each failure to pay tax, or file a return or report, more than 30 days after its due date for any tax period is a separate offense under this section and punishable accordingly. However, 30 days prior to instituting criminal proceedings, the Tax Commissioner shall give the person written notice of any failure to pay a tax or to file a return or report. Notice shall be served on the person by certified mail or by personal service.
6.4. Failure to maintain records. -- Any person who willfully fails to maintain any records, or supply any information, in the manner required by this rule is guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than $100 nor more than $1,000 or imprisoned in jail not more than six months, or both fined and imprisoned.
6.5. Attempt to evade tax. -- If any person: (1) knowingly files a false or fraudulent return, report or other document under any provision of this rule; or (2) willfully delivers or discloses to the Tax Commissioner any list, return, account, statement, record or other document known by him or her to be fraudulent or false as to any material matter with the intent of obtaining or assisting another person in obtaining any credit, refund, deduction, exemption or reduction in tax not otherwise permitted by law; or (3) willfully attempts in any other manner to evade any tax imposed by this rule or the payment thereof, is guilty of a felony and, notwithstanding any other provision of the code, upon conviction thereof, shall be fined not less than $1,000 nor more than $10,000 or imprisoned in a correctional facility not less than one nor more than three years or, in the discretion of the court, be confined in jail not more than one year, or both fined and imprisoned.
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