Nuts and Bolts of the Home Rule Program Application Sales and Use Taxes

by Spilman Thomas & Battle, PLLC
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This is an outline of a presentation given by Spilman attorneys Dale Steager and Brian Helmick before the WV Municipal League 44th Annual Conference, Home Rule: Learn, Lead, Succeed, at the Charleston Marriott Hotel in Charleston, WV, August 8, 2013.

I.             General Information.

                234 municipalities in West Virginia

                117 municipalities (approximately) impose business and occupation taxes

                4 members of this group participate in the Municipal Home Rule Pilot Program

                                Bridgeport

                                Charleston

                                Huntington

                                Wheeling

                3 members of this group are authorized to impose sales and use taxes

                                Charleston  (October 1, 2013)

                                Huntington

                                Wheeling  (October 1, 2013)

                The remaining 113 members of this group may not impose a sales tax unless:

                Selected to be one of 16 new members of Home Rule Pilot Program and their approved written plan includes reducing their business and occupation taxes and imposing a sales tax, at a rate not to exceed 1%.  (SB 435 does not allow municipalities to impose a use tax.)

                                or

                They eliminate their business and occupation tax.

                117 municipalities (approximately) do not impose business and occupation taxes

                3 members of this group impose sales and use taxes, W. Va. Code §§ 8-13C-4 and 5

                                Quinwood  (October 1, 2013)

                                Rupert

                                Williamstown.

                The remaining 114 members of this group may impose sales and use taxes as provided in W. Va. Code §§ 8-13C-4 and 5 without being selected to participate in the Home Rule Pilot Program.

II.            Elements of Local Sales/Use Tax Ordinance.

                Section 1.  Council findings (optional).

                Section 2.  Definitions.

                                Provided for terms used in ordinance to be defined as provided in articles 15, 15A and 15B, chapter 11 of the West Virginia Code.

                                Define additional terms such as “city.”

                Section 3.  Imposition of sales tax.

                                Rate may not exceed 1% of gross proceeds of sale.

                Section 4.  Imposition of use tax

                                Rate may not exceed 1% of purchase price of goods or service.

                                The 16 new participants in Home Rule Pilot Program may impose a sales tax but not a use tax.

                Section 5.  Calculation of tax on fractional parts of a dollar.

                Section 6.  State and local sales and use tax bases.

                                With limited exceptions, state and local tax bases must be identical.

                Section 7.  Exceptions. -- Local tax may not apply to:

                                Motor vehicles taxed under W. Va. Code § 11-15-3c

                                Motor fuels

                                Purchases/uses of property/services that State law exempts from taxation or prohibits municipalities from taxing

                                Transactions preempted by federal law.

                Section 8.  Credit for local sales taxes lawfully paid to another municipality.

                Section 9.  Local rate and boundary changes – Notification of Tax Commissioner.

                Section 10.  State level administration.

                                Tax Commissioner will charge an annual fee equal to the cost of administration or 5% of net revenues collected for the municipality.  See H. B. 105 enacting W. Va. Code § 11-10-11c and proposed legislative rule 110-28.

                Section 11.  Administrative procedures.

                Section 12.  Criminal penalties.

                Section 13.  Automatic updating.

                Section 14.  Deposit of taxes collected.

                                General revenue fund or account

                                Special revenue fund or account

                                Special fund doctrine.

                Section 15.  Effective dates.

                                Effective date of ordinance

                                Effective date of tax collection

                                                Notice to Tax Commissioner

                                                Notice to sellers – general

                                                Notice to catalogue sellers

                                Proposed legislative rule 110-28.

III.           Implementation of Sales/Use Tax Ordinance.

                A.            Notify Tax Commissioner of adoption of tax ordinance.

                B.            Provide certified copy of tax ordinance.

                C.            Build rates and boundaries database.

                                1.            Instructions are posted at State Tax Department webpage

                                2.            Need to know:

                                                a..           Boundaries of municipality

                                                b.            5-digit zip codes applicable to the municipality

                                                c.             Boundaries of each 5-digit zip code and how they relate to boundaries of municipality

                                                d.            9-digit zip codes in each 5-digit zip code located in whole or in part in municipality and how each 9-digit zip code relates to the boundaries of the municipality

                                                e.            Federal Information Processing Standards Codes for:

                                                                The West Virginia FIPS Code is 54

                                                                The county

                                                                The municipality.

                D.            Furnish Tax Commissioner with the rates and boundaries databases.

                E.            Maintain the rates and boundaries databases and notify Tax Commissioner of changes.

                                Rate of tax may change

                                Municipal boundaries may change due to annexation or de-annexation

                                Boundaries of 5-digit zip codes may change

                                Boundaries of 9-digit zip codes may change.

IV.          Miscellaneous.

                The municipal sales tax is in addition to:

                                State sales tax

                                Special district excise tax (if applicable)

                                Amusement taxes

                                Hotel occupancy taxes

                                Tax on sales of intoxicating liquor.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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