As you are aware, businesses doing business in your municipality will begin collecting your municipal sales and use taxes in addition to the State sales and use taxes on July 1, 2017.
For businesses that only make sales from a storefront in your municipality, there will be a new, additional reporting requirement, but not much else changes for them.
For businesses that deliver products to the location of the customer, or that provided services at the customer’s location there are new compliance and reporting rules. These businesses will need to become familiar with the sourcing rules, in W. Va. Code §§ 11-15B-14, 11-15B14a and 11-15B-15, that apply to both the State sales and use taxes and to municipal sales and use taxes.
Businesses doing business in your municipality will also need to comply with some additional reporting rules beginning July 1, 2017.
The Tax Commissioner and the State Tax Department are responsible for administering, collecting, and enforcing your municipal sales and use taxes. Because these new rules and requirements can be challenging for some businesses and can affect their compliance, you may want to consider hosting or sponsoring a meeting with representatives of your business community to make them aware of the new requirements. We are willing to provide one or more speakers to explain the new rules and answer questions that the business may have.
A good example of a businesses that may have some difficulty in properly collecting and remitting municipal sales taxes is the local pizza shop that delivers pizza to customers located both within and outside your municipality.
Collection is easy for the pizza shop when the customer picks up the pizza order at the business location in your municipality or the customer dines in at that business location. Those sales will be subject to both State and municipal sales taxes. Difficulty can be encountered when the business delivers pizza to customers. The business will need to know (1) is the delivery to a place located within the corporate limits of your municipality, in which case both the State sales tax and your municipal sales tax must be charged and collected; (2) is the delivery to a place located outside the corporate limits of your municipality, in which case only the State sales tax is to be charged and collected from the customer; unless (3) the delivery is to a place in another municipality that imposes a municipal sales tax, in which case the State sales tax must be charged along with the sales tax of the municipality into which the pizza is delivered.
Businesses that collect municipal sales taxes are required to keep accurate additional records detailing (1) their gross sales subject to State sales tax and the amount of State sales tax collected; (2) their gross sales subject to your municipal sales and the amount of municipal sales tax collected; and (3) their gross sales from pizza delivered to customers located in a different municipality that imposes a sales tax and the amount of municipal sales taxes collected for each municipality.
Businesses will be required to properly report to the Tax Commissioner the amount of sales taxes they collected for each municipality in which pizza was delivered to the customer.
Businesses will need to know how to determine whether the place of delivery is located within or outside the corporate limits of your municipality. Compliance can be facilitated by posting signs on roads and streets letting the public know when they are entering or leaving your municipality. Knowing whether the place of delivery is in or outside of your municipality becomes more challenging when you have “donut holes” (unincorporated areas) within your municipality.
Businesses will also need to be notified in advance of the July 1, 2017 imposition date that beginning July 1, 2017 they will need to begin collecting your municipal sales tax. Cash registers will need to be programmed to charge the correct rate of tax, and accounting records will need to be modified so that the business can properly account for State and municipal sales taxes that it collected or should have collected.
These same rules apply to any other business located in your municipality that delivers to customers located within and outside your municipality. Businesses located outside your municipality that deliver within your municipality to customers will also be subject to these rules. This includes contractors doing contracting work in your municipality.
Finally, West Virginia imposes sales tax on more services than many other states. These rules apply to service businesses and taxability depends upon where the customer first received the benefit of the service.
Please let us know if you want to host an informational meeting for businesses doing business in your municipality and would like for us to attend the meeting to discuss items discussed in this letter and to answer questions. Please forward to my executive assistant, Alicia Elam Clark, the name of your coordinator along with their phone number, email address and a couple of possible meeting dates.
Sincerely,
Dale W. Steager
State Tax Commissioner
