Understanding West Virginia Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in West Virginia.
In West Virginia, the sales tax is referred to as the general consumers sales and service tax. The West Virginia tax is imposed on the privilege of selling tangible personal property or rendering certain selected services. Most services are taxable except for the furnishing of professional or personal services.
Leases. The definition of sale includes leases and rentals. The transfer of the possession or ownership of tangible personal property for a consideration is defined as a lease or rental. So leasing, renting, and licensing to use tangible personal property are subject to sales and use tax.
An operating lease is treated as a lease, while a financing lease is treated as a sale for purposes of the sales and use tax. An operating lease gives the lessee use of the leased property for a certain period, while the lessor retains all or most of the risk and rewards of ownership. A financing lease transfers title of the leased property to the lessee at the end of the lease or gives the lessee the option to purchase the property at a nominal price. Consumers sales tax is imposed on the total amount of each lease payment.
Sales and use tax rate. The West Virginia sales and use tax rates are 6 percent. (In addition, make sure you contact your local governments in West Virginia because they are allowed to assess a local sales and use tax.)
The sales and use tax on the sale, purchase and use of food and food ingredients intended for human consumption has been reduced 3 percent. However, the lower rate does not apply to prepared food, food sold in a heated state, or food sold with eating utensils provided by the seller.
A 5 percent sales tax applies to all motor vehicle sales to West Virginia residents. The tax replaces the vehicle title privilege tax. The tax applies to sales of new cars and to sales of used cars sold by dealers.
Sellers Must Collect Sales Tax from Purchasers
In West Virginia the state imposes upon vendors the duty to collect sales tax from purchasers and to pay the collected tax to the Tax Commissioner.
Absorbing the tax is not permitted. It is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Obtaining tax permits in West Virginia
West Virginia does not specifically address whether vendors need to be registered for collecting sales tax. However, any person engaging in a business activity in West Virginia must obtain a business registration certificate from the Tax Commissioner.
Many Items and Transactions Are Nontaxable
West Virginia has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from West Virginia sales tax. Resale exemptions and blanket exemptions are two of the most important exceptions to sale tax liability. You'll want to check and see if you are exempt from the sales tax.
An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Items Purchased for Resale Are Tax Exempt
In West Virginia, the sale of tangible personal property or services for resale or the resale of tangible personal property in connection with the performance of taxable services, is not subject to sales and use tax. You as a purchaser claim the exemption by presenting an exemption certificate.
State Form WV/CST-280, Exemption Certificate, is used for a valid resale exemption. The exemption certificate must include the following information:
- the purchaser's signature
- the purchaser's address
- a description of the reason for the exemption
Blanket Resale Certificates Are Allowed
Sellers may accept blanket certificates from a purchaser if the purchaser repeatedly buys the same type of property or services for processing or resale. However, blanket certificates may not be used to purchase property or services not covered by a blanket certificate. Resale certificates must be renewed annually during the vendor's taxable year. The seller is relieved from liability if a false, expired, canceled, or ineffective certificate is accepted from you the purchaser, unless the certificate was not accepted in good faith.
Physical Presence Triggers Tax Liability
West Virginia has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within West Virginia. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in West Virginia? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter West Virginia for purposes of taking and transmitting orders from West Virginia? If your employee or independent contractor goes into West Virginia to take or transmit orders, your business may have physical presence in West Virginia. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter West Virginia for purposes of delivering property? Frequent deliveries in West Virginia by your trucks will give you physical presence in West Virginia.
Sales Tax Computed Using a Rounding System
West Virginia uses a rounding system for computing sales and use taxes, rather than a bracket system. Sales tax is computed to the third decimal place and rounded up to the next whole cent when the third decimal place is greater than four, and rounded down to the lower whole cent when the third decimal place is four or less. Any tax due on a transaction may be computed either on a per item basis or on an invoice basis as long as the same method is used consistently during the reporting period.
The following table illustrates how the 6 percent state tax is computed on each dollar and/or fraction of a dollar:
|Amount of Sale ||Tax |
|$0.00 to $0.08 ||no tax |
|0.09 to 0.24 ||$0.01 |
|0.25 to 0.41 ||0.02 |
|0.42 to 0.58 ||0.03 |
|0.59 to 0.74 ||0.04 |
|0.75 to 0.91 ||0.05 |
|0.92 to 1.08 ||0.06 |
|1.09 to 1.24 ||0.07 |
|1.25 to 1.41 ||0.08 |
|1.42 to 1.58 ||0.09 |
|1.59 to 1.74 ||0.10 |
|1.75 to 1.91 ||0.11 |
|1.92 to 2.08 ||0.12 |
Use Tax Imposed on Out of State Purchases
The use tax is an excise tax levied and imposed on the use in West Virginia of tangible personal property and taxable services. The sales tax and the use tax are intended to be complementary. Thus, property brought into West Virginia on which a sales or use tax has been paid in another state equal to or in excess of the West Virginia tax is not subject to tax in West Virginia.
In West Virginia, the use tax that is not collected by the retailer must be paid to the Tax Commissioner directly by the purchasers using the property in West Virginia.
Claiming refund for excess tax payments
Any credit or refund given to your customers for returned goods may be deducted from the gross proceeds on your sales tax report. West Virginia does not allow any deductions for worthless accounts. You may file a sales tax credit claim within one year from the date of payment. Sales and use tax overpayments may be credited against the quarterly or monthly remittance of sales and use tax due, and any overpayments remaining may be credited against certain other taxes.