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Introduced Version House Bill 4440 History

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Key: Green = existing Code. Red = new code to be enacted
hb4440 intr
H. B. 4440


(By Delegate White)
[Introduced February 6, 2008; referred to the
Committee on Finance.]




A BILL to amend and reenact §11-13A-3a and §11-13A-17 of the Code of West Virginia, 1931, as amended; and to amend said code by adding thereto a new section, designated §11-13V-4a, all relating to oil and gas production; relating to the Severance and Business Privilege Tax Act and the Workers' Compensation Debt Reduction Act; deleting superannuated language; specifying collection and remittance of the severance tax on production of natural gas or oil by the first person to purchase the natural gas or oil after it has been severed, or in the event that the natural gas or oil has been severed and processed before the first sale, the first person to purchase natural gas or oil after it has been severed and processed; specifying purchaser liability for failure to collect or remit the tax; specifying due dates and payment requirements; specifying exceptions to the requirement that the purchaser collect and remit the tax; specifying persons subject to applicable bonding requirements; authorizing issuance of emergency rules and other rules by the Tax Commissioner; and specifying application of exemptions and exceptions and use of direct severance payment authorization number.

Be it enacted by the Legislature of West Virginia:
That §11-13A-3a and §11-13A-17 of the Code of West Virginia, 1931, as amended, be amended and reenacted; and that said code be amended by adding thereto a new section, designated §11-13V-4b, all to read as follows:
ARTICLE 13A. SEVERANCE AND BUSINESS PRIVILEGE TAX ACT.
§11-13A-3a. Imposition of tax on privilege of severing natural gas or oil.

(a) Imposition of tax. -- (1) For the privilege of engaging or continuing within this state in the business of severing natural gas or oil for sale, profit or commercial use, there is hereby levied and shall be collected from every person exercising such this privilege an annual privilege tax: Provided, That effective for all taxable periods beginning on or after the first day of January, two thousand, there is an exemption from the imposition of the tax provided in this article on the following:
(1) (A) Free natural gas provided to any surface owner;
(2) (B) Natural gas produced from any well which produced an average of less than five thousand cubic feet of natural gas per day during the calendar year immediately preceding a given taxable period;
(3) (C) Oil produced from any oil well which produced an average of less than one-half barrel of oil per day during the calendar year immediately preceding a given taxable period; and
(4) (D) For a maximum period of ten years, all natural gas or oil produced from any well which has not produced marketable quantities of natural gas or oil for five consecutive years immediately preceding the year in which a well is placed back into production and thereafter produces marketable quantities of natural gas or oil.
(b) Rate and measure of tax. -- The tax imposed in subsection (a) of this section shall be is five percent of the gross value of the natural gas or oil produced, as shown by the gross proceeds derived from the sale thereof by the producer, except as otherwise provided in this article.
(c) Tax in addition to other taxes. -- The tax imposed by this section shall apply applies to all persons severing gas or oil in this state, and shall be is in addition to all other taxes imposed by law.
(d)(1) The Legislature finds that in addition to the production reports and financial records which must be filed by oil and gas producers with the State Tax Commissioner in order to comply with this section, oil and gas producers are required to file other production reports with other agencies, including, but not limited to, the office of oil and gas, the Public Service Commission and county assessors. The reports required to be filed are largely duplicative, the compiling of the information in different formats is unnecessarily time consuming and costly, and the filing of one report or the sharing of information by agencies of government would reduce the cost of compliance for oil and gas producers.
(2) On or before the first day of July, two thousand three, the Tax Commissioner shall design a common form that may be used for each of the reports regarding production that are required to be filed by oil and gas producers, which form shall readily permit a filing without financial information when such information is unnecessary. The commissioner shall also design such forms so as to permit filings in different formats, including, but not limited to, electronic formats.
(3) Effective the first day of July, two thousand six, this subsection shall have no force or effect.
(d) Purchaser of natural gas or oil to withhold tax. Remittance of withheld tax by purchaser. -- On or after the first day of January, two thousand eight, the first person to purchase the natural gas or oil after it has been severed, or in the event that the natural gas or oil has been severed and processed before the first sale, the first person to purchase natural gas or oil after it has been severed and processed, is liable for the collection of the taxes imposed by this article from the person severing (or severing and processing) the natural gas or oil, and shall remit the taxes to the Tax Commissioner. Taxes so collected by the purchaser are held in trust for the state, and the purchaser is liable for any failure to collect or remit the tax, in accordance with the provisions of articles nine and ten of this chapter.
(1) No profit shall accrue to any person as a result of the collection of the tax levied by this article notwithstanding the total amount of the taxes collected may be in excess of the amount for which the severer would be liable by the application of the rate of tax levied by this article. The total amount of all taxes collected by the purchaser shall be returned and remitted to the Tax Commissioner as provided in this article.
(2) If any severer refuses to pay or otherwise does not pay to the purchaser the tax imposed by this article, or a severer refuses to present to the purchaser a valid direct severance payment authorization number indicating that the purchaser is not required to collect and remit the taxes imposed by this article, or presents to the purchaser a false direct severance payment authorization number or a false document, the severer is personally liable for the amount of tax applicable, and the purchaser may not be liable for such tax.
(3) Nothing in this section relieves any severer who owes the tax and who has not paid the tax imposed by this article from liability for payment of the tax. In those cases the Tax Commissioner has authority to make an assessment against the severer, based upon any information within his or her possession or that may come into his or her possession. This assessment and notice thereof shall be made and given in accordance with article ten of this chapter. The severer is not liable for tax withheld by the purchaser, but not remitted to this state by the purchaser.
(4) The due dates and payment requirements of this article apply to the payment and remittance of tax by purchasers of natural gas or oil under this section.
(5) Exceptions. -- The requirement that the purchaser shall withhold and remit the tax imposed by this article on production of natural gas or oil does not apply:
(A) Where the person severing (or severing and processing) the natural gas or oil sells the gas or oil to the ultimate consumer, the person so severing (or severing and processing) the natural gas or oil is liable for the taxes imposed by this article; or
(B) Where the Tax Commissioner determines that the collection of the taxes due under this article or article thirteen-v of this chapter, or both, from the person severing the natural gas or oil, or severing and processing the natural gas or oil would be accomplished in a more efficient and effective manner through the severer (or severer and processor) remitting the taxes, the Tax Commissioner shall set out his or her determination in writing, stating his or her reasons for so finding, and so advise the severer (or severer and processor) at least fifteen days in advance of the first reporting period for which the commissioner's determination is effective.
(6) Notwithstanding the provisions of this section, the person severing the natural gas or oil is the taxpayer for purposes of this article and is liable for the tax imposed by this article. The first purchaser that is responsible for withholding and remittance of the tax is subject to the bonding requirements as applicable under section sixteen of this article, and severers from whom the tax is withheld may not be subject to the bond specified in section sixteen of this article. However, a severer who has been issued a direct severance payment authorization number or who is otherwise subject to a requirement to pay the oil or gas severance tax directly to the state rather than through withholding by the first purchaser, is subject to the bonding requirements as applicable under section sixteen of this article. This article may not be interpreted to relieve any person of a bonding requirement other than the bonding requirement set forth in section sixteen of this article, and may not be interpreted as addressing any bonding requirement other than the bonding requirement set forth in section sixteen of this article.
(7) Severers that pay the tax directly on production of oil or natural gas pursuant to the provisions of this section shall deliver to the purchaser a direct severance payment authorization number, issued by the Tax Commissioner. The purchaser may not withhold and remit the tax imposed by this article on production of natural gas or oil sold to a severer who delivers to the purchaser a direct severance payment authorization number.
(8) The Tax Commissioner may promulgate emergency rules addressing collection and remittance of the severance tax by the first purchaser or the severer or both, taxation of oil and natural gas and coal bed methane and such administrative matters as may relate to the filing, reporting and payment of the tax imposed by this article and by article thirteen-v of this chapter, and such interpretive and legislative rules as the Tax Commissioner may find appropriate relating thereto.
(9) Notwithstanding other provisions of this code to the contrary, if the Tax Commissioner determines that a transaction between a first purchaser and a severer is not an arm's length transaction or is otherwise a transaction for which price manipulation appears to have affected the amount of tax collected or remitted under this article, the Tax Commissioner may determine the applicable tax base on which such tax should have been imposed and issue an assessment of tax accordingly.
§11-13A-17. Collection of tax; agreement for processor to pay tax due from severer; reporting by first purchaser of oil and gas.

(a) General. -- In the case of natural resources, other than natural gas and oil, where the Tax Commissioner finds that it would facilitate and expedite the collection of the taxes imposed under this article, 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 in such form 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.
(b) Natural gas and oil. --
(1) In the case of natural gas and oil, except for those cases:
(A) Where the person severing (or both severing and processing) the natural gas will sell the gas to the ultimate consumer, or
(B) Where the Tax Commissioner determines that the collection of taxes due under this article would be accomplished in a more efficient and effective manner through the severor, or severor and processor, remitting the taxes; the first person to purchase the natural gas after it has been severed, or in the event that the natural gas has been severed and processed before the first sale, the first person to purchase the natural gas after it has been severed and processed, shall be liable for the collection of the taxes imposed by this article. He shall collect the taxes imposed from the person severing (or severing and processing) the natural gas, and he shall remit the taxes to the Tax Commissioner. In those cases where the person severing (or severing and processing) the natural gas sells the gas to the ultimate consumer, the person so severing (or severing and processing) the natural gas shall be liable for the taxes imposed by this article. In those cases where the Tax Commissioner determines that the collection of the taxes due under this article from the severance (or severance and processing) of natural gas would be accomplished in a more efficient and effective manner through the severor (or severor and processor) remitting the taxes, the Tax Commissioner shall set out his determination in writing, stating his reasons for so finding, and so advise the severor (or severor and processor) at least fifteen days in advance of the first reporting period for which such action would be effective.
(2) On or before the last day of the month following each taxable calendar month, each person first purchasing natural gas or oil as described in this article or in this subdivision (1) above, shall report the purchases of natural gas and the purchases of oil during the taxable month, showing the quantities of gas purchased, the quantities of oil purchased, the price paid, the date of purchase, and any other information deemed necessary by the Tax Commissioner for the administration of the tax imposed by this article, and shall pay the amount of tax due, on forms prescribed by the Tax Commissioner.
(3) (2) 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.
§11-13V-4a. Purchaser of natural gas to withhold tax.
(a) Remittance of withheld tax by purchaser. -- On or after the first day of January, two thousand eight, the first person to purchase the natural gas after it has been severed, or in the event that the natural gas has been severed and processed before the first sale, the first person to purchase natural gas after it has been severed and processed, is liable for the collection of the taxes imposed by this article from the person severing (or severing and processing) the natural gas, and shall remit the taxes to the Tax Commissioner. Taxes so collected by the purchaser are held in trust for the state, and the purchaser is liable for any failure to collect or remit the tax, in accordance with the provisions of articles nine and ten of this chapter. The severer is not liable for tax withheld by the purchaser, but not remitted to this state by the purchaser.
(1) No profit shall accrue to any person as a result of the collection of the tax levied by this article notwithstanding the total amount of the taxes collected may be in excess of the amount for which the severer would be liable by the application of the rate of tax levied by this article. The total amount of all taxes collected by the purchaser shall be returned and remitted to the Tax Commissioner as provided in this article.
(2) If any severer refuses to pay or otherwise does not pay to the purchaser the tax imposed by this article, or a severer refuses to present to the purchaser a valid direct severance payment authorization number indicating that the purchaser is not required to collect and remit the taxes imposed by this article, or presents to the purchaser a false direct severance payment authorization number or a false document, the severer is personally liable for the amount of tax applicable, and the purchaser is not liable for such tax.
(3) Nothing in this section relieves any severer who owes the tax and who has not paid the tax imposed by this article from liability for payment of the tax. In those cases the Tax Commissioner has authority to make an assessment against the severer, based upon any information within his or her possession or that may come into his or her possession. This assessment and notice thereof shall be made and given in accordance with article ten of this chapter. The severer is not liable for tax withheld by the purchaser, but not remitted to this state by the purchaser.
(4) The due dates and payment requirements of this article apply to the payment and remittance of tax by purchasers of natural gas under this section.
(5) Exceptions. The requirement that the purchaser shall withhold and remit the tax imposed by this article on production of natural gas does not apply:
(A) Where the person severing (or severing and processing) the natural gas sells the gas or oil to the ultimate consumer, the person so severing (or severing and processing) the natural gas is liable for the taxes imposed by this article; or
(B) Where the Tax Commissioner determines that the collection of the taxes due under this article or article thirteen-a of this chapter, or both, from the person severing the natural gas or oil, or severing and processing the natural gas would be accomplished in a more efficient and effective manner through the severer (or severer and processor) remitting the taxes, the Tax Commissioner shall set out his or her determination in writing, stating his or her reasons for so finding, and so advise the severer (or severer and processor) at least fifteen days in advance of the first reporting period for which the commissioner's determination is effective.
(6) Notwithstanding the provisions of this section, the person severing the natural gas is the taxpayer for purposes of this article and is liable for the tax imposed by this article. The taxpayer is subject to the bonding requirements as applicable under section thirteen of this article. The first purchaser that is responsible for withholding and remittance of the tax is subject to the bonding requirements as applicable under section thirteen of this article, and severers from whom the tax is withheld is not subject to the bond specified in section thirteen of this article. However, a severer who has been issued a direct severance payment authorization number or who is otherwise subject to a requirement to pay the tax imposed by this article directly to the state rather than through withholding by the first purchaser, is subject to the bonding requirements as applicable under section thirteen of this article. This article may not be interpreted to relieve any person of a bonding requirement other than the bonding requirement set forth in section thirteen of this article, and may not be interpreted as addressing any bonding requirement other than the bonding requirement set forth in section thirteen of this article.
(7) On or before the last day of the month following each taxable calendar month, each person first purchasing natural gas as described in this section shall report the 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 for the administration of the tax imposed by this article, and shall pay the amount of tax due, on forms prescribed by the Tax Commissioner.




NOTE: The purpose of this bill is to simplify the taxation and clarify the regulation and treatment under the law of the production, marketing and delivery of natural gas and oil.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.
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