FISCAL NOTE
Date Requested: February 04, 2026
Time Requested: 04:32 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2751 |
Introduced |
HB5177 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to create a state sales tax rebate for qualifying materials used in the construction of modest homes of 1,600 square feet or less, to limit the rebate to the state six percent sales tax, to permit voluntary municipal participation, to establish fixed material quantity limits.
This bill would allow for a rebate to builders of a home of no more than 1,600 square feet for the sales tax paid towards material purchases. The building material must be purchased in West Virginia. According to our interpretation, passage of this bill would result in a contractor refundable sales tax exemption on building materials for newly constructed homes of no bigger than 1,600 square feet. The current average square feet per existing home in West Virginia is 1,711 according to available data from the U.S. Census Bureau. In 2024, a total of 3,515 building permits were issued for new privately-owned single unit homes with total construction value of $798,785,000 or $227,253 per unit on average. Assuming the average cost of new home construction in West Virginia is $125 per square foot (national average is in the $150 to $165 range), the average new home would be 1,818 square feet. The size of new homes is typically dictated by market factors and consumer tastes. Under the assumption that no more than half of the new homes constructed in West Virginia will fall under the 1,600 square foot rule for sales tax exemption, the annual loss to the State General Revenue Fund would average $10 million or more beginning in FY 2028. The current sales tax share of a total home price averages out to around 2%.
Additional administrative costs incurred by the State Tax Department would be $46,200 in FY2026; $93,300 in FY2027; and $90,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2026
Increase/Decrease
(use"-") |
2027
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
46,200 |
93,300 |
90,000 |
| Personal Services |
0 |
90,000 |
90,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
3,300 |
0 |
| Other |
46,200 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-10,000,000 |
Explanation of above estimates (including long-range effect):
This bill would allow for a rebate to builders of a home of no more than 1,600 square feet for the sales tax paid towards material purchases. The building material must be purchased in West Virginia. According to our interpretation, passage of this bill would result in a contractor refundable sales tax exemption on building materials for newly constructed homes of no bigger than 1,600 square feet. The current average square feet per existing home in West Virginia is 1,711 according to available data from the U.S. Census Bureau. In 2024, a total of 3,515 building permits were issued for new privately-owned single unit homes with total construction value of $798,785,000 or $227,253 per unit on average. Assuming the average cost of new home construction in West Virginia is $125 per square foot (national average is in the $150 to $165 range), the average new home would be 1,818 square feet. The size of new homes is typically dictated by market factors and consumer tastes. Under the assumption that no more than half of the new homes constructed in West Virginia will fall under the 1,600 square foot rule for sales tax exemption, the annual loss to the State General Revenue Fund would average $10 million or more beginning in FY 2028. The current sales tax share of a total home price averages out to around 2%.
Additional administrative costs incurred by the State Tax Department would be $46,200 in FY2026; $93,300 in FY2027; and $90,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create a state sales tax rebate for qualifying materials used in the construction of modest homes of 1,600 square feet or less, to limit the rebate to the state six percent sales tax, to permit voluntary municipal participation, to establish fixed material quantity limits.
A builder of an eligible modest dwelling may apply for a rebate equal to the state 6% sales tax paid on eligible materials. The rebate does not apply to municipal sales tax unless the municipality elects via ordinance to authorize a rebate of “all or part” of its sales tax on eligible materials. The State Tax Department [sic] must administer any municipal rebate. The apparent option for a municipality to offer a rebate of less than all its sales tax may cause problems with administration.
The bill states that it takes effect on July 1, 2026. There is no requirement that the “modest dwelling” must be constructed after that date, although the definition of “eligible modest dwelling” states that it must be “newly constructed.” It is not clear how loosely “newly” applies - whether construction can be begun or even completed before July 1, 2026 and still be eligible for the rebate.
Although this article styles itself as a “rebate,” it appears to function much like a refundable sales tax exemption like those found under W. Va. Code §11-15-9(b), it might be better placed in that subsection.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov