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.