HB2816 HFA Butler 3-27 #2
Delegate Butler moves to amend the bill on page 20, following line 55, by inserting the following:
“Article 28. commercial activity tax.
§11-28-1. Imposition of privilege tax.
There is hereby levied and shall be collected an annual privilege tax on persons conducting any business or commercial activities in this state, in the amount of two tenths of one percent of the gross income of the business as defined by this article.
(a) General. – When used in this article, words defined in subsection (b) of this section have the meanings ascribed to them in this section, except in those instances where a different meaning is provided in this article or the context in which the word is used clearly indicates that a different meaning is intended by the Legislature.
(1) "Banking business" or "financial organization" shall mean any bank, banking association, trust company, industrial loan company, small loan company or licensee, building and loan association, savings and loan association, finance company, investment company, investment broker or dealer, and any other similar business organization whose assets consist primarily of intangible personal property and whose gross income consists primarily of dividends, interest and other charges derived from the use of money or credit.
(2) "Business" includes all activities engaged in or caused to be engaged in with the object of gain or economic benefit, either direct or indirect. "Business" does not include a casual sale by a person who is not engaged in the business of selling the type of property involved in such casual sale. "Business" includes the production of natural resources or manufactured products which are used or consumed by the producer or manufacturer and includes the activities of a banking business or financial organization.
(3) (A) "Gross income" means the gross receipts of the taxpayer, other than a banking or financial business, received as compensation for personal services and the gross receipts of the taxpayer derived from trade, business, commerce or sales and the value proceeding or accruing from the sale of tangible property (real or personal), or service, or both, all receipts from the investment of the capital of the business, including rentals, royalties, fees, reimbursed costs or expenses or other emoluments however designated and including all interest, carrying charges, fees or other like income, however denominated, derived by the taxpayer from repetitive carrying of accounts, in the regular course and conduct of its business , and extension of credit in connection with the sale of any tangible personal property or service, and without any deductions on account of the cost of property sold, the cost of materials used, labor costs, taxes, royalties paid in cash or in kind or otherwise, interest or discount paid or any other expenses whatsoever: Provided, That gross income shall not include contributions to capital.
(B) (i) "Gross income of a banking or financial business” means the gross income received from interest, premiums, discounts, dividends, service fees or charges, commissions, fines, rents from real or tangible personal property, however denominated, royalties, charges for bookkeeping or data processing, receipts from check sales, charges or fees, and receipts from the sale of tangible personal property.
(ii) “Gross income of a banking or financial business” does not include:
(I) Interest received on the obligations of the United States, its agencies and instrumentalities,
(II) Interest received on the obligations of this state, or any political subdivision of this state, or
(III) Interest received on investments or loans primarily secured by first mortgages or deeds of trust on residential property occupied by nontransients; however, all interest derived from these activities shall be reported on the return of a person taxable under the provisions of this section.
(C) "Gross proceeds of sales" means the value, whether in money or other property, proceeding from the sale of tangible property, without any deduction for the cost of property sold or expenses of any kind: Provided, That bad debts shall be allowed as a deduction except that the amount of any bad debt recovery shall be included in gross proceeds of sale.
(D) The terms "gross income" and "gross proceeds of sales" do not include:
(i) Cash discounts allowed and taken on sales;
(ii) The proceeds of sale of goods, wares or merchandise returned by customers when the sale price is refunded either in cash or by credit;
(iii) The amount allowed as "trade-in value" for any article accepted as part payment for any article sold;
(iv) Excise taxes imposed by this state; or
(v) Money or other property received or held by a professional person for the sole use and benefit of a client or another person or money received by the taxpayer on behalf of a bank or other financial institution for the repayment of a debt of another.
(4) "Person" or "company,'' herein used interchangeably, includes any individual, firm, copartnership, partnership, limited liability company, joint adventure, association, corporation, trust or any other group or combination acting as a unit, and the plural as well as the singular number, unless the intention to give a more limited meaning is disclosed by the context.
(5) "Sale," "sales" or "selling" means any transfer of the ownership of or title to property, whether for money or in exchange for other property.
(6) "Selling at wholesale" or "wholesale sales" means and includes:
(A) Sales of any tangible personal property for the purpose of resale in the form of tangible personal property;
(B) Sales of machinery, supplies or materials which are to be directly consumed or used by the purchaser in the conduct of any business or activity which is subject to the tax imposed by this article; and
(C) Sales of any tangible personal property to the United States of America, its agencies and instrumentalities or to the State of West Virginia, its institutions or political subdivisions.
(7) "Service business or calling" means all activities engaged in by a person for other persons for a consideration which involve the rendering of a service as distinguished from the sale of tangible property, but does not include the services rendered by an employee to his or her employer. This term includes, but is not limited to:
(A) Persons engaged in manufacturing, compounding or preparing for sale, profit or commercial use, articles, substances or commodities which are owned by another or others;
(B) Persons engaged as independent contractors in producing natural resource products which are owned by another or others, as personal property, immediately after the same are severed, extracted, reduced to possession and produced;
(C) The repetitive carrying of accounts, in the regular course and conduct of business, and extension of credit in connection with the sale of any tangible personal property or service.
(8) "Taxpayer" means any person liable for the tax imposed by this article;
(9) "Tax year" or "taxable year" means the calendar year, unless permission is obtained from the Tax Commissioner to use the taxpayer's fiscal year as the tax period;
(10) "Electronic filing" or "e-filing" means filing using electronic technology such as computer modem, magnetic media, optical disk, facsimile machine, telephone or other technology approved by the Tax Commissioner, in such manner as he or she deems acceptable. Any return required to be filed electronically under this article may contain an electronic signature, if a signature is required.
§11-28-3. Rules for determining measure of tax.
(a) If any person liable for the tax ships or transports its products or any part thereof out of the state without making sale of such products, the value of the products in the condition or form in which they exist immediately before transportation out of the state shall be the basis for the assessment of the tax. The tax commissioner may prescribe rules for ascertaining such value.
(b) In determining value, however, of sales between affiliated companies or persons, or under other circumstances where the relation between the buyer and seller is such that the gross proceeds from the sale do not reflect the true value of the subject matter of the sale, the tax commissioner may prescribe rules for determining the value on which the privilege tax shall be levied, corresponding as nearly as possible to the gross proceeds from the sale of products where no common interest exists between the buyer and seller but the circumstances and conditions are otherwise similar.
(c) Upon every person engaging or continuing within this state in the business of manufacturing, compounding or preparing for sale, profit, or commercial use, either directly or through the activity of others in whole or in part, any article or articles, substance or substances, commodity or commodities, or newspaper publishing (including all gross income or proceeds of sale from circulation and advertising), the measure of this tax is the value of the entire product manufactured, compounded or prepared in the state for sale, profit or commercial use, regardless of the place of sale or the fact that deliveries may be made to points outside the state.
(d) In those instances in which the same person partially manufactures, compounds or prepares products within this state and partially manufactures, compounds or prepares such products outside of this state, the measure of the tax shall be that proportion of the sale price of the product that the payroll cost of manufacturing within this state bears to the entire payroll cost of manufacturing the product; or, at the option of the taxpayer, the measure of his or her tax under this section shall be the proportion of the sales value of the articles that the cost of operations in West Virginia bears to the full cost of manufacture of the articles.
The provisions of this article do not apply to:
(a) Insurance companies which pay the State of West Virginia a tax on premiums. However, this exemption does not apply to portions of the gross income of insurance companies received for the use of real property, other than property in this state in which the insurance company maintains its office or offices, whether that income is in the form of rentals or royalties;
(b) Nonprofit cemetery companies organized and operated for the exclusive benefit of their members;
(c) Fraternal societies, organizations and associations organized and operated for the exclusive benefit of their members and not for profit. This exemption does not apply to gross income arising from the sale of alcoholic liquor, food and related services of such fraternal societies, organizations and associations which are licensed as private clubs under the provisions of article seven, chapter sixty of this code, except that funds derived from the licensed charitable gaming activities of such organizations are exempt;
(d) Corporations, associations and societies organized and operated exclusively for religious or charitable purposes: Provided, That this exemption does not apply to gross income derived from engaging in unrelated business activity as defined for federal income tax purposes;
(e) Production credit associations, organized under the provisions of the federal "Farm Credit Act of 1933"; or
(f) Any credit union organized under the provisions of chapter thirty-one or any other chapter of this code: Except, that the exemptions of this section shall not apply to corporations or cooperative associations organized under the provisions of article four, chapter nineteen of this code.
§11-28-5. Computation of tax; payment.
The tax imposed by this article is due and payable as follows:
(a) For taxpayers whose estimated tax under this article exceeds $1,000 per month, the tax shall be due and payable in monthly installments on or before the last day of the month following the month in which the tax accrued. Each such taxpayer shall, on or before the last day of each month, make out an estimate of the tax for which it is liable for the preceding month and submit it with a remittance in the form prescribed by the Tax Commissioner, of the amount of tax to the office of the commissioner.
(b) For taxpayers whose estimated tax under this article does not exceed $1,000 per month, the tax shall be due and payable in quarterly installments within one month from the expiration of each quarter in which the tax accrued. Each such taxpayer shall, within one month from the expiration of each quarter, make out an estimate of the tax for which he or she is liable for such quarter, sign the same and mail it together with a remittance, in the form prescribed by the Tax Commissioner, of the amount of tax to the office of the commissioner.
(c) When the total tax for which any person is liable under this article does not exceed $200 in any year, the taxpayer may pay the same quarterly as described in subsection (b) of this section or, with the consent in writing of the Tax Commissioner, at the end of the month next following the close of the tax year.
(d) The Tax Commissioner may require the return and payment for periods of shorter duration than those prescribed above if it is deemed necessary to ensure payment of the tax.
(e) The forms shall be filed electronically, in accordance with the procedures set forth in the Tax Commissioner’s rule on use and acceptance of electronic records. Any taxpayer required to file and pay electronically who fails to do so, shall be required to pay a money penalty in an amount equal to five percent of the tax due.
§11-28-6. Return and remittance by taxpayer.
On or before the expiration of one month after the end of the tax year, each taxpayer shall make a return for the entire tax year showing the gross proceeds of sales or gross income of business, trade or calling, and compute the amount of tax chargeable in accordance with the provisions of this article and deduct the amount of monthly or quarterly payments (as hereinbefore provided), if any, and transmit with its report a remittance in the form prescribed by the Tax Commissioner covering the residue of the tax chargeable against the taxpayer to the office of the Tax Commissioner; such return shall be signed by the taxpayer if made by an individual, or by the president, vice president, secretary or treasurer of a corporation if made on behalf of a corporation. If made on behalf of a partnership, joint adventure, association, trust, or any other group or combination acting as a unit, any individual delegated by such firm, copartnership, joint adventure, association, trust or any other group or combination acting as a unit shall sign the return on behalf of the taxpayer. The Tax Commissioner may extend the time for making the annual return on the application of any taxpayer and grant such reasonable additional time within which to make the same, for good cause shown. Annual returns must be filed, and payments remitted, electronically, as provided in section four of this article, unless the taxpayer first obtains a waiver in writing from the Tax Commissioner.
§11-28-7. Tax year.
The assessment of taxes and the returns required under the provisions of this article shall be on a calendar year basis, unless permission is obtained from the Tax Commissioner to use the taxpayer's fiscal year as the tax period.
§11-28-8. Tax cumulative.
The tax imposed by this article is in addition to all other licenses and taxes levied by law as a condition precedent to engaging in any business, trade or calling in this state. A person exercising a privilege taxable under this article, subject to the payment of all licenses and charges which are condition precedent to exercising the privilege taxed, may exercise the privilege for the current tax year upon the condition that he or she shall pay the tax accruing under this article.
§11-28-9. Receivership or insolvency proceedings.
In the event a business subject to the tax imposed by this article is being operated in connection with a receivership or insolvency proceeding, the court under whose direction the business is operated shall, by the entry of a proper order in the cause, make provision for the regular payment of the taxes imposed by this article as they become due.
§11-28-10. Priority in distribution in receivership, etc.; personal liability of administrator.
In the distribution, voluntary or compulsory, in receivership, bankruptcy or otherwise, of the estate of any person, firm or corporation, all taxes due and unpaid under this article shall be paid from the first money available for distribution in priority to all claims, except taxes and debts due the United States which under federal law are given priority over the debts and liens created by this article. Any person charged with the administration of an estate who shall violate the provisions of this section shall be personally liable for any taxes accrued and unpaid under this article, which are chargeable against the person, firm or corporation whose estate is in administration.
§11-28-11. Credit for taxes paid.
(a) A credit shall be allowed against the tax imposed by this article for the following taxes paid to the State of West Virginia:
(1) The severance and business privilege tax imposed by article thirteen-a of this chapter.
(2) The health care provider tax imposed by article twenty-seven of this chapter.
(3) The acute care hospital tax imposed by article twenty-seven of this chapter.
(4) The business and occupation tax imposed by article thirteen of this chapter.
(b) No credit may be taken for the following taxes paid within this state:
(1) The municipal business and occupation tax imposed by a municipality pursuant to article thirteen, chapter eight of this code.
(2) The municipal public utilities tax imposed by a municipality pursuant to article thirteen, chapter eight of this code.
(c) In no case may the credit allowed under this section reduce a taxpayer’s liability for the tax imposed by this article below zero dollars.
(d) No unused credit under this section may be carried forward or carried back to another tax year.
§11-28-12. Offenses; penalties.
It shall be unlawful for any person to refuse to make the return required by section six of this article; or to make any false or fraudulent return or false statement in any return, with intent to defraud the state or to evade the payment of the tax, or any part thereof, imposed by this article; or for any person to aid or abet another in any attempt to evade the payment of the tax, or any part thereof, imposed by this article; or for the president, vice president, secretary or treasurer of any corporation to make or permit to be made for any corporation or association any false return, or any false statement in any return required in this article, with the intent to evade the payment of any tax hereunder. Any person violating any of the provisions of this section shall be guilty of a misdemeanor and, on conviction thereof, shall be fined not more than $10,000 or imprisoned not exceeding one year in the regional jail or punished by both fine and imprisonment, at the discretion of the court, within the limitations aforesaid. In addition to the foregoing penalties, any person who shall knowingly swear to or verify any false or fraudulent return, or any return containing any false or fraudulent statement with the intent aforesaid, shall be guilty of the offense of false swearing, and, on conviction thereof, shall be punished in the manner provided by law. Any corporation for which a false return, or a return containing a false statement, as aforesaid, shall be made, shall be guilty of a misdemeanor and shall be punished by a fine of not more than $10,000. The circuit and criminal courts of the county in which the offender resides, or, if a corporation, in which it carries on business, shall have concurrent jurisdiction to enforce this section.
§11-28-13. Severability; effective date.
(a) Severability – If any provision of this article or the application thereof shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder of said article, but shall be confined in its operation to the provision thereof directly involved in the controversy in which such judgment shall have been rendered, and the applicability of such provision to other persons or circumstances shall not be affected thereby.
(b) Effective date – The provisions of this article take effect July 1, 2017 and shall apply to gross income from business activity engaged in, on or after that date.
§11-28-14. Termination date; short taxable years for taxpayers on calendar or fiscal year and cash or accrual accounting methods.
(a) Each and every provision of this article is repealed for all tax periods beginning on and after July 1, 2020: Provided, That the provisions of this article shall remain in effect on and after July 1, 2020, so long as the combined balance of funds as of June 30, 2019, or any subsequent June 30, in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund - Part B established in section twenty, article two, chapter eleven-b of this code is less than fifteen percent of the General Revenue Fund budgeted for the fiscal year of the state commencing July 1, 2019 or any fiscal year commencing thereafter. However, tax liabilities, if any, arising for taxable years or portions thereof ending prior to a July 1 termination date shall be determined, administered, assessed and collected as if the taxes imposed by this article had terminated; and the rights and duties of the taxpayer and the State of West Virginia shall be fully and completely preserved.
(b) Persons who are calendar year taxpayers under this article shall file their annual return for the calendar year of the termination date, on or before July 31 of that calendar year, and remit the amount of any taxes shown thereon to be due, unless an extension of time for filing is authorized by the Tax Commissioner.
(c) Persons who are fiscal year taxpayers shall similarly file an annual return on or before July 31 of the termination year, for their short taxable year which ended June 30 of that year, and remit the amount of any taxes shown thereon to be due, unless an extension of time for filing is authorized by the Tax Commissioner.
(d) Persons who keep their records using the accrual method of accounting shall file their annual return for the full or short taxable year ending June 30 of the termination year, computing their tax liability under that method of accounting. A taxpayer shall file an amended return for the termination year and pay any additional taxes due within thirty days after determining that gross income was under-reported on the annual return.
(e) Persons who keep their records using the cash method of accounting may file their annual return for the full or short taxable year ending June 30 of the termination year, computing their tax liability under the cash method of accounting: Provided, That the taxpayer shall file a supplemental return for the termination year within one month after the close of each calendar quarter during each ensuing year in which the taxpayer receives gross income for any activity or portion thereof completed prior to July 1 of the termination year, and pay any additional taxes shown on the supplemental return to be due. The purpose of this requirement is to minimize the advantage or disadvantage associated with the different methods of accounting when the commercial activity tax is repealed.
§11-28-15. General procedure and administration.
Each and every provision of the "West Virginia Tax Procedure and Administration Act" set forth in article ten of this chapter, and the “West Virginia Tax Crimes and Penalties Act” set forth in article nine of this chapter shall apply to the tax imposed by this article with like effect as if said acts were applicable only to the tax imposed by this article and were set forth in extenso in this article.;
and by amending the enacting section to read as follows:
“That §11-13X-4 and §11-13X-13 of the Code of West Virginia, 1931, as amended, be amended and reenacted; that §11-15-9 of said code be amended and reenacted; that §11-16-13 of said code be amended and reenacted; and that said code be amended by adding thereto a new article, designated §11-28-1, §11-28-2, §11-28-3, §11-28-4, §11-28-5, §11-28-6, §11-28-7, §11-28-8, §11-28-9, §11-28-10, §11-28-11, §11-28-12, §11-28-13, §11-28-14 and §11-28-15, all to read as follows:”