HB 4696 Text

H. B. 4696

(By Delegate Morgan)
[Introduced February 27, 2004; referred to the
Committee on Finance.]

A BILL to amend the code of West Virginia, 1931, as amended, by adding thereto a new article, designated §8-13C-1, §8-13C-2, §8-13C-3, §8-13C-4, §8-13C-5, §8-13C-6, §8-13C-7, §8-13C-8, §8-13C-9 and §8-13C-10; to amend and reenact §11-9-2, §11-9-3, §11-9-4, §11-9-5, §11-9-6, §11-9-8 and §11-9-10 of said code; and to amend and reenact §11-10-3 of said code, all relating to authorizing a qualifying municipality to impose a municipal occupational tax, a municipal sales and service tax and a use tax; responsibilities of tax commissioner relating to municipal sales and service tax and municipal use tax; application of other state tax laws; creation of qualifying municipal sales and service tax and use tax fund; tax rate in printed catalogs; limiting use of the proceeds of the taxes to application towards the unfunded liability of certain pensions; instances where qualifying municipality loses certain taxing authority; addressing conflicts and unconstitutionality; and imposing criminal penalties for certain violations relating to a municipal sales and service tax and a use tax .

Be it enacted by the Legislature of West Virginia:
That the code of West Virginia, 1931, as amended, be amended by adding thereto a new article, designated §8-13C-1, §8-13C-2, §8-13C-3, §8-13C-4, §8-13C-5, §8-13C-6, §8-13C-7, §8-13C-8, §8-13C-9 and §8-13C-10 ; that §11-9-2, §11-9-3, §11-9-4, §11-9-5, §11-9-6, §11-9-8 and §11-9-10 of said code be amended and reenacted; and that §11-10-3 of said code be amended and reenacted, all to read as follows:
CHAPTER 8. MUNICIPAL CORPORATIONS.
ARTICLE 13C. MUNICIPAL TAXES APPLICABLE TO PENSION FUNDS.
§8-13C-1. Findings.
The Legislature finds that:
(a) Imposing additional taxes creates an extra burden on the citizens of the state;
(b) Imposing additional taxes can be detrimental to the economy of the state;
(c) Imposing additional taxes is only proper under the most rare circumstances;
(d) For many cities with severe unfunded liabilities of the police and fire pension funds, all available sources of local revenue have been exhausted. Property taxes are at the maximum allowed by the state constitution and local business and occupation taxes and utility taxes are at the maximum rates allowed by state law. Other fees have reached the economic maximum and are causing relocation of business to outside the municipal boundaries;
(e) For many cities with severe unfunded police and fire pension fund liabilities, revenue from existing sources has become stagnant over the past few years with no expectation of significant future growth;
(f) For many cities with severe unfunded police and fire pension fund liabilities, payments required under state law to fund fire and police pension funds now are close to equaling the city payrolls for police and fire protection and will rise to exceed those payrolls within a ten-year period;
(g) For many cities with severe unfunded police and fire pension fund liabilities, payments required under state law to fund fire and police pension funds now constitute a large percentage of the cities total budget and will rise to an even larger percentage of the available revenues in the next ten years. Payment and benefit levels are dictated to the cities by state law;
(h) As the required pension payments rise, many of the cities with severe unfunded police and fire pension fund liabilities will find it impossible to maintain at minimum levels necessary and proper city services including, but not limited to, police and fire protection, street maintenance and repair and sanitary services;
(i) For some of the cities with severe unfunded liabilities of the police and fire pension funds, the combination of the steeply rising pension obligations and the stagnant revenue sources raises the real possibility of municipal bankruptcy in the near and predictable future. If this happens, pensioners would either not receive the full benefits which they have been promised or pressure would be placed on the state to fund these programs;
(j) For a municipality that has the most severe unfunded liability in its pension funds, paying off the unfunded liability in a timely manner would cause tremendous financial hardship and the loss of many services that would otherwise be provided to the municipality's citizens; and
(k) Only for a municipality that has the most severe unfunded liability in its pension funds would the imposition of any of the taxes authorized by this article be an appropriate method of addressing the unfunded liability.
§8-13C-2. Definitions.
For the purposes of this article:
(a) "Qualifying municipality" means any municipality, as defined in section two, article one of this chapter, in which the weighted average of the percentages to which its policemens' and firemens' pension and relief funds are fully funded is three percent or less on the date of adoption of the ordinance imposing the tax; and
(b) "Taxable employee" means any individual:
(1) Who holds employment with an employer with a place of business located within the qualifying municipality electing to impose the municipal payroll tax pursuant to this article; and
(2) Whose salaries, wages, commissions and other earned income that would be included in federal adjusted gross income for the year is more than ten thousand dollars per year.
§8-13C-3. Municipal occupational tax.
(a) Each qualifying municipality has the plenary power and authority to impose, by ordinance, a municipal occupational tax on taxable employees. Any municipal occupational tax imposed pursuant to this section shall meet the following requirements:
(1) The tax shall be imposed at a rate of one percent or less;
(2) The tax shall be imposed at a uniform rate; and
(3) The tax rate shall be applied only to salaries, wages, commissions and other earned income of taxable employees that would be included in federal adjusted gross income for the year. The tax rate may not be applied to other forms of income including, but not limited to, intangible income and net profit from a business.
(b) Each employer with a taxable employee, during each pay period, shall withhold from the taxable employee's salary the amount of the tax as computed by applying the appropriate tax rate to the taxable employee's salary during that pay period and pay over the withholdings to the appropriate municipal taxing authority.
§8-13C-4. Municipal sales and service tax.
Each qualifying municipality has the plenary power and authority to impose, by ordinance, a municipal sales and service tax at a rate not to exceed one percent. Any municipal sales and service tax imposed shall be subject to the following:
(a) The base of a municipal sales and service tax imposed pursuant to this section shall be identical to the base of the consumers sales and service tax imposed pursuant to article fifteen, chapter eleven of this code on sales made and services rendered within the boundaries of the qualifying municipality, subject to the following:
(1) Except for the exemption provided in section nine-f, article fifteen, chapter eleven of this code, all exemptions and exceptions from the consumers sales and service tax also shall apply to a municipal sales and service tax imposed pursuant to this section; and
(2) Sales of gasoline and special fuel shall not be subject to a municipal sales and service tax imposed pursuant to this section but shall remain subject to the tax levied by article fifteen, chapter eleven of this code;
(b) Any municipal sales and service tax imposed pursuant to this section applies solely to tangible personal property, custom software and services that are sourced to the municipality. The sourcing rules set forth in article fifteen-b, chapter eleven of this code, including any amendments thereto, shall apply to municipal sales and use taxes levied pursuant to this article;
(c) Any municipality that imposes a municipal sales and service tax pursuant to this section or changes the rate of a municipal sales and service tax imposed pursuant to this section shall notify the tax commissioner pursuant to section six of this article; and
(d) Any municipality that imposes a municipal sales and service tax pursuant to this section may not administer or collect the tax, but shall use the services of the tax commissioner to administer, enforce and collect the tax.
§8-13C-5. Municipal use tax.
(a) Each qualifying municipality that imposes a municipal sales and service tax pursuant to this article also shall impose, by ordinance, a municipal use tax at the same rate that is set for the municipal sales and service tax.
(b) The base of a municipal use tax imposed pursuant to this section shall be identical to the base of the use tax imposed pursuant to article fifteen-a, chapter eleven of this code on the use of tangible personal property, custom software and taxable services within the boundaries of the qualifying municipality, subject to the following:
(1) Except for the exemption provided in section nine-f, article fifteen, chapter eleven of this code, all exemptions and exceptions from the use tax also shall apply to a municipal use tax imposed pursuant to this section; and
(2) Sales of gasoline and special fuel shall not be subject to a municipal use tax imposed pursuant to this section, but shall remain subject to the tax levied by article fifteen-a, chapter eleven of this code.
(c) A person is entitled to a credit against a tax imposed pursuant to this section on the use of a particular item of tangible personal property, custom software or service equal to the amount, if any, of sales tax lawfully paid to another municipality for the acquisition of that property or service: Provided, That the amount of credit allowed does not exceed the amount of use tax imposed on the use of the property in the qualifying municipality of use. For purposes of this subsection, "sales tax" includes a sales tax or compensating use tax imposed on the use of tangible personal property, custom software or a service by the municipality in which the sale occurred.
(d) Any municipality that imposes a municipal use tax pursuant to this section or changes the rate of a municipal use tax imposed pursuant to this section shall notify the tax commissioner pursuant to section six of this article.
(e) Any municipality that imposes a municipal use tax pursuant to this section may not administer or collect the tax, but shall use the services of the tax commissioner to administer, enforce and collect the taxes.
§8-13C-6. Notification to tax commissioner; responsibilities of tax commissioner; application of state tax law.

(a) Any qualifying municipality that imposes a municipal sales and service tax and a municipal use tax pursuant to this article or changes the rate of the taxes, shall notify the tax commissioner of the imposition of the taxes or the change in the rate of the taxes within thirty days of enacting the ordinance imposing the taxes or changing the rate of the taxes. A municipal sales and service tax and a municipal use tax imposed pursuant to this article or a change in the rate of the taxes may not become effective until at least ninety days after the ordinance imposing the taxes is enacted.
(b) The tax commissioner is responsible for collecting, enforcing and administering any municipal sales and service tax and the municipal use tax imposed pursuant to this article in the same manner as the state sales and service tax imposed pursuant to article fifteen, chapter eleven of this code and the state use tax imposed pursuant to article fifteen-a of this code. Additionally, the tax commissioner may charge a fee not to exceed the lesser of the cost of the service provided or one percent of the proceeds from the municipal sales and service tax.
(c) The state consumer sales and service tax law, set forth in article fifteen, chapter eleven of this code, and the amendments to that article and the rules of the tax commissioner relating to the laws shall apply to the municipal sales and service tax to the extent the rules and laws are applicable.
(d) The state use tax law, set forth in article fifteen-a, chapter eleven of this code, and the amendments to that article and the rules of the tax commissioner relating to the laws shall apply to the municipal use tax to the extent the rules and laws are applicable.
(e) Any term used in this article or in an ordinance adopted pursuant to this article that is defined in articles fifteen, fifteen-a and fifteen-b, chapter eleven of this code, as amended, shall have the same meaning when used in this article or in an ordinance adopted pursuant to this article, unless the context in which the term is used clearly requires a different result.
(f) Any amendments to articles nine, ten, fifteen, fifteen-a and fifteen-b, chapter eleven of this code, shall automatically apply to a sales or use tax imposed pursuant to this article, to the extent applicable.
(g) Each and every provision of the "West Virginia Tax Procedure and Administration Act" set forth in article ten, chapter eleven of this code, applies to the taxes imposed pursuant to this article, except as otherwise expressly provided in this article, with like effect as if that act were applicable only to the taxes imposed by this article and were set forth in extenso in this article.
(h) Each and every provision of the "West Virginia Tax Crimes and Penalties Act" set forth in article nine of this chapter applies to the taxes imposed pursuant to this article with like effect as if that act were applicable only to the taxes imposed pursuant to this article and were set forth in extenso in this article.

§8-13C-7. Qualifying municipal sales and service tax and use tax fund; deposit and remittance of collections.

(a) There is created a special revenue account in the state treasury designated the "qualifying municipal sales and service tax and use tax fund" which is an interest-bearing account and shall be invested in the manner described in section nine-c, article six, chapter twelve of this code with the interest and other return earned a proper credit to the fund. A separate subaccount within the fund shall be established for each qualifying municipality that imposes a municipal sales and service tax and use tax pursuant to this article.
(b) The tax commissioner shall deposit all the proceeds from the municipal sales and service tax and municipal use tax collected for each municipality minus any fee for collecting, enforcing and administering the taxes in the appropriate subaccount. All moneys collected and deposited in the fund shall be remitted at least quarterly by the state treasurer to the treasurer of the appropriate municipality.
§8-13C-8. Printed catalogs.
Local tax rate changes made pursuant to sections four and five of this article shall apply to purchases from printed catalogs where the purchaser computed the tax based upon the local tax rate published in the catalog only on and after the first day of a calendar quarter after a minimum of one hundred twenty days' notice to the sellers.
§8-13C-9. Restriction on use of revenues.
(a) All proceeds from any of the taxes imposed pursuant to this article shall be used solely for the purpose of reducing the unfunded actuarial accrued liability of policemen's and firemen's pension and relief funds of the qualifying municipality imposing the tax. The proceeds used for this purpose shall be in addition to the minimum annual contribution required by section twenty, article twenty-two of this chapter.
(b) A qualifying municipality loses its authority to impose a tax pursuant to this article after :
(1) The unfunded actuarial accrued liability of the qualifying municipality's policemens' and firemens' pension and relief funds is eliminated; or
(2) Sufficient moneys accrue from the proceeds of any of the taxes imposed pursuant to this article to eliminate the unfunded actuarial accrued liability of the qualifying municipality's policemens' and firemens' pension and relief funds.
§8-13C-10. Conflict; partial unconstitutionality.
(a) If a court of competent jurisdiction finds that the provisions of this article and the provisions of articles fifteen, fifteen-a and fifteen-b, chapter eleven of this code conflict and cannot be harmonized, then the provisions of articles fifteen, fifteen-a and fifteen-b, chapter eleven of this code shall control.
(b) If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this article is for any reason held to be invalid, unlawful or unconstitutional, that decision does not affect the validity of the remaining portions of this article or any part thereof: Provided, That if this article is held to be unconstitutional under article VI, section thirty-nine of the constitution of this state, this severability clause shall not apply.
CHAPTER 11. TAXATION.

ARTICLE 9. CRIMES AND PENALTIES.

§11-9-2. Application of this article.
(a) The provisions of this article apply to the following taxes imposed by this chapter: (1) The inheritance and transfer taxes and estate taxes imposed by article eleven of this chapter; (2) the business registration tax imposed by article twelve of this chapter; (3) the minimum severance tax on coal imposed by article twelve-b of this chapter; (4) the corporate license tax imposed by article twelve-c of this chapter;(5) the business and occupation tax imposed by article thirteen of this chapter; (6) the severance tax imposed by article thirteen-a of this chapter; (7) the telecommunications tax imposed by article thirteen-b of this chapter; (8) the gasoline and special fuels excise tax imposed by article fourteen of this chapter; (9) the motor fuel excise tax imposed by article fourteen-c of this chapter; (10) the motor carrier road tax imposed by article fourteen-a of this chapter; (11) the interstate fuel tax agreement authorized by article fourteen-b of this chapter; (12) the consumers sales and service tax imposed by article fifteen of this chapter; (13) the use tax imposed by article fifteen-a of this chapter; (14) the tobacco products excise tax imposed by article seventeen of this chapter; (15) the soft drinks tax imposed by article nineteen of this chapter; (16) the personal income tax imposed by article twenty-one of this chapter; (17) the business franchise tax imposed by article twenty-three of this chapter; (18) the corporation net income tax imposed by article twenty-four of this chapter; and (19) the health care provider tax imposed by article twenty-seven of this chapter.
(b) The provisions of this article also apply to the West Virginia tax procedure and administration act in article ten of this chapter, and to any other articles of this chapter when application is expressly provided for by the Legislature.
(c) The provisions of this article also apply to municipal sales and use taxes imposed pursuant to article thirteen-c, chapter eight of this code; the charitable bingo fee imposed by sections six and six-a, article twenty, chapter forty-seven of this code; the charitable raffle fee imposed by section seven, article twenty-one of said chapter; and the charitable raffle boards and games fees imposed by section three, article twenty-three of said chapter.
(d) Each and every provision of this article applies to the articles of this chapter listed in subsections (a), (b) and (c) of this section, with like effect, as if the provisions of this article were applicable only to the tax and were set forth in extenso in this article.

§11-9-3. Definitions.

For the purposes of this article, the term:
(1) "Person" means any individual, firm, partnership, limited partnership, copartnership, joint venture, association, corporation, municipal corporation, organization, receiver, estate, trust, guardian, executor, administrator, and any officer, employee or member of any of the foregoing who, as such officer, employee or member, is under a duty to perform or is responsible for the performance or nonperformance of the act in respect of which a violation occurs under this article.
(2) "Return or report" means any return or report required to be filed by any article of this chapter imposing any tax to which this article applies as specified in section two of this article, or by any other article of this code pursuant to which a tax or fee is imposed that is collected by the tax commissioner as specified in section two of this article.
(3) "Tax" or "taxes" means any tax to which this article applies, as specified in section two of this article, and includes additions to tax, penalties and interest unless the intention to give it a more limited meaning is disclosed by the context in which the term "tax" or "taxes" is used.
(4) "Tax commissioner" or "commissioner" means the tax commissioner of the state of West Virginia or his delegate.
(5) "This chapter" means chapter eleven of the code of West Virginia, 1931, as amended, and shall include only those articles of chapter eleven listed in section two of this article.
(6) "Willfully" means the intentional violation of a known legal duty to perform any act, required to be performed by any provision of this chapter, or article thirteen-c, chapter eight of this code, in respect of which the violation occurs: Provided, That the mere failure to perform any act shall not be a willful violation under this article. A willful violation of this article requires that the defendant had knowledge of or notice of a duty to perform such act, and that the defendant, with knowledge of or notice of such duty, intentionally failed to perform such act.
(7) "Evade" means to willfully and fraudulently commit any act with the intent of depriving the state of payment of any tax which there is a known legal duty to pay under this chapter.
(8) "Fraud" means any false representation or concealment as to any material fact made by any person with the knowledge that it is not true and correct, with the intent that such representation or concealment be relied upon by the state.
§11-9-4. Failure to pay tax or file return or report.
Any person required by any provision of this chapter, or article thirteen-c, chapter eight of this code to pay any tax, or to file any return or report, who willfully fails to pay such tax, or willfully fails to file such return or report, more than thirty days after the date such tax is required to be paid by law, is guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than one hundred dollars nor more than one thousand dollars, or imprisoned in ~~the county~~ jail not more than six months, or both fined and imprisoned. Each failure to pay tax, or file a return or report, more than thirty days after its due date for any tax period is a separate offense under this section and punishable accordingly: Provided, That thirty days prior to instituting criminal proceedings under this section, the tax commissioner shall give the person written notice of any failure to pay a tax or to file a return or report. Such notice shall be served on the person by certified mail or by personal service. The provisions of this section shall not apply to the business franchise registration tax imposed by article twelve of chapter eleven.

§11-9-5. Failure to account for and pay over another's tax.

Any person required by any provision of this chapter or article thirteen-c, chapter eight of this code to collect, or withhold, account for and pay over any tax, who willfully fails to truthfully account for and pay over such tax in the manner required by law, more than thirty days after the date such tax is required to be accounted for and paid over by law, is guilty of a felony if the amount of tax not paid over is one thousand dollars or more and, upon conviction thereof, shall be fined not less than five thousand dollars nor more than twenty-five thousand dollars, or imprisoned in ~~the penitentiary~~ a correctional facility not less than one nor more than three years, or, in the discretion of the court be confined in ~~the county~~ jail not more than one year, or both fined and imprisoned; or, is guilty of a misdemeanor, if the amount of tax not paid over is less than one thousand dollars, and, upon conviction thereof, shall be fined not less than five hundred dollars nor more than five thousand dollars, or imprisoned in ~~the county~~ jail not more than six months, or both fined and imprisoned. Each failure to account for and pay over tax for any tax period under this section is a separate offense and punishable accordingly: Provided, That thirty days prior to instituting a criminal proceeding under this section, the tax commissioner shall give the person written notice of the failure to truthfully account for and pay over tax. Such notice shall be served on the person by certified mail or personal service.

§11-9-6. Failure to collect or withhold tax.

Any person required by any provision of this chapter or article thirteen-c, chapter eight of this code to collect or withhold any tax, who willfully fails to collect or withhold such tax in the manner required by law, is guilty of a misdemeanor, and, upon conviction thereof, shall be fined not less than one hundred dollars nor more than five hundred dollars, or imprisoned in ~~the county~~ jail not more than six months, or both fined and imprisoned. Each month or fraction thereof during which such failure continues is a separate offense under this section and punishable accordingly.

§11-9-8. Willful failure to maintain records or supply information; misuse of exemption certificate.

If any person: (1) Willfully fails to maintain any records, or supply any information, in the manner required by this chapter or article thirteen-c, chapter eight of this code or regulations therefor promulgated in accordance with law, to compute, assess, withhold or collect any tax imposed by this chapter; or (2) presents to any vendor a certificate for the purpose of obtaining an exemption from the tax imposed by article fifteen or fifteen-a of this chapter or article thirteen-c, chapter eight of this code and then knowingly uses the item or service purchased in a manner that is not exempt from such tax without remitting such tax in the manner required by law, such person is guilty of a misdemeanor, and, upon conviction thereof, shall be fined not less than one hundred dollars nor more than one thousand dollars, or imprisoned in ~~the county~~ jail not more than six months, or both fined and imprisoned.

§11-9-10. Attempt to evade tax.

If any person: (1) Knowingly files a false or fraudulent return, report or other document under any provision of this chapter or article thirteen-c, chapter eight of this code; or (2) willfully delivers or discloses to the tax commissioner any list, return, account, statement, record or other document known by him or her to be fraudulent or false as to any material matter with the intent of obtaining or assisting another person in obtaining any credit, refund, deduction, exemption or reduction in tax not otherwise permitted by this chapter or article thirteen-c, chapter eight of this code; or (3) willfully attempts in any other manner to evade any tax imposed by this chapter or article thirteen-c, chapter eight of this code or the payment thereof, is guilty of a felony and, notwithstanding any other provision of the code, upon conviction thereof, shall be fined not less than one thousand dollars nor more than ten thousand dollars, or imprisoned in ~~the penitentiary~~ a correctional facility not less than one nor more than three years, or, in the discretion of the court be confined in ~~the county~~ jail not more than one year, or both fined and imprisoned.
ARTICLE 10. PROCEDURE AND ADMINISTRATION.
§11-10-3. Application of this article.
(a) The provisions of this article apply to the inheritance and transfer taxes, the estate tax, and interstate compromise and arbitration of inheritance and death taxes, the business registration tax, the annual tax on incomes of certain carriers, the minimum severance tax on coal, the corporate license tax, the business and occupation tax, the severance tax, the telecommunications tax, the interstate fuel tax, the consumers sales and service tax, the use tax, the tobacco products excise tax, the soft drinks tax, the personal income tax, the business franchise tax, the corporation net income tax, the gasoline and special fuel excise tax, the motor fuel excise tax, the motor carrier road tax, the health care provider tax, and the tax relief for elderly homeowners and renters administered by the state tax commissioner. This article shall not apply to ad valorem taxes on real and personal property or any other tax not listed in this section, except that in the case of ad valorem taxes on real and personal property, when any return, claim, statement or other document is required to be filed, or any payment is required to be made within a prescribed period or before a prescribed date, and the applicable law requires delivery to the office of the sheriff of a county of this state, the methods prescribed in section five-f of this article for timely filing and payment to the tax commissioner or state tax department are the same methods utilized for timely filing and payment with the sheriff.
(b) The provisions of this article apply to the beer barrel tax levied by article sixteen of this chapter and to the wine liter tax levied by section four, article eight, chapter sixty of this code.
(c) The provisions of this article also apply to any other article of this chapter when the application is expressly provided for by the Legislature.
(d) The provisions of this article apply to local sales and use taxes imposed under article thirteen-c, chapter eight of this code and collected by the tax commissioner.

NOTE: The purpose of this bill is give certain municipalities with severe pension liability problems authority to impose a municipal occupational tax, a municipal sales and service tax and a use tax. The proceeds of the tax are limited to use for the pension obligations.

§8-13C-1, §8-13C-2, §8-13C-3, §8-13C-4, §8-13C-5, §8-13C-6, §8-13C-7, §8-13C-8, §8-13C-9 and §8-13C-10 are new; therefore, strike-throughs and underscoring have been omitted.

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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