Local, State and Federal
AS AN ENTREPRENEUR, you should know some basic facts about the taxes your business will be
paying: when, where and if you have to file. Failure to follow state, local and federal tax rules can result in
substantial interest and penalties.
This chapter will brief you on the most common state and federal taxes, as well as the forms to which
most small and medium-sized firms are subject. Keep in mind that this chapter is meant to be a source
of general information and is not a substitute for tax laws or regulations. If you have questions about
your business tax obligations, see your accountant.
Development Assistance Programs
Business Tax Assistance
Business and Occupation Tax (B&O Tax)
The major source of revenue for most West Virginia cities is a broadly based municipal business and
occupation (B&O) tax, which is imposed for the privilege of engaging in certain business activities. The
B&O Tax is generally determined as a percentage of gross receipts and allows no deductions for losses to
the business. Different tax rates may be imposed for different types of business activities; rates may vary
from city to city.
Before beginning your business, you should contact the mayor’s office or the treasurer’s office in the
city in which the business will operate to determine whether the business will be subject to a local
B&O tax or whether additional registration or licensing requirements apply. Certain cities may impose
registration taxes or license or fire service fees.
A list of municipalities can be found online at the Business4WV.com web site.
Click on Contacts.
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Property Taxes are administered by and paid to each of our 55 county governments. Each county,
municipality and board of education can impose its own rates of property taxation depending upon the
class and location of the property.
Businesses are subject to a personal property tax on all furniture, fixture, equipment and inventory used
in the business. In addition, if you own the building where you operate your business, you will have
to pay real estate taxes on the building. If you have questions concerning property taxes, you should
contact the county assessor of the county in which the property is located. There are new inventory
requirements from manufacturers in 2008. Ask your county assessor for more information.
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As mentioned in Chapter 10, the Tax Department
has a consolidated view of taxpayer accounts
through the MyTaxes reporting system. To use the
online filing applications for businesses, you must
first complete the Online Electronic Funds Transfer
Application (Form WV/EFT-5).
Once you have registered for Electronic Funds
Transfers, you may begin to file the following
Taxpayers who must pay the Sales and Use, and
Withholding taxes can view, file and pay those
taxes on the Tax Department’s new, secure Web
site called mytaxes.wvtax.gov.
- Online Combined Estimated Corporation Net Income/Business Franchise Tax Payment (Form WV/CNF-120 ES).
- Online Tentative Combined Corporation Net Income/Business Franchise Tax Return (Form WV/CNF-120 T).
Personal & Corporate Net Income Tax
West Virginia’s personal income tax and corporate
net income taxes have been updated to be in
line with federal income taxes. Businesses may
claim a 50 percent bonus depreciation deduction
on new investments. Small business’ maximum
allowable deductions for new capital investments
The gradual phase-down of the Business
Franchise tax will continue and there will be a
net tax reduction and the tax will be eliminated
in 2015. The Business Franchise Tax rate will drop
from 0.34% to 0.27% effective January 1, 2012. In
addition, there are reductions in the Corporate
Net Income Tax rate which are estimated to
provide additional tax savings. The Corporation
Net Income Tax rate will decrease from 8.5% to
7.75% effective January 1, 2012.
Consumers’ Sales and Service Tax (CSST) and Use Tax
West Virginia has consumers’ sales and service
tax and a use tax. Sales of goods and service to a
manufacturer for direct use in manufacturing are
exempt from CSST (for in-state purchases) and
from the use tax (for out-of-state purchases).
The Streamlined Sales and Use Tax Agreement
The Streamlined Sales and Use Tax Agreement is a
multi-state simplification of varying sales and use
tax laws. The agreement is the joint effort of 44
states, the District of Columbia, local governments
along with members of the business community
to develop measures to design and implement
a system that simplifies the collection and
remittance of sales and use tax between retailers
Individuals and companies seeking more
information on the Streamlined Sales and Use Tax
Agreement and the streamlined system can refer
to the Web site at www.streamlinedsalestax.org or
contact the West Virginia State Tax Department,
Taxpayer Services Division at (304) 558-3333 or
A single return for the Sales and Use Tax allows for
combined tax assessments and requires electronic
filing of all tax returns for those taxpayers who pay
more than $100,000 a year for any single tax.
To file, use the following online:
Online Sales and Use Tax Return (Forms
WV/CST-200 and/or WV/CST-220).
Online Direct Pay Sales and Use Tax
Return (Form WV/CST-210).
For more information on these and any other
tax-related or licensing matters, contact the West
Virginia State Tax Department, Taxpayer Services
Division at (304) 558-3333 or 1-800-982-8297 or
visit the Tax Department Web site at www.wvtax.
gov or speak with your accountant.
Severance taxes are levied on the production of
natural resources including ordinary processing
commonly employed by the industry to obtain a
salable natural resource product. The oil and gas
production privilege will end at the well-mouth;
the timber production privilege ends once the
tree is severed, de-limbed, and topped; the
limestone or sandstone production privilege ends
immediately after severance from the earth; and
the coal production privilege includes certain coal
Personal Income Tax
Personal Income Tax is imposed on the taxable
income of all West Virginia resident individuals,
estates and trusts, as well as on the income that
non-residents gain from West Virginia sources.
The starting point for determining West Virginia
taxable income is the federal adjusted gross
income. Business owners, except for C Corporation
owners, must list the amount of income from the
business on their personal income tax return, and
will be taxed accordingly.
Every employer making payment of any wages
subject to the West Virginia personal income tax
is required to deduct and withhold the tax from
each worker’s wages and then remit it to the West
Virginia Tax Department. In addition, employers
are liable for workers compensation taxes and
state unemployment taxes on any wages paid to
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|DEVELOPMENT ASSISTANCE PROGRAMS
In addition to loan programs, West Virginia is
providing development assistance in the form
of tax credits and incentives. This development
assistance can reduce startup and operating costs
and provide for enhanced productivity.
Corporate Headquarters Credit
Companies that relocate their corporate
headquarters to West Virginia are eligible for state
tax credits if 15 new jobs (including relocated
employees) are created within the first year. The
credit can offset up to 100 percent of the tax
liability for business and occupation tax, business
franchise tax, corporate net income tax, and
personal income tax on certain pass through
income, for a period of up to 13 years.
Economic Opportunity Credit
For qualified companies that create at least 20
new jobs (10 jobs in the case of qualified small
business) as a result of their business expansion
project, the State’s Economic Opportunity Tax
Credit can offset up to 80 percent of specified
business taxes for a period of up to 13 years. If
a qualified company that creates the requisite
number of jobs pays an annual median wage
higher than the statewide average non-farm
payroll wage, then the qualified company can
offset up to 100 percent of the specified taxes for
up to 13 years.
For eligible businesses creating less than 20 new
jobs within specified time limits and less than 10
new jobs per year, a $3,000 credit is allowed per
new job for five years, providing the new job pays
at least $32,000 per year and the employee has
employer-provided health insurance benefits. The
$32,000 figure is adjusted annually for cost-ofliving.
The program provides property tax valuation for
new investment property of manufacturers that
make qualified capital improvements of more
than $50 million to an existing manufacturing
facility having an original investment asset cost
base of at least $100 million. Under this program,
the new capital addition is valued at 5 percent of
original cost for the first 10 years after it is placed
on the property tax rolls.
Manufacturing Investment Credit
A tax credit is allowed against up to 60 percent of
corporate net income tax and business franchise
tax based on qualified investment in eligible
manufacturing property, with no new job creation
Manufacturing Sales Tax Exemption
Purchases of materials and equipment purchased
for direct use in manufacturing are exempt from the
6 percent state sales and use tax, including building
materials and process equipment purchased for
construction of a manufacturing facility.
Strategic R&D Credit
The Strategic Research and Development Tax
Credit can offset up to 100 percent of corporate
net income tax and business franchise tax, based
on qualified expenditures for R&D projects.
Sales Tax Exemption for E-Commerce Vendors
Some computer-related sales of tangible personal
property and services are exempt from the
consumer sales and services tax.
High-Technology Business Property Valuation Act
Tangible personal property, including servers,
directly used in a high technology business or
in an internet advertising business is valued
for property tax purposes at 5 percent of the
original cost of the property. In addition, sales
tax is eliminated from all purchases of prewritten
computer software, computers, computer
hardware, servers, building materials and
tangible personal property, for direct use in a
high technology business or internet advertising
Tax Increment Financing
Allows increases in property tax based on the
improvement associated with qualified economic
development and public improvement projects to
assist with their long-term financing.
Warehouse “Freeport” Tax Exemption
The Freeport Amendment
from the West Virginia ad valorem property tax in
- Manufactured products produced in West Virginia and stored in the state for a short time before moving into interstate commerce are exempt from property tax.
- Goods transported into West Virginia from outside of the state, which are held for a short time in a warehouse and then shipped to a destination outside of West Virginia, are exempt from the property tax.
The exemption does not apply to inventories of
raw materials or goods in process.
For lodging stays in excess of 30 consecutive
days per person at the same facility, there is an
exemption from the state Consumers Sales and
Service Tax (6 percent) and exemption from the
Local Hotel/Motel Tax (varies per region).
West Virginia Film Industry Investment Act
Up to 31 percent of direct production and postproduction
expenditures can be converted to
transferable tax credits to offset state taxes.
High-Tech Manufacturing Credit
Businesses that manufacture certain computers
and peripheral equipment, electronic components
or semi-conductors and which create at least
20 new jobs within one year after placement of
qualified investment into service, can receive a tax
credit to offset 100 percent of the business and
occupation tax, business franchise tax, corporate
net income tax, and personal income tax on
certain pass through income for 20 consecutive
Manufacturing Inventory Credit
Offsets the business franchise tax and corporate
net income tax in the amount of property tax paid
on raw materials, goods in process and finished
goods manufacturing inventory.
Also, new tax incentives for retail establishments
offering alternative fuel products, the use of
alternative fuel vehicles and manufacturing
activities associated with by-products of the
Marcellus Shale industry take effect in 2011.
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Income taxes are assessed on the taxable income
of businesses. The business organization structure
(Sole Proprietorship, Partnership, Corporation
or Limited Liability Company) will determine
whether a separate tax return is required or the
business return is part of the owner’s individual
Payroll taxes are due on any wages paid to
employees and taxes withheld from salaries.
There are additional taxes due by the employer
which include the employer’s share of FICA
(Social Security and Medicare Taxes) and federal
To know exactly which taxes apply to your
business, check with your accountant, the Small
Business Development Center nearest you or
visit the IRS Web site at www.irs.gov
on Businesses and go to the West Virginia Tax
Department Web site at www.wvtax.gov
on Frequently Asked Questions.
Federal Tax Incentives
West Virginia has adopted federal provisions for
100% bonus depreciation and enhanced Section
179 expensing in 2011 under the American
Recovery and Reinvestment Act.
Incentives for Employers
The Affordable Care Act, the health reform
legislation passed into law a year ago, is giving
small businesses important tools to help them
compete, create jobs and drive economic
growth. It’s critical that small businesses take full
advantage of the new benefits and consumer
protections of the law and understand the
positive impact health reform will have on their
operations. The SBA and the entire Administration
is committed to working with the small business
community to ensure that they know about tools
in the Affordable Care Act that will help small
businesses start-up, succeed, and grow.
Already, the Affordable Care Act is providing tax
credits of up to 35 percent of employee premium
costs, helping small business owners reinvest
thousands of dollars to grow their business and
create jobs at tax time.
Eligibility for Tax Credits
Generally, tax credits are available for small
business owners who:
- Have started or continued health insurance coverage for employees in 2010
- Contribute at least 50 percent of employee premiums at the single coverage rate
- Have fewer than 25 full-time employee equivalents (parttime employees are counted proportionately)
- Pay their employees an average of less than $50,000
The IRS has provided a simple three-step
worksheet (below and at www.irs.gov
For small businesses, the maximum tax credit is 35 percent of the business’ premium costs. On Jan.
1, 2014, these rates will increase to 50 percent and 35 percent, respectively. These credits phase out
for firms with average wages over $25,000 and for firms with the equivalent of more than 10 full-time
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United States Internal Revenue Service (IRS)
Taxpayer Education sponsors free small business tax workshops. It also provides free instructional
material to schools and other agencies for use in conducting workshops. For free IRS forms and
publications visit the IRS Web site at www.irs.gov
or call (800) 829-3676. For business tax questions call
West Virginia Tax Department
West Virginia Tax Department provides information and offers many incentives to encourage the
location of business and industry in the state. It also furnishes detailed tax packages and provides tax
comparisons between West Virginia and other localities. For more information, write to:
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||West Virginia Tax Department
1206 Quarrier St.
Charleston, WV 25301
(304) 558-3333 or (800) 982-8297