West Virginia Department of Commerce Reporting Taxes: Local, State and Federal

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Reporting Taxes: Local, State and Federal



Going Into Business in West Virginia
GOING INTO BUSINESS IN WEST VIRGNIA    

REPORTING TAXES:
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.

City Taxes
County Taxes
State Taxes
Development Assistance Programs
Federal Taxes
Business Tax Assistance








CITY TAXES

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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COUNTY TAXES

Property Taxes
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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STATE TAXES

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 online:

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 are $250,000.

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 and states.

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 1-800-982-8297.

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
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 processing activities.

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.

Payroll Taxes
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 employees.

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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.

“Five-for-Ten” Program
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 required.

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 business.

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 exempts property from the West Virginia ad valorem property tax in two ways:
  1. 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.
  2. 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.

Lodging Exemptions
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 years.

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.

Additional Incentives
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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FEDERAL TAXES

Income Taxes
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 tax return.

Payroll Taxes
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 unemployment.

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 and click on Businesses and go to the West Virginia Tax Department Web site at www.wvtax.gov and click 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

Download PDF
Download PDF

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 employee equivalents.

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BUSINESS TAX ASSISTANCE

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 (800) 829-1040.

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:

  West Virginia Tax Department
1206 Quarrier St.
Charleston, WV 25301
(304) 558-3333 or (800) 982-8297
www.wvtax.gov

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