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Contracting Classification of the West Virginia Municipal Business and Occupation Tax

On Behalf of | Jun 12, 2017 | Municipal, Tax

Allow us to briefly discuss the contracting classification of the West Virginia municipal business and occupation tax (B&O Tax) as it applies to contracting within municipalities.

Tax Class

Contracting is broadly defined as the furnishing of work, or both materials and work, in the fulfillment of a contract for the construction, alteration, demolition, repair, decoration or improvement of a new or existing building or structure, or any part thereof. Contracting also includes the alteration, improvement or development of real property.

Tax Base

Every separate person engaged in the business of contracting within the municipality is required to report the entire gross income derived therefrom under the contracting classification on the West Virginia municipal business and occupation tax form.

Gross income to be reported on the West Virginia municipal business and occupation tax form includes all receipts, change orders, direct and indirect, without any deduction whatsoever. Accordingly, a prime contractor must report gross income under the contracting classification without any deduction on account of expenses incurred, including amounts paid to subcontractors, suppliers and other third parties.  Any non-employee subcontractor is also taxable on its entire gross income under the contracting classification without credit or benefit associated with the prime contractor’s reporting the entire amount.

Gross income is subject to municipal business and occupation tax even if the owner for whom the contractor provides work or work and materials is considered a “tax exempt” or governmental entity. The tax is imposed on the contractor for the privilege exercised by the contractor, not the user.


It is irrelevant whether an owner is affiliated with or otherwise related to the contractor or a contractor is affiliated with a subcontractor.  Each separate “person” stands on its own for West Virginia business and occupation tax purposes.  Related party transactions are not exempt and there is no provision for consolidated or combined filing.

A prime contractor and each subcontractor are all separately responsible for reporting (without deduction) all gross income from a contracting activity within the municipality.

A contractor does not need to maintain a separate place of business within the municipality to be liable for the tax. If the contracting activity is carried on within the municipality, the contractor is subject to the West Virginia municipal business and occupation tax.

A speculative builder is solely a person who constructs improvements upon real property owned by that same person for sale or rental. Gross income reported from the sale of real property by a speculative builder shall be reported under retail classification. The sales price is the measure of the tax.