All persons engaging in business activities in a municipality that imposes a municipal business and occupation tax (B&O Tax) pursuant to the authority granted by the Legislature in W. Va. Code § 8-13-5 are subject to the tax unless specifically exempted by law. Individuals, corporations, partnerships, or other entities providing services to others within municipalities of West Virginia must report the entire gross receipts derived therefrom under the service classification on the Business and Occupation Tax return.
Businesses do not necessarily have to maintain a physical location within a West Virginia municipality to give rise to business and occupation tax liability. Companies with offices outside a municipality, who sell to others therein, are doing business in the municipality, irrespective of the commercial domicile of the seller and irrespective of whether or not the seller maintains a permanent place of business in the municipality. Conversely, businesses that have their principal office in a West Virginia municipality from which they direct their activities must report their entire gross receipts to that municipality unless they are reporting to another West Virginia municipality where a portion of their business activity is occurring.
Businesses providing services that derive gross receipts from both selling tangible personal property and providing services to customers must pay tax under the appropriate sales classifications and the service classification.
The entire gross income derived by information and computer service companies from providing employees that manufacture, develop, process computer services and computer programs to a client is subject to the service classification. No deduction is permitted for expenses involved in conducting a business. The measure of tax includes payments that the information and computer services company receives for custom program development, charges for on-line services, and licensing fees for the use of intellectual property.
For example, an information technology and computer services company designs and writes custom software for a pharmacy management system for a non-profit hospital located in a municipality that imposes the business and occupation tax. The company furnishes personnel to write, install, and manage the system at the hospital. The information and computer services company must report its entire gross receipts from supplying services at the facility. The measure of tax for the company includes all receipts (even if denominated as “reimbursements”) attributable to activities and services at the facility in the municipality without any deduction for supervisory, overhead or back office activities whether inside or outside the municipality. It is immaterial whether the facility is for-profit or non-profit.