The West Virginia municipal business and occupation tax (B&O Tax) is imposed on all entities for the privilege of engaging in business activities within a municipality that levies the tax. West Virginia law provides that purposive revenue generating activity and the establishment and maintenance of markets for products constitutes doing business for B&O tax purposes. 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.
The tax is measured by the application of rates against the gross proceeds of sale of the business. All persons engaging in business activities in a municipality that imposes a municipal business and occupation 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.
Tax Class and Rate
All sales of tangible personal property are taxable at either retail or wholesale for municipal business and occupation tax. Price and quantity are not relevant in determining wholesale sales for municipal business and occupation tax purposes. The fact that an item is discounted or is sold in large quantities does not make a transaction wholesale. It is the status and intention of the customer of the vendor which determines whether the gross proceeds received by the vendor from the sale are taxable under the retail classification or the wholesale classification.
Only three categories of sales are deemed as “wholesale” sales for municipal business and occupation tax purposes:
1 – Sales of any tangible personal property for the purpose of resale in the form of tangible personal property.
2 – Sales of machinery, supplies or materials which are to be directly consumed or used by the purchaser in the conduct of any business or activity that is subject to the municipal business and occupation tax.
3- Sales of any tangible personal property to the United States of America, its agencies and instrumentalities or the State of West Virginia, its institutions or political subdivisions.
All other sales of tangible personal property are retail.
Sales of tangible personal property to purchasers who are engaged in activities that are exempt from the municipal business and occupation tax, i.e., non-profit entities, are not sales considered exempt from the tax. In these instances the exempt entity is considered to be the final consumer of the property purchased. Therefore, sales to these exempt organizations must be reported by the vendor under the retail sales classification.
For example, a pharmaceutical distributor engages in purposive revenue generating activity, and sells drugs to a non-profit hospital and a for-profit retail pharmacy both located in a municipality that imposes the business and occupation tax. The distributor must report the gross receipts from sales to the hospital under the retail classification on the appropriate municipal business and occupation tax return since non-profit hospitals are exempt from paying the tax. Gross receipts from sales to the retail pharmacy must be reported under the wholesale classification on the tax return since sales to the pharmacy would be considered sales for resale.