West Virginia law provides that purposive revenue generating activity and the establishment and maintenance of markets for products constitutes doing business for business and occupation tax purposes. All persons engaging in business activities in a municipality that imposes a municipal business and occupation tax (B&O) 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 or whose employees are stationed at a facility 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 separate place of business in the municipality.
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 staffing companies from providing employees that perform services 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 staffing company, as employer of workers supplied to the staffing company’s clients, may designate in invoices or otherwise to clients as the cost of the staffing company’s employees’ wages and benefits. It is irrelevant whether the workers are licensed or their services are considered “professional” or otherwise.
For example, a medical staffing company furnishes personnel to a non-profit hospital in a municipality that imposes the business and occupation tax. The medical staffing company is the employer of record of the personnel furnished to the hospital. The medical staffing company must report its entire gross receipts from supplying services to the hospital under the services classification on the appropriate municipal business and occupation tax return. The measure of tax for the medical staffing company includes all payments (even if denominated as “reimbursements”) received from the hospital, including for the labor provided by the medical staffing company’s employees assigned to the hospital.