The West Virginia municipal business and occupation 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 business and occupation 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.
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:
- Sales of any tangible personal property for the purpose of resale in the form of tangible personal property.
- 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.
- 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 provider of pharmacy services engages in purposive revenue generating activity, and sells specially packaged (individualized doses) drugs to residents of a nursing home direct billed to a third party payor (including government, insurance, and private pay) and delivers the drugs to the nursing home located in a municipality that imposes the business and occupation tax. The pharmacy services provider must report the gross receipts from sales to the residents of the nursing home under the retail classification on the appropriate municipal business and occupation tax return.