West Virginia Code of State Rules › Agency 110 - Tax › Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT › Series 110-26 - Municipal Business And Occupational Tax › Section 110-26-1a - Definitions

Current through Register Vol. XLI, No. 28, July 12, 2024
For purposes of these rules and regulations, the following
				  terms are hereby defined.
1a.1. "Tax
				Year" or "taxable year" means the one year period adopted by the municipal
				ordinance providing for a municipal business and occupation tax authorized
				under W. Va. Code '8-13-5.
				Such tax year may be the calendar year, the municipality's fiscal year, the
				taxpayer's fiscal year, or any other year as determined under the ordinance
				imposing the municipal business and occupation tax. Where no tax year is
				specified, and no provision is made for determining the taxpayer's tax year
				under the ordinance, the "tax year" shall be the calendar year.
1a.2. "Municipality" is a word of art and
				shall mean and include any Class I, Class II and Class III city and any Class
				IV town or village, heretofore or hereafter incorporated as a municipal
				corporation under the laws of this State.
1a.3. "Town or village" is a term of art and
				shall, notwithstanding the provisions of W. Va. Code '2-2-10
				mean, include and be limited to any Class IV town or village, as classified in
				W. Va. Code '8-1-3
				heretofore or hereafter incorporated as a municipal corporation under the laws
				of this State, however created and whether operating under (1) a special
				legislative charter, (2) general law, or (3) a combination of the
				foregoing.
1a.5. "Governing body"
				shall mean the mayor and council together, the council, the board of directors,
				the commission, or other board or body of any municipality, by whatever name
				called, as the case may be, charged with the responsibility of enacting
				ordinances and determining the public policy of such municipality; and in
				certain articles dealing with intergovernmental relations shall also mean the
				county court [county commission] of any county or governing board of other
				units of government referred to in said articles.
1a.6. "Councilmen" shall mean the members of
				a governing body, by whatever name such members may be called.
1a.7. "Mayor" shall mean the individual
				called mayor unless as to a particular municipality a commissioner (in a
				commission form of government) or the city manager (in a manager form of
				government) is designated or constituted by charter provision as the principal
				or chief executive officer or chief administrator thereof, in which event the
				term "mayor" shall mean as to such municipality such commissioner or city
				manager unless as to any particular power, authority, duty or function
				specified in this chapter to be exercised, discharged or fulfilled by the mayor
				it is provided by charter provision or ordinance that such particular power,
				authority, duty or function shall be exercised, discharged or fulfilled by the
				individual called mayor and not by a commissioner or city manager, in which
				event such particular power, authority, duty or function shall in fact be
				exercised, discharged or fulfilled in and for such municipality by the
				individual called mayor: Provided, That in the exercise and discharge of the ex
				officio justice of the peace [magistrate], conservator of the peace and mayor's
				court functions specified in this chapter, the term "mayor" shall always mean
				the individual called mayor.
1a.8.
				"Recorder" shall mean the recorder, clerk or other municipal officer, by
				whatever name called, charged with the responsibility of keeping the journal of
				the proceedings of the governing body of the municipality and other municipal
				records.
1a.9. "Treasurer" shall
				mean the treasurer or other municipal officer, by whatever name called,
				exercising the power and authority commonly exercised by a treasurer.
1a.10. "Administrative authority"
				shall mean the officer, commission or person responsible for the conduct and
				management of the affairs of the municipality in accordance with the charter,
				general law and the ordinances, resolutions and orders of the governing body
				thereof.
1a.11. "Charter" shall
				mean, except where specific reference is made to a particular type of charter,
				either a special legislative charter (whether or not amended under the
				provisions of former W. Va. Code '8A-1-1 et
				seq. or under W. Va. Code '8-4-1
				et seq., and although so amended, such special legislative charter shall, for
				the purposes of these regulations, remain a special legislative charter), or a
				home rule charter framed and adopted or revised as a whole or amended by a city
				under the provisions of former W. Va. Code '8A-1-1 et
				seq. or under the provisions of W. Va. Code '8-3-1
				et seq. or 8-4-1 et seq.
1a.12.
				"Ordinances" shall mean the ordinances and laws enacted by the governing body
				of a municipality in the exercise of its legislative power.
1a.13. "County court" ["county commission"]
				shall mean the governmental body created by Section 22, article VIII of the
				Constitution of this State, or any existing tribunal created in lieu of a
				county court [county commission].
1a.14. "Code" shall mean the Code of West
				Virginia, one thousand nine hundred thirty-one, as heretofore and hereafter
				amended.
1a.15. The term "Person"
				or the term "Company", herein used interchangeably, includes any individual,
				firm, partnership, co-partnership, joint adventure, association, corporation,
				trust, or any other group or combination acting as a unit, and the plural as
				well as the singular number, unless the intention to give a more limited
				meaning is disclosed by the context.
1a.16. "Taxpayer" means any person liable for
				any tax hereunder.
1a.17. "Sale",
				"Sales" or "Selling" includes any transfer of ownership of, or title to,
				property, whether for money or in exchange for other property. When property is
				exchanged for other property rather than for money, the taxpayer must place a
				value on the property received and report the same for municipal business and
				occupation tax purposes as if money were received.
1a.18. The term "Sale Price" means the
				consideration whether money, credits, price, or other property expressed in the
				terms of money, paid or delivered by a buyer to a seller, all without any
				deduction, on account of the cost of tangible property sold, the cost of
				materials used, labor cost, interest, discount, delivery cost, taxes or any
				other expenses whatsoever paid or accrued, and without any deduction on account
				of losses.
1a.19. The term "Gross
				Proceeds of Sales" means the value proceeding or accruing from the sale of
				tangible property without any deduction on account of cost of property sold,
				the cost of materials used, labor costs, interest, discount paid, delivery
				cost, taxes, or any other expense whatsoever paid or accrued and without any
				deduction on account of losses.
1a.20. "Gross Income" means all income from
				whatever source derived, unless excluded by law. Gross income shall include
				income realized in any form, whether in money, property, or services. Gross
				income means the gross receipts of the taxpayer, other than a banking or
				financial business, received as compensation for personal services and the
				gross receipts of the taxpayer derived from trade, business, commerce, or sales
				and the value proceeding or accruing from the sale of tangible property (real
				or personal), or service, or both. Gross income includes all receipts by the
				reason of the investment of the capital of the business engaged in and shall
				include rents, royalties, fees, reimbursed cost or expenses or other emoluments
				however designated. Gross income includes all interest, carrying charges, fees
				or other like income, however denominated, derived by the taxpayer from
				repetitive carrying of accounts, in the regular course and conduct of his
				business, and extension of credit in connection with the sale of any tangible
				property or service.
1a.20.1. If services or
				property are paid for other than in money, the fair market value of the
				property or service taken in payment must be included in gross
				income.
1a.20.2. No deduction shall
				be allowed against gross income for the cost of property sold, the cost of
				materials used, labor costs, taxes, royalties paid in cash or in kind or
				otherwise, interest or discount paid or any other expense whatsoever.
1a.20.3. For the definition of gross income
				of a banking or financial business, See Section 2k.2 of these rules and
				regulations.
1a.20.4. Examples of
				gross income are:
1a.20.4.1. A construction
				company, which desires to purchase a piece of heavy equipment, does not have
				available capital to make such purchase and, therefore, transfers title to a
				parcel of real estate to the heavy equipment dealer in return for the piece of
				heavy equipment. The fair market value of the real estate received by the heavy
				equipment dealer will be included in the dealer's gross income for purposes of
				the municipal business and occupation tax. An indicator as to the value of the
				real estate received by the dealer would be the price of the heavy equipment if
				it had been purchased for cash. This indicator does not conclusively establish
				the amount of gross receipts which inured to the dealer. If the article (real
				estate) received has a greater value than the article (heavy equipment)
				exchanged, then it is necessary that the dealer report the greater value for
				municipal business and occupation tax purposes.
1a.20.4.2. A person in the business of
				selling and servicing home appliances has income for the taxable year in the
				following manner: ninety-seven thousand dollars ($97,000) from the retail sale
				of appliances; thirteen thousand dollars ($13,000) received from servicing and
				repairing appliances; and ten thousand dollars ($10,000) received from the
				rental of the building. Even though the rental income is not directly related
				to the business of selling and servicing home appliances, it is an item of
				gross income as defined by the municipal business and occupation tax law. All
				three are items of gross income which the taxpayer must report on his municipal
				business and occupation tax return. Each item of gross income must be reported
				under its proper business classification.
1a.20.4.3. B agrees to construct an apartment
				building for R. The contract entered into by the parties stipulates that B's
				remuneration shall be his cost plus twenty percent (20%) thereof. B constructs
				said building and his cost aggregate one hundred fifty thousand dollars
				($150,000) for which R makes reimbursement to B. B receives also thirty
				thousand dollars ($30,000) from R as his twenty percent (20%) of costs as
				stipulated by the contract. On his municipal business and occupation tax
				return, B will report, as gross income, one hundred eighty thousand dollars
				($180,000). B will receive no deduction against gross income for monies
				received as reimbursement cost or expenses.
1a.20.4.4. M, who is in the business of
				drilling for and producing natural gas and oil, agrees with L, a landowner, to
				sink a well on L's land. The parties agree that if gas or oil is discovered, L
				will be entitled to a one-eighth (1/8) royalty therefrom, either in cash or in
				kind at L's option. The well is successful and L decides to accept, in payment
				(as his one-eighth (1/8) royalty) from M, two thousand (2,000) barrels of oil
				and thirty-five thousand dollars ($35,000) in cash. M, on his municipal
				business and occupation tax return, must report the entire gross income
				received from the production of oil and is not allowed a deduction therefrom
				for either the royalty paid in cash or in kind to L. M must also place a value
				on the two thousand (2,000) barrels of oil paid to L as a royalty and report
				said value for purposes of this tax.
1a.20.5. The term "Gross Income" and "Gross
				Proceeds of Sales" shall not include cash discounts allowed and taken on sales.
				When a contract of sale is made subject to cancellation at the option of one of
				the parties to revision in the even goods sold are defective or if the sale is
				made subject to discount upon cash payment, the gross proceeds actually derived
				from the contract and the selling price are determined by the transaction as
				finally completed. The selling price of a service or article of property does
				not include the amount of bona fide cash discount actually taken by the
				purchaser and the amount of such discount may be deducted from gross proceeds
				of sales providing such amount has been included in the gross amount column on
				the municipal business and occupation tax return.
1a.20.5.1. Cash discount deductions will be
				allowed under the production and manufacturing classifications only when the
				value of the products is determined from the gross proceeds of sales.
1a.20.5.2. The cost to the retailer of
				business stimulants and promotions is not considered cash discounts; nor is the
				value of such stimulants and promotions cash discounts. The expense incurred by
				the merchant in purchasing and distributing such items is a cost of doing
				business and is not deductible or excludible from gross income or gross
				proceeds of sales.
1a.20.5.3. X, a
				retail grocer, to stimulate business, purchases trading stamps and dispenses
				the same, based upon the amount of each individual order, to his customers. In
				preparing his municipal business and occupation tax return, X is not permitted
				to deduct the cost or value of the trading stamps from his gross proceeds of
				sales to arrive at his taxable income.
1a.20.6. The term "Gross Income" and "Gross
				Proceeds of Sales" shall not include the proceeds of sale of goods, ware or
				merchandise returned by the customers when the sale price is refunded either in
				cash or by credit.
1a.20.6.1. When sales are
				made either upon approval or upon a sale and return basis, and the purchaser
				returns the property purchased and the entire selling price is refunded or
				credited to the purchaser, the vendor may deduct an amount equal to the selling
				price from gross proceeds of sales in computing tax liability; if the gross
				income from said sale has been previously reported or entered in the gross
				amount column on the municipal business and occupation tax
				return.
1a.20.7. The term
				"Gross Income" and "Gross Proceeds of Sales" shall not include the amount
				allowed as trade-in value for any article accepted as part of payment for any
				article sold.
1a.20.7.1. This particular
				situation is prevalent in the automobile business. For example, X sells Y a new
				automobile for three thousand two hundred dollars ($3,200). In payment for the
				new automobile, X accepts Y's used automobile which has a trade-in value of
				seven hundred dollars ($700). X must report, on his municipal business and
				occupation tax return, the amount of two thousand five hundred dollars ($2,500)
				as gross income. When X sells the used automobile, the amount received from
				said sale will also be subject to municipal business and occupation
				tax.
1a.20.8. The terms
				"Gross Income" and "Gross Proceeds of Sales" shall not include excise tax
				imposed by the State of West Virginia.
1a.20.8.1. Excise taxes imposed by the State
				of West Virginia are not to be included in gross income to determine the amount
				of municipal business and occupation tax payable. For purposes of this
				deduction or exclusion from gross income, the following constitute West
				Virginia excise taxes: gasoline tax, diesel fuel tax, cigarette tax, beer
				barrel tax and soft drink tax.
1a.20.8.2. Exclusions or deductions from
				gross income for West Virginia excise taxes will be disallowed unless the
				taxpayer provides necessary information on his annual municipal business and
				occupation tax return to support the claimed deduction. On his tax return, the
				taxpayer claiming this exclusion or deduction must itemize the quantity of
				gasoline, diesel fuel, cigarettes and soft drinks sold. Adequate records must
				be maintained to properly establish the deductions claimed.
1a.20.9. The term "Gross Income" and "Gross
				Proceeds of Sales" shall not include certain excise taxes imposed by the United
				States of America.
1a.20.9.1. All excise
				taxes levied by the federal government are not deductible from gross income or
				from gross proceeds of sales. The test as to whether or not a particular
				federal excise tax is to be included in or excluded from gross income for
				municipal business and occupation tax purposes is whether the particular excise
				tax is a tax on the manufacturing process or a tax which attaches at the time
				of sale and not before. Therefore, to qualify as a deduction from gross income,
				the burden of said tax must rest upon the customer.
1a.20.9.2. Federal excise taxes which are
				taxes upon the process of manufacturing are not deductible or excludible from
				gross income or gross proceeds of sales for municipal business and occupation
				tax purposes. This includes, but is not limited to, federal excise taxes on
				alcohol and distilled spirits, tobaccos, cigars, cigarettes, matches,
				automobiles, tires, et cetera.
1a.20.9.3. Federal excise taxes which are
				taxes upon the consumer and which are held in trust by the vendor as agent for
				the federal government may be deducted from gross income or gross proceeds of
				sales in determining the amount of municipal business and occupation tax
				liability. This includes federal excise paid on gasoline, diesel fuel and
				lubricants.
1a.20.9.4. Persons
				claiming deductions for federal excise taxes must itemize on the annual
				municipal business and occupation tax form and provide necessary information to
				support said deduction. Deductions claimed for federal excise taxes will be
				disallowed in those cases where the taxpayer fails to provide an
				itemization.
1a.20.9.5. An example
				pertaining to state and federal excise taxes is presented below: Example --
				John Doe owns and operates a service station. During the calendar year 1972, he
				sold, at retail, gasoline, oil, cigars, cigarettes, and soft drinks. His retail
				sales for the taxable year totaled one hundred fifty-seven thousand dollars
				($157,000) and his service income from repairing and washing of automobiles
				totaled twenty-three thousand dollars ($23,000).
The taxpayer must report and pay tax under two (2) business
				  classifications, retail and service. He is allowed a deduction from gross
				  income, reported under the retail classification on the tax form, for State
				  excise taxes on cigarettes, soft drinks and powders and gasoline. The taxpayer
				  is also permitted a deduction for federal excise taxes on gasoline and oil. No
				  deduction is permitted for the federal excise tax on cigars and
				  cigarettes.
1a.20.10. The terms "Gross Income" or "Gross
				Proceeds of Sales" shall not include money or other property received or held
				by a professional person for the sole use and benefit of a client or another
				person or money received by the taxpayer on behalf of a bank or other financial
				institution for the repayment of a debt of another. The manner in which the
				attorney keeps his books and records must clearly and properly reflect this
				situation. Money or property received for the benefit of a client should be
				credited to a trustee or escrow account so that the State's tax examiners do
				not credit and include said funds in the trustee's gross income. For example,
				X, an attorney, institutes suit on behalf of a client and receives a favorable
				verdict. As a result therefore, the defendant, rather than making restitution
				directly to the plaintiff, pays the amount of the verdict to X. Therefore, X
				has received money for the benefit of a client and said amount shall not
				constitute gross income to X. X, the attorney, will include in gross income for
				municipal business and occupation tax purposes only his fee.