Opinion ID: 1304942
Heading Depth: 2
Heading Rank: 2

Heading: History of Municipal B & O Tax

Text: As necessary background to our resolution of this matter, we find it helpful to review the history of the municipal B & O tax. Although the state first enacted a B & O tax in 1921, the Legislature first delegated to municipalities the power to enact a municipal B & O tax in 1947. See 1947 W.Va. Acts, Ex.Sess., ch. 3. In 1985, the state began phasing out the state B & O tax for most business activities with an effective date of July 1, 1987, for eliminating such tax on those selected businesses and occupations. Incident to this alteration in the state tax structure, municipalities were expressly authorized to continue to assess and collect B & O taxes under West Virginia Code § 8-13-5 (1998) (Supp.2002), provided that the business activity or occupation upon which the city seeks to assess such tax was subject to the state B & O tax prior to July 1, 1987. See Town of Burnsville v. Kwik-Pik, Inc., 185 W.Va. 696, 705, 408 S.E.2d 646, 654 (1991). From its onset, the state B & O tax was recognized as a tax on the privilege of doing business in this state. See Syl. Pt. 1, Hydraulics, Inc. v. Dailey, 171 W.Va. 648, 301 S.E.2d 605 (1983) (observing that state B & O tax is levied on privilege of selling or serving within this State and not on sales themselves or on income); Virginia Foods v. Dailey, 161 W.Va. 94, 102, 239 S.E.2d 770, 775 (1977). In City of Morgantown v. West Virginia University Medical Corp., 193 W.Va. 614, 457 S.E.2d 637 (1995), we identified the various businesses once subject to this tax: In its most comprehensive form the statute [W.Va.Code § 11-13-1 et seq. ] listed the following categories of businesses upon which the State could impose its B & O tax: production of coal and other natural resources, W.Va.Code, 11-13-2a; manufactured or compounded products, W.Va.Code, 11-13-2b; business of selling tangible property, W.Va.Code, 11-13-2c; public service or utility business, W.Va.Code, 11-13-2d; business of contracting, W.Va.Code, 11-13-2e; business of operating amusements, W.Va.Code, 11-13-2g; service business or calling not otherwise specifically taxed, W.Va.Code, 11-13-2h; business of furnishing property for hire, W.Va.Code, 11-13-2i; small loan business, W.Va.Code, 11-13-2j; banking and other financial businesses, W.Va.Code, 11-13-2k; an additional surtax on coal production, W.Va.Code, 11-13-2 l; generation or production of electric power, W.Va.Code, 11-13-2m. 193 W.Va. at 616-17 n. 1, 457 S.E.2d at 639-40 n. 1 (citing statutes from 1983 Replacement Volume and 1986 Cumulative Supplement of W.Va.Code). Currently, the state levies B & O taxes on a limited number of business activities, including public service or utility businesses; gas storage; manufacturing or producing synthetic fuel from coal; and the generation or production of electric power. See W.Va.Code § 11-13-2d (1995) (Repl.Vol.1999); W.Va.Code § 11-13-2e (1995) (Repl.Vol.1999); W.Va.Code § 11-13-2f(2001) (Supp.2002); W.Va.Code § 11-13-2m (1995) (Repl.Vol.1999). Because banking was a business activity or occupation for which the state previously imposed its B & O tax, municipalities are authorized under the provisions of West Virginia Code § 8-13-5 to continue to impose this type of tax. See W.Va.Code §§ 8-13-5; 11-13-2k (1983) (repealed W.Va. Acts 1989, 1st Ex.Sess., ch. 2). The essential nature of the banking business, as we discussed in Morris v. Marshall, 172 W.Va. 405, 305 S.E.2d 581 (1983), is: the receipt of deposits. Having a place of business where deposits are received and paid out on checks, and where money is loaned upon security, is the substance of the business of a banker. Warren v. Shook, 91 U.S. 704, 710, 23 L.Ed. 421 (1875). Strictly speaking, the term `bank' implies a place for the deposit of money, and that is the most obvious purpose and a primary function of such an institution. 10 Am.Jur.2d Banks § 1 (1963). The chief functions of a `bank' involve the receipt of deposits from the general public, repayable to the depositors on demand or at a fixed time, the use of deposit funds for secured loans, and the relationship of debtor and creditor between the bank and the depositor. 1 Banks and Banking 6 (1973). See also Oulton v. German Savings and Loan Society, 84 U.S. (17 Wall.) 109, 21 L.Ed. 618 (1872); Congress Industries, Inc. v. Federal Life Ins. Co., 114 Ariz. 361, 560 P.2d 1268 (1977); State v. Jefferson Finance Co., 163 La. 1005, 113 So. 355 (1927); State ex rel. Compton v. Buder, 308 Mo. 253, 271 S.W. 770 (1925); Williams v. Fidelity Loan & Savings Co., 142 Va. 43, 128 S.E. 615 (1925). 172 W.Va. at 410, 305 S.E.2d at 586. [6] While no one can dispute that the nature of the banking business has changed considerably in recent years due both to interstate banking and various technological advancements, the banking industry still revolves around the depositing and procurement of funds by its customers through either withdrawals or loans.