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The Sound And The Fury

When I paid for my foot-long black forest ham subway on whole wheat yesterday, I pay $5.33 instead of the usual $5.30. I realized immediately that the new Charleston sales and use tax had kicked in and the end of the world, as we know it, was rapidly approaching.

Despite its fairly modest position in the hierarchy of taxation, municipal taxes in West Virginia are, in my opinion, the most complex of any state, federal or local taxes for purposes of compliance and administration. Anyone who has grappled with the State Tax Department’s rule on the municipal business and occupation tax in West Virginia knows that it is virtually unfathomable.

Sales taxes applied at the local level are complicated because of the West Virginia geography. The Balkan-like jumble of incorporated municipalities in Kanawha and Monongalia Counties create transactions that complicate sales tax compliance. If I buy charcoal at Pyle Hardware, the transaction is straightforward and simple. I am in Charleston as is Pyle Hardware. Obviously, the new Charleston 1/2% sales tax applies. If, on the other hand, Evans Hardware were still in business in South Charleston and I called Evans and asked them to ship me some lumber to be delivered in Charleston, would that trigger a Charleston sales tax event? No, but it would probably trigger a Charleston use tax event. If, on the other hand, I lived in Cross Lanes and ordered charcoal to be delivered from Pyles, would that trigger a sales tax event? I don’t know. Those issues are fairly simple and susceptible to being worked through. However, things get a little more complicated when more than one of the municipalities in a region the side to also apply a sales tax. So we may well have a situation in the foreseeable future in which not only does Charleston imposes sales tax but so too does South Charleston, Saint Albans, Marmet etc. Nothing requires that the municipal ordinances of these municipalities be uniform so that conflicting requirements can be imposed by different jurisdictions.

When certain services are subject to sales tax as they are under the West Virginia and Charleston sales tax provisions, things get even more complicated. A bookkeeper sits in Saint Albans and prepares tax returns for a client residing in Charleston. The bookkeeper resides in Cross Lanes and prepares tax returns for a client residing in South Charleston. What are the sales and use consequences of these transactions?

The matter is further compounded by the necessity for further elaboration on the imposition of the municipal sales taxes. The Charleston ordinance is well drafted and simple. Eventually, I predict someone will suggest that some form of a regulation or rule is needed to flesh out the terms of the sales tax ordinance. Once again, predicting that other municipalities in the Kanawha Valley will adopt a sales tax, it is foreseeable that other municipalities will also promulgate rules elaborating on their particular form of the sales tax. If left to each city or town, there is no reason to predict that the rule or the ordinances will be consistent among the various sales tax imposing municipalities. If then the cry goes out to the Tax Commissioner to provide a uniform set of rules for the administration of municipal imposed sales taxes, we effectively reach the end of home rule and return to the day when the state defines how the several cities and towns raise necessary taxes.

Sales and use taxes are good taxes, but they are not simple taxes in a region like Charleston or Morgantown. And since the business obliged to collect and remit the taxes are often very small businesses, the compliance cost can be substantial and the consequences of getting it wrong can be tremendous.

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