West Virginia Sales Tax & Audit Guide
Straightforward Answers to Your West Virginia Sales Tax Questions.
- Do I need to collect West Virginia sales tax?
- Should I be collecting or paying West Virginia use tax?
- What do I do if I should have been collecting but haven't?
- I received an audit notice. What should I do?
- Guidance on fighting a sales tax assessment in West Virginia.
- Who Needs to Collect West Virginia Sales and Use Tax?
Like most states, to be subject to West Virginia sales tax collection and its rules, your business must:
1) Have nexus with West Virginia, and
2) Sell or use something subject to West Virginia sales tax.
How is Nexus Established in West Virginia?
According to the West Virginia Department of Revenue, any business with a physical presence in West Virginia must be licensed for sales tax collection. The minimum thresholds listed below for remote sellers do not apply to businesses with a physical presence in West Virginia.
Any person meeting one of the following definitions for a vendor must license to collect and remit sales tax:
• If you are in the state of West Virginia making sales of tangible personal property, admissions, or taxable services in West Virginia.
• This definition encompasses those who open an online business in West Virginia. If your online business provides taxable products or services, you must obtain a sales/use tax license and follow all the statutes that apply to a store-front business.
Any person located outside of West Virginia who creates nexus by:
- Having an office, distribution house, sales house, warehouse, or any place of business in West Virginia.
- Having people who solicit sales or advertise in West Virginia.
- Have inventory or equipment in West Virginia.
- Leasing equipment in West Virginia
- Make deliveries into West Virginia using company vehicles.
Additionally, businesses that do not have a physical presence in West Virginia can establish economic nexus by exceeding a certain annual sales threshold.
Economic Nexus (Wayfair Law) and Internet Sales in West Virginia
Remote sellers and marketplace facilitators without physical nexus but who meet at least on of the following requirements for the current calendar year, or the preceding calendar year have nexus:
- Gross revenue from sales of tangible personal property, admissions, or services delivered into West Virginia that exceed one hundred thousand dollars ($100,000.00); or
- Two hundred or more separate transactions for delivery into West Virginia.
When one of these thresholds is satisfied during or after the calendar year 2019, the remote seller must register and collect West Virginia State and municipal sales and use taxes on all sales made after the date one of the thresholds is first satisfied.
For additional information, see TSD-442 Marketplace Facilitators.
How is the $100,000 gross revenue threshold calculated?
Gross receipts include charges from sales of tangible personal property and/or services delivered in West Virginia. The calculation is based on total transactions with West Virginia destinations regardless of whether the transaction is subject to or exempt from sales and use tax.
Which Sales are Subject to West Virginia Sales Tax?
If you have nexus in West Virginia, the next step is determining whether the products or services you sell are subject to West Virginia sales and use tax.
Unless an item is specifically exempt, sales and rentals of tangible personal property are subject to West Virginia sales tax.
The rules seem simple, but many details make applying West Virginia’s tax rules to your business challenging. We recommend scheduling a time to review your specific situation with one of our sales tax professionals.
Common Exemptions from West Virginia Sales and Use Tax:
Items exempt from West Virginia sales tax include:
- Food Stamp Purchases
- Lottery Tickets
- Public Transportation
- School Activities
- Isolated Transactions
- School Newspapers
- Durable Medical Goods
The West Virginia Department of Revenue has different rules and rates depending on the industry and the type of service. Find information about sales tax on specific types of services below.
Nontaxable Services include those provided by:
- Personal Services - Sales of services to an individual, such as barbering, hairstyling, manicuring, and massaging. Generally, this exemption does not apply to weight loss or physical fitness programs.
- Professional Services and Certified Public Accountants - Sales of services recognized as professional under West Virginia law, such as those provided by doctors, lawyers, engineers, architects, and CPAs.
- Public Services - Sales of services subject to the control of the West Virginia Public
Service Commission includes sales of gas, steam, water delivered through pipes and mains, electricity sales, most telephone services, regulated public or common carriers, bus, and taxi services.
Many people have questions about the taxability of software as a service (SaaS).
Many states already impose a tax on software as a service. As these options proliferate, states are moving to update their tax laws and, naturally, impose a tax.
To determine whether you need to collect tax on software sales, we highly recommend contacting one of our sales tax professionals to help you sort it out.
For now, we’ve summarized West Virginia’s software tax rules here:
According to West Virginia tax law, the following sales of tangible personal property and software are exempt:
- Sales of computer hardware or software (including custom-designed software) to be directly incorporated by a manufacturer into a manufactured product.
- Sales of computer hardware or software (including custom-designed software) directly used in communication.
- Sales of electronic data processing services.
- Sales of educational software to be used in any of the state's public schools or any institution in this state that qualifies as a nonprofit or educational institution.
- Sales of Internet advertising.
- "Internet advertising business" means a for-profit business engaged in the primary business activity of announcing or calling public attention to goods or services to induce the public to purchase those goods or services, using the Internet as its sole advertising communications medium.
- Sales of high-technology business services to high-tech businesses that enter contracts with this state.
- Sales of prewritten computer software, computers, computer hardware, servers, and tangible personal property to be installed into a building or facility for direct use in a high-technology business or an Internet advertising business.
- "High-technology business" is defined as and is limited to businesses primarily engaged in the following activities:
- Computer hardware design and development; computer software design, development, customization, and upgrade; computer systems design and development; website design and development; network design and development; design and development of newly manufactured products which incorporate computer hardware and software; electronic data processing; network management and maintenance, engineering, administration of security services
Vendors providing shipping and delivery services to customers must charge consumer sales and service tax or use tax on the delivery service's total cost, including the postage and handling fee.
While the general sales tax rules seem straightforward, applying those rules can get tricky when gray areas arise. The West Virginia Department of Revenue provides some specific guidance for the following industries:
Determining Local Sales Tax Rates in West Virginia
West Virginia’s state sales tax rate is six percent (6%). Municipalities also charge an additional sales tax of up to 1%.
All sellers who are required to collect West Virginia sales tax and doing business in a locality that imposes a sales and use tax must also collect municipal or local sales taxes and remit the collected amount to the State Tax Department.
Local Sales and Use Tax Tables
Here you can access local West Virginia sales tax rates or see the chart below for the total tax rates of the most populated West Virginia cities.
*Exact tax rates vary. Occupancy fees and taxes are not included in this table.
I Should Have Collected West Virginia Sales Tax, But I Didn't
Many of our competitors suggest Filing a Voluntary Disclosure Agreement in each state. This is a one-size-fits-all solution that isn't always the best. Our sales tax professionals will work with you to determine your business's best and most cost-effective solution.
If you determine your business has nexus, but you have not collected West Virginia sales tax, here are your options:
1. Register and pay back taxes, penalties, and interest, or
2. Complete a VDA to cut penalties (and, in some cases, reduce your tax liability and avoid interest).
Here is what you need to know about each option to make the best decision for your business:
Option 1: Register to Pay Back Taxes, Penalties, and Interest.
A VDA is not cost-effective if the past liabilities and penalties are minimal. Sometimes the best resolution for a business is to register with West Virginia and pay back taxes, penalties, and interest.
Be wary of the tax professionals recommending a VDA in these cases. They want to make a buck rather than look out for your best interests.
When to consider registration and payment:
- If you established nexus less than 3 or 4 years ago.
- The sales tax penalty is LESS than the professional fees charged for the VDA.
- Your business does NOT have a sales tax collected issue.
Beware: Registering does not generally end past liabilities.
If you're unsure what your past liabilities are, contact us. Our state tax professionals work with you so you can make the right choice for your business.
Option 2: Voluntary Disclosure Agreement (VDA)
West Virginia’s lookback period is three years.
In many situations, voluntary disclosures are a valuable tool to reduce extended periods of past exposure.
The voluntary disclosure limits the lookback period to three years. So, if you should have collected sales tax over the past ten years but didn't, you may benefit from doing a VDA.
A VDA may be a good option for you if:
- You established nexus more than 3 or 4 years ago.
- You have a sales tax collected but not remitted issue.
- The sales tax penalty savings is MORE than the professional fees charged for the VDA.
What to Expect During an Audit
The typical audit process is shown in this flowchart. Detailed guidance for each West Virginia audit process stage follows in the sections below.
A Notice of Intent to Audit (Audit Questionnaire & Routine Audit Letter) -->.All records, documents, and books are presented to the auditor on the commencement date of the audit--> Site Visit (sometimes)--> You must deliver any exemption certificates within 120 (one hundred twenty) days-->The length of an audit will vary, depending on the complexity of the business and the problems encountered -->Preliminary audit findings provided --> Resolve with auditor or assessment issued.
West Virginia regularly audits businesses required to charge, collect, and remit various taxes in the state. Many audits begin with a call from a West Virginia Department of Revenue sales tax auditor. Shortly after the call, your business will receive a Notification of Intent to Audit. This notification confirms that you were lucky enough to be chosen for a West Virginia sales tax audit.
When the audit is completed, the auditor will send you the assessment and the amount.
It is good to start with getting a state and local tax professional involved to prepare for the audit.
I Received a West Virginia Sales Tax Audit Notice. What Should I Do?
Businesses that receive a sales tax audit notice need to consider the following questions:
- If you don’t have sales tax audit experience, how can you trust that the state's auditor abides by the rules and follows proper procedures?
- How will you know when to provide documents or when to push back?
- Do you thoroughly understand your sales and use tax areas of exposure?
- Controlling the audit is paramount to limiting exposure and shaping the results. Are you confident in doing that on your own?
Unless you can confidently answer these questions, hiring a professional is most likely to be the best option.
Contact us to learn how our sales tax professionals can give you the peace of mind and confidence you’ll need during your audit.
Visit our resource pages for more information to help you make critical decisions during your West Virginia sales and use tax audit.
What to Expect from a West Virginia Sales Tax Auditor
Here is a summary of the general audit process:
- The auditor will conduct pre-audit research.
- The auditor will often schedule and perform an entrance conference.
- The auditor will request records (many of which the auditor is not entitled to and does not need)
Once the auditor receives the necessary records, they will compare your West Virginia sales and use tax returns to your federal income tax returns or bank statements to determine whether you reported all applicable or gross sales on your West Virginia sales tax return(s).
NOTE: A slight error in how the tax was charged on even a single type of transaction can add up to a significant sales tax liability.
Once the auditor is confident all sales are accounted for, they will:
- Review your exempt and out-of-state sales.
- Conduct a use tax audit – the auditor will request accounts documents to ensure you adequately paid use tax on applicable purchases.
Common areas audited include:
- Advertising Expense
- Auto & Truck Expense
- Repair and Maintenance
- Office Expense
- Miscellaneous Expense
After reviewing all information, the auditor will prepare a proposed audit report which shows preliminary findings, and a preliminary amount due or refund. The proposed audit report is the basis for discussion between you and the auditor; it is not a final determination. It may be estimated in cases where requested information has not been provided.
If a business buys an item online without paying use tax, the business is still obligated to remit the tax to West Virginia. Believing otherwise often leads to shocking results for the unsuspecting taxpayer during an audit. Here is more information on West Virginia Use Tax.
If you have questions about your situation, contact us to discuss it with one of our tax professionals.
After the Audit – Understand and Defend Your Businesses Rights
The auditor will produce an audit report with corresponding work papers to support the West Virginia sales and use tax assessment.
It is advisable to have a sales tax professional present during this meeting. This is your first opportunity to see the auditor's findings. You'll want to push back on areas where they have overstepped their bounds or misapplied West Virginia's sales tax laws.
It's best to hold off on agreeing to the sales tax assessment until a sales tax professional has reviewed it for issues that should be challenged.
Many businesses wind up drastically overpaying the state because the business owner or in-house accounting personnel weren't well versed in the sales tax laws that, if challenged, could have reduced their sales tax liability.
In the following sections, we'll cover the process of challenging a West Virginia sales tax audit assessment.
Contesting Audit Findings After the Audit
West Virginia Sales Tax Audit Protest Process Flow Chart
Notice of Assessment Issued -->. 60 days -->. file an appeal with the Office of Tax Appeals -->. 6-9 months -->. Final Decision Issued -->. 30 days -->Appeal to the circuit court.
NOTE: If the deadlines are missed, it is implausible that you will be able to have the case reopened.
You will receive a Notice of Assessment or audit report from the Tax Commissioner. It's essential to review and understand its implications carefully.
The audit report:
- Details of the auditor's findings
- Describes any proposed audit adjustments
- Shows the amount of tax, interest, and penalty due
If you disagree with the assessment, you may request an informal conference with the auditor.
If you and the auditor cannot agree, the Department will issue a final notice of field audit determination. It is final unless you appeal it.
Audit Closing Conference
The taxpayer has a short period to contest the findings with the auditor. Any issues with the results are handled as follows:
1. Issues related to exemptions, proof of tax paid, and calculations are worth addressing with the auditor.
2. Legal interpretations of sales tax law are often not resolvable at this stage.
If you cannot resolve this with the auditor, the next step is to appeal/protest the issue.
If you disagree with the decision of the Office of Tax Appeals, the next step is an appeal with West Virginia Circuit Court.
Settling a West Virginia Sales Tax Liability
After any critical notices are issued, settling your West Virginia sales tax case with the West Virginia Department of Revenue is possible by filing a West Virginia Offer in Compromise. The business must meet specific criteria to qualify, but you can get better results negotiating here than with the auditor. However, knowing a fair settlement from an unreasonable settlement will be challenging without experience and knowledge of West Virginia tax laws.
DO NOT attempt to negotiate a settlement without an experienced West Virginia state and local tax lawyer or other professional.
Contest a West Virginia Jeopardy Assessment
West Virginia may issue a Notice of Jeopardy Determination in certain situations.
The jeopardy assessment gives the West Virginia Department of Revenue the right to try to collect immediately.
Due to the jeopardy nature, the taxpayer only has a very short time to contest the assessment and must place a security deposit to fight the issue.
If you believe the assessment is based on a mistake of fact or an error of law, you must appeal to the Office of Tax Appeals. Although the West Virginia Office of Tax Appeals is another state agency and technically not a court, it is very similar to a court. A neutral Administrative Law Judge hears testimony and receives evidence during a hearing.
To begin the case, a petition is filed. The petition appeal must state why the assessment is incorrect and be sent to the Office of Tax Appeals. It is essential to have a sales tax professional draft and file the petition, as putting your best foot forward is a strategic way to show the agency you are taking your case seriously and intend to fight it if not settled.
To properly develop the record, it is critical to have a sales tax lawyer involved to get the results you deserve!
If the assessment is under $10,000 for any one year, you can ask to have your case handled as small claims, which will be more informal than it would be otherwise; however, neither the taxpayer nor the Tax Department will be able to appeal the decision to the Circuit Court.
If you have received a Notice of Assessment and haven't talked to someone experienced in West Virginia State tax, now is the time. Do it before these deadlines pass.
Suppose you cannot resolve your case with the Department or Office of Tax Appeals. In that case, you still have a chance to fight your West Virginia sales tax assessment – The Circuit Court. Neither party wants to spend the time and resources on the uncertainty of the tax court. So, challenging the assessment can effectively maximize your settlement potential, but, at this stage, it is imperative that you have an experienced representative. We don't generally recommend it, but you always have the option to skip the agency protest process and file it in district court.
Our team has handled hundreds of administrative court cases. It can help your company receive the resolution you are entitled to. Get in touch with us today.
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