Kingwood City Council learns about implementing a municipal sales tax

KINGWOOD — Kingwood learned more last week about how to implement a municipal sales tax, when it could expect to collect funds and restrictions on how they can be spent.

Mark Morton, of the West Virginia Tax Department, spoke to council Tuesday June 12.

Currently, 39 West Virginia towns have the tax. Four more will begin collecting it July 1: Athens, Davis, Elizabeth and Elkins. They will collect a total of about $73 million this year, Morton said.

Locally, Bridgeport, Clarksburg, Fairmont, Grafton and White Hall have the tax.

Kingwood Councilwoman Michelle Whetsell brought the idea to council in April. Council hasn’t voted on levying the tax.

The tax can be up to  one cent on each $1 of business done in town. Businesses remit the tax to the state with the state sales tax, and the state tax department  sends the municipal tax to the town.

Some purchases are exempt from the tax, including  the sale of fuel, sale or use of motor vehicles, satellite television service and other transactions where federal law preempts local,

Internet sales are not exempt. If a product is purchased online and delivered in the city, it is taxed. There are some exemptions, such as prescription drug sales. Many online sellers are already collecting state tax because they are part of the streamlined tax provision, Morton said.

“The thing to remember in relation to municipal sales tax is there’s a timing issue,” Morton said.

The tax can become effective Jan. 1 or July 1, but not until 180 days after the State Tax Commissioner has been notified that council passed the tax and  the town provides boundary files, showing which businesses are within the city and are to collect the tax.

The first receipts will not come in until the end of the quarter after this.

The money can be put into the city’s general fund or into a special fund, dedicated to certain uses. Morton advised council to, “get a good lawyer, who really knows how to deal with those funds and statutes and details and knows exactly where all the pitfalls are.”

For example, the tax department notes on its website, Charleston puts its municipal tax receipts in a special fund. It, “issued revenue bonds to finance capital improvements to its civic center secured by a first lien on its special revenue fund.”

Kingwood Council has discussed using the money it could collect to replace the street sweeper and garbage truck, or to help with paving and other expenses.

Councilman Mike Lipscomb asked Morton about a bill introduced in the last legislative session that would have allowed the state to keep part of  municipal taxes as an administrative fee.

“That idea never got traction,” Morton said. “What they are talking about… is a total, statewide, 7 percent or 7 and a half percent [tax], and then just distributing back … a piece to the counties, a piece to the municipalities, and just have the state collect that 7 percent.”

But that proposal hasn’t been passed into law yet, Morton noted.

For more info  about the state’s municipal tax: Tax/MunicipalSalesAndUse Tax/Pages/MunicipalSalesAn dUseTax.aspx

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