Bill Text: WV HB2928 | 2011 | Regular Session | Introduced
Bill Title: Relating to the administration of sales and use tax generally
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2011-01-28 - To House Finance [HB2928 Detail]
Download: West_Virginia-2011-HB2928-Introduced.html
(By Delegates White, T. Campbell)
(By Request of the State Tax Department)
[Introduced January 28, 2011; referred to the
Committee on Finance.]
A BILL to amend and reenact §11-15B-2, §11-15B-2a, §11-15B-24 and §11-15B-32 of the Code of West Virginia, 1931, as amended, all relating to the administration of sales and use tax generally; adding new definitions; clarifying present definitions; incorporating changes to the Streamlined Sales and Use Tax Agreement; adding a computer software maintenance contract as a Streamlined Sales and Use Tax Agreement; relieving seller of tax liability in certain instances; and providing new effective dates.
Be it enacted by the Legislature of West Virginia:
That §11-15B-2, §11-15B-2a, §11-15B-24 and §11-15B-32 of the Code of West Virginia, 1931, as amended, be amended and reenacted, all to read as follows:
ARTICLE 15B. SALES AND USE TAX ADMINISTRATION.
§11-15B-2. Definitions.
(a) General. -- When used in this article and articles fifteen and fifteen-a of this chapter, words defined in subsection (b) of this section shall have the meanings ascribed to them in this section, except where a different meaning is distinctly expressed or the context in which the term is used clearly indicates that a different meaning is intended by the Legislature.
(b) Terms defined. --
(1) "Agent" means a person appointed by a seller to represent the seller before the member states.
(2) "Agreement" means the Streamlined Sales and Use Tax Agreement as defined in section two-a of this article.
(3) "Alcoholic beverages" means beverages that are suitable for human consumption and contain one half of one percent or more of alcohol by volume.
(4) "Bundled transaction" means the retail sale of two or more products, except real property and services to real property, where: (i) The products are otherwise distinct and identifiable; and (ii) the products are sold for one nonitemized price. A "bundled transaction" does not include the sale of any products in which the "sales price" varies, or is negotiable, based on the selection by the purchaser of the products included in the transaction.
(A) "Distinct and identifiable products" does not include:
(i) Packaging such as containers, boxes, sacks, bags and bottles or other materials such as wrapping, labels, tags and instruction guides that accompany the "retail sale" of the products and are incidental or immaterial to the "retail sale" thereof. Examples of packaging that are incidental or immaterial include grocery sacks, shoe boxes, dry cleaning garment bags and express delivery envelopes and boxes;
(ii) A product provided free of charge with the required purchase of another product. A product is "provided free of charge" if the "sales price" of the product purchased does not vary depending on the inclusion of the product "provided free of charge"; or
(iii) Items included in the member state's definition of "sales price" as defined in this section.
(B) The term "one nonitemized price" does not include a price that is separately identified by product on binding sales or other supporting sales-related documentation made available to the customer in paper or electronic form including, but not limited to, an invoice, bill of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and services, rate card or price list.
(C) A transaction that otherwise meets the definition of a "bundled transaction", as defined in this subdivision, is not a "bundled transaction" if it is:
(i) The "retail sale" of tangible personal property and a service where the tangible personal property is essential to the use of the service and is provided exclusively in connection with the service and the true object of the transaction is the service; or
(ii) The "retail sale" of services where one service is provided that is essential to the use or receipt of a second service and the first service is provided exclusively in connection with the second service and the true object of the transaction is the second service; or
(iii) A transaction that includes taxable products and nontaxable products and the "purchase price" or "sales price" of the taxable products is de minimis;
(I) "De minimis" means the seller's "purchase price" or "sales price" of the taxable products is ten percent or less of the total "purchase price" or "sales price" of the bundled products;
(II) Sellers shall use either the "purchase price" or the "sales price" of the products to determine if the taxable products are de minimis. Sellers may not use a combination of the "purchase price" and "sales price" of the products to determine if the taxable products are de minimis;
(III) Sellers shall use the full term of a service contract to determine if the taxable products are de minimis; or
(iv) A transaction that includes products taxable at the general rate of tax and food or food ingredients taxable at a lower rate of tax and the "purchase price" or "sales price" of the products taxable at the general sales tax rate is de minimis. For purposes of this subparagraph, the term "de minimis" has the same meaning as ascribed to it under subparagraph (iii) of this paragraph;
(v) The "retail sale" of exempt tangible personal property, or food and food ingredients taxable at a lower rate of tax, and tangible personal property taxable at the general rate of tax where:
(I) The transaction includes "food and food ingredients", "drugs", "durable medical equipment", "mobility-enhancing equipment", "over-the-counter drugs", "prosthetic devices" or medical supplies, all as defined in this article; and
(II) Where the seller's "purchase price" or "sales price" of the taxable tangible personal property taxable at the general rate of tax is fifty percent or less of the total "purchase price" or "sales price" of the bundled tangible personal property. Sellers may not use a combination of the "purchase price" and "sales price" of the tangible personal property when making the fifty percent determination for a transaction.
(5) "Candy" means a preparation of sugar, honey or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops or pieces. "Candy" shall not include any preparation containing flour and shall require no refrigeration.
(6) "Clothing" means all human wearing apparel suitable for general use. The following list contains examples and is not intended to be an all-inclusive list.
(A) "Clothing" shall include:
(i) Aprons, household and shop;
(ii) Athletic supporters;
(iii) Baby receiving blankets;
(iv) Bathing suits and caps;
(v) Beach capes and coats;
(vi) Belts and suspenders;
(vii) Boots;
(viii) Coats and jackets;
(ix) Costumes;
(x) Diapers, children and adult, including disposable diapers;
(xi) Ear muffs;
(xii) Footlets;
(xiii) Formal wear;
(xiv) Garters and garter belts;
(xv) Girdles;
(xvi) Gloves and mittens for general use;
(xvii) Hats and caps;
(xviii) Hosiery;
(xix) Insoles for shoes;
(xx) Lab coats;
(xxi) Neckties;
(xxii) Overshoes;
(xxiii) Pantyhose;
(xxiv) Rainwear;
(xxv) Rubber pants;
(xxvi) Sandals;
(xxvii) Scarves;
(xxviii) Shoes and shoe laces;
(xxix) Slippers;
(xxx) Sneakers;
(xxxi) Socks and stockings;
(xxxii) Steel-toed shoes;
(xxxiii) Underwear;
(xxxiv) Uniforms, athletic and nonathletic; and
(xxxv) Wedding apparel.
(B) "Clothing" shall not include:
(i) Belt buckles sold separately;
(ii) Costume masks sold separately;
(iii) Patches and emblems sold separately;
(iv) Sewing equipment and supplies, including, but not limited to, knitting needles, patterns, pins, scissors, sewing machines, sewing needles, tape measures and thimbles; and
(v) Sewing materials that become part of "clothing" including, but not limited to, buttons, fabric, lace, thread, yarn and zippers.
(7) "Clothing accessories or equipment" means incidental items worn on the person or in conjunction with "clothing". "Clothing accessories or equipment" are mutually exclusive of and may be taxed differently than apparel within the definition of "clothing", "sport or recreational equipment" and "protective equipment". The following list contains examples and is not intended to be an all- inclusive list. "Clothing accessories or equipment" shall include:
(A) Briefcases;
(B) Cosmetics;
(C) Hair notions, including, but not limited to, barrettes, hair bows and hair nets;
(D) Handbags;
(E) Handkerchiefs;
(F) Jewelry;
(G) Sunglasses, nonprescription;
(H) Umbrellas;
(I) Wallets;
(J) Watches; and
(K) Wigs and hair pieces.
(8) "Certified automated system" or "CAS" means software certified under the agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state and maintain a record of the transaction.
(9) "Certified service provider" or "CSP" means an agent certified under the agreement to perform all of the seller's sales and use tax functions other than the seller's obligation to remit tax on its own purchases.
(10) "Computer" means an electronic device that accepts information in digital or similar form and manipulates the information for a result based on a sequence of instructions.
(11) "Computer software" means a set of coded instructions designed to cause a "computer" or automatic data processing equipment to perform a task.
(12) "Computer software maintenance contract" is a contract that obligates a vendor of computer software, or other person, to provide a customer with future updates or upgrades to computer software, support services with respect to computer software or both. The term "computer software maintenance contract" includes contracts sold by a person other than the vendor of the computer software to which the contract relates.
(A) A "mandatory computer software maintenance contract" is a computer software maintenance contract that the customer is obligated by contract to purchase as a condition to the retail sale of computer software.
(B) An "optional computer maintenance contract" is a computer software maintenance contract that a customer is not obligated to purchase as a condition to the retail sale of computer software.
(13) "Delivered electronically" means delivered to the purchaser by means other than tangible storage media.
(A) Contains one or more of the following dietary ingredients:
(i) A vitamin;
(ii) A mineral;
(iii) An herb or other botanical;
(iv) An amino acid;
(v) A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or
(vi) A concentrate, metabolite, constituent, extract or combination of any ingredient described in subparagraph (i) through (v), inclusive, of this paragraph;
(B) And is intended for ingestion in tablet, capsule, powder, softgel, gelcap or liquid form, or if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and
(C) Is required to be labeled as a dietary supplement, identifiable by the "Supplemental Facts" box found on the label as required pursuant to 21 CFR § 101.36 or in any successor section of the Code of Federal Regulations.
(A) Recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States or official National Formulary, and supplement to any of them;
(B) Intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease; or
(C) Intended to affect the structure or any function of the body. The amendment to this subdivision enacted during the 2009 regular legislative session shall apply to sales made after July 1, 2009.
(
(A) Can withstand repeated use;
(B) Is primarily and customarily used to serve a medical purpose;
(C) Generally is not useful to a person in the absence of illness or injury; and
(D) Is not worn in or on the body.
(A) "Lease" does not include:
(i) A transfer of possession or control of property under a security agreement or deferred payment plan that requires the transfer of title upon completion of the required payments;
(ii) A transfer or possession or control of property under an agreement that requires the transfer of title upon completion of required payments and payment of an option price does not exceed the greater of $100 or one percent of the total required payments; or
(iii) Providing tangible personal property along with an operator for a fixed or indeterminate period of time. A condition of this exclusion is that the operator is necessary for the equipment to perform as designed. For the purpose of this subparagraph, an operator must do more than maintain, inspect or set-up the tangible personal property.
(iv) "Lease" or "rental" includes agreements covering motor vehicles and trailers where the amount of consideration may be increased or decreased by reference to the amount realized upon sale or disposition of the property as defined in 26 U.S.C. §7701(h)(1).
(B) This definition shall be used for sales and use tax purposes regardless if a transaction is characterized as a lease or rental under generally accepted accounting principles, the Internal Revenue Code, the Uniform Commercial Code or other provisions of federal, state or local law.
(A) Is primarily and customarily used to provide or increase the ability to move from one place to another and which is appropriate for use either in a home or a motor vehicle;
(B) Is not generally used by persons with normal mobility; and
(C) Does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.
(A) A "drug facts" panel; or
(B) A statement of the "active ingredient(s)" with a list of those ingredients contained in the compound, substance or preparation.
(A) Compensated by the payment of wages in the ordinary course of employment; and
(B) Rendered to the person of an individual without, at the same time, selling tangible personal property, such as nursing, barbering, manicuring and similar services.
(
(i) Food sold in a heated state or heated by the seller;
(ii) Two or more food ingredients mixed or combined by the seller for sale as a single item; or
(iii) Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins or straws. A plate does not include a container or packaging used to transport the food.
(B) "Prepared food" in subparagraph (ii), paragraph (A) of this subdivision does not include food that is only cut, repackaged or pasteurized by the seller, and eggs, fish, meat, poultry and foods containing these raw animal foods requiring cooking by the consumer as recommended by the Food and Drug Administration in Chapter 3, Part 401.11 of its Food Code of 2001 so as to prevent food-borne illnesses.
(C) Additionally, "prepared food" as defined in this subdivision does not include:
(i) Food sold by a seller whose proper primary NAICS classification is manufacturing in Sector 311, except Subsection 3118 (bakeries);
(ii) Food sold in an unheated state by weight or volume as a single item; or
(iii) Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas.
(A) The combining of two or more prewritten computer software programs or prewritten portions thereof does not cause the combination to be other than prewritten computer software.
(B) "Prewritten computer software" includes software designed and developed by the author or other creator to the specifications of a specific purchaser when it is sold to a person other than the specific purchaser. Where a person modifies or enhances computer software of which the person is not the author or creator, the person is considered to be the author or creator only of the person's modifications or enhancements.
(C) "Prewritten computer software" or a prewritten portion thereof that is modified or enhanced to any degree, where the modification or enhancement is designed and developed to the specifications of a specific purchaser, remains prewritten computer software. However, where there is a reasonable, separately stated charge or an invoice or other statement of the price given to the purchaser for the modification or enhancement, the modification or enhancement does not constitute prewritten computer software.
(A) Artificially replace a missing portion of the body;
(B) Prevent or correct physical deformity or malfunction of the body; or
(C) Support a weak or deformed portion of the body.
(A) Any sale, lease or rental for any purpose other than for resale as tangible personal property, sublease or subrent; and
(B) Any sale of a service other than a service purchased for resale.
(i) The seller's cost of the property sold;
(ii) The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller and any other expense of the seller;
(iii) Charges by the seller for any services necessary to complete the sale, other than delivery and installation charges;
(iv) Delivery charges; and
(v) Installation charges.
(B) "Sales price" does not include:
(i) Discounts, including cash, term or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale;
(ii) Interest, financing and carrying charges from credit extended on the sale of personal property, goods or services, if the amount is separately stated on the invoice, bill of sale or similar document given to the purchaser; or
(iii) Any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale or similar document given to the purchaser.
(C) "Sales price" shall include consideration received by the seller from third parties if:
(i) The seller actually receives consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale;
(ii) The seller has an obligation to pass the price reduction or discount through to the purchaser;
(iii) The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser; and
(iv) One of the following criteria is met:
(I) The purchaser presents a coupon, certificate or other documentation to the seller to claim a price reduction or discount where the coupon, certificate or documentation is authorized, distributed or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate or documentation is presented;
(II) The purchaser identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount (a "preferred customer" card that is available to any patron does not constitute membership in such a group); or
(III) The price reduction or discount is identified as a third-party price reduction or discount on the invoice received by the purchaser or on a coupon, certificate or other documentation presented by the purchaser.
(A) Clay and glazes;
(B) Paints; acrylic, tempora and oil;
(C) Paintbrushes for artwork;
(D) Sketch and drawing pads; and
(E) Watercolors.
(A) Reference books;
(B) Reference maps and globes;
(C) Textbooks; and
(D) Workbooks.
(A) Computer storage media; diskettes, compact disks;
(B) Handheld electronic schedulers, except devices that are cellular phones;
(C) Personal digital assistants, except devices that are cellular phones;
(D) Computer printers; and
(E)Printer supplies for computers; printer paper, printer ink.
(A) Binders;
(B) Book bags;
(C) Calculators;
(D) Cellophane tape;
(E) Blackboard chalk;
(F) Compasses;
(G) Composition books;
(H) Crayons;
(I) Erasers;
(J) Folders; expandable, pocket, plastic and manila;
(K) Glue, paste and paste sticks;
(L) Highlighters;
(M) Index cards;
(N) Index card boxes;
(O) Legal pads;
(P) Lunch boxes;
(Q) Markers;
(R) Notebooks;
(S) Paper; loose-leaf ruled notebook paper, copy paper, graph paper, tracing paper, manila paper, colored paper, poster board and construction paper;
(T) Pencil boxes and other school supply boxes;
(U) Pencil sharpeners;
(V) Pencils;
(W) Pens;
(X) Protractors;
(Y) Rulers;
(Z) Scissors; and
(AA) Writing tablets.
(A) Ballet and tap shoes;
(B) Cleated or spiked athletic shoes;
(C) Gloves, including, but not limited to, baseball, bowling, boxing, hockey and golf;
(D) Goggles;
(E) Hand and elbow guards;
(F) Life preservers and vests;
(G) Mouth guards;
(H) Roller and ice skates;
(I) Shin guards;
(J) Shoulder pads;
(K) Ski boots;
(L) Waders; and
(M) Wetsuits and fins.
(c) Additional definitions.
Other terms used in this article are defined in articles fifteen and fifteen-a of this chapter, which definitions are incorporated by reference into this article. Additionally, other sections of this article may define terms primarily used in the section in which the term is defined.
§11-15B-2a. Streamlined Sales and Use Tax Agreement defined.
As used in this article and articles fifteen and fifteen-a of this chapter, the term "Streamlined Sales and Use Tax Agreement" or "agreement" means the agreement adopted November 12, 2002, by states that enacted authority to engage in multistate discussions similar to that provided in section four of this article, except when the context in which the term is used clearly indicates that a different meaning is intended by the Legislature. "Agreement" includes amendments to the agreement adopted by the implementing states in calendar years 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010 and amendments adopted by the governing board on or before, January 31,
§11-15B-24. Administration of exemptions.
(a) General rules. - When a purchaser claims an exemption from paying tax under article fifteen or fifteen-a of this chapter:
(1) Sellers shall obtain identifying information of the purchaser and the reason for claiming a tax exemption at the time of the purchase, as determined by the governing board.
(2) A purchaser is not required to provide a signature to claim an exemption from tax unless a paper exemption certificate is used.
(3) The seller shall use the standard form for claiming an exemption electronically that is adopted by the governing board.
(4) The seller shall obtain the same information for proof of a claimed exemption regardless of the medium in which the transaction occurred.
(5) The Tax Commissioner may utilize a system wherein the purchaser exempt from the payment of the tax is issued an identification number that is presented to the seller at the time of the sale.
(6) The seller shall maintain proper records of exempt transactions and provide the records to the Tax Commissioner or the Tax Commissioner's designee.
(7) The Tax Commissioner shall administer use-based and entity-based exemptions when practicable through a direct pay permit, an exemption certificate or another means that does not burden sellers.
(8)
(b) The Tax Commissioner shall relieve sellers that follow the requirements of this section from the tax otherwise applicable if it is determined that the purchaser improperly claimed an exemption and shall hold the purchaser liable for the nonpayment of tax. This relief from liability does not apply:
(A) To a seller who fraudulently fails to collect the tax;
(B) To a seller who solicits purchasers to participate in the unlawful claim of an exemption;
(C) To a seller who accepts an exemption certificate when the purchaser claims an entity-based exemption when: (i) The subject of the transaction sought to be covered by the exemption certificate is actually received by the purchaser at a location operated by the seller; and (ii) the state in which that location resides provides an exemption certificate that clearly and affirmatively indicates (graying out exemption reason types on uniform form and posting it on a state's website is an indicator) that the claimed exemption is not available in that state.
(c) Time within which seller must obtain exemption certificates. - A seller is relieved from paying tax otherwise applicable under article fifteen or fifteen-a of this chapter if the seller obtains a fully completed exemption certificate or captures the required data elements within ninety days subsequent to the date of sale.
(d)(1) If the seller has not obtained an exemption certificate or all required data elements, the seller
(2) If the seller obtains the information described in subdivision (1) of this subsection, the seller shall be relieved of any liability for the tax on the transaction unless it is discovered through the audit process that the seller had knowledge or had reason to know at the time such information was provided that the information relating to the exemption claimed was materially false or the seller otherwise knowingly participated in activity intended to purposefully evade the tax that is properly due on the transaction.
§11-15B-32. Effective date.
(a) The provisions of this article, as amended or added during the regular legislative session in the year 2003, shall take effect January 1, 2004, and apply to all sales made on or after that date and to all returns and payments due on or after that day, except as otherwise expressly provided in section five of this article.
(b) The provisions of this article, as amended or added during the second extraordinary legislative session in the year 2003, shall take effect January 1, 2004, and apply to all sales made on or after that date.
(c) The provisions of this article, as amended or added by act of the Legislature in the year 2004 shall apply to all sales made on or after the date of passage in the year 2004.
(d) The provisions of this article, as amended or added during the regular legislative session in the year 2008, shall apply to all sales made on or after the date of passage and to all returns and payments due on or after that day, except as otherwise expressly provided in this article.
(e) The provisions of this article, as amended or added during the 2009 regular legislative session, shall apply to all sales made on or after the date of passage and to all returns and payments due on or after that day, except as otherwise expressly provided in this article.
(f) The provisions of this article, as amended or added during the 2010 regular legislative session, shall apply to all sales made on or after the date of passage and to all returns and payments due on or after that day, except as otherwise expressly provided in this article.
(g) The provisions of this article, as amended or added during the 2011 regular legislative session, shall apply to all sales made on or after the date of passage and to all returns and payments due on or after that day, except as otherwise expressly provided in this article.
NOTE: This purpose of this bill is to update code provisions to conform to the Streamlined Sales Tax Agreement. The bill adds new definitions and clarifies present definitions. The bill incorporates changes to the Streamlined Sales and Use Tax Agreement and adds computer software maintenance contracts as a Streamlined Sales and Use Tax Agreement. The bill also relieves a seller of tax liability in certain instances. The bill provides new effective dates.
Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.