COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 678
(By Senators Browning, McCabe, K. Facemyer,
Unger, Helmick
Foster, Stollings, Jenkins and Kessler)
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[Originating in the Committee on Government Organization;
reported March 26, 2009.]
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A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §11-6J-1, §11-6J-2,
§11-6J-3, §11-6J-4, §11-6J-5, §11-6J-6 and §11-6J-7; and to
amend and reenact §11-15-8d and §11-15-9h of said code, all
relating to taxation; providing mandated salvage valuation of
certain high-technology businesses' property; specifying short
title; providing definition; specifying method for valuation
of property; specifying initial determination by county
assessor; specifying procedure for protest and appeal;
specifying limitations on right to assert exemptions;
exempting certain items installed into building or facility
for direct use in specified business activity; providing
definitions; and specifying effective dates.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §11-6J-1, §11-6J-2,
§11-6J-3, §11-6J-4, §11-6J-5 and §11-6J-6; and that §11-15-8d and
§11-15-9h of said code be amended and reenacted, all to read as
follows:
ARTICLE 6J. SPECIAL METHOD FOR VALUATION OF CERTAIN HIGH
TECHNOLOGY PROPERTY.
§11-6J-1. Short title.
This article shall be known and cited as the "High Technology
Business Property Valuation Act."
§11-6J-2. Definition.
For purposes of this article, the term "salvage value" means
five percent of original cost.
§11-6J-3. Valuation of certain specialized High Technology
property.
Notwithstanding any other provision of this code to the
contrary, the value of servers directly used in a high technology
business or in an internet advertising business, as defined in
section nine-h, article fifteen of this chapter, and the value of
tangible personal property directly used in a high technology
business or in an internet advertising business, as defined in
section nine-h, article fifteen of this chapter, for the purpose of
ad valorem property taxation under this chapter and under Article X of the Constitution of this state, shall be its salvage value.
§11-6J-4. Initial determination by county assessor.
The assessor of the county in which a server or specific item
of tangible personal property is located shall determine, in
writing, whether that server or specific item of tangible personal
property is directly used in a high technology business or an
Internet advertising business subject to valuation in accordance
with this article. Upon making a determination that a taxpayer has
a server or tangible personal property directly used in a high
technology business or an Internet advertising business, the county
assessor shall notify the Tax Commissioner of that determination,
and shall provide such information to the Tax Commissioner as the
Tax Commissioner may require relating to that determination.
§11-6J-5. Protest and appeal.
At any time after the property is returned for taxation but
prior to January 1 of the assessment year, any taxpayer may apply
to the county assessor for information regarding the issue of
whether any particular item or items of property constitute
property directly used in a high technology business or an Internet
advertising business under this article which should be subject to
valuation in accordance with this article. If the taxpayer
believes that some portion of the taxpayer's property is subject to
this article, the taxpayer shall file objections in writing with
the county assessor. The county assessor shall decide the matter by either sustaining the protest and making proper corrections, or
by stating, in writing if requested, the reasons for the county
assessor's refusal. The county assessor may, and if the taxpayer
requests, the county assessor shall, before January 1 of the
assessment year, certify the question to the Tax Commissioner in a
statement sworn to by both parties, or if the parties are unable to
agree, in separate sworn statements. The sworn statement or
statements shall contain a full description of the property and any
other information which the Tax Commissioner may require.
The Tax Commissioner shall, as soon as possible on receipt of
the question, but in no case later than the February 28 of the
assessment year, instruct the county assessor as to how the
property shall be treated. The instructions issued and forwarded
by mail to the county assessor are binding upon the county
assessor, but either the county assessor or the taxpayer may apply
to the circuit court of the county for review of the question of
the applicability of this article to the property in the same
fashion as is provided for appeals from the county commission in
section twenty-five, article three of this chapter. The Tax
Commissioner shall prescribe forms on which the questions under
this section shall be certified and the Tax Commissioner has the
authority to pursue any inquiry and procure any information which
may be necessary for disposition of the matter.
§11-6J-6. Effective date.
This article shall be effective on and after July 1, 2009.
§11-6J-7. Report on economic benefit.
The West Virginia Development Office shall provide to the
Joint Committee on Government and Finance by March 1, 2013, and on
March 1 of each of the two subsequent years, a report detailing the
economic benefit of the valuation method specified in this article.
The report is to include the number of new jobs created and the ad
valorem property tax impact.
ARTICLE 15. CONSUMERS SALES AND SERVICE TAX.
§11-15-8d. Limitations on right to assert exemptions.
(a) Persons who perform "contracting" as defined in section
two of this article, or persons acting in an agency capacity, may
not assert any exemption to which the purchaser of such contracting
services or the principal is entitled. Any statutory exemption to
which a taxpayer may be entitled shall be invalid unless the
tangible personal property or taxable service is actually purchased
by such taxpayer and is directly invoiced to and paid by such
taxpayer.
Provided, That This section shall not apply to purchases
by an employee for his or her employer; purchases by a partner for
his or her partnership; or purchases by a duly authorized officer
of a corporation, or unincorporated organization, for his or her
corporation or unincorporated organization so long as the purchase
is invoiced to and paid by such employer, partnership, corporation or unincorporated organization.
(b) Transition rule. -- This section shall not apply to
purchases of tangible personal property or taxable services in
fulfillment of a purchasing agent or procurement agent contract
executed and legally binding on the parties thereto prior to
the
fifteenth day of September, one thousand nine hundred ninety
September 15, 1999: Provided, That this transition rule shall not
apply to any purchases of tangible personal property or taxable
services made under such a contract after
the thirty-first day of
August, one thousand nine hundred ninety-one August 31, 1991; and
this transition rule shall not apply if the primary purpose of the
purchasing agent or procurement agent contract was to avoid payment
of consumers sales and use taxes.
Provided, however, That
effective the first day of July, two thousand seven However,
effective July 1, 2007, this section shall not apply to purchases
of services, machinery, supplies or materials, except gasoline and
special fuel, to be directly used or consumed in the construction,
alteration, repair or improvement of a new or existing building or
structure by a person performing "contracting", as defined in
section two of this article, if the purchaser of the "contracting"
services would be entitled to claim the refundable exemption under
the provisions of subdivision (2), subsection (b), section nine of
this article had it purchased the services, machinery, supplies or
materials.
In addition, effective July 1, 2009, this section shall not apply to purchases of services, computers, servers, building
materials and tangible personal property, except purchases of
gasoline and special fuel, to be installed into a building or
facility or directly used or consumed in the construction,
alteration, repair or improvement of a new or existing building or
structure by a person performing "contracting", as defined in
section two of this article, if the purchaser of the "contracting"
services would be entitled to claim the exemption under paragraph
(7), subsection (a), section nine-h of this article.
§11-15-9h. Exemptions for sales of computer hardware and software
directly incorporated into manufactured products;
certain leases; sales of electronic data processing
service; sales of computer hardware and software
directly used in communication; sales of educational
software; sales of internet advertising; sales of
high technology business services directly used in
fulfillment of a government contract; sales of
tangible personal property for direct use in a high
technology business or internet advertising
business; definitions.
(a) In order to modernize the exemptions from tax contained in
this article as a result of technological advances in computers and
the expanded role of computers, the Internet and global instant
communications in business, and to encourage computer software developers, computer hardware designers, systems engineering firms,
electronic data processing companies and other high technology
companies to locate and expand their businesses in West Virginia
the following sales of tangible personal property and software are
exempt:
(1) Sales of computer hardware or software (including custom
designed software) to be directly incorporated by a manufacturer
into a manufactured product. For purposes of this subsection, the
payment of licensing fees for the right to incorporate hardware or
software developed by persons other than the manufacturer into a
manufactured product is exempt from the tax imposed by this
article;
(2) Sales of computer hardware or software (including custom
designed software) directly used in communication as defined in
this article;
(3) Sales of electronic data processing services;
(4) Sales of educational software required to be used in any
of the public schools of this state or in any institution in this
state which qualifies as a nonprofit or educational institution
subject to administration, regulation, certification or approval of
the Department of Education, the Department of Education and the
Arts or the Higher Education Policy Commission;
(5) Sales of Internet advertising of goods and services;
and
(6) Sales of high technology business services to high technology businesses which enter into contracts with this state,
its institutions and subdivisions, governmental units, institutions
or subdivisions of other states, or with the United States,
including agencies of federal, state or local governments for
direct use in fulfilling the government contract;
and
(7) Sales of prewritten computer software, computers, computer
hardware, servers and building materials 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.
(b) Definitions.
As used in this
article section, the following terms have the
following meanings:
(1) "Building materials" means all tangible personal property
that becomes a part of the building or other structure or the
realty which is used by builders, building construction contractors
or landowners in making improvements, additions, alterations or
repairs to a building or other structure or to real property.
(1) (2) "Computer hardware" means a computer, as defined in
article fifteen-b of this chapter, and the directly and immediately
connected physical equipment involved in the performance of data
processing or communications functions, including data input, data
output, data processing, data storage, and data communication
apparatus that is directly and immediately connected to the
computer. The term "computer hardware" does not include computer software.
(2) (3) "High technology business" means 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 new manufactured products
which incorporate computer hardware and software; electronic data
processing; network management, maintenance, engineering,
administration and security services; website management,
maintenance, engineering, administration and security services and
computer systems management, maintenance, engineering,
administration and security services.
Provided, That High
technology business as defined herein is intended to include
businesses which engage in the activities enumerated in this
definition as their primary business activity, and not as a
secondary or incidental activity and not as an activity in support
of or incidental to business activity not specifically enumerated
in this definition.
(3) (4) "High technology business services" means and is
limited to 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; electronic data processing; computer systems management; computer systems maintenance; computer
systems engineering; computer systems administration and computer
systems security services.
(5) "Internet advertising business" means a for profit
business that is engaged, for monetary remuneration, in the primary
business activity of announcing, or calling public attention to,
goods or services in order to induce the public to purchase those
goods or services, and which uses the Internet as its sole
advertising communications medium. For purposes of this
definition, Internet advertising must be the primary business
activity of the business, and not a secondary or incidental
activity and not an activity in support of or incidental to other
business activity.
(6) "Network" means a group of two or more computer systems
linked together.
(7) "Server" means a computer or device on a network that
manages network resources.
(c) The amendments to this section made in the 2009 regular
session of the Legislature shall apply to purchases made on and
after July 1, 2009.