Senate Bill No. 4007
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
[Introduced September 7, 2005; referred to the Committee on
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new section, designated §11-15-3a; and to
amend and reenact §11-15B-2 and §11-15B-2a of said code, all
relating generally to consumers sales and use taxes on food
and food ingredients intended for human consumption; reducing
rate of tax on sales, purchases and uses of food and food
ingredients to five percent beginning on specified date;
defining "food and food ingredients" and certain other terms;
providing that lower rate does not apply to sales, purchases
and uses of candy, dietary supplements or prepared food or to
sales through vending machines; authorizing Tax Commissioner
to promulgate emergency rules and to propose other rules for
administration, enforcement and implementation of this act,
whether interpretive, legislative or procedural; and
specifying internal 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 section, designated §11-15-3a; and that
§11-15B-2 and §11-15B-2a of said code be amended and reenacted, all
to read as follows:
ARTICLE 15. CONSUMERS SALES AND SERVICE TAX.
§11-15-3a. Rate of tax on food and food ingredients intended for
human consumption; reduction of tax beginning January
1, 2006; exceptions; legislative, emergency and other
(a) Rate of tax on food and food ingredients
Notwithstanding any provision of this article or article fifteen-a
of this chapter to the contrary, the rate of tax on sales,
purchases and uses of food and food ingredients intended for human
consumption after the thirty-first day of December, two thousand
five, shall be five percent of its sales price, as defined in
section two, article fifteen-b of this chapter.
(b) Calculation of tax on fractional parts of a dollar
. -- The
tax computation under this section shall be carried to the third
decimal place and the tax rounded up to the next whole cent
whenever the third decimal place is greater than four and rounded
down to the lower whole cent whenever the third decimal place is
four or less. The seller may elect to compute the tax due on a
transaction on a per item basis or on an invoice basis provided the
method used is consistently used during the reporting period.
. -- The reduced rate of tax provided for in this section shall not apply to sales, purchases and uses by
consumers of the following items, which shall remain taxable at the
general rate of tax specified in section three of this article and
section two, article fifteen-a of this chapter:
(1) "Candy," as defined in article fifteen-b of this chapter;
(2) "Dietary supplements," as defined in article fifteen-b of
(3) "Food and food ingredients sold through vending machines,"
as defined in article fifteen-b of this chapter;
(4) "Prepared food," as defined in article fifteen-b of this
(5) "Soft drinks," as defined in article fifteen-b of this
(d) Federal food stamp and women, infants and children
programs, other exemptions
. -- Nothing in this section shall affect
application of the exemption from tax provided in section nine of
this article for food purchased by an eligible person using food
stamps, electronic benefits transfer cards or vouchers issued by or
pursuant to authorization of the United States Department of
Agriculture to individuals participating in the federal food stamp
program, by whatever name called, or the women, infants and
children (WIC) program, or application of any other exemption from
tax set forth in this article or article fifteen-a of this chapter.
(e) Legislative rules; emergency rules
. -- The Tax
Commissioner may promulgate legislative rules and other rules explaining and implementing this section, which rules shall be
promulgated in accordance with the provisions of article three,
chapter twenty-nine-a of this code. The authority to promulgate
rules includes authority to amend or repeal those rules. If
proposed legislative rules for this section are filed in the State
Register before the fifteenth day of December, two thousand five,
those rules may be promulgated as emergency legislative rules, as
provided in article three, chapter twenty-nine-a of this code,
which emergency rules shall be effective upon being filed in the
State Register and shall remain in effect until sixty days after
conclusion of the Legislature's regular sixty-day session in two
thousand seven or until the effective date of legislative rules
promulgated by the Tax Commissioner pursuant to authorization of
the Legislature in accordance with said article, notwithstanding
any provision of said article to the contrary. As necessary, the
Tax Commissioner may amend or modify his or her emergency
legislative rules for this section.
ARTICLE 15B. STREAMLINED SALES AND USE TAXES.
. -- 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 in those instances 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
(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, shoeboxes, 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
(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;
(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 (10%) 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.
(I) "De minimis" means the seller's "purchase price" or "sales
price" of the products taxable at the general sales tax rate is ten
percent (10%) 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 products taxable at the general rate of tax are de minimis. Sellers may not use a
combination of the "purchase price" and "sales price" of the
products to determine if the products taxable at the general rate
of tax are de minimis.
(III) Sellers shall use the full term of a service contract to
determine if the products taxable at the general rate of tax are de
(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
(I) The transaction includes "food and food ingredients",
"drugs", "durable medical equipment", "mobility enhancing
equipment", "prosthetic devices" all as defined in article
fifteen-b of this chapter; 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 (50%) 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 (50%) 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.
"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.
"Certified service provider" or "CSP" means an agent
certified under the agreement to perform all of the seller's sales
"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.
"Computer software" means a set of coded instructions
designed to cause a "computer" or automatic data processing
equipment to perform a task.
"Delivered electronically" means delivered to the
purchaser by means other than tangible storage media.
"Delivery charges" means charges by the seller of
personal property or services for preparation and delivery to a
location designated by the purchaser of personal property or
services including, but not limited to, transportation, shipping,
postage, handling, crating and packing.
"Dietary supplement" means any product, other than
"tobacco", intended to supplement the diet that:
(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 subdivision;
(B) 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.
"Direct mail" means printed material delivered or
distributed by United States mail or other delivery service to a
mass audience or to addressees on a mailing list provided by the
purchaser or at the direction of the purchaser when the cost of the
items are not billed directly to the recipients. "Direct mail"
includes tangible personal property supplied directly or indirectly
by the purchaser to the direct mail seller for inclusion in the
package containing the printed material. "Direct mail" does not include multiple items of printed material delivered to a single
"Drug" means a compound, substance or preparation,
and any component of a compound, substance or preparation, other
than food and food ingredients, dietary supplements or alcoholic
(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 in humans; or
(C) Intended to affect the structure or any function of the
"Durable medical equipment" means equipment including
repair and replacement parts for the equipment, but does not
include "mobility-enhancing equipment", which:
(A) Can withstand repeated use;
(B) Is primarily and customarily used to serve a medical
(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.
"Electronic" means relating to technology having
electrical, digital, magnetic, wireless, optical, electromagnetic
or similar capabilities.
"Entity-based exemption" means an exemption based on
who purchases the product or service or who sells the product or
"Food and food ingredients" means substances, whether
in liquid, concentrated, solid, frozen, dried or dehydrated form,
that are sold for ingestion or chewing by humans and are consumed
for their taste or nutritional value. "Food and food ingredients"
does not include alcoholic beverages, candy, dietary supplements,
food sold through vending machines, prepared food, soft drinks
(19) "Food sold through vending machines" means food dispensed
from a machine or other mechanical device that accepts payment.
"Includes" and "including" when used in a definition
contained in this article is not considered to exclude other things
otherwise within the meaning of the term being defined.
"Lease" includes rental, hire and license. "Lease"
means any transfer of possession or control of tangible personal
property for a fixed or indeterminate term for consideration. A
lease or rental may include future options to purchase or extend.
(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 one hundred dollars 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.
(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.
"Load and leave" means delivery to the purchaser by
use of a tangible storage media where the tangible storage media is
not physically transferred to the purchaser.
"Mobility enhancing equipment" means equipment,
including repair and replacement parts to the equipment, but does
not include "durable medical equipment", which:
(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.
"Model I seller" means a seller that has selected a
certified service provider as its agent to perform all the seller's
sales and use tax functions, other than the seller's obligation to
remit tax on its own purchases.
"Model II seller" means a seller that has selected a
certified automated system to perform part of its sales and use tax
functions, but retains responsibility for remitting the tax.
"Model III seller" means a seller that has sales in
at least five member states, has total annual sales revenue of at
least five hundred million dollars, has a proprietary system that
calculates the amount of tax due each jurisdiction and has entered
into a performance agreement with the member states that
establishes a tax performance standard for the seller. As used in
this definition, a seller includes an affiliated group of sellers
using the same proprietary system.
"Person" means an individual, trust, estate,
fiduciary, partnership, limited liability company, limited
liability partnership, corporation or any other legal entity.
"Personal service" includes those:
(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.
(29)(A) "Prepared food" means:
(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
"Prescription" means an order, formula or recipe
issued in any form of oral, written, electronic or other means of
transmission by a duly licensed practitioner authorized by the laws
of this State to issue prescriptions.
"Prewritten computer software" means "computer
software", including prewritten upgrades, which is not designed and
developed by the author or other creator to the specifications of
a specific purchaser.
(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
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
, That 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
"Product-based exemption" means an exemption based on
the description of the product or service and not based on who
purchases the product or service or how the purchaser intends to
use the product or service.
"Prosthetic device" means a replacement, corrective
or supportive device, including repair and replacement parts for
the device worn on or in the body, to:
(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.
"Protective equipment" means items for human wear and
designed as protection of the wearer against injury or disease or
as protections against damage or injury of other persons or
property but not suitable for general use.
"Purchase price" means the measure subject to the tax
imposed by article fifteen or article fifteen-a of this chapter and
has the same meaning as sales price.
"Purchaser" means a person to whom a sale of personal
property is made or to whom a service is furnished.
"Registered under this agreement" means registration
by a seller with the member states under the central registration
system provided in article four of the agreement.
"Retail sale" or "sale at retail" means:
(A) Any sale or lease 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
(A) "Sales price" means the measure subject to the tax
levied by this article and includes the total amount of
consideration, including cash, credit, property and services, for
which personal property or services are sold, leased or rented,
valued in money, whether received in money or otherwise, without any deduction for the following:
(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;
(v) Installation charges;
(vi) The value of exempt personal property given to the
purchaser where taxable and exempt personal property have been
bundled together and sold by the seller as a single product or
piece of merchandise; and
(vii) Credit for the fair market value of any trade-in.
(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; and
(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.
"Sales tax" means the tax levied under article
fifteen of this chapter.
"Seller" means any person making sales, leases or
rentals of personal property or services.
"Service" or "selected service" includes all
nonprofessional activities engaged in for other persons for a
consideration, which involve the rendering of a service as
distinguished from the sale of tangible personal property, but does
not include contracting, personal services, services rendered by an
employee to his or her employer, any service rendered for resale or
any service furnished by a business that is subject to the control
of the Public Service Commission when the service or the manner in
which it is delivered is subject to regulation by the Public
Service Commission of this state. The term "service" or "selected
service" does not include payments received by a vendor of tangible
personal property as an incentive to sell a greater volume of such
tangible personal property under a manufacturer's, distributor's or
other third-party's marketing support program, sales incentive
program, cooperative advertising agreement or similar type of
program or agreement, and these payments are not considered to be
payments for a "service" or "selected service" rendered, even
though the vendor may engage in attendant or ancillary activities
associated with the sales of tangible personal property as required
under the programs or agreements.
(43) "Soft drink" means nonalcoholic beverages that contain natural or artificial sweeteners. "Soft drinks" does not include
beverages that contain milk or milk products, soy, rice or similar
milk substitutes or greater than fifty percent of vegetable or
fruit juice by volume.
(39)(44) "State" means any state of the United States and the
District of Columbia.
(40)(45) "Tangible personal property" means personal property
that can be seen, weighed, measured, felt or touched, or that is in
any manner perceptible to the senses. "Tangible personal property"
includes, but is not limited to, electricity, steam, water, gas and
prewritten computer software.
(41)(46) "Tax" includes all taxes levied under articles
fifteen and fifteen-a of this chapter and additions to tax,
interest and penalties levied under article ten of this chapter.
(42)(47) "Tax Commissioner" means the State Tax Commissioner
or his or her delegate. The term "delegate" in the phrase "or his
or her delegate", when used in reference to the Tax Commissioner,
means any officer or employee of the Sstate tax division duly
authorized by the Tax Commissioner directly, or indirectly by one
or more redelegations of authority, to perform the functions
mentioned or described in this article or rules promulgated for
(43)(48) "Taxpayer" means any person liable for the taxes
levied by articles fifteen and fifteen-a of this chapter or any
additions to tax, penalties imposed by article ten of this chapter.
(44)(49) "Tobacco" means cigarettes, cigars, chewing or pipe
tobacco or any other item that contains tobacco.
(45)(50) "Use tax" means the tax levied under article
fifteen-a of this chapter.
(46)(51) "Use-based exemption" means an exemption based on the
purchaser's use of the product or service.
(47)(52) "Vendor" means any person furnishing services taxed
by article fifteen or fifteen-a of this chapter or making sales of
tangible personal property or custom software. "Vendor" and
"seller" are used interchangeably in this article and in article
fifteen and fifteen-a of this chapter.
(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 the twelfth day of
November, two thousand two, 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 two
and two thousand four and two thousand five, but
does not include any substantive changes in the agreement adopted
after the first sixteenth day of January April, two thousand five.
NOTE: The purpose of this bill is to reduce the six percent
sales tax on food and food ingredients intended for human
consumption to five percent beginning January 1, 2006.
Sales, purchases and uses of alcoholic beverages, candy,
dietary supplements, prepared foods and soft drinks would continue
to be taxed at the six percent rate as would vending machine sales
Definitions in the bill for the terms "alcoholic beverages,"
"bundled transaction," "candy," "dietary supplement," "food and
food ingredients," "food sold through a vending machine," "prepared
food" and "soft drinks" conform to requirements of the Streamlined
Sales and Use Tax Agreement.
Section 11-15-3a is new. Therefore, strike-throughs and
underscoring are omitted.
Sections 11-15B-2 and 11-15B-2a are amended and reenacted.
Strike-throughs indicate language of the present law that would be
deleted and underscoring indicates new language that would be