ENGROSSED
Senate Bill No. 505
(By Senators Sharpe, Ross, Brackenrich,
Manchin, Felton and Minard)
____________
[Introduced March 22, 1993;
referred to the Committee on Finance.]
____________
A BILL to amend and reenact section two, article fifteen, chapter
eleven of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, relating to modifying the
definition of contracting to include the furnishing of work,
or work and materials, in fulfillment of a contract for the
construction, alteration, repair, decoration or improvement
of a new or existing building or structure, or any part
thereof, or for removal or demolition of a building or
structure, or any part thereof, or for the alteration,
improvement or development of real property, regardless of
whether or not it results in a capital improvement.
Be it enacted by the Legislature of West Virginia:
That section two, article fifteen, chapter eleven of the
code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted to read as follows:
ARTICLE 15. CONSUMERS SALES TAX.
§11-15-2. Definitions.
For the purpose of this article:
(a) "Persons" means any individual, partnership,
association, corporation, state or its political subdivisions or
agency of either, guardian, trustee, committee, executor or
administrator.
(b) "Tax commissioner" means the state tax commissioner.
(c) "Gross proceeds" means the amount received in money,
credits, property or other consideration from sales and services
within this state, without deduction on account of the cost of
property sold, amounts paid for interest or discounts or other
expenses whatsoever. Losses shall not be deducted, but any
credit or refund made for goods returned may be deducted.
(d) "Sale", "sales" or "selling" includes any transfer of
the possession or ownership of tangible personal property for a
consideration, including a lease or rental, when the transfer or
delivery is made in the ordinary course of the transferor's
business and is made to the transferee or his agent for
consumption or use or any other purpose.
(e) "Vendor" means any person engaged in this state in
furnishing services taxed by this article or making sales of
tangible personal property.
(f) "Ultimate consumer" or "consumer" means a person who
uses or consumes services or personal property.
(g) "Business" includes all activities engaged in or caused
to be engaged in with the object of gain or economic benefit,
direct or indirect, and all activities of the state and itspolitical subdivisions which involve sales of tangible personal
property or the rendering of services when those service
activities compete with or may compete with the activities of
other persons.
(h) "Tax" includes all taxes, interest and penalties levied
hereunder.
(i) "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
shall not include contracting, personal services or the services
rendered by an employee to his employer or any service rendered
for resale.
(j) "Purchaser" means a person who purchases tangible
personal property or a service taxed by this article.
(k) "Personal service" includes those:
(1) Compensated by the payment of wages in the ordinary
course of employment; and
(2) Rendered to the person of an individual without, at the
same time, selling tangible personal property, such as nursing,
barbering, shoe shining, manicuring and similar services.
(l) "Taxpayer" means any person liable for the tax imposed
by this article.
(m) "Drugs" includes all sales of drugs or appliances to a
purchaser, upon prescription of a physician or dentist and any
other professional person licensed to prescribe.
(n) (1) "Directly used or consumed" in the activities ofmanufacturing, transportation, transmission, communication or the
production of natural resources means used or consumed in those
activities or operations which constitute an integral and
essential part of such activities, as contrasted with and
distinguished from those activities or operations which are
simply incidental, convenient or remote to such activities.
(2) Uses of property or consumption of services which
constitute direct use or consumption in the activities of
manufacturing, transportation, transmission, communication or the
production of natural resources include only:
(A) In the case of tangible personal property, physical
incorporation of property into a finished product resulting from
manufacturing production or the production of natural resources;
(B) Causing a direct physical, chemical or other change upon
property undergoing manufacturing production or production of
natural resources;
(C) Transporting or storing property undergoing
transportation, communication, transmission, manufacturing
production or production of natural resources;
(D) Measuring or verifying a change in property directly
used in transportation, communication, transmission,
manufacturing production or production of natural resources;
(E) Physically controlling or directing the physical
movement or operation of property directly used in
transportation, communication, transmission, manufacturing
production or production of natural resources;
(F) Directly and physically recording the flow of propertyundergoing transportation, communication, transmission,
manufacturing production or production of natural resources;
(G) Producing energy for property directly used in
transportation, communication, transmission, manufacturing
production or production of natural resources;
(H) Facilitating the transmission of gas, water, steam or
electricity from the point of their diversion to property
directly used in transportation, communication, transmission,
manufacturing production or production of natural resources;
(I) Controlling or otherwise regulating atmospheric
conditions required for transportation, communication,
transmission, manufacturing production or production of natural
resources;
(J) Serving as an operating supply for property undergoing
transmission, manufacturing production or production of natural
resources, or for property directly used in transportation,
communication, transmission, manufacturing production or
production of natural resources;
(K) Maintenance or repair of property directly used in
transportation, communication, transmission, manufacturing
production or production of natural resources;
(L) Storage, removal or transportation of economic waste
resulting from the activities of manufacturing, transportation,
communication, transmission or the production of natural
resources;
(M) Pollution control or environmental quality or protection
activity directly relating to the activities of manufacturing,transportation, communication, transmission or the production of
natural resources and personnel, plant, product or community
safety or security activity directly relating to the activities
of manufacturing, transportation, communication, transmission or
the production of natural resources; or
(N) Otherwise be used as an integral and essential part of
transportation, communication, transmission, manufacturing
production or production of natural resources.
(3) Uses of property or services which would not constitute
direct use or consumption in the activities of manufacturing,
transportation, transmission, communication or the production of
natural resources include, but are not limited to:
(A) Heating and illumination of office buildings;
(B) Janitorial or general cleaning activities;
(C) Personal comfort of personnel;
(D) Production planning, scheduling of work, or inventory
control;
(E) Marketing, general management, supervision, finance,
training, accounting and administration; or
(F) An activity or function incidental or convenient to
transportation, communication, transmission, manufacturing
production or production of natural resources, rather than an
integral and essential part of such activities.
(o) "Contracting".
(1) In general. -- "Contracting" means and includes the
furnishing of work, or both materials and work, for another by a
sole contractor, general contractor, prime contractor orsubcontractor in fulfillment of a contract for the construction,
alteration, repair, decoration or improvement of a new or
existing building or structure, or any part thereof, or for
removal or demolition of a building or structure, or any part
thereof, or for the alteration, improvement or development of
real property.
(2) Form of contract not controlling. -- An activity that
falls within the scope of the definition of contracting shall
constitute contracting regardless of whether such contract
governing the activity is written or verbal and regardless of
whether it is, in substance or form, a lump sum contract, a cost-
plus contract, a time and materials contract, whether or not
open-ended, or any other kind of construction contract.
(3) Special rules. -- For purposes of this definition:
The term "structure" includes, but is not limited to,
everything built up or composed of parts joined together in some
definite manner and attached or affixed to real property, or
which adds utility to real property or any part thereof, or which
adds utility to a particular parcel of property and is intended
to remain there for an indefinite period of time.
(p) "Manufacturing" means a systematic operation or
integrated series of systematic operations engaged in as a
business or segment of a business which transforms or converts
tangible personal property by physical, chemical or other means
into a different form, composition or character from that in
which it originally existed.
(q) "Transportation" means the act or process of conveying,as a commercial enterprise, passengers or goods from one place or
geographical location to another place or geographical location.
(r) "Transmission" means the act or process of causing
liquid, natural gas or electricity to pass or be conveyed from
one place or geographical location to another place or
geographical location through a pipeline or other medium for
commercial purposes.
(s) "Communication" means all telephone, radio, light, light
wave, radio telephone, telegraph and other communication or means
of communication, whether used for voice communication, computer
data transmission or other encoded symbolic information transfers
and shall include commercial broadcast radio, commercial
broadcast television and cable television.
(t) "Production of natural resources" means the performance,
by either the owner of the natural resources or another, of the
act or process of exploring, developing, severing, extracting,
reducing to possession and loading for shipment for sale, profit
or commercial use of any natural resource products and any
reclamation, waste disposal or environmental activities
associated therewith.
(u) "Management information services facility" means a
building, or any part thereof, or a complex of buildings, or any
part thereof, including the machinery and equipment located
therein, that is exclusively dedicated to providing management
information services to the owner or operator thereof or to
another person.
(v) "Management information services" means, and is limitedto, data processing, data storage, data recovery and backup,
programming recovery and backup, telecommunications, computation
and computer processing, computer programming, electronic
information, and data management activities, or any combination
of such activities, when such activity, or activities, is not
subject to regulation by the West Virginia public service
commission and such activity, or activities, is for the purpose
of managing, planning for, organizing or operating, any
industrial or commercial business, or any enterprise, facility or
facilities of an industrial or commercial business, whether such
industrial or commercial business or enterprise, facility or
facilities of an industrial or commercial business is located
within or without this state and without regard to whether such
industrial or commercial business, or enterprise, facility or
facilities of an industrial or commercial business is owned by
the provider of the management information services or by a
"related person", as defined in Section 267(b) of the Internal
Revenue Code of 1986, as amended.
_____________
(NOTE: The purpose of this bill would be to treat all work
or work and materials furnished in fulfillment of a contract for
the construction, alteration, repair, decoration or improvement
of a new or existing building or structure, or any part thereof,
or for the removal or demolition of a building or structure, or
any part thereof, or for the alteration, improvement or
development of real property as "contracting" regardless of
whether or not the work results in a capital improvement. Under
current law, only work resulting in a capital improvement is
treated as "contracting". Under this new provision, persons
performing such activities would pay sales and use tax on their
purchases of equipment and supplies for use in their business and
on the materials used in performing such contracts. No sales or
use tax would be charged to the customer. Currently personsfurnishing such work that does not result in a capital
improvement pay sales tax on their purchases for use in business,
but not on their purchases of materials that are resold to the
customer, and charge sales tax to the customer on both the charge
for labor and the charge for materials.)