H. B. 4551


(By Delegate S. Williams (By Request))
[Introduced February 22, 1994; referred to the
Committee on Political Subdivisions.]




A BILL to amend article thirteen, chapter eight of the code of West Virginia, one thousand nine hundred thirty-one, as amended, by adding thereto a new section, designated section five-b, relating to empowering West Virginia municipalities to impose a tax upon salaries, wages, commissions, certain contractual payments and other compensation for work performed and services rendered within said municipalities.

Be it enacted by the Legislature of West Virginia:

That article thirteen, chapter eight of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new section, designated section five-b, to read as follows:
ARTICLE 13. TAXATION AND FINANCE.

§ 8-13-5b. Gross wage tax.

(a) Subject to the provisions set forth in subsection (c) of this section, every municipality shall have plenary power and authority to levy and collect a tax upon all salaries, wages, commissions, contractual payments which are not otherwise subject to a municipal business and occupation tax, and other compensation and income earned for work performed and services rendered within the municipality: Provided, That where a municipality does not impose a municipal business and occupation tax or hereafter repeals any ordinances imposing a municipal business and occupation tax, then the municipality shall have plenary power and authority to levy and collect the tax herein upon all net income earned by proprietorships, partnerships and corporations, including, but not limited to, limited liability corporations and subchapter corporations, conducting and transacting business within the corporate limits of the municipality.

Any ordinance imposing such tax shall provide that it shall not exceed one percent of the gross salaries, wages, commissions, contractual payments not subject to a municipal business and occupation tax, or other income or compensation levied upon pursuant to the provisions of this section. Such ordinance may provide that the tax herein may exceed one percent: Provided, That the ordinance shall not become effective until it shall be ratified by no less than two thirds of the legal votes cast thereon by the qualified voters of such municipality at a regular municipal election or special municipal election, as the governing body shall direct, but in no event shall the tax exceed three percent of the amounts levied upon.
The proceeds generated by the levy of the tax herein within the municipality in the first year of imposition pursuant to this section and, where the rate has been increased pursuant to the provisions of this section, the proceeds collected by the municipality in the first year of imposition, shall be accompanied by a reduction of the municipality's business and occupation tax rates in an amount not less than seventy-five percent of the amounts of the tax herein collected in the previous year. Such reduction in municipal business and occupation revenues shall be accomplished by a permanent rate reduction, or an exemption credit increase, or both. The remaining twenty-five percent of said amounts collected in the first year shall be dedicated to permanent infrastructure improvements, and a like amount shall be set aside annually from the proceeds of the tax herein for the same purpose.
(b) There shall be no double taxation resulting from the application and enforcement of the provisions of this section, and reciprocity shall be maintained between all municipalities imposing the tax herein. The tax shall be levied, collected and retained by the municipality in which the taxpayer is employed and earns compensation. In any case where the municipality in which the taxpayer resides imposes the tax herein at a higher percentage rate than the municipality in which such taxpayer is employed and compensated, the municipality in which the taxpayer resides shall levy, collect and retain the difference between its percentage rate and the percentage rate paid to the municipality in which such taxpayer has earned such compensation.
(c) The following income, regardless of its recipient, shall be exempt from the tax herein:
(1) All proceeds of life insurance policies paid to the individual beneficiaries upon the death of the insured;
(2) All amounts paid to the insured which constitute a return of premium or premiums paid pursuant to life insurance or endownment contracts, either during the term of the contract or at the maturity of the term mentioned therein, or upon the surrender thereof;
(3) All amounts received which constitute unemployment benefits, workers' compensation awards, social security benefits, veterans' benefits conferred by reason of honorable service in the military or naval forces of the United States of America, compensation for personal injuries or sickness, monetary damages, whether compensatory or punitive, received on account of such injuries or sickness, or through the war risk insurance act or any other applicable law or regulation enacted or adopted for the benefit and relief of injured or disabled persons or members of the military or naval forces of the United States of America;
(4) The value of any property acquired by gift, bequest, devise or descent: Provided, That any income derived from such property shall constitute income and the subject to the tax herein;
(5) Interest upon the obligations of this state, or any political subdivision thereof, or upon the obligations of the United States or its possessions;
(6) Any other income or compensation which is exempted by this code or federal laws and regulations.
(d) Every municipality shall have plenary power and authority to impose, by ordinance, upon employers the duties to collect and remit to such municipality the tax herein levied upon the earnings of employees or compensation paid for contracted labor and services, and to prescribe penalties for failure to perform such duties. In the event a municipality imposes upon employers such duties to collect and remit the tax herein, such employers shall be entitled to deduct and retain one and one-half percent of the total amount collected as compensation to such employers for collecting and remitting such tax.
(e) No ordinance enacted pursuant to the provisions of this section may require any taxpayer to provide the municipality with copies of the taxpayer's state or federal income tax returns or any other personal financial information.
(f) The state and all of its political subdivisions, agencies and instrumentalities shall deduct from the wages and salaries of their employees the amount of any municipal wage tax imposed and levied upon the income of such employees pursuant to this section and pay the same over to the municipality levying such tax, and further, shall be entitled to deduct and retain the following percentages from the total amounts collected as compensation for collecting and remitting such tax to the municipality: (1) Three percent if the tax is one half of one percent of gross earnings; and (2) one and one-half percent if the tax is one percent or more of gross earnings.



NOTE: The purpose of this bill is to empower West Virginia municipalities to impose a tax upon salaries, wages, commissions, certain contractual payments and other compensation for work performed and services rendered within the municipalities for the purpose of eliminating or significantly reducing the B & O taxes.

This section is new; therefore, strike-throughs and underscoring have been omitted.