Senate Bill No. 678
(By Senators Browning, McCabe, K. Facemyer,
Unger, Helmick
Foster, Stollings, Jenkins and Kessler)
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[Introduced March 23, 2009; referred to the Committee on
Government Organization; and then to the Committee on Finance.]
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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 and §11-6J-6; 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 specialized manufacturing production
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.
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.
NOTE: The purpose of the bill is to provide for mandated
salvage valuation for property tax purposes, of tangible personal
property and computer servers directly used in certain high
technology businesses or an Internet advertising business, and to
exempt from the consumers sales and service tax and use tax, all
purchases of computer software, computers, servers and building
materials and tangible personal property installed into a
building or facility for direct use in a high technology business
or Internet advertising business, and to provide for a
contractor's pass through exemption for such purchases.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
Article 11-6J is new; therefore, strike-throughs and
underscoring have been omitted.