BUCKHANNON – The start of the new year also signals the beginning of the City of Buckhannon’s 1 percent municipal sales tax.
Expected to generate approximately $1 million in additional revenue annually, the 1 percent sales tax – which applies to some but not all products and services sold within city limits – goes into effect today, Wednesday, Jan. 1, 2020.
City finance and administrative director Amberle Jenkins on Monday provided an overview of how the municipal sales tax, which was adopted by Buckhannon City Council in February 2019, will work.
Jenkins said first off, it’s important for residents to realize that anything that’s exempt from state sales tax – such as gasoline and medical prescriptions – will also be exempt from the municipal sales tax.
But if a product or service is purchased in city limits and doesn’t fall under an exemption, a 1 percent sales tax will be added to the 6 percent state sales tax.
“The State Tax Department will collect [the 1 percent sales tax] for us monthly, and then they remit it to us on a quarterly basis,” Jenkins said. “When the retailer is filing taxes, there’s a ‘Schedule M’ that lists all the cities that are collecting sales tax, so the sales tax goes through the state tax department, and then they send us a check.”
“We probably won’t get the first check until May, maybe late April if we’re lucky,” she added.
According to Ordinance 433, the mechanism through which the city adopted the 1 percent sales tax, the amount collected will go directly into a specifically earmarked fund known as the City Sales and Use Tax.
Jenkins said the 1 percent sales tax is levied based on the point of sale location. For instance, if someone who lives in the City of Buckhannon orders a pizza from a pizzeria located outside city limits, the 1 percent tax is applicable, whereas if someone living outside the city limits orders a pizza from the same pizzeria, they wouldn’t be required to pay the 1 percent tax.
“It’s the point of sale – where the pizza is going to,” Jenkins explained.
In addition, the 1 percent sales tax will apply to products purchased from online retailers, such as Amazon, if those products are being delivered within city bounds. Jenkins said online retailers will be able to identify if that sales tax is applicable based on zip code and information provided to them by the W.Va. State Tax Department.
“We had to send a database of zip codes that pertain to our boundaries,” Jenkins said. “In this case, if you live in the city, the point of sale is at your home.”
According to previous stories, Buckhannon became eligible to levy the tax by writing an amendment to its Home Rule Plan; the amendment was approved by the West Virginia Municipal Home Rule Board in early 2019. In order to institute the tax, the city was also required to lower its business and occupation tax rates slightly. According to Ordinance 433, B&O tax will be reduced by 5 cents per $100, a requirement under state law for cities that impose a municipal sales tax.
Specifically, the ordinance reduces the B&O tax from 25 cents to 20 cents for every $100 above $1 million in annual adjusted gross income. The tax will be lowered from 50 cents per $100 to 45 cents per $100 for businesses making more than $10 million in annual adjusted gross income.
Under city code, a business’ first $1 million in annual adjusted gross income is exempt from the B&O tax.
City officials have maintained the additional revenue will allow Buckhannon to accomplish a host of infrastructure-related, recreational, cultural and quality-of-life enhancements to the city, such as the completion of more paving and sidewalk projects and improvements to parks and youth facilities.
Mayor David McCauley explained the rationale behind the implementation of the tax Monday.
“After year of stagnant general fund finances, with greater demands for storm sewer management, streets and sidewalks projects, parks enhancements and other physical plant needs, our City opted to implement the tax that has been nearly universally adopted by the other municipalities in our State,” McCauley told My Buckhannon. “The majority of the sales tax revenues will not be paid by our City residents. There is an accompanying reduction in the inherently unfair business and occupational tax.”
See Chapter 11, Article 15, Section 9 for a list of items or services exempt from state tax, which are also exempt from municipal sales tax.