Sales tax issues a recurring problem
CHARLESTON, W.Va. -- The ongoing situation involving businesses outside Charleston charging the city's new sales tax is new for Kanawha County, but not for other areas of the state.
The state's first two cities to have sales taxes -- Williamstown and Huntington -- have dealt with the problem before.
Williamstown was the first West Virginia city to enact a sales tax, doing so in 2011. Though Williamstown does not have home rule, it was able to enact the tax because it did not have a business and occupation tax.
Williamstown Councilwoman Barbara Lewis said a few businesses outside city limits began charging the 1 percent tax, including a Dollar General a few miles beyond the city limits.
Part of the confusion stemmed from the fact that some businesses located outside the city still have a Williamstown address. City leaders came up with a quick method to determine if a business should charge the tax.
"If they have city water, they have to charge the tax," Lewis said, adding that the city's water system lines up with city limits.
"It's an easy solution," she said.
Still, it took some time for issues to be resolved. Lewis said Williamstown took a proactive approach -- sending notices to all nearby businesses explaining the change.
"That's a difficult chore," she said. "But that's what you need to do is send out letters to the businesses. It'll probably take some time."
A few months after Williamstown enacted its tax, Huntington followed suit.
"When that happened, there was one major retailer (outside the city limits) that began to charge the additional 1 percent," said Deron Runyon, Huntington's finance director.
That retailer was Wal-Mart, though Runyon didn't identify it by name.
However, Runyon said both the retailer and the city were proactive about the issue when it was discovered, and the store stopped charging the tax within a few days.
"In the defense of the retailer, they are just outside city limits," Runyon said.
Since then, Runyon said the city has been active in pursuing any instances where consumers think the city tax may be erroneously applied, but have not discovered any cases so far.
After Huntington, five more cities have enacted municipal sales taxes -- Rupert on April 1, and Charleston, Harrisville, Quinwood and Wheeling on Oct. 1.
Charleston, Huntington and Wheeling enacted sales taxes as a result of home rule status, while the smaller cities were allowed to enact the tax because they don't charge a B&O tax.
Since Charleston has enacted its sales tax, businesses outside the city in ZIP codes shared with Charleston or that have Charleston addresses have been reported to be charging the tax -- similar to the situation Williamstown faced. Many are large corporate chains.
Locally, the issue has affected businesses in South Charleston, Cross Lanes and the Sissonville area. Some of those businesses have since stopped charging the tax, while others have not.
All sales taxes are sent to the state Tax Department, which then distributes the local sales tax to the respective municipality, Heather Raines, department spokeswoman, said in an email to the Daily Mail.
The department sends notices to businesses that should be collecting the tax, based on nine-digit ZIP code boundaries, a list of which is available on the department's website.
In addition, the department has "contacted numerous businesses and their corporate offices to help resolve these type of location issues," Raines said.
Part of the problem is that even when using the nine-digit ZIP codes, boundaries still don't always line up with municipal boundaries.
"In our contiguous neighboring states, the local option sales tax is generally restricted to county governments with larger geographic areas that tend to more closely follow five-digit ZIP codes versus nine-digit ZIP codes," Raines said.
"The geography location problems are far more acute with small jurisdictions and jurisdictions with boundaries that do not necessarily even follow along with nine-digit ZIP code boundaries. There will always be a vendor learning curve with regard to these new tax collection requirements; this is an ongoing process."
In cases where the tax has erroneously been collected, the customer who paid the tax can apply for a refund from the tax department by calling 1-800-982-8297. Business owners can also use that number for assistance.
Charleston's sales tax should not be applied to motor vehicles, motor vehicle fuel, food and anything else exempted from state sales tax.
Back in Williamstown, Lewis said once the dust settles, the tax will be good for the municipality.
"You will be very happy you did this," she said.