West Virginia Sales and Use Tax Guide: Rates, Nexus & Compliance Tips

Sales and Use Tax Basics in West Virginia

Sales Tax

In West Virginia, the sales tax applies to all sales or leases of tangible personal property, or goods, and services, unless a specific exemption applies. The vendor or seller charges the sales tax at the point of sale. Vendors or sellers are considered to be acting as a trustee of the state, and are, consequently, required to maintain accurate records sufficient to prepare returns and verify their accuracy.

Use Tax

The use tax in West Virginia applies when goods or services are used in the state, when no sales tax was collected at the time of purchase. Notably, until the vendor or seller collects the sales tax or the buyer pays it directly to the Tax Division, the buyer remains liable for the use tax. 

West Virginia Sales and Use Tax Rates

The statewide sales and use tax in West Virginia is 6%. Additionally, many municipalities impose a local or municipal sales and use tax at 1% rate. These taxes generally follow the same rules as the state sales and use tax, with a few limited exceptions. To determine the tax, the state and municipal rates are combined and applied to the taxable sales price, rounding to the nearest cent. Collected municipal taxes are reported on the municipal schedules when filing the state’s combined sales and use tax return.

Tax-Exempt Transactions

Generally, all sales or leases of goods and taxable services are subject to sales and use tax. Tax must be collected unless a specific exemption applies, with proper documentation provided by the buyer and retained by the seller. The responsibility for proving an exemption rests with both the buyer claiming it and the vendor making the sale.

Some notable examples of tax-exempt transactions include certain advertising services, the construction, alteration, repair, improvement, or decoration of real property, and sales of newspapers delivered by route carriers. Furthermore, services such as data processing, sales of motion picture films, sales of coin-operated video arcade machines and other video arcade games, and purchases from affiliated entities are exempt from sales and use tax.

Additionally, some organizations are exempt from sales and use tax, including certain non-profit organizations, churches, purchases by the US government or the State of West Virginia, including their institutions or subdivisions, county and municipal governments of West Virginia, and schools.

Nexus Rules in West Virginia

In addition to being physically present in West Virginia, individuals and businesses may become liable for state taxes if they establish an economic or marketplace nexus.

Physical Nexus

A physical nexus in West Virginia can be established through various activities, including maintaining or using an office, warehouse, sales house, or other place of business, or having an agent or representative in the state. Additionally, activities such as being part of a unitary business with another company that maintains a presence in West Virginia, or performing services in the state related to goods or services sold, are sufficient to create a nexus. Also, if a person directly or through an agent solicits business in the state on behalf of the retailer, that creates a physical nexus.

Economic Nexus

Since January 1, 2019, remote or out-of-state sellers of goods and services to in-state consumers must register for sales and use tax purposes in West Virginia and collect and remit taxes once their gross sales exceed USD 100,000 or they have 200 or more separate transactions for goods and services delivered in the state.

Marketplace Nexus

Similar to the economic nexus, the marketplace nexus requires marketplace operators or facilitators to register, collect, and remit West Virginia sales tax once their gross sales exceed USD 100,000 or they have 200 or more separate transactions. What distinguishes the marketplace nexus from the economic nexus is that marketplace facilitators include gross sales made on their own behalf and on behalf of one or more marketplace sellers when determining whether the thresholds are met.

Taxable Goods and Services in West Virginia

As previously mentioned, sales and leases of goods and services are taxable, except those strictly defined as exempt. Consequently, sales of clothes, candy, clothing accessories or equipment, and dietary products are taxable. Taxable services include services directly related to the sale of goods, services to real property, business services, and amusement and recreation services.

Bundled Transactions and the True Object Test

A bundled transaction includes the sale of two or more distinct and identifiable products sold together for a single non-itemized price. Notably, the term does not include items like incidental packaging or products provided free with a required purchase. Whether a transaction is taxable depends on its true object.

For example, if the taxable portion of a transaction is de minimis, meaning 10% or less of the total price, the sale is not considered a bundled transaction. If the taxable portion is not de minimis, the entire transaction is subject to sales tax, and if the non-taxable portion is de minimis, the taxable portion is still subject to sales tax.

E-Commerce Framework

E-commerce sellers that do not have a physical nexus in West Virginia must comply with sales and use tax rules and regulations if they exceed the economic nexus threshold. When determining whether the threshold is exceeded, remote sellers must include both taxable and non-taxable sales of services in the calculation of annual gross sales and transaction counts. Once registered for sales tax purposes in West Virginia, remote sellers must collect and remit sales or use tax on all sales of taxable products and services into the state, unless an applicable exemption applies.

Marketplace Rules

Remote sellers that offer their goods and services through marketplace facilitators are not required to collect and remit sales tax if the marketplace facilitator is registered for sales tax purposes. However, if the marketplace facilitator does not collect and remit taxes, the liability remains with the marketplace seller. Additionally, remote sellers who sell goods through marketplaces and various other channels are responsible for any direct-to-consumer sales. Notably, they must calculate all sales towards the economic nexus threshold.

Digital Goods and Services

Given that all sales of services are presumed taxable unless strictly exempt, sales of streaming services, as well as any supply of digital content, are taxable. Additionally, Software-as-a-Service (SaaS) and other digital services are taxable supplies. 

Digital Marketplace

In West Virginia, the term "marketplace facilitator" is broadly defined to include individuals and businesses that actively enable sales by third-party sellers, marketplace sellers, through a marketplace they operate, whether physical or digital. However, to be considered as a facilitator, they must contract with one or more sellers and, in exchange for consideration, facilitate the sale of the seller’s products, even if the consideration is taken indirectly, such as through fees deducted from transactions.

Furthermore, individuals or businesses must be involved in connecting buyers and sellers by transmitting offers or acceptances, operating or owning the marketplace's technological or physical infrastructure, providing a virtual currency for purchases, or engaging in software or research and development activities that directly support the marketplace.

Additionally, to qualify as marketplace facilitators, persons must perform at least one substantive activity related to the seller’s products, such as processing payments, storing or fulfilling goods, listing products, setting prices, branding the sales as its own, taking orders, advertising or promoting the products, or providing customer service, including handling returns or exchanges.

Notably, the term does not include a payment processor business that is appointed to handle payment transactions across various channels, such as credit and debit cards, and whose sole activity with respect to marketplace sales is to process payments between buyers and sellers.

Digital Platform Operator

Individuals and businesses that meet the criteria set to be treated as marketplace facilitators, and have gross revenue from West Virginia sales equal to or exceeding USD 100,000 for or make 200 or more separate transactions for an immediately preceding calendar year or a current calendar year, must register with the Tax Commissioner to collect state and municipal sales and use taxes. The collecting and remitting requirements apply to all taxable sales of goods, custom software, or services made by the facilitator or marketplace sellers.

Filing and Payment Requirements in West Virginia

The sales and use tax return filing and payment frequency may be monthly, quarterly, or annually, depending on the taxable sales amount. The returns and payments are due on the 20th day of the calendar month following the close of the reporting period. The only exemption is for the annual return, which is due on January 30 of the following year. Returns are filed electronically using the Tax Division's online filing and payment system MyTaxes.

Taxable persons that paid USD 50,000 or more in taxes during the most recent fiscal year may be required to file and pay all taxes electronically. Notably, the filing and payment frequencies are subject to the annual review and may be changed.

Penalties for Non-Compliance with Sales and Use Tax Requirements

Failure to timely file a return on time may result in a penalty of 5% of the tax due, up to a maximum 25%. Furthermore, those who fail to pay taxes on time risk penalties ranging from 0.5% to 25% of the reported or adjusted taxes. 

However, if the failure to pay due taxes was caused by negligence or intentional disregard of rules, a penalty of 5% to 25% calculated on the amount of the deficiency may apply. Filing a false or fraudulent return is punishable with the 50% penalty of the amount of deficiency. In addition to penalties, interest accrues daily and is assessed from the return's due date until payment, regardless of any filing extension.