A 1 percent municipal sales and use tax in Beckley has generated more than $18 million for the City of Beckley in three and a half years, according to figures supplied by the State Tax Department.
Enacted on July 1, 2016, the tax is paid by consumers who purchase goods or services inside corporate city limits. From July 2016 until Sept. 30, 2019, the tax generated $18,115,526 for city services.
Beckley Mayor Rob Rappold said the city began charging the 1 percent under Home Rule guidelines, which allow cities to pass rules that govern themselves as long as state and federal constitutions are obeyed.
In exchange for the 1 percent consumer sales tax, the mayor said, the city reduced the Business and Occupation tax on business owners in three classifications. The highest reduction was in retail at 20 percent. The B&O rates in manufacturing and amusement were reduced by around 15 percent, he added.
"So it wasn't a money grab," Rappold said. "We gave money back to the business owners, in exchange for the right to charge a 1 percent sales and consumer use tax.
"The city suffered from deferred maintenance and deferred construction for many, many years," he added. "If you look around Beckley, you can see we've been able to make a pretty good comeback, and a lot of it, admittedly, has to do with our tax schedule."
The County Commission Association of West Virginia will be asking the Legislature in the upcoming session for similar taxing authority.
Raleigh County Commission President David Tolliver and Fayette County Commission President Denise Scalph said their counties want state legislators to allow Home Rule – and taxing – in unincorporated areas of counties. The money would help counties pay staggering jail bills, they said.
Under legislation proposed by Republican Del. Brandon Steele of Raleigh County, Class 1 and Class 2 cities, which include Beckley, would pay to house inmates arrested within municipal limits.
West Virginia Tax Commissioner Dale Steager said that for municipalities that impose the tax, businesses collect the 1 percent tax on sales completed at the storefronts in corporate limits. Those revenues are then turned over to the city.
The tax is also collected when a good or service is delivered to a customer who lives inside city limits, he added.
"For example, when a heating and cooling business goes to a customer's home located in a municipality that imposes a sales and use tax to service the heating or cooling system, the business must collect that municipality's sales and use tax on the charge for that taxable service, even if the location of the business is outside the municipality imposing the tax," Steager said.
Steager said that each city that imposes a sales and use tax is required to furnish the State Tax Department with a boundary database that shows the nine-digit ZIP codes, or ZIP + 4 code, that is used for addresses that are inside city limits.
He said the same boundary database is used by online retailers, telemarketers and catalog merchants to determine whether to charge the customer a municipal sales tax.
Businesses collect the tax and submit the monies to the State Tax Department.
Tolliver said that he has been approached in the last month by those who report they are paying a 1 percent tax in places that are outside of Beckley municipal limits but that have a 25801 ZIP code.
In November 2018, a manager of the Arby's at 3692 Robert C. Byrd Drive verified reports that a customer had complained that she was being charged a tax of 7 percent, instead of the 6 percent sales tax enforced by the West Virginia Tax Department.
The manager said an Arby's corporate representative was notified of the complaint. Shortly after the notification, a corporate representative directed the local restaurant to stop charging the 1 percent, the manager reported.
Mayor Rappold pointed out that Beckley hosts many "doughnut holes."
"If they're in the city, they should be charging the 1 percent," he said. "People who go there, obviously, have the benefits of police protection and, God forbid, fire protection if there is a fire in a car or something."
Although the system usually works well, Steager said, mistakes can occur due to the limitations of the ZIP code.
Steager said Tuesday that the ZIP + 4 is the code that city officials supply to the State Tax Department for collection of the 1 percent tax.
"The 9-digit ZIP codes were developed to facilitate mail delivery," Steager explained. "Because ZIP codes often cross municipal and county boundary lines, collecting municipal sales and use taxes using 9-digit ZIP codes generally works well, but the system is not perfect."
Steager said there is a protocol to follow if customers believe a 1 percent tax should not have been placed on their transactions.
"Depending upon the specific circumstances, the business may, or may not, choose to reimburse the customer for what the customer believes is erroneously collected municipal sales and use tax," he said.
If the business does not reimburse the customer, the customer may file a claim for refund with the State Tax Department for the amount of municipal sale and use tax the customer believes was erroneously paid, Steager explained.
The claim must include (1) the physical address of the store that collected the municipal sales and use tax, (2) the purchase price paid by the customer upon which the sales tax was computed, (3) the name of the municipality imposing the tax, (4) the amount of municipal sales and use tax paid, (5) a statement of why the customer believes the store should not have charged the municipal sales and use tax and (6) a copy of the receipt showing payment of the tax.