Small businesses in West Virginia could run into multiple state business taxes that cut into their bottom lines. Here’s what you need to know about the most common business taxes in the state and what you should do to stay on the right side of the West Virginia State Tax Department.
How are corporations taxed on income in West Virginia?
Every non-exempt corporation, domestic or foreign, that engages in business or derives income from property, activity, or other sources in West Virginia is subject to the corporation net income tax. The tax rate is 6.5% of West Virginia taxable income.
The starting point in calculating West Virginia taxable income is a company’s federal taxable income. Certain increasing or decreasing adjustments that reflect differences between West Virginia and federal tax law are then made. For example, federal net operating losses are added back, and Qualified Opportunity Zone business income is deducted.
How do corporations pay their net income tax?
Form CIT-120, “West Virginia Corporate Net Income Tax Return,” is due on the 15th day of the fourth month following the close of the tax year.
Several electronic filing and payment options are available. Businesses that have made payments totaling $50,000 or more during the most recent fiscal year may be required to file and pay their West Virginia taxes electronically.
If you’re not required to file electronically, you can mail your completed tax return and supporting documents to:
West Virginia Tax Division
Tax Account Administration Division
P.O. Box 1202
Charleston, WV 25324-1202
Are filing extensions available?
An extension of time to file a federal tax return is automatically accepted by West Virginia as an extension of time to file the state tax return. A state extension of time to file may be obtained— even if a federal extension has not been requested— if you make a written request to the West Virginia Tax Division before the due date of the return.
An extension of time to file doesn’t extend your time for payment of tax due, though. If you have an extension, your payment of any tax due may be made by filing a tentative return with Form CIT-120EXT, “West Virginia Extension Corporation Net Income Tax Return.”
Are estimated tax payments required for the corporation’s net income tax?
Yes. If your corporation reasonably expects its West Virginia taxable income to exceed $10,000, you must make estimated payments throughout the tax year.
Payments are due in four equal installments on the 15th day of the fourth, sixth, ninth, and twelfth months of the tax year. You can pay online or with Form CIT-120ES, “West Virginia Estimated Corporate Net Income Tax Payment.”
What filing obligations do S corporations and partnerships have?
In pass-through entities such as S corporations and partnerships, all income, losses, credits, and deductions pass through to the owners, who file individual tax returns. But that doesn’t mean the entities themselves are off the hook when it comes to tax reporting.
Pass-through entities must file an income tax informational return, Form PTE-100, “West Virginia Income Tax Return S Corporation and Partnership (Pass-Through Entity).” This requirement applies to limited liability companies that are treated like partnerships for federal income tax purposes, too.
The form is also used to report and pay West Virginia withholding tax for nonresident shareholders or partners in a West Virginia S corporation or partnership (see below for more information). It’s due by March 15 each year.
Are extensions available for S corporations and partnerships?
A partnership or S corporation can file Form PTE-100EXT, “Extension of Time to File Information Returns,” if it requires an extension of time to file—and/or expects to owe nonresident withholding tax—on or before the return’s due date.
Any partnership that’s been granted an extension of time to file its federal tax return is granted the same extension to file its West Virginia return.
A state extension of time to file may still be obtained, even if a federal extension hasn’t been requested, as long as the request is filed before the due date of the West Virginia return.
Remember, though, that a filing extension doesn’t extend the time for payment.
Does West Virginia offer businesses any tax incentives?
West Virginia provides a wide range of tax credits and other incentives to encourage business development and increase employment opportunities, including the:
- Corporate Headquarters Credit
- Coal Loading Facilities Credit
- Economic Opportunity Tax Credit
- Manufacturing Investment Tax Credit
- High Tech Manufacturing Tax Credit
- Research and Development Sales Tax Exemption
What is nonresident withholding?
Partnerships and S corporations are required to withhold West Virginia income tax from each nonresident partner or shareholder who hasn’t provided Form NRW-4, “West Virginia Nonresident Income Tax Agreement.”
The business must withhold 6.5% of the nonresident partner’s/shareholder’s share of the federal taxable income or portion thereof that comes from West Virginia sources—regardless of whether the amount is actually distributed or deemed to have been distributed for federal income tax purposes. The entire amount withheld is remitted with Form PTE-100 (see above).
Every S corporation or partnership required to deduct and remit nonresident withholding tax must provide an information statement to each shareholder/partner on or before the date it files its tax return. The individual nonresident partners/shareholders can claim the amount withheld as a credit against their West Virginia income tax liability by attaching a copy of the information statement to their personal income tax returns.
An S corporation or partnership may opt to satisfy the nonresident withholding requirements by filing a composite tax return on Form IT-140 NRC, “West Virginia Nonresident Composite Income Tax Return,” for one or more of its nonresident shareholders. The return is due the 15th day of the fourth month after the close of the taxable year.
Any nonresident shareholder/partner included in a composite return with income from any other West Virginia source must file a separate Form IT-140, “West Virginia Personal Income Tax Return,” for the taxable year to report and pay personal income tax on all of their West Virginia source income. The nonresident shareholder/partner may claim credit for their share of West Virginia income tax remitted with the nonresident composite return.
Does West Virginia have a pass-through entity tax election?
The Tax Cuts and Jobs Act of 2017 imposed a new $10,000 limit on the federal individual income tax deduction for state and local taxes. The limit led to higher taxes for many owners of pass-through businesses, who pay state taxes on their businesses’ income on their individual tax returns. West Virginia is among the more than 30 states that have since enacted a workaround.
West Virginia’s selective pass-through entity tax was enacted in 2023, retroactive to 2022. The tax is imposed on the entity’s income, defined as the resident owners’ income plus the apportioned nonresident owners’ income. The pass-through entity tax is filed and paid instead of the nonresident withholding due with Form PTE-100 (see above). In other words, if your small business elects to pay the pass-through entity tax, you don’t need to file Form PTE-100.
For calendar-year taxpayers, the election is due on or before March 15. The filing of an “Elective Pass-Through Entity Return” online will be treated as the taxpayer election for the tax year.
For calendar-year taxpayers, the return is due on or before March 15, and any allowable extension is through September 15.
Are estimated payments required for the pass-through entity tax?
- For Tax Year 2023
- First three quarters: September 15
- Final Quarter: December 15
- For Tax Year 2024 and beyond:
- First Quarter: April 15
- Second Quarter: June 15
- Third Quarter: September 15
- Fourth Quarter: December 15
Is business personal property taxed in West Virginia?
All tangible personal property in West Virginia, with limited exceptions, is subject to property tax. As of July 1 each year, the ownership, use, and value of property are determined for the next calendar tax year. Rates vary.
The assessed value of the property is generally 60% of its fair market value. For example, property with a market value of $100,000 will have an assessed value of $60,000. The county assessor determines the value of commercial business property not centrally valued by the Tax Commissioner or assessed by the Board of Public Works.
Are there any excise taxes?
West Virginia imposes excise taxes on certain products, including gasoline and special fuels, alcohol, tobacco products, soft drinks, soft drink syrups and powders, and medical cannabis.
Does West Virginia impose sales and use taxes?
West Virginia has a sales and service tax and a use tax. It requires “vendors” to collect a tax from purchasers and remit all receipts to the Tax Division. The taxes are imposed on the sale, lease, or rental of tangible personal property and certain services. All sales are presumed to be subject to the tax unless an exemption is clearly established.
Vendors that don’t collect the tax are personally liable for payment of the tax. You can opt to assume or absorb the tax as long as you remit the total amount due. “Tax included” must be shown on your invoice.
The sales tax rate is 6% and based on a rounding system. The purchase price is multiplied by 6%, carried to the third decimal place, and rounded to the nearest cent.
The use tax rate is also 6%. The use tax is imposed on the use of tangible personal property or services on which the West Virginia sales tax wasn’t paid.
Are remote sellers subject to the sales and use taxes?
Yes. Remote sellers need to collect West Virginia sales and use taxes on sales delivered in West Virginia unless the small seller exception applies (see below). “Remote seller” generally means a taxpayer with no physical presence in the state that sells tangible personal property and/or services for delivery in West Virginia.
The duty to collect West Virginia sales and use taxes also applies to West Virginia municipal sales and use taxes when the transaction is sourced to a municipality that imposes sales and use taxes (see below).
What is the small seller exception?
Smaller remote sellers with no physical presence in West Virginia aren’t required to collect West Virginia state and municipal sales and use taxes if:
- Their annual sales of products and services into the state are no more than $100,000, and
- They have fewer than 200 separate transactions for goods and services delivered in West Virginia.
The annual gross sales amount and number of separate transactions include both taxable and nontaxable sales of services delivered to West Virginia.
The small seller exception is determined annually by looking at the seller’s business during the preceding calendar year. However, if either of these thresholds is satisfied during the current calendar year, the seller must begin collecting West Virginia state and municipal sales taxes on all sales made after the day the threshold was reached.
How do businesses pay their sales and use taxes?
When you register with the West Virginia Tax Division, a sales and use tax account will be established, and you’ll receive Form CST-200CU, “West Virginia Sales and Use Tax Return.”
If you collect sales tax exceeding $250 a month, you must remit the tax monthly. If the average monthly remittance is no more than $250, you can file on a quarterly basis. If the annual aggregate sales and use tax to be remitted is $600 or less, you may file only an annual return.
Returns are due on the 20th day of the month following the close of the reporting period. You need to file a sales and use tax return even if no tax is collected or due.
Returns may be filed online. If you paid more than $25,000 in the prior tax year, you must file and pay electronically.
What is the accelerated sales and use payment?
The accelerated payment applies to business taxpayers whose average monthly payment of sales and use tax for the previous calendar year (or portion of a year if not in business for the entire year) is $100,000 or greater. It’s due by June 20 and equals the tax attributed to the first 15 days of June. You can pay the actual amount due or half of the May payment.
The remainder of the June liability is due by July 20.
Are any exemptions available?
Several types of exemptions might apply to sales and use taxes. Your business might qualify for an exemption and/or have customers who qualify. Some exemptions are based on the type of product or service; others are based on the intended use of the product or service. And some exemptions depend on the type of buyer.
What are municipal taxes?
West Virginia municipalities have the authority to levy local sales and use taxes, and many do so. Municipal sales and use tax is collected by the Tax Division.
Municipal sales tax may be imposed by the municipality where the tangible personal property or taxable service is delivered. In addition, certain cities may impose local registration taxes, license fees, and other fees not collected by the Tax Division.
The primary source of revenue for most West Virginia cities is a broadly based municipal business and occupation tax. This tax is imposed on the privilege of engaging in certain business activities within the municipality. The measure of the tax is gross receipts with no deductions for the cost of doing business. Different tax rates apply to different business activities, and rates may vary from city to city.
What are the employer withholding obligations?
Every employer that pays wages or salary subject to the West Virginia personal income tax must deduct and withhold the tax and remit the tax withheld to the State Tax Department (this is in addition to federal withholding for Social Security, Medicare, and federal unemployment taxes).
The amount of tax to be withheld is to be determined on the basis of the employee’s Form IT-104, “Employee’s Withholding Exemption Certificate,” and West Virginia’s Employer’s Withholding Tax Tables. The withheld tax is due on or before the 15th day of the succeeding month.
Form IT-101Q, “West Virginia Employer’s Quarterly Return of Income Tax Withheld,” is due on or before the last day of the month following the end of every quarter, with the first quarterly return due April 30. In addition, you must file Form IT-103, “West Virginia Withholding Year End Reconciliation,” on or before January 31.
Employers that withhold less than $600 annually must continue to file Form IT-101A, “West Virginia Employer’s Annual Return of Income Tax Withheld,” and pay the withheld amount annually; they’re not required to file a quarterly return. For these employers only, the due date for the annual return is January 31 of the year after the year for which the withholdings are deducted and withheld. Annual filers don’t need to file a separate Form IT-103—the forms are combined.
Any employer required to file a withholding return for 25 or more employees or uses a payroll service must submit all data electronically.
Employers are required to furnish each employee with two copies of a withholding tax statement (IRS Form W-2, “Wage and Tax Statement,” or an approved substitute) on or before January 31 of the following year.
How do unemployment insurance taxes work in West Virginia?
Every business that has employees or is a corporation, limited liability company, limited partnership, or limited liability partnership must register with WorkForce West Virginia. After you register, the agency will determine if your business meets the liability requirements for the unemployment compensation program based on the information in your Form UC 201-B, “Employer’s Initial Statement.” The state unemployment insurance tax is on top of the federal unemployment tax.
Generally, your small business will be deemed liable when you:
- Employ one or more individuals for some part of a day in each of 20 different weeks in a calendar year (the weeks needn’t be consecutive), or
- Pay total wages of $1,500 or more in a calendar quarter in the current or preceding calendar year.
Certain service is excluded from the calculation of wages, including an employer’s parents, spouse, and children under age 18. If your business is a limited liability company that files as a sole proprietorship or partnership for federal tax purposes, you can exclude the members’ wages.
Most employers pay unemployment insurance taxes at a rate of 2.7% of wages, although the rate may be higher or lower based on individual experience (what’s known as experience rating). Only the first $9,000 of an employee’s annual wages are taxed.
Experience rating is done after 36 months. The rate is based on several factors, including:
- Average annual payroll
- Credits to your account
- Charges against the account for benefits paid to former employees
Rates are established every June 30, taking effect the following January 1.
Wage and Contribution Reports, as well as the contributions, are due quarterly by the following dates:
- January 31
- April 30
- July 31
- October 31
You generally must file online. You’re required to file even for periods when you paid no wages.
If you file a written request before the due date, you may qualify for an extension of up to 30 days.
Staying up-to-date on all of your federal and state tax obligations can take up a lot of your time and resources. Gusto’s payroll service can simplify matters by making it easier to pay employees and automatically file your payroll taxes.