PARKERSBURG, W.Va. — Customers will be paying 7 cents on the dollar instead of 6 for taxable items purchased and services rendered in Parkersburg and Vienna starting Wednesday as 1 percent municipal sales taxes go into effect.
Both cities were among 16 accepted into West Virginia’s Municipal Home Rule Pilot Program, and both received permission to implement a 1 percent sales tax. It’s tacked on to the 6 percent state sales tax, which is collected on a host of items and services. Exemptions to the state sales tax – like automobiles, gasoline and prescriptions – also apply to the local ones.
“Anything that citizens would currently pay West Virginia state (sales) tax on, this would be included,” said Pam Salvage, Parkersburg’s personnel director who has also been handling administrative duties in the Finance Department recently.
While the sales tax was approved in December, Parkersburg recently sent out a reminder notice after the state Tax Department failed to include one with its June tax returns due to a glitch, Salvage said.
Vienna also sent its own notices, Mayor Randy Rapp said.
“We prepared notices for all the businesses and sent them out, telling them the 1 percent increase is coming July 1. There are no difficulties that we are aware of, and we are expecting a pretty smooth transition,” Rapp said.
The change to the higher rate won’t be a difficult one to make, said Jim Oppe, owner of six Foodland stores in the region, including three in Parkersburg and one in Vienna.
“It’s just a matter of reprogramming” the register, he said.
That will be done Tuesday.
“On Tuesday it’ll be 6 (percent); on Wednesday, it’ll be 7,” Oppe said.
Since food and its ingredients aren’t subject to the tax, Oppe estimated only about 17 to 18 percent of the products in his stores will be subject to the tax. He said he doesn’t foresee a big impact on business.
“I’m like anybody; I hate to see taxes go up on anything,” Oppe said.
Under state law, the trade-off for implementing a municipal sales tax is a reduction in business and occupation taxes.
Starting Wednesday, Vienna will cut its B&O on retail and restaurant businesses by 20 percent, while eliminating the B&O on manufacturing. That will cost the city approximately $452,000 in revenue, while conservative estimates project $3.2 million in sales tax income.
“No one ever likes extra taxes, I know that,” Rapp said. “But it’s a way that we can do projects that we’ve never had an opportunity to do before, and the average consumer won’t notice a big increase.”
Parkersburg is eliminating the B&O tax on manufacturing and electric and natural gas utilities, while cutting the retail and restaurants rate by 30 percent. That’s expected to cost $2.1 million in revenue over a full year.
But while the sales tax will be collected starting Wednesday, the city of Parkersburg’s plan calls for the B&O cuts to begin Jan. 1, 2016.
The rationale given by city officials is that they don’t know whether the actual sales tax receipts will match the conservative projection of $4.7 million in revenue. Their plan to delay the B&O cuts was initially approved by the Home Rule Board, but recently, that group asked Attorney General Patrick Morrisey for an opinion on whether delaying the cuts still complies with the law.
In a June 16 letter to Morrisey, City Attorney Joe Santer, then serving as acting mayor, said the plan is appropriate and necessary to ensure the city maintains a balanced budget.
It notes the municipal sales tax is collected by the state with its own tax, then the city’s revenue is remitted quarterly. The initial revenues are also expected to be slightly delayed.
“The state has told us we can probably expect receipts for July and August by the middle of October,” Salvage said.
In the letter to Morrisey, Santer argues that Parkersburg’s cuts are more significant than ones proposed by other cities and caution must be exercised.
“Parkersburg’s plan makes the transition from one tax scheme to the other in accord with its budgetary responsibilities and in a cost-effective and efficient manner,” the letter said.. “Ironically, to do otherwise would cause a serious budget shortfall, and in the future encourage meaningless tax cuts by other cities seeking Home Rule so as to avoid such a negative collection gap.”
Parkersburg officials are considering ways to hold back the money it would have to repay businesses if the B&O cuts do have to be made earlier than planned. Salvage noted that B&O funds are collected quarterly, so they won’t be coming in until around the same time as the first sales tax receipts.
“We have time to put together our plan,” she said.
While residents will be paying a higher sales tax, city officials have noted the elimination of the B&O on utilities will directly benefit customers. The tax is passed along on bills, but the amount cannot legally continue to be collected after the tax is eliminated.