Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
                Introduced House Bill 3427
                By Delegate Criss [Introduced February 13, 2023; Referred to the Committee on Finance]
     Introduced HB 3427
  A BILL to amend and reenact §11-15-9n of the Code of West Virginia, 1931, as amended, all
         relating to the consumers sales and service tax and use tax exemption for qualified
         purchases of computers and computer software, primary material handling equipment,
         racking and racking systems, and components, building materials and certain tangible
         personal property to be incorporated into a qualified, new or expanded warehouse or
         distribution facility; changing threshold jobs creation number from 300 to 50; and making
         stylistic changes.
     Be it enacted by the Legislature of West Virginia:
     ARTICLE           15.       CONSUMERS               SALES          AND         SERVICE            TAX.
     §11-15-9n. Exemption of qualified purchases of computers and computer software, primary material handling equipment, racking and racking systems, and components,
            building materials and certain tangible personal property.
         (a) Definitions. — For purposes of this section:
         (1) "Building materials" means all tangible personal property, including any device or
  appliance used by builders, contractors or landowners in making improvements, additions, or
  alterations to a building or other structure or to real property in such a way that such tangible
  personal property becomes a part of the building or other structure or the realty, which is installed
  into or directly used or consumed in the construction, addition, alteration, repair or improvement of
  a qualified, new or expanded warehouse or distribution facility. "Building materials" does not
  include tools, construction equipment or any property or device which does not become a
  permanent part of the realty when construction is completed. A device or appliance becomes a
 fixture and a part of the building or other structure or the real property to which it is connected when
 it is built into or is attached to the property in such a way that its removal would substantially
 damage or deface such property.
        (2) "Computers and computer software" as defined in section two, article fifteen-b of this
 chapter §11-15B-2 of this code means computer equipment and related software directly and
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 primarily used to control automated machinery in the facility and the movement of goods within the
 facility, to facilitate customer delivery operations including shipment, preparation for shipment,
 order tracking and delivery inventory control, printing of packing lists and labels and any other
 customer order fulfillment functions.
        (3) "Distribution facility" means a warehouse, facility, structure, or enclosed area which is
 used primarily for the storage, shipment, preparation for shipment, or any combination of such
 activities, of finished goods, consumer ready wares, and consumer ready merchandise.
        (4) "Expansion period" means the period of time beginning one 1 year prior to the start of
 the construction or expansion of the qualified, new or expanded warehouse or distribution facility,
 and ending one 1 year after the substantial completion of the construction or expansion of the
 facility. In no event shall the expansion period exceed five 5 years.
        (5) "Full-time employment" for purposes of determining a full-time employee or a full-time
 equivalent employee, means employment for at least one hundred forty 140 hours per month at a
 wage not less than the prevailing state or federal minimum wage, depending on which minimum
 wage provision is applicable to the business.
        (A) For purposes of this definition, any employee paid less than state or federal minimum
 wage, depending on which minimum wage provision is applicable, shall be excluded from the
 count of employees for the purpose of determining the three hundred 50 jobs requirement of this
 section.
        (B) For purposes of this definition, seasonal employees and part-time employees may be
 converted into full-time equivalent employees if the part-time or seasonal employee is customarily
 performing job duties not less than twenty 20 hours per week for at least six 6 months during the
 tax year. Persons who have worked less than twenty 20 hours per week or who have worked less
 than six 6 months during the tax year do not qualify as part-time employees or as seasonal
 employees.
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        (6) "Primary material handling equipment" means the principal machinery and equipment
 used directly and primarily for the handling and movement of tangible personal property in a
 qualified, new or expanded warehouse or distribution facility.
        (A) The following items may be considered primary material handling equipment:
        (i)   Conveyers, carousels, lifts, positioners, pick-up-and-place units, cranes, hoists,
 mechanical arms and robots;
        (ii) Mechanized systems, including containers which are an integral part thereof, whose
 purpose is to lift or move tangible personal property;
        (iii) Automated storage and retrieval systems, including computers and software which
 control them, whose purpose is to lift or move tangible personal property; and
        (iv) Forklifts and other off-the-road vehicles which are used to lift or move tangible
 personal property and which cannot be legally operated on roads and streets.
        (B) "Primary material handling equipment" does not include:
        (i) Motor vehicles licensed for operation on the roads and highways of this state or any
 other state of the United States or any other political jurisdiction;
        (ii) Parts or equipment used to repair, refurbish, or recondition other equipment; or
        (iii) Equipment which replaces, in whole or in part, primary material handling equipment.
        (7) "Qualified, new or expanded warehouse or distribution facility" means a new or
 expanded facility, subject to the following:
        (A) Qualification criteria. "Qualified, new or expanded warehouse or distribution facility"
 means a new or expanded facility located in this state, that is a warehouse or distribution facility
 that will employ three hundred 50 or more West Virginia domiciled, West Virginia residents, as full-
 time employees in the warehouse or distribution facility once the expansion period is complete and
 which is either:
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        (i) An existing warehouse or distribution facility that will be expanded over the expansion
 period where the total value of all real and personal property purchased or acquired over the
 expansion period as direct investment in the facility is $50 million or more; or
        (ii) A new warehouse or distribution facility where the total value of all real and personal
 property purchased or acquired over the expansion period as direct investment in the facility is $50
 million or more.
        (B) Exclusions and disqualifications.
        (i) Subject to the limitations and restrictions set forth in this section, "qualified, new or
 expanded warehouse or distribution facility" does not include a building or facility where tangible
 personal property is manufactured, fabricated or assembled.
        (ii) Subject to the limitations and restrictions set forth in this section, "qualified, new or
 expanded warehouse or distribution facility" does not include a building or facility where annual
 calendar year retail sales of tangible personal property are made over-the-counter from such
 building or facility to the general public, if such sales exceed five percent 5% of the total annual
 calendar year revenues of the warehouse or distribution facility during the same calendar year.
        (iii) Subject to the limitations and restrictions set forth in this section, "qualified, new or
 expanded warehouse or distribution facility" does not include a building or facility where the
 average monthly full-time employment (determined by including full-time equivalent employees)
 for each calendar year at the facility is less than three hundred 50 West Virginia domiciled, West
 Virginia residents. For purposes of determining average monthly employment for the calendar
 year, the taxpayer shall divide the sum of the twelve 12 monthly averages of qualified full-time and
 full-time equivalent West Virginia employees at the qualified, new or expanded warehouse or
 distribution facility by twelve 12. Each monthly average is computed as the average of West
 Virginia employment at the beginning of each calendar month and at the end of each calendar
 month. Provided, That the State Tax Commissioner may specify a different method for
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  computation of average monthly full-time employment, on a state-wide basis or on a case-by-case
  basis, or both, as the State Tax Commissioner may prescribe.
         (8) "Qualified West Virginia employee" means a full-time employee or full-time equivalent
  employee who is a West Virginia domiciled West Virginia resident.
         (9) "Racking and racking systems" means any system of machinery, equipment, fixtures,
  or portable devices whose function is to store, organize, or move tangible personal property within
  a warehouse or distribution facility, including, but not limited to, conveying systems, chutes,
  shelves, racks, bins, drawers, pallets, and other containers and storage devices which form a
  necessary part of the facility’s storage system, and which is used directly and primarily for the
  storage, handling and movement of tangible personal property in a qualified, new or expanded
  warehouse or distribution facility.
        (10) "Tangible personal property" means tangible personal property as defined in section
 two, article fifteen-b §11-15B-2 et seq. of this chapter code.
        (11) "Warehouse" means a facility, structure, or enclosed area which is used primarily for
 the storage of finished goods, consumer ready wares, and consumer ready merchandise.
        (b) Exemption. — Qualified purchases of computers and computer software, primary
 material handling equipment, racking and racking systems, and components thereof, building
 materials and tangible personal property installed into or directly used or consumed in the
 construction, addition, alteration or improvement of a qualified, new or expanded warehouse or
 distribution facility, as such terms are defined in this section, purchased during the expansion
 period are exempt from the tax imposed by this article and article fifteen-a of this chapter §11-15A-
 1 et seq. of this code. This exemption may apply either to qualified purchases made by a person or
 entity which will be the owner and operator of the qualified, new or expanded warehouse or
 distribution facility or to qualified purchases made by a lessor or lessee of the qualified, new or
 expanded warehouse or distribution facility. A purchase of computers and computer software,
 primary material handling equipment, racking and racking systems, and components thereof,
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 building materials and tangible personal property is a qualified purchase if all requirements for
 exemption set forth in this section are met with relation to the purchase.
        (c) Application for certification of exemption and plan describing investment to be made.
        (1) In order to qualify for the exemption authorized by this section, a taxpayer must submit
 an application for certification of the exemption to the State Tax Commissioner, together with a
 plan describing the investment to be made in the qualified, new or expanded warehouse or
 distribution facility. The application and plan shall be submitted on forms prescribed by the State
 Tax Commissioner. The plan shall demonstrate that the requirements of the law will be met.
        (2) Filing date. The application for certification of the exemption and plan describing the
 investment to be made must be filed on or before the start of the construction or expansion of the
 proposed qualified, new or expanded warehouse or distribution facility.
        (3) Late filing. If the taxpayer fails to timely file the application for certification of the
 exemption with the State Tax Commissioner, together with a plan describing the investment to be
 made, on or before the start of the construction or expansion of the proposed qualified, new or
 expanded warehouse or distribution facility, the exemption allowed by this section shall not be
 available for any purchases of computer and computer software, primary material handling
 equipment, racking and racking systems, and components thereof, building materials and tangible
 personal property otherwise exempt under this section that were made prior to the filing date of the
 application for certification of the exemption, and no refund shall be issued for any such purchase.
        (4)   Exemption in cases of untimely filing. Notwithstanding the untimely filing of the
 application for certification of the exemption and plan describing the investment to be made, if
 certification of the exemption and plan is issued by the State Tax Commissioner of an untimely
 filed application and plan, the exemption shall be available for qualified purchases of computers
 and computer software, primary material handling equipment, racking and racking systems, and
 components thereof, building materials and tangible personal property made subsequent to the
 filing date of the application and plan and before the end of the expansion period.
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        (5) Exemption limited to expansion period purchases.
        (A)    Upon approval of the application and certification of the exemption, qualified
 purchases of computers and computer software, primary material handling equipment, racking
 and racking systems, and components thereof, building materials and tangible personal property
 shall be exempt from the tax imposed by this article and article fifteen-a of this chapter §11-15A-1,
 et seq. of this code. However, if the requisite investment is not made within the expansion period,
 or if the terms and requirements of this section are not satisfied, the taxpayer shall be subject to
 assessment for any tax, penalty or interest that would otherwise have been due.
        (B) Limitations. Any statute of limitations set forth in article ten of this chapter §11-10-1 et
 seq. of this code for assessment made under this subsection for any such tax, penalty or interest
 shall not close until five years subsequent to the end of the expansion period.
        (d) Any person having a right or claim to any exemption set forth in this section shall first
 pay to the vendor the tax imposed by this article and then apply to the State Tax Commissioner for
 a refund or credit or, as provided in section nine-d §11-15-9d of this article code, give to the vendor
 his or her West Virginia direct pay permit number.
        (e) Additional Restrictions, Assessments and Statutes of Limitations. —
        (1) Over-the-counter sales restrictions.
        (A) If within ten 10 years after the end of the expansion period, over-the-counter sales are
 made in any one 1 calendar year, from a warehouse or distribution facility for which qualification
 for exemption under this section was originally established, which over-the-counter sales, in the
 aggregate, exceed five percent 5% of the total revenues of the warehouse or distribution facility
 during the same calendar year, the taxpayer will be disqualified from receiving the exemption
 under this section as of the close of the calendar year in which over-the-counter sales first exceed
 five percent 5% of the total revenues of the warehouse or distribution facility during the same
 calendar year; and the taxpayer shall be subject to assessment for any tax, penalty or interest that
 would otherwise have been due had the exemption set forth in this section never been applied.
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 This over-the-counter sales restriction shall not apply to any year subsequent to the end of the
 tenth 10th year after the end of the expansion period.
         (B) Limitations. Notwithstanding any other provision of this code pertaining to statute of
 limitations to the contrary, any statute of limitations set forth in article ten of this chapter §11-10-1 et
 seq. of this code for assessment for any such tax, penalty or interest shall not close until five 5
 years subsequent to the end of the calendar year in which over-the-counter sales first exceed five
 percent 5% of the total revenues of the warehouse or distribution facility during the same period.
         (2) Fabrication and Assembly Restriction.
         (A) Subject to the restriction and limitations set forth in this subsection, a qualified new or
 expanded warehouse or distribution facility does not include a building or facility where tangible
 personal property is manufactured, fabricated or assembled. If during any calendar year within ten
 10 years after the end of the expansion period, the building or facility for which qualification for
 exemption under this section was originally established, is used for manufacturing, fabrication or
 assembly of tangible personal property, the taxpayer will be disqualified from receiving the