CHARLESTON, WV (WVPREBB) β Gross receipts taxes, a crucial revenue source for many regions in America, trace their origins to West Virginia. On July 1, 1921, West Virginia pioneered this taxation method by replacing its corporate excise tax and gas pipeline tax with the first gross receipts tax, also known as the gross sales tax. This tax, later termed the business and occupation (B&O) tax, was initially set at a rate of 0.4 percent.
What is a Gross Sales Tax?
A gross sales tax is applied to a companyβs total sales without allowing deductions for business expenses such as the cost of goods sold and compensation. According to the Tax Foundation, this means that the tax is calculated based on the companyβs gross revenue rather than its net profit.
Application of the B&O Tax in West Virginia
The West Virginia Tax Division specifies that the B&O tax applies to any person or entity engaged in any public service or utility business within the state. However, this excludes certain industries, including railroad companies, express companies, pipeline companies, telephone and telegraph companies, water carriers by steamboat or steamship, and motor carriers.
Spread and Evolution of the Tax
During the Great Depression of the 1930s, the concept of gross receipts taxes spread across the country, becoming a significant source of tax revenue for various states. In West Virginia, the B&O tax remained a primary revenue source until 1987. At that point, it was largely replaced by a severance tax and a business franchise tax, marking a shift in the state’s approach to taxation.
This historical shift underscores the evolving nature of tax systems and their adaptation to economic and political changes over time.
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