W. Va. Code R. § 110-12A-4

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-12A-4 - Imposition of Annual Tax on Net Income

4.1. Persons subject to tax.

(a) In addition to the annual tax imposed on gross income, (See Section 3 of these rules and regulations) every carrier doing business in this State shall pay an annual tax on its net income earned within this State.

(b) The annual tax on net income shall apply to carriers who have income from transportation activities beginning and ending (two-point business) within this State, and who also have one-point or pass-through business in this State. The annual tax on net income also applies to persons who have no two (2) point business in West Virginia but have one (1) point business or pass-through business in West Virginia and who also have minimal connection within this State. The annual tax on net income also applies to persons who have no two-point business in West Virginia, but have one-point business or pass-through business in West Virginia and who have minimal connection within this State. For Example: A trucking company with its home offices in Covington, Virginia, transports goods from Virginia to Elkins, West Virginia. On its return trips from Elkins to Virginia, said carrier transports goods that were taken aboard in Elkins. In Elkins, the carrier owns a terminal, maintains a small office and employs several persons. The activities mentioned in the preceding sentence are sufficient to subject the trucking company to the tax on net income, even though the trucker has no transportation activities which begin and end in the state and is not subject to the tax on gross income. Therefore, the trucker must compute his motor vehicle miles within West Virginia (from the border to Elkins and return) and compute his tax liability on net income by the formula method set forth in Section 3.3(a) of this rule.

(c) Types of carriers subject to the tax on net income are the same as those carriers listed in Section 3.1 of these rules and regulations and also in Section 4.2.

4.2. Tax rates. -- The rates of tax to be applied against net income earned within West Virginia are set forth below for each type of carrier. (See Table 110-12AB found at the end of this regulation)

4.3. Determination of net income. The net income earned within this State against which the tax rate is to be applied shall be determined as follows:

(a) Motor vehicles.

(1) Net income of motor vehicles shall be determined by reducing the total net income of the carrier by an amount bearing the proportion to such total net income that its West Virginia gross income bears to its total gross income from all business done everywhere.

(2) This reduced amount of net income is then reduced further to an amount bearing the proportion to such reduced net income of the carrier that its business done in this State in motor vehicle miles bears to all business done everywhere in motor vehicle miles.

(3) To illustrate: A trucking company has total net income of one thousand dollars ($1,000). Said company has total gross income for the taxable year of twenty-five thousand dollars ($25,000) and has West Virginia gross income (beginning and ending) of ten thousand dollars ($10,000). Therefore, West Virginia gross income is forty percent (40%) of total gross income. This forty percent (40%) (West Virginia gross as compared to total gross) is applied against the carrier's total net income of one thousand dollars ($1,000) and reduces said income to six hundred dollars ($600), which is to be further apportioned and reduced by the mileage factor.

(4) The trucker, in this illustration, had total mileage, in all states, of 5,000 miles. His mileage in West Virginia, both intrastate and interstate, was 1,000 miles. Therefore, his West Virginia mileage factor is twenty percent (20%) of his total mileage (1,000 miles divided by 5,000 miles = 20%). This West Virginia mileage factor of twenty percent (20%) is applied against the reduced net income of six hundred dollars ($600) and results in West Virginia taxable income of one hundred twenty dollars ($120).

(b) Railroad carriers.

(1) Net income of railroad carriers shall be determined by reducing the total net income of the carrier by an amount bearing the proportion to such total net income that its West Virginia gross income bears to its total gross income from all business done everywhere.

(2) This reduced amount of net income is then reduce further to an amount bearing the proportion to such reduced net income of the carrier that its business done in this State in ton-miles bears to all business done everywhere in ton-miles.

(3) In computing the annual tax on the net income of a railroad carrier, passenger-miles within or without West Virginia are not to be considered.

(c) Railroad car carriers and express companies.

(1) Net income of railroad car carriers and express companies shall be determined by reducing the total net income of the carrier by an amount bearing the proportion to such total net income that its West Virginia gross income bears to its total gross income from all business done everywhere.

(2) This reduced amount of net income is then reduced further to an amount bearing the proportion to such reduced net income of the carrier that its business done in this State in car-miles bears to all business done everywhere in car-miles.

(d) Pipeline companies.

(1) Net income of pipeline companies shall be determined by reducing the total net income of the company by an amount bearing the proportion to such total net income that its West Virginia gross income bears to its total gross income from all business done everywhere.

(2) This reduced amount of net income is then reduced further to an amount bearing the proportion to such reduced net income of the company that is business done in this State in barrel-miles in the case of oil and liquid coal or slurry and of thousand cubic feet-miles in the case of gas, bears to all business done, measured in like fashion.

(e) Airline companies and steamboat or other watercraft.

(1) Net income of airlines, steamboats or other watercraft shall be determined by reducing the total net income of the carrier by an amount bearing the proportion to such total net income that its West Virginia gross income bears to its gross income from all business done everywhere.

(2) This reduced amount of net income is then reduced further to an amount bearing the proportion to such reduced net income that its business done in West Virginia, measured in passenger-miles in the case of airline companies and ton-miles in the case of any person operating a steamboat or other watercraft, bears to all business done, measured in like fashion.

(3) Airline companies, in computing the mileage factor, are to use only passenger-miles.

(f) Telephone and telegraph companies.

(1) Net income of telephone and telegraph companies shall be determined by reducing the total net income of the company by a amount bearing the proportion to such total net income that its West Virginia gross income bears to its total gross income from all business done everywhere.

(2) This reduced amount of net income is then reduced further to an amount bearing the proportion to such reduced net income of the company that its business done in this State in wire-miles bears to all business done everywhere in wire-miles.

4.4. Exclusions from income.

(a) For the purpose of computing the amount of annual tax on net income, the taxpayer must exclude all nontransportation income. Therefore, the amounts employed in the formula which are designated total gross income and West Virginia gross income must contain only items of income from transportation activities. See Section 3.3(a) of these rules and regulations as to nontransportation income.

(b) Total net income as used in the preceding paragraph shall mean net transportation income of the business. Net transportation income may be determined by employing those rules that are used to compute net income tax due the federal government. However, in determining total net income, the taxpayer may exclude all items of nontransportation income (See Section 3.3(a) of these rules) and must exclude any expenses incurred in relation to the nontransportation income. In other words, net transportation income is that income computed by federal guidelines without items of nontransportation income or expenses reflected therein.

4.5. Persons not subject to tax on net income. -- Any person who engages in business within West Virginia only (has only two-point business in West Virginia) is not subject to the annual tax on net income. Such person is, of course, subject to the annual tax on gross income and must report the entire amount of his gross income from transportation activities thereunder.

W. Va. Code R. § 110-12A-4