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West Virginia Manufacturers Hit Hard by Personal Property Tax

by Tom Branham, Washington D.C., November 2019

 

In West Virginia, nearly a third of all property tax collections are derived from tangible personal property. The taxes are especially burdensome for manufacturing companies.

 

While other taxes have been reformed, manufacturers continue to be saddled with high tangible personal property taxes on machinery, equipment, and inventory.

 

High Tax Rates

 

Personal property taxes represent a sizeable tax liability for capital-intensive manufacturing operations in West Virginia. The supply chain is also affected, with distribution centers facing effective tax rates of more than 30%, according to the Tax Foundation.

 

“These taxes discourage investment, since new, undepreciated equipment has a higher taxable value than older equipment, even if its continued use is inefficient,” explained Jared Walczak, Director of State Policy at the Tax Foundation.

 

Property Tax on Inventory

 

West Virginia is one of only 10 states, which taxes inventory. It creates a huge compliance cost for manufacturers and other businesses.

 

Companies must track the acquisition price and depreciation of each piece of property, along with the value and location of their inventory, the relevant assessment ratios and millages, and applicable credits, abatements, and refunds to calculate and remit the tax. Analysts say inventory taxes can be an incentive for businesses to relocate to other states where they can avoid the tax.

 

Previous attempts to repeal taxes on manufacturing machinery, equipment and inventory have failed. They include recommendations from the 1999 Commission on Fair Taxation, the 2006 Tax Modernization Project, and the 2018 Just Cut Taxes and Win Proposal. Heading into the next legislative session, there appears to be some new momentum for change.