Can a West Virginia municipality apply its sales tax to transactions that happen outside city limits, just because the buyer's zip code overlaps the city?

Official title

Opinion of the Attorney General's Office Regarding a Municipality's Ability to Collect Sales Tax on Purchases Made Outside City Limits

Plain-English summary

The Town of Harrisville (in Ritchie County) had passed a 1% municipal sales-and-use-tax ordinance under the framework in W. Va. Code Chapter 8, Article 13C. The ordinance, by its own terms, applied only to "sales made and services rendered within the boundaries of" Harrisville. The 26362 zip code, however, covers a much larger geographic area than the town itself, and the prosecutor reported that the tax was being applied to citizens and businesses throughout the zip code, not just inside town limits.

The AG's analysis ran in three steps.

First, municipalities have no inherent power to tax. They can tax only when the legislature delegates the power, and they must "strictly comply" with the limits of any delegation (Hunkle v. City of Huntington). Doubts get resolved against the city. The constitutional source of all municipal taxing authority is W. Va. Const. art. X, § 9, which lets the legislature authorize cities, towns, and villages to assess and collect taxes for corporate purposes, but those taxes "shall be uniform, with respect to persons and property within the jurisdiction of the authority imposing the same."

Second, the legislature's grant of municipal sales-tax authority in § 8-13C-4 is geographically explicit. Subsection (c)(1) ties the municipal tax base to the state tax on "sales made and services rendered within the boundaries of the municipality." Subsection (c)(2) lets municipalities tax sales "sourced to the municipality." Subsection (f) treats municipal taxes as "in addition to" the state tax on sales within the municipality. Read together, the statute repeatedly says "within the municipality."

Third, "sourced to the municipality" is a defined term. Under § 11-15B-15(a), a sale is sourced to where the buyer receives the product, usually the seller's business location or the buyer's delivery address, not the buyer's zip code. So if Harrisville was treating the entire 26362 zip code as taxable, that practice contradicted both the statute and Harrisville's own ordinance.

The opinion did not adjudicate specific overcollections. The AG noted that without specific factual instances of misapplication, broader questions about who would be liable to whom (the town, the state, businesses) were not before the office.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Why doesn't a town's zip code define its tax boundaries?

A: Zip codes are postal-service routing zones, not legal jurisdictions. A single zip code often spans a town and a large surrounding rural area, or even multiple jurisdictions. A municipality is a legally bounded political subdivision with its own incorporated limits established by state law. The two systems serve different purposes and frequently do not align.

Q: How is a sale "sourced" for West Virginia municipal sales tax?

A: Under § 11-15B-15(a), West Virginia follows destination sourcing for most retail sales: the sale is sourced to where the buyer receives the product. For an in-store retail sale, that is the seller's business location. For a delivery, that is the buyer's delivery address. The municipal tax applies only when that delivery address or business location is inside the municipality's boundaries.

Q: What if a small-town business has customers in both the town and the surrounding rural area?

A: The seller has to track the location of each sale and apply the municipal tax only to the in-town transactions. Modern point-of-sale systems and tax-software providers handle this with address verification or geofencing tools that distinguish municipal boundaries from zip codes.

Q: What happens if a town has been collecting tax on out-of-boundary sales for years?

A: The opinion did not adjudicate that question, but in general, taxes collected without authority can be subject to refund claims. The state tax department, which administers municipal sales tax under Chapter 8 Article 13C, would be involved in any reconciliation.

Q: How does W. Va. Const. art. X, § 9 fit into this?

A: Article X, § 9 is the constitutional source of all municipal taxing authority. It lets the legislature delegate the power to assess and collect taxes "for corporate purposes" but requires the resulting taxes to be "uniform, with respect to persons and property within the jurisdiction of the authority imposing the same." A tax applied to people outside the jurisdiction is by definition not "within" it, and would also not be uniform with respect to similarly situated taxpayers in the area.

Q: Why does the AG quote Hunkle v. City of Huntington from 1950?

A: Hunkle is the leading West Virginia case on the limits of municipal taxing power. It says: "A municipality has no inherent power to levy taxes; it can do so only by virtue of authority delegated to it by the legislature." And: "the statute vesting it with power to tax must be strictly construed and strictly followed." That bedrock rule has been the framework for analyzing municipal taxes ever since.

Q: Could a town tax non-residents who shop at in-town stores?

A: Yes. The municipal tax follows the situs of the sale, not the residence of the buyer. A tourist or non-resident who buys something at a store inside Harrisville pays the Harrisville municipal sales tax. A Harrisville resident who buys something at a store outside Harrisville does not, even if the resident's address has the same zip code.

Q: What should a business do if it thinks it has been collecting municipal tax on out-of-boundary sales?

A: Consult a tax professional or the West Virginia State Tax Department. Sales-tax misapplication usually involves either a refund process or a future correction with disclosure. The opinion did not provide specific procedural guidance.

Background and statutory framework

The constitutional framework. W. Va. Const. art. X, § 9: "The Legislature may, by law, authorize the corporate authorities of cities, town and villages, for corporate purposes, to assess and collect taxes; but such taxes shall be uniform, with respect to persons and property within the jurisdiction of the authority imposing the same."

The statutory framework. W. Va. Code § 8-13C-4 lets municipalities impose sales-and-use taxes that follow the state tax base. Subsection (c)(1) limits the municipal tax to "sales made and services rendered within the boundaries of the municipality." Subsection (c)(2) lets municipalities tax sales "sourced to the municipality." Subsection (f) labels the municipal tax as "in addition to" the state tax on in-municipality sales. The Use Tax counterpart in subsection (b) reaches "the use within this municipality of tangible personal property, custom software, and taxable services."

The sourcing rule. W. Va. Code § 11-15B-15(a) defines where a sale is "sourced" for state and municipal sales-tax purposes. The rule is destination-based: the sale is sourced to where the buyer receives the product, with default rules for the seller's business location and the buyer's delivery address.

The judicial gloss. Hunkle v. City of Huntington, 134 W. Va. 249, 58 S.E.2d 780 (1950), supplies the foundational rules. "A municipality has no inherent power to levy taxes." The grant must be "strictly construed and strictly followed." "[A]ll doubts" over a tax statute "should be resolved against the city and in favor of the taxpayer."

Application to Harrisville. The town's ordinance, by its terms, applied only to in-municipality sales. So the ordinance itself was lawful. The problem the prosecutor reported was a mismatch between the ordinance's text and how the tax was being collected on the ground (apparently by zip code rather than by actual address). That collection practice would not satisfy the statute or the ordinance. The AG explicitly limited the opinion to the legal framework, declining to adjudicate any specific overcollection without facts about specific transactions.

Citations

• W. Va. Const. art. X, § 9 (legislative authorization of municipal taxes)
• W. Va. Code § 5-3-2 (AG advisory authority)
• W. Va. Code § 8-13C-4 (municipal sales-and-use-tax authority)
• W. Va. Code § 11-15B-15(a) (sourcing rules for sales)
• Hunkle v. City of Huntington, 134 W. Va. 249, 58 S.E.2d 780 (1950)

Source

• Landing page: https://ago.wv.gov/media/18051/download?inline
• Original PDF: https://ago.wv.gov/media/18051/download?inline

Original opinion text

State of West Virginia
Office of the Attorney General
Patrick Morrisey
Attorney General
(304) 558-2021
Fax (304) 558-0140

August 13, 2014

The Honorable Steven A. Jones
Prosecuting Attorney
Ritchie County
115 East Main Street, Room 302
Harrisville, WV 26362

Dear Prosecutor Jones,

You have asked for an Opinion of the Attorney General about whether a town may tax transactions that occur outside its municipal boundaries. This Opinion is being issued pursuant to West Virginia Code § 5-3-2, which provides that the Attorney General "may consult with and advise the several prosecuting attorneys in matters relating to the official duties of their office." To the extent this Opinion relies on facts, it is based solely on the factual assertions set forth in your correspondence with the Office of Attorney General.

Your letter concerns the lawfulness of a municipal sales and use tax imposed by the Town of Harrisville. The town levies a 1% municipal sales and use tax on its citizens and businesses. See Ordinance Imposing Alternative Municipal Sales and Service Tax and Alternative Municipal Use Tax in Accordance with WV Code, Chapter 8, Article 13C §§ 11-44, 11-47 (amended Mar. 12, 2013). By its own terms, the town's ordinance limits the tax's application to transactions within the town's boundaries. Id. You state in your letter that in operation, however, citizens and businesses in Ritchie County within the 26362 zip code who reside beyond the borders of Harrisville are being taxed.

Your letter raises the following legal question:

Does a municipal sales or use tax violate Article X, Section 9 of the West Virginia Constitution or Chapter 8, Article 13C, Section 4 of the West Virginia Code if applied beyond the municipality's boundaries?

Municipal corporations require legislative authorization before they may levy taxes. As the West Virginia Supreme Court of Appeals explained in Hunkle v. City of Huntington, "[a] municipality has no inherent power to levy taxes; it can do so only by virtue of authority delegated to it by the legislature." 134 W. Va. 249, 255, 58 S.E.2d 780, 783 (1950) (internal quotations omitted). The Legislature's power to authorize such taxation is found in Article X, Section 9 of the state constitution. See W. Va. Const, art. X, § 9 ("The Legislature may, by law, authorize the corporate authorities of cities, town and villages, for corporate purposes, to assess and collect taxes; but such taxes shall be uniform, with respect to persons and property within the jurisdiction of the authority imposing the same.").

It follows, therefore, that municipalities must strictly comply with legislative limits on any grant of taxing authority. Because a municipality's "powers are limited," "the statute vesting it with power to tax must be strictly construed and strictly followed." Hunkle, 134 W. Va. at 255, 58 S.E.2d 784 (internal quotations omitted). The Supreme Court of Appeals has instructed that "all doubts" over a tax statute "should be resolved against the city and in favor of the taxpayer, and [the city] must show that all conditions essential to the lawful exercise of power delegated to it have been complied with." Id.

With respect to sales and use taxes, we believe that the Legislature has authorized municipal taxes only over sales and services that the buyer actually receives within the geographical bounds of "the municipality." Under Section 8-13C-4(c)(2) of the West Virginia Code, the Legislature has granted municipalities the power to tax sales and services "sourced to the municipality." W. Va. Code § 8-13C-4(c)(2). By statute, a sale is "sourced" to the location where the buyer receives a product, usually the seller's business location or the buyer's delivery address. Id. § 11-15B-15(a). This geographical limitation is further reflected in the fact that municipal sales and service taxes are subject to the same base as state taxes levied "on sales made and services rendered within the boundaries of the municipality." Id. § 8-13C-4(c)(1) (emphasis added). Similarly, municipal sales and service taxes are considered to be "in addition to" state taxes "on sales made and services rendered within the boundaries of the municipality." Id. § 8-13C-4(f) (emphasis added).

Here, it appears that the Town of Harrisville has not in fact authorized any municipal sales or use taxes beyond its municipal boundaries. See Ordinance Imposing Alternative Municipal Sales and Service Tax and Alternative Municipal Use Tax in Accordance with WV Code, Chapter 8, Article 13C § 11-44 (amended Mar. 12, 2013) (imposing a tax "upon all persons or entities engaging in business within the municipal boundaries of the Town of Harrisville . . . on all sales and services rendered within the boundaries of the municipality of the Town of Harrisville"); id. § 11-47 (imposing a tax "on the use within this municipality of tangible personal property, custom software, and taxable services").

But if the tax is being applied "according to zip code," as you state, it would appear to be unlawful in operation. As you note in your correspondence, the 26362 zip code covers a much larger geographical area than the Town of Harrisville. If the town's tax is being imposed throughout that zip code, it would appear to violate the Legislature's limited grant of taxing authority, as well as the plain text of the town's own ordinance. As we do not have knowledge of any specific instances of the tax being applied beyond the town's boundaries, we do not address broader questions about the liability of any municipality, state officials, or businesses who may have collected unauthorized taxes.

Sincerely,

Patrick Morrisey
Attorney General

Elbert Lin
Solicitor General

Julie Marie Blake
Assistant Attorney General