Current through Register Vol. XLI, No. 38, September 20, 2024
7.1.
Sales by Producers and Manufacturers. - A person exercising the privilege of
producing for sale, profit or commercial use, any natural resource product or
manufactured product and engaged in the business of selling the same at
wholesale or retail shall collect consumers sales and service tax on the gross
proceeds from such sales unless the transaction is exempt per se from the
consumers sales and service tax, or the vendor, in good faith, takes from the
purchaser a property executed exemption certificate or the purchaser's direct
pay permit number.
7.2. Use by
Producer or Manufacturer. - A person exercising the privilege of producing for
sale, profit or commercial use, any natural resource product or manufactured
product which he then uses or consumes in a manner which would be taxable had
such person purchased the product from another person, such person shall pay
consumers sales or use tax on the gross value of such product or products at
the time they are first used or consumed by him in this State. "Gross value"
shall be determined as provided in Section 7.3 of these regulations.
7.3. Determination of "Gross Value". -
Whenever a person partially or wholly consumes or uses tangible personal
property in this State which he produced or manufactured in this State or in
another state, the gross value thereof for consumers sales and use tax purposes
shall correspond as nearly as possible to the gross proceeds which such person
would have received from the sale of such natural resource product or
manufactured product to another person in an arms-length transaction, as that
term is defined for federal income tax purposes. Such value shall be determined
by application of the following rules in the order stated:
7.3.1. The value of the natural resource
product or the manufactured product consumed or used shall be equal to the
selling price, at the place of use or consumption, of similar products of like
quality and character offered for sale in similar quantities by persons
unrelated to the taxpayer.
7.3.2.
In the absence of sales of similar natural resource products or similar
manufactured products by other persons as a guide to value, gross value shall
be equal to the average price at which sales of the same or a similar product
are made during the taxable year to customers of the producer or
manufacturer.
7.3.3. In the absence
of sales to customers of the taxpayer as a guide to value, gross value shall be
determined by first determining the cost of the product and adding thereto the
average markup realized by the producer or manufacturer of the product being
valued. The cost of the product shall include every item of cost attributable
to that particular product, including all direct and indirect overhead
costs.
7.4. Examples.
7.4.1. Example 1. - ABC Company is an
integrated manufacturer of asphalt and a road contractor. Some of the asphalt
ABC Company manufactures is sold to other contractors. ABC Company is exempt
from paying consumers sales and use taxes on tangible personal property
directly used or consumed in the manufacture of asphalt. Until March 1, 1989,
ABC Company was also exempt from paying consumers sales and use taxes on
tangible personal property directly used or consumed in his contracting
activity. ABC Company must now pay consumers sales and use taxes on all
tangible personal property and/or taxable services purchased for use or
consumption in his contracting activity unless a specific exemption applies. As
a road contractor, ABC Company may be engaged in building or resurfacing roads
under contracts with the State of West Virginia or a political subdivision
thereof, or with the United States government, or with other persons such as
commercial and industrial business and residential property owners. The asphalt
which ABC Company manufactures and sells or uses or consumes will be taxed as
follows:
1. Consumers sales and service tax
must be collected on sales of asphalt to other contractors and persons unless
ABC Company accepts in good faith an exemption certificate or a valid direct
pay permit number.
2. As of October
1, 1990, asphalt which ABC Company manufactures and uses or consumes in
building or resurfacing roads under a single government contract for materials
and labor is subject to consumers sales and use tax. See Section 109 of these
regulations for transition rules concerning the taxing of materials for use in
governmental contracts.
3. Asphalt
which ABC Company manufactures and uses or consumes in building or resurfacing
roads, parking lots and driveways, etc. in this State for other persons is
subject to consumers sales and service tax based on the gross value of the
asphalt so used or consumed.
