Retailers can absorb West Virginia sales tax

It used to be illegal for a vendor to absorb West Virginia sales tax, but that’s no longer the case. 

What is absorbing sales tax?

Absorbing sales tax is when a business pays the applicable sales tax itself rather than passing the tax through to the consumer. Retailers “absorb” the tax the way a sponge absorbs water, instead of dampening consumer spirits by charging them the tax.

Approximately 15 states allow businesses to absorb sales tax, while about 18 states generally prohibit sales tax absorption. Some states, like Virginia, allow vendors to absorb sales tax only during specified periods. Others don’t say one way or the other. 

Why would a business want to absorb sales tax?

One reason, perhaps the only reason, a business would want to absorb sales tax is to encourage sales of affected products. Most businesses don’t make a habit of this because it would cut into profits, but there can be a time and a place to absorb sales tax.

For example, a retailer may elect to absorb the tax due on nonqualifying items during an annual sales tax holiday in Maryland or Virginia. Doing so may encourage shoppers to purchase items not eligible for the temporary sales tax exemption that might otherwise be passed over during a sales tax holiday shopping spree.

A business may also want to absorb the tax due on certain items, like diapers and feminine hygiene products, that some people think shouldn’t be subject to sales tax in the first place.

Whatever the reason, it’s now legal for vendors to absorb sales tax in West Virginia.

When did West Virginia allow businesses to absorb sales tax?

The enactment of Senate Bill 661 in April 2021 amended West Virginia Code §11-15A-8 to permit retailers to assume or absorb sales or use tax starting July 1, 2021.

Guidance published by the department in February 2022 explains that beginning July 1, 2021, a retailer may assume or absorb the tax so long as the full amount of tax is remitted to the department and the invoice notes that the tax is included.

West Virginia Code R. §110-15M-4 further clarifies that a retailer may directly or indirectly advertise, hold out, or state that the retailer will absorb or assume the tax for the customer provided all following conditions are met:

  • The retailer makes clear it’s paying the tax on behalf of the customer
  • The retailer doesn’t indicate or imply the transaction is exempt or excluded from sales tax
  • The receipts, invoices, or statements separately state the total amount of tax and indicate how much of the tax will be paid by the retailer
  • The retailer remits and reports to the state any sales or use tax absorbed as if it had been paid by the customer
  • The retailer separately states the purchase price and the tax when recording a sale and indicates how much of the tax it absorbed or assumed

How do you know if you can absorb sales tax in a state?

It can be hard to keep up with changing sales tax laws. If you search for “absorb sales tax” on the West Virginia Tax Division website today, you may land on guidance from 2014 or 2018 explaining that it’s “a crime” to absorb sales tax. Dig deeper and you may uncover more current guidance, but to do that, you’d need to know what you’re looking for.

Some state tax departments make new policies easier to find than others, but in all states, the taxpayer is responsible for keeping up with changing regulations and requirements.

Avalara Tax Research can help you uncover the latest tax laws and policies. The platform is easy to navigate and answers questions in plain language. Learn more.

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