A recently-introduced bill in the West Virginia Senate would impose a new tax on companies that provide digital advertising services. SB 605, introduced on March 9 by Senator Rupie Phillips (R-Logan 07), would impose a gross receipts tax on the annual gross revenues of a taxpayer derived from digital advertising services in the state.
“Digital advertising services” are defined in the bill as “advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services.” “Digital interface” means any type of software, including a website, part of a website, or application, that a user is able to access.
Annual gross revenues from digital advertising services are determined by an apportionment fraction comprised of the taxpayer’s gross revenues derived from digital advertising services in West Virginia compared to digital advertising services in the United States. The bill directs the West Virginia Tax Commissioner to promulgate sourcing regulations.
The digital advertising gross revenues tax rate proposed by the bill is
- 2.5% of the assessable base for a party with global annual gross revenues of $100,000,000 through $1,000,000,000;
- 5% of the assessable base for a party with global annual gross revenues of $1,000,000,001 through $5,000,000,000;
- 7.5% of the assessable base for a party with global annual gross revenues of $5,000,000,001 through $15,000,000,000; and
- 10% of the assessable base for a party with global annual gross revenues exceeding $15,000,000,000.
The bill requires returns to be filed by each party that has at least $1 million in annual gross digital advertising revenues derived in West Virginia in a calendar year. Returns for this tax would be due April 15, and estimated quarterly returns would be due on June 15, September 15, and December 15 each year.
The proposed tax in SB 605 strongly mirrors Maryland’s recently-enacted digital advertising tax legislation, which is subject to various and well-documented legal challenges.