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ELKINS - An online sales tax compliance program has apparently caused a mistake in which a Randolph County resident who lives outside Elkins city limits was charged the city's 1% sales tax on an internet purchase, a city official said.
Bion Manning, whose home is in Faraway Knolls and who has an Elkins address, nonetheless lives outside of Elkins city limits. In January, Manning made an online purchase of more than $1,000 from realtruck.com. When he noticed that the Elkins 1% sales tax had been applied to his purchase, he asked the company for a refund.
The company responded, writing in part "we are unfortunately not able to process your refund. We dearly apologize for this. We have determined that a refund is not due as a result of the following: Tax is calculated by zip code and using a program called TaxJar," according to a Feb. 1 email Manning shared with The Inter-Mountain.
The Inter-Mountain reached out to Elkins City Clerk Sutton Stokes, who said he had also spoken with Manning.
"It's a new topic to me," Stokes told The Inter-Mountain. "I got all of (Manning's) documentation and referred him to the city treasurer. As I understand the situation, many companies that sell products online, instead of keeping track of tax stuff themselves, they go with a third party, sort of a plug-in for their site, where customers type in their addresses. That third-party company calculates whatever sales tax is due.
"It seems like, just judging from the screen shots he has ... it looks like that company, which is TaxJar, they for some reason decided that the zip code 26241 is identical to the city limits," Stokes said. "So anyone who is buying something shipping to 26241, this company says is in Elkins, and therefore has to pay the 1% sales tax.
"So based on this outside-looking-in view, it looks like TaxJar is essentially using zip codes wrong, because the post office doesn't really care where the boundary of a city is. So there's no guarantee that it coincides with the city limits.
"So it seems that TaxJar is doing something wrong, and this gentleman is having sales tax misapplied," Stokes said.
Stokes said he had seen another online company's website using a sales tax compliance program that "was a little more fine-grained" and that, during the checkout process, "actually asked 'are you inside or outside Elkins'. And if you clicked that 'inside Elkins,' it would apply the 1% sales tax."
The website for TaxJar, whose motto is "Sales Tax Compliance for Modern Commerce," says the program "is trusted by over 20,000 high-growth businesses."
Stokes said residents living within Elkins city limits are subject to the 1% sales tax on online purchases.
"My understanding is that, the location where the sale is complete - meaning, the place where the product is sent - is the jurisdiction where sales tax is applied," he said.
"If you're ordering something from out of state, then some amount of sales tax from the state, and perhaps an additional sales tax from the local jurisdiction, will apply."
City Treasurer Tracy Judy emailed The Inter-Mountain information about the issue.
"The state is responsible for the collection and disbursement of sales tax," she wrote. "The state was provided the city boundary map. When we receive notices of improperly applied sales tax, we notify the state of any business that is collecting sales tax outside of the city boundary. The state then contacts the business.
"Anyone who feels they were improperly charged sales tax should contact the state tax department and request a refund."
Elkins City Council voted 7-3 to pass the new tax in December 2017, creating a 1% sales tax on businesses within the city limits, which became possible when the state approved the city's application to amend the original Home Rule plan for Elkins.
In order to implement the new sales tax, Elkins needed to give the state six months' lead time. The 1 percent sales tax went into effect July 1, 2018, with the advent of the new fiscal year.