Background
Cardinal Health wholesales and distributes drugs and druggist’s sundries to pharmacies and other customers in Charleston. It operated a distribution center in Wheeling and paid business-and-occupation taxes there. Charleston audited Cardinal for April 2008 through March 2018 after concluding that Cardinal had not properly reported taxable Charleston business activity.
Charleston issued and later revised jeopardy assessments against Cardinal Health 110 and Cardinal Health 411. The final assessments included tax, interest, and penalties. At an administrative reassessment hearing, Cardinal contended that it had reported all West Virginia revenue, including Charleston sales, to Wheeling. The hearing examiner found that Cardinal had not substantiated that claim or reconciled discrepancies in its records, and upheld the assessments. The Kanawha County Circuit Court affirmed.
The Court’s Holding
The Intermediate Court of Appeals summarily affirmed the circuit court’s decision. It found no reversible error in the administrative determination that Cardinal had sufficient contacts with Charleston for municipal B&O taxation, including wholesale and retail sales and shipping, drop-shipping, and freight-transportation services for Charleston-area customers.
The court also rejected Cardinal’s double-taxation challenge. The record supported the finding that Cardinal proved payment to Wheeling on only some taxable sales, did not establish that all Charleston sales had been taxed by Wheeling, and did not reconcile the differences between its total West Virginia sales and its Wheeling reports. Charleston, meanwhile, had excluded sales shown to have been taxed by Wheeling. The court likewise left intact the interest and penalties.
Key Takeaways
- A business need not maintain a physical location in a municipality to have sufficient contacts for municipal B&O taxation.
- A taxpayer challenging a municipal assessment as double taxation must substantiate the particular receipts already taxed elsewhere.
- Charleston could impose interest and penalties where Cardinal failed to remit taxes and did not exercise ordinary business care and prudence.
Why It Matters
The decision underscores that payment of B&O tax in one West Virginia municipality does not, by itself, defeat another municipality’s assessment. Businesses claiming protection against duplicate municipal taxation need records that identify the relevant receipts and demonstrate where they were previously taxed.
It also confirms the deference appellate courts give administrative tax determinations when the taxpayer cannot show that the findings are legally erroneous, unsupported by substantial evidence, or otherwise prejudicial under the Administrative Procedures Act.