Bluefield Daily Telegraph, Bluefield, WV

February 25, 2013

Local leaders are hoping B&O tax incentives help attract new businesses

By KATE COIL
Bluefield Daily Telegraph

PRINCETON — City leaders in Mercer County are hoping to see more entrepreneurs take advantage of tax incentives for new small businesses locating within city limits.

City Clerk Kenneth Clay said so far this year alone three new businesses have already taken advantage of a program offering exemptions on the city’s business and occupation (B&O) tax.

“We have already had three businesses approved for B&O tax exemptions since January,” Clay said. “That is great news. This is typically the slowest time of year for business and especially for new businesses to open, so this is very encouraging.”

Clay said the exemption allows new businesses to ease into paying the tax over a period of three years.

“It is a tax break we give to new businesses that start up in the city,” Clay said. “The city council has adopted a three-year graduated system for new business start-ups. For the first year, they get 100 percent off the tax. In the second year, they receive 65 percent off the tax and during the third year there is a 40 percent exemption. It mainly targets businesses with no more than 20 employees and no more than $3 million in gross revenue a year. It is a one-time thing. The owner cannot close one business and then open up another and get the same tax break.”

During the past 14 years, Clay said hundreds of local businesses have taken advantage of the program.

“Since 1999, a large number of businesses have taken advantage of this break,” he said. “The goal for this is predominantly to help locally owned small businesses. It helps them get started and established. It encourages more small businesses to locate within the city. If a building is annexed into the city, it can also apply.”

Clay said the incentive also encourages businesses to locate within the city limits.

“Businesses outside the city limits do not have to pay a B&O taxes, so this is an incentive to attract businesses to come within the city limits rather than to locate outside the city limits,” he said. “Businesses within the city also get excellent services like fire, police as well as services from the city’s sanitation and street departments. They get these services in exchange for this tax.”

The city has also benefited from the incentive program, Clay said.

“Princeton uses B&O taxes as a primary source of our revenue to keep these departments up and running,” Clay said. “The B&O taxes come from one half of 1 percent of all retail sales from business in Princeton. Our departments provide excellent services, which is why our B&O taxes are there. They provide these business with professional services.”

Clay said new businesses can apply for the program when they file their business license with the city.

“The city’s finance administration recommends new businesses for the tax exemption after the business submits an application,” he said. “The application for an exemption to the B&O tax (can be filed) at the same time they fill out their paperwork for their business license. The finance administration recommends these new businesses to the city council which then approves the tax exemption.”

The city of Bluefield offers a similar incentive to new businesses opening up within the city limits, according to City Manager Jim Ferguson.

“We do a similar program,” Ferguson said. “ Right now, we offer any new business 100 percent off the tax their first year, 33 percent off the second year, and 66 percent off in year three. They don’t pay the full tax until the fourth year. This is for any new business located within the city limits. This is either for a person who owns the building or lease agreement. We have been offering this incentive since June 1, 2010.”

 New business owners in the downtown historic district receive additional discounts on their B&O taxes for the first four years after opening the business, Ferguson said.

“New businesses within the downtown historic district pay no tax the first year,” he said. “The second year they only pay 25 percent, on the third they only pay 50 percent, 75 percent in the fourth and it graduates up to 100 percent in the fifth year. I believe this has been in place since 1998 when the board of directors and city created financial incentives for businesses within the city limits. The goal was to create a scale rate of tax relief.”

Ferguson said the goal of the incentive program is to encourage businesses to locate within the city limits and downtown.

“Economic development was and is a priority, especially downtown,” Ferguson said.  “We wanted to encourage businesses to come into the city. I don’t know how many businesses have located under this incentive since it took place long before I came, but it something we are continuing to offer.”

Ferguson said the city is also exploring other business incentives as part of the new economic development plan.

“There are some things on the table that came about with the economic development director when he came on board,” he said. “We have talked offering incentives to businesses in certain locations to further encourage economic developments.”

— Contact Kate Coil at kcoil@bdtonline.com