Virginia ~ Corporate Income Tax: Guidelines Issued Regarding Single Sales Factor Election for Manufacturers

The Virginia Department of Taxation has issued guidelines to provide guidance to manufacturing companies regarding the modification to the state’s corporate income tax apportionment formula for manufacturers under Sec. 58.1-422, Va. Code. Under current law, a multistate manufacturing company is allowed to continue apportioning income using a three-factor formula consisting of property, payroll, and double-weighted sales or elect to use a modified method of apportionment based on sales. The modified apportionment method for manufacturers is being phased in over the course of three years in the following manner: for taxable years beginning on or after July 1, 2011, until July 1, 2013, qualifying corporations use a triple-weighted sales factor; for taxable years beginning on or after July 1, 2013, until July 1, 2014, qualifying corporations use a quadruple-weighted sales factor; and for taxable years beginning on or after July 1, 2014, and thereafter, qualifying corporations use the single sales factor method to apportion Virginia taxable income. Once a manufacturing company elects the modified apportionment method, the method of apportionment may not be changed for three taxable years.

 

The guidelines discuss pertinent definitions; modified apportionment method formulas; electing to use the modified apportionment method; mixed apportionment factors; treatment of pass-through entities; wage and employment requirements (specifically, recapture and interest); and documentation and filing requirements. Finally, the department also notes that the guidelines are intended to complement the existing corporate apportionment formula regulations and to the extent that there is a conflict between the existing regulations and Sec. 58.1-422, Va. Code, the statutory provisions, as interpreted by these guidelines, supersede the existing regulations.

 

Ruling of Commissioner, P.D. 6-13 , Virginia Department of Taxation, January 7, 2013 , ¶205-761

 

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Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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