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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