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