Virginia Regulatory Town Hall
Agency
Department of Taxation
 
Board
Department of Taxation
 
chapter
Business, Professional and Occupational License Tax Regulations [23 VAC 10 ‑ 500]
Action To Amend the BPOL Tax Regulation to Reflect a Recent Decision of the Virginia Supreme Court
Stage Fast-Track
Comment Period Ended on 9/22/2017
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Back to List of Comments
9/1/17  12:05 pm
Commenter: Amber Guenther, Altus Group

Example of Calculation
 

The following comments are related to amending Regulation 23 VAC 10-500-210 Business, Professional and Occupational License Tax Regulations.

We believe that it would be helpful to taxpayers to provide examples of how to apply the amended regulations.  The Virginia Tax Commissioner has previously provided examples in their rulings, including P.D. 12 -89 and P.D. 14-29.  We have included the example used in P.D. 12-89 and used the wording from P.D. 14-29 to create an example that could be used.  

We have worked with taxpayers and jurisdictions throughout Virginia and we strongly believe that the more clarity that can be provided will be helpful for taxpayers as well as for the jurisdictions that will need to adhere to this new regulation. 

Thank you for your consideration.  If you have any questions, or would like to discuss our comments, please contact me at amber.guenther@altusgroup.com or at 410-568-0745.

P.D. 12-89 Example

For example, presume a taxpayer (Taxpayer A) has an office in Virginia and offices in six other states. It has $10,000,000 in gross receipts and a payroll of $1,000,000. It files an income tax return and pays income tax in four of the six states. Employees from the Virginia office travel to the offices in the other states and generate receipts attributable to the customers the other states.  Taxpayer A, situses its gross receipts using payroll apportionment. The out-of-state deduction would be computed as follows:

State  Payroll   Payroll Factor   Apportioned Gross Receipts   Income Tax Return Filed   Eligible for Deduction   Gross Receipts Eligible for Deduction 
Virginia           500,000 50.00%     5,000,000 Yes No                 -  
State A           200,000 20.00%     2,000,000 Yes Yes     2,000,000
State B           150,000 15.00%     1,500,000 Yes Yes     1,500,000
State C             75,000 7.50%        750,000 Yes Yes        750,000
State D             25,000 2.50%        250,000 Yes Yes        250,000
State E             20,000 2.00%        200,000 No No                 -  
State F             30,000 3.00%        300,000 No No                 -  
 Total          1,000,000      10,000,000         4,500,000
          Virginia Payroll Factor 50.000%
          Out-of-State Deduction     2,250,000

P.D. 14-29 Example

Taxpayer has definite places of business in a Maryland, North Carolina, Pennsylvania and a Virginia
locality. Its employees from the Virginia locality participate in earning receipts attributable to each
state where it has a definite place of business. T is required to file income tax returns in Virginia,
Maryland, and North Carolina. The Taxpayer has total gross receipts of $1,000,000. Payroll is
attributable as follows:  40% to Virginia; 30% to Maryland; 10% to North Carolina and 20% to Pennsylvania.  The out-of-state deduction would be computed as follows:
State  Payroll Factor   Apportioned Gross Receipts   Income Tax Return Filed   Eligible for Deduction   Gross Receipts Eligible for Deduction 
Virginia 40%        400,000 Yes No                -  
Maryland 30%        300,000 Yes Yes        300,000
North Carolina 10%        100,000 Yes Yes        100,000
Pennsylvania 20%        200,000 No Yes                -  
        1,000,000            400,000
        Virginia Payroll Factor 40.000%
        Out-of-State Deduction        160,000

 

 

 

 

 

 

 

 

 

 

 

 

 

CommentID: 62762