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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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 |
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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 |