Document Number
03-89
Tax Type
Corporation Income Tax
Description
Sales factor
Topic
Computation of Tax
Taxpayers' Remedies
Date Issued
11-14-2003

November 14, 2003



Re: § 58.1-1821 Application: Corporate Income Tax

Dear *********************:

This will reply to your letter in which you seek correction of the Virginia corporate income tax assessment issued to ***** (the "Taxpayer"), for the taxable year ended December 31, 1996.
FACTS

The Taxpayer timely filed a Virginia corporate income tax return for the taxable year ended December 31, 1996. The return was subsequently amended by the Taxpayer to adjust the numerator of the sales factor because sales to a wholly-owned subsidiary were included twice.

Under audit, the adjustment made to the numerator of the sales factor was disallowed based on the sales schedules provided at the time of the audit. The Taxpayer appeals this assessment on the basis that the sales factor is misstated.
DETERMINATION

Virginia Code § 58.1-414 provides:
    • The sales factor is a fraction, the numerator of which is the total sales of the corporation in the Commonwealth during the taxable year, and the denominator of which is the total sales of the corporation everywhere during the taxable year, to the extent that such sales are used to produce Virginia taxable income and are effectively connected with the conduct of a trade or business within the United States and income therefrom is includable in federal taxable income.

Virginia Code § 58.1-302 defines the term "sales" as the gross receipts of the corporation from all sources (except dividends, which are allocated), whether or not such gross receipts are generally considered sales. The sales factor includes all gross receipts that are included in Virginia taxable income and are connected with the conduct of the taxpayer's trade or business within the United States.

A review of the Taxpayer's documentation indicates that sales to its subsidiary were reported twice in the Taxpayer's sales factor numerator. Accordingly, the Taxpayer's sales factor numerator for the taxable year ended December 31, 1996, will be adjusted pursuant to the enclosed schedules. Please remit payment of the balance due to *****, Office of Policy and Administration, Appeals and Rulings, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia 23218-1880. Payment should be made within 30 days from the date of this letter to avoid the accrual of additional interest.

Copies of the Code of Virginia sections cited, and other reference documents are available on-line in the Tax Policy Library section of the Department's web site, located at www.tax.state.va.us. If you have additional questions regarding this determination, you may contact ******************* at ********************.
                • Sincerely,

                • Kenneth W. Thorson
                  Tax Commissioner




AR/43376B




Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46