Tax Type
Corporation Income Tax
Description
Completed contract method of accounting
Topic
Allocation and Apportionment
Date Issued
03-06-1984
- March 6, 1984
Re: Virginia Code § 58-151.051
Request for Alternative Method of Allocation and Apportionment
Dear ******************
This is in response to your letter of December 13, 1983 requesting permission for the above referenced taxpayer to use an alternative method of allocation and apportionment under § 58-151.051 for the taxable year ending April 30, 1982.
FACTS
Taxpayer is a construction contractor with its commercial domicile in Delaware and doing business in several states including Virginia. For prior years, Taxpayer has utilized the completed contracts method of accounting in computing the apportionment of its income.
For the taxable year ending April 30, 1982, Taxpayer realized a loss in Virginia after deducting direct job costs and before deducting any overhead allocable to Virginia contracts. Taxpayer contends that the completed contract method of accounting does not fairly reflect the result of operations in Virginia and also subjects Taxpayer to a double taxation of income.
DETERMINATION
In Corporation Income Tax Circular No. 1 (enclosed herein), the Deparment of Taxation published its policy in granting permission to use an alternate method of allocation and apportionment. Taxpayer has not shown that any of the criteria for granting permission have been satis-fied.
Taxpayer has submitted no evidence showing that any of its income is subject to double taxation. The department presumes that all states permit or require. a method of allocation and apportionment substantially similar to Virginia's. Allowing Taxpayer to use separate accounting in a loss state and formulary apportionment in profitable states results in some income avoiding taxation in all states. Accordingly, permission to use an alternative method of allocation and apportionment is denied.
It should be noted that the department's interpretation of § 58-151.051 expressed in Corporation Income Tax Circular No. 1 has- been upheld by the courts. Department of Taxation v. Lucky Stores, 217 VA 121, 225 SE 2d; 870 (1976).
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner