Document Number
Tax Type
Individual Income Tax
Out-of-state tax credit; West Virginia business and occupation tax
Date Issued
October 26, 1988

Re: §58.1-1821 Application/Individual Income Tax


This will reply to your letter dated August 10, 1988 in which you seek relief of income tax assessed your client, *********** (taxpayer), for tax year 1985.

The taxpayer desires to obtain a credit on his 1985 Virginia income tax return for a liability incurred on non-Virginia source income, specifically a credit for business and occupation (B & O) taxes paid to West Virginia. The taxpayer's request was denied in a determination letter dated March 8, 1988 because it was ascertained that the business and occupation tax is not an income tax and thus not allowable as a credit under §58.1-332 of the Code of Virginia. Per the taxpayer's request, a hearing was held on June 28, 1988 to further discuss the issues involved. The taxpayer maintained that a credit should be allowed for the West Virginia B & O tax since these taxes were allowable as a credit against West Virginia income tax and thus "replaces" the West Virginia income tax. After again analyzing the facts and issues involved, the Tax Commissioner ruled that the West Virginia B & o tax is not an income tax and denied any correction of tax in a July 15, 1988 letter to the taxpayer.

The taxpayer maintains that an offset by a business and occupation tax credit in West Virginia does not negate the fact that an income tax liability was incurred and that Virginia law provides for a credit against such a liability.


§58.1-332 of the Code of Virginia provides:
    • Whenever a resident of the Commonwealth has become liable for income tax to another state...the amount of income tax payable by him shall, upon proof of such payment, be credited on his return with the income tax so paid by him to such other state. (emphasis added)
As stated in my July 15, 1988 letter to the taxpayer, while the B & O tax may be allowed as a credit against West Virginia income tax, this in and of itself does not infer that the B & O tax is an income tax. The B & O tax is distinctly different from the individual income tax imposed by West Virginia.

Further, the taxpayer has not shown that any income tax was paid to West Virginia on the income in question. Rather, the West Virginia B & o tax credit eliminated any West Virginia income tax liability that the taxpayer may have incurred. Therefore, the credit allowed under §58.1-332 of the Code of Virginia is inapplicable.

In response to an issue raised by the taxpayer, I would point out that the department does not conduct formal evidentiary hearings. The June 28, 1988 meeting in the*********District Office was held upon the request of the taxpayer so that he could have an opportunity to present additional information and further discuss the issues involved.

Based upon the foregoing, I continue to find no basis for relief in the instant matter. This represents my final determination in this matter; as such, the assessment issued to the taxpayer is due and payable in full.


W. H. Forst
Tax Commissioner

Last Updated 08/25/2014 16:46