Tax Type
Corporation Income Tax
Description
Alternative method of allocation and apportionment
Topic
Allocation and Apportionment
Date Issued
04-05-1991
April 5, 1991
Re: §58.1-1821 Application; Corporation Income Tax
Dear********************
This will reply to a letter of August 13, 1990, written on your behalf, which seeks correction of a corporation income tax assessment and requests permission to use an alternative method of allocation and apportionment of income for**************(the "Taxpayer").
FACTS
The taxpayer's first year of operation in Virginia (taxable year ended November 30, 1989) resulted in a loss. The corporation's operations outside Virginia produced taxable income. Instead of apportioning all of its income (except dividends) by the statutory method using the three factor (property, payroll and sales) formula, the taxpayer used a method based primarily on separate accounting for its Virginia operations. The method was not allowed and additional taxes were assessed. You contend that your proposed method is more equitable because the taxpayer generated no income from its business in Virginia; therefore, no tax should be due. Your application will be treated as a request to use an alternative method of allocation and apportionment.
DETERMINATION
The policies which apply to requests for an alternative method under Va. Code §58.1-421 are well established. See VR 630-3-421 and the Ruling Letter dated September 18, 1986, P.D. No. 86-184 (copies enclosed). After considering the facts set forth, I find that you have not demonstrated by clear and cogent evidence that the statutory method is unconstitutional or inapplicable as applied in your situation.
Accordingly, permission to use an alternative method of allocation and apportionment is denied. The assessment is correct as made and is now due and payable. You will shortly receive an updated bill with interest accrued to date. The bill should be paid within thirty days to avoid the accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner