Tax Type
Corporation Income Tax
Description
Alternative apportionment method
Topic
Allocation and Apportionment
Date Issued
04-16-1993
April 16, 1993
Re: Request for Ruling: Corporate Income Tax
Dear*****************
This will reply to your letter dated June 11, 1992, in which you request a ruling allowing the use of an alternative method of apportionment for the ***** ("Taxpayer").
FACTS
The Taxpayer filed its 1989, 1990, and 1991 Virginia corporation income tax returns using a one factor formula (sales) to apportion income among the taxing jurisdictions in which business was transacted. On field audit, the Taxpayer was changed to a three factor formula and the property and payroll factors were included at 100% in Virginia. According to the Taxpayer, Maryland and Washington, D.C., use the same apportionment factor in their income tax allocation formula. The Taxpayer believes this constitutes double taxation and requests permission to use an alternative apportionment method.
DETERMINATION
1. Alternative Method
The policies which apply to requests for an alternative method under Va. Code § 58.1-421 are well established. The use of an alternative method is allowed only in extraordinary circumstances where the need for relief has been demonstrated by clear and cogent evidence. After considering the facts set forth, I find that you have not demonstrated that the statutory method is unconstitutional or inapplicable as applied in your situation.
2. Payroll Factor
Virginia Regulation ("VR") 630-3-413.3, a copy of which is attached, provides that compensation is deemed paid in Virginia regardless of whether the taxpayer's employees' services are performed within and without Virginia, if the employees' base of operation is in Virginia. Based on the information presented, it appears as if the base of operation is in Virginia. Thus, the auditor was correct to include 100% in the allocation formula.
3. Property Factor
In your letter you indicate that the Taxpayer is doing business in Maryland and Washington, D.C. If the Taxpayer can furnish a schedule of moveable property and the number of days located outside of Virginia, the property factor will be adjusted to correctly reflect the time the property is in Virginia.
Accordingly, the audit will be returned to the auditor for revision to adjust the property factor to exclude the above-referenced property if the appropriate evidence is presented. If you have not supplied the auditor with the necessary information within 30 days, or shown the auditor good cause for extending the period to supply this information, the information on which the assessment was originally based will be presumed to be the best available. The assessment will then be immediately due and payable, and collection action will resume.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6239L
Rulings of the Tax Commissioner