Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 500 - BUSINESS, PROFESSIONAL AND OCCUPATIONAL LICENSE TAX REGULATIONS › Section 23VAC10-500-210 - Apportionment; in general

Current through Register Vol. 40, No. 24, July 15, 2024
A. If
				the taxpayer has more than one definite place of business and it is not
				possible or practical to determine at which definite place of business gross
				receipts should be taxed, gross receipts must be divided between the definite
				places of businesses by payroll. Some activity must occur or be controlled from
				a definite place of business for gross receipts to be taxed by the locality of
				the definite place of business. If an entity's definite place of business is in
				a locality that does not tax gross receipts, a different locality may not tax
				these gross receipts simply because the first locality does not have a license
				tax.
B. If apportionment has been
				used to divide the gross receipts of the business among its definite places of
				businesses, then the use of apportionment to assign gross receipts to a
				definite place of business is presumed to have compromised the ability of the
				taxpayer to determine the situs of the assigned gross receipts for any other
				purpose, such as the other-state deduction. For the purposes of this section,
				"other-state deducation" means a deduction for receipts attributable to
				business in another state in which it is subject to income tax as described in
				§
									58.1-3732B of
				the Code of Virginia. Generally, the same apportionment method used to assign
				gross receipts to a definite place of business must be used to subdivide those
				receipts unless the taxpayer has demonstrated that some other method is
				feasible and more accurate. This requires an analysis of the facts and
				circumstances applicable to each taxpayer and its definite places of business.
				Both of the following conditions must be satisfied before apportionment can be
				used to subdivide receipts assigned to a definite place of business by any
				method.
1. The business satisfies the
				conditions in subsection A of this section that make it necessary to subdivide
				the gross receipts assigned to a definite place of business. For example, in
				the case of the other-state deduction this would require determining if any
				employees at the Virginia definite place of business participated in interstate
				transactions by, for example, contacting or shipping goods to customers in
				other states, participating with employees in other offices in transactions,
				etc. If there has been no participation in transactions that generate
				interstate receipts, then the business is not eligible for the deduction and it
				has no need to subdivide the receipts assigned to the definite place of
				business.
2. It must be impossible
				or impractical to use specific criteria to subdivide the receipts assigned to
				the definite place of business. This will normally be the case when gross
				receipts have been assigned to a definite place of business by apportionment
				because apportionment ignores anything related to a specific transaction other
				than the criteria used for apportionment, which usually is payroll.