By: Ryan Beethoven-Wilson, CPA | Tax Supervisor | Manufacturing & Retail Industry Team
The final phase of apportionment changes in Virginia is upon us for manufacturers and retailers. As a reminder, manufacturers have the ability to elect a phase-in of single sales apportionment over three total taxable years. Retailers on the other hand, are now required to use the phase-in of single sales apportionment.
For example, if a calendar-year manufacturer has elected the phase-in of single sales factor apportionment, the manufacturer will be able to apportion income using a single-sales factor on its 2015 Virginia return. The election is made by filing a Virginia return using a triple-weighted sales factor for 2013 and by filing a return using a quadruple-weighted sales factor for 2014. Again, the determining factor is when the taxpayer’s tax year begins.
For manufacturers to be eligible to use the phase-in of single sales apportionment, certain employment thresholds must be met each year. Those thresholds are:
1) the average weekly wage of the company’s full-time employees must be equal to or greater than the local average weekly wage, and
2) the average number of the company’s full-time and full-time equivalent employees must be at least 90% of the average number of employees during the base year (the first year the election is made). If a company had previously elected the phase-in and no longer meets either of these thresholds, then the company should return to apportioning income using the standard double-weighted sales factor. If a company has already filed a previous year return using the elected single sales factor phase-in, and did not in fact meet the employment thresholds, then an amended return may be in order to remit a “recapture” tax. This situation should be discussed with a tax advisor as facts and circumstances will differ for each taxpayer.
On the other hand, retailers are required to apportion income using quadruple-weighted sales for tax years beginning after July 1, 2014, and will be able to apportion income using a single-sales factor in tax years beginning after July 1, 2015.
Links to our previous articles and further information on Virginia’s apportionment changes can be found here:
The instructions for Virginia Forms 500A and 502A are also a good place to turn for guidance. As always, please contact your Keiter representative with any questions or for further assistance or email@example.com | 804.747.0000
Ryan works with both large and mid-market clients in the construction, real estate, manufacturing, private equity, and retail industries. He assists his clients with tax planning and saving opportunities to help their businesses grow. Ryan also participates in the Greater Richmond Chamber of Commerce’s Helping Young Professionals Engage (HYPE) program and in the Richmond Venture Forum. Read more of Ryan’s insights on our blog.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.