West Virginia Adopts Single Sales Factor & Market-Based Sourcing
The West Virginia Department of Revenue has adopted amended state corporation net income tax rules reflecting recently enacted legislation (H.B. 2026 (2021)) that includes:
- Moving from a three-factor apportionment formula consisting of property, payroll, and double-weighted sales to a single-sales factor formula, effective for tax years beginning on or after January 1, 2022.
- Eliminating the sales factor “throw-out” rule for certain sales of tangible personal property made on or after January 1, 2022. Now sales on which a corporation does not pay tax in any state are subtracted from the numerator but will remain in the denominator of the sales factor.
- Adopting market-based sourcing for certain receipts derived from services and intangible property on sales made on or after January 1, 2022, in place of its “costs of performance” sourcing methodology. Now sales of service go into the sales factor numerator based on whether the service is delivered to a customer in the state.
The proposed rule includes a sunset date of August 1, 2027, for the date the rule “shall terminate and have no further force or effect …” See the July and September West Virginia Register for additional details.
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