A BILL to amend and reenact § 58.1-3732 of the Code of Virginia, relating to license taxes; deduction for out-of-state receipts.
HB956 amends Virginia Code § 58.1-3732, which governs exclusions and deductions from “gross receipts” for local license tax purposes. The bill keeps the existing list of items that are not counted as gross receipts and revises the deduction for receipts attributable to business conducted outside Virginia. Under the bill, receipts from out-of-state or foreign business activity would be deductible if the taxpayer, or its owners in pass-through entities, is liable for an income tax or other tax based on income in that other jurisdiction.
The bill also clarifies how those out-of-state receipts are determined, directing that they be identified based on the facts and circumstances of the business operations rather than on the amount ultimately taxed by the other state or country. It further defines “income or other tax based upon income” to include a net income tax and, where no net income tax exists, another business activity tax measured in whole or in part by gross or net income or receipts. The bill leaves intact the other existing exclusions and deductions in the statute, including items such as sales tax amounts, loan proceeds, returns and allowances, and certain investment income.
HB956 would affect local business license taxation by narrowing the receipts that may be included in the tax base when business activity occurs outside Virginia and is already subject to income-based taxation elsewhere. In practical terms, businesses with multistate or international operations could see a reduced local license tax burden if they can show the receipts are attributable to taxable out-of-state activity. The bill would amend § 58.1-3732 of the Code of Virginia, which is the principal statute defining gross receipts exclusions and deductions for license tax purposes.
The available record shows no committee transcript or recorded vote, so there is no direct evidence of debate or formal support/opposition in the materials provided. Based on the bill’s subject matter, the measure appears to be a technical tax adjustment aimed at preventing double taxation of out-of-state business receipts rather than a broad policy change. Its referral to and remaining in the Finance Committee suggests it was treated as a tax policy issue requiring further consideration.
The main point of potential contention is the scope of the deduction for out-of-state receipts and how broadly “attributable” business activity should be interpreted. Local governments and tax administrators may be concerned about reduced license tax revenue and the complexity of verifying whether receipts qualify, while multistate businesses are likely to favor the clarification as relief from overlapping tax burdens. Another possible issue is the bill’s reliance on facts-and-circumstances determinations, which can create uncertainty and disputes over apportionment and documentation.