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Virginia Circuit Court denies use of alternative apportionment method for Virginia-based service provider

The Circuit Court of Arlington County, Va., recently denied a taxpayer’s appeal for an income tax refund and the use of an alternative apportionment formula. The taxpayer, a service provider headquartered in Virginia, claimed that a single-sales factor apportionment formula based on a market-based sales sourcing methodology more accurately reflected its revenue from Virginia sources than the statutory method. The court denied the taxpayer’s refund claim and the use of an alternative apportionment formula, holding that the statutory three-factor, double-weighted sales apportionment formula, based on a cost of performance sales sourcing methodology, did not accurately measure taxpayer activity in Virginia.

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