Tax Type
Individual Income Tax
Description
Out-of-state tax credit; West Virginia business and occupation taxes
Topic
Credits
Date Issued
07-15-1988
July 15, 1988
Re: §58.1-1821 Application/Individual Income Tax
Dear*****************
This is in response to the hearing that was held on June 28, 1988 in the*************District office regarding your appeal of income tax assessed for tax year 1985.
DISCUSSION
The taxpayer seeks to claim an out-of-state tax credit for business and occupation taxes paid to West Virginia in 1985. The taxpayer's request was denied in a determination letter dated March 8, 1988 because it was ascertained that the business and occupation tax is not an income tax and thus not allowable as a credit under §58.1-332 of the Code of Virginia. Per the taxpayer's request, a hearing was arranged with the taxpayer and a representative of the department in the ******* District office to further discuss the issues involved. The taxpayer contends that a credit should be allowed for the West Virginia business and occupation tax since these taxes were allowable as a credit against the Nest Virginia income tax. The taxpayer asserts that the business and occupation tax is a tax on income since it "replaces" the West Virginia income tax. In addition, the taxpayer maintains that he is being taxed by both states on the same income.
DETERMINATION
I have been apprised of the information presented in the hearing of June 28, 1988. However, after analyzing the facts and issues presented by the taxpayer, it is still evident that the West Virginia business and occupation tax is not an income tax. As set forth in my earlier letter to the taxpayer, the department cannot permit an out-of-state tax credit for anything other than an income tax liability incurred on non-Virginia source income.
While the business and occupation tax may be allowed as a credit against West Virginia income tax, this in and of itself does not infer that the business and occupation tax is an income tax. As stated in the introduction of the West Virginia Business and occupation Tax Regulations:
-
- [t]he West Virginia business and occupation tax is a tax levied for the privilege of engaging in business in West Virginia....Even though gross income is the measure of the tax,...it is not an income tax;...It can be defined as a privilege tax, or with some degree of accuracy, as a business activities tax measured by gross receipts. (emphasis added)
- [t]he West Virginia business and occupation tax is a tax levied for the privilege of engaging in business in West Virginia....Even though gross income is the measure of the tax,...it is not an income tax;...It can be defined as a privilege tax, or with some degree of accuracy, as a business activities tax measured by gross receipts. (emphasis added)
Based upon all of the foregoing, I find no basis for a correction of the assessment, which is now due and payable in full. In addition, the department will correct your 1986 tax return, on which you claimed a subtraction for income subject to the West Virginia business and occupation tax. This correction is necessary as Virginia law does not contain a provision permitting such a subtraction.
Sincerely.
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner