Virginia HB 609: Income tax, corporate; sourcing of sales, other than sales of tangible personal property.

Bill Text

2027 SESSION

INTRODUCED

26101765D

HOUSE BILL NO. 609

Offered January 14, 2026

A BILL to amend and reenact §§ 58.1-416, as it is effective and as it may become effective, 58.1-422.4, and 58.1-422.5, as it may become effective, of the Code of Virginia and to repeal the third enactment of Chapter 256 and the third enactment of Chapter 257 of the Acts of Assembly of 2022, relating to corporate income tax; sourcing of sales other than sales of tangible personal property.

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Patron—McNamara

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Referred to Committee on Finance

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Be it enacted by the General Assembly of Virginia:

1. That §§ 58.1-416, as it is effective and as it may become effective, 58.1-422.4, and 58.1-422.5, as it may become effective, of the Code of Virginia are amended and reenacted as follows:

§ 58.1-416. (Contingent expiration date — See Editor's note) When certain other sales deemed in the Commonwealth.

A. Sales, other than sales of tangible personal property, are in the Commonwealth if:

1. The income-producing activity is performed in the Commonwealth; or

2. The income-producing activity is performed both in and outside the Commonwealth and a greater proportion of the income-producing activity is performed in the Commonwealth than in any other state, based on costs of performance. the taxpayer's market for the sales is in the Commonwealth and the taxpayer's sales in the Commonwealth for the taxable year exceed $100,000 in aggregate. Except as provided in subsections B and E, the taxpayer's market for sales is in the Commonwealth:

1. In the case of sale, rental, lease, or licensing of real property, if and to the extent the property is located in the Commonwealth;

2. In the case of sale of a service, if and to the extent that the benefit of the service is received at a location in the Commonwealth; and

3. a. In the case of intangible property that is rented, leased, or licensed, if and to the extent that the property is used in the Commonwealth. For purposes of this subdivision a, intangible property utilized in marketing a good or service to a consumer is "used in the Commonwealth" if that good or service is purchased by a consumer who is in the Commonwealth; and

b. In the case of intangible property that is sold, if and to the extent that the property is used in the Commonwealth. For purposes of this subdivision b, (i) a contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is "used in the Commonwealth" if the geographic area includes all or part of the Commonwealth; (ii) receipts from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property are treated as receipts from the rental, lease, or licensing of such intangible property under subdivision a; and (iii) all other receipts from a sale of intangible property are excluded from the numerator and denominator of the sales factor.

B. 1. B. For debt buyers, as defined in § 58.1-422.3, sales, other than sales of tangible personal property, are in the Commonwealth if they consist of money recovered on debt that a debt buyer collected from a person who is a resident of the Commonwealth or an entity that has its commercial domicile in the Commonwealth. Such rule shall apply regardless of the location of a debt buyer's business.

2. For property information and analytics firms, as defined in § 58.1-422.4, that meet the requirements set forth in § 58.1-422.4, sales of services are in the Commonwealth if they are derived from transactions with a customer or client who receives the benefit of the services in the Commonwealth. Such rule shall apply regardless of the location of a property information and analytics firm's business operations.

C. The taxes under this article on the sales described under subsection B this section are imposed to the maximum extent permitted under the Constitutions of Virginia and the United States and federal law. For the collection of such taxes on such sales, it is the intent of the General Assembly that the Tax Commissioner and the Department assert the taxpayer's nexus with the Commonwealth to the maximum extent permitted under the Constitutions of Virginia and the United States and federal law.

D. 1. If necessary information is not available to the taxpayer to determine whether a sale other than a sale of tangible personal property is in the Commonwealth pursuant to the provisions of subsections B and C this section, the taxpayer may estimate the dollar value or portion of such sale in the Commonwealth, provided that the taxpayer can demonstrate to the satisfaction of the Tax Commissioner that (i) the estimate has been undertaken in good faith, (ii) the estimate is a reasonable approximation of the dollar value or portion of such sale in the Commonwealth, and (iii) in using an estimate the taxpayer did not have as a principal purpose the avoidance of any tax due under this arti