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HB 552

Income tax, corporate; sourcing of sales other than sales of tangible personal property.

2025 Regular Session Introduced by Joe McNamara

Virginia bill redefines how corporate income from services and intangible property is allocated among states for tax purposes, affecting corporate tax liability sourcing rules.

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Bill Summary · HB 552

Legislative bill overview

HB 552 modifies how Virginia taxes corporate income from services and intangible property sales by changing the sourcing rules—determining which state gets to tax the revenue. The bill specifically addresses how to allocate non-tangible sales (like services, software, and intellectual property) for corporate tax purposes, rather than relying solely on where the customer is located.

Why is this important

This directly affects how much corporate income tax Virginia can collect from businesses operating across multiple states. It also influences where companies choose to locate operations and how they structure their business activities. The rule changes could shift tax liability between states, potentially increasing or decreasing Virginia's tax base depending on the specific sourcing mechanism adopted.

Potential points of contention

  • Competitive disadvantage concerns: Stricter sourcing rules might discourage out-of-state service providers from doing business in Virginia or push Virginia companies to relocate
  • Revenue uncertainty: The fiscal impact statement shows the state doesn't know whether this generates more or less tax revenue, creating budgeting challenges
  • Complexity for business compliance: New sourcing rules require companies to track and report sales differently, increasing administrative burden and potential audit disputes
  • Interstate commerce implications: Changes could trigger reciprocal legislation from other states or interstate disputes over tax authority

Compiled from official sources — confirm details with the bill’s official record.

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