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Bill

SB 1456

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

2025 Regular Session Introduced by Mark Obenshain

Modifies Virginia corporate income tax sourcing for intangible services to tax based on customer benefit location rather than seller location, potentially reducing state revenue.

Passed by indefinitely in Finance and Appropriations (10-Y 5-N)
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Bill Summary · SB 1456

Legislative bill overview

SB 1456 modifies how Virginia sources corporate income tax for sales of intangible services and digital products—essentially determining which state gets to tax these transactions when a Virginia corporation sells them across state lines. The bill changes the sourcing rules to align with where the customer receives the benefit of the service rather than where the seller is located, which is a common approach in multi-state tax policy.

Why is this important

Corporate sourcing rules directly affect state tax revenue and determine the tax burden on Virginia businesses selling services nationally. How states apportion income tax on intangible services has become increasingly important as the economy shifts toward software, consulting, digital content, and other service-based business models. This impacts both state budget projections and the competitiveness of Virginia companies in interstate commerce.

Potential points of contention

  • Revenue impact: Changing sourcing rules could reduce Virginia's tax revenue if more income gets attributed to other states, though the TAX Department impact statement would clarify the fiscal effect
  • Business competitiveness: Virginia companies might see tax relief competing nationally, but this could also incentivize other states to adopt similar provisions, creating a "race to the bottom"
  • Complexity for compliance: Businesses may find it more difficult to determine "benefit of the service" location versus their home state location, potentially increasing compliance costs and audit disputes

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

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