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New Tax Reporting Requirement for Virginia Businesses — Unitary Business Report

By: Manvi Sidhu

Businesses who are subject to Virginia income tax may need to file a one-time Unitary Business Report by July 1, 2021. If your company is required to file this report but fails to file by July 1, your business will be subject to a $10,000 fine. This new filing requirement affects businesses that are part of a “unitary business.”

What is a Unitary Business?

A unitary business is a single economic enterprise made up of either separate parts of a single business entity or a commonly controlled group of business entities that are sufficiently interdependent, integrated and interrelated through their activities.

How Do I Know If My Business Needs to File a Report?

The Virginia Department of Taxation sent letters about this filing requirement to businesses in May. To know if your business needs to file a report, fill out this brief questionnaire from the Virginia Department of Taxation as soon as possible, using the information provided in the letter.

A company that is an in-state unitary business or only does business in Virginia isn’t required to file a Unitary Business Report. Business entities that are subject to Virginia’s Insurance Premiums License tax or Virginia’s Bank Franchise Tax are also exempt from filing a report.

Why Is the Unitary Business Report Now Required?

Businesses are required to submit this report to help the Virginia Department of Taxation determine if it would collect more tax revenues from making entities file unitary returns rather than separate returns.

I’m Required to Submit a Report. Now What?

Companies that fall under this filing requirement must complete and file the report by July 1, 2021, using 2019 tax return information. The report must include information about gross income, apportionment computation, tax credits and tax liability calculation.

Your business will need to provide this information as if filing a unitary combined report under both the Joyce and Finnigan methods, as well as the same tax information as it is under the current filing requirements for all the members of the group that have nexus with Virginia.

The Virginia Department of Taxation gives the following guidance about the Joyce method approach in this reference guide: “Nexus determinations are made at the level of each individual entity for apportionment purposes, and as a result, sales by an entity lacking nexus in Virginia are excluded from the sales factor numerator for Virginia income tax purposes.”

The department gives the following guidance about the Finnigan method approach in this reference guide: “Nexus determinations are made at the level of unitary combined group as a whole, and as a result, all sales of members of the unitary combined group attributable to Virginia are included in the sales factor numerator, even if certain individual members lack nexus in Virginia if filing on a separate entity basis.”

The Unitary Business Report must be submitted by a single designated entity on behalf of the entire unitary business and must include all entities within the unitary business. You’ll need to file the report online. The Virginia Department of Taxation will provide a spreadsheet template to businesses that will need to be completed and then uploaded online here.

There is no extension for filing the Unitary Business Report. If you don’t submit a required report by July 1, 2021, your business will be subject to a $10,000 fine.

Is There a Fee to File the Report?

There is no fee or tax due with the filing of this report.

What if My 2019 Tax Returns Aren’t Filed Yet?

If your business’s 2019 tax return will not be filed by July 1, 2021, due to an extension, the computation can be based on the 2018 tax year.

Need Help?

Contact us here or call 800.899.4623.

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Published May 27, 2021

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