The Court of Appeals of Virginia, upholding the trial court’s decision, held that the successor to The C. F. Sauer Company could elect the manufacturer’s apportionment method for the first time on its amended tax return. By doing so, the court (preliminarily*) paved the way for qualifying taxpayers to take a wait and see approach to deciding on whether to elect Virginia’s alternative apportionment method for manufacturers is right for them. Virginia’s standard apportionment method prescribes a three-factor formula comprised of a taxpayer’s property factor, payroll factor, and double-weighted sales factor, whereas the manufacturer’s apportionment method for tax years beginning on or after July 1, 2014 is comprised of a single-sales factor. Considering that the manufacturer’s apportionment method is irrevocable for three taxable years, the flexibility in making such an election could be crucial for taxpayers that are uncertain of the impact that the alternative method could have when filing their original tax returns. To reach its conclusion, the court rejected the Department’s argument that certain provisions (e.g., the recapture provision) and phrases (e.g. any interest accrued would be “from the original due date for filing”) in the statute directly conflicted with the trial court’s ruling (and the taxpayer’s position) and showed the legislature’s intent to limit the election to the original tax return. Rather, the court found that there is no conflict and that, unlike other Virginia tax elections, the plain language of the statute “simply does not prevent a taxpayer company from electing to use the manufacturer’s apportionment method in a timely amended return.” Further support for the court’s reading was found in the “legislature’s liberal acceptance of amended returns generally elsewhere in the tax code.” *Virginia does not permit an appeal to the Supreme Court of Virginia as a matter of right in tax cases that do not involve the State Corporation Commission.
Commonwealth of Virginia, Department of Taxation v. 1887 Holdings, Inc., Record No. 0598-22-2 (Va. Ct. App. May 23, 2023).