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2023 SESSION

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23103193D
SENATE BILL NO. 1349 Offered January 11, 2023 Prefiled January 11, 2023 A BILL to amend and reenact § 58.1-416 of the Code of Virginia, relating to taxation of corporations; apportionment; Internet root infrastructure providers. ---------- Patron-- Barker ---------- Referred to Committee on Finance and Appropriations ----------

Be it enacted by the General Assembly of Virginia:

1. That § 58.1-416 of the Code of Virginia is amended and reenacted as follows:

§ 58.1-416. 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.

B. 1. 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.

3. a. For Internet root infrastructure providers, sales of services are deemed to be in the Commonwealth if they are derived from sales transactions with a customer or client that receives the benefit of the services in the Commonwealth. Such rule shall apply regardless of the location of an Internet root infrastructure providers' operations.

b. For purposes of this subdivision unless the context requires a different meaning:

"Internet root infrastructure providers" means an entity and its affiliated entities that operates one or more Internet root servers of the Internet Assigned Numbers Authority (IANA) root and functions as the authoritative directory for one or more generic top-level domains.

"Internet root server of the IANA root" means a Domain Name System server that answers requests for the Domain Name System root zone of the Internet, redirecting requests for each top-level domain to its respective name server.

C. The taxes under this article on the sales described under subsection B 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. 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, 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 article. The Department may implement procedures for obtaining its approval to use an estimate. The Department shall adopt remedies and corrective procedures for cases in which the Department has determined that the sourcing rules for sales other than sales of tangible personal property have been abused by the taxpayer, which may include reliance on the location of income-producing activity and direct costs of performance as described in subsection A.