Information About the Pass-Through Entity Tax (SB 151)
Beginning on January 1, 2022, a number of legislative changes to the West Virginia Pass Through Entity Tax became effective.
The apportionment formula for S-corporations/partnerships doing business in more than one state has changed. For tax years beginning on or after January 1, 2022, West Virginia uses a single sales factor formula. Under this formula, the numerator includes sales occurring in West Virginia and the denominator includes sales occurring everywhere. Prior to tax year 2022, West Virginia apportioned the income of multi-state S-corporations/partnerships through use of a four-factor formula consisting of a property factor, a payroll factor, and a double weighted sales factor.
Beginning on January 1, 2022, sales on which a S-corporation/partnership does not pay tax in any state should not be included in the numerator but remain in the denominator of the sales factor. Prior to tax year 2022, sales on which a S-corporation/partnership does not pay tax in any state were not included in either the numerator and denominator of the sales factor.
West Virginia has adopted market-based sourcing for services and certain intangible property starting on January 1, 2022. Under a “market-based sourcing” rule, sales of services go into the numerator of the sales factor based on whether the service was delivered to a customer in this state. Intangible property that is rented or licensed, or a contract right or government license, should also be included in the numerator of the sales factor if they were used in this state.