Dear Chair Anthony and Members of the Subcommittee I am John Musso, Government Affairs Manager at the Arlington Chamber of Commerce. On behalf of the Chamber, I am expressing our support for H.B. 956 (Watts). This bill amends now-outdated language in the code and clarifies tax law related to allowable out-of-state deductions, making straightforward changes to benefit Virginia businesses. I ask that you please report this bill favorably out of the subcommittee tomorrow afternoon.

Comments Document

The Council On State Taxation (COST) supports HB 956, which updates Virginia’s BPOL deduction for receipts attributable to business conducted outside the Commonwealth. Under current law, taxpayers may deduct out‑of‑state receipts only if the other jurisdiction imposes a net income tax. HB 956 modernizes this rule by also allowing the deduction when the taxpayer is subject to a business activity tax measured in whole or in part by gross or net income or receipts, such as gross receipts taxes or margins taxes used in states like Ohio and Texas. COST’s letter explains that BPOL is a local gross receipts tax that relies on deductions to avoid taxing extraterritorial activity. The bill ensures taxpayers are treated consistently regardless of whether other states impose net income taxes or alternative business activity taxes. The letter emphasizes that HB 956: Promotes tax neutrality by eliminating arbitrary differences in treatment between states based on their choice of business tax structure. Provides administrative clarity by defining qualifying taxes and reducing disputes over the deduction’s availability. Aligns BPOL with constitutional standards requiring fair apportionment and preventing taxation of out‑of‑state business activity. Modernizes the statute to reflect today’s multistate tax landscape, where many states have moved away from traditional net income taxes. COST concludes by urging the Subcommittee to support HB 956 as a targeted, reasonable improvement that enhances fairness, consistency, and constitutional integrity without expanding BPOL taxation or undermining local revenues.