Telecommunications companies; imposition of tax

# A.

Generally. Telecommunications companies must calculate both their minimum tax as provided in 23VAC10-120-83 and their income tax liability as provided in 23VAC10-120-84 for each taxable year. For each taxable year, the tax liability of a telecommunications company will be the greater of its minimum tax or of its corporate income tax.

# B.

Amended return. If due to a change in federal taxable income, or for any other reason, the Virginia taxable income or gross receipts of a telecommunications company is changed, an amended return must be filed. The minimum tax and corporate income tax must be recomputed to determine which tax is applicable to the telecommunications company.

EXAMPLE 1: Telecommunications Company (TC) is a calendar year filer for federal income tax purposes. For calendar year 1990, it has $200,000 in gross receipts and Virginia taxable income equal to $35,000. TC's minimum tax liability is $2,400 ($200,000 X 1.2%) and its Virginia income tax is $2,100 ($35,000 X 6.0%). Because TC's minimum tax liability exceeds its income tax liability, it is subject to the minimum tax and must pay $2,400 in tax.

EXAMPLE 2: Same facts as in Example 1. In 1993 the Internal Revenue Service audits TC for calendar year 1990 and determines that the company overreported its wage expense by $6,000; thus TC's federal taxable income for calendar year 1990 was underreported by $6,000. TC subsequently amends its Virginia income tax return for calendar year 1990 to report the additional $6,000 in taxable income. The amended return still shows a minimum tax liability of $2,400 (no charge in gross receipts) and an income tax liability of $2,460, 6.0% of ($35,000 + 6,000). Since TC's income tax liability is now higher than its minimum tax liability, it is now subject to the income tax. TC owes the department $60 ($2,460 - $2,400).