Tax Type
Corporation Income Tax
Description
Exemption from Corporate Tax
Topic
Allocation and Apportionment
Date Issued
04-23-1999
April 23, 1999
Re: Request for Ruling: Corporation Income Tax
Dear****************
This will respond to your letter in which you request a nexus ruling regarding the Virginia corporate income tax on behalf of an anonymous client (the "Taxpayer').
FACTS
The Taxpayer is a manufacturer of tangible personal property, incorporated and located outside Virginia. The Taxpayer does not maintain an office in Virginia nor does it have any property located in Virginia including inventory. The Taxpayer sell its products to Virginia customers and inquires whether certain sales activities would subject it to filing a Virginia income tax return.
RULING
A tax is imposed on the Virginia taxable income of every foreign corporation having income from Virginia sources, unless specifically exempted. Public Law (P.L.) 86-272, codified at 15 U.S.C.A. Secs.381-384, prohibits Virginia from imposing a net income tax on a taxpayer when the only contact with Virginia is the solicitation of sales of tangible personal property. P.L. 86-272 protection has been extended by the U.S. Supreme Court to include activities which are ancillary to direct sales solicitation, as well as de minimis activities. See Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 11I2 S Ct. 2447 (1992).
In Wrigley, the U.S. Supreme Court held that a "solicitation of orders' means any speech or conduct explicitly or implicitly proposing a sale, and activities entirely ancillary to soliciting sales. In your letter you do not describe any activities the Taxpayer's sales force might engage in, however, if such activities are limited to those enumerated in Wrigley, they would not be subject to Virginia tax. Employees or other representatives soliciting sales for the Taxpayer in Virginia would not, on its own, subject the Taxpayer to Virginia tax.
In Commonwealth v. National Private Truck Council, 253 Va. 74, 480 S.E.2d 500 (1997), the Virginia Supreme Court ruled that delivery into Virginia using one's own trucks did not exceed the protection afforded by P.L. 86-272. The court held that Congress did not identify any manner of delivery to qualify for immunity under P.L. 86-272.
Assuming the Taxpayer limits its activities as explained above, the Taxpayer would be exempt from Virginia corporation income tax pursuant to P.L. 86-272. If you have any questions regarding this ruling, please contact ***** of the Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/17674P
Rulings of the Tax Commissioner