Tax Type
Corporation Income Tax
Description
Apportionment factors; Property sold
Topic
Allocation and Apportionment
Collection of Tax
Taxable Income
Date Issued
10-11-2000
October 11, 2000
Re: § 58.1-1821 Application: Corporate Income Taxation
This will reply to your letter in which you contest the assessment of corporate income tax against * * * (the "Taxpayer") for the taxable years ending December 31, 1996 and 1997. I apologize for the delay in responding.
FACTS
The Taxpayer filed Virginia corporate income tax returns for the 1996 and 1997 taxable years reporting property, but no payroll or sales in Virginia for the purposes of apportioning income subject to Virginia taxation. Because the property was reported on the 1996 and 1997 taxable year returns, and the Taxpayer reported rental income for the Virginia property in 1995, the auditor concluded that the Taxpayer had received rental income from the Virginia property in 1996 and 1997, and adjusted the sales factor.
According to the Taxpayer, the Virginia property was sold in 1995. Based on this assertion, the Taxpayer contests the assessments on the basis that it had no nexus with Virginia during the taxable years in question, and requests refunds for the income taxes paid.
DETERMINATION
Under Code of Virginia § 58.1-400, every corporation having income from Virginia sources is subject to the corporate income tax. A corporation will, generally, have income from Virginia sources if there is sufficient business activity within Virginia to make any one or more of the applicable apportionment factors positive. See Public Document ("P.D.") 92-238 (11/16/92)(copy enclosed).
However, Public Law (P.L.) 86-272, codified at 15 U.S.C.A. §§ 381-384, prohibits a state from imposing a net income tax where the only business activity within the state is the solicitation of orders for the sale of tangible personal property. The department has a long established policy of narrowly interpreting the provisions of P.L. 86-272.
Documentation provided by the Taxpayer indicates that the Taxpayer's property located in Virginia was sold during the 1995 taxable year. As such, the Taxpayer had no positive apportionment factors for the 1996 and 1997 taxable years, and therefore, had no income subject to Virginia tax.
Accordingly, the assessments of Virginia corporate income tax against the Taxpayer for the 1996 and 1997 taxable years have been abated. In addition, refunds for the full amount of income tax paid for the 1996 and 1997 taxable years will be issued shortly along with any applicable interest. If you have any questions regarding this determination, you may contact * * * at * * *
Danny M. Payne
Tax Commissioner
Re: § 58.1-1821 Application: Corporate Income Taxation
This will reply to your letter in which you contest the assessment of corporate income tax against * * * (the "Taxpayer") for the taxable years ending December 31, 1996 and 1997. I apologize for the delay in responding.
FACTS
The Taxpayer filed Virginia corporate income tax returns for the 1996 and 1997 taxable years reporting property, but no payroll or sales in Virginia for the purposes of apportioning income subject to Virginia taxation. Because the property was reported on the 1996 and 1997 taxable year returns, and the Taxpayer reported rental income for the Virginia property in 1995, the auditor concluded that the Taxpayer had received rental income from the Virginia property in 1996 and 1997, and adjusted the sales factor.
According to the Taxpayer, the Virginia property was sold in 1995. Based on this assertion, the Taxpayer contests the assessments on the basis that it had no nexus with Virginia during the taxable years in question, and requests refunds for the income taxes paid.
DETERMINATION
Under Code of Virginia § 58.1-400, every corporation having income from Virginia sources is subject to the corporate income tax. A corporation will, generally, have income from Virginia sources if there is sufficient business activity within Virginia to make any one or more of the applicable apportionment factors positive. See Public Document ("P.D.") 92-238 (11/16/92)(copy enclosed).
However, Public Law (P.L.) 86-272, codified at 15 U.S.C.A. §§ 381-384, prohibits a state from imposing a net income tax where the only business activity within the state is the solicitation of orders for the sale of tangible personal property. The department has a long established policy of narrowly interpreting the provisions of P.L. 86-272.
Documentation provided by the Taxpayer indicates that the Taxpayer's property located in Virginia was sold during the 1995 taxable year. As such, the Taxpayer had no positive apportionment factors for the 1996 and 1997 taxable years, and therefore, had no income subject to Virginia tax.
Accordingly, the assessments of Virginia corporate income tax against the Taxpayer for the 1996 and 1997 taxable years have been abated. In addition, refunds for the full amount of income tax paid for the 1996 and 1997 taxable years will be issued shortly along with any applicable interest. If you have any questions regarding this determination, you may contact * * * at * * *
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner