Tax Type
Corporation Income Tax
Description
Nexus
Topic
Persons Subject to Tax
Date Issued
09-18-2001
September 18, 2001
Re: Request for Ruling: Corporate Income Taxation
Dear *****
This will respond to your letter in which you request a ruling with respect to corporate income tax nexus for ****** (the "Taxpayer"). I apologize for the delay in the department's response.
FACTS
The Taxpayer is a manufacturer and seller of signs. The Taxpayer is incorporated outside Virginia and maintains no physical presence within Virginia. The Taxpayer employs no salesmen or independent solicitors of business in Virginia. All sales are made into Virginia directly from the Taxpayer's office, and the products are shipped by common carrier from locations outside Virginia.
The signs are installed in Virginia by unrelated third parties. Unrelated third-party vendors also provide on-site services and warranty work. You request a ruling as to whether the services provided by a third-party installer or warrantor in Virginia would subject the Taxpayer to Virginia income tax.
RULING
Under P.L. 86-272, as codified at 15 U.S.C.A. §§ 381-384, Virginia is prohibited from imposing an income tax on a corporation whose 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.
Although P.L. 86-272 only applies to the sale of tangible personal property, Virginia applies the same "solicitation" test to sales of intangible personal property. Under these circumstances, sales of services on behalf of an independent third party would not create nexus for a corporation that is otherwise protected under P.L. 86-272.
Neither the installation of tangible personal property nor its subsequent servicing in Virginia are activities protected by P.L. 86-272. In this case, however, the Taxpayer does not provide on-site installation or warranty service with its own employees. The on-site installation and warranty services are provided on behalf of the Taxpayer by unrelated third-party vendors, who perform all needed on-site services. The department views these activities as if the Taxpayer is purchasing the installation or warranty services from a vendor and reselling them to its customers. See Public Document ("P.D.") 99-278 (10/14/99) (copy enclosed).
As with any guidance provided by the department, this ruling is limited to the years and the facts and circumstances identified in your letter. Any material changes in the facts could alter the results. I trust this will answer the questions posed in your letter. If you have additional questions, please contact ***** in the department's Appeals and Rulings Office at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
ARO/31555B
Rulings of the Tax Commissioner