Tax Type
Corporation Income Tax
Description
Nexus Ruling
Topic
Basis of Tax
Taxability of Persons and Transactions
Date Issued
10-23-2001
October 23, 2001
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 *********(the "Taxpayer").
FACTS
The Taxpayer is a reseller of long distance telephone and Internet services. The Taxpayer is also a broker for third party providers of services such as wireless communications, propane and home heating oil. All of these services are provided through the Taxpayer's website.
The Taxpayer does not own or lease any property in Virginia. All sales and customer support functions occur at the Taxpayer's headquarters, which is located outside of Virginia. All sales are solicited and generated via the Internet. All potential sales are either accepted or rejected at the headquarters.
You have inquired as to whether the facts, as set forth above, would establish sufficient nexus to allow Virginia to impose the corporate income tax on the income of the Taxpayer.
RULING
Under Code of Virginia § 58.1-400, every corporation having income from Virginia sources is subject to the corporate income tax. A taxpayer will have income from Virginia sources when sales are made to customers located in Virginia. Public Law (P.L.) 86-272, however, prohibits a state from imposing an income tax on businesses when the only contacts with the state are a narrowly defined set of activities. Although P.L. 86-272 applies to tangible property, the department's policy has been to extend the "solicitation test" of P.L. 86-272 to situations involving the sale of services. The department limits the scope of P.L. 86-272 to only those activities that constitute solicitation, are ancillary to solicitation, or are de minimis in nature.
The Taxpayer does not own or lease any property in Virginia. None of the Taxpayer's employees are present in Virginia. The Taxpayer solicits exclusively through the Internet. Based on the facts as presented, the Taxpayer's activities in Virginia would not exceed the standards set forth under P.L. 86-272.
This ruling has been made subject to the facts presented to the department as summarized above. Any change in these facts or the introduction of facts by another party may lead to a different result. If you have any additional questions regarding this ruling, please call *********** in Policy Development at *************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/33610G
Rulings of the Tax Commissioner