Tax Type
Corporation Income Tax
Description
Limited liability corporation; income from Virginia sources
Topic
Persons Subject to Tax
Taxability of Persons and Transactions
Date Issued
04-18-2003
April 18, 2003
Re: Request for Ruling: Corporate Income Tax
Dear *******************:
This is in reply to your letter in which you request guidance regarding the Virginia
corporate income tax return filing requirements for *************** (the "Taxpayer"). I apologize for the delay in the Department's response.
FACTS
The Taxpayer is a limited liability corporation ("LLC") located outside Virginia. You state that the business does not have any offices or employees in Virginia. The Taxpayer is registered to collect sales and use tax on its products sold in Virginia.
RULING
Under Va. Code § 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, as codified at 15 U.S.C.A. §§ 381-384, prohibits a state from imposing a net income tax where the only contacts with a state are a narrowly defined set of activities constituting solicitation of orders for sales of tangible personal property. 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. See Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992). Based on the information provided, the Taxpayer does not appear to have nexus for income tax purposes.
It should be noted, however that even if the Taxpayer did not meet the protection provided under P.L. 86-272, it, being an LLC, may not have a Virginia corporate income tax filing requirement. Because Virginia follows the federal entity classification rules under Treasury Regulations § 301.770 et seq., an LLC may be disregarded and treated as a pass through entity not subject to Virginia income tax.
Income and deductions distributed to the members are considered to have the same tax attributes to the members as they had for the LLC. See Public Document 97-343 (8/29/97). If a member of the LLC is a Virginia resident or otherwise has nexus with Virginia, that member would be subject to Virginia income tax on that income. If a member is an individual, that member would be required to file a Virginia individual income tax return if its Virginia Adjusted Gross Income reached the minimum filing threshold set forth in Va. Code § 58.1-321.
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.
A copy of the public document cited has been enclosed for your reference. This public document and other reference documents are available online in the Tax Policy . Library section of the Department's web site, located at www.tax.state.va.us. If you have any questions regarding this response or desire additional information, please contact ************ in the Department's Office of Policy and Administration, Appeals and Rulings, at ****************.
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- Sincerely,
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Kenneth W. Thorson
Tax Commissioner
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AR/42437E
Rulings of the Tax Commissioner