Document Number
04-123
Tax Type
Withholding Taxes
Description
Nonresident, a domiciliary resident or an actual resident
Topic
Withholding of Tax
Date Issued
09-16-2004


September 16, 2004


Re: Request for Ruling: Income Tax Withholding

Dear **********

This will reply to your letter in which you request a ruling concerning the Virginia income tax withholding requirements of ***** (the "Taxpayer"). I apologize for the delay in this response.
FACTS

The Taxpayer hired an individual (the "Employee") in a position that requires the Employee to travel for extended periods of time without the United States. The Employee's base of operations is the Taxpayer's corporate headquarters in Virginia. Prior to being hired by the Taxpayer, the Employee resided with his spouse and children in another state. The Employee has rented an apartment in Virginia, where he intends to stay while working in the United States. The Employee requested the Taxpayer to change his home address to Virginia. You have requested a ruling as to whether the Taxpayer is required to withhold Virginia income tax from the Employee's wages.
RULING

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintains his place of abode within Virginia. The determination as to whether an individual is a Virginia resident for income tax purposes is factual in nature and is determined after consideration of all the evidence. The information provided is not sufficient to make such a determination.

Virginia Code § 58.1-461 provides that employers must withhold taxes on wages of employees. Virginia Code § 58.1-460 defines "employee" as "an individual, whether a resident or a nonresident of the Commonwealth, who performs or performed any service in the Commonwealth for wages, or a resident of the Commonwealth who performs or performed any service ... outside the Commonwealth for wages." As such, an employee who earns wages while performing services in Virginia must have tax withheld regardless of whether the employee is a resident or a nonresident of Virginia. Usually, when an employee is a resident of Virginia, all of his wages are subject to withholding.

Under Va. Code § 58.1-461, however, an employer is not required to withhold any Virginia income tax if the employee provides a signed Employee's Virginia Income Tax Withholding Exemption Certificate (Form VA-4) that certifies that the employee incurred no Virginia income tax liability for the prior taxable year and will incur no Virginia income tax liability for the current taxable year. An employer is not required to determine whether the employee has claimed the correct number of exemptions. Form VA-4 also provides a full exemption from withholding if:
    • 1. The employee expects to have Virginia adjusted gross income of less than $5,000 (single), $8,000 (married, filing a joint or combined return) or $4,000 (married, filing a separate return); or
    • 2. The employee lives in Kentucky or the District of Columbia and commutes on a daily basis to employment in Virginia, or the employee is a domiciliary or legal resident of Maryland, Pennsylvania, or West Virginia whose only Virginia source income is from salaries and wages and such salaries and wages are subject to income tax by the employee's state of domicile.

An employee can reduce or eliminate Virginia income tax withholding by submitting a Virginia Employee's Withholding Income Tax Credit for Income Taxes Paid to Another State form (Form VA-4b). This form allows an employee to estimate the credit that would be claimed by an employee for income taxes paid to another state and have his Virginia income tax withholding adjusted accordingly.

In this case, the Employee works primarily outside of the United States, but does perform some services in Virginia for the Taxpayer for wages. In addition, the Employee has established a place of abode in Virginia. The state in which the Employee resided prior to his employment with the Taxpayer does not impose an income tax on individuals. Based on the facts provided, it does not appear the Employee meets any of the exemptions from withholding provided on Form VA-4 or Form VA-4b. Accordingly, the Taxpayer is required to withhold Virginia income tax from the Employee's wages.

If you determine that the Employee is a nonresident of Virginia, several methods exist to determine the amount of wages subject to withholding. The method an employer utilizes should be the one that provides the most accurate reflection of actual Virginia source income. See Public Documents 82-169 (12/02/82), 84-62 (5/23/84), 85-134 (6/18/85), and 96-252 (9/27/96).

I hope that the foregoing answers your question. Copies of the Code of Virginia sections and public documents cited are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions regarding this ruling, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
                • Sincerely,




                  Kenneth W. Thorson
                    • Tax Commissioner


AR/46809B


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46