Document Number
07-163
Tax Type
Corporation Income Tax
Description
Nexus is not created by delivery via common carrier or by the use of an independent agent in the State.
Topic
Classification
Nexus
Date Issued
10-17-2007

October 17, 2007



Dear *****:

This is in response to your letter of June 2007, in which you requested a ruling on behalf or your clients, ***** (The Taxpayer) regarding Virginia income tax nexus.

FACTS


The Taxpayer trades in petrochemical products used by their customers in manufacturing. The Taxpayer uses common carriers to transport materials into a customer's tank in a port or terminal located in the state. Title to the goods typically passes upon discharge of the materials into the customer's tank. An independent agent represents both the Taxpayer and the customer to serve as a witness of cargo delivery. The fees for the independent agent are split between the buyer and seller. For purposes of this ruling TAX accepts the Taxpayer's assertion that the Taxpayer does not maintain property, have payroll or solicit sales orders in the State.

You ask whether the delivery through common carrier and the presence of the independent agent in the State generates nexus for purposes of corporate income tax.

RULING


The Taxpayer does not have a substantial enough physical presence in the State to create nexus. The Taxpayer has no property or payroll in the State. It appears from the facts that all orders are made via electronic communications and therefore the Taxpayer has no sales in the State.

The use of a common carrier to deliver does not create nexus with the State. The Department of Taxation (TAX) views the use of a common carrier to deliver goods as if the Taxpayer is purchasing the services from a vendor and reselling them to its customers. See Public Document (P.D.) 99-278 (10/14/99).

The use of an independent agent to witness delivery does not create nexus with the State. An independent agent is engaged in business on behalf of more than one principal and is in fact independent from the principals. Since the Taxpayer and the Taxpayer's customer share the cost of the independent agent and the agent is acting for the benefit of both principals, the agent is in an independent agent.

The Taxpayer has no nexus with Virginia at this time because the Taxpayer has no physical presence in the State. In addition, nexus is not created by delivery via common carrier or by the use of an independent agent in the State. The Taxpayer is not currently subject to the corporate income tax in Virginia.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of TAX's web site. If you have any questions regarding this ruling, you may contact ***** in the Office of Policy and Administration, Policy Development, at *****.
                • Sincerely,


                • Janie E. Bowen
Tax Commissioner


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46