Document Number
Tax Type
Individual Income Tax
A nonresident who works in Virginia may apportion his or her salary to Virginia
Allocation and Apportionment
Date Issued

March 31, 2010

Re: § 58.1-1821 Application: Individual Income Tax

Dear *****:

This will reply to your letter in which you seek correction of the individual income tax assessments issued to ***** (the "Taxpayer") for the taxable years ended December 31, 2005 through December 31, 2007.


The Taxpayer, a resident of ***** (State A), owns 50% of a Virginia limited liability company (VLLC). The Taxpayer currently reports his business income from the VLLC to Virginia. The Taxpayer also receives salaried compensation for services performed on behalf of the VLLC. The Taxpayer returns to Virginia several times a year to assist with the sales at peek periods. He maintains a home and registered vehicles in Virginia. For the taxable years at issue, the Taxpayer filed a Virginia nonresident income tax return.

Under audit, the Department determined the Taxpayer was a domiciliary resident of Virginia and assessed 100% of his salary earned from the VLLC for tax years 2005 through 2007. The Taxpayer agrees that a portion of his salary is subject to taxation by Virginia, but only for the days he returned to Virginia to assist the VLLC with its business.



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 an individual or the place to which he intends to return even though he may actually reside elsewhere. For an individual to change his domiciliary residency to another state, that individual must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that individual must acquire a new domicile, where that individual is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means an individual who, for an aggregate of more than 183 days of the taxable year, maintains a place of abode within Virginia, whether domiciled in Virginia or not.

In determining domicile, consideration may be given to an individual's expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, sites of real and tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine an individual's domicile. An individual's true intention must be determined with reference to all of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish domiciliary residency.

The Taxpayer performed several actions supporting a change in domicile from Virginia. The Taxpayer acquired residential property in State A in July, 2002. He relinquished his Virginia driver's license and obtained a State A driver's license and voter's registration card in July 2002. In addition, the Taxpayer made a declaration of his nonresident status by reporting his Virginia source income on a Virginia nonresident income tax return prior to the tax years in question. The Taxpayer joined social organizations in State A and provided documentation that verified that the number of days he spent in State A exceeded the days he spent in Virginia.

The Taxpayer also performed actions that are consistent with maintaining a Virginia domicile. The Taxpayer spent time in Virginia working for the VLLC and maintained a house, and motor vehicles registered in Virginia. Although the Taxpayer retained significant connections with Virginia, I find the preponderance of evidence demonstrates that the Taxpayer abandoned his Virginia domicile and established a domicile outside Virginia.

Nonresident Salaries

During the course of the Department's review, the Taxpayer acknowledged he worked on behalf of the VLLC during the taxable years at issue. He did not, however, attribute any salaries he earned from the VLLC to Virginia on his nonresident returns.

Individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. The Virginia taxable income of a nonresident is defined under Va. Code § 58.1-325 as "an amount bearing the same proportion to his Virginia taxable income, computed as though he were a resident, as the net amount of his income, gain, loss and deductions from Virginia sources bears to the net amount of his income, gain, loss and deductions from all sources."

Typically, the factor that most equitably determines the apportionment of salaries and wages is the ratio of the number of days services were performed in Virginia to the number of days services were performed elsewhere. See Public Document (P.D.) 94-219 (7/13/1994). The Department has previously ruled that a nonresident who works in Virginia may apportion his or her salary to Virginia using a ratio of (1) the number of days or portion thereof spent in Virginia performing duties for his or her employer, divided by (2) the number of days or portion thereof spent anywhere performing duties for his or her employer. See P.D. 85-134 (6/18/1985).

As a general rule, the Department uses 260 days in the denominator of the ratio for determining wages attributable to Virginia for full-time employees. Taxpayers who claim to have worked more than 260 days during a given taxable year must document that claim. Likewise, taxpayers who worked less than 260 days are limited to using days actually worked in the denominator of the ratio. For part-time employees, semi-retired individuals, and consultants, a ratio of hours worked in Virginia divided by hours worked anywhere may be a better indicator of income from Virginia sources.

Based on the foregoing, the audit will be returned to the audit staff to adjust the assessments as noted above. After the auditor makes the appropriate adjustments, the Taxpayer will receive a revised bill if there are any outstanding liabilities. The Taxpayer should remit his payment for the outstanding balance as shown on the revised bill within 30 days from the date of the bill to avoid the accrual of additional interest.

For future taxable years, the Taxpayer should document the time he worked in Virginia and elsewhere. Such documentation should be in the form of a log, calendar, or schedule providing sufficient details to determine the days the Taxpayer worked, the number of hours worked each day, and the number of days worked in Virginia. Given that the Taxpayer may not work a full day for the VLLC, lack of substantiation could result in the Department reducing the number of days or hours worked, resulting in a higher nonresident apportionment percentage.

The Code of Virginia section and public document cited are available on-line at in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,

                • Janie E. Bowen
                  Tax Commissioner


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46