Tax Type
Individual Income Tax
Description
Nonresident return; Withholding tax
Topic
Persons Subject to Tax
Returns/Payments/Records
Withholding of Tax
Date Issued
07-03-1984
July 3, 1984
Re: Ruling Request: Individual Income Tax
Dear ******
This will reply to your letter of January 12, 1984 concerning the application of withholding and individual income taxes to an employee of ************************ (the "Employer"), a Virginia university.
Facts
***** (the "Employee"), a resident of Memphis, Tennessee (for purposes of Va. Code §58-151.02(e)), has been employed by Employer since March 1978 for development and promotional work. Until the end of 1981 Employee performed his services in a specifically assigned territory outside Virginia.
On September 1, 1982 Employee became ***** with the understanding that he would be available to do promotional and development work for Employer whenever and wherever needed. In 1982, Employee's sole direct fundraising activities within Virginia were conducted August 27, 1982 in ***** and November 3, 1982 in *****. In 1983 Employee was in Virginia in ***** for the inauguration of Employer's ***** and met with several people to discuss Employer's development program. In September 1983 Employee spent five days in Virginia to train new personnel for the development program.
It is expected that Employee's direct fundraising activities in Virginia and his trips to Virginia for staff meetings or special school activities will be as infrequent in the future as they were in 1982 and 1983.
Employee has been paid a salary since 1978 and employer began withholding Virginia income tax in January 1983.
Determination
1) Filing Nonresident Return. A nonresident who has income from carrying on a business or occupation within Virginia is required to file a Virginia return, unless the individual meets the "$3,000 filing exclusion" described in Va. Code § 58-151.03. Employee did not receive income from carrying on a business or occupation in Virginia in the years 1978 through 1981 and no return was required for those years. However, for 1982, 1983 and any future years in which duties, no matter how minimal, were or are performed in Virginia, Employee would be required to file a nonresident return.
2) Withholding. Va. Code §§ 58-151.2 and 58-151.1(3) require an employer to withhold tax from wages paid to an individual, whether a Virginia nonresident or resident, who performs or performed any service in Virginia for wages. Employee performed no service in Virginia for the years 1978 through 1981 and no withholding was required. However, like the requirement for filing a nonresident return, for 1982, 1983 and any future years in which any service was or would be performed in Virginia, withholding would be required. In order to compute the amount of withholding, Employer would be permitted to rely on information provided by Employee, who should file with Employer a pro forma return (nonresident income tax) by January 1, 1985 based on income received during calendar year 1984 and who should advise Employer when and if circumstances change. It would remain Employee's responsibility to file and pay estimated Virginia tax if he were so liable or to advise Employer to adjust the amount of withholding to avoid liability for payment of estimated tax.
3) Calculating Virginia taxable income. Employee's Virginia taxable income with respect to his income from Virginia sources would be deter-mined as follows: Employee's Virginia taxable income (computed as if he were a resident) would be multiplied by the ratio of his net income, gain, loss and deductions from Virginia sources to his net income, gain, loss and deduction from all sources. Assuming that Employee's sole income from Virginia sources is his salary from Employer, Employee's "net income, gain, loss and deductions from Virginia sources" would be an amount equal to (i) his total annual salary from Employer (ii) multiplied by the number of days or portion thereof that he spent in Virginia performing his duties for Employer and (iii) divided by the number of days or portion thereof that he spent anywhere performing his duties for Employer.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner