Tax Type
Employer Income Tax Withholding
Individual Income Tax
Description
Personal use of company automobiles
Topic
Taxable Income
Withholding of Tax
Date Issued
10-15-1985
October 15, 1985
Dear ****
This will reply to your letter of July 11, 1985 concerning applicability of Virginia income and withholding tax to noncash fringe benefits in the form of personal use of company automobiles.
You indicate that such benefits are considered taxable compensation for federal income tax purposes and are subject to withholding. Public Law 99-44 amends I.R.C. Sec. 3402 by adding a subsection (s), effective January 1, 1985, to permit an employer not to withhold income taxes on the value of an employee's personal use of an employer-provided automobile that is included in the employee's income.
Because Virginia is a conformity state, federal adjusted gross income is the starting point for determining an individual's Virginia adjusted gross income and Virginia taxable income. As you indicate, personal use of company automobiles is included in an employee's federal adjusted gross income. Code of Virginia Sec. 58.1-322 provides no modification for such fringe benefit. Accordingly, it is subject to Virginia individual income tax. Moreover, because Virginia Code Sec. 58.1-460 does not exclude such fringe benefit from the definition of "wages,' it is subject to Virginia withholding tax. Virginia does not have a provision comparable to I.R.C. Sec. 3402(s), so Virginia withholding would be required for any personal use of company automobiles included in federal adjusted gross income.
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner