Tax Type
Employer Income Tax Withholding
Description
Withholding reciprocity agreements; Application to unemployment taxes
Topic
Withholding of Tax
Date Issued
12-08-1986
December 8, 1986
Re: Ruling Request: Withholding
Dear ********************
This will reply to your letter of June 6, 1986 concerning the applicability of Virginia income tax withholding to Taxpayer's employees. Thank you for furnishing us a duplicate copy.
Facts
Taxpayer has a number of employees that work in multiple states during the course of the year. For purposes of paying unemployment taxes, Taxpayer has determined that the "place of direction and control" test applies. Taxpayer asks how the state unemployment law applies to Virginia withholding and reciprocity agreements.
Determination
Sections 58.1-460 and -461 of the Code of Virginia require an employer to withhold tax from wages paid to an individual, whether a Virginia resident or nonresident, who performs or performed any service in Virginia for wages, or to a resident of Virginia who performs or performed any service outside Virginia for wages. Certain remuneration is deemed not to be "wages" for the purpose of withholding, but none of these exclusions apply to the facts you have presented. Any determination made for unemployment tax purposes has no bearing on whether Virginia income tax is required to be withheld.
With respect to reciprocity agreements, §58.1-482 of the Code of Virginia provides that the Tax Commissioner may regulate relief from withholding for employees who reside in reciprocity states. VR 630-6-482 of the Virginia Income Tax Withholding Regulations (copy enclosed) exempts from Virginia withholding the wages of employees who live in Kentucky, Maryland, West Virginia, or the District of Columbia and commute each workday to their Virginia place of employment. Also exempted are Pennsylvania residents who earn wages in Virginia.
The foregoing rules determine whether and when an employer must withhold Virginia income tax from its employees. Not relevant to the inquiry is what the employer does for unemployment tax purposes or whether the employee is only performing an incidental portion of his services in Virginia.
I trust the above will answer your concerns.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner