Tax Type
Corporation Income Tax
Description
Sales factor adjustments; Delivery to contract carrier in Virginia
Topic
Allocation and Apportionment
Date Issued
10-29-1991
October 29, 1991
Re: §58.1-1821 Application; Corporation Income Tax
Dear***************************
This will reply to your letter of June 24, 1991, in which you seek correction of corporation income tax assessments for***********************(the "Taxpayer").
FACTS
The taxpayer's returns for 1987-1989 were audited, and an adjustment was made to the sales factor for each year. The auditor included in the numerator of the factor sales in which an independent carrier, under contract to a purchaser, took delivery of the goods in Virginia. The merchandise was then delivered to the purchaser's distribution points outside Virginia. The auditor determined that, because the purchaser had the carrier under contract, delivery to the carrier in Virginia constituted delivery to the purchaser and that the sales were attributable to Virginia.
You object to the sales factor adjustment, asserting that none of the sales in question had an ultimate destination in Virginia; therefore, the sales should not be included in the numerator of the sales factor.
DETERMINATION
The department has previously ruled that direct delivery in Virginia to an independent carrier designated by the purchaser for transportation purposes does not constitute a sale attributable to Virginia, when the taxpayer (seller) knows the ultimate recipient of the merchandise is located outside Virginia. Therefore, such sales are not included in the numerator of the sales factor. See P.D. 91-248 (10/8/91) (copy enclosed).
The information provided indicates that delivery to the contract carrier in Virginia was for transportation purposes only. The taxpayer knew that the merchandise was to be delivered to the purchaser's distribution points outside Virginia. Therefore, the sales should not be included in the numerator of the sales factor.
It is not necessary to address the second issue you raise in your letter since it deals with the estimation of contract carrier sales to be included in the numerator of the sales factor for prior years.
Accordingly, the assessment will be abated.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5306F
Rulings of the Tax Commissioner