Tax Type
Corporation Income Tax
Description
Three Factor Formula of Property, Payroll and Sales.
Topic
Allocation and Apportionment
Date Issued
05-29-1992
May 29, 1992
Re: Request for Ruling: Corporation Income Tax
Dear ****
This will reply to your letter of January 8, 1992 in which you request a ruling regarding nexus for Virginia corporation income tax purposes for * * * ("the company").
FACTS
The company is a Delaware corporation domiciled in Texas. During 1991, the company had one employee who lived in Virginia but worked in the District of Columbia. The company filed Virginia payroll withholding returns and District of Columbia unemployment returns during 1991. The company is not authorized to do business in Virginia, does not have income from Virginia sources, and does not own property within Virginia.
You request a ruling that the company is not subject to Virginia Corporate Income Tax for 1991.
RULING
Under paragraph 2.b. of the definition of "Income and deductions from Virginia sources" in Virginia Regulation (VR) 630-3-302, the applicable apportionment formula determines which activities are the most relevant for sourcing income.
According to the information provided, the company owns and operates a pipeline system and is primarily engaged in the purchase, transmission and sale of natural gas to distribution companies for resale in states other than Virginia. Under Virginia law, the applicable apportionment formula is the three factor formula of property, payroll and sales.
You indicate that the company owns no property in Virginia and does not have income from Virginia sources. Therefore, the company's sales and property factors for Virginia would be zero.
The company did have one employee who lived in Virginia, but the employee worked in the District of Columbia. Under VR 630-3-312, total wages reported to Virginia for unemployment compensation purposes are presumed to be compensation paid in Virginia for payroll factor purposes. In this case, wages were reported on District of Columbia unemployment returns for 1991 because the employee's service was performed entirely in the District of Columbia; there were no wages to be reported for Virginia unemployment compensation purposes. Because there was no compensation paid or accrued in Virginia, there is no Virginia payroll, and the payroll factor is zero.
Accordingly, I find that based on the representations in your letter, the company is not subject to the Virginia corporation income tax for 1991.
If you have any questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner