Tax Type
Corporation Income Tax
Description
Documentation of multistate status
Topic
Allocation and Apportionment
Date Issued
06-01-1992
June 1, 1992
Re: § 58.1-1821; Corporation Income Tax
Dear ***************
This will reply to your letter of December 28, 1990, in which you seek correction of an assessment of corporation income tax against * * * ("the Taxpayer").
FACTS
The taxpayer filed corporation income tax returns for the 1981, 1982 and 1983 taxable years showing all income taxable to Virginia. Subsequently, amended returns were filed apportioning income using the statutory three factor formula; refunds were issued for the 1981 and 1982 amended returns. At approximately the same time, it was determined in a field audit that the taxpayer was not a multistate corporation and, therefore, not entitled to apportion income. The taxpayer was assessed tax based on the refunds that were erroneously issued. You assert that the taxpayer is a multistate corporation entitled to allocate and apportion income; therefore, the refunds based on the amended returns were properly issued and the assessment should be abated.
DETERMINATION
A previous ruling of the department upheld the assessment based on the auditor's finding that the taxpayer's entire business was conducted in Virginia; the taxpayer was not entitled to allocate and apportion its Virginia taxable income. See P.D. 86-67 (3/31/86). The decision was based on Va. Code § 58.1-406, which provides that a corporation must have income subject to taxation both within and without Virginia in order to allocate and apportion its Virginia taxable income.
Since that ruling, the taxpayer has never substantiated its claim that it is a multistate corporation subject to taxation in a state other than Virginia. A corporation is presumed to be doing business entirely within Virginia; the burden is on the taxpayer to demonstrate that it is subject to taxation in another state. See § A. of VR 630-3-405 (copy enclosed). The department sent an auditor to the taxpayer's facilities on three separate occasions following the March 31, 1986, ruling to review information and records relating to the multistate issue; no information was provided during those visits to overcome the presumption and change the department's position.
Recent correspondence with the taxpayer has produced no new information to lead the department to alter its conclusion. While you state that the taxpayer maintained field offices in both Illinois and California during the audit period in question, there is no documentation to substantiate this. Furthermore, this was never brought to the auditor's attention during the review of the taxpayer's records. The taxpayer has never produced tax returns indicating tax was paid to a state other that Virginia, nor has it shown that another state had jurisdiction to impose its tax during the years under review. Therefore, it is presumed that the taxpayer is doing business entirely in Virginia, and the taxpayer is not entitled to allocate and apportion its Virginia taxable income for the audit years in question. The refunds based on the allocation and apportionment of the taxpayer's Virginia taxable income were issued in error.
Accordingly, the assessment is correct as made and is now due and payable. You will shortly receive an updated bill with interest accrued to date. The bill should be paid within 30 days to avoid the accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner