Tax Type
Corporation Income Tax
Description
Motor Carriers; Vehicle Miles in Virginia
Topic
Allocation and Apportionment
Date Issued
06-01-1992
June 1, 1992
Dear*********:
This will reply to your letter dated October 3, 1991 in which you request guidance regarding Virginia tax law and policy as it pertains to out of state trucking companies.
Nexus
Public Law 86-272 prohibits states from imposing an income tax on a taxpayer whose only business activity in a given state is the solicitation of orders for the sale of tangible personal property. Public Law 86-272 protection does not apply to the act of providing trucking services for hire, since these services are intangible sales.
In Virginia, a positive apportionment factor, which in this case would be vehicle miles in Virginia, would create nexus for a trucking company. However, there are some de minimus rules pertaining to apportioning income to Virginia earned from trucking services.
Apportionment
Virginia Code § 58.1-417 contains the rules for apportioning the income of motor carriers. Motor carriers do not use the standard three factor apportionment formula, but instead apportion income to Virginia using a ratio of vehicle miles traveled in Virginia to vehicle miles traveled everywhere.
The term "vehicle miles' means miles traveled on a scheduled route or, in any case, while carrying property or passengers for a charge. Vehicle miles does not include travel for repairs or service, whether the vehicle is normally used for carrying property or passengers or is normally used as a service vehicle. The mileage travelled by all owned or leased vehicles is included in the apportionment factor. See Virginia Regulation (VR) 630-3-417 (copy enclosed).
Exclusions
Meeting all of the following conditions exempts a motor carrier from the Virginia income tax:
-
- The motor carrier neither owns nor rents real or tangible personal property in Virginia, except vehicles, and the vehicle miles in Virginia are not more than 5% of the total vehicle miles annually traveled in all states, and
the corporation either:
--has made no pick ups or deliveries in Virginia and has traveled less than 50,000 miles in Virginia, or
--has made no more than twelve round trips into Virginia.
- The motor carrier neither owns nor rents real or tangible personal property in Virginia, except vehicles, and the vehicle miles in Virginia are not more than 5% of the total vehicle miles annually traveled in all states, and
If you have further questions regarding the taxation of trucking companies, please do not hesitate to write.
Sincerely,
W.H. Forst
Tax Commissioner
Rulings of the Tax Commissioner