Tax Type
Corporation Income Tax
Description
Payroll factor; Officers of subsidiaries
Topic
Allocation and Apportionment
Date Issued
11-16-1993
November 16, 1993
Re: §58.1-1821 Application: Corporation Income Tax
Dear**************
This letter is in response to your June 17, 1993 meeting with two members of my Tax Policy staff in which you presented additional information concerning corporation income tax assessments against
************** (the "Taxpayer"). After reviewing the audit report and the information provided, I find no reason to change the department's position.
You maintain that the subsidiaries had payroll in Virginia and, therefore, had the requisite nexus to allow them to be included in the Taxpayer's consolidated Virginia corporation income tax return. Under Virginia Regulation (VR) 630-3-412(C), there is a strong presumption that the total wages reported to Virginia for unemployment compensation purposes represent compensation paid or accrued in Virginia by the taxpayer. While the Taxpayer's "employees" in question also served as officers of the subsidiaries, all compensation for the employees in question was reported by the Taxpayer for Virginia Unemployment Compensation purposes. This is consistent with the fact that the Taxpayer was contractually obligated to provide management services to the subsidiaries. The dual function of the employees as officers of the subsidiaries does not clearly establish anything that would overcome the presumption that the payroll was properly reported to the Virginia Employment Commission by the Taxpayer. As indicated in P.D. 93-116 (4/29/93), the department will not allow a taxpayer to attribute compensation to one corporation for Virginia Unemployment Compensation purposes and to another corporation for income tax purposes.
Accordingly, the subsidiaries were properly removed from the Taxpayer's consolidated Virginia corporation income tax return.
The assessments are correct as made and are 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
OTP/7456F
Rulings of the Tax Commissioner