Tax Type
Corporation Income Tax
Description
Nexus; Out-of-state telephone service provider
Topic
Taxpayers
Date Issued
03-25-1993
March 25, 1993
Re: Ruling request: Corporate Income Taxes
Dear****************
This will reply to your letter dated November 11, 1991 in which you request a ruling regarding Virginia corporate income taxes on behalf of ************* (The "Taxpayer").
FACTS
The Taxpayer is a long distance rebiller, buying and selling telephone transmission services. The Taxpayer is headquartered outside of Virginia, and is considering entering the Virginia marketplace. The Taxpayer intends to engage independent distributors.
RULING
Sales & Use Tax: Va. Code §58.1-612 (copy attached), sets forth the "nexus" requirements which give the Commonwealth the authority to require dealers to register for collection and remittance of the sales tax. I note that the statute provides in pertinent part that a dealer shall be deemed to have sufficient activity within this state to require registration if he "solicits business in this State by employees, independent contractors, agents or other representatives." Based upon the facts presented within your request, the Taxpayer anticipates soliciting business within Virginia through independent contractors. Therefore, the Taxpayer would be required to register with the department and would be liable for the tax during the period which it met the nexus requirements. However, Virginia considers charges for local or long distance telephone services and billing and services to be exempt from the sales & use tax. See Public Document (PD) 92-137 (8/10/92) (copy enclosed).
Corporate Income Tax: Generally, Virginia corporate income tax is imposed on foreign corporations if they have income from Virginia sources. See Virginia Regulation (VR) 630-3-400, (copy enclosed). If the entire business of a corporation is not deemed to have been transacted or conducted within Virginia, "Income from Virginia sources" means that portion of the corporation's Virginia taxable income resulting from the allocation and apportionment formulas. A corporation will have income from Virginia sources if it has sufficient business activity within Virginia to make any of the following apportionment factors positive: 1) property; 2) payroll; or 3) sales. (VR 630-3-302, copy enclosed).
I have enclosed copies of the applicable Virginia regulations addressing Virginia property, payroll and sales apportionment. Please note that as the Taxpayer is providing a service, sales will be allocated to Virginia if the income producing activity is performed in Virginia. Please see VR 30-3-416 for more information.
Every corporation registered with the State Corporation Commission for the privilege of doing business in Virginia must file an income tax return. A return must be filed even if the corporation has no income from Virginia sources and no Virginia income tax is due. See Virginia Regulation (VR) 630-3-441 (copy enclosed).
The Virginia income tax is imposed at a rate of 6%. The Virginia corporate income tax rate has traditionally remained constant, although it is subject to change by the Virginia General Assembly.
Virginia tax structure:
In Virginia, all taxes must be authorized by the Code of Virginia. Currently, localities (counties, cities and towns) can and do impose various local taxes. I have enclosed a copy of Virginia Tax Facts, for your reference. You may also wish to check directly with the Commissioner of Revenue in the particular localities in which you intend to do business for more detailed information.
Nonprofit Corporations:
Virginia does not tax religious, educational, benevolent and other corporations not organized or conducted for pecuniary profit which by reason of their purposes or activities are exempt from federal income taxes, except those corporations having unrelated business income or other taxable income under federal law.
Enclosed is a registration application for the Taxpayer to complete and return to the department in order to register for all applicable taxes. Please contact the department if you have any additional questions or if we may be of any further assistance.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/5752M
Rulings of the Tax Commissioner