Tax Type
Corporation Income Tax
Description
Apportionment of income; Entertainers
Topic
Allocation and Apportionment
Date Issued
09-14-1994
September 14, 1994
Re: Ruling Request: Corporation and Individual Income Tax
Dear****************
This will reply to your letter of July 18, 1994, in which you inquire about Virginia's tax treatment of nonresident entertainers.
FACTS
You represent entertainers in the music industry who tour in the United States and Canada. Your clients wish to comply with all tax laws in the jurisdictions in which they perform. Therefore, you have requested the department provide all information concerning the tax statutes of Virginia that are relevant to your clients' endeavors. You specifically request information concerning the filing requirements for individuals and corporations, any de minimus rules that may apply to the income tax, gross receipts taxes, source withholding requirements and tax rates.
RULING
The Code of Virginia does not grant any specific income tax exemptions or preferences for individuals or corporations engaged in the music industry. Virginia law treats such individuals and corporations on an equal basis with other individuals or corporations performing services in Virginia.
Corporate Income Tax
The Code of Virginia provides that the corporate income tax shall be imposed on domestic corporations and on every foreign corporation which has income from Virginia sources. Va. Code §58.1-302 defines "Income and deductions from Virginia sources" as:
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- 1. Items of income, gain, loss and deduction attributable to:
a. The ownership of any interest in real or tangible personal property in Virginia; or
b. A business, trade, profession or occupation carried on in Virginia.
- 1. Items of income, gain, loss and deduction attributable to:
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.
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 income tax is due. See Virginia Regulation (VR) 630-3-441, copy attached.
Virginia law currently imposes a tax rate of 6% on the Virginia taxable income of a corporation.
Individual Income Tax
Individuals with income from Virginia sources are subject to the individual income tax and are required to file a Virginia income tax return. In the case of a nonresident, Va. Code § 58.1-325(A) provides:
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- The Virginia taxable income of a nonresident individual, partner or beneficiary shall be an amount bearing the same proportion to his Virginia taxable income, computed as though he were a resident, as the net amount of his income, gain, loss and deductions from Virginia sources bears to the net amount of his income, gain, loss and deductions from all sources.
- The Virginia taxable income of a nonresident individual, partner or beneficiary shall be an amount bearing the same proportion to his Virginia taxable income, computed as though he were a resident, as the net amount of his income, gain, loss and deductions from Virginia sources bears to the net amount of his income, gain, loss and deductions from all sources.
However, it the amount of Virginia source income can be separately identified by performance or appearance, it is not necessary to apportion income to determine the amount of income from Virginia sources. See Public Document 88-302 (10/31/88) which deals with nonresident professional athletes, copy attached.
Virginia law prescribes a tiered rate schedule for individuals. The rates currently imposed on the Virginia taxable income of a individual are 2% on first $3,000 of taxable income, 3% on income in excess of $3,000 but not in excess of $5,000, 5% on income in excess of $5,0()0 but not in excess of $17,000 and 5.75% on income in excess of $1 7,000.
Withholding Tax
Under Virginia law, an employer is required to withhold tax from wages paid to an individual, whether a Virginia resident or nonresident, who performs or performed any service in Virginia for wages. An employer is subject to Virginia income tax withholding if the employer is a resident of Virginia, or is doing business in Virginia, or is domesticated under the laws of Virginia relating to the domestication of foreign corporation.
Gross receipts taxes
Currently, localities (counties, cities and towns) can and do impose various local taxes, including a license tax imposed on gross receipts of a business. For detailed information on taxes imposed by Virginia localities, you may wish to contact the Commissioner of the Revenue in the particular localities in which your clients wish to perform.
Sales Tax
Entertainers or others who sell souvenirs in connection with Virginia performances are required to register for collection of Virginia's 4.5% state and local sales tax. Enclosed is a copy of Form R-1, which will enable your clients to register for most applicable Virginia taxes.
Enclosed you will find a copy of Virginia Tax Facts for your reference. Please contact ***** if you have any additional questions or if we may be of any further assistance.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8276L
Rulings of the Tax Commissioner