Tax Type
Corporation Income Tax
Description
Federal limitation on taxation of interstate commerce; Out of state lessor
Topic
Constitutional Provisions
Date Issued
09-26-1994
September 26, 1994
Re: Ruling request: Corporate income taxes
Dear*****************
This will reply to your letter of May 27, 1993 in which you have requested a ruling with respect to corporate tax nexus for******************(the "Taxpayer"). I apologize for the delay in responding.
FACTS
The Taxpayer is a general equipment lessor domiciled outside of Virginia. The Taxpayer's leasing portfolio has consisted of operating leases, direct finance leases, leveraged leases of aircraft, and a limited partnership interest in a computer leasing limited partnership. The Taxpayer is in a wind-down mode of its leasing activities; its current portfolio is made up of three direct finance leases and two leveraged leases of five aircraft to commercial airlines. The Taxpayer has no employees in Virginia, nor does it have any property with a fixed location in the state.
The aircraft leased to commercial airlines have no fixed place of business in Virginia. They fly in and out of most states in the continental United States.
You ask whether the Taxpayer's activities create nexus in Virginia, and whether the Taxpayer is immune from Virginia taxation under Public Law 86-272.
RULING
The department has previously ruled that activity similar to the Taxpayer's is sufficient to create nexus with Virginia. However, as indicated in that ruling, the Taxpayer is unlikely to
have a positive apportionment factor. See Public Document (P.D.) 94-175 (6/8/94), copy attached. Accordingly, although the Taxpayer is subject to tax and required to file a return, the Taxpayer may not have any tax liability due to a zero apportionment factor.
Public Law (P.L.) 86-272, codified at 15 U.S.C.A. §§381-384, prohibits a state from imposing a net income tax where the only contacts with a state are a narrowly defined set of activities constituting solicitation of orders for sales of tangible personal property. In this situation, the Taxpayer is engaged in the sale of services (leasing) which are outside the federal statutory protection of P.L. 86-272. However, the department applies P.L.86-272 type to solicitation of other than tangible personal property. See P.D. 94-181 (6/13/94), copy attached. Accordingly, the Taxpayer's activities are not protected by P.L. 86-272, but may still be protected by the department's policy in this area.
If you have any questions regarding this ruling, you may contact ******at ******* .
Sincerely,
Danny M. Payne
Tax Commissioner
Enclosures
OTP/7048M
Rulings of the Tax Commissioner