Tax Type
Corporation Income Tax
Description
Motor carriers; Solicitation and ancillary activities
Topic
Allocation and Apportionment
Date Issued
11-16-1994
November 16, 1994
Re: Request for ruling: Corporation Income Tax
Dear*******
This is in response to your letter of July 21, 1994 requesting a ruling as to whether******** (Taxpayer) is required to file Virginia income tax returns. Penalties have been assessed for failing to file returns for 1992 and 1993. You state that the Taxpayer is a manufacturer with a salesman based in Virginia who works out of his home. Customer orders are called or faxed to the manufacturing plant in another state.
We contacted to State Corporation Commission and determined that the Taxpayer is registered as a private motor carrier. Virginia Regulation (VR) 630-3-441 (copy enclosed) clearly states that a return must be filed even though no tax may be owed as a result of a federal exemption. Therefore, returns are required for both 1992 and 1993.
The facts you state suggest that the Taxpayer may be eligible for an exemption under federal P.L. 86-272 (codified at 5 U.S.C.A 381) for taxable year 1992 and earlier. The Taxpayer's eligibility for exemption under P.L. 86-272 depends on an analysis of the facts and circumstances of the activities in Virginia conducted by the salesman and the delivery drivers. For example, activities by the salesman such as engineering and design, training, warranty service, and installation would exceed solicitation and ancillary activities protected by P.L. 86-272. For taxable years beginning before November 9, 1992, the department allowed a taxpayer otherwise eligible for the P.L. 86-272 exemption to use its own trucks for delivery as long as it did not exceed the services that would be provided by a common carrier. Thus, for example, if the delivery driver rendered any services such as training, installation, picking up trade-ins or removing the customer's old equipment, then the P.L. 86-272 exemption would not apply.
For taxable years beginning on and after November 9, 1992, the use of the taxpayer's own trucks on the highways of Virginia exceeds solicitation and ancillary activities. See Public Document P.D. 92-230 (11/9/92) (copy enclosed). Because the taxpayer is registered as a private carrier and is using the highways of Virginia with its own trucks, the return for 1993 cannot claim exemption from Virginia income tax under P.L. 86-272.
Because the 1992 taxable year began before November 9, 1992, the taxpayer's return for 1992 may claim exemption from Virginia income tax under P. L. 86-272 provided that (i) the salesman performed only activities in Virginia that consist of solicitation of orders or activities ancillary to solicitation; and (ii) the delivery drivers performed no services in Virginia beyond those normally provided by a common carrier. While activities beyond solicitation and ancillary activities, or common carrier delivery services prior to 1993 may sill be protected by P.L. 86-272 as de minimis activities, analysis depends upon all of the facts and circumstances each year, in particular as to whether the activities in question are a regular part of the taxpayer's business or an isolated transaction. If you desire a ruling on whether the Taxpayer's activities in Virginia for years prior to 1993 subjected it to Virginia income tax please describe in detail the activities conduced in Virginia by the salesman and delivery drivers.
If you have any questions, please feel free to contact******************
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8356C
Rulings of the Tax Commissioner