Tax Type
Corporation Income Tax
Description
Limitation on taxation of interstate commerce; Deliveries by Co. owned vehicles
Topic
Constitutional Provisions
Date Issued
07-31-1995
July 31, 1995
Re: Request for Ruling: Corporate Income Tax
Dear***************
This will reply to your letter of May 15, 1995, in which you requested a ruling as to the Commonwealth's position on certain delivery activities involving "private" vehicles. For purposes of this ruling, it is assumed that "private" when used in the above context applies to company owned vehicles of whatever type.
Code of Virginia §58.1 -400 provides that the corporate income tax shall be imposed on domestic corporations, and every foreign corporation which has income from Virginia sources. Where a foreign corporation makes sales of tangible personal property to customers in Virginia, such corporation will have income from Virginia sources within the meaning of Virginia Regulation (VR) 630-3-400, copy attached. Therefore, a corporation with income from Virginia sources is subject to Virginia tax regardless of how the merchandise is delivered, unless exempted by federal law.
Public Law (P.L.) 86-272 (15 U.S.C.A. §§381-384), as recently interpreted by the U.S. Supreme Court, exempts a corporation from state income tax if its only contacts with the state are solicitation, activities ancillary to solicitation, and other minor amounts of activity (called de minimis). However, it is possible for a corporation to have nexus even though such corporation does not physically solicit sales in Virginia. For example, the ownership of real or tangible personal property in Virginia will generally constitute nexus regardless of whether the corporation also solicits sales.
In Public Document (P.D.) 92-230 (11/9/92), copy attached, the department ruled that nexus for corporate income tax existed where tangible personal property was sold and delivered into Virginia by company vehicles on a regular basis. In that ruling, the department revoked its previous policy regarding deliveries on a prospective basis, beginning with taxable years beginning after November 9, 1992.
The department's policy is that utilization of a taxpayer's own vehicle to make deliveries into Virginia does not constitute solicitation which is protected by Public Law (P.L.) 86-272 (15 U.S.C.A. §§381-384). Delivery activity will be considered with all other activity, if any, which does not constitute solicitation. Where all activity which does not constitute solicitation creates more than a de minimis connection to the Commonwealth, there is sufficient nexus for the imposition of the corporate income tax. The department will consider, among other things, whether the deliveries are a regular and continuous activity carried on in Virginia.
The department is currently in litigation regarding this issue in the City of Alexandria Circuit Court (National Private Truck Council. Inc. v Payne). In that action the petitioner has challenged the department's policy regarding deliveries, and in particular the ruling in P.D. 92-230. No trial date has been set for this action.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9748P
Rulings of the Tax Commissioner