Document Number
95-281
Tax Type
Individual Income Tax
Description
Questions concerning imposition of individual income tax
Topic
Basis of Tax
Collection of Tax
Residency
Date Issued
11-03-1995
November 3, 1995



Re: Ruling Request: Individual Income Tax


Dear********************

This will reply to your letter of August 1, 1995, requesting information regarding the tax status of a Virginia citizen living and working in Virginia.
RULING

Your letter indicated a number of questions concerning the manner in which the income tax imposed pursuant to Code of Virginia § 58.1-320 would apply to you as a Virginia citizen. These questions will be addressed below in the order presented.

1. Is the income tax imposed on individuals?
    • Yes. Code of Virginia § 58.1-320 provides that the tax is imposed on individuals. "Individual" is defined by the Code of Virginia § 58.1-302 to mean, "[A]ll natural persons whether married or unmarried and fiduciaries acting for natural persons, but not fiduciaries acting for trusts or estates."
2. Is the income tax imposed on property classified as income or any other kind of property?
    • The tax is imposed on Virginia taxable income, which is computed by modifying federal adjusted gross income (FAGI) with additions, subtractions, deductions and exemptions provided in Code of Virginia § 58.1-322. Therefore, to the extent that income is included in FAGI, it may be subject to the Virginia taxation. This income may include, but is not limited to, salaries, wages, interest, dividends, self-employment income, capital gains, partnership income, S corporation income, trust income, and pension income.

While the tax imposed by Code of Virginia § 58.1-320 applies to the Virginia taxable income of an individual, it does not apply to value of other kinds of property. This property may include, but is not limited to, the possession of real property, such as houses and land; tangible personal property, such as motor vehicles, machinery, equipment, and tools, or intangible property, such as stock and bond certificates. Such property, however, may be subject to property taxes administered by localities within the Commonwealth.

3. Is the income tax imposed on the right or privilege of receiving income?
    • No. Code of Virginia § 58.1-320 imposes the tax on the income received or earned by an individual rather than their right to receive such income. If the resident does not receive or earn income subject to Virginia taxation, then the resident will not incur a tax liability.
4. Is the income tax imposed on the right to exist within the state or the privilege of existing within the state?
    • No. Code of Virginia § 58.1-320 does not impose the tax on the right or privilege to exist in Virginia. The tax, however, is imposed on the Virginia taxable income of an individual who is a "resident" of Virginia or income from Virginia sources by a nonresident.

      Code of Virginia § 58.1-302 considers a "resident" to be a person domiciled in Virginia (domiciliary resident) or physically present in Virginia for 183 or more days (actual resident). A "domiciliary resident" is a legal resident of Virginia and must file a return with Virginia regardless of whether he/she is physically present in Virginia. Further, an "actual resident" of Virginia, though typically a domiciliary resident of another state, must also file a Virginia return.
5. Is the income tax imposed on the right or privilege to earn or receive income within the state?
    • See Question 3 for the answer to this question.
6. Is the income tax imposed on the act or event of receiving income within the state?
    • No. The tax is imposed on the amount of income subject to Virginia taxation, not the act of earning income or an event that results in the receipt of income.
    • A resident is subject to Virginia taxation on all income whether it is received from inside or outside of Virginia. A nonresident, on the other hand, is taxable only on income received from Virginia sources.
Additionally, Virginia tax is imposed on an individual based on their accounting method used for federal tax purposes pursuant to Code of Virginia § 58.1-340. Most individuals use the cash basis accounting method. Therefore, income is reported when actually or constructively received and expenses are deducted when paid. Nevertheless, in instances where an individual uses accrual accounting for federal tax purposes, Virginia will also accept the use of this method. In this instance, income is reported when earned and expenses are deducted when incurred.

7. Is the income tax imposed on a Virginia citizen while the citizen is living within and is earning a living within Virginia?
    • Yes. An individual's residency, as opposed to citizenship, determines if his income is subject to Virginia taxation. However, a Virginia citizen is typically a Virginia domiciliary resident. Code of Virginia § 58.1-320 provides that a tax is annually imposed on the Virginia taxable income of an individual resident. Taxable income is computed by modifying federal adjusted gross income (FAGI) with the additions, subtractions, deductions, and exemptions provided in Code of Virginia § 58.1-322. Code of Virginia § 58.1-301 also provides that Virginia income taxation conforms with the Internal Revenue Code. Therefore, a Virginia resident with FAGI is subject to Virginia taxation.
I trust that the concerns of your letter have been addressed. However, if you have additional questions, please contact ********** at****************.

Sincerely,


Danny M. Payne
Tax Commissioner


OTP/10064N

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46