Tax Type
Retail Sales and Use Tax
Description
Application of sales and use taxes; Nexus
Topic
Taxability of Persons and Transactions
Date Issued
06-13-1996
June 13, 1996
Re: Ruling Request: Sales & Use Tax; Corporate Income Tax
Dear*****************
This will reply to your letter of April 24, 1996, in which you request a ruling on behalf of your client, an out-of-state mail order company (the "Taxpayer"). The ruling request relates to whether the Taxpayer's activities would create Virginia nexus for the Corporate Income Tax, or the Retail Sales & Use Tax.
FACTS
The Taxpayer is an out-of-state mail order seller of garden seeds, and is currently not registered to do business in Virginia. The Taxpayer does not have any Virginia location. It does not have any person, employee, agent, or representative conducting sales on its behalf in this state. Sales are primarily solicited through advertisements placed in magazines and through catalogues distributed to individuals and retailers. Orders are also received through an "800" telephone number, as well as by facsimile transmission or the mail. All orders are fulfilled by shipment through the mail, or by common carrier from inventories located outside the state.
The Taxpayer is required to register with the Virginia Department of Agriculture (Agriculture) before any mail order sales can be made. The Taxpayer wishes to confirm that it will not acquire a taxable nexus for corporate income, or retail sales and use taxes as a result of Agriculture's registration requirement .
DETERMINATION
Income Tax - Every taxpayer having income from Virginia sources is subject to the Virginia income tax. A taxpayer will have income from Virginia sources when sales are made to customers located in Virginia.
Public Law (P.L.) 86-272 (15 U.S.C.A. §§ 381-384) prohibits a state from imposing a net income tax where the only contacts with the state are a narrowly defined set of activities constituting solicitation of orders for sales of tangible personal property. Based on the information presented, the Taxpayer's activities do not go beyond the provisions of P.L. 86-272, and are not subject to the corporate income tax.
Retail Sales & Use Tax - Code of Virginia § 58.1-612, copy enclosed, also sets forth the requirements which give the Commonwealth the authority to require dealers to register for the collection and remittance of the retail sales tax. This same section defines "dealer" to include every person who "sells at retail, or who offers to sell at retail, or who has in his possession for sale at retail, or for use, consumption, or distribution, or for storage to be used or consumed in the Commonwealth, tangible personal property."
Based on the facts as presented, and with regard to the requirements of Code of Virginia § 58.1-612, there is insufficient contact with the Commonwealth to require the Taxpayer to register for the collection of the Virginia Retail Sales and Use Tax. Accordingly, I find that the requirement to register with Agriculture would not, in and of itself, create a taxable Virginia nexus for the Taxpayer.
I trust the foregoing has responded to your concerns. If you have any additional questions related to this matter, please contact ****of the department's Office of Tax Policy at *** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11194Q
Rulings of the Tax Commissioner