Tax Type
Corporation Income Tax
Description
Federal limitations on taxation of interstate commerce; Relocation of corporation to Virginia
Topic
Constitutional Provisions
Date Issued
07-26-1996
July 26, 1996
Re: Request for Ruling: Corporate Income Tax
Dear*********************
This will reply to your letter of July 12, 1996, in which you inquire about certain tax consequences of a foreign corporation relocating to Virginia. I want to thank you for your interest in Virginia as a business location.
The Code of Virginia provides that the corporate income tax shall be imposed on domestic corporations and on every foreign corporation which has income from Virginia sources. Code of Virginia § 58.1-302 defines "Income and deductions from Virginia sources" as:
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- a. The ownership of any interest in real or tangible personal property in Virginia; or
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- b. A business, trade, profession or occupation carried on in Virginia.
If the entire business of a corporation is transacted or conducted within Virginia, "Income from Virginia sources" means the entire Virginia taxable income of the corporation. If the business of the corporation is conducted both within and without Virginia, taxable income would be determined by allocation and apportionment as provided in Code of Virginia §§ 58.1-407 through 58.1-420.
A state's authority to impose an income tax on a foreign corporation is controlled by Public Law (P.L.) 86-272 (15 U.S.C.A. §§ 381-384). Under P.L. 86-272, a state is prohibited from imposing an income tax on the taxpayer "if the only business activities within such state by or on behalf of such person during such taxable year..." is the solicitation of orders for the sale of tangible personal property.
Thus, if the taxpayer's only activities in such state are the missionary work of its salesmen and the resulting sales of its product to purchasers in such state, the taxpayer would be exempt from an income tax in such state, even though it clearly has income from sources within such state.
On the issue of your New Jersey taxable status I suggest you contact the New Jersey Department of Revenue directly to ensure you are obtaining the authoritative information you need. The phone number for the New Jersey Commissioner of Revenue is
If you have any questions regarding this ruling, please contact******* at*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11416P
Rulings of the Tax Commissioner