Tax Type
Employer Income Tax Withholding
Description
Wages subject to withholding; Nonresident employer; Obligation to withhold
Topic
Withholding of Tax
Date Issued
10-31-1996
October 31, 1996
Re: § 58.1 -1821 Application: Withholding Tax
Dear**********
This will reply to your letter in which you applied for correction of an assessment for withholding taxes to ******* (the "Taxpayer") for the periods July 1989 through June 1995. I apologize for the delay in responding.
FACTS
The Taxpayer is a wholesaler located in another state with customers in Virginia. The Taxpayer employs sales personnel who travel into Virginia to perform their job function as required by their employer. For the periods July 1989 through June 1995, the Taxpayer was assessed tax and interest for failure to withhold taxes from certain sales employees who performed services in Virginia. The Taxpayer contends that they were unaware of their responsibility to file Virginia withholding tax and, therefore, withheld income tax for the employees' resident state.
DETERMINATION
Code of Virginia § 58.1-461 requires employers to withhold taxes from employee wages for each payroll period. Code of Virginia § 58.1-460 defines "employer" as, "[T]he person, whether a resident or a nonresident of the Commonwealth, for whom an individual performs or performed any service as an employee...." (Emphasis added) Further, this section defines "employee" as, "[A]n individual, whether a resident or a nonresident of the Commonwealth, who performs or performed any service in the Commonwealth for wages...." (Emphasis added) Consequently, unless a state has a reciprocity agreement with Virginia, an employer located outside of Virginia may be required to withhold Virginia income taxes for an employee who is not a resident of Virginia when that employee earns income from Virginia sources.
The Taxpayer believes that remittance of Virginia withholding creates double taxation, because the other state will not refund the monies paid by the Taxpayer. It is unfortunate that the Taxpayer is unable to obtain relief for withholdings remitted to the other state, but the laws of Virginia are very clear in this matter.
Attached are previous rulings issued by the department where assessments were upheld against employers in situations analogous to yours. See Public Document (P.D.) 96-252, (9/27/96) and attachments, Copies enclosed. As in your situation, the taxpayer in P.D. 96-252 was also an out-of-state wholesaler with nonresident sales persons working in Virginia.
Based upon the information provided, the department must deny your request for relief. Thus, the audit assessments for the period July 1989 through June 1995 are due and payable. Should you have any questions regarding this matter, you may contact ****** at ***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10641O
Rulings of the Tax Commissioner