Tax Type
Corporation Income Tax
Description
Federal limitation on taxation of interstate commerce; Nexus; Travel into state by sales personnel
Topic
Constitutional Provisions
Date Issued
11-12-1996
November 12, 1996
Re: Ruling Request: Corporation Income Tax
Dear**************
This will reply to your letter in which you request a ruling regarding the Virginia corporation income tax obligations of your client, *******(the "Taxpayer"). I apologize for the delayed response.
FACTS
The Taxpayer is a manufacturer with all its operations located outside the state of Virginia. Over the past five years, employees of the Taxpayer have traveled into Virginia to solicit orders from its one Virginia customer. All orders are received and approved at the Taxpayer's home office, where the orders are filled and shipped to Virginia via common carrier. The Taxpayer maintains no offices or other property in Virginia and has no employees or independent contractors working on its behalf in the Commonwealth .
The Taxpayer filed corporation income tax returns for the 1993, 1994, and 1995 taxable years. You have requested a ruling concerning the Taxpayer's corporation income tax liability in Virginia for these years a return was filed.
RULING
Public Law (P.L.) 86-272 (15 U.S.C.A. §§ 381-384) provides an exemption from a state's income tax if a taxpayer's activities in such state do not exceed a narrowly defined set of activities constituting solicitation of orders for the sales of tangible personal property. The department has a long established policy of narrowly interpreting the provisions of P.L. 86-272.
Based on the facts presented in your letter, the Taxpayer did not have sufficient nexus with Virginia for the Commonwealth to impose its corporation income tax during the 1993, 1994, and 1995 taxable years. The mere presence of sales personnel in Virginia is not a sufficient basis upon which to impose an income tax absent any nonancillary activities of the sales personnel in the state. However, if the salesman or the Taxpayer engage in any additional activity which is not ancillary to direct sales activity, it may lose its P.L. 86-272 protection and be subject to the Virginia corporation income tax.
Accordingly, The Taxpayer did not have sufficient nexus with Virginia to be required to file corporation income tax returns for 1993, 1994 and 1995 taxable years. If you have any questions regarding this ruling, you may contact ****** at*******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11281O
Rulings of the Tax Commissioner