Tax Type
Corporation Income Tax
Description
Nexus
Topic
Constitutional Provisions
Date Issued
02-28-1997
February 28, 1997
Re: Request for Ruling: Corporate Income Tax
Dear**********
This will respond to your letter of January 25, 1997, in which you requested a ruling with respect to the activities of ******(the "Taxpayer") and whether such activities are sufficient for Virginia to impose its corporate income tax.
FACTS
The Taxpayer is a provider of program management administration services and is located outside this state. The Taxpayer will have one employee who will furnish these services on a government contract and will perform his duties within Virginia. You request a ruling as to whether the Taxpayer would have taxing nexus in Virginia given these circumstances.
RULING
A tax is imposed on the Virginia taxable income of every foreign corporation having income from Virginia sources, unless specifically exempted. Under Public Law (P.L.) 86-272, codified at § 15 U.S.C.A. §§ 382-384, Virginia is prohibited from imposing an income tax on the Taxpayer "if the only business activities within [Virginia] by or on behalf of [the taxpayer] during [the] taxable year are...." the solicitation of orders for the sale of tangible personal property. Although P.L. 86-272 only applies to the sale of tangible personal property, Virginia applies the same "solicitation" test to intangible personal property. When the activities of the Taxpayer exceed the solicitation test by providing business services in Virginia, nexus is created.
In the instant case, the Taxpayer's employee provides the Taxpayer's service from a location in Virginia. The "solicitation" test would be exceeded because such activities serve a business function separate and apart from the solicitation of sales. Because the Taxpayer has income from Virginia sources from the performance of services in this state and its activities exceed those permitted by P.L. 86-272, it would be subject to the Virginia income tax.
If you have any questions regarding this ruling, please contact ******** at *********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12107P
Rulings of the Tax Commissioner