Tax Type
Corporation Income Tax
Description
Federal limitations on taxation of interstate commerce; Provision of computer services exceeded solicitation of orders
Topic
Constitutional Provisions
Date Issued
10-29-1998
October 29, 1998
Dear******************:
This will respond to your letter in which you request a ruling with respect to whether the activities of your client, ***** (the ``Taxpayer'), are sufficient for Virginia to impose its corporate income tax.
FACTS
The Taxpayer is a provider of a wide array of specialized computer related services. The Taxpayer does not sell or develop systems hardware or software, rather it uses customer provided equipment and software in conjunction with its services. The Taxpayer provides the services within Virginia through employees residing from both within and without Virginia. Occasionally work is performed at the Taxpayer's headquarters outside Virginia. You request a ruling as to whether the Taxpayer would be subject to Virginia corporate income tax.
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. Secs. 382-384, Virginia is prohibited from imposing an income tax on a taxpayer whose only business activities within Virginia by or on behalf of the taxpayer during a 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 employees furnish the specialized computer services to customers in Virginia. Solicitation is exceeded because the service activities are 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 is subject to Virginia tax.
I trust this will address your question. You have not indicated what tax year is involved in your request so we have enclosed a return for the most current year. Should you need additional forms, please contact our forms request unit at *****. If you have any questions on this matter, please contact ***** of the Office of Tax Policy at *****.
Dear******************:
This will respond to your letter in which you request a ruling with respect to whether the activities of your client, ***** (the ``Taxpayer'), are sufficient for Virginia to impose its corporate income tax.
FACTS
The Taxpayer is a provider of a wide array of specialized computer related services. The Taxpayer does not sell or develop systems hardware or software, rather it uses customer provided equipment and software in conjunction with its services. The Taxpayer provides the services within Virginia through employees residing from both within and without Virginia. Occasionally work is performed at the Taxpayer's headquarters outside Virginia. You request a ruling as to whether the Taxpayer would be subject to Virginia corporate income tax.
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. Secs. 382-384, Virginia is prohibited from imposing an income tax on a taxpayer whose only business activities within Virginia by or on behalf of the taxpayer during a 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 employees furnish the specialized computer services to customers in Virginia. Solicitation is exceeded because the service activities are 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 is subject to Virginia tax.
I trust this will address your question. You have not indicated what tax year is involved in your request so we have enclosed a return for the most current year. Should you need additional forms, please contact our forms request unit at *****. If you have any questions on this matter, please contact ***** of the Office of Tax Policy at *****.
Rulings of the Tax Commissioner