Tax Type
Employer Income Tax Withholding
Description
Failure to Withhold, Wages Subject to Withholding
Topic
Withholding of Tax
Date Issued
06-17-1999
June 17, 1999
Re: Sec. 58.1-1821 Application: Withholding Tax
Dear***
This will reply to your letter in which you contest the assessment of withholding tax, penalty and interest against ***** (the "Taxpayer') for the period of June 1990 through December 1995. I apologize for the delay in responding.
FACTS
The Taxpayer is located outside Virginia, but occasionally performs work in Virginia. The Taxpayer did not withhold Virginia income tax from its employees working in the Commonwealth. Under audit, the Taxpayer was assessed for failing to withhold from its employees working in Virginia for the period of June 1990 through December 1995.
The Taxpayer contends that it was not required to withhold Virginia income tax from its employees because no employee's income from Virginia jobs exceeded the filing thresholds set out in Code of Virginia Sec. 58.1-321.
DETERMINATION
Code of Virginia Sec. 58.1-461, copy enclosed, requires employers to withhold taxes from employee wages for each payroll period. Code of Virginia Sec. 58.1-460, copy enclosed, defines "employer' as, "[T]he person, whether a resident or 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, 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.
Code of Virginia Sec. 58.1-470, copy enclosed, provides that employees that receive wages will be entitled to the same exemptions for which the employees qualify, respectively, under federal income tax law. While it is true that some of the Taxpayer's employees may not be subject to withholding because they claim a number of exemptions, the Taxpayer must withhold from all other Virginia wage earners.
You contend that no employee of the Taxpayer had more than the threshold amount of $5,000 (single) or $8,000 (married) Virginia adjusted gross income required to file a Virginia individual income tax return and no withholding was required.
Virginia adjusted gross income is calculated in the same manner for both nonresidents and residents. An employee's federal adjusted gross income, adjusted by the additions and subtractions specifically indicated in Code of Virginia Sec. 58.1-322, is used to calculate his Virginia adjusted gross income. Thus, Virginia adjusted gross income of a nonresident is not limited to those wages actually earned preforming work in Virginia.
A review of the Taxpayer's records by audit staff revealed that the majority of the employees have Virginia adjusted gross income which exceeded the thresholds set by Code of Virginia Sec. 58.1-321.
Accordingly, the relief which the Taxpayer has requested cannot be granted. Enclosed is a schedule which states the amount of withholding tax and interest due. Please send your payment to ***** Office of Tax Policy, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia within 30 days to avoid the accrual of additional interest. If you have any questions about this determination, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11368B
Re: Sec. 58.1-1821 Application: Withholding Tax
Dear***
This will reply to your letter in which you contest the assessment of withholding tax, penalty and interest against ***** (the "Taxpayer') for the period of June 1990 through December 1995. I apologize for the delay in responding.
FACTS
The Taxpayer is located outside Virginia, but occasionally performs work in Virginia. The Taxpayer did not withhold Virginia income tax from its employees working in the Commonwealth. Under audit, the Taxpayer was assessed for failing to withhold from its employees working in Virginia for the period of June 1990 through December 1995.
The Taxpayer contends that it was not required to withhold Virginia income tax from its employees because no employee's income from Virginia jobs exceeded the filing thresholds set out in Code of Virginia Sec. 58.1-321.
DETERMINATION
Code of Virginia Sec. 58.1-461, copy enclosed, requires employers to withhold taxes from employee wages for each payroll period. Code of Virginia Sec. 58.1-460, copy enclosed, defines "employer' as, "[T]he person, whether a resident or 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, 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.
Code of Virginia Sec. 58.1-470, copy enclosed, provides that employees that receive wages will be entitled to the same exemptions for which the employees qualify, respectively, under federal income tax law. While it is true that some of the Taxpayer's employees may not be subject to withholding because they claim a number of exemptions, the Taxpayer must withhold from all other Virginia wage earners.
You contend that no employee of the Taxpayer had more than the threshold amount of $5,000 (single) or $8,000 (married) Virginia adjusted gross income required to file a Virginia individual income tax return and no withholding was required.
Virginia adjusted gross income is calculated in the same manner for both nonresidents and residents. An employee's federal adjusted gross income, adjusted by the additions and subtractions specifically indicated in Code of Virginia Sec. 58.1-322, is used to calculate his Virginia adjusted gross income. Thus, Virginia adjusted gross income of a nonresident is not limited to those wages actually earned preforming work in Virginia.
A review of the Taxpayer's records by audit staff revealed that the majority of the employees have Virginia adjusted gross income which exceeded the thresholds set by Code of Virginia Sec. 58.1-321.
Accordingly, the relief which the Taxpayer has requested cannot be granted. Enclosed is a schedule which states the amount of withholding tax and interest due. Please send your payment to ***** Office of Tax Policy, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia within 30 days to avoid the accrual of additional interest. If you have any questions about this determination, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11368B
Rulings of the Tax Commissioner