Tax Type
Employer Income Tax Withholding
Description
Virginia Withholding Tax Law
Topic
Withholding of Tax
Date Issued
06-21-1999
June 21, 1999
Re: Request for a Ruling: Withholding Tax
Dear***
This will reply to your letter in which you request a ruling of the application of Virginia withholding tax law to the Transportation Equity Act for the 21st Century. I apologize for the delay in responding.
FACTS
In June 1998, the Transportation Equity Act for the 21st Century, Public Law ("P.L.') 105-178 was passed into law. Among other things, the Act allows employers to offer pretax benefits to employees who use mass transportation. The General Services Administration ("GSA') offers these transportation-related fringe benefits to federal employees.
You ask two questions concerning the effect of P.L. 105-178 on Virginia withholding from federal employees subject to Virginia income tax.
RULING
1. Is the P.L.105-178 exempt amount subtracted from gross wages before the calculation of Virginia withholding taxes as is done before performing federal income tax withholding?
P.L. 105-178 exempts certain fringe benefits given to employees who use mass transportation. These fringe benefits are exempt from federal gross income. Code of Virginia Sec. 58.1-461, copy enclosed, provides that employers must withhold income tax from employees subject to Virginia income tax, an amount which is equal to the employees' income tax liability. The starting point in calculating Virginia taxable income is federal adjusted gross income. See Code of Virginia Sec. 58.1-322, copy enclosed. In general, items of income exempt from inclusion in federal adjusted gross income will also be excluded from Virginia taxable income. Because there is no provision in the Code of Virginia that imposes income tax on the P.L.105-178 fringe benefits that will be excluded from federal adjusted gross income, they will not be included in Virginia gross wages prior to calculating withholding tax.
2. Should the W-2 gross amount be the earnings amount less the P.L.105-178 contribution?
For the reasons stated above, the P.L. 105-178 contributions should not be subtracted from the W-2's gross wages.
I hope that this ruling answers your questions. If you have any other questions, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21715B
Re: Request for a Ruling: Withholding Tax
Dear***
This will reply to your letter in which you request a ruling of the application of Virginia withholding tax law to the Transportation Equity Act for the 21st Century. I apologize for the delay in responding.
FACTS
In June 1998, the Transportation Equity Act for the 21st Century, Public Law ("P.L.') 105-178 was passed into law. Among other things, the Act allows employers to offer pretax benefits to employees who use mass transportation. The General Services Administration ("GSA') offers these transportation-related fringe benefits to federal employees.
You ask two questions concerning the effect of P.L. 105-178 on Virginia withholding from federal employees subject to Virginia income tax.
RULING
1. Is the P.L.105-178 exempt amount subtracted from gross wages before the calculation of Virginia withholding taxes as is done before performing federal income tax withholding?
P.L. 105-178 exempts certain fringe benefits given to employees who use mass transportation. These fringe benefits are exempt from federal gross income. Code of Virginia Sec. 58.1-461, copy enclosed, provides that employers must withhold income tax from employees subject to Virginia income tax, an amount which is equal to the employees' income tax liability. The starting point in calculating Virginia taxable income is federal adjusted gross income. See Code of Virginia Sec. 58.1-322, copy enclosed. In general, items of income exempt from inclusion in federal adjusted gross income will also be excluded from Virginia taxable income. Because there is no provision in the Code of Virginia that imposes income tax on the P.L.105-178 fringe benefits that will be excluded from federal adjusted gross income, they will not be included in Virginia gross wages prior to calculating withholding tax.
2. Should the W-2 gross amount be the earnings amount less the P.L.105-178 contribution?
For the reasons stated above, the P.L. 105-178 contributions should not be subtracted from the W-2's gross wages.
I hope that this ruling answers your questions. If you have any other questions, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21715B
Rulings of the Tax Commissioner