Tax Type
Employer Income Tax Withholding
Description
Failure to withhold by an out-of-state employer doing business in Virginia
Topic
Withholding of Tax
Date Issued
11-05-1999
November 5, 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 and interest against ***** (the "Taxpayer') for the period of March 1997 through June 1998.
FACTS
The Taxpayer is located outside Virginia, but its employees temporarily performed work in Virginia. The Taxpayer did not withhold Virginia income tax from these employees. Under audit, the Taxpayer was assessed for failing to withhold from its employees working in Virginia for the period of March 1997 through June 1998.
The Taxpayer contends that it was not required to withhold Virginia income tax from its employees because it was not liable for withholding tax, nor did its employees income from Virginia jobs exceed the filing thresholds set out in the Code.
DETERMINATION
Code of Virginia Sec. 58.1-461 requires employers to withhold taxes from employee wages for each payroll period. Code of Virginia Sec. 58.1-460 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 provides that employees who 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 the Taxpayer had no liability last year and expected not to have any liability this year and that no employee of the Taxpayer had more than the threshold amount of $5,000 (single) or $8,000 (married) Virginia adjusted gross income ("VAGI') required to file a Virginia individual income tax return and no withholding was required.
The starting point for computing VAGI is federal adjusted gross income. The federal adjusted gross income of a Virginia resident, however, can be modified by the additions and subtractions specifically indicated in Code of Virginia Sec. 58.1-322, when computing Virginia adjusted gross income. See also Code of Virginia Sec. 58.1-321.
VAGI is calculated in the same manner for both nonresidents and residents. Thus, the VAGI of a nonresident is not limited to those wages actually earned performing work in Virginia.
The review of the Taxpayer's records by audit staff revealed that the majority of the Taxpayer's employees would have had VAGI that exceeded the thresholds set by Code of Virginia Sec. 58.1-321. You have not provided any information to show whether the Taxpayer's employees' VAGI fell below the threshold levels. Accordingly, relief cannot be granted.
The enclosed schedule which shows 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 23218-1880 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
TP/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 and interest against ***** (the "Taxpayer') for the period of March 1997 through June 1998.
FACTS
The Taxpayer is located outside Virginia, but its employees temporarily performed work in Virginia. The Taxpayer did not withhold Virginia income tax from these employees. Under audit, the Taxpayer was assessed for failing to withhold from its employees working in Virginia for the period of March 1997 through June 1998.
The Taxpayer contends that it was not required to withhold Virginia income tax from its employees because it was not liable for withholding tax, nor did its employees income from Virginia jobs exceed the filing thresholds set out in the Code.
DETERMINATION
Code of Virginia Sec. 58.1-461 requires employers to withhold taxes from employee wages for each payroll period. Code of Virginia Sec. 58.1-460 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 provides that employees who 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 the Taxpayer had no liability last year and expected not to have any liability this year and that no employee of the Taxpayer had more than the threshold amount of $5,000 (single) or $8,000 (married) Virginia adjusted gross income ("VAGI') required to file a Virginia individual income tax return and no withholding was required.
The starting point for computing VAGI is federal adjusted gross income. The federal adjusted gross income of a Virginia resident, however, can be modified by the additions and subtractions specifically indicated in Code of Virginia Sec. 58.1-322, when computing Virginia adjusted gross income. See also Code of Virginia Sec. 58.1-321.
VAGI is calculated in the same manner for both nonresidents and residents. Thus, the VAGI of a nonresident is not limited to those wages actually earned performing work in Virginia.
The review of the Taxpayer's records by audit staff revealed that the majority of the Taxpayer's employees would have had VAGI that exceeded the thresholds set by Code of Virginia Sec. 58.1-321. You have not provided any information to show whether the Taxpayer's employees' VAGI fell below the threshold levels. Accordingly, relief cannot be granted.
The enclosed schedule which shows 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 23218-1880 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
TP/11368B
Rulings of the Tax Commissioner