Tax Type
Corporation Income Tax
Description
Situs of franchises
Topic
Corporate Distributions and Adjustments
Penalties and Interest
Date Issued
09-30-1982
September 30, 1982
Re: § 58-1118 Application
Capital Not Otherwise Taxed
For the Years ******
Dear **************:
This ruling is issued in response to your application under § 58-1118, Code of Virginia.
FACTS
*********** is a Virginia corporation. The principal business activity of the corporation is franchisor for******** has no branch operations and its principal business location is in ************* Virginia.
The Department of Taxation included franchises and agreements not to compete as capital of the business subject to capital not otherwise taxed.
The franchised operations are owned by ****** who also owns ******. The taxpayer contends that the franchises are not subject to Virginia tax since the franchised operations are located outside of the state. The taxpayer also takes the position that since******** pays franchise taxes and is regulated by the State, that the corporation should not be subject to the capital not otherwise taxed tax.
According to our files, the issue regarding the situs of franchises was decided in the 1977 capital tax audit. During a conference between the taxpayer and the Department concerning the 1977 audit, it was disclosed that ******** did not have any branch offices and its principal place of business was in Virginia. During the same conference, it was established that *************operated many branches outside of Virginia and certain of its business capital was attributed to these branches. § 58-415, Code of Virginia, provides that when a Virginia corporation has branch offices outside of the state, any capital which acquires situs at the out-of-state branch will not be included in the capital subject to Virginia tax.
In the situation at hand, ********** is the owner of franchises, has no branches outside of Virginia, is not specifically exempt from capital tax, and files a corporation income tax return.
DETERMINATION
Since ******** is domiciled in Virginia and has no branches located outside of Virginia, all of its property defined as capital, including franchises, is subject to Virginia capital not otherwise taxed. Therefore, I find no error in the audit computations of taxable capital or in the deficiencies assessed. Your application for correction is therefore denied and the assessments should be paid with interest accrued to date of payment.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner