Tax Type
Corporation Income Tax
Retail Sales and Use Tax
Description
Child registration service
Topic
Computation of Income
Date Issued
05-22-1989
May 22, 1989
Re: Request for Ruling: Sales and Use/Corporate Income Tax
Dear*****************
This will reply to your letter dated December 27, 1988, in which you requested a ruling on the application of the sales and use/corporate income tax to your client ("The Taxpayer").
FACTS
The Taxpayer, a Virginia corporation, provides a child registration service in which a kidnap/missing child prevention kit ("the kit") is furnished to customers who utilize the service. The kit, manufactured in Connecticut, consists of instructions, personal data card, fingerprint pad, missing child and adhesive stickers for the telephone, etc. The Taxpayer solicits customers using mail inserts (printed in Pennsylvania) which are enclosed in bank card statements and sent to bank customers located in states other than Virginia.
The customer registers his child by completing the registration packet ("the packet") which includes the data card and fingerprint sheet. This packet is mailed by the customer to a post office box in the District of Columbia. The Taxpayer's employee picks up the packet in the District of Columbia and performs a review of the fingerprints and data cards in his home located in Virginia. The acceptable data cards and fingerprints are sent to the Taxpayer's office located in Connecticut where all records are stored. The data is released to police authorities in the event the child is missing or kidnapped.
The Taxpayer asks whether they are subject to the Virginia sales and use tax and whether they are considered to be doing business for purposes of filing a corporate income tax return.
RULING
Based on the information presented, the Taxpayer is providing a nontaxable service exempt from the tax under Virginia Code §58.1-608(2), and should not charge the tax to customers. The Taxpayer, however, is subject to the sales and use tax on any tangible personal property purchased, stored, used or consumed in Virginia in connection with providing the service.
Virginia Code §58.1-400, imposes an income tax on "every corporation organized under the laws of the Commonwealth and every foreign corporation having income from Virginia sources." The Taxpayer is subject to Virginia corporate income tax because it is organized under Virginia law and has income from Virginia sources. As defined in Virginia Regulation 630-3-302 (copy enclosed), the Taxpayer generates "income and deductions...attributable to a business, trade, profession or occupation...in Virginia...." The Taxpayer's employee, by reviewing the fingerprints and data cards in Virginia, conducts a profession or occupation in Virginia on behalf of the Taxpayer. Therefore, the Taxpayer is considered to be doing business in Virginia and is required to file a corporate return.
If you have any further questions, please contact us.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner