Tax Type
Individual Income Tax
Description
Nonresident employee income; Truck Drivers
Topic
Allocation and Apportionment
Withholding of Tax
Date Issued
08-01-1990
August 1, 1990
Re: Ruling Request/Individual Income Tax Apportionment of Nonresident Income
Dear****************
This is in reply to your letter dated February 9, 1990, in which you request a ruling regarding the proper method of apportioning wages to employees who perform services in both Virginia and Tennessee.
Ruling
Virginia Code §58.1-302 defines "Income and deductions from Virginia sources" in the following manner:
-
- 1. Items of income gain, loss and deduction attributable to;
a.The ownership of any interest in real or tangible personal property in Virginia; or
b. A business, trade, profession or occupation carried on in Virginia.
2. Income from intangible personal property, including annuities, dividends, interest, royalties and gains from the disposition of intangible personal property to the extent that such income is from property employed by the taxpayer in a business, trade, profession, or occupation carried on in Virginia. (Emphasis added.)
- 1. Items of income gain, loss and deduction attributable to;
As you can see from the applicable section of the Virginia Code, income earned by nonresidents from "a business, trade, profession or occupation carried on in Virginia" gives rise to Virginia source income. Therefore, to the extent that the individuals that are the subject of your inquiry, carry on their duties within the physical boundaries of Virginia, they are liable for income taxation to Virginia as nonresidents.
Since these individuals perform services both within and without Virginia, their Virginia source income must be computed by apportioning their income between Virginia and Tennessee. Such apportionment should be based upon factors which most equitably determine the employee's portion of total income that is attributable to services performed in Virginia. Because these employees are truck drivers, it appears that the most appropriate method of apportioning their income would be to determine the ratio of the number of miles driven in Virginia to the total number of miles driven everywhere.
It is the employer's responsibility to determine the amount of Virginia source income for purposes of withholding Virginia income tax on wages. However, the employee is ultimately responsible for determining the amount of Virginia source income to be reported on his individual income tax return. While there is no requirement to separately state the amount of wages earned in each state on Form W-2, many employers do so as a convenience to their employees.
If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner