Tax Type
Corporation Income Tax
Description
Sales Factor; Delivery in Virginia for Transportation Purposes
Topic
Allocation and Apportionment
Date Issued
10-08-1991
October 8, 1991
Re: §58.1-1821 Application; Corporation Income Tax
Dear**************
This will reply to your letter of April 11, 1991, in which you seek correction of corporation income tax assessments for****************** (the "Taxpayer").
FACTS
The taxpayer's returns for 1986 and 1987 were audited, and an adjustment was made to the sales factor for each year. The auditor included in the numerator of the factor sales in which an independent carrier, under contract to the purchaser, took delivery of the goods in Virginia. The merchandise was then delivered to the purchaser's distribution points outside Virginia. The auditor determined that delivery to the carrier in Virginia constituted delivery to the purchaser and that the sales were attributable to Virginia.
You object to the sales factor adjustment, asserting that none of the sales in question had an ultimate destination in Virginia; therefore, the sales should not be included in the numerator of the sales factor.
DETERMINATION
The Virginia sales factor is a fraction, the numerator of which is the total sales in Virginia during the taxable year. The denominator is the total sales of the corporation everywhere during the taxable year. Va. Code §58.1-415 and the regulations thereunder provide guidance in determining when sales of tangible personal property are deemed to be in Virginia.
Virginia assigns or attributes sales to a jurisdiction on a destination basis. Under this rule, sales are attributable to the state to which the goods are shipped or delivered to the customer. Va. Code §58.1-415 provides that in the case of delivery by common carrier or other means of transportation, the place at which property is ultimately received after all transportation has been completed shall be considered as the place at which such property is received by the purchaser. Direct delivery in the Commonwealth, other than for purposes of transportation, to a person or firm designated by a purchaser, constitutes delivery to the purchaser in the Commonwealth.
In this case, there clearly was direct delivery in Virginia to the independent carrier designated by the purchaser. However, the facts indicate that the delivery was for purposes of transportation. Prior to delivery to the carrier, the taxpayer knew that the ultimate recipient of the merchandise was outside Virginia. Virginia Regulation (VR) 630-3-415 dictates that, because the ultimate recipient of the merchandise was known (at the time of the first shipment) to be outside Virginia and the delivery in Virginia was for transportation purposes only, the sales are not attributable to Virginia and, therefore, should not be included in the numerator of the sales factor.
Accordingly, the assessment will be abated.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5095F
Rulings of the Tax Commissioner