Tax Type
Retail Sales and Use Tax
Description
Interstate transactions; Nexus with Virginia
Topic
Taxability of Persons and Transactions
Date Issued
01-07-1994
January 7, 1994
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
This will reply to your letter of August 24, 1993 in which you request a ruling regarding Virginia's nexus standards for sales and use tax purposes.
FACTS
Corporation Z is headquartered outside Virginia and is engaged in the sale and the sub-contracting of the installation of tangible personal property in Virginia. Sales are not solicited in Virginia by company representatives, and Corporation Z does not have any assets in Virginia with the exception that during the installation period Corporation Z maintains title to the property. The inventory is in Virginia during installation for less than one week.
Sales representatives do not perform credit checks, rectify problems with Corporation Z's products, or attempt to collect accounts receivable or approve sales. All orders are accepted outside Virginia and shipped from inventory located outside Virginia. Corporation Z does not send repair people into Virginia, and no other activities are engaged in by sales representatives or other individuals acting on the company's behalf in Virginia.
You ask if Corporation Z's activities are sufficient to create nexus in Virginia for sales and use tax purposes.
RULING
Va. Code §58.1-612 (copy enclosed) sets forth the "nexus requirements which give the Commonwealth the authority to require dealers to register for collection and remittance of the sales tax. The statute provides in part that a dealer shall be deemed to have sufficient activity within the state to require registration if he: (1) maintains or has within Virginia, directly or through an agent or subsidiary, an office, warehouse, or place of business of any nature; or (2) makes regular deliveries of tangible personal property within this Commonwealth by means other than common carrier. A person is deemed to be making regular deliveries if vehicles other than those operated by a common carrier enter this Commonwealth more than twelve times during a calendar year.
It is not clear from your letter the exact relationship between Corporation Z and the subcontractors installing the tangible personal property. If an agency relationship exists, and the subcontractor maintains a place of business in Virginia, Corporation Z is deemed to have nexus with Virginia and is required to register to collect the tax. Under Virginia law, two factors are necessary in order for an agency relationship to be established. First, the agent must be subject to the principal's control, with regard to the work to be done and the manner of performing it. Actual control is not the test; it is the right to control that is determinative. Second, the work has to be done on the business of the principal or for his benefit.
Similarly, your letter does not indicate the manner in which the tangible personal property is delivered to Corporation Z's Virginia customers. If Corporation Z makes deliveries of its goods into Virginia more than twelve times per year by means other than common carrier, it is required to register to collect the Virginia sales tax. If Corporation Z does not make deliveries sufficient in number and scope to require registration, and if it does not meet any of the other nexus requirements in Va. Code §58.1-612, it may voluntarily register with the department for the collection of the tax as a service to its customers.
However, as the enclosed statute indicates, if Corporation Z solicits in Virginia through employees, independent contractors, agents or other representatives, it would have sufficient activity in Virginia to require registration. Corporation Z would also be liable for the tax during the period which it met the nexus requirements within the statute of limitations period.
You request that if nexus is established, may Corporation Z remit sales tax on a transaction basis due to the sporadic nature of their business in Virginia.
Under Virginia Regulation (VR) 630-10-31 (copy enclosed), a new dealer is not placed on a filing basis other than monthly until the dealer has been in business sufficient time to determine that he should fall into another reporting category. Therefore, Corporation Z will initially be required to file sales tax returns on a monthly basis. The returns will be due on or before the 20th day of the month following each reporting period even if no tax is due.
The department may determine that Corporation Z is required to file sales tax returns on a quarterly basis. If quarterly filing status is warranted, the department will change the filing status automatically and notify Corporation Z. If Corporation Z is required to file on a quarterly basis, the sales and use tax return will be due on the 20th day of the month following the close of the reporting period.
Enclosed is a registration application which should be completed by Corporation Z and returned to the department's Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23282-1880. If you have any questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/7332F
Rulings of the Tax Commissioner