Tax Type
Employer Income Tax Withholding
Description
No reciprocity agreement with North Carolina
Topic
Withholding of Tax
Date Issued
08-03-1999
August 3, 1999
Re: § 58.1-1821 Application: Withholding Tax
Dear*****
This will reply to your letter in which you contest the assessment of withholding tax and interest against ***** (the "Taxpayer') for the period of August 1996 through July 1998.
FACTS
The Taxpayer is located in North Carolina, but performs work in Virginia. The Taxpayer did not withhold Virginia income tax from its employees working in Virginia. Under audit, the Taxpayer was assessed for failing to withhold from its employees working in Virginia for the period of August 1996 through July 1998.
The Taxpayer believes that North Carolina has reciprocity with Virginia. Therefore, it was not required to withhold Virginia income tax from its employees because no employee worked in Virginia for more than 30 consecutive days.
DETERMINATION
Code of Virginia § 58.1461 requires employers to withhold taxes from employee wages for each payroll period. Code of Virginia § 58.1-460 defines "employer' as, "[T]he person, whether a resident or nonresident of the Commonwealth, for whom an individual performs or performed any service as an employee...' Further, this section defines "employee' as, "[A]n individual, whether a resident or a nonresident of the Commonwealth, who performs or performed any service in the Commonwealth for wages ...'
Consequently, an employer located outside of Virginia may be required to withhold Virginia income taxes for an employee who is not a resident of Virginia when that employee earns income from Virginia sources. Employers are required to withhold an amount which would equal each employee's approximate income tax liability. A nonresident is not required to work 30 days in Virginia before becoming subject to withholding tax.
Code of Virginia § 58.1-342 (B) grants the department the authority to enter into reciprocal agreements with other states to exempt nonresidents from the Virginia income tax when they earn salaries and wages from working in Virginia if such other states similarly exempt Virginia residents. In addition, employers are not required to withhold Virginia income tax from residents of these states. Virginia currently has this type of agreement with Maryland, West Virginia and Pennsylvania. However, no such agreement exists with the state of North Carolina.
Accordingly, the relief which the Taxpayer has requested cannot be granted. Enclosed is a schedule which states the amount of withholding tax and interest due. Please send your payment to ***** Office of Tax Policy, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia within 30 days to avoid the accrual of additional interest. I apologize for the erroneous information provided to you by the department. If you have any questions about this determination, you may contact at ******
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22898B
Re: § 58.1-1821 Application: Withholding Tax
Dear*****
This will reply to your letter in which you contest the assessment of withholding tax and interest against ***** (the "Taxpayer') for the period of August 1996 through July 1998.
FACTS
The Taxpayer is located in North Carolina, but performs work in Virginia. The Taxpayer did not withhold Virginia income tax from its employees working in Virginia. Under audit, the Taxpayer was assessed for failing to withhold from its employees working in Virginia for the period of August 1996 through July 1998.
The Taxpayer believes that North Carolina has reciprocity with Virginia. Therefore, it was not required to withhold Virginia income tax from its employees because no employee worked in Virginia for more than 30 consecutive days.
DETERMINATION
Code of Virginia § 58.1461 requires employers to withhold taxes from employee wages for each payroll period. Code of Virginia § 58.1-460 defines "employer' as, "[T]he person, whether a resident or nonresident of the Commonwealth, for whom an individual performs or performed any service as an employee...' Further, this section defines "employee' as, "[A]n individual, whether a resident or a nonresident of the Commonwealth, who performs or performed any service in the Commonwealth for wages ...'
Consequently, an employer located outside of Virginia may be required to withhold Virginia income taxes for an employee who is not a resident of Virginia when that employee earns income from Virginia sources. Employers are required to withhold an amount which would equal each employee's approximate income tax liability. A nonresident is not required to work 30 days in Virginia before becoming subject to withholding tax.
Code of Virginia § 58.1-342 (B) grants the department the authority to enter into reciprocal agreements with other states to exempt nonresidents from the Virginia income tax when they earn salaries and wages from working in Virginia if such other states similarly exempt Virginia residents. In addition, employers are not required to withhold Virginia income tax from residents of these states. Virginia currently has this type of agreement with Maryland, West Virginia and Pennsylvania. However, no such agreement exists with the state of North Carolina.
Accordingly, the relief which the Taxpayer has requested cannot be granted. Enclosed is a schedule which states the amount of withholding tax and interest due. Please send your payment to ***** Office of Tax Policy, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia within 30 days to avoid the accrual of additional interest. I apologize for the erroneous information provided to you by the department. If you have any questions about this determination, you may contact at ******
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22898B
Rulings of the Tax Commissioner