Bulletin Number
VTB 86-14
Tax Type
Employer Income Tax Withholding
Description
Personal Use of Company Automobiles
Topic
Withholding of Tax
Date Issued
09-15-1986
Public Law 99-44 amended I.R.C. §3402 by adding a subsection (s), effective January 1, 1985, to permit an employer to elect not to withhold taxes on the value of an employee's personal use of an employer-provided automobile that is included in the employee's income. To avail itself of this "no-withholding' option, an employer was required to notify the employee in writing of this policy, by September 1, 1985 for 1985, and generally by January 31 of any subsequent year as to which the election is to apply. The employer must also include the amount of benefits as wages on the employee's Form W-2 for the year in which the benefit is received.
Effective immediately, Virginia will follow the procedures established by the Internal Revenue Service concerning the withholding of Virginia income tax from noncash fringe benefits in the form of personal use of company automobiles.
This ruling supersedes an earlier ruling of the Department of Taxation, dated October 15, 1985, that held such benefits were subject to Virginia withholding tax, notwithstanding the federal provision that permitted an employer not to withhold income taxes on the value of such benefits. The October 15, 1985 ruling is hereby rescinded. [See }201-185 in the Virginia Tax Reporter Transfer Binder of New Matters 1955-1985.]
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