Did Virginia tax wages earned during a roughly 150-day Virginia work stay by a West Virginia domiciliary resident?

Subject

Virginia's reciprocity agreement with West Virginia prohibits the taxation of any income earned in Virginia by a domiciliary resident of West Virginia, the Taxpayer was not required to file a 2009 Virginia income tax return

Plain-English summary

An individual moved from Maryland to West Virginia in 2008, then stayed in Virginia for about 150 days while working in 2009. Virginia initially assessed her as a nonfiler.

The evidence established West Virginia domicile, and her Virginia stay did not exceed the 183-day actual-resident threshold. Virginia's reciprocal agreement exempted a West Virginia resident's salaries and wages earned while working in Virginia.

Virginia concluded that she did not have to file a 2009 Virginia return and owed no Virginia income tax. It abated the assessment and directed a refund of payments made.

Citations and references

• Va. Code §§ 58.1-302 and 58.1-342 B.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-163

Original ruling text

August 25, 2016

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you request correction of the individual income tax assessment issued to * (the “Taxpayer”) for the taxable year ended December 31, 2009. I apologize for the delay in responding to your appeal.

FACTS

The Department received information from the Internal Revenue Service (IRS) that the Taxpayer may have income subject to Virginia income tax for the 2009 taxable year. The Department requested additional information from the Taxpayer. When no response was received, the Department issued an assessment. The Taxpayer filed an appeal, contending she was a resident of West Virginia during 2009.

DETERMINATION

Domicile

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he or she may actually reside elsewhere. For a person to change domiciliary residency to another state, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia.

The Taxpayer asserts she was a resident of Maryland until January 2008 when she moved to West Virginia to live with a relative. The Taxpayer asserts she only moved into Virginia for approximately 150 days during 2009 to work within the Commonwealth. The Department has no evidence of the Taxpayer taking steps to abandon her West Virginia domicile. In fact, the Taxpayer returned to West Virginia. Because the Taxpayer's residency in Virginia was less than 183 days, and the Taxpayer took no actions indicative of abandoning her West Virginia domicile, the Taxpayer was neither an actual or domiciliary resident of Virginia during the 2009 taxable year.

Reciprocity

Generally, individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. See Va. Code § 58.1-325. Virginia Code § 58.1-302 limits the term income and deductions from Virginia sources to the items of income, gain, loss and deductions attributable to the ownership of property in Virginia or the conduct of a business, trade, profession or occupation in Virginia.

Virginia Code § 58.1-342, however, specifies special cases in which a nonresident is not required to file a Virginia individual income tax return. Virginia Code § 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.

Virginia's agreement with West Virginia only requires the Taxpayer to provide her employer(s) with a certificate of nonresidence to be exempt from Virginia income tax. Such exemption may apply even in instances where the taxpayer remains in Virginia overnight, but not to exceed 183 days.

CONCLUSION

Based on the evidence, the Taxpayer was domiciled in West Virginia during the 2009 taxable year. Further, because Virginia's reciprocity agreement with West Virginia prohibits the taxation of any income earned in Virginia by a domiciliary resident of West Virginia, the Taxpayer was not required to file a 2009 Virginia income tax return and was not liable for Virginia income tax. Accordingly the 2009 assessment will be abated, and all payments made will be refunded to the Taxpayer.

The Code of Virginia sections, and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department's website. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/6033544842.D