I'm a Virginia domiciliary who went to college out of state and earned summer internship wages in a different state -- do I still owe Virginia income tax on those wages?

Plain-English summary

A young man lived in Virginia before enrolling in college in a different state ("State B"). During the summer while in school, he worked an internship and earned income in yet another state ("State A"). He didn't file a Virginia income tax return for that year. The IRS shared information with Virginia suggesting he might have owed Virginia tax; when he didn't respond to the Department's request for more information, an assessment was issued. On appeal, he argued his income was earned in State A, not Virginia, so it shouldn't be taxed here.

Virginia taxes two categories of residents: domiciliary residents (people whose permanent home and intended place of return is Virginia, even if they're temporarily elsewhere) and actual residents (people who maintain a place of abode in Virginia for more than 183 days in the year, regardless of domicile). A domiciliary resident stays taxable on ALL their income, wherever earned, unless and until they actually change their domicile -- which requires BOTH abandoning the old domicile with no intent to return AND establishing a new one somewhere else through actual physical presence plus intent to remain permanently or indefinitely. The person claiming the change bears the burden of proving it, looking at all the facts and circumstances (financial independence, employment, income sources, spouse's residence, property, vehicle registration, and more) -- a simple declaration of a new home isn't enough.

The Department's established experience is that college students RARELY establish a new domicile just by attending school somewhere -- most remain domiciled wherever they were domiciled before college. Here, several facts cut against a domicile change: the student kept his Virginia driver's license (itself requiring a certification of Virginia residency, and a strong indicator of intent to remain domiciled here even though it's possible to hold a Virginia license while domiciled elsewhere); he stayed registered to vote in Virginia and voted by absentee ballot (also strong evidence of intent to remain domiciled); and he used his father's Virginia address for correspondence, including on his own State A tax return. None of this showed the kind of permanent connection to State A or State B needed to establish a new domicile there.

Because he remained a Virginia domiciliary resident, his internship wages earned in State A were taxable in Virginia too -- but Virginia gives a credit for income tax actually paid to another state on earned or business income (limited to the LESSER of the tax actually paid to the other state, or the Virginia tax that would apply to that same income). The assessment was upheld as issued (based on the best information the Department had), but the student was given 30 days to file an actual Virginia resident return and claim that credit, which would adjust the assessment. He was also told to evaluate whether he remained a Virginia domiciliary resident in later years and file accordingly if so.

What this means for you

College students (and their parents) with an out-of-state school and/or internship

Attending college out of state does NOT, by itself, change your tax domicile -- Virginia's default assumption is that you remain domiciled wherever you were before college. If you want to actually change domicile (rare for students, but possible), you need real, provable steps: getting a driver's license and registering to vote in the NEW state, cutting ties like using a Virginia address for mail, and generally establishing the kind of permanent presence a court or the Department would recognize -- not just living somewhere temporarily for school.

Virginia domiciliaries who never filed a return because they thought their income was "earned elsewhere"

Where you physically earned wages doesn't determine which state's residency taxes apply -- a Virginia domiciliary resident is taxable on ALL income regardless of where it was earned, as long as domicile hasn't actually changed. If you paid tax to another state on that same income, don't skip filing in Virginia; instead file and claim the credit for tax paid to the other state.

Anyone who ignores a Department inquiry about unfiled returns

An assessment issued because you didn't respond isn't necessarily final or your only option -- as here, the Department can still let you file the actual return afterward (within a stated window, here 30 days) to correct the assessment with real numbers and credits, rather than leaving the "best information available" assessment as the final word.

Common questions

Q: Does going to college in another state automatically change my tax domicile?
A: No. The Department's consistent experience is that college students rarely establish a new domicile simply by attending school elsewhere -- most remain domiciled wherever they were domiciled before enrolling, absent real, provable steps to abandon the old domicile and establish a new one.

Q: I kept my Virginia driver's license while at school out of state -- does that alone prove I'm still a Virginia domiciliary?
A: Not alone, but it's a strong indicator. Virginia law requires certifying Virginia residency to get or renew a license, and the Department treats holding one as a strong (though not automatically conclusive) sign of intent to remain domiciled in Virginia; voter registration and absentee voting in Virginia are similarly strong evidence.

Q: If I'm taxed as a Virginia resident on wages I earned and paid tax on in another state, do I get taxed twice?
A: No. Virginia allows a credit on your resident return for income tax actually paid to the other state on that same earned or business income, limited to the lesser of the tax paid there or the Virginia tax that would otherwise apply to that income.

Citations and references

• P.D. 00-151 (8/18/2000) (an individual may establish domicile outside Virginia even while retaining a Virginia driver's license)
• P.D. 02-149 (12/9/2002) (obtaining/renewing a Virginia driver's license is a strong indicator of intent to retain Virginia domicile)
• Cooper's Adm'r v. Commonwealth, 121 Va. 338, 93 S.E. 680 (1917) (Virginia voter registration and absentee voting is strong evidence of intent to remain domiciled in Virginia)
• P.D. 17-97 (6/12/2017) and P.D. 18-84 (5/9/2018) (voting eligibility under the Virginia Constitution requires domiciliary residency)
• P.D. 11-121 (6/30/2011) and P.D. 19-91 (8/16/2019) (college students rarely establish a new domicile where they attend school; generally remain domiciled where domiciled before college)
• P.D. 97-301 (7/7/1997) (credit for taxes paid to another state is limited to the lesser of the tax actually paid or the Virginia tax on that same income)

Subject

Residency : Domicile - College Student, Credit : Tax Paid To Another State - Wages

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-125

Original ruling text

September 21, 2021

Re: § 58.1-1821 Appeal: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the individual income tax assessment issued to * (the “Taxpayer”) for the taxable year ended December 31, 2017.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2017 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. When a response was not received, the Department issued an assessment. The Taxpayer appeals, contending his income was earned in * (State A), not Virginia.

DETERMINATION

Domicile

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia 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 may reside elsewhere. For a person to change domiciliary residency to another state or country, 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. A Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.

In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.

In determining domicile, consideration may be given to the individual’s expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, situs of real or tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person’s domicile. A person’s true intention must be determined with reference to all the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.

The Department determines a taxpayer’s intent through the information provided. A taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. See Virginia Code § 58.1-205. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.

Prior to enrolling in college, the Taxpayer lived in Virginia. During the summer of 2017, he earned income as an intern working in State A. The Taxpayer was a student attending college in * (State B). While in school, he continued to hold his Virginia driver’s license and voter’s registration and voted by absentee ballot. He also used his father’s Virginia address for correspondence and used it when filing his State A income tax return.

Virginia Code § 46.2-323.1 states, “No driver’s license ... shall be issued to any person who is not a Virginia resident.” In fact, this section states that every person applying for a driver’s license must execute and furnish to the Commissioner of the Department of Motor Vehicles (DMV) a statement that certifies that the applicant is a Virginia resident. The Department has found that an individual may successfully establish a domicile outside Virginia even if he retains a Virginia driver’s license. See Public Document (P.D.) 00-151 (8/18/2000). However, obtaining or renewing a Virginia driver’s license is considered to be a strong indicator of intent to retain domiciliary residency in Virginia. See P.D. 02-149 (12/9/2002).

In addition, registering to vote in Virginia and voting absentee in Virginia elections is also strong evidence of an intent to remain domiciled in Virginia. See Cooper’s Adm’r v. Commonwealth , 121 Va. 338, 349, 93 S.E. 680, 683 (1917). The Department has consistently found that individuals must be domiciliary residents of Virginia in order to be eligible to vote under the Constitution of Virginia . See P.D. 17-97 (6/12/17) and P.D. 18-84 (5/9/2018).

Further, it has been the Department’s experience that college students rarely establish domicile where they attend college. As such, most college students will remain domiciled where they were domiciled at the time they entered college. See P.D. 11-121 (6/30/2011), and P.D. 19-91 (8/16/2019).

In this case, the Taxpayer’s ongoing connections with Virginia evidence an intent to retain his Virginia domicile. In addition, there is no indication that the Taxpayer established the type of permanent connections to State A or State B that would indicate he intended to establish a new domicile.

Credit for Taxes Paid to another State

Virginia Code § 58.1-332 A allows Virginia residents a credit on their Virginia income tax return for taxes paid to another state provided the income is either earned or business income. Virginia law does not necessarily allow a taxpayer to claim a credit for the total amount of tax paid to another state. Rather, the credit is limited to the lesser of the amount of tax actually paid to the other state or the amount of Virginia income tax actually imposed on the taxpayer on the income earned or derived in the other state. See P.D. 97-301 (7/7/1997).

In this case, the Taxpayer paid individual income tax to State A on wages earned there. Under these circumstances, a taxpayer may be eligible to claim a credit for taxes paid to State A on his Virginia resident income tax return.

CONCLUSION

Because the Taxpayer was required to file a Virginia income tax return, the Department was correct in issuing the assessment. The assessment was based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents his Virginia income tax liability. Therefore, he should file a 2017 Virginia resident income tax return and claim a credit for income tax paid to State A to the extent allowed under Virginia Code § 58.1-332.

The return should be submitted within 30 days of the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *. The return will be reviewed and processed, and the assessment will be adjusted as warranted. If the return is not received within the allotted time, the assessment will be adjusted based on the best information available.

Further, the information provided indicates the Taxpayer may have remained a domiciliary resident of Virginia in subsequent years. As such, the Taxpayer should evaluate his residency status for succeeding taxable years under the standards set forth in this determination and file Virginia resident returns as needed.

The Code of Virginia sections and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules & 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/3691-C

Related Documents

19-91

18-84

17-97

11-121

10-206

02-149

00-151

97-301