Did checks paid to another state's revenue department prove that a taxpayer was not a Virginia resident?

Subject

The Taxpayer contends that he was a resident but did not provide proof

Plain-English summary

Virginia upheld the assessment because the taxpayer did not prove that he was domiciled in another state. IRS information returns used a Virginia address, and the Department requested residency documentation before assessing.

The taxpayer supplied copies of checks paid to the other state's revenue department. Virginia said those checks could have paid nonresident tax and did not establish domicile.

Residency depended on intent and conduct shown by the full circumstances, including employment, income, spouse, marital status, real and personal property, vehicle registration, licensing, and other factors. A simple declaration was not enough. Because the taxpayer withheld the requested evidence, he did not overcome the presumed correctness of the assessment.

What this means for you

• Build a domicile file covering home, family, work, property, vehicles, licenses, and actual conduct.
• Paying tax to another state does not by itself prove residence there.
• Respond fully to Department information requests; the taxpayer bears the burden on an assessment appeal.

Citations and references

• Va. Code §§ 58.1-302, 58.1-219, and 58.1-205.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-205

Original ruling text

December 5, 2007

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessment issued to you, * (the "Taxpayer") for the taxable year ended December 31, 2003.

FACTS

The Department received information from the Internal Revenue Service (I.R.S.) that the Taxpayer received federal information returns at a Virginia address for the 2003 taxable year. The auditor requested that the Taxpayer provide information in order to establish the Taxpayer's residence for the taxable year at issue. The Taxpayer did not provide the requested documentation and an assessment of tax was issued. The Taxpayer appeals the assessment and contends that he was a resident of * (State A) during the 2003 taxable year.

DETERMINATION

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 may actually reside elsewhere.

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, sites of real and 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.

The Taxpayer contends that he was not liable for Virginia income tax during the 2003 taxable year because he was a resident of State A. In support of his assertion, the Taxpayer has provided copies of checks sent to State A's Department of Revenue. The copies of the checks are insufficient to show that the Taxpayer was a resident of State A. It is entirely possible that the Taxpayer owed tax on nonresident income subject to tax in State A. In order to determine whether the Taxpayer had any Virginia income tax liability, the Department requested that the Taxpayer provide information to substantiate his residency. The Taxpayer never provided the requested information.

The Department has the authority to investigate any books and records of a taxpayer in order to ascertain the proper tax liability. See Va. Code § 58.1-219. Further, Va. Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayer to show he was not a resident of Virginia. Inasmuch as he has not provided the requested information, the assessment is upheld.

A bill for the 2003 taxable year, with interest accrued to date, will be issued shortly. Please remit your payment to the Virginia Department of Taxation, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attn: *. Payment must be received within 30 days from the date of this letter to avoid the accrual of additional interest.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact * at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1450314886B