By Kathryn Pittman and Andrew Appleby

The Virginia Tax Commissioner found that a corporation with a single employee in Virginia who conducted work-related activities from a home office had nexus for corporate income tax purposes. The taxpayer, headquartered outside of Virginia, had one employee who conducted training at various facilities outside Virginia, but also developed test methods relating to such training from her home office in Virginia. The Commissioner determined that the employee’s activities from her home office exceeded the protection of P.L. 86-272 because they were related to the taxpayer’s sales of training and consulting services to its customers and were not related to sales of tangible products. The Commissioner noted that the activities would not create nexus if they were de minimis, but the taxpayer did not provide sufficient information to make such a determination. Thus, the Commissioner concluded that the taxpayer had nexus with Virginia for corporate income tax purposes. This is the second ruling discussing the nexus effects of a single employee in the state that the Commissioner has issued in the last two years. See Va. Pub. Doc. Rul. No. 12-37 (Mar. 30, 2012). Other states have also issued their own P.L. 86-272 decisions relating to the presence of a single employee in the state. See, e.g., Colo. Gen. Inf. Ltr. No GIL-13-021 (Aug. 20, 2013) (noting that a wholesaler that had an employee in Colorado would have nexus in Colorado if the employee’s activities were not closely related to the solicitation of sales). Taxpayers should be aware of these developments, particularly in states in which they have employees engaged in telework or other flexible employment arrangements. Va. Pub. Doc. Rul. No. 13-172 (Sept. 19, 2013).