The Virginia Department of Taxation (Department) ruled that a company’s sales of cloud computing services did not create nexus with Virginia for corporate income tax purposes. The Department also said that in applying P.L. 86-272, it uses the same “solicitation” test for both the sales of intangible personal property and tangible personal property. The company licensed basic software from a developer, customized the basic software, and then resold the customized basic software to customers in Virginia including subscriptions to cloud computing services. The company had no tangible personal property in Virginia, but the developer owned and maintained at least one server in Virginia that hosted the software. The Department concluded that the company’s activities did not create more than a de minmis connection to Virginia, but warned the company that the rental and continual use of servers in Virginia are not de minimis activities. In determining whether P.L. 86-272 protected the company, and whether the activities of the developer would be imputed to the company, the Department advised the company to examine its relationship with the developer to ensure that the developer meets the requirements of an independent contractor. The Department said the existence of one or more positive Virginia apportionment factors would create nexus in the state and advised the company to examine its property, payroll and sales factors. The ruling also addressed the company’s responsibility to collect sales and use tax from its customers or pay sales tax to the developer. The Department said the company was not required to pay sales tax or collect sales tax from customers because the provision of cloud computing services is not a transfer of tangible personal property. Va. Public Document Ruling No. 16-135 (Va. Dep’t of Revenue June 24, 2016).