Virginia State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Virginia, with full citations and the original source on every page.
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Were software license fees under the same contract decided in Intersections exempt from Virginia sales and use tax for 2002-2004?
Yes. A Fairfax County Circuit Court had already held the license fees under the contract exempt for an earlier period. Because the 2002-2004 appeal presented the identical issue, Virginia treated the …
Could Virginia separately assess a retailer's freight-in costs after those costs were included in the customer price already subjected to sales tax?
No. Freight-in is normally part of a retailer's taxable product cost, but this retailer included the freight in its marked-up customer price and collected sales tax on that full price. A separate audi…
Was a parent company liable for Virginia sales tax on hotel property sold by a wholly owned QSub subsidiary?
No. The purchase and settlement documents showed that the subsidiary, not the parent, owned and sold the hotel. A qualified Subchapter S subsidiary remained a separate legal entity for Virginia sales …
Were replacement parts and tires for trucks carrying exempt oil-and-gas drilling equipment also exempt from Virginia sales tax?
Only partly. Parts and supplies for truck-mounted equipment used directly in exempt drilling qualified under the former exemption. The trucks themselves were not used directly in drilling, so their ti…
Did customers' direct payment of use tax excuse a registered dealer's failure to collect tax on sales lacking exemption certificates?
No. A registered dealer still had to collect Virginia tax on sales unsupported by valid exemption certificates, so customer self-assessment did not remove those sales from the audit sample. Credits we…
Did a country club owe use tax on sod that its golf-course renovation contractor furnished and installed without charging sales tax?
Yes. Virginia treated the contractor as a retailer for the sod even though its other renovation work was a real-property service. Because the contractor did not collect sales tax on the furnished and …
Was a buyer liable for a seller's unpaid Virginia use tax when it acquired the business assets without obtaining tax clearance or withholding funds?
Yes. The buyer neither obtained Department certification that the seller's liabilities were paid nor withheld enough purchase money to cover them. Under Va. Code § 58.1-629, the buyer became personall…
Could restaurants buy foil wraps, bamboo skewers, napkin bands, and carryout foil pans tax-free for resale?
Yes. The foil wraps, bamboo skewers, paper napkin rings or bands, and lidded foil carryout pans were furnished with meals and discarded after one customer's use. Virginia treated them as part of the m…
Should Virginia remove one of two annual production charges from a one-year audit sample when including both distorted the projection?
Yes. Although sampling was a valid audit technique, Virginia found that including both annual video-production charges in the September 2003 through August 2004 purchase sample distorted its result. T…
Could a cut-your-own Christmas tree farm buy weed eaters and similar equipment tax-free when used to make fields accessible to customers?
No. The weed eaters and similar equipment were used to make the Christmas-tree fields accessible for customer visits, not to produce trees for market. Unlike equipment that affected crop growth or pro…
Could retailers defeat reconstructed Virginia sales-tax assessments without adequate records or support for claimed exempt sales?
No. With missing returns and no verifiable records, Virginia could reconstruct sales from the best information available. The retailers supplied no evidence that the method was unreasonable and no sup…
Were delivery charges for mobile-mixed concrete taxable, and what documentation supported exempt government sales?
Yes. Charges connected with concrete mixed at the job site—including short-load and transportation charges—were taxable even when separately stated. Government sales required qualifying direct billing…
How did Virginia sales and use tax apply to modular duplexes and site-work materials installed for a U.S. Navy construction project?
The contractor's proposed calculation was rejected. Assuming the duplexes qualified as modular buildings, the 60% taxable base applied only to the factory-built units, with the installer treated as th…
Was a permanently implanted birth-control device exempt from Virginia sales and use tax as durable medical equipment?
No. The device failed two mandatory durable-medical-equipment criteria: it could not withstand repeated use and was not appropriate for home use because a trained medical practitioner had to implant i…
Did business growth during part of an audit period require Virginia to adjust a sales and use tax sample's extrapolation or error factor?
No. The sample covered months before and after the company's growth, and its error factor was applied across an audit period that likewise included lower- and higher-revenue months. Growth alone did n…
Were feed, supplies, and resale horses exempt when a Virginia horse breeder also used the horses for paid riding lessons, training, or shows?
Not for the paid lessons and other business uses. Feed, hay, and supplies were exempt only for horses used exclusively in qualifying breeding or raised exclusively for market, and using resale horses …
Did Virginia use tax apply to lease payments after equipment moved from California when California tax had been correctly paid upfront on the full lease value?
No. The lessee had correctly paid California sales tax on the full value of the five-year lease when the lease began. After the equipment moved to Virginia, that payment qualified for Virginia's other…
Did an out-of-state publisher create Virginia sales-tax nexus by retaining title to books stored and sold through an independent Virginia distributor?
No under the specific 2007 facts. Although the publisher retained title to books in the distributor's Virginia warehouse and qualified as a dealer, the distributor sold in its own name and was not sub…
Did a notice of intent preserve a Virginia tax appeal when the complete administrative appeal was not filed within 90 days of assessment?
No. The assessment was dated December 22, 2006, making March 22, 2007 the deadline. A March 21 notice stating that a complete appeal would follow did not satisfy or extend the 90-day period, so the ap…
Were leases and other transactions between separately incorporated affiliates exempt as intracompany transfers for Virginia sales tax?
No. Virginia records showed that the taxpayer and its affiliates were separate legal entities, not departments of one company. Transactions for consideration between them—including rentals of tangible…
Under Virginia's 2007 guidance, could a retailer advertise that it would pay, absorb, or discount an amount tied to the customer's sales tax?
Generally no. Virginia treated both direct promises to pay the customer's sales tax and discounts advertised as equal to the tax as prohibited absorption advertising, potentially a Class 2 misdemeanor…
Could Virginia reconstruct a government contractor's sales and use tax from a prior audit when the contractor lacked records for the current period?
Yes. With inadequate current records, Virginia could use the prior audit as the best available information. Unsupported claims about underground-phone-line contracts did not justify revision, but mixe…
Did a Virginia country club have to charge sales tax on dyed diesel sold to members for pleasure boats?
Yes. The club could buy the fuel exempt for resale, but it had to collect and remit 5% retail sales tax when selling dyed diesel to members for pleasure watercraft. Because that use was exempt from Vi…
Was an auto dealer's combined environmental-disposal and shop-supply charge taxable when it actually represented only shop supplies?
No, on the verified facts. Virginia abated the assessment because the combined invoice label actually represented only nontaxable shop-supply charges, not an environmental disposal fee. Dealers must p…
Would using a separate affiliated Virginia distribution center create Virginia income-tax or sales-tax nexus for an internet retailer?
Not by itself, under the stated 2007 facts. Virginia found no corporate-income-tax nexus because the retailer had no Virginia property or payroll and its activities remained within P.L. 86-272. It als…
Were software royalties and maintenance fees exempt when the vendor said delivery was electronic but its contracts allowed tangible media?
No. Virginia upheld tax on both the software royalties and maintenance revenue because the agreements allowed or did not rule out tangible delivery. To support electronic-only treatment, the invoice, …
Did a customer's direct pay permit shift tax on a mechanical contractor's materials and operated equipment to the customer?
No. Virginia treated the contractor as the user and consumer of materials used in real-property, painting, sandblasting, and other service work. The customer's direct pay permit did not cover the cont…
Could a mechanical contractor avoid Virginia tax on job materials and operated equipment by relying on its customers' direct pay permits?
No. Virginia treated the contractor as the user and consumer of materials used in real-property, painting, sandblasting, and other service contracts, so it owed sales or use tax on those purchases. It…
Did Virginia approve a manufacturer's refund claim for use tax paid on property allegedly covered by the manufacturing exemption?
Not yet. Virginia found the protective refund claim timely, but the manufacturer still had to prove both that it remitted the use tax and that the property qualified for the manufacturing exemption. T…
Was a custom digital film exempt from Virginia use tax when an amusement facility bought it for an attraction?
Yes. Virginia held that the custom digital film qualified for the audiovisual-work exemption because the amusement facility acquired it for commercial exhibition and incorporated it into an attraction…
Did Virginia use tax apply to tools first received and controlled in Virginia before being sent to out-of-state power plants?
Yes. Virginia treated possession and control of the tools in Virginia as the first taxable use, even though the manufacturer later sent them to power plants in other states. Later out-of-state deliver…
Could a home-infusion pharmacy buy IV medications and other patient products for resale despite providing nursing support?
Yes. Virginia found that patients sought the IV medications and that the company's nursing and support services were incidental, so patient products could be bought for resale. Prescription IV drugs a…
Were a home-infusion pharmacy's IV medications treated as exempt product sales rather than taxable supplies consumed in a service?
Yes. Virginia found that patients sought the IV medications themselves and that the pharmacy's support services were incidental. The pharmacy could buy medications and related products for resale; pre…
Was a multi-pharmacy home-infusion company's true transaction the sale of exempt IV medication rather than a medical service?
Yes. Virginia found that patients sought IV medications and that the company's nursing, dietician, and support services were incidental. The pharmacies could buy patient products for resale, prescript…
Which pallets, shrink-wrap, and printing plates qualified for Virginia's manufacturing exemption at poultry facilities?
Pallets and shrink-wrap applied at the processing plant as the final production step were exempt. The same items used after off-site storage at separate distribution facilities were not manufacturing-…
Did Virginia sales tax apply when a hotel guest redeemed loyalty points for a complimentary room or when the hotel received money from the program fund?
No. A hotel did not collect Virginia sales tax when a guest redeemed loyalty points for a complimentary room, and money redistributed from the segregated program fund was not a separate taxable sale. …
Did Virginia sales tax apply when a broker arranged private-home rentals for race fans only two weekends per year?
No, under the stated 2007 facts. The broker did not own or operate the homes, and homeowners renting only for two race weekends made occasional sales rather than regularly furnishing transient lodging…
Could a poolside cabana include Virginia sales tax in posted item prices instead of adding it separately?
Yes, by specific permission. Virginia allowed the cabana to include retail sales tax in posted prices beginning May 1, 2007 because ordinary point-of-sale collection was impractical. Signs had to say …
Could a poolside cabana include Virginia sales tax in posted item prices instead of adding it separately?
Yes, by specific permission. Virginia allowed the cabana to include retail sales tax in posted prices beginning May 1, 2007 because ordinary point-of-sale collection was impractical. Signs had to say …
Were equipment leases between sister corporations exempt as intracompany transfers for Virginia sales and use tax?
No. Virginia treated affiliated corporations as separate legal entities, so equipment rentals for consideration between sister companies were taxable leases rather than exempt intracompany transfers. …
What did the Fairfax County Circuit Court order in Intersections Inc.'s tax case against Virginia?
The court set aside as contrary to law the tax assessed on license fees Intersections paid to DMS from April 1999 through December 2001. It ordered Virginia to refund $222,848.74 plus statutory intere…
How did Virginia apply sales and use tax to a steel fabricator whose main business was real-property contracting?
Virginia treated the company primarily as a real-property contractor fabricating for its own use, so the manufacturing exemption did not apply and it owed tax on raw materials and taxable third-party …
How did Virginia tax dietary supplements, mixed product packages, shipping-and-handling charges, and distributor renewal fees?
Dietary supplements, vitamins, toothpaste, cream, and the mixed package were taxable at the full then-current rate unless qualifying items were sold by prescription. A combined shipping-and-handling c…
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These are official tax letter rulings and advisory opinions issued by Virginia's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.