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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Can a Virginia resident claim a credit for income tax paid to California if the spouse is also an actual resident of California?
Possibly yes -- Virginia normally denies the credit for tax paid to California because California lets a Virginia resident claim the credit instead, but if the husband was truly an actual (dual) resid…
Did a testing laboratory's product and component testing qualify for Virginia's research and development sales and use tax exemption?
No -- the Tax Commissioner upheld the use tax assessments because the Taxpayer's testing was taxable environmental and feasibility testing, not exempt research and development, and the Taxpayer failed…
Are forgivable Paycheck Protection Program (PPP) loan proceeds counted as gross receipts for Virginia's local BPOL tax?
No -- the Tax Commissioner advised that PPP loan proceeds are not gross receipts for BPOL tax purposes, regardless of whether the loan is later forgiven in whole or in part.
Did a contractor succeed in lowering a use tax assessment by arguing the Department overestimated the taxable materials cost in its lump-sum invoices?
No -- the Tax Commissioner upheld the assessment because the Taxpayer billed in undifferentiated lump sums, the auditor's 37.73% materials estimate came from the Taxpayer's own records, and the Taxpay…
Our nonprofit's exemption renewal was denied because we submitted a financial review instead of a financial audit -- do we have to get the audit, or can the Department accept the review we already have?
No relief -- the Tax Commissioner ruled the Department was within its authority to require an independent certified public accountant's financial audit (rather than accept the financial review already…
Could a university use an alternative method to situs BPOL gross receipts from online courses instead of the statutory 'definite place of business' rule?
No -- the Tax Commissioner upheld the city's BPOL assessment because the Taxpayer failed to show its receipts should have been sitused differently under the statutory method, and the Department has no…
Did a taxpayer who moved abroad in 2018 successfully change his domicile away from Virginia, entitling him to a refund of Virginia income tax withheld from a 2019 retirement distribution?
Yes -- the Tax Commissioner found the Taxpayer changed his domicile to Country A when he moved there in November 2018, and directed that his Form 763-S nonresident withholding refund claim be processe…
Did an IT company's refund claim for aircraft and retail sales and use tax paid on its March 2008 return succeed?
No -- the Tax Commissioner upheld the denial. The Taxpayer could not document that it had actually overpaid aircraft sales and use tax, and its retail sales and use tax refund request for the March 20…
Does a business intelligence firm's BPOL exemption for benefits paid to contract employees depend on how much control its clients exercise over those employees?
Yes -- it depends on the facts of each engagement. The Tax Commissioner found the taxpayer's sample statements of work showed at least some engagements involved the kind of client control that would q…
Could the Virginia Tax Commissioner review a Business Tangible Personal Property tax assessment when the taxpayer had only emailed the locality instead of filing a formal local appeal?
No -- the Tax Commissioner determined he lacked jurisdiction because the Taxpayer never filed a proper local administrative appeal or received a final local determination from the county; the Taxpayer…
Was a fertilizer-additive plant properly classified as a 'processor' rather than a 'manufacturer' for Virginia BPOL tax purposes?
No -- the Tax Commissioner overturned the City's classification and found the Taxpayer is a manufacturer, because its chemical reaction between raw material oxides and sulfuric acid produced a substan…
What does Virginia Tax Bulletin 21-1 say about the increase to the Litter Tax rate and the new penalty for late payment?
Effective for Litter Tax returns due May 1, 2021, the base annual Litter Tax rate doubled from $10 to $20 per Virginia business establishment, and the additional Litter Tax on grocery/soft drink/beer-…
What are the current rules for claiming Virginia's Port Volume Increase Tax Credit, and how do I calculate and transfer it?
These are the Department of Taxation's updated Guidelines explaining the Port Volume Increase Tax Credit, an individual and corporate income tax credit of $50 per 20-foot-equivalent-unit (TEU) of incr…
Did the Virginia Tax Commissioner grant reconsideration of a prior determination that denied a sales tax refund based on the Internet Service Provider exemption and the electronically delivered software exemption?
No -- the Tax Commissioner denied the request for reconsideration, finding no misstatement of facts or misapplication of policy on either the ISP exemption or the electronically delivered software exe…
Does Virginia's manufacturing sales and use tax exemption cover materials used to construct a new electrical generating facility?
It depends on the specific item -- the Tax Commissioner could not give a yes-or-no answer because the Taxpayer did not identify the actual materials, equipment, or supplies involved, so the ruling ins…
Did paying Arizona sales tax on assets delivered to Virginia excuse the Taxpayer from Virginia use tax?
No -- the Tax Commissioner upheld the assessment because the fixed assets were delivered to and used in Virginia, so Virginia use tax was due regardless of the Arizona tax the vendor mistakenly collec…
What happened when a Virginia rental business appealed a sales and use tax assessment issued because it had not filed its returns?
The appeal became unnecessary -- the Taxpayer filed its overdue sales and use tax returns and paid the tax due, so the Department cancelled and reversed the assessments on its own records, and the Tax…
State Tax Ruling
No. In P.D. 20-193, Virginia's Tax Commissioner upheld the denial of a Qualified Equity and Subordinated Debt Investments Tax Credit application because it was filed after the April 1 deadline, reject…
What does Virginia Ruling of the Tax Commissioner P.D. 20-192 conclude about Exemption : Nexus (P.L. 86-272) - De Minimis, Property, Payroll Compensation : Nonresident - Virginia Wages Virginia Source Income : Nonresident - Apportionment?
The Tax Commissioner found the subsidiary had no Virginia nexus in 2013 (no property or payroll in the state), but its 2014 and 2015 activities -- placing company laptops in the Virginia office and ha…
Was a fire extinguisher servicer's service-call surcharge taxable, and could it get its audit penalty, amnesty penalty, and interest waived?
No relief -- the Tax Commissioner held the service call fees (billed as either a 'surcharge' or 'service call fee') were taxable to recoup the taxpayer's own costs, and denied waiver of the compliance…
What does Virginia Ruling of the Tax Commissioner P.D. 20-190 conclude about Use Tax: Fixed Asset Purchases - Legal Obligation Applies to Both Dealer and Purchaser, Purchases - Caterer Audit: Records - Expenses, Sampling Exemptions: Catering - Nonprofit Organizations, Churches, and Governments, Certificates - Reasonable Care Administration: Penalty - First Audit, Interest?
The Virginia Tax Commissioner upheld the full use tax audit assessment against a restaurant/caterer, ruling that unpaid tax on untaxed online purchases is the purchaser's legal responsibility, the sam…
State Tax Ruling
The Tax Commissioner upheld the county's BPOL tax assessments because the taxpayer, though it showed some software was developed and licensed, failed to prove how much of its gross receipts were attri…
State Tax Ruling
Denied. The Tax Commissioner rejected the taxpayer's request to reconsider P.D. 20-78, holding that the parties merely disagreed over how to interpret the same apportionment statute rather than the De…
What does Virginia Ruling of the Tax Commissioner P.D. 20-187 conclude about Residency : Domicile - No Virginia Domicile Established?
The Tax Commissioner abated the assessment: the taxpayer proved he did not become a Virginia domiciliary or actual resident until 2018, so he owed no Virginia individual income tax for 2017.
What does Virginia Ruling of the Tax Commissioner P.D. 20-186 conclude about a corporate group's request to change from filing separate Virginia returns to filing a combined return, including which affiliates were eligible for inclusion?
The Tax Commissioner granted the requested change from separate to combined filing only in part: two affiliates without Virginia-source income (Asub1 and Allc1) were not eligible and must file separat…
What does Virginia Ruling of the Tax Commissioner P.D. 20-185 conclude about Exemption: Occasional Sale - Sale or Exchange of Substantially All Assets of a Division of a Business (Criteria), Medical Practice?
No exemption: the Tax Commissioner upheld the use tax assessment because the Taxpayer failed to show the purchased oral surgery practice was a separate and distinct division of the Seller's larger hea…
State Tax Ruling
The Tax Commissioner ruled in the taxpayer's favor: because the taxpayer was not part of an affiliated group filing on a different basis for Virginia and federal purposes, it was bound by its federal …
What does Virginia Ruling of the Tax Commissioner P.D. 20-183 conclude about Tangible: Administration - Jurisdiction, Statute of Limitations for Refunds Classification of Property: General v. Manufacturing - Food Service?
The Tax Commissioner ruled the Taxpayer's 2012 refund claim was time-barred under the three-year limit in Va. Code § 58.1-3990, and remanded the manufacturer-vs-business-service classification questio…
What does Virginia Ruling of the Tax Commissioner P.D. 20-181 conclude about Residency : Domicile - Change, Part-year?
The Tax Commissioner found that the taxpayer had abandoned Virginia domicile in 2015 but re-established it in October 2017 by leasing a Virginia residence and registering a vehicle there, making him a…
What does Virginia Ruling of the Tax Commissioner P.D. 20-180 conclude about Residency : Domicile - Change Requires Both Abandoning One Domicile and Obtaining A New One.?
The Tax Commissioner abated the Virginia resident income tax assessments because the taxpayer had not yet completed a change of domicile to Virginia for 2016-2017 -- he still lived and worked mostly i…
State Tax Ruling
No relief: the Tax Commissioner ruled the taxpayer's appeal of a 2010 individual income tax assessment was barred because it was filed more than six years after the 90-day deadline in Va. Code § 58.1-…
What does Virginia Ruling of the Tax Commissioner P.D. 20-178 conclude about Tangible : Administration - Failure to Issue Final Local Determination?
The Tax Commissioner ruled he had no jurisdiction to decide the taxpayer's business tangible personal property tax appeal because the county's e-mail response was not a valid 'final local determinatio…
What does Virginia Ruling of the Tax Commissioner P.D. 20-177 conclude about Exemption : Rooms, Lodgings & Accommodations for 90 Continuous Days?
The 90-continuous-day exemption applies separately to each room based on the fewest rooms rented on any single day during a rolling 90-day window, and it does not extend to meals -- if a room charge i…
What does Virginia Ruling of the Tax Commissioner P.D. 20-176 conclude about Administration : Accounting - Application of Overpayments; Collections - Offsets?
Denied. The Tax Commissioner upheld the Taxpayer's 2018 corporate income tax assessment and underpayment penalty, ruling that the Department had properly offset the Taxpayer's prior-year overpayment a…
What does Virginia Ruling of the Tax Commissioner P.D. 20-175 conclude about Virginia Taxable Income: No Deduction for Out-of-State Income Credit : Taxes Paid to Another State - North Carolina?
The Virginia Tax Commissioner held there is no deduction or subtraction from Virginia taxable income for income earned in another state (here, North Carolina); the correct remedy is the credit for tax…
What does Virginia Ruling of the Tax Commissioner P.D. 20-174 conclude about Dealer: Vehicle Repair Administration: Refund - Taxes Paid On Inventory, Statute of Limitations?
Partial win: the Tax Commissioner agreed to credit the taxpayer for sales tax it had erroneously paid to vendors on items later assessed as retail sales, but only for amounts the taxpayer documents it…
State Tax Ruling
No. The Virginia Tax Commissioner ruled that an Indian Tribe is not exempt from Virginia retail sales and use tax on purchases occurring off its reservation, even when the items are for the Tribe's ow…
What does Virginia Ruling of the Tax Commissioner P.D. 20-172 conclude about Audit: Identity Theft, Fraud, Records?
The Tax Commissioner upheld the full sales tax assessment against a cigarette retailer, ruling that the taxpayer's bare claim that its distributor accounts were used fraudulently, without supporting d…
State Tax Ruling
Yes on both points raised: the Tax Commissioner ruled that the taxpayer's prototype marine engines kept their research-and-development sales tax exemption because the one-time demonstration use was de…
What does Virginia Ruling of the Tax Commissioner P.D. 20-170 conclude about Administration : Audits - Employee/Subcontractor, VEC Information?
Partial win for the taxpayer: the Tax Commissioner did not cancel the withholding tax assessment but sent it back to audit staff, ruling that VEC information alone cannot establish that workers are em…
What does Virginia Ruling of the Tax Commissioner P.D. 20-169 conclude about Sales Price: True Object, Exemptions - Manufactured Signs, Permit Fees, Permit Procurement Fees, Installation?
Manufactured signs are taxable tangible personal property, so permit fees and permit procurement fees billed with a sign purchase are part of the taxable sales price, but the taxpayer's separately sta…
State Tax Ruling
Mixed outcome: the sign sold to a church stayed taxable because the church never gave the Taxpayer an exemption certificate, but the billboard/advertising charges were removed from the audit because t…
If a business didn't have invoices ready during a Virginia sales and use tax audit, can it still fix the assessment by submitting invoices later during the appeal?
Yes, but only for the specific line items where the taxpayer actually produced the missing invoices. Virginia's Tax Commissioner removed audit line items from a dermatology practice's use tax assessme…
Does a restaurant have to charge sales tax or communications tax on premium content fees (games, news, songs) charged through tabletop ordering devices?
No. The Tax Commissioner ruled that fees a restaurant charges customers for access to premium content (games, news/social media, song selection) on tabletop ordering devices are charges for a service,…
If I temporarily moved to California for work and paid California tax, do I still owe Virginia income tax as a domiciliary resident, and can I claim a credit for the California tax?
Yes to both. The Tax Commissioner ruled the taxpayer remained a Virginia domiciliary resident despite living in California for nine months in 2016 (he never abandoned Virginia and returned to his Virg…
What happens to a Virginia sales and use tax appeal if the taxpayer submits the missing documentation after filing it?
The Tax Commissioner closed the appeal because the taxpayer had by then supplied the documentation that was missing during the audit. The records were referred to field audit staff for review and any …
Does a contractor who fabricates and installs mailboxes at new homes owe use tax on the materials, even if the finished mailboxes become real property?
Yes. Virginia upheld the use tax assessment because a contractor who fabricates tangible personal property (like mailboxes) and installs it so it becomes real property is a "using or consuming contrac…
If Virginia returns my sales tax refund request because it was submitted on a CD, does the three-year filing deadline still count against me?
Granted in part: the Tax Commissioner found the Taxpayer's refund requests were timely filed in December 2015, even though the Department had returned them because they were submitted on a CD, and gav…
In a communications sales and use tax audit, did the cable/video provider succeed in overturning the erroneous-remittance charge, the cable right-of-way fee assessment, the related interest, and the bad-debt credit denial?
Mixed outcome: the Tax Commissioner gave the taxpayer another chance to document its erroneous-remittance claim (audit reopened on that point), but denied relief on the cable right-of-way fee assessme…
If the IRS limited our net operating loss carryovers after an ownership change on our consolidated federal return, does Virginia apply the same limitation to our separate Virginia corporate return?
Partly granted, partly remanded. The Tax Commissioner agreed the Department should have recalculated the IRC § 382 loss limitation on a separate-company basis (not the consolidated federal amount) and…
If I move abroad and Virginia later says I was still a full-year resident, how do I show I changed my domicile and become a part-year filer instead?
Partly granted: the Tax Commissioner found the taxpayer did abandon his Virginia domicile, but only as of late September 2015 (not earlier as claimed), so the original full-year-resident assessment wa…
How is the basis of inherited Virginia real estate determined for a capital gain/loss on the state income tax return when the taxpayer's appraisal and the locality's tax appraisal disagree?
Neither side fully won: the Tax Commissioner rejected both the taxpayers' March 2007 appraisal (too remote in time and unsupported by the actual appraisal report or estate tax return) and the Departme…
Can a real estate company or team (a licensed business entity) also exclude from its BPOL gross receipts the commissions it pays to its own real estate salespersons, the way the principal broker excludes commissions paid to it?
Only if that company or team is itself licensed as a real estate broker (not merely as a real estate salesperson entity). Virginia's BPOL exclusion in Va. Code § 58.1-3732.2 lets a real estate broker …
If a taxpayer appeals a sales/use tax audit by offering to prove its customers already paid consumer use tax, what happens to the appeal?
The Tax Commissioner closed the appeal and sent it back to the auditor, who agreed to review the taxpayer's evidence (submitted in Excel format) that its Virginia customers had paid consumer use tax o…
Can a Virginia county ask the Department of Taxation for a formal advisory opinion on whether it may assess local real property tax against leaseholders of tax-exempt property?
No. The Department of Taxation's authority to issue advisory opinions on local tax matters is limited by statute to the BPOL tax and certain local mobile-property and business taxes; it has no express…
Can a taxpayer still appeal a converted sales and use tax assessment after the 90-day appeal deadline has passed, and what options remain if they cannot afford to pay it?
No. Virginia Code § 58.1-1821 gives a taxpayer only 90 days from the date of an assessment to apply for relief, and an appeal filed years after that deadline is barred regardless of its merits. A taxp…
Does a 501(c)(6) nonprofit's revenue from originating, processing, and servicing SBA 504 commercial real estate loans qualify for Virginia's BPOL tax exemption for nonprofit organizations?
Only partly. Because the Company is exempt under IRC § 501(c)(6) rather than § 501(c)(3) or § 501(c)(19), it is not a "charitable nonprofit organization" under Va. Code § 58.1-3703 C 18 a, so its rece…
Can a taxpayer void a six-year use-tax audit and challenge a one-year sample period used to project the assessment, and how does a taxpayer request relief from an assessment based on financial hardship?
No on both audit challenges: the Tax Commissioner upheld the six-year audit period (extended from three years because the contractor had never registered for or filed consumer use tax) and upheld the …
Who owes Virginia's Motor Vehicle Rental Tax and Peer-to-Peer Vehicle Sharing Tax, and how does it work?
Virginia imposes a combined Motor Vehicle Rental Tax and Fee (MVRT) of up to 10 percent of gross proceeds on traditional short-term vehicle rentals, and a separate Peer-to-Peer (PTP) Vehicle Sharing T…
In a consumer use tax audit of out-of-state real property contractors, how does Virginia sort dozens of contested vendor purchases into taxable versus nontaxable based on recordkeeping, the fencing/cabinets/countertops retailer exception, and taxes already paid elsewhere?
Mixed, line-item-by-line-item outcome: the Tax Commissioner reviewed the audit vendor by vendor and removed some charges (proven consuming-contractor installations, unpaid disputed invoices, items pro…
Browse Virginia rulings by topic
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.