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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How did Virginia treat grocery food sold in decorative tins, late or defective resale certificates, and repairs to built-in versus standalone refrigeration?
The result was mixed. Decorative tins were packaging, so qualifying food inside received the reduced rate; food bundled with separate ineligible items did not. Verified resale certificates removed som…
Could a Virginia resident claim an out-of-state tax credit for wage withholding that the other state fully refunded?
No. The other state's return showed a full refund of the wage withholding, so no tax remained actually paid there. Allowing the same amount as a Virginia credit would create a double benefit. If the o…
Did a for-profit family medical practice need each controlled-drug invoice to name a licensed physician or DEA number to claim Virginia's medical-entity exemption?
No. The physician-name or DEA-number invoice requirement applied to a separate exemption for controlled drugs purchased by an individual licensed practitioner. After the 2006 amendment, a qualifying f…
Did Virginia's recomputation of a taxpayer's retirement-income subtraction produce relief for the paid 2010 assessment?
Yes. Virginia used the available records and W-2-verified contributions to recompute the allowable retirement subtraction. It reduced the paid 2010 assessment and directed a refund with accrued intere…
Could employees deduct internet and vehicle costs when the internet amount lacked support and the employer paid for fuel?
Partly. Virginia upheld the internet-expense adjustment because the taxpayers did not document the larger amount claimed, but restored the net mileage deduction because the standard mileage rate cover…
Was a hospital's one-time sale of laboratory equipment exempt as an occasional sale even though the hospital was registered for other retail sales?
Yes. The hospital's sales-tax registration covered its cafeteria and gift shop, not the laboratory assets, so the one-time equipment sale qualified as an occasional sale. A refund was due only after t…
Did a salesperson's mileage schedule and meal receipts substantiate the unreimbursed employee expenses claimed on a 2013 Virginia return?
Yes. The mileage itinerary excluded the stated home-to-first-client commute, accounted for the employer's flat reimbursement, and documented travel between clients; the taxpayers also supplied the bus…
Were hotels' mandatory 20% service charges on banquet and meeting meals subject to Virginia sales tax?
No. Mandatory gratuity or service charges of 20% or less on the hotels' meal charges were excluded from taxable sales price; only the portion above 20% was taxable. Virginia reversed the assessments a…
Was a deed transferred after confirmation and pursuant to a Chapter 11 plan subject to Virginia state and local grantor's tax?
No. Because the affiliate's deed transfer occurred after confirmation and pursuant to the Chapter 11 plan, federal law barred Virginia's state and local grantor's tax. The Department ordered its porti…
Was a post-confirmation deed transfer required by a Chapter 11 plan subject to Virginia state and local grantor's tax?
No. The affiliate's property transfer occurred after confirmation and pursuant to the Chapter 11 plan, so 11 U.S.C. § 1146(a) barred the state and local grantor's tax. Virginia ordered its portion ref…
Was a private country club's mandatory 20% service charge on banquet meals subject to Virginia sales tax?
No. The country club qualified under the broad restaurant definition used for the meal-charge exclusion, so its mandatory service charge of 20% was not taxable. Only a portion above 20% would be taxab…
Was a Virginia refund claim timely when an overseas taxpayer filed on July 1, three years after the automatic extended due date?
Yes. Because the taxpayer was overseas on the original May 1 due date, Virginia's July 1 extension applied automatically. The return claiming a refund was filed exactly three years after that extended…
What Virginia tax interest rates applied during the first quarter of 2015?
Virginia's first-quarter 2015 rates were 5% for tax underpayments and 5% for tax overpayments. The reduced rate for qualifying disputed assessments after the nine-month point was 0%, while the corresp…
How did Virginia resolve two sales/use-tax audits involving fixed assets, return reconciliations, wrong tax rates, exemption certificates, and customer-paid use tax?
Virginia sent both paid audits back for document review and adjustments. Reconciliations and several exemption certificates supported reductions; fixed-asset tax required more seller proof; customer-p…
What Virginia tax interest rates applied during the fourth quarter of 2014?
Virginia's fourth-quarter 2014 rates were 5% for tax underpayments and 5% for tax overpayments. The reduced rate for qualifying disputed assessments after the nine-month point was 0%, while the corres…
Was a Virginia corporate refund return timely when filed within one year after an IRS adjustment to NOL carrybacks, despite the ordinary three-year period?
Yes. The IRS finalized adjustments to 2001-2002 NOL carrybacks in August 2012, and the corporation filed its amended 2000 Virginia return in March 2013. That was within the special one-year period for…
Were a hotel's mandatory banquet gratuities of 20% taxable when part was retained by the house and the hotel was not treated as a conventional restaurant?
No. Virginia's statute excluded mandatory gratuities up to 20% of the meal price without requiring the full amount to be distributed to employees, and the exemption covered hotels and other places ser…
Did Virginia apply a Fairfax County circuit-court ISP equipment exemption statewide, and which purchases qualified for a refund?
No. Virginia continued to construe the ISP equipment exemption narrowly and declined to apply the Fairfax County Cisco decision statewide. It allowed a refund, with interest, only for equipment the au…
Did a telecom repair pricing agreement qualify for the rule taxing only half of a parts-and-labor maintenance contract?
No. The agreement set prices for optional repair and replacement transactions but imposed no predetermined fee or total charge when signed. It was a pricing agreement, not a qualifying maintenance con…
Did a telecom repair pricing agreement qualify for the rule taxing only half of a parts-and-labor maintenance contract?
No. The agreement set prices for optional repair and replacement transactions but imposed no predetermined fee or total charge when signed. It was a pricing agreement, not a qualifying maintenance con…
Could buyers of transferred Virginia Land Preservation Tax Credits protect a refund claim while litigation challenged the Department's easement valuation?
Potentially. Virginia did not reverse the Department's lower conservation-easement valuation. Because litigation was pending over that valuation, the taxpayers could consider a protective claim under …
Did Virginia's ISP equipment exemption cover assets used for wholesale Internet service and web hosting as well as retail Internet access?
Only in part. Assets used in Fairfax County could qualify for the ISP exemption for retail or wholesale Internet service under a county circuit-court decision. Outside Fairfax, Virginia continued to d…
Did a military spouse qualify for Virginia nonresident withholding relief by sharing the service member's domicile in another state?
Yes. The preponderance of evidence showed that the taxpayer and active-duty spouse had established and maintained domicile in the same other state. Their legal-residence certificate, vehicle registrat…
Could existing leasehold interests reduce the property value used for Virginia grantor tax when the fee and leases were sold together?
Yes. Because the purchase documents and deed preserved the leasehold interests instead of merging them into the purchaser's fee ownership, the leases remained encumbrances whose value was excluded fro…
Could Virginia abate pass-through withholding assessments when the LLC had paid enough tax into the wrong employer-withholding account?
Yes. The LLC had remitted enough employer withholding to cover its 2008-2011 pass-through withholding, so Virginia abated the assessments and refunded the 2011 overpayment with interest. But partners …
Could a government contractor recover BPOL tax and claim a current deduction for out-of-state receipts when it used payroll situs?
Yes. Virginia held that payroll apportionment did not eliminate the deduction for qualifying business where the contractor owed income-based tax. It remanded the 2008-2011 refund claims and 2012 deduc…
Could a business-service provider using payroll situs claim BPOL deductions and refunds for qualifying out-of-state receipts?
Yes. Payroll apportionment did not bar the out-of-state deduction. Virginia remanded the 2008-2012 refund and assessment dispute so the county could identify qualifying receipts from states where the …
Did tax software's automatic annuity death-benefit subtraction prove that a Virginia taxpayer qualified for the refund?
No. Virginia's approval of tax-preparation software meant the program met processing requirements, not that every tax calculation was correct. The annuity subtraction required a qualifying insurance-c…
Could a part-year resident receive Virginia's standard deduction after failing to substantiate the larger itemized deductions claimed on her federal return?
Yes. Virginia disallowed the unsupported itemized deductions, but the substantiated amount was below both the federal and Virginia standard deductions. Following the IRS approach used when reviewing f…
How did Virginia tax mortgage-fraud-related deposits when the taxpayer documented some payments to a business partner?
Virginia removed from taxable income the deposits the taxpayer documented as later paid to her husband's business partner, but treated the undistributed balance as her income. Dismissal of criminal ch…
Could a Navy contractor buy office equipment tax-free for task orders whose true object was renting temporary office facilities?
Yes. The task orders principally rented temporary office trailers, furnishings, and equipment to the Navy. Janitorial, sewage, utility, maintenance, and a minor administrative-assistant service made t…
Did removing one floor-repair transaction from a Virginia restaurant audit eliminate the whole sales-tax assessment?
No. Virginia had already removed the floor-repair service because the contractor, not the restaurant, was the consumer of the repair materials. The Department issued the tax-and-interest refund for th…
Were certified pit liners, storage tanks, and silt fence bought after July 1, 2006 still exempt pollution-control equipment?
Yes. Virginia reversed its earlier view that the DMME-certified pollution-control exemption expired July 1, 2006. A later Department ruling and 2013 legislation clarified that the exemption continued …
Was a deed of trust securing a federal land credit association's loan exempt from Virginia recordation tax?
Yes. Federal law exempted the federally chartered land credit association and its mortgage instruments from state and local taxation other than real-property tax. Because Virginia's recordation tax is…
Were vehicles taxable in Virginia when a Virginia dealer prepared them before out-of-state delivery?
No. The vehicles qualified for Virginia's interstate-commerce exemption because the manufacturer retained title under FOB-destination terms until delivery to the out-of-state hospital. The Virginia de…
Was a customized marketing package taxable because it included surveys, campaigns, website work, DVDs, CDs, booklets, and a DVD player?
No. Virginia found the athletic facility's true object was a customized strategy to attract and retain members, not the DVDs, CDs, booklets, DVD player, or other property included in the package. The …
Was an automotive company's purchase of substantially all assets from three related store operators exempt as an occasional sale?
Yes. The asset purchase agreement transferred all or substantially all assets of the sellers' automotive-store businesses, including equipment, inventory, records, customer lists, intangible rights, a…
Were Internet-delivered television and movie subscriptions subject to Virginia communications tax?
No. Virginia treated the online television and movie content as electronically delivered digital products rather than communications services. It refunded the tax, penalty, and interest the provider h…
Did a Virginia investment LLC with no employees or Virginia property have to withhold tax for its nonresident member?
No. The LLC held intangible investments and royalty interests but had no employees, Virginia real estate, or tangible property. The Department found that it was not carrying on a Virginia trade or bus…
Did a Virginia investment limited partnership with no employees or Virginia property owe withholding for a nonresident owner?
No. The limited partnership held intangible investments and royalty interests but had no employees, Virginia real estate, or tangible property. The Department found that it was not carrying on a Virgi…
Were cable television converter boxes locally taxable as business tangible personal property in Virginia?
No. The Tax Commissioner held that customer converter boxes were used in the cable television business and that Virginia's 1984 statutory change classified them as intangible property rather than loca…
Was a deed of trust held by a federal land credit association exempt from Virginia state and local recordation tax?
Yes. Although no Virginia statutory exemption applied, 12 U.S.C. § 2098 exempted mortgages held by a federal land credit association from federal, state, municipal, and local taxation. The originator …
Were laptop data-card charges, regulatory cost-recovery fees, and activation or reactivation fees subject to Virginia communications sales tax?
Regulatory cost-recovery fees and activation or reactivation fees were taxable, including connection fees related to Internet service. The record did not establish whether the laptop-connect and data-…
Should deed and grantor taxes use the sale consideration when the property's assessed value was higher?
Not automatically. Virginia recordation and grantor taxes use the greater of consideration or the property's actual value. Assessed value has a strong presumption of accuracy, but the circuit-court cl…
Were an owner and a retired corporate secretary personally liable for a closed business's unpaid Virginia taxes?
No on the facts presented. The 50% owner was not an officer or employee with a specific corporate duty, and the ruling understood that person's converted assessments had already been canceled. The ret…
Did Wendy's qualify for Virginia's related-member royalty add-back exception when its affiliate received unrelated royalties indirectly?
Yes. Oldemark owned Wendy's marks and received a 3% royalty through Wendy's, while Wendy's sublicensed the marks to related and unrelated restaurants at 4%. Because at least one-third of Oldemark's gr…
Could a Virginia resident employed by NATO exclude qualifying foreign earnings from 2010 Virginia taxable income?
Yes. The taxpayer documented that NATO—not a United States agency—employed her under a three-year contract as a NATO International Staff member throughout 2010. Virginia therefore allowed the IRC § 91…
Must Virginia deed and grantor's tax use assessed value when it exceeds the sale consideration?
Not always. Recordation and grantor's tax use the greater of consideration or actual value, and assessed value carries a strong presumption of accuracy. But a circuit-court clerk may consider clear an…
Did owning and renting residential property make a Virginia taxpayer liable for litter tax?
No. Virginia's litter tax applied to manufacturers, wholesalers, distributors, and retailers of listed products. The taxpayer only owned and rented residential property and did not produce or sell tho…
Could severe medical problems extend Virginia's deadline to claim a 2004 income-tax overpayment as a 2005 credit?
No. Applying an overpayment to the next year was subject to the same three-year limit as a refund. The taxpayer's missed extended filing date made the extension invalid, and the September 2008 return …
Did refinancing through a lender's subsidiary qualify for Virginia's same-lender recordation-tax exemption when the parent serviced the loan?
No. The original lender's subsidiary made the refinanced loan, while the parent merely serviced it and received the monthly payments. Because the parent and subsidiary were separate legal entities, th…
Could a Virginia resident claim all dependent exemptions but only a proportional share of joint itemized deductions with a nonresident spouse?
Yes. Claiming all dependent exemptions on the resident's separate state return showed the spouses' mutual agreement and separate accounting, so those exemptions were allowed. But the resident did not …
Who decides a property's actual value when Virginia deed recordation tax differs from the stated consideration?
The circuit-court clerk. Virginia recordation tax used the greater of consideration or actual property value, and assessed value carried a strong presumption but was not conclusive. The Department ask…
Could Virginia include a nonresident servicemember spouse's federally excluded combat pay when allocating joint itemized deductions?
No. Virginia could proportionally allocate deductions when the resident and nonresident spouses did not separately account for them, but the calculation had to use federal adjusted gross income. Comba…
Was real property contributed by a corporation for a 42% LLC interest exempt from Virginia recordation tax?
No. Both combining corporations survived, the new entity was an LLC rather than the corporation required for the cited federal reorganizations, the transfer was corporation-to-LLC rather than parent-t…
When spouses file separate Virginia returns and one is a nonresident, what income measure allocates shared deductions and exemptions?
Federal adjusted gross income was the example Virginia used for proportional allocation. Each spouse first had to account separately for income, deductions, and exemptions. Only items that could not b…
Could taxpayers move a 2008 Virginia NOL deduction to 2007 because an other-state tax credit prevented a cash refund for 2006?
No. Virginia required the 2008 loss to follow the ordinary two-year federal carryback sequence after disallowing the special five-year carryback. The deduction fully reduced the taxpayers' 2006 FAGI a…
Was a 10% shareholder who served as secretary and treasurer personally liable for the corporation's unpaid Virginia withholding tax?
No. Virginia found that the minority shareholder was not a responsible corporate officer for the unpaid withholding tax because the evidence did not show he had a duty to file or pay it, authority to …
Was a Virginia facility that assembled raw materials into prefabricated home components a manufacturer for local property-tax purposes?
Yes. The facility transformed wood, steel, insulation, concrete, and other raw materials into substantially different foundation walls, trusses, wall panels, and interior walls. Its manufacturing acti…
Must a Virginia circuit-court clerk use assessed value for deed recordation tax when an appraisal and consideration indicate a lower market value?
No. Assessed value carried a strong presumption, but the clerk could rely on clear and cogent appraisal or other reliable evidence showing it did not reflect fair market value on the transaction date.…
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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.