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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What Virginia tax interest rates applied during the third quarter of 2018?
For July 1 through September 30, 2018, Virginia's ordinary interest rates were 7% on tax underpayments and assessments and 7% on overpayments and refunds. The reduced rate for qualifying disputed asse…
Did a military spouse become a Virginia domiciliary by buying a home and obtaining a Virginia driver's license?
No. Despite a Virginia home, vehicles, and driver's license, the taxpayer retained strong ties to the service member's State A domicile, including a home and active voting there. Virginia found no com…
Did a temporary move and job in another state end a taxpayer's Virginia domicile?
No. The taxpayer described the other-state residence as temporary and Virginia as her permanent home, while keeping a Virginia license and voter registration. Virginia treated her as a 2014 domiciliar…
Could a corporation use alternative records to support cost-of-performance changes to its Virginia sales factor?
Potentially. Virginia said no single document proves cost of performance for every business, so the corporation could submit alternative records and explain its methods. Refunds would be issued only t…
Which tier of pass-through entities had to report and pay Virginia nonresident-owner withholding?
The upper-tier LLC, trust, and estate—not the lower-tier taxpayer—were responsible for Virginia pass-through withholding and Form 502 filings. The LLC lacked proof of a hardship waiver, and the trust …
Could taxpayers subtract an entire prior-year federal NOL directly from Virginia adjusted gross income?
No. The taxpayers could not subtract the entire federal NOL and drive Virginia adjusted gross income below zero. But part of the 2009 loss could still be deductible after Virginia fixed-date-conformit…
How did Virginia tax restricted stock units earned partly from services performed in Virginia?
Virginia taxed the service-related portion of RSU income when the units vested, using a ratio of Virginia service days to total service days. Any later gain after vesting was investment income and was…
Could a corporation's president avoid converted tax assessments by saying she was only an investor?
No. The president provided no evidence that she lacked knowledge of the unpaid taxes or authority to prevent the failure. Because the assessments were presumed correct and she did not meet her burden …
Did solar-panel mounting, racking, and certified pollution-control property qualify for Virginia sales-tax exemptions?
Yes, in part. Mounting and racking integral to the solar tracking system qualified for the manufacturing exemption, but concrete foundations did not. Items certified by DMME qualified under the pollut…
Did vendor correspondence prove that software and maintenance were delivered only electronically and qualified for Virginia's exemption?
No. Later vendor correspondence identifying the purchase order did not satisfy Virginia's documentation rule. The invoice, contract, or sales agreement had to certify electronic delivery and that no t…
Could Virginia tax a 2016 retirement distribution received after the taxpayer moved abroad and abandoned Virginia domicile?
No. The taxpayer had sufficiently abandoned Virginia domicile and established domicile in Country A before 2016. Federal law barred Virginia from taxing the retirement distribution received as a nonre…
Did financial disability or a timely estimated payment extend Virginia's deadline for a 2012 refund?
No. Virginia said federal financial-disability tolling did not alter its refund limitation period, and making a timely estimated payment did not preserve a refund claimed on a late return. The prior d…
Did military orders prevent a service member and retired spouse from becoming Virginia domiciliaries?
No. Military orders alone do not change domicile, but voluntary actions can. Based on the available record, Virginia found the retired spouse had established Virginia domicile and the service member h…
Could Virginia base a withholding assessment solely on another agency's worker-classification information?
No. Virginia could lawfully obtain VEC information, but the auditor still had to independently apply the employee-versus-contractor factors to the company's records. The case returned for a full revie…
Which services sold with audiovisual systems were taxable, and could the audit sample be revised?
Virginia exempted actual repair and installation labor, but taxed project management, bundled GUI work, training, and a sound-system rental with only a standby technician. Custom programming and netwo…
Was a business manager personally liable for the corporation's unpaid Virginia sales tax as a responsible officer?
Yes. Virginia found that the manager's authority over the company's financial affairs created a duty to ensure sales-tax filing and payment absent proof of delegation. He also failed to disprove knowl…
Could a government contractor buy communications equipment tax-free before shipping it abroad for installation on a naval ship?
Yes, under the resale exemption—not the temporary-storage exemption. The contract's true object was selling communications equipment to the federal government, so qualifying purchases could be made wi…
Could a deceased taxpayer's successor receive a 2013 Virginia refund claimed after the three-year deadline?
No. The 2013 return had to be filed by May 1, 2017, to claim a refund, but the successor filed it on November 13, 2017. Virginia said it had no discretion to waive the expired three-year limitation pe…
Were grocery personal-shopping fees, item surcharges, and home-delivery charges taxable in Virginia?
Personal-shopping fees and item surcharges followed the tax treatment of the groceries or other items sold because the true object was obtaining the goods. A separately stated home-delivery charge was…
Was a dissolving steroid-releasing sinus implant exempt as medical equipment, a prosthetic device, or medicine?
Generally no. The single-use physician-implanted product was not durable medical equipment, did not replace a missing body function, and was classified as a medical device rather than medicine. Sales …
Did a military spouse prove that she retained the service member's other-state domicile?
No. The spouse established substantial Virginia ties and did not show resident returns or other sufficient connections to the service member's claimed home state. Virginia upheld the assessments, whil…
Could a taxpayer claim Virginia's retirement subtraction without records showing which pension contributions another state taxed?
No. The taxpayer had to prove that pension contributions were deductible or excluded federally but added back and taxed by another state. Difficulty obtaining decades-old records did not satisfy that …
Was BPOL a net-income tax excluded from the Internet Tax Freedom Act's internet-access protection?
No. Virginia said BPOL taxes gross receipts without deductions and is not a net-income tax excluded from the federal Act. Even so, the Department declined to decide whether the city's tax was grandfat…
Did Virginia order a county to refund BPOL tax on internet-access receipts under federal preemption?
No. Virginia said federal law may be judged by a tax's operation and effect and had previously applied the Internet Tax Freedom Act to BPOL. But it declined to decide the disputed grandfather-status q…
Did Virginia order a city to refund BPOL tax on internet-access receipts under the Internet Tax Freedom Act?
No. Virginia recognized that the Internet Tax Freedom Act could apply to BPOL tax, but declined to decide the disputed factual question whether the city was grandfathered. Without an order for correct…
Did Virginia order BPOL refunds after rejecting a city's narrow reading of the Internet Tax Freedom Act?
No. Virginia maintained that the Internet Tax Freedom Act was not limited to transactional taxes and could reach BPOL. But it declined to decide the city's disputed grandfather status, so the local re…
Did a sole S-corporation shareholder who received a W-2 count as an employee for Virginia's 2016 telework credit?
Yes. The 100% shareholder performed services for the S corporation, received compensation and a W-2, and was treated as the corporation's employee rather than an ineligible self-employed person. Virgi…
Were converted restaurant sales-tax assessments removed after zero returns showed the business was inactive?
Yes. After the restaurant filed returns showing no income for the assessed periods, Virginia reversed the business assessments, discharged the converted assessments against the former owner, and close…
When did a taxpayer become a Virginia resident if domicile changed in May but he spent more than 183 days here?
Virginia found the taxpayer changed domicile in May 2015, but his taxable period began March 8. Because he spent more than 183 days in Virginia during 2015, he was an actual resident from his first Vi…
Were Virginia's corrections to 2014 and 2015 income tax returns untimely because the errors were not found sooner?
No. Virginia notified the taxpayers of the corrections in August 2017, within the three-year assessment period for both returns. The tax and interest remained due, and interest could not be waived unl…
Did living in Pennsylvania and working in Delaware end a taxpayer's Virginia domicile for 2013?
No. The taxpayer kept a Virginia license, vehicle registration, voter registration, and prior home while showing little evidence of a permanent Pennsylvania domicile. Virginia taxed him as a resident …
Did buying a Virginia retirement home and obtaining a Virginia license establish domicile while the taxpayer worked abroad?
No. The taxpayer showed future intent to live in Virginia but was present only for brief vacations while working abroad. Because domicile requires intent and physical presence together, Virginia found…
Did the Internet Tax Freedom Act require Virginia to cancel a city's 2016 BPOL assessment on internet-access receipts?
No correction was ordered. The Department reiterated that the Internet Tax Freedom Act can apply to BPOL tax and that BPOL is not a tax on net income, but it declined to decide the disputed question w…
Were conveyor bottoms and hangers exempt repair parts for coal-mining equipment?
Yes. The bottoms and hangers were integral repair or replacement parts for an exempt mining conveyor, not taxable structural supports fixed to realty. Virginia accepted the customer's late Form ST-11 …
Which mining and manufacturing audit items were exempt, taxable, or sent back for verification?
Virginia reached a mixed result. Direct production parts and certain repair labor were removed; water-truck parts, maintenance tools, and post-production testing stayed taxable. Several lubricants, pa…
What sales-tax change took effect in Williamsburg, James City County, and York County on July 1, 2018?
Effective July 1, 2018, a new 1% Historic Triangle regional tax raised the combined retail sales and use tax rate in Williamsburg, James City County, and York County to 7%. The bulletin also set sourc…
Did years of living in another state end Virginia domicile when the taxpayer kept voting and maintaining a home here?
No. Although the taxpayer lived in State A, she retained a Virginia home, license, vehicles, mailing address, and repeatedly voted full Virginia ballots. Virginia found she had not abandoned domicile,…
Could a gas station overturn estimated Virginia sales and use tax assessments without producing its records?
No. Virginia was allowed to estimate taxable sales, purchases, and fixed assets from the best information available after the business supplied no records. Because it still produced no evidence on app…
Did additional documents prove that a data warehouse appliance was resold tax-free to the federal government?
No. The new documents did not verify that the appliance and maintenance support were sold for resale, later transferred to a federal agency, or tied to the cited government contract. The prior assessm…
Could a homebuilder remove freight-and-handling and millwork purchases from a Virginia audit sample?
Only with more documentation. Combined freight-and-handling charges stayed taxable unless the builder proved they were freight only or obtained corrected invoices. Millwork purchases also required inv…
Would Virginia-based independent contractors create sales-tax nexus if they solicited only out-of-state wholesale customers?
Yes. Under the law applied in this 2018 ruling, using independent contractors who lived and solicited sales from Virginia created sufficient in-state business activity, even though they targeted only …
Which construction-company audit purchases could be removed based on the records supplied?
Virginia removed one engineering-services charge and one subcontract-labor charge after new records showed they were not material purchases. Other transactions stayed taxable because the documents did…
How should taxpayers file when they moved to Virginia in June 2014?
They were Virginia part-year residents beginning with the June move. The couple had to file Form 760 PY, report income attributable to the Virginia resident period, and prorate personal exemptions and…
Did a temporary overseas assignment establish a new domicile outside Virginia for 2014?
No. The taxpayer kept a Virginia lease, driver's license, vehicle registration, and financial mailing address, and later moved to a different state rather than remaining abroad. Virginia treated the f…
Could nonresident individuals claim Virginia's corporate foreign-income subtraction on S-corporation income passed through trusts?
No. Pass-through owners could claim only modifications available under Virginia's individual-income-tax statute. The individual foreign-source-income subtraction had been repealed for years beginning …
Did a Japanese government employee working in Virginia owe Virginia income tax on compensation exempt from federal tax under the U.S.-Japan treaty?
No, on these facts. The treaty itself applied only to federal and national taxes, not Virginia tax. But Article 18 exempted this Japanese government employee's compensation from federal tax, leaving n…
Could Virginia assess an IRS adjustment when taxpayers failed to file an amended state return?
Yes. Taxpayers had one year to report the final federal adjustment on an amended Virginia return. Because they did not do so, Virginia could assess at any time from the IRS information, and the refund…
Did Virginia correctly limit a resident's credit for 2013 income tax paid to Vermont?
Yes. Virginia applied the allocation percentage from the Vermont nonresident return to Vermont taxable income and limited the credit to Virginia tax on the income actually taxed by Vermont. The reques…
Were retained arbitration proceeds foreign-source income when they arose from selling stock in a U.S. corporation?
No. The taxpayer retained the arbitration rights while selling stock in a U.S. corporation and reported the proceeds federally as gain. Virginia treated the proceeds as part of that domestic stock-sal…
Could nonresident grantor trusts, QSSTs, and ESBTs join an S corporation's Virginia composite return?
Yes. Qualifying grantor trusts and QSSTs could be included because their income is treated as owned by the grantor or beneficiary, and qualifying ESBTs could also participate. Each trust still had to …
Did a taxpayer successfully abandon Virginia domicile after moving to another state for work?
Yes. The taxpayer worked and lived in State A, leased a residence, moved his license and vehicle registration, registered to vote there, and had no meaningful Virginia ties beyond a mailing address. V…
Did employer error extend the deadline for a nonresident to reclaim 2011 and 2012 Virginia withholding?
No. Excess withholding remained subject to Virginia's three-year refund limitation regardless of whether the employer caused the error. The taxpayer filed both Form 763-S claims in March 2017, after t…
Could Virginia residents subtract overseas wages or defeat their assessments by asserting that one spouse changed domicile?
No. Virginia's foreign-source-income subtraction had been repealed for tax years beginning in 2003, so the overseas wages could not be subtracted if the couple were residents. The couple also failed t…
Did a six-year missionary assignment abroad end the taxpayer's Virginia domicile?
No. The taxpayer's wife and children remained in Virginia, a Virginia organization continued paying his stipend, the assignment was for experience, and he returned in 2016. Virginia treated the work a…
Could a taxpayer recover a 1999 overpayment by filing the Virginia return in 2016?
No. The 1999 return needed to be filed by May 1, 2003 under the general refund rule or by October 2007 under the two-year post-payment exception. Filing in August 2016 was too late under both periods,…
Could a residential contractor assume retailers had charged sales tax when invoices were missing?
No. Virginia required invoices or other records proving tax payment for each purchase. The audit was revised for transactions the contractor documented, but the remaining purchases stayed because gene…
Did payroll records and a reversing ledger entry prove that a fixed-asset entry was actually nontaxable labor?
No. A reversing ledger entry and payroll records did not prove the capitalized-materials entry had been corrected for tax purposes. Virginia required amended federal and state returns removing it from…
Could a door-and-glass shop remove church-association and other transactions from an audit extrapolation?
No. The church association was not itself a qualifying church, and the shop did not prove the disputed sales and purchases were isolated from its normal business. The sample extrapolation remained, an…
Was an appeal of denied HB 2313 transitional sales-tax refunds filed within Virginia's 90-day period?
No. Virginia treated the March 22, 2016 refund-denial letter as the assessment date, making June 20 the appeal deadline. The contractor's July 6 certified-mail postmark was late, so the Department cou…
Was the wife a full-year Virginia resident in 2014 despite spending substantial time in another state?
Yes. The couple moved to Virginia intending a permanent change in 2013, filed a Virginia part-year return, established a home here, and added licenses and vehicle registrations. Virginia treated the w…
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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.