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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Could a qualifying Virginia nonprofit buy alcohol and alcoholic beverages exempt from sales tax?
Yes, when all three meal-policy conditions were met: the purchase furthered the nonprofit's mission, the nonprofit was billed and paid from its own account, and it controlled who consumed the items an…
Who paid Virginia sales or use tax in a cabinet installation chain involving a big-box retailer, broker, and installer?
The party that directly purchased the cabinets and materials owed sales tax to the supplier or consumer use tax to Virginia. The big-box retailer, broker, and installer were all real-property contract…
Could the Department decide whether a personal-vehicle tax should be prorated after the owner moved away?
No. Tax on an ordinary personal vehicle is neither a local business tax nor local mobile property tax within the Department's jurisdiction. Even though the city's final letter gave misleading appeal i…
Could the Virginia Department review a city's local food-and-beverage tax assessment?
No. Department review is limited to specified local business, property, mobile-property, and utility taxes. Local food-and-beverage tax, commonly called meals tax, is not on that list, so the taxpayer…
Did a city's failure to issue promised BPOL refunds create an appealable denial?
Apparently yes. Although the city had not issued formal written findings, it promised partial refunds and then failed to pay them for more than a year. Virginia treated that inaction as an apparent de…
Did a city's failure to pay promised BPOL refunds amount to an appealable denial?
Apparently yes. The city promised partial refunds but neither paid them nor issued written findings for more than a year. Virginia said that inaction appeared to deny the refund, permitting a local ap…
Did a city's failure to pay promised BPOL refunds amount to an appealable denial?
Apparently yes. The city promised partial refunds but neither paid them nor issued written findings for more than a year. Virginia said that inaction appeared to deny the refund, permitting a local ap…
Could a laboratory claim the BPOL out-of-state deduction merely because Virginia staff coordinated testing with out-of-state labs?
No. The deduction required receipts attributable to business conducted in another taxing jurisdiction, not merely coordination between Virginia and out-of-state employees. Virginia upheld the county's…
Could a home-based business reduce BTPP value by the percentage of time equipment was used personally?
No. Virginia law directed the city to value business tangible personal property using a percentage of original cost. The taxpayer cited no authority allowing an additional reduction based on the owner…
Was a gasoline retailer's BPOL tax based on gallons sold or gross receipts, and was its 2013 refund timely?
Gross receipts. Virginia BPOL tax applied to the retailer's total gasoline-sale receipts, not the number of gallons sold. The February 2017 refund request for 2013 also came more than three years afte…
Could a taxpayer receive a 2012 Virginia income tax refund when the original return was filed in December 2016?
No. The 2012 return had to be filed by May 2, 2016 to claim the overpayment, but the taxpayer filed it in December 2016. Virginia's three-year refund statute gave the Department no discretion to pay t…
Did wages earned and taxed in another country escape Virginia income tax for a Virginia resident in 2013?
No. A Virginia resident is taxed on foreign wages included in federal adjusted gross income. The former foreign-income subtraction had been repealed, the other-state credit does not cover foreign coun…
Could a taxpayer use historic rehabilitation credits that accompanied an LLC partnership interest assigned by the prior owner?
Yes. Virginia generally does not allow a historic rehabilitation credit to be transferred by itself, but the taxpayer received the prior owner's LLC partnership interest. Under IRC § 704 and Virginia …
Could a taxpayer use historic rehabilitation credits that accompanied an LLC partnership interest assigned by the prior owner?
Yes. Virginia generally does not allow a historic rehabilitation credit to be transferred by itself, but the taxpayer received the prior owner's LLC partnership interest. Under IRC § 704 and Virginia …
Could a beneficiary use historic rehabilitation credits allocated to trusts that had matured before the credit distribution?
Yes. Because the taxpayer had reached the trusts' maturity ages before the credit distribution, IRC § 678(a) treated him as owner and the trusts as disregarded grantor trusts. He could use their histo…
Does underreported cable franchise fee revenue increase a locality's Trust Fund distribution when the corrected fee remains below its percentage share?
No. An underreported cable franchise fee increases a locality's Communications Sales and Use Tax Trust Fund distribution only when the franchise fee owed exceeds the locality's ordinary percentage dis…
Does underreported cable franchise fee revenue increase a locality's Trust Fund distribution when the corrected fee remains below its percentage share?
No. An underreported cable franchise fee increases a locality's Communications Sales and Use Tax Trust Fund distribution only when the franchise fee owed exceeds the locality's ordinary percentage dis…
Could alleged oral advice that a taxpayer had five years to file preserve a late 2012 Virginia refund claim?
No. The original 2012 return was filed in December 2016, after the May 2, 2016 refund deadline. The alleged five-year advice was not documented in writing, and Va. Code § 58.1-1835 applies to assessme…
Was a March 2017 Virginia estate tax refund claim timely after the IRS accepted the estate's Form 890-AD in December 2015?
No. The federal change became final when the IRS accepted Form 890-AD on December 7, 2015, so the estate had until December 7, 2016 to amend its Virginia return. Filing in March 2017 was late; the lat…
Must a Virginia partnership withhold for nonresident partners on guaranteed payments for services performed outside Virginia?
Not if the guaranteed payments are not Virginia-source income. Payments made without regard to partnership profitability are treated more like compensation; when the nonresident partners perform the s…
Did a fencing contractor prove that cash withdrawals recorded as tools and materials were personal and not taxable purchases?
No. The contractor's ledger recorded the cash checks in small-tools and materials expense accounts, and the contractor supplied no invoices or other proof that the money was withdrawn for personal use…
Were a dental practice's implant purchases exempt because they were ordered for specific patients?
Only purchases proven to be for specific patients qualified. Shipping implants to a lab, buying from registered vendors, or handwriting a patient's name later did not by itself establish exemption or …
Are separately stated FCC regulatory and PEG grant fees excluded from Virginia communications sales tax?
It depends. A separately stated government fee is excluded only when law requires the provider to add it to the service price. A fee the provider may pass through at its discretion remains taxable. Th…
Does a pending challenge to an IRS audit cancel Virginia's assessment based on the current federal adjustment?
No. Virginia treated the current IRS adjustment as controlling and kept the assessment due. If the IRS later changed its findings, the taxpayers could file an amended Virginia return within one year o…
Did a worker change domicile after moving from Virginia for a permanent out-of-state job, making Virginia wage withholding refundable?
Yes. The worker accepted permanent employment, obtained housing and a driver's license, registered a car, and took steps to sell Virginia property. Although his wife and some assets remained in Virgin…
Did a Canadian corporation with no Virginia office or employees owe Virginia corporate tax or have to file a return?
It appeared to owe no Virginia corporate income tax because the treaty produced no federal taxable income, but it still had to file a Virginia return if registered with the State Corporation Commissio…
Did medical disability extend Virginia's deadline to claim a 2012 income tax overpayment credit?
No. Virginia law did not suspend the three-year refund period for mental or physical disability, so a January 2017 return was too late to claim or carry forward the 2012 overpayment.
Did a taxpayer who moved abroad establish that he was no longer domiciled in Virginia for 2013?
Yes. After weighing all facts, Virginia found the taxpayer was not domiciled in the Commonwealth during 2013 and abated the assessment. His foreign residence, spouse's citizenship and property abroad …
May restaurants subtract payroll deductions lost because they claimed the federal tip-credit when computing Virginia taxable income?
No. Virginia law provides no subtraction for payroll expense deductions reduced by the federal IRC § 45B tip-credit, whether the restaurant reports on an individual or corporate return.
Did a former Virginia resident change domicile while attending school and later working in other states during 2013?
Partly. She remained a Virginia domiciliary while in graduate school, but changed domicile when she moved for indefinite employment in June 2013. Her pre-move capital gains were Virginia income, yet f…
Could a taxpayer challenge old Virginia income tax assessments and overturn later estimates without filing returns or records?
No for 2007-2010: the appeal was years late, so Virginia lacked jurisdiction. For 2011-2014, the timely appeal failed because the taxpayer supplied no returns or evidence, though he received 30 days t…
Was heat-resistant masking tape used in powder coating exempt manufacturing equipment, and could vendor-paid tax reduce a use-tax audit sample?
The masking tape was exempt because it was integral to powder coating and performed a quality-control function during production. But sales tax paid incorrectly to a vendor did not belong in a sample …
Did a Virginia auto repair shop owe tax on diagnostic and environmental charges and estimated underreported sales?
Yes. Diagnostic charges were taxable when connected with parts sales, environmental charges were taxable, and the shop did not disprove estimated underreported sales. Only separately charged repair la…
Is a Virginia seller and installer of water-flow instruments a retailer or a real property contractor?
Both, depending on the job. The firm was a contractor when installed instruments became part of real property and a retailer when they remained tangible personal property or were sold without installa…
Must a Virginia manufacturer collect sales tax on fiber posts sold in packs to dental practices?
Yes. The fiber posts were sold in packs for general dental use rather than bought on behalf of identified patients, so the manufacturer should collect Virginia sales tax from dental practices.
Are mowers and chain saws exempt when farmers use them to maintain the edges of crop fields?
No. Mowing field edges and trimming bordering trees were ancillary activities, not agricultural production for market, so the equipment was taxable. A dealer unsure of an exemption should charge tax a…
Could a possible Virginia domiciliary resident claim credit for New York tax paid on 2013 wages?
Yes. If she was a Virginia domiciliary and a New York actual resident, Virginia allowed a credit for New York tax on New York-source wages, subject to the statutory cap. She had to file a Virginia ret…
Did an affiliated corporate group need permission to include a newly acquired corporation in its Virginia consolidated return?
No permission was needed. A newly acquired affiliate must follow the filing method already elected by the affiliated group, so Corporation A belonged in the consolidated return. The group still should…
Does an allegedly incorrect W-2 or an employer's withholding failure eliminate an employee's Virginia income tax liability?
No. An employee still must report and pay tax on income received even if the employer failed to withhold or issued a disputed W-2. The taxpayer did not disprove the IRS-based assessment or show full p…
Was a private leaseholder exempt from recordation tax on a deed of trust signed jointly with a tax-exempt authority?
No. The joint deed of trust was not exempt, and because the regional authority could not be charged, the private taxpayer owed the required tax. The purchase-option price did not prove value, so the c…
Who pays Virginia sales or use tax when countertops are fabricated and installed through retailers and contractors?
The fabricator-installer pays sales or use tax on its raw materials, and the retailer does not tax the homeowner's installed job. If the countertops are sold without installation, the retailer buys th…
Did living and working in another state prove that a taxpayer had abandoned her Virginia domicile for 2013?
No. Out-of-state employment and withholding did not prove a permanent domicile change where she retained a Virginia address, license, and vehicle registration and gave incomplete residence and voting …
Was an online restaurant-ordering platform a Virginia sales-tax dealer for food sold by independent restaurants?
No. The independent restaurants retained title and possession until customers received the food, so the platform was not the retail dealer. Because it collected tax for restaurants, it still had to do…
Did low operating capacity require a county to reduce the taxable value of a new automated racking system?
Not on the evidence submitted. A representative's economic-obsolescence analysis did not invalidate the county's cost-based value, but the county had to consider any bona fide independent appraisal de…
Were VoIP adaptors loaned to subscribers exempt as broadcasting or Internet-access equipment?
No. The VoIP provider was not a broadcaster, cable company, video programmer, or open video system and did not provide direct Internet access. Its adaptors required a separate third-party Internet con…
Is taxidermy a taxable fabrication service or an exempt personal service in Virginia?
Taxidermy was an exempt personal service because the customer's true object was the taxidermist's expertise, not incidental boards or glass eyes. The taxidermist still owed tax on consumed supplies, a…
Did placing digital projectors in theaters without charging for their possession create a taxable lease?
No. The theaters paid installation and setup fees but no consideration for possessing or using the projectors, so there was no taxable lease and the assessment was abated. The provider still owed use …
Did placing digital projectors in theaters without charging for their possession create a taxable lease?
No. The theaters paid installation and setup fees but no consideration for possessing or using the projectors, so there was no taxable lease and the assessment was abated. The provider still owed use …
Are lump-sum body-piercing and insertion charges taxable when they include jewelry, and could Virginia audit six years?
Piercing charges were exempt personal services because the included jewelry was incidental. Insertion fees could also be exempt if documented, but stand-alone jewelry remained taxable. The six-year no…
How did Virginia's ABLE account contribution deduction work, including limits, carryforwards, and recapture?
For tax years beginning in 2016, an individual could deduct contributions to a Virginia529 ABLE account, generally up to $2,000 per account each year with unlimited carryforward. Contributors age 70 o…
What Virginia filing and payment relief was available to Florida and Georgia taxpayers affected by Hurricane Irma?
Virginia offered historical extensions and late-filing and payment penalty waivers to qualifying Florida and Georgia taxpayers whose records were unavailable because of Hurricane Irma. Deadlines varie…
Did a Virginia domiciliary stop being a resident while working abroad when he kept his Virginia home, driver's license, vehicles, and returned to that home?
No. The taxpayer did not prove that he abandoned Virginia and established a new permanent or indefinite domicile abroad. He kept his Virginia home available, retained his driver's license and two vehi…
Could Virginia residents claim a Virginia credit for California tax when their California return did not actually impose alternative minimum tax?
No. California imposed no alternative minimum tax because the couple's tentative minimum tax was below regular tax. California also allowed their credit for Virginia tax to reduce liability below the …
What Virginia tax interest rates applied in the fourth quarter of 2017 to assessments, refunds, disputed assessments, estimated tax, and local taxes?
For October 1 through December 31, 2017, Virginia's ordinary interest rates were 6% on tax underpayments and assessments and 6% on overpayments and refunds. The reduced rate for qualifying disputed as…
What Virginia filing and payment relief was available to taxpayers affected by Hurricane Harvey?
Virginia offered temporary extensions and late-filing and payment penalty waivers to qualifying taxpayers whose records were unavailable because of Hurricane Harvey. Federal-linked income and withhold…
Could an estate transfer unused Virginia Land Preservation Tax Credits that remained when the original credit holder died?
No. The decedent could use the credit on his final return, but any remaining carryover was extinguished at death. Virginia treated tax credits as legislative privileges rather than personal property, …
Could a pass-through LLC file one 2015 Virginia unified return for selected nonresident individual and grantor-trust owners?
Yes. Virginia allowed the LLC to submit a 2015 unified return if it followed the Department's conditions: include only consenting qualified nonresident owners, provide Schedule VK-1, use the highest i…
Which cable, internet, and telephone equipment was exempt or taxable, and how did Virginia allocate mixed-use purchases?
Virginia reached mixed results. It allowed bandwidth allocation for mixed-use equipment through 2015, required percentage-of-time allocation from 2016, exempted signal-leak testing devices used throug…
Did an affiliate's Virginia government-affairs employee create corporate income-tax nexus for a seller making tangible-property sales into Virginia?
No. The seller had Virginia-source income through destination-sourced sales, and the affiliate's government-affairs employee was treated as its representative. But the employee's Virginia lobbying had…
When did dealer warranty work, technician visits, and a Virginia home-based events employee create corporate nexus or Virginia payroll?
The outcomes differed. Independent dealers' warranty repairs would not be attributed to the manufacturer, rare technician visits required a fuller de minimis review, and a home-based employee's annual…
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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.