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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Did a North Carolina beneficiary owe Virginia tax on trust income derived from rental property located in Virginia?
Yes. The trust reported that the distribution came from rental income on Virginia real property, making it Virginia-source income to the North Carolina beneficiary. He filed a Virginia nonresident ret…
Could a laboratory provider using payroll apportionment also deduct receipts for testing performed by out-of-state laboratories?
No. Payroll apportionment had already separated the receipts attributable to testing performed by out-of-state laboratories. The provider also failed to show that employees at its county facilities pa…
Could a cigarette wholesaler reduce a Virginia sales-tax assessment by supplying resale certificates and invoices after the audit?
Potentially. Virginia returned the audit to remove cigarette sales supported by valid Form ST-10 resale certificates and invoices, but late certificates received extra scrutiny because none were avail…
Did a retail printing-services business qualify for Virginia's industrial manufacturing exemption on print-production equipment?
Generally no. Virginia treated the business as a copy and reproduction service rather than an industrial custom printer, so its ordinary production equipment remained taxable. Audit staff had to revie…
How did Virginia's 2017 Tax Amnesty Program work, including eligibility, waived amounts, deadlines, and the post-amnesty penalty?
From September 13 through November 14, 2017, eligible taxpayers could pay all qualifying tax plus half the accrued interest and receive a waiver of all penalties and the other half of interest. Partic…
Did a new IRS bill justify reconsidering Virginia's 2010 income-tax determination when the federal transcript showed no new adjustment?
No. The updated 2010 federal transcript still showed no new IRS adjustment affecting Virginia taxable income, and the later IRS bill likely concerned another year. The taxpayer identified no factual e…
Could Virginia assess 2013 income tax from final IRS audit information when the taxpayer failed to file an amended Virginia return?
Yes. Virginia required the taxpayer to report the final federal change within one year. Because he did not file an amended Virginia return, the Department could assess from the IRS information and wou…
Was a promotional distributor's DVD sale exempt when the customer supplied a Virginia ST-10A certificate accepted in good faith?
Yes. The DVDs contained information used in the purchaser's advertising campaign and qualified under the ST-10A certificate. Because the distributor accepted the certificate in good faith and supplied…
Could a restaurant reduce an estimated Virginia sales-tax assessment without records supporting its claim that projected sales were too high?
The estimated tax stayed because the restaurant supplied no records and did not rebut the $50,000 annual sales projection from its business-license application. Virginia waived the first-audit complia…
Were a service member and spouse both exempt from Virginia resident tax merely because they claimed the same out-of-state military domicile?
No. Virginia accepted that the husband remained domiciled in State A, though his Virginia farm could require a nonresident return. The wife did not prove she had ever been physically present or domici…
Could Virginia residents subtract an entire IRA distribution because contributions may have been taxed by another state?
Not without documentation. The subtraction covered only the prorated portion tied to federally deductible contributions that another state actually taxed. The couple did not prove the prior taxation o…
Could a Virginia resident receive credits for tax paid through composite nonresident returns, and was Virginia's assessment timely?
Yes, with state-by-state documentation. Virginia found the taxpayer entitled to credits for tax paid through composite returns in Hawaii, Mississippi, and Montana. The April 21, 2017 assessment was st…
Did keeping a Virginia driver's license and using a Virginia tax-return address prevent a worker from changing domicile to another state?
No. The worker leased a home near his State A job, moved his belongings, had State A withholding, and did not vote or renew his license in Virginia while away. Considering all the evidence, Virginia f…
Would Virginia reconsider an IRS audit adjustment or waive interest while the taxpayer disputed the federal result?
No. Virginia does not look behind the IRS's final adjustment and upheld the 2013 assessment after the taxpayer failed to file an amended Virginia return. Interest was mandatory and could not be waived…
Could a taxpayer obtain review of a late refund claim after fully paying a Virginia assessment?
Yes. Although the ordinary refund period for the late 2010 return had expired, the taxpayer had fully paid the March 19, 2014 assessment and pursued the claim within three years. Virginia treated the …
Could federal income tax withheld from an IRA distribution reduce the Virginia tax due after an IRS audit adjustment?
No. The IRA distribution was included in federal adjusted gross income and no Virginia tax had been withheld. Virginia provides no deduction for federal income tax withheld from retirement income, so …
Could taxpayers dispute IRS changes to federal adjusted gross income through a Virginia tax appeal, and was the resulting assessment timely?
No. Virginia matched the taxpayers' federal adjusted gross income to the IRS record and would not reconsider the federal audit. The January 2017 assessment was timely before the May 1, 2017 general de…
What certificate and application rules did Virginia's 2017 guidelines establish for tax-exempt purchases of stamped cigarettes for resale?
Starting January 1, 2018, dealers purchasing Virginia-stamped cigarettes for resale had to use Department-issued Form ST-10C rather than Form ST-10. The guidelines created fast-track, expedited, and f…
Could the Virginia Department of Taxation review a county tax on a personal vehicle or decide whether an income-tax-refund setoff paid that debt correctly?
No. A personal vehicle was not local business or mobile property within the Department's appeal jurisdiction, and refund-setoff disputes had to be raised with the county that certified the debt. The t…
Was a corporate secretary and store manager personally liable for the company's unpaid Virginia sales and withholding taxes as a responsible officer?
No. Although she was a 50% owner, corporate secretary, and store manager, the evidence showed her husband alone controlled bookkeeping, tax preparation, filing, and payment. She lacked the required ta…
What extended filing deadline did Virginia apply to 2016 C-corporation income tax returns after the federal extension changed?
Virginia granted C corporations a seven-month filing extension beginning with taxable year 2016, so calendar-year returns on extension were due November 15. The original April 15 deadline did not chan…
Could a corporation reduce Virginia's related-party factoring-expense add-back by bad debts and cash discounts because a prior audit accepted that method?
No. Virginia treated the full related-party factoring expense as an intangible expense subject to add-back unless a statutory exception applied. The corporation did not show that the earlier auditor k…
Could a business appeal a county's BPOL refund denial directly to the Virginia Tax Commissioner before obtaining a final local determination?
No. The county's refund-denial letter directed the business to file a local administrative appeal and was not a final determination. The business had to complete that county appeal first, unless it re…
Could a Virginia resident claim a Virginia credit for Maryland tax withheld from wages earned while commuting to work in Maryland?
No. The Virginia-Maryland reciprocal agreement exempted a Virginia resident's Maryland wages from Maryland income tax when the taxpayer was not a Maryland resident. The taxpayer had to request a Maryl…
Could Virginia residents claim a credit for Pennsylvania tax paid on wages when the two states have a reciprocal agreement?
Not on the existing record. If the husband was only a Virginia resident commuting to Pennsylvania, reciprocity made the wages exempt there and the remedy was a Pennsylvania refund, not a Virginia cred…
Could a retiree use Virginia's simplified pension method without records proving that prior contributions were taxed by another state?
No. The simplified method could calculate the qualifying portion only after the taxpayer proved that federally deductible contributions had actually been taxed by another state. A Form 1099-R and the …
Did a couple living abroad avoid all Virginia filing duties after proving they changed domicile but continued to own Virginia rental property?
No. Virginia accepted that the couple had established domicile abroad and were not Virginia residents in 2013. But their Virginia rental properties produced Virginia-source income, so they still had t…
Could a divorced spouse make Virginia collect a joint-return assessment only from the former spouse after he paid the related federal debt?
No. Filing a joint Virginia return made each spouse individually liable for the entire state tax debt as well as jointly liable together. Their later divorce and the husband's payment of the federal d…
Could a Virginia resident working abroad for a U.S. government contractor use the federal foreign earned income exclusion and fall below Virginia's filing threshold?
Yes. The husband worked in the foreign country for all of 2012 as an employee of a U.S.-based government contractor, not as a federal employee. Virginia accepted the IRC § 911 exclusion; after it redu…
Did foreign tax withholding statements prove that a payment was pension income eligible for Virginia's foreign retirement-income tax credit?
No. Virginia's credit required pension or retirement income from past foreign employment that was included in federal adjusted gross income and taxed by both jurisdictions. The couple's spreadsheet an…
Does Virginia's three-year refund deadline also prevent a taxpayer from applying an old income-tax overpayment as a credit to a later year?
Yes. The court held that receiving an overpayment by check and applying it as a credit are functionally the same recovery. Because the taxpayer claimed his 2011 overpayment more than three years after…
Which equipment at a rotogravure printing plant was directly used in manufacturing and subject to Virginia local machinery-and-tools tax?
Virginia split the equipment by use. Cylinder coating and engraving equipment, walking surfaces, handrails, and noise enclosures were not taxable machinery and tools. Bindery printers used inside prod…
Did a taxpayer prove he was only a part-year Virginia resident when his return and records showed substantial Virginia ties?
No. His part-year return listed Virginia residence for the entire year while assigning all income outside Virginia, and he failed to document the claimed State A domicile. A Virginia address, driver's…
Did the Servicemembers Civil Relief Act exempt a military spouse who formed extensive Virginia ties and stayed after the service member retired?
No. The Act protected a spouse present solely because of military orders, but did not prevent the spouse from voluntarily acquiring Virginia domicile. Her Virginia voter registration, home purchase, s…
Would sending documents to the IRS overturn Virginia assessments based on the IRS's current audit adjustments?
No. Virginia would not look behind the IRS's current final adjustments, and merely submitting rebuttal documents to the IRS did not show the Virginia assessments were wrong. If the IRS later changed t…
Could a retiree subtract the full amount of pension contributions attributed to years worked in other states without records of their state tax treatment?
No. Virginia's subtraction covered only federally deductible employee contributions that another state had actually taxed, not employer contributions or investment earnings. The retiree's basic-annuit…
Would unused Virginia coalfield credits survive a Chapter 11 reorganization, entity conversions, and two short tax years?
Generally yes. Credits stayed with subsidiaries that remained legal entities, including entities converting to pass-through status, and could flow to the new parent consolidated group. The ruling also…
What Virginia returns did a temporarily assigned employee owe when she worked and kept housing in Virginia but moved among several states?
She had to file a 2012 nonresident return for Virginia-source work and a 2013 resident return because the evidence indicated Virginia domicile. If she could prove she moved and changed domicile to Sta…
Could an acquiring corporate group switch from separate to combined Virginia returns by adopting the target group's filing method without advance permission?
No. The acquiring parent and its existing affiliates had already elected separate Virginia returns, so the acquired group had to follow that method absent timely permission to change. The target repre…
Did an exemption from federal self-employment tax prevent Virginia from taxing income included in federal adjusted gross income after an IRS audit?
No. Federal self-employment tax is separate from income tax, and Virginia taxed the income because it was included in federal adjusted gross income. Virginia accepted the current IRS audit result, but…
Could Virginia consider an administrative tax appeal filed more than 90 days after the assessment notice was mailed?
No. Virginia mailed the assessment on March 29, 2016, making the 90-day administrative appeal deadline June 27. Because the taxpayer did not file until August 4, the Tax Commissioner could not reach t…
Was a Pennsylvania-domiciled college student a full-year Virginia resident when he kept Virginia housing and moved here permanently after graduation?
Yes on the available evidence. Even if Pennsylvania domicile continued until July, the taxpayer likely maintained a Virginia place of abode from college in January through May and again after moving p…
Could a retailer use Oklahoma sales tax paid on fixtures shipped by common carrier to offset Virginia use tax?
No. Oklahoma treated delivery to a common carrier for shipment outside the state as an exempt interstate sale, even though the retailer hired the carrier. The Oklahoma tax was therefore paid in error …
Could a Virginia retailer credit Oklahoma sales tax paid on fixtures that a common carrier picked up in Oklahoma and delivered to Virginia?
No. Oklahoma treated the common carrier's possession as shipment outside the state, so the fixture sales were exempt interstate transactions even though the retailer hired the carrier. The Oklahoma ta…
Could a repair business receive an audit credit for sales tax paid to vendors without invoices from the audit period proving the payments?
No. Vendor lists, general claims that vendors charged tax, and sample invoices from outside the audit period did not prove sales tax was paid on the specific resale purchases under audit. Virginia uph…
Could a retailer use exemption certificates obtained after an audit and unsupported bag claims to remove sales and purchases from the assessment?
Mostly no. Certificates dated after the audit, missing registration data, or using the wrong nonprofit form did not prove good-faith exempt sales. Virginia removed only the identified political-subdiv…
How did Virginia's July 2017 law change the sales-tax treatment of separately stated automobile repair shop-supply charges?
Beginning July 1, 2017, automobile repair shops had to collect sales tax on separately stated shop-supply charges, whether or not the supplies transferred to the vehicle or customer. The shops could b…
Was a corporation exempt from county BPOL tax when it packaged and sold only farm products that it had grown itself?
Yes. Virginia's farm-products exemption applied because the same corporate taxpayer grew all produce sold from the county facility. Packaging its own products did not create a taxable wholesale busine…
What Virginia tax interest rates applied in the third quarter of 2017 to assessments, refunds, disputed assessments, estimated tax, and local taxes?
For July 1 through September 30, 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 asse…
Did filing both part-year and nonresident returns prove that a couple abandoned Virginia domicile during a brief 2015 absence?
No. The couple's filing history showed Virginia residence before and after an absence of less than six months, creating prima facie evidence that they never abandoned Virginia domicile. Because they d…
Could a retiree obtain Virginia's previously taxed contribution subtraction without records supporting the retirement-income claim?
Not without documentation. Virginia taxes retirement income included in federal adjusted gross income unless a specific subtraction applies, and federal tax paid on that income does not itself create …
Did federally taxable lump-sum death benefits from annuity contracts qualify for Virginia's death-benefit subtraction without being life-insurance proceeds?
Yes. The statute required payments from an annuity contract with an insurance company, received by a beneficiary in a lump sum, and subject to federal income tax. The payments met all three conditions…
Does a later acquisition disqualify Virginia's long-term capital-gain subtraction when the original company qualified at the time of investment, and what proof must the investor provide?
A later merger or acquisition does not by itself defeat Virginia's long-term capital-gain subtraction if the original company was a qualified business when the investment was made. But this taxpayer h…
Could insurance-company disability pension income qualify for Virginia's disability subtraction even when reported on Form W-2?
Yes. Form W-2 reporting did not control when the insurer confirmed the payments had changed from salary continuation to disability pension income and the husband remained disabled under Social Securit…
Could a restaurant raise a new gratuities issue after the 90-day appeal period by calling it a reconsideration request?
No. The restaurant raised gratuities after the 90-day deadline and had not included that issue in its original timely appeal. Reconsideration could correct facts, apply changed law or policy, or consi…
Can Virginia hold a minority shareholder and corporate officer personally liable for unpaid company sales and withholding taxes when he knew of the delinquency but lacked responsibility and authority over tax payments?
No. Although the taxpayer was a 15% shareholder, vice president, secretary, director, and knew the company was behind on taxes, his father controlled budgeting, bills, and tax payments. Because the ta…
Did inventory owned at Virginia fulfillment centers require an out-of-state online seller to register and collect Virginia sales tax?
Yes. The seller retained ownership and control of inventory stored at Virginia fulfillment centers, which was sufficient activity under the inventory-nexus rule. Its collection and remittance duty beg…
Could an online retailer with Virginia fulfillment inventory close its registration and recover tax collected since voluntarily registering in 2015?
No. Owning goods for sale at a Virginia fulfillment center required registration under the inventory-nexus rule effective June 1, 2017. The retailer also could not recover tax collected since its Augu…
Did an out-of-state internet seller have to collect Virginia sales tax because its resale inventory was stored in a Virginia fulfillment center?
Yes. Under the 2017 inventory-nexus amendment, owning goods for sale at a Virginia fulfillment center was sufficient activity to require dealer registration. Beginning June 1, 2017, the seller had to …
What major Virginia state and local tax changes did the Department of Taxation identify in its 2017 Legislative Summary?
Virginia's 2017 Legislative Summary was a broad historical guide, not a taxpayer ruling. Major changes included a Fiscal Year 2018 tax-amnesty program, new electronic filing and payment mandates, IRC …
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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.