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 Virginia personally assess a majority shareholder and CEO for unpaid corporate income tax when he knew of the liability but continued paying operating expenses while the company wound down?
Yes. The taxpayer conceded he met Virginia's corporate-officer definition, knew of the 2014 corporate income tax liability before the return was filed, and continued paying salaries and other operatin…
Could a countertop fabricator avoid Virginia sales tax on fabrication and related service charges by claiming Department representatives gave incorrect advice, and how did a July 2017 law change affect later transactions?
No relief was available for the May 2013-April 2016 audit. The taxpayer could not document qualifying written Department advice under Va. Code § 58.1-1835, and fabrication labor plus services connecte…
Under Virginia's 2017 guidelines, how did purchasers and dealers claim refunds of erroneously paid retail sales and use tax, what made a claim complete, and when did limitations and interest begin?
The purchaser generally had to seek a refund from the dealer first. If the dealer could not provide it, a direct Department claim required a complete Refund Claimant Return, transaction spreadsheet, i…
Did the Servicemembers Civil Relief Act preserve a military couple's claimed Florida domicile after they moved to Virginia under the wife's orders, bought a home, registered and voted in Virginia, and obtained Virginia licenses?
No. Military orders alone do not change domicile, but the Servicemembers Civil Relief Act also does not prevent a servicemember or spouse from acquiring a new domicile. The couple failed to show that …
Did a military contractor employee's documented combat-zone service extend the Virginia refund period for 2011 and 2012 returns filed in July 2016?
Yes. IRS documentation showed that the military contractor employee qualified for the federal combat-zone postponement. Virginia extended both return due dates to June 15, 2015, so the July 29, 2016 f…
Was it double taxation for a county to use the same first full year's receipts in two BPOL license-year calculations?
No. The corrected 2015 liability and the 2016 license tax covered different periods, even though both used actual 2015 receipts. The business had not elected the final-year estimate procedure, and the…
Did the federal Internet Tax Freedom Act bar a Virginia city from including an internet provider's access-service receipts in its BPOL gross-receipts base for 2010 and 2011?
Not for the years at issue. Virginia concluded that a BPOL tax measured by internet-access receipts was a tax on internet access under the federal Internet Tax Freedom Act. But the city proved it had …
Must a business claiming Virginia's BPOL out-of-state deduction prove that each deducted gross receipt exactly equals income shown as a separate amount on another state's income tax return?
No. Once the city accepted that the taxpayer was eligible for the BPOL out-of-state deduction, the taxpayer did not have to make its sitused gross receipts equal the taxable income shown on another st…
Was a December 2014 amended return timely to recover a 2007 Virginia assessment paid through a tax lien in February 2012?
No. The taxpayers missed both the general May 1, 2011 amended-return deadline and the special two-year period after the February 2012 lien payment. Their December 2014 filing was late, so Virginia had…
How does Virginia calculate the retirement-income subtraction when pension contributions were deductible federally but taxed by another state before later distributions?
Virginia uses a pro-rata formula, not a dollar-for-dollar recovery of contributions. The taxpayers proved that the wife's 1984-1986 pension contributions were excluded federally and taxed by State A, …
Could the Virginia Department of Taxation reconsider BPOL years already governed by a circuit-court order or hear later tax years when the taxpayer had not first filed the required local appeal?
No. For 2008-2012, the county had appealed the Department's earlier determination to circuit court, making assessment correctness and relief exclusively judicial matters. For 2013-2014, the taxpayer h…
Could a Virginia taxpayer's otherwise late amended refund return remain timely if it was filed within one year after another state's final determination changed the taxpayer's resident status?
Potentially. The taxpayer's second amended return was outside Virginia's ordinary three-year period, but Va. Code § 58.1-1823 A (v) allowed a refund claim within one year after another state's final d…
Must a Virginia real property contractor include separately stated shop drawings, administrative fees, custom gel coat, and tooling charges in the consumer use tax base for fabricated construction materials?
Yes. A real property contractor is the user and consumer of construction materials, and Virginia's cost-price definition does not deduct connected labor, service, or other expenses. The separately sta…
What administrative request fees did Virginia Tax Bulletin 17-5 announce effective July 1, 2017, and could taxpayers request a waiver?
Effective July 1, 2017, the bulletin announced a $50 fee for a doubtful-collectability offer in compromise, $275 for a ruling letter, $275 for a local business tax advisory opinion, and $100 for a cor…
Did working and renting a home in another state establish a new domicile when the taxpayer kept a Virginia home for family, Virginia vehicles, and a Virginia driver's license?
No. The taxpayer's State A job, rental, and resident returns showed ties there, but he retained a Virginia home for his former wife and children, three Virginia-registered vehicles, and renewed his Vi…
Can Virginia personally assess a minority shareholder and senior manager for unpaid withholding tax when his work covered engineering and legal matters, not payroll or finance?
No. The taxpayer managed engineering, testing, business development, and legal matters, while other executives controlled accounting, payroll, and finance. His limited financial involvement consisted …
Could corrected fencing invoices separating materials from installation labor reduce a Virginia sales tax assessment that originally taxed lump-sum charges?
Yes, for this audit. Virginia accepted corrected invoices that separately stated fencing materials and installation labor, returned the audit for revision, and warned that future pre-July 2017 lump-su…
Were software purchases and a support renewal exempt from Virginia sales and use tax when some software was downloaded but manuals and a CD were delivered?
The two asset-software purchases were exempt because documentation showed electronic delivery. The annual support transaction was not fully exempt because manuals and a CD were physically delivered be…
Can a wastepaper recycler qualify for Virginia's industrial processing exemption when it performs mechanical treatments beyond ordinary sorting and baling?
Possibly. Virginia reaffirmed that ordinary sorting and baling of wastepaper was not qualifying industrial processing. But if the recycler proved that it also shredded, fluffed, compacted, compressed,…
Can the Virginia Department hear a BPOL refund appeal before the taxpayer appeals to the city and receives a final local determination?
No. The city's denial of the taxpayer's 2011-2013 BPOL refund request was an appealable event, giving the taxpayer one year to file a local appeal. The Department could hear the dispute only after the…
When may a taxpayer ask the Virginia Department to review a city's denial of a BPOL refund request?
Only after the taxpayer files the statutory local appeal and the locality issues a final determination. The city's denial of the 2010-2013 refund request was an appealable event, starting a one-year p…
Could a taxpayer appeal a city's BPOL refund denial directly to the Virginia Department without first filing the statutory local BPOL appeal?
No. The city's denial of the 2010-2013 BPOL refund request was an appealable event under the BPOL statute. The taxpayer had one year from communication of that denial to appeal to the city. Only after…
Could taxpayers overturn a Virginia assessment based on an IRS audit while their later federal amendment was still pending, and would a payment plan admit liability?
No immediate abatement was available. Virginia properly used the IRS's final 2010 audit adjustments after the taxpayers failed to file a Virginia amended return, and the IRS's write-off of its balance…
Are a Virginia resident's wages and salaries exempt from Virginia income tax, and can that theory defeat assessments or filing duties?
No. Virginia begins with federal adjusted gross income, so a resident's wages included federally are taxable unless a specific Virginia modification applies. The taxpayer's cited cases did not support…
Must a Virginia resident estate file a fiduciary income tax return when securities sold after death should receive a stepped-up basis but may still produce some taxable gain?
Yes. A resident estate must file if it is required to file federally or has any Virginia taxable income. The Department agreed that securities acquired from the decedent should use fair market value a…
Could married taxpayers use a lower federal adjusted gross income than the IRS reported and claim an unreduced Virginia age deduction for 2013?
No. Virginia used the federal adjusted gross income reported by the IRS because the couple's return showed a lower amount, and any discrepancy had to be resolved federally. Only the husband qualified …
Did an employer still owe Virginia withholding tax and a 100% fraud penalty when its employees had already filed returns and paid their own tax?
The withholding tax itself was removed because each employee had filed and paid the Virginia tax, and the evidence did not support a fraudulent intent to evade tax. But the employer remained liable fo…
Could a taxpayer obtain abatement of a 2013 Virginia income-tax assessment with incomplete and conflicting evidence that she had moved to another state?
Not yet. The taxpayer's rental, address-change, and information-return records did not establish when she moved or whether she intended to remain in the other state, and some evidence conflicted. Beca…
Did foreign work assignments and purchasing property in another state establish a new domicile when the taxpayer returned to Virginia within six months?
No. The taxpayer's overseas work was temporary, his Virginia driver's-license record contradicted his claim that it had lapsed, Virginia tax continued to be withheld, and the property he bought in Sta…
Did an out-of-state online seller have to register for Virginia sales tax when its only Virginia presence was resale inventory stored at a fulfillment center?
Yes. Effective June 1, 2017, owning tangible personal property for sale in Virginia was sufficient activity under Va. Code § 58.1-612 C 9. Because the online seller kept its resale inventory at a Virg…
Must a business hold a Virginia state contractor's license before a locality may classify it as a contractor for BPOL tax purposes?
No. Virginia said state contractor licensing and local BPOL classification use different definitions and serve different purposes. A business could be classified as a contractor for BPOL tax even with…
What resale exemption certificate did Virginia Tax Bulletin 17-4 require for purchases of stamped cigarettes beginning January 1, 2018?
Beginning January 1, 2018, a retailer purchasing Virginia-stamped cigarettes for resale had to use a Department-issued Form ST-10 C Cigarette Resale Exemption Certificate. The certificate was unique t…
Could a security-services provider qualify as a staffing firm and exclude employee wages, payroll taxes, and benefits from BPOL gross receipts?
No. Although its client contracts were temporary, the security company retained substantial control over its guards, equipment, supervision, reporting, and performance. Virginia treated it as providin…
How should former New Jersey residents calculate Virginia's subtraction for pension distributions attributable to contributions previously taxed by New Jersey?
They could not subtract the entire unrecovered contribution balance at once. Because the pension lacked an individual year-end account value, Virginia used the federal simplified annuity method. The s…
Could Virginia assess 2012 tax more than three years after the return due date when taxpayers had not reported an IRS increase in federal income?
Yes. The ordinary three-year limit did not apply because the taxpayers failed to file a Virginia amended return within one year of the IRS change. Va. Code § 58.1-312 A 3 then allowed Virginia to asse…
Was an IRA distribution received before a taxpayer became a Virginia resident included in her Virginia part-year resident income?
No. After reviewing new documentation, Virginia found that one taxable IRA distribution was received in May 2013, before the taxpayer became a Virginia resident in June. That distribution was excluded…
Could a Virginia resident claim an out-of-state tax credit for income tax a partnership paid on his behalf through another state's unified return?
Yes. The partnership statement showed both the taxpayer's pro rata share of income attributable to the other state and his pro rata share of the tax paid there on his behalf. That satisfied Virginia's…
Could a taxpayer claim Virginia's Livable Home Tax Credit without a certificate of approval from the Department of Housing and Community Development?
No. A taxpayer first had to apply to the Department of Housing and Community Development and obtain a certificate proving that the accessible new home or retrofit qualified. Without that certificate, …
Could an auto-parts and paint retailer rely on customers' resale certificates for consumable shop supplies when the certificates appeared valid and resale was plausible?
Yes. Virginia found that the retailer could reasonably conclude from the certificates and its knowledge of the customers' businesses that the disputed supplies might be resold. Its acceptance of the r…
Which dealers had to make Virginia's accelerated sales-tax payments in June 2017 and June 2018, and how were those payments calculated and reconciled?
For the June 2017 payment, dealers with at least $2.5 million of taxable sales or purchases in the prior fiscal year had to prepay 90% of their June 2016 sales-tax liability. For June 2018, the thresh…
What sales-tax registration rule did Virginia Tax Bulletin 17-3 announce for out-of-state dealers storing inventory at Virginia warehouses or fulfillment centers?
Beginning June 1, 2017, an out-of-state dealer making sales to Virginia customers had to register and collect Virginia retail sales and use tax if it owned inventory for sale stored in Virginia, inclu…
Did a county audit letter styled as a final determination permit an immediate Virginia Department appeal when the taxpayer had not first filed a local BPOL appeal?
No. The county audit staff's letter denied the refund and was labeled a final determination, but it responded only to amended returns and not to a local administrative appeal. The refund denial was an…
Could a local school-board member claim Virginia's subtraction for federal or state employees earning no more than $15,000?
No. Virginia treated local school boards as political subdivisions and distinguished their members from state employees, so the husband's compensation did not qualify for the subtraction in Va. Code §…
Could Virginia Tax decide whether a non-cable telephone and internet provider properly charged a local government a right-of-way or cost-recovery fee?
No. The provider did not offer cable television, so its surcharge was not a right-of-way fee administered under the Communications Sales and Use Tax Act. If it was a telephone right-of-way fee, VDOT h…
Could a fencing contractor remove assessed use-tax purchases by showing cancelled checks and asserting that the checks were personal cash withdrawals?
No. Cancelled checks showing cash did not establish that the withdrawals were personal when the contractor's own general ledger recorded them in small-tools and materials expense accounts. Because Vir…
Did 100% natural latex mattresses qualify for Virginia's durable-medical-equipment sales-tax exemption?
No. Virginia again held that the natural latex mattresses did not meet the durable-medical-equipment exemption because they remained useful when illness or injury was absent. A federal flammability re…
Did an advertising firm owe use tax on printed campaign materials bought for a tax-exempt nonprofit client, and could Virginia project a sample year's errors across the audit period?
Yes. An advertising business is the user and consumer of tangible property purchased for its campaigns, including printing, so the nonprofit client's exemption did not shield the firm's purchases. Vir…
How did Virginia's 2017 guidelines calculate and administer the Major Research and Development Expenses Tax Credit?
For taxable years beginning on or after January 1, 2016, taxpayers with more than $5 million of Virginia qualified R&D expenses could claim 10% of current expenses above 50% of the prior-three-year av…
How did Virginia's 2017 guidelines calculate and administer the regular Research and Development Expenses Tax Credit for taxable years beginning in 2016 or later?
The generally refundable credit offered a primary base calculation of 15% of qualified Virginia research expenses above the base amount, capped at $45,000, or 20% and a $60,000 cap for qualifying univ…
Were cable converter boxes taxable as business tangible personal property by a Virginia city for 2015?
No. Virginia held the customer converter boxes were intangible property exempt from local business tangible personal property tax under Va. Code § 58.1-1101 A 2a. The Department remanded the case and …
Were corporate refund claims timely when Virginia amended returns were filed more than one year after IRS closing agreements became final?
No. The IRS closing agreements became final when the taxpayer received notice that the Commissioner of Internal Revenue had signed them. Both Virginia amended returns were filed more than one year lat…
Could a Virginia resident who moved during the year claim a credit for tax paid to the new state on income earned before the move?
Yes, for qualifying income earned in the other state while the taxpayer was still a Virginia resident and taxed by both states, subject to Virginia's statutory limits. But income earned while working …
Did working and leasing homes in Maryland establish Maryland domicile for 2011-2013 when the taxpayer filed Maryland nonresident returns naming Virginia as home?
No. The taxpayer worked and leased residences in Maryland but kept a Virginia license and vehicles and filed Maryland nonresident returns identifying Virginia as his residence. He did not prove a perm…
Did prescribed 100% natural latex mattresses qualify for Virginia's durable-medical-equipment sales-tax exemption?
No. The mattresses failed Virginia's durable-medical-equipment test because they were useful even without illness or injury and were not specifically manufactured for medical purposes. A prescription …
Could a contractor reduce a Virginia consumer-use-tax audit by showing that a vendor charged tax on only some invoices?
Only for transactions supported by adequate documentation. A few invoices justified limited audit adjustments, but proof that a vendor charged tax on some purchases did not establish that tax was paid…
Did federal gain from a deemed sale of Virginia land-preservation tax credits remain taxable for Virginia income tax?
No. Although the IRS treated the transaction as a disguised sale producing federal adjusted gross income, Va. Code § 58.1-513 E barred Virginia gain or loss from transferring the land-preservation cre…
Could a Virginia resident overturn income-tax assessments by claiming no duty to pay, tendering a hand-drawn Treasury check, and objecting to wage garnishment?
No. Most older appeals and refund claims were time-barred, and Virginia upheld the 2012 assessment because its information showed the taxpayer was a Virginia resident with taxable income. A hand-drawn…
Did a former service member who lived abroad prove that he had abandoned Virginia domicile for 2012?
No. The taxpayer did not establish a permanent domicile in another state or country and retained Virginia ties, including a driver's license for much of the period and use of a Virginia family address…
Were a horse-boarding facility's feed and supply purchases exempt as agricultural production, and was a six-year audit proper?
No exemption applied. The facility provided nontaxable horse-boarding services but did not raise horses for breeding or sale, so it was the taxable consumer of feed and supplies used in that service. …
What did Virginia's 2017 guidelines require for the Recyclable Materials Processing Equipment Tax Credit?
For taxable years beginning in 2015 or later, the guidelines described a credit equal to 20% of qualifying equipment purchase costs, subject to a $2 million statewide annual cap and proration. Equipme…
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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.