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 corporation prove that county vehicle-property-tax assessments should be abated because it was domiciled and taxed in another state?
Not yet. The corporation supplied out-of-state tax bills and insurance information but did not prove the bills were paid or establish where its commercial domicile and vehicles were located. Virginia …
Did stock acquired in 2006 qualify for Virginia's long-term-capital-gain subtraction because it did not vest until 2011?
No. Virginia treated the stock as an investment when the taxpayer acquired it in 2006, even though it was then nontransferable and did not vest until 2011. Because the statute required the investment …
Were sales and rentals of required college textbooks by a private online retailer exempt from Virginia sales tax?
Yes. Both sales and rentals by a private retailer qualified when the textbook was certified by a college department or instructor as required for the student's course. The exemption applied to student…
Did a skid loader and mulching head used to clear land qualify for Virginia's forest-products harvesting sales-tax exemption?
No. The contractor cut and ground vegetation into mulch that stayed on the property, so it provided a land-clearing service and did not harvest forest products for sale or for use in a product to be s…
Could Virginia expand a contractor's use-tax audit from three years to six when it found untaxed purchases and no filed returns?
Yes. The contractor failed to accrue and remit use tax on untaxed purchases and filed no sales-and-use-tax returns, giving Virginia reasonable cause under Va. Code § 58.1-634 to examine six years. A h…
Were optional consulting services that gave customers instructions for modifying taxable canned software also subject to Virginia sales tax?
No. Although the canned software delivered in tangible form was taxable, the optional consulting contained no software or other tangible property and could be bought separately or not at all. Virginia…
How did Virginia treat cable-franchise fees after the Communications Sales and Use Tax began in 2007?
New or renewed cable franchises entered on or after January 1, 2007 could not include a franchise fee while cable service remained subject to the communications tax. Fees under agreements already in f…
Did living abroad and filing a prior part-year return prove that this taxpayer was no longer domiciled in Virginia in 2013?
Not on the evidence provided. Living abroad and filing a prior part-year return did not by themselves prove abandonment of Virginia domicile, especially with a Virginia address and driver's license st…
Must married federal or state employees combine their salaries when testing Virginia's $15,000 employee-salary subtraction?
No. Virginia applied the salary limit separately to each employee-spouse. Because the wife was a federal employee whose total annual salary was below $15,000, the couple could subtract her qualifying …
Did temporary work in two other states end this taxpayer's Virginia domicile for 2012 income-tax purposes?
No. The taxpayer did not show a permanent home or intent to remain in either other state, while continuing to use a Virginia family address and driver's license. Virginia treated him as a domiciliary …
Does an employer's failure to withhold Virginia income tax relieve the employee from paying tax on the wages?
No. Even if the employer should have classified the worker as an employee and withheld Virginia tax, the worker remained responsible for reporting the income and paying the full tax. Without withholdi…
Can an employee claim Virginia withholding credit when the employer's reported payment cannot be verified?
Yes, if the employee proves the employer actually deducted Virginia tax from wages. Va. Code § 58.1-468 protects an employee when withheld tax was not remitted, but the taxpayer had not supplied verif…
Did moving to New Jersey for work establish a new domicile when the taxpayer kept Virginia licenses and described the move as temporary?
No. The taxpayer's New Jersey home, job, and resident return favored a move, but she kept Virginia driver's, vehicle, and voter registrations and described New Jersey as temporary while pursuing New Y…
Did a married couple abandon Virginia domicile by living and working in a U.S. territory for several years?
No. Although the couple leased a home and the husband worked in the territory, they retained their Virginia house, obtained Virginia driver's licenses and vehicle registration before returning, and th…
What Virginia tax interest rates applied during the second quarter of 2017?
Virginia's second-quarter 2017 rates were 6% for tax underpayments and 6% for tax overpayments. The reduced rate for qualifying assessments under administrative appeal was 1%. Certain local delinquenc…
Could Virginia refund 2011 and 2012 overpayments when the original returns were filed after the three-year deadline?
No. Both returns were filed after the three-year refund period expired, and Va. Code § 58.1-499 D gave the Department no discretion to extend it. Disability did not suspend the deadline, and caring fo…
How should a Virginia city classify and measure a used-car dealer's BPOL receipts from fees, warranties, special orders, and trade-ins?
Processing fees and warranty or insurance commissions connected to vehicle sales were ancillary to the dealer's retail business, not a separate service business. Virginia remanded the special-order, w…
Were new RVs financed by a bank still the dealer's taxable inventory for Virginia merchants' capital tax?
Yes. RVs titled in the dealer's name and held by the bank only as collateral were dealer-owned inventory; true consignments would not be. Virginia upheld the county's rate but remanded because the cou…
Can a Virginia locality tax a nursery's inventory as merchants' capital and its other business property under BTPP rules?
Yes. Merchants' capital and business tangible personal property are separate property classes, so both taxes can apply. A locality may not impose both BPOL and merchants' capital tax on the same merch…
For Virginia BPOL tax, is a company that buys defaulted debt for its own account a collection agency or a financial-services business?
It was a financial-services business. The company bought discounted debt for its own account, kept any collections, and bore the loss risk. A collection agency instead collects for a client and remits…
Was the full price of a laser-tag party package taxable when it included pizza, beverages, and party services?
Yes. Because each package included food and beverages, the entire charge—including laser tag, the room, invitations, paper goods, and cleanup—was taxable. Standalone admission remained exempt, and tax…
Could Chesterfield County tax Verizon cable set-top boxes, and could it raise an appeal-timeliness objection for the first time in circuit court?
No on both issues. The Supreme Court of Virginia held that Verizon's cable set-top boxes were intangible personal property not subject to local tax. Chesterfield County also waived its 2008-2009 timel…
Could a taxpayer take a BPOL dispute to the Virginia Department before filing a complete local appeal?
No. The county's audit letter was not a final appeal determination, and the taxpayer had not filed a complete local appeal. The Department lacked jurisdiction until that process was completed, but the…
Was a business that bought, rehabilitated, and resold real estate a contractor for Virginia BPOL tax even when independent contractors did the work?
Yes. A business constructing or improving property for its own account for sale can be taxed at the contractor rate even when it hires others to perform the work. Virginia upheld that classification b…
Did disability suspend Virginia's three-year deadline for claiming a 2012 income-tax refund?
No. The 2012 return had to be filed by May 2, 2016 to obtain a refund, but it was not filed until October 2016. Virginia law required a fiduciary or authorized agent to file for a disabled taxpayer an…
Were freight charges a broker collected from shippers and passed to motor carriers part of its Virginia BPOL gross receipts?
Not if the broker could prove the carrier payments were separately accounted agency funds. Contracts showed it collected and disbursed the money for shippers and carriers, and its federal reporting ma…
What federal tax changes did Virginia adopt for 2016 returns when it advanced its Internal Revenue Code conformity date?
Virginia advanced its fixed conformity date from December 31, 2015 to December 31, 2016 for tax years beginning in 2016. It adopted the 2016 Olympian and Paralympian medal-and-prize exclusion but reta…
Did gain from Fortune 500 insurance-company stock qualify for Virginia's small technology-business capital-gain subtraction?
No. The stock was purchased in 2004 and issued by a large insurance company, not a qualifying small Virginia technology business within the statutory investment period. Oral advice later written down …
Did a husband's move to another state make the couple eligible to file a joint Virginia nonresident return for 2012?
No. The husband worked and lived in another state, but kept his Virginia home, license, vehicle registrations, and voter registration and returned in 2013. Virginia found no domicile change, treated h…
Did delivered meal kits containing chilled, raw ingredients qualify for Virginia's reduced sales-tax rate on food for home consumption?
Yes. The chilled raw ingredients were packaged for customers to cook at home, so the full meal-kit sales price qualified for the reduced food rate then in effect. Separately stated delivery was exempt…
Did arbitration proceeds tied to a domestic subsidiary's stock sale qualify for Virginia's foreign-source-income subtraction?
No. The sold subsidiary was a U.S. corporation, so the gain was not from foreign intangible property, and the federally reported stock-sale gain could not be recharacterized as technical fees. Because…
Which labor and customer transactions were exempt in Virginia's sales-tax audit of an audiovisual system seller?
Only separately stated labor performed by installation technicians qualified for the installation exemption; engineering and other services remained in the taxable system price. Virginia allowed credi…
Could California residents amend a Virginia nonresident return for a reciprocal tax credit after California changed their 2011 liability?
Yes. California's September 2015 adjustment made the taxpayers eligible to claim Virginia's reciprocal nonresident credit, and their May 2016 amended Virginia return was within the special one-year pe…
Did the Servicemembers Civil Relief Act keep this active-duty member's basic pay outside Virginia income tax?
No. Military orders alone do not change domicile, but a servicemember can voluntarily establish a new one. The taxpayer provided no proof of continued ties to the claimed home state and instead owned …
Was saying that he neither worked nor lived in Virginia enough to overturn this nonfiler's 2012 assessment?
No. The taxpayer supplied no objective evidence despite two Department requests, so he did not prove abandonment of Virginia domicile or overcome the assessment's presumption of correctness. He receiv…
Could Virginia assess a nonfiler from an IRS audit adjustment and give notice at the taxpayer's last known address?
Yes. Virginia used the IRS's final income adjustment after the taxpayer failed to file a state return or respond to an information request. The Department had mailed proposed-assessment notice to the …
Could a Virginia resident defeat a 2012 assessment merely because the Department could not provide the employer's actual Form W-2?
No. Federal exchange data showed wages from a California employer and interest from a Virginia institution, and the taxpayer did not deny Virginia residency or receiving income. The assessment remaine…
Was an auto body shop subject to Virginia's annual litter tax because it sold replacement vehicle parts during repairs?
Yes. Motor-vehicle parts were enumerated litter-tax products, and the shop regularly sold and installed them while repairing damaged bodies. Those parts were integral to its primary repair business, n…
What did Virginia's original Food Crop Donation Tax Credit guidelines require from farmers and nonprofit food banks?
Beginning in 2016, qualifying Virginia farmers could claim 30% of donated food crops' fair market value, up to $5,000 per taxpayer and a $250,000 statewide annual cap. A Virginia nonprofit food bank h…
Did a room lease and work aboard a vessel prove that this taxpayer abandoned Virginia domicile for 2012?
Not on the evidence provided. The taxpayer had a month-to-month room lease elsewhere and worked aboard a vessel most of each month, but renewed his Virginia driver's license in 2011 and ignored two re…
Did repeated requests that an employer start Virginia withholding relieve the employee from paying the tax due?
No. The employee reported Virginia wages and a tax liability but no corresponding withholding. Even if the employer should have withheld and ignored his requests, no tax was actually deducted from his…
Did a Public Health Service commissioned officer qualify for Virginia's military-pay subtraction when fewer than 90 active-duty days fell in 2012?
Yes. The Public Health Service Commissioned Corps counted as a uniformed service, and the 90-day test applied to the continuous extended-active-duty period rather than days within one tax year. Becaus…
What Virginia tax interest rates applied during the first quarter of 2017?
Virginia's first-quarter 2017 rates were 6% for tax underpayments and 6% for tax overpayments. The reduced rate for qualifying assessments in administrative appeals was 1%. Certain local delinquency a…
Could insurer-paid long-term disability benefits reported on Form W-2 qualify for Virginia's disability-income subtraction?
Potentially. Virginia modified its prior position and said Form W-2 reporting alone does not disqualify benefits proven to arise from long-term disability insurance. But the taxpayers documented perma…
Could a credit-card finance company use retailer assignments to claim Virginia sales-tax bad-debt credits on customer defaults?
No. Virginia strictly read the bad-debt statute to benefit the retail dealer that made the sale, reported it, and remitted the tax. The finance company bought or originated the accounts and bore the d…
Did a federally taxable lump-sum annuity death benefit qualify for Virginia's income subtraction even though it was not life-insurance proceeds?
Yes. The payment came from an annuity contract with an insurance company, was paid to the beneficiary in a lump sum, and was federally taxable. Those facts met Va. Code § 58.1-322 C 32; the payment di…
Did claiming residence in another state overturn this nonfiler's best-information Virginia assessment for 2012?
No. The taxpayer did not answer the Department's request for evidence showing abandonment of Virginia domicile, so the best-information assessment remained presumed correct. He received one final 30 d…
Could an employee claim a Virginia withholding credit for tax his employer allegedly should have withheld after March 2014?
No. An employee may receive credit when an employer actually deducts Virginia tax but fails to remit it, but this taxpayer did not prove any deduction after March 2014. Unemployment eligibility, a sub…
Did an asserted post-divorce move outside Virginia overturn this taxpayer's estimated 2012 resident income-tax assessment?
No. Virginia unemployment records covered all four quarters of 2012, the taxpayer retained Virginia DMV ties, and she supplied no evidence of living elsewhere that year. Because she did not complete t…
Could a business overturn its Virginia sales-and-use-tax audit by claiming it operated only as a wholesaler?
No. The business did not keep or provide records separating wholesale from retail sales or substantiating sales, purchases, fixed assets, and an exempt Virginia transaction. Virginia upheld the assess…
Did work in another state and later hotel stays in Pennsylvania end this taxpayer's Virginia domicile for 2011 through 2013?
No. An out-of-state employment letter did not prove a permanent new domicile, and temporary Pennsylvania hotel stays were not a permanent abode. Virginia treated the taxpayer as a domiciliary resident…
Was a workstation and tool chest used to support cleaning, deburring, and inspection exempt as industrial manufacturing equipment?
No. Although the cabinet facilitated product inspection and could be essential to the business, it was not indispensable to or an immediate part of actual production. Its quality-control function also…
Did the Internet Tax Freedom Act or Virginia's Internet-access exclusion exempt a cellular provider's Picture Mail charges?
No. Picture Mail did not provide Internet access; customers needed Internet access before using it. Virginia also found the service was picture messaging rather than email, instant messaging, or a sim…
Which common catering charges were taxable, and when could nonprofit, church, or government customers buy meals and related services exempt?
Virginia treated customer charges for wait staff, passed-through delivery, disposable paper goods, and administrative fees as taxable. Gift certificates were taxed when redeemed, not when sold. Exempt…
How could a crowdfunding investment qualify for Virginia's Qualified Equity and Subordinated Debt Investments Tax Credit under the 2016 guidelines?
An SEC-authorized crowdfunding investment made through an online solicitation, broker, or funding portal could qualify if it otherwise met Va. Code § 58.1-339.4. The business needed annual Virginia ce…
What Virginia tax interest rates applied during the fourth quarter of 2016?
Virginia's fourth-quarter 2016 rates were 6% for tax underpayments and 6% for tax overpayments. The reduced rate for qualifying assessments in administrative appeals was 1%. Certain local delinquency …
Did employment, a driver's license, and living in a camper in another state end the husband's Virginia domicile in 2013?
No. The husband worked and obtained a license in another state, but lived in a Virginia-registered camper, became a student, and retained a Virginia home, spouse, voter registration, vehicles, family,…
Did resale certificates obtained years after an audited sale prove that an IT provider's data-warehouse appliance sale was exempt?
No. The seller obtained the certificates more than three and nearly four years after the sale, so they were not accepted in good faith at the transaction. Virginia also could not validate the buyer as…
Did long-term work, housing, licensing, and marriage abroad establish that this taxpayer had left Virginia domicile by 2012?
Yes. Nearly two decades of employment abroad, leased homes, a foreign driver's license and vehicle registration, and marriage to a citizen of that country outweighed the taxpayer's retained Virginia l…
Could taxpayers avoid Virginia's three-year refund deadline by carrying a late-claimed overpayment forward as a credit?
No. Virginia applies the same three-year limitation to refunds and overpayment credits. The Department had no record of the 2011 return before January 2016, and a signed April 2012 copy plus preparer …
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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.