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 this couple deduct carried-forward Virginia 529 contributions and subtract gain from publicly traded Virginia-company stock?
Virginia allowed the 529 deductions because records showed unused contributions from two contracts remained available for 2012 and 2013. It denied the capital-gain subtraction because the publicly tra…
Were public-university employees exempt from Virginia motor-vehicle rental tax when they paid personally for business-travel rentals?
No. The exemption applied when the Commonwealth or a political subdivision rented and directly paid for the vehicle. An employee's personal credit card or cash payment was not payment by the Commonwea…
Did a company prove exempt fence-installation labor or agricultural use of a tractor and loader in its Virginia use-tax audit?
No. Installation labor was bundled with fencing materials and no corrected invoice supported a separate exempt amount. The company also did not prove that it owned the cattle or farm, purchased cattle…
Did a Virginia-created resident trust owe Virginia fiduciary income tax when its trustee, beneficiary, and securities were outside Virginia?
No, on the stated facts. The trust was a Virginia resident trust because a Virginia domiciliary created and funded it, but it lacked sufficient current nexus after his death because the trustee, benef…
Could a taxpayer use the federal claim-of-right method on his 2015 Virginia return after repaying income reported in 2014?
Yes. Virginia follows an individual's federal IRC § 1341 election. The taxpayer claimed the credit in the repayment year, attached the Virginia and federal computation schedules, and reported the bene…
Did the husband's unemployment after military retirement mean this Virginia couple did not have to file a 2012 resident return?
No. The husband received more than $50,000 of retirement income, the wife had wage income, and unemployment compensation was taxable. The couple had to file a Virginia resident return and received 30 …
Did gain from a qualified Virginia technology company's sale of internet domain names qualify for the capital-gain subtraction?
No. Even if the LLC was a qualified technology business and the gain was long-term, the subtraction applied to gain from the taxpayer's equity or subordinated-debt investment in the business. Internet…
Was a federal Civil Service Retirement System annuity exempt from Virginia income tax like Social Security benefits?
No. Virginia's subtraction covered Social Security and benefits included federally solely under IRC § 86, not CSRS annuities. Any CSRS amount included in federal adjusted gross income remained in Virg…
Could Virginia residents claim an other-state income-tax credit for New Hampshire's Business Enterprise and Business Profits Taxes?
No. The Business Enterprise Tax was based on business expenditures, and the Business Profits Tax was not a broad-based individual net-income tax. Neither was substantially similar to Virginia's indivi…
Who determines actual property value for Virginia recordation tax when the purchase price, appraisal, and assessment differ?
The circuit-court clerk makes the factual valuation, and Virginia generally defers unless the result is unreasonable. A recent assessment strongly indicates fair market value, but the clerk may consid…
Did a lower purchase price and appraisal automatically require recordation-tax refunds when the clerk used the property's assessed value?
Not automatically. A recent assessment strongly indicated fair market value, and an appraisal alone did not prove the clerk unreasonable. Virginia asked the clerk to reconsider all reliable evidence; …
Did compensation in the New Hampshire Business Enterprise Tax base make it a qualifying income tax for Virginia's other-state credit?
No. The tax base included compensation, interest, and dividends paid or accrued, making it a tax on business expenditures rather than a broad-based individual income tax substantially similar to Virgi…
What did Virginia advise a town about BPOL authority, tax bases, appeals, out-of-state receipts, and receipt situs?
A county generally could not duplicate a town's BPOL tax without town permission. A locality could use gross receipts or Virginia taxable income but had to use one base for all business classes. Appea…
Did a corporation substantiate Virginia's foreign-source-income subtraction for overseas software licensing and related technical services?
No. Technical-service fees qualified only when incidental to qualifying foreign property licensing, but the corporation did not provide the requested software and trademark license contracts despite e…
Was a minority corporate officer personally liable for unpaid Virginia sales and withholding taxes handled by the treasurer?
No. Although he was an officer and later knew of the delinquencies, the evidence did not show authority to take over the treasurer's tax duties or prevent the failures. The struggling corporation coul…
Was a corporate secretary personally liable after learning of unpaid Virginia sales and withholding taxes and taking control of some payments?
Yes. After learning of the delinquencies, the officer directed and made company and personal payments, signed checks, and had joint discretion over corporate bills. Virginia found duty, knowledge, aut…
Could a hotel purchaser value acquired business property at its resale proceeds instead of the city's percentage-of-original-cost method?
No. Virginia law directed most business tangible property to be valued using percentages of original cost, meaning the capitalized cost when first purchased new, not a later buyer's allocated purchase…
Did new evidence show that a taxpayer who moved to Virginia in late October 2012 was only a part-year resident?
Yes. New documentation showed that the taxpayer left his job and prior-state domicile and moved to Virginia in late October 2012. Virginia treated him as a part-year resident, requested Form 760PY wit…
Could a merchant mariner exclude 2012 wages from Virginia tax without proving domicile in another state?
No. Working outside Virginia did not establish a new domicile. The husband retained a Virginia home with his wife, vehicles, a driver's license, and other ties, and provided no evidence of permanent d…
Should one-time tornado fence repairs stay in a manufacturer's audit sample, and did its new-gauge project qualify as research and development?
The tornado repairs were isolated and unrelated to normal meter manufacturing, so Virginia removed them from the sample and taxed them separately. The new-gauge project qualified as research and devel…
Did Virginia's Internet-service equipment exemption cover wireless service and equipment used for retail, wholesale, and telephone activity?
Wireless transmission itself did not defeat the exemption. Equipment directly serving retail Internet subscribers could qualify, while wholesale carrier service, telephone service, pager service, and …
Did a purchase price near half the assessed value and a lower appraisal automatically reduce Virginia recordation tax?
Not automatically. A recent assessment strongly indicated fair market value, and an appraisal alone did not prove the clerk unreasonable. Virginia requested a review of all reliable evidence; any stat…
Could a taxpayer challenge Virginia's 2008 and 2012 income-tax assessments after the 90-day administrative appeal periods expired?
No. The 2008 and 2012 assessments were issued in April 2011 and August 2013, making the appeal deadlines July 2011 and November 2013. The taxpayer did not appeal until February 2015, so Virginia could…
Did frequent moves and uncertain startup employment prove that this taxpayer established permanent domicile outside Virginia in 2012?
No. The taxpayer described his startup job and residence in another state as uncertain, moved frequently, used a Virginia address on his federal return, retained and renewed a Virginia license, and ke…
Did Virginia tax wages earned during a roughly 150-day Virginia work stay by a West Virginia domiciliary resident?
No. The taxpayer established West Virginia domicile and stayed in Virginia for only about 150 days, below the actual-resident threshold. Virginia's reciprocal agreement exempted her Virginia wages as …
Did Virginia's new commissary exemption cover sales by third-party vendors in local, regional, and state correctional facilities?
The exemption covered tangible property and prepared-food sales in local correctional commissaries established by a sheriff, including commissaries operated under third-party contracts. It did not cov…
Did a trust created by a Virginia decedent owe Virginia fiduciary income tax when its trustee, property, and beneficiaries were all outside Virginia?
No, on the stated facts. The trust was a Virginia resident trust because a Virginia domiciliary created it by will, but domicile of the deceased grantor alone was insufficient nexus. With no Virginia …
Would Virginia abate tax when a taxpayer reasonably relied on incorrect written Department advice about a death-benefit subtraction?
Yes. Although the taxpayer was not eligible for the subtraction on the stated facts, an authorized Department representative had approved it in writing. Virginia abated the 2012 assessment because tha…
Were vehicle diagnostic charges exempt from Virginia sales tax when billed with replacement parts?
No. Under the law and policy applied to the audit period, diagnostic services billed with replacement parts were taxable services connected with a sale. A diagnostic-only transaction with no tangible …
Could Virginia's other-state tax credit use a pass-through entity's full distributive income when the other state taxed a smaller amount?
No. The credit calculation could include only the pass-through income actually taxed by the other state after its conformity modification. Virginia therefore upheld the reduced credit and assessment.
Could a taxpayer overturn Virginia's 2012 nonfiler assessment without evidence that he was not a Virginia resident?
No. Virginia could use IRS information and estimate the liability when no return was filed. Because the taxpayer produced no objective evidence that he was not a Virginia resident required to file for…
How did Virginia treat restaurant gift-card sales and sales to a nonprofit customer that provided no exemption certificate?
Gift-card sales were removed because tax applies when the card is redeemed for taxable property, not when sold. Sales to the claimed nonprofit stayed taxable because the restaurant had no exemption ce…
Could a company collect Virginia sales tax only on the equipment portion of a financial lease for installed energy-efficiency upgrades?
Yes, conditionally. The itemized lease treatment was acceptable only if the installed equipment remained tangible personal property. If it became a real-property fixture, the contractor was the taxabl…
Did a taxpayer abandon her Virginia domicile when she moved to another state for employment in 2012?
Yes. Even assuming she had established Virginia domicile earlier, her move for employment, new permanent home, and other evidence showed that she abandoned it in 2012. Virginia abated the assessment.
Could Virginia recover a refund after the taxpayer filed a second return showing fewer deductions and more tax due?
Yes. Virginia treated the second return as an amended return. Because it showed higher liability after a refund had already been issued, the excess refund became an underpayment that the Department co…
Was a husband a Virginia domiciliary resident in 2011 when the couple claimed he remained domiciled elsewhere?
Yes. The evidence tied the husband to the couple's Virginia home, while the couple provided no proof that he maintained or acquired domicile elsewhere. He had to file as a Virginia resident for 2011.
Could Virginia residents claim an out-of-state income-tax credit for New York's Metropolitan Commuter Transportation Mobility Tax?
No. Virginia found that the New York MCTMT was a targeted payroll and self-employment tax, not a tax substantially similar to Virginia's broad individual income tax. Denying the credit also did not vi…
Was an interstate motor carrier exempt from Virginia use tax or entitled to apportion the tax among the states where it operated?
No. Virginia's motor-vehicle common-carrier exemption had been repealed, and the use tax was not apportioned by operating miles. The Department did order the audit revised because its extrapolation du…
Could taxpayers defeat a Virginia assessment merely by saying they had submitted documents disputing the IRS adjustment?
No. Virginia used the IRS's final adjustment after the taxpayers failed to report it on an amended state return. The Department would not reexamine the federal result, and the taxpayers did not show t…
Could Virginia residents claim a credit based on all Arkansas tax paid instead of the Arkansas income actually subject to tax?
No. Virginia applied Arkansas's nonresident allocation percentage to determine the income actually taxed there, then limited the credit to the Virginia tax on that income. The assessment was upheld.
Did Virginia accept a research-and-development credit application received after April 1 when the envelope had no postmark?
No. An application without a postmark was treated as filed when Virginia received it. Because the Department received the application on April 6, after the April 1 deadline, the denial was upheld.
Could Virginia residents claim a Virginia credit for Maryland tax on commuting wages and have assessment interest waived?
No. Virginia-Maryland reciprocity meant the Virginia residents were not liable for Maryland tax on their commuting wages, so no Virginia credit was allowed. They had to seek any Maryland refund from M…
Could a taxpayer overturn a Virginia residency assessment without providing the domicile records the Department requested?
Not on the existing record. The assessment was presumed correct, and the taxpayer had not supplied the requested domicile evidence. Virginia allowed one final 45-day opportunity to provide documentati…
Could corporate partners apportion Virginia income when their partnership had Ohio nexus, using destination-based sales factors?
Yes. The partnership's Ohio activities exceeded protected solicitation and passed nexus through to its corporate partners. They could amend their returns to apportion income using destination-based sa…
Could a holding company join a Virginia combined return based on commercial domicile or a positive Virginia apportionment factor?
No. The group did not prove that the holding company's affairs were directed from Virginia or that it had a positive Virginia apportionment factor. Its losses could not be attributed entirely to Virgi…
Are prepaid grocery-delivery memberships and separately stated delivery charges taxable in Virginia?
No, under the stated facts. A prepaid delivery service bought separately from groceries was an exempt transportation charge and provided no tangible property. Delivery fees on mixed food and non-food …
Could a Virginia sign seller avoid sales tax on manufactured signs because a Department employee allegedly gave contrary oral advice?
No. Manufactured signs were taxable retail sales, and Virginia could not abate the assessment based on alleged oral advice. The statutory relief required erroneous written Department guidance, which t…
When did a couple become Virginia residents for taxing a 2012 IRA distribution?
They became Virginia domiciliaries when they closed on their Virginia home in September 2012. Because the IRA distribution came in November, it was attributable to their Virginia-resident period and h…
Did taking a visiting-professor job in another state end a taxpayer's Virginia domicile?
No. The taxpayer showed employment in another state but did not prove a permanent home or other domicile ties there, while retaining a Virginia license, vehicle registrations, and mailing address. Vir…
Did the Servicemembers Civil Relief Act exempt a military spouse's income when the couple did not prove a shared out-of-state domicile?
Not on the record provided. The couple did not prove that both spouses shared the claimed out-of-state domicile or avoided Virginia domicile. Virginia gave them 30 days to provide complete records or …
Did electronically delivered software and cloud subscriptions create Virginia sales tax or corporate income-tax nexus?
The all-electronic software and cloud subscriptions were not subject to Virginia sales tax. Corporate income-tax nexus was conditional: an independent developer merely providing services would not cre…
Are implantable cardiac monitors exempt from Virginia sales tax as durable medical equipment?
Yes, when a monitor is bought by or for a specific patient on a licensed practitioner's prescription or work order and the seller keeps supporting records. Bulk purchases by a medical practice are tax…
Did military-spouse status exempt a taxpayer who had established Virginia domicile before the federal protection changed?
No. The taxpayer's pre-2009 resident returns, Virginia home and employment, and 2009 Virginia driver's license supported Virginia domicile. She supplied no documentation proving a shared out-of-state …
Did a federal construction contractor owe consumer use tax on freestanding furniture, audiovisual equipment, and installed cabling?
The audit had to be revised. Freestanding furniture and equipment not affixed to real property could be retailer sales if resale requirements were met. Permanently affixed cabling remained taxable to …
Was gain from an out-of-state property sale excluded when the taxpayers had already bought a Virginia home and reported moving before the sale?
No. The taxpayers did not prove that their Virginia domicile began after the September 24, 2012 sale. Their August home purchase, time spent in Virginia, vehicle record stating a September 17 move, la…
Could a service member claim Virginia's National Guard pay subtraction without proof of Virginia Guard service?
Not on the existing record. The subtraction applied only to qualifying service in the Virginia National Guard, while the W-2 suggested Department of Defense reserve service. Virginia allowed 30 days t…
Did a retiree living in Virginia for more than 183 days owe Virginia tax on New York retirement income?
Yes. The retiree took steps to abandon New York and establish Virginia domicile, and she also lived in Virginia for more than 183 days. Virginia could tax her retirement income, subject to a possible …
Did renting a District of Columbia apartment establish a new domicile outside Virginia for 2012?
No. Renting a D.C. apartment and later registering to vote there did not prove a permanent D.C. domicile, especially without evidence of a D.C. tax filing and amid an overseas move followed by a retur…
Could Virginia recover a refund after a second return reported higher federal adjusted gross income?
Yes. Virginia properly issued the first refund from the original return, but the second return increased federal adjusted gross income and tax liability. The earlier refund then became an erroneous re…
When did a family that moved for work, schools, and a home purchase become Virginia residents?
Their Virginia residency began in September 2012. By then the husband had permanent Virginia work, the children attended Virginia schools, and the family was staying in Virginia before buying a home. …
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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.