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 exercising a testamentary power of appointment create a new Virginia resident trust?
Yes. The Virginia decedent's will exercised a power of appointment and supplied the terms for holding the assets in further trust, creating a new testamentary trust. It was therefore a Virginia reside…
Could a taxpayer limit Virginia's 2012 assessment by saying he moved to Virginia in October without supplying residency records?
Not yet. The taxpayer conceded tax on a post-move IRA distribution but did not provide the other-state return or domicile records Virginia requested. The assessment remained presumptively correct, wit…
Was a researcher a Virginia domiciliary despite claiming fewer than 90 Virginia days and residence elsewhere?
Yes. The researcher kept a Virginia apartment and vehicle, held a Virginia driver's license, and used a Virginia address on his 2011 federal return. Later out-of-state records and an unsigned lease di…
Were handling charges taxable when a truck-repair dispatcher's invoices included repair parts?
Yes. The repair invoices predominantly included tangible repair parts, so the dispatcher's handling charge was a taxable service, markup, and profit connected with those sales. A handling charge could…
Did a contractor's purchase of another company's division qualify for Virginia's occasional-sale exemption?
Possibly, but Virginia could not decide from the record. Selling one division was not automatically a sale of substantially all company assets, a liquidation, or a reorganization. The buyer did not pr…
Did a Maryland nonprofit owe Virginia withholding even without a Virginia office or property?
Potentially yes, because a Virginia resident's wages remain subject to Virginia withholding even when the work is performed in Maryland. The nonprofit had filed two returns for the quarter, so Virgini…
Did an out-of-state consultant owe Virginia income tax when he worked 105 days at a Virginia client's headquarters?
Yes, to the extent his pay came from services performed in Virginia. Working from an out-of-state home office did not erase the 105 days spent at the Virginia client's headquarters. Virginia required …
Was a military spouse protected from Virginia tax when he claimed the service member's domicile but had never been physically present in that state?
No for the husband. The service member remained domiciled in the other state, but her husband had never lived there and therefore could not have acquired that domicile. His Virginia home, employment, …
Could manufacturing equipment be real property rather than taxable machinery and tools merely because it was used directly in production?
Possibly. Direct use in manufacturing did not end the inquiry. Virginia remanded because the county had to apply the Danville Holding fixture test—annexation, adaptation, and especially the owner's in…
Which medical, charitable, home-office, travel, meal, and LLC deductions survived Virginia's review of a 2014 return?
Documented medical costs could count if they cleared the 2014 federal floor, and the church contribution was substantiated. Pre-tax health premiums, life insurance, and the husband's personal claim of…
Was a Virginia resident entitled to larger credits for New York income tax on his 2012 and 2014 Virginia returns?
No for 2014, and Virginia could not decide 2012. The 2014 credit was properly limited using Virginia's established New York nonresident-income calculation, so the refund was denied. For 2012, there wa…
Could a corporate partner include overseas intellectual-property royalties in its Virginia sales-factor denominator while treating them as foreign-source income?
No, if the corporation claimed the foreign-source-income subtraction. The joint-venture royalties kept their royalty character and qualified as foreign-source income, so the related sales were exclude…
Did individually prepackaged ice cream sold from a truck qualify for Virginia's reduced food tax rate?
No. Virginia treated ice-cream trucks as vendors of food for immediate consumption. The Department's policy did not distinguish prepackaged single servings from soft-serve cones or cups, so both were …
Were a provider's equipment and service charges for hospital and nursing-home patient-monitoring systems subject to Virginia sales tax?
Yes, unless the hospital or nursing home documented an exemption. Virginia found that the customer's true object was the cameras, boxes, monitors, and related equipment used to monitor patients—not th…
Was diesel used by ready-mix trucks exempt from Virginia sales tax after a motor-fuel-tax refund?
Yes, for the manufacturing portion. Virginia used the statutory 35% motor-fuel-tax refund ratio to measure diesel powering the mixing unit and treated that share as fuel used directly in manufacturing…
Did filing a federal return, with no IRS adjustment, satisfy a Virginia resident's separate duty to file a 2012 Virginia return?
No. Virginia filing duties arise under Virginia law, regardless of whether the IRS adjusts the federal return. Because the resident filed no Virginia return and offered no proof that the estimate was …
Could a city impose BPOL tax on a fuel wholesaler that owned and operated pumps and tanks at a local retailer?
Potentially, but only on properly sited receipts. Continuous ownership and operation of pumps, tanks, and signage appeared to create a definite city place of business, and sales to the retailer were w…
Did an unsupported claim of moving away overcome Virginia's estimated 2008 resident income-tax assessment?
No. The taxpayer provided no objective proof that he abandoned Virginia and acquired another domicile, while a Virginia driver's license was reissued during 2008. Virginia left the estimated assessmen…
Could Virginia estimate a restaurant's six-year sales-tax liability from one month of ABC records when the restaurant supplied no reliable sales records?
Yes. Because the restaurant did not provide reliable records and the other reported figures were doubtful, Virginia accepted January 2012 ABC data as the best information available. The restaurant rec…
Could Virginia review a city's boat valuation and overturn tax on another boat kept in the city for more than six months?
No on both issues. The Department is barred from reviewing valuation or valuation methods for local mobile property tax. It also upheld the second boat's 2015 assessment because the boat had remained …
Could a Virginia domiciliary who was also a District of Columbia actual resident claim a Virginia credit for District income tax?
Potentially yes. Because the wife was a Virginia domiciliary and a District actual resident, she filed resident returns in both jurisdictions and Virginia's usual bar for D.C. nonresidents did not app…
Did a temporary employer-required assignment outside Virginia make the employee a part-year Virginia resident for 2012?
No. The employee kept her Virginia home, driver's license, vehicle registration, and voter registration and returned when the temporary assignment ended. Virginia taxed all of her 2012 income, upheld …
Did a couple's unsupported claim of living in another state overcome Virginia's estimated 2012 resident assessment?
No. The couple offered no objective evidence that they abandoned Virginia and acquired another domicile, so they did not overcome the presumed-correct estimate. Virginia allowed 30 days to provide ade…
Could Virginia hear a BPOL classification appeal when the city claimed its own procedural rules made the local appeal invalid?
Yes. Whatever procedural objections the city raised, its letter decided the business-classification issue and included the required notice for a final local determination. The taxpayer timely appealed…
Did Virginia double-tax a fabricator's untaxed sales when its customer had already been audited for part of the same period?
No. The fabricator's sample included the customer, but the extrapolation assessed nothing for August 2011 through July 2014—the period covered by the customer's audit. Virginia taxed the fabricator's …
Could an employer avoid Virginia withholding tax, penalties, and interest because it did not know the rule and was not notified sooner?
No. Employers must self-assess and withhold Virginia tax from covered wages; ignorance of the law and the Department's inability to flag every deficiency immediately were not grounds for relief. Virgi…
Could a Virginia corporation subtract health-insurance premiums that were not federally deductible because it claimed the federal Small Business Health Care Tax Credit?
No. Virginia starts with federal taxable income and allows only the additions and subtractions authorized by state statute. Although Virginia expressly permits a subtraction for wages disallowed becau…
Could a taxpayer reverse Virginia's 2011 federal-income adjustment without providing the requested official IRS transcript?
Not on the existing record. Virginia begins with federal adjusted gross income, and the taxpayer provided no official IRS document showing that Virginia's matching adjustment was wrong. The assessment…
Did a lower deed price and private appraisal require Virginia to override the county clerk's assessed-value calculation of recordation tax?
Not automatically. A recent property assessment strongly indicated fair market value, and a private appraisal plus disagreement did not by itself show the clerk's valuation was unreasonable. Virginia …
Did a lease and claimed out-of-state driver's license prove that a taxpayer had abandoned Virginia domicile for 2014?
No. The taxpayer showed some ties to another state, but Virginia records still showed a vehicle and driver's license here, and his federal return used a Virginia address. Because he bore the burden of…
Could a Virginia resident claim a Virginia credit for California tax paid on capital gain passed through from California rental property?
No, on the record presented. Because California generally lets a Virginia resident claim a reciprocal credit on the California nonresident return, Virginia does not also allow the resident to claim th…
Could a taxpayer avoid Virginia income-tax assessments by arguing that federal and state income-tax payment is voluntary?
No. Voluntary compliance does not make payment optional or prevent Virginia from assessing unpaid tax. The taxpayer also failed to document possible Maryland residency and reciprocity eligibility, so …
Which corporations belong on a Virginia consolidated income-tax return, and could two eligible affiliates amend prior returns to remove ineligible entities?
Only eligible affiliates that would be subject to Virginia income tax on separate returns belong in the consolidated return. Corporations without Virginia-source income, or otherwise excluded by the r…
What Virginia tax interest rates applied during the second quarter of 2016?
For April 1 through June 30, 2016, Virginia's ordinary state interest rates were 6% on tax underpayments and assessments and 6% on noncorporate overpayments and refunds. The reduced rate for qualifyin…
Could a nonfiler overturn a Virginia income-tax assessment merely by saying he lived in another state and then attended out-of-state graduate school?
No. The taxpayer did not answer Virginia's documentation request or prove that he had abandoned Virginia domicile and acquired another one. Because the assessment was presumed correct, Virginia upheld…
Could a taxpayer appeal a county's local real-property tax assessments to the Virginia Department of Taxation?
No. Virginia law did not authorize the Department of Taxation to review local real-property tax assessments or decide whether the county commissioner properly declined the taxpayer's appeal. Those dis…
Could a taxpayer reverse Virginia's W-2-based corrections to federal adjusted gross income and withholding without objective contrary evidence?
No. The return apparently reported Virginia withholding as federal adjusted gross income. Virginia corrected income and withholding to the amounts on the taxpayer's W-2 and allowed a personal exemptio…
Could Virginia residents claim an out-of-state tax credit for District of Columbia Unincorporated Business Franchise Tax paid on sole-proprietor income?
No. The District of Columbia Unincorporated Business Franchise Tax is a franchise tax that does not tax all of an individual's income, so it is not the kind of individual income tax eligible for Virgi…
Could a fixed-date conformity subtraction create a Virginia corporate net operating loss even when the corporation reported no federal loss?
Yes. Virginia federal taxable income equals federal taxable income plus fixed-date conformity additions minus fixed-date conformity subtractions. Because the 2014 subtraction exceeded the other two am…
Did saying that a married couple paid income tax in Virginia and another state prove that they had changed domicile for 2012?
No. The couple did not provide objective evidence that they abandoned Virginia domicile and acquired another one, and paying tax in two states did not establish the change. Virginia kept the best-info…
Did claiming an out-of-state residence from 2011 through 2015 overturn a Virginia best-information assessment for 2012 without supporting records?
No. Although the taxpayer said he lived elsewhere from July 2011 until February 2015, he ignored Virginia's documentation request and supplied no substantial evidence about his domicile. The 2012 asse…
Did saying she moved out of Virginia in March 2013 prove that a nonfiler was not subject to Virginia income tax for 2012?
No. The claimed March 2013 move did not document the taxpayer's 2012 status, and she did not answer Virginia's records request. The assessment remained presumed correct, but Virginia allowed one final…
Could a nonfiler overturn a 2012 Virginia assessment merely by claiming residence in another state without supplying the requested records?
No. A bare claim of residence elsewhere did not prove abandonment of Virginia domicile, and the taxpayer ignored Virginia's documentation request. The best-information assessment remained presumed cor…
Did Virginia sales tax apply to a provider's charges for furnishing medical records in print, by fax, or electronically along with coding and related services?
No. The true object was the provider's medical-record and information services, not the paper or other property transferred, so charges to healthcare providers and requesting parties were not subject …
Did an out-of-state S corporation create Virginia income-tax nexus through one remote employee handling accounting, HR, payroll, legal, and customer support?
Yes, apparently. The Virginia employee's bookkeeping, accounting, HR, payroll, legal consultation, and customer support were not protected solicitation under P.L. 86-272 and were sufficient to create …
Was an out-of-state college student a Virginia resident for tax purposes after maintaining a Virginia abode for more than 183 days in 2012?
Likely yes. The student could retain domicile in another state, but Virginia's separate actual-resident rule applies when a person maintains a Virginia abode for more than 183 days. Her spring and fal…
Could a leasehold owner appeal a county's local real-property tax assessment to the Virginia Department of Taxation?
No. The Department of Taxation had no statutory jurisdiction over a local real-property assessment appeal, including the taxpayer's claim that the county insufficiently discounted a leasehold interest…
Did a divorce property-settlement agreement assigning tax liability to one spouse prevent Virginia from collecting a joint-return assessment from the other spouse?
No. Spouses who filed a joint Virginia return were jointly and individually liable for the full tax. Their divorce agreement could allocate responsibility between them, but it could not bind the Depar…
Was a foreign citizen who lived and worked abroad in 2012 exempt from Virginia resident tax even though he retained a Virginia house, vehicles, and license?
He was not taxable as a Virginia resident for 2012, but he still owed Virginia tax as a nonresident on rent from his Virginia house. The federal substantial-presence test did not control Virginia resi…
Did 90 days of full-time National Guard duty qualify for Virginia's subtraction for basic military pay received during extended active duty?
No. The husband's orders placed him on full-time National Guard duty, which the cited federal definitions distinguish from active duty. He therefore did not qualify for Virginia's extended-active-duty…
How did Virginia Tax Bulletin 16-1 change fixed-date conformity and 2015 income-tax return adjustments?
Virginia advanced its fixed-date conformity from December 31, 2014 to December 31, 2015 for taxable years beginning in 2015. That generally adopted 2015 federal changes, including PATH Act extensions …
Did Virginia's related-party royalty add-back safe harbor exclude every royalty reported by Kohl's affiliate in other states, even portions not actually taxed there?
No. The Richmond Circuit Court held that the safe harbor applies only to the portion of related-member royalty income on which another state actually imposed a qualifying tax. Merely including royalti…
Could a telecommunications carrier remove software, maintenance, labor, and asset-gross-up purchases from a Virginia use-tax audit without invoices or contracts?
No, not on the existing record. The carrier supplied no invoices, contracts, or other evidence proving electronic software delivery, labor-only service, or another exemption. Every contested line and …
Could a telecommunications company reduce an Invoice Capture Tool asset gross-up when the supporting records for related contested assets had not been provided?
Not yet. The taxpayer did not dispute a specific item, and the related entity had not supplied the invoices and other records needed to remove assets feeding the Invoice Capture Tool calculation. Virg…
Could a business bypass the county BPOL appeal process by asking Virginia for an advisory opinion during an active assessment dispute?
No. Virginia would not use an advisory opinion to decide the substance of an active county BPOL assessment dispute when the county had not joined the request. The taxpayer first had to appeal to the l…
Could Virginia consider an administrative appeal filed December 10 when the 90-day deadline expired November 23?
No. The August 25 assessment had to be appealed by November 23, 2015, but the taxpayer filed on December 10, so the administrative appeal was time-barred. Virginia still allowed 30 days to file a 2012…
How did Virginia treat grocery food sold in decorative tins, late or defective resale certificates, and repairs to built-in versus standalone refrigeration?
The result was mixed. Decorative tins were packaging, so qualifying food inside received the reduced rate; food bundled with separate ineligible items did not. Verified resale certificates removed som…
Could buyers use a transferred 2006 Virginia Land Preservation Tax Credit on their 2012 return after its five-year carryover expired?
No. A Land Preservation Tax Credit earned in 2006 could be carried only through 2007-2011. The later 10-year carryover applied only to property conveyed on or after January 1, 2007. The Department had…
Can a taxpayer bypass Virginia's refund deadline by carrying a late-claimed overpayment forward as a credit to the next year?
No. Virginia treated a request to credit an overpayment to another tax year as subject to the same three-year limitation as a cash refund. The 2011 return was due May 1, 2012, so the taxpayer had to f…
Did federal Tax Court allocation or a divorce agreement relieve a husband from Virginia liability on a joint 2010 return?
No. Virginia adjusted the 2010 joint return to match federal income changes that the couple had not reported. State law made each spouse liable for the entire joint-return tax. The federal Tax Court's…
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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.