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 couple operate their short-lived 2007 import business for profit despite losses and closing before year-end?
Yes. Virginia found the couple organized and operated a new import business with registrations, online sales accounts, supplier and reseller agreements, relevant experience, and a website. Unexpected …
Could City 1 impose 2009 BTPP tax on a business aircraft that used its hangar more than any other location but stayed there less than six months?
No. Although the aircraft was registered and based at City 1's airport and spent more time there than anywhere else, it was hangared there for less than six months in 2009. Virginia found it was not n…
Could a taxpayer reverse a paid Virginia assessment without providing records substantiating the itemized deductions claimed?
Not yet. Virginia upheld the assessment because the taxpayer supplied no records supporting the itemized deductions despite repeated requests, and the assessment was presumed correct. The Department a…
Could estate beneficiaries subtract lump-sum survivor annuity death benefits from Virginia taxable income?
Yes. The payments qualified because each came from an annuity contract between the deceased annuitant and an insurance company, was paid to a beneficiary in a lump sum, and was subject to federal inco…
Could a Virginia resident filing separately claim dependent exemptions allocated by agreement with a nonresident servicemember spouse?
Yes. Although the couple filed a joint federal return, Virginia law allowed them to allocate federal dependent exemptions between their separate Virginia returns as they mutually agreed. Because they …
Was injectable tuberculin antigen exempt from Virginia sales and use tax when a licensed medical practice bought it for professional use?
Yes. The Department treated the injectable tuberculin antigen as a prescription drug and Schedule VI controlled substance, distinct from the taxable TB tine testing device addressed in an earlier ruli…
Did a military spouse who moved to Virginia solely to accompany an active-duty spouse remain domiciled in their shared prior state for 2009?
Yes. Virginia found that the service member had established domicile in State A through legal-residence certificates, a driver's license, and the absence of meaningful continuing ties to the home-of-r…
Could a couple deduct losses from a horse farm that trained and sold horses for fox hunting despite losses and no separate bank account?
Yes. Virginia found the farm was conducted for profit based on the wife's horse expertise, the couple's 139 to 152 monthly work hours, advertising and sales efforts, adequate books, cost reductions, a…
Could a Virginia resident claim all dependent exemptions when filing separately from a nonresident military spouse?
Yes. A Virginia resident and nonresident military spouse who filed jointly for federal purposes but separately in Virginia could allocate dependent exemptions as they mutually agreed. Proportional all…
How did Virginia sales tax apply to automotive core charges, later core returns, exchanges, and partial refunds?
All core charges were taxable when imposed because they were part of the sales price. Tax was refundable when the part and core charge were fully refunded, proportionally refundable with a partial par…
Did a taxpayer establish foreign domicile by 2006 despite retaining an unrenewed Virginia driver's license and automobile?
Yes. The taxpayer moved abroad in 2002, pursued an advanced degree as part of obtaining permanent status, secured permanent employment, leased a home, bought a local car, sold her Virginia rental prop…
Did a Virginia property owner receive recordation-tax refunds when a deed to a relative was followed by foreclosure the next day?
Only in part. The deed validly conveyed valuable rights when recorded, so the state and local tax based on property value was not refundable merely because foreclosure followed the next day. But Virgi…
Did Virginia's occasional-sale exemption cover equipment transferred to a subsidiary in a corporate spinoff?
Yes. The transfer of all electronic-medical-records assets and equipment to a subsidiary for stock was a reorganization of the business and qualified for Virginia's occasional-sale exemption. The tran…
Was a missionary domiciled in Virginia because she kept a Virginia driver's license, voter registration, bank account, and mailing address?
No. Virginia found that the taxpayer was domiciled in the foreign country during 2006. She had sold her former home and car, moved or stored her property, established a permanent home abroad, and rema…
Did a disabled taxpayer lose Virginia's disability-income subtraction by spending a few hours per week stocking an antique-shop stall?
No. Virginia found that the taxpayer's limited antique-stall activity was not substantial gainful activity. She spent only three to five hours per week obtaining and arranging inventory, worked irregu…
Did a U.S. citizen living abroad become a Virginia domiciliary by using his parents' address and holding a Virginia license, voter registration, property interest, and vehicle?
No. Virginia found that the taxpayer remained domiciled abroad in 2005. He had lived there for decades, maintained a permanent home and license there, worked there full time, and visited Virginia for …
Did an equipment rental company qualify as a short-term rental business when less than 80% of annual rental receipts came from periods of 92 days or less?
No. For 2007 and 2008, the company failed the statutory test because less than 80% of its annual gross rental receipts came from transactions lasting 92 consecutive days or less, including extensions …
Who had to determine fair market value when assessed real-estate value exceeded deed consideration for Virginia grantor tax?
The local circuit-court clerk. After the 2007 amendment, grantor tax used the greater of consideration or property value. Assessed value carried a strong presumption but was not conclusive; clear and …
Could a federal contractor buy hardware under a mixed task order for resale and transfer it tax-free to the federal government?
Yes, on the facts presented. Although CLIN 14 listed hardware as other direct costs and required no separate true-object analysis, Virginia examined the mixed task order as a whole. Its primary object…
Did a mortgage refinancing qualify for Virginia's same-lender recordation-tax exemption after the original lender merged into the new lender?
Yes. The original mortgage lender had merged into the refinancing lender, so the successor became the same lender for the existing debt. Virginia recordation tax therefore applied only to the portion …
Did a taxpayer abandon Virginia domicile in July 2005 despite retaining a Virginia home and some vehicle registrations?
Yes. The taxpayer moved into a State A residence in July 2005 and declared that date on his Virginia part-year return. Later actions—including surrendering his Virginia driver's license, obtaining a S…
What interest rates did Virginia apply to state tax assessments and refunds in the third quarter of 2009?
Virginia's third-quarter 2009 rate was 6% for state tax underpayments and 6% for overpayments. The bulletin also applied the 6% rate through October 15, 2009 for certain estimated-tax additions of tax…
Could a late 2003 Virginia overpayment claim offset a 2004 assessment after an IRS correction moved retirement income between years?
No. The federal correction became final on October 20, 2006, and Virginia said the amended 2003 return had to be filed by October 22, 2007. The couple waited until April 2008. Even though the same ret…
Could a 2003 overpayment reported on an August 2007 original return be credited against a 2004 Virginia assessment?
No. The three-year period for the 2003 overpayment expired May 1, 2007, and the taxpayer filed the original return on August 29, 2007. Calling the request a credit or carryforward rather than a refund…
Did a couple abandon Virginia domicile after moving, buying a home, and operating a business in another state while retaining Virginia ties?
Yes. The couple established a permanent home and demanding business in another state and proved an intent to remain there indefinitely. Keeping an unsold Virginia house, an old Virginia registration, …
Could Virginia refund a 2003 overpayment when the original return was filed in April 2008 after the refund deadline?
No. Virginia's refund statute required the return or written claim within three years of the timely filing deadline. The April 2008 original return came after the applicable period, even considering t…
Was a brick maker's separately stated minimum-load charge an exempt delivery charge or a taxable service?
It was exempt. A third-party carrier charged for a full truckload even when the shipment used less capacity, and the brick maker used the minimum-load line to recover the difference between actual fre…
Did franchisee royalty payments passed through a restaurant corporation let its related trademark subsidiary qualify for Virginia's unrelated-party add-back exception?
No. Although the corporation passed most franchise royalties to its related intangible holding company, the franchise agreements licensed trademarks from the corporation itself. Because the subsidiary…
Were laser access, computer training, and patient-billing charges taxable for two Virginia vision businesses?
The laser agreement was a taxable equipment rental because the physician controlled and operated the laser. Required computer training was part of the taxable equipment sale, while customized patient-…
Did a MERS mortgage assignment prevent Virginia's same-lender recordation-tax exemption on a later refinancing?
No. The exemption depended on refinancing with the lender that actually held the deed of trust, not on whether the assignment appeared in county land records or the MERS database. Tax was exempt up to…
Did Virginia sales tax apply to a lump-sum equestrian package that included horseback riding, lodging, meals, and other activities?
No. Virginia found that customers' true object was horseback riding, making the lump-sum package an exempt service. The retreat owed tax on food, restaurant meals, lodging, and other inputs used to pr…
Was a home-infusion pharmacy a retailer of IV drugs and medical supplies when an affiliate separately provided nursing services?
Yes. The pharmacy sold IV medications and medical supplies for home use, while a separate legal entity provided nursing and therapy services. Its purchases of the drugs and supplies were therefore exe…
Was a nonresident decedent's LLC membership taxable by Virginia merely because the LLC owned Virginia real estate?
No. Virginia law treated the decedent's LLC membership as personal, intangible property located in her state of residence. The estate owned the LLC interest, not the Virginia real estate held by the L…
Was an out-of-state domiciliary an actual Virginia resident when she owned a Virginia home but spent fewer than 184 days in the state?
No. The taxpayer's daily log, receipts, and other evidence sufficiently showed she spent fewer than 184 days in Virginia in both 2004 and 2005. She was not an actual resident, so Virginia abated the p…
Could a Virginia dealer remove audited sales by producing customer exemption certificates?
Only in part. Virginia removed sales covered by a complete exemption certificate accepted in good faith and ordered a refund with interest. It rejected a second customer's incomplete, post-audit resal…
Could a city apply its grandfathered three-percent telephone BPOL rate to a cellular PCS provider that did not offer landline local-exchange service?
No. The PCS provider was a telephone company, but the city's grandfathered three-percent rate applied only to the local-exchange landline service covered by its 1972 ordinance. The city could apply th…
Did an out-of-state corporation receiving Virginia Lottery annuity payments owe corporate income tax, and could the Lottery withhold tax anyway?
The corporation was not expected to owe Virginia corporate income tax because its apportionment factor was zero. Virginia could still require withholding on Lottery payments. The corporation could fil…
Did filter cartridges that cleaned and recirculated soluble oil on a beverage-can production line qualify for Virginia's manufacturing exemption?
Yes. The filters removed contaminants from soluble oil used by the can-forming bodymaker, protected the cans from defects, and returned the oil to the production line. Virginia found them used directl…
Did working overseas for all of 2004 end Virginia domicile when the taxpayer kept an unleased Virginia home and driver's license?
No. Living and working overseas for the entire year did not by itself change domicile. The taxpayer kept an unleased Virginia home and driver's license, later registered another Virginia vehicle, and …
Were software license fees under the same contract decided in Intersections exempt from Virginia sales and use tax for 2002-2004?
Yes. A Fairfax County Circuit Court had already held the license fees under the contract exempt for an earlier period. Because the 2002-2004 appeal presented the identical issue, Virginia treated the …
Could Virginia separately assess a retailer's freight-in costs after those costs were included in the customer price already subjected to sales tax?
No. Freight-in is normally part of a retailer's taxable product cost, but this retailer included the freight in its marked-up customer price and collected sales tax on that full price. A separate audi…
Did a commercial printer owe Virginia litter tax when it printed envelopes, stationery, brochures, letterhead, and business cards but not newspapers or magazines?
No. Merely printing images on paper did not make the company a manufacturer or seller of covered paper products, and it did not print newspapers or magazines. Virginia ended its litter-tax filing obli…
Did Virginia use tax apply to lease payments after equipment moved from California when California tax had been correctly paid upfront on the full lease value?
No. The lessee had correctly paid California sales tax on the full value of the five-year lease when the lease began. After the equipment moved to Virginia, that payment qualified for Virginia's other…
Did Virginia approve a manufacturer's refund claim for use tax paid on property allegedly covered by the manufacturing exemption?
Not yet. Virginia found the protective refund claim timely, but the manufacturer still had to prove both that it remitted the use tax and that the property qualified for the manufacturing exemption. T…
Was a custom digital film exempt from Virginia use tax when an amusement facility bought it for an attraction?
Yes. Virginia held that the custom digital film qualified for the audiovisual-work exemption because the amusement facility acquired it for commercial exhibition and incorporated it into an attraction…
Was a multi-pharmacy home-infusion company's true transaction the sale of exempt IV medication rather than a medical service?
Yes. Virginia found that patients sought IV medications and that the company's nursing, dietician, and support services were incidental. The pharmacies could buy patient products for resale, prescript…
Could Virginia refund 2000 and 2001 tax paid in error after the statutory refund deadline expired?
No. Even though the Maryland resident's wages were described as exempt from Virginia tax and her preparer had filed incorrectly, the 2000 and 2001 refund claims were outside Va. Code § 58.1-1823. The …
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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.