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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Should a taxpayer who moved into Virginia in May 2010 file as a full-year resident after an IRS income adjustment?
No. Virginia found that the taxpayer became domiciled in the state in May 2010 rather than being a full-year resident. He had to file Form 760PY, report income attributable to the Virginia-residence p…
How did Virginia correct overlapping estimated-tax and late-filing penalties on a December 2014 return for 2013?
Virginia found the estimated-tax addition had already been paid with the return, so it should not appear again. But the return was filed in December 2014, making the 30% late-filing penalty proper. Th…
Did an employer's failure to issue a W-2 or withhold enough Virginia tax excuse the employee from filing and paying 2011 income tax?
No. Even if the employer failed to issue a W-2 or withhold Virginia tax, the employee remained responsible for reporting the income, filing the resident return, and paying the full liability. Because …
Did Virginia have to restore a tuition deduction after the IRS denied it and the taxpayer failed to amend the 2011 Virginia return?
No. Virginia began with federal adjusted gross income, and the IRS transcript showed that the tuition-and-fees deduction had been denied. The taxpayer was required to report that final federal change …
Did a military spouse keep her former-state domicile after moving to Virginia, renting out that home, and obtaining a Virginia driver's license?
No. Virginia found that the spouse did not maintain enough ties to her former state: its home became rental property, vehicles were registered only to the service member, and she obtained and kept a V…
Could Virginia assess a nonfiler from IRS information when the taxpayer claimed some reported income was nontaxable but filed no state return?
Yes. Virginia could use IRS information and other available data to assess a resident who filed no proper 2012 return. The taxpayer's assertion that some income should have been reported as nontaxable…
Could an employee-shareholder deduct loans that became worthless when his S corporation closed?
Yes, on the record before Virginia. A shareholder-employee's loans qualify as business bad debt only if protecting employment, rather than the investment, was the dominant motive. The Department lacke…
What Virginia return was required when a taxpayer moved into the state and established domicile in August 2011?
A part-year return. Virginia found that the taxpayer established domicile when he moved into the state in August 2011, so he was not a full-year resident. He had to file Form 760PY and report income a…
Did a taxpayer prove she was domiciled outside Virginia in 2011 without providing the requested objective records?
Not yet. The taxpayer claimed another-state residence but supplied no objective evidence despite two information requests, while her federal return used a Virginia mailing address. The assessment rema…
Did an apartment-complex statement prove that a taxpayer with a Virginia W-2 address was not a Virginia actual resident in 2013?
No. A Virginia address on the taxpayer's W-2 triggered a request for residency evidence. An apartment-complex statement from State B, without additional proof and against other returns showing nonresi…
Did an initial letter that questioned Virginia sales-tax assessments count as a complete appeal before the 90-day deadline?
No. The initial letter merely questioned the assessments and did not fully identify the alleged errors, supporting facts, requested remedy, or controlling authority. Virginia warned the taxpayer and g…
Could a tire wholesaler accept a valid resale certificate from a dealer not registered for Virginia's tire recycling fee?
Yes. Virginia sales-tax law did not require a tire buyer to be registered for the tire recycling fee before giving a valid resale certificate. Sales supported by complete Form ST-10 certificates had t…
Did moving abroad for a temporary job end a taxpayer's Virginia domicile when he kept major Virginia ties and planned another state later?
No. The taxpayer's foreign job was temporary, he did not intend to remain abroad, and he kept Virginia homes, family, voter registration, vehicles, and a driver's license. He also could not establish …
Did an active-duty service member and spouse have the same Virginia residency result for 2012?
No. The husband maintained another-state domicile through his military legal-residence certificate, driver's license, and voter registration, so his active-duty income was not treated as Virginia resi…
Could a restaurant overturn reconstructed sales-tax liability with revised figures unsupported by daily sales records?
No. The restaurant kept no daily sales logs or register tapes to reconcile its tax returns and alcoholic-beverage reports. Virginia could therefore use the best information available—beverage reports …
What Virginia tax interest rates applied during the fourth quarter of 2015?
Virginia's fourth-quarter 2015 rates were 5% for tax underpayments and 5% for tax overpayments. The reduced rate for qualifying assessments in administrative appeals was 0%. Certain local delinquency …
When do customer sites become definite places of business for situsing an IT provider's Virginia BPOL receipts?
Customer sites may become definite places of business when employees work there regularly and continuously for at least 30 days, potentially requiring local licenses and receipt situs there. If the cu…
Was pollution-control equipment exempt from 2013 local tax when it was operating by January 1 but had not yet been certified?
No. The exemption required qualifying equipment to be certified by the Department of Environmental Quality, and the equipment was not certified as of the January 1, 2013 tax day. Virginia upheld that …
Could a federal real-property contractor buy freestanding office furniture for resale tax-free and recover use tax paid on it?
Yes. Freestanding furniture, fixtures, and equipment that remained unattached to the buildings could be purchased with Form ST-10 for resale and then sold tax-free to the federal agency. Virginia orde…
Could a Virginia county apply the local definite place of business's payroll factor to known gross receipts from business conducted in another state when calculating the BPOL out-of-state deduction?
Yes, if the data are suitable. When actual gross receipts from business conducted in another state are available, the Virginia definite place of business's payroll factor may be applied to that amount…
How should a Virginia locality calculate the BPOL out-of-state deduction when payroll apportionment is used?
When payroll apportionment is necessary, the locality may apply the Virginia payroll factor to reliable gross receipts from business conducted in a state where the taxpayer owes an income-based tax. T…
Did a Treasury Offset Program notice restart Virginia's 90-day appeal period, and was a citizen's domestic income exempt from Virginia tax?
No. The 90-day appeal period ran from the June 2014 assessment, not the later Treasury Offset Program notice, so the April 2015 appeal was untimely. The assessment remained due, and Virginia rejected …
Could parents deduct contributions to Virginia 529 accounts when the money came from their children's irrevocable UGMA or UTMA custodial accounts?
No. Although the husband was listed as owner of the Virginia 529 accounts, the contributed money belonged to the children because it came from their irrevocable UGMA or UTMA accounts. The parents ther…
Did paying by the original due date preserve Virginia's six-month extension when the original 2010 return was filed after the extended deadline?
No. A valid extension required both timely estimated payment and filing the original return within the six-month extended period. Because the return was filed after that period, Virginia treated the e…
Could a Virginia corporation exclude wages of employees working solely overseas from its payroll-factor numerator by substituting wages subject to Virginia income-tax withholding?
Not by using withholding wages as a substitute. Wages reported to the Virginia Employment Commission were strongly presumed to belong in the Virginia payroll numerator, but the presumption was rebutta…
Did Foreign Service assignments and an intent to retire in another state end a couple's established Virginia domicile for 2010?
No. The couple established Virginia domicile before the overseas assignments, which were temporary. An intention to retire in another state and withholding there did not establish domicile without ren…
Could taxpayers who moved into Virginia in July 2011 claim itemized deductions on a full-year resident return?
They had to use a part-year return. Because the couple moved into Virginia in July 2011, they were taxable as residents only for the Virginia portion of the year and could claim itemized deductions pa…
Could Virginia extend the three-year deadline for sales-tax refunds voluntarily overpaid from February 2008 through March 2012?
No. The latest disputed period's three-year refund deadline expired before the taxpayer's May 2015 request. Virginia law authorized refunds only through a timely amended return and provided no applica…
Could Virginia estimate a grocery store and café's taxable sales from incomplete records, and did the estimate support penalty and interest?
Yes, Virginia could estimate the sales-tax liability because the grocery store and café kept incomplete records and did not prove the methodology wrong. But the estimate did not prove tax was actually…
Did Virginia reverse the remand of BPOL and machinery-and-tools assessments when records did not show which of several entities performed each activity at one business location?
No. Virginia affirmed the remand to the city because the records did not identify which legal entity conducted each activity at the shared business location. The taxpayers had to provide enough docume…
How does Virginia BPOL tax treat a telecommunications company's data-transmission revenue, and does the long-distance-call exclusion cover electronic document exchanges or interstate local calls?
Data-transmission revenue is gross receipts whether the provider is a statutory telephone company or a business-service company, but the local BPOL situs rules differ. Electronic Data Interchange docu…
Was an HVAC distributor a BPOL retail merchant because contractors consumed many purchased parts while performing services, or was it a wholesaler?
Virginia classified the distributor as a wholesale merchant. Its contractor, government, and industrial customers bought goods for business use, the HVAC contractors likely used them in a productive p…
Could a taxpayer who moved to Virginia in March claim an out-of-state tax credit on a full-year resident return without submitting the other state's return?
Not as filed. A March mover should file Virginia Form 760PY and report only income received while a Virginia resident, attaching the other state's return to support any credit. The credit cannot cover…
Could a taxpayer who moved to Virginia in November overturn a 2011 income-tax assessment merely by saying he worked in Virginia for only two weeks?
No. The taxpayer admitted moving to Virginia in November and had Virginia-source income, but provided no objective evidence or return showing the correct 2011 liability. Virginia gave him 60 days to f…
Did one Virginia-resident co-trustee make a Pennsylvania testamentary trust a Virginia resident trust when that trustee could not act alone?
Not by itself. Because the Virginia co-trustee could act only with at least one nonresident co-trustee, that person's residency alone did not make the trust administered in Virginia if the trustee gro…
Were a retailer's sales to diplomats exempt when its transaction records lacked exemption-card numbers, and could a diplomat pay with another person's card?
The audited sales were removed because later documentation proved they were made to diplomats, despite the missing exemption-card numbers. For future sales, the retailer had to record the card number …
Which manufacturing purchases, contractor charges, and services could be removed from a Virginia use-tax audit, and was the second-audit penalty waived?
Virginia removed documented items used directly in manufacturing, qualifying contractor work, hauling, HVAC maintenance, and a purchase credit, but kept taxable or unsupported items and allowed 30 day…
Did vendor emails and software activation keys prove that a computer reseller's contested software sales were electronically delivered without tangible media?
Yes. The invoices alone did not expressly certify electronic delivery, and the lack of a freight charge was not enough. But certificate-key invoices plus the vendor's statement established that the so…
Was Virginia's bank-deposit estimate of a pawn shop's unreported sales valid when records were seized, and what audit adjustments were required?
The bank-deposit estimate was reasonable because records were unavailable and the auditor excluded identified nontaxable deposits while using the representative's cash-sales testimony. But Virginia re…
What items and transactions qualified under Virginia's 2015 combined sales-tax-holiday guidelines, and what duties applied to retailers?
The 2015 guidelines created one three-day August holiday for qualifying hurricane items, school supplies, clothing, footwear, and labeled Energy Star or WaterSense products within stated per-item pric…
Did Virginia driver's licenses and federal-only absentee voting keep a couple domiciled in Virginia after they established a permanent home abroad?
No. The couple proved that they sold their Virginia home, established a permanent home and tax residency abroad, owned no Virginia property, and voted only in federal elections under the overseas-vote…
How could Virginia estimate taxable complimentary restaurant meals when records were missing, and did the first-audit penalty apply?
Virginia could estimate the liability because the restaurants did not document why complimentary meals were given. The auditor's 65% taxable estimate was corrected to 35% of total complimentary meals,…
Did installment payments from an annuity death benefit qualify for Virginia's 2011-2012 subtraction, or did oral Department advice protect the taxpayer?
No. Virginia interpreted the subtraction to require a federally taxable annuity death benefit awarded in a lump sum, so installment payments did not qualify for 2011 or 2012. Tax-form instructions wer…
Could taxpayers carry a 2009 overpayment forward after filing the return too late, and did New York's MCTMT qualify for Virginia's out-of-state tax credit?
No on both issues. The first recorded 2009 return arrived after Virginia's three-year refund deadline, so any overpayment could not be carried to 2010. New York's Metropolitan Commuter Transportation …
Which retail products qualified as exempt nonprescription drugs or durable medical equipment in Virginia's audit?
Electrical heating pads and vaporizers qualified as durable medical equipment and were removed from the audit. A&D ointment, aloe vera, desensitizing toothpaste, contact lens solution, and disposable …
Was an HVAC equipment distributor a BPOL wholesaler when it sold mainly to contractors and business users rather than the general public?
Yes. The evidence showed sales mainly to HVAC contractors, government, and industrial customers for business use, little or no public retail activity, and individualized pricing consistent with wholes…
Did an out-of-state procurement company's Virginia customer and third-party vendors create corporate income-tax nexus?
Not enough facts were provided for a categorical answer. Buying and reselling services from an unrelated independent contractor would not by itself create nexus for an otherwise protected company. But…
Could Virginia still assess related corporations for 2000-2004 royalty transactions when one filed returns and the intangible affiliate did not?
For the filing corporation, the ordinary assessment period generally barred a royalty adjustment unless fraud or an in-period net-operating-loss carryforward issue applied. For the affiliate that had …
Did renewable one-year overseas work end Virginia domicile, and was accountant advice reasonable cause to waive the late-filing penalty?
No. Renewable one-year overseas employment was temporary, while the taxpayer bought a Virginia home, kept a Virginia vehicle and license, and used a Virginia address. Virginia found he remained domici…
Did Maryland partnership income reported on Schedule E qualify a Virginia couple for the full border-state tax credit?
No. Virginia's special border-state rule covered qualifying earned income and business income reported on Schedule C, not the husband's partnership income reported on Schedule E. The ordinary credit t…
Did a copy of an unrecorded Virginia return overcome an IRS-based assessment when the taxpayer supplied no federal transcript or proof of payment?
No. Virginia had no record of the claimed state return or payment, the IRS had no federal return, and IRS income information exceeded the income on the taxpayer's copy. The assessment remained due, bu…
Could a Virginia resident subtract an entire IRA distribution because retirement contributions had been taxed by another state, and carry unused subtraction forward?
No. Only the prorated portion attributable to documented contributions that were federally deductible but taxed by the other state could be subtracted; investment earnings could not. The taxpayer lack…
Was a company's president personally responsible for unpaid sales and withholding taxes when she signed payroll reports and tax checks?
Yes. Virginia found that the president knew about the company's tax obligations and had authority to prevent nonpayment because she signed payroll reports as president, signed sales-tax checks, access…
Is a Virginia retailer's layaway cancellation fee taxable when the order is cancelled, payments are refunded, and title never transfers?
No. When the customer cancelled the layaway, the retailer refunded the purchase payments and never transferred title or possession of the merchandise. Because no retail sale occurred, the separate $10…
Which installed home-improvement sales had to be treated as contractor real-property work, and could Virginia credit use tax paid to the first receiving state?
Virginia removed many installed items because the retailer acted as a consuming contractor rather than making installed retail sales under the law then applicable. It also allowed a possible credit fo…
Could Virginia estimate a restaurant's sales from income-tax returns when audit-period register records were missing, and did first-audit penalty apply?
Yes. Because the restaurant did not preserve or provide audit-period sales journals and register reports, Virginia used the difference between sales-tax and income-tax return sales and extrapolated it…
Could Virginia project a grocery store's three-year sales from a two-day observation, and did the 50% fraud penalty apply?
Yes. With no supporting records, Virginia reasonably used one low-sales day and one high-sales day chosen with the store to project food, nonfood, and phone-card sales across the audit period. Unsuppo…
What gold, silver, and platinum bullion sales qualified for Virginia's exemption under Tax Bulletin 15-6?
Under the 2015 bulletin, a transaction over $1,000 was exempt only for refined bullion containing at least 90% gold, silver, or platinum whose value depended on metal mass and purity and did not excee…
Who became liable for Virginia's Forest Products Tax under Tax Bulletin 15-5, and what records and filings were required?
Effective July 1, 2015, the bulletin generally placed the tax on the first fixed-place manufacturer that processed, used, consumed, or stored Virginia forest products for out-of-state sale. If no manu…
Could a nonresident Electing Small Business Trust claim Virginia credit for California ESBT income tax and the California Mental Health Services Tax?
Yes. California's separately computed ESBT tax was still a broad-based fiduciary net income tax, and the 1% Mental Health Services Tax on income over $1 million also qualified. The credit had to refle…
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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.