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 motor carrier overturn a city BTPP assessment when it refused requests needed to reconcile conflicting truck-location evidence?
No. The carrier's GPS data and affidavit conflicted with information from its manager, and it did not provide the city's requested reconciliation, mileage, or alternative records. Because the local as…
Could employees deduct internet and vehicle costs when the internet amount lacked support and the employer paid for fuel?
Partly. Virginia upheld the internet-expense adjustment because the taxpayers did not document the larger amount claimed, but restored the net mileage deduction because the standard mileage rate cover…
Could taxpayers subtract full IRA distributions when only part represented retirement contributions previously taxed by another state?
Not yet. The previously taxed contributions could qualify, but investment earnings could not. Virginia gave the taxpayers 30 days to prove the contribution balance, year-end account values, and distri…
Was a federal IT and systems contractor properly classified as a professional engineering business for local BPOL tax?
Unresolved. Virginia found evidence that the contractor performed professional engineering services, but the taxpayer had not provided the requested gross-receipts breakdown and the county had reviewe…
How should Virginia's graduated recordation-tax rates apply when a supplemental deed increases secured debt from $35.4 million to $65 million?
The taxable increase was $29.6 million, but the rate brackets had to continue from the $35.4 million existing debt rather than restart at the first bracket. Virginia taxed $4.6 million at $0.16 per $1…
Was a corporate president personally liable for old withholding tax when he helped complete audits and began a payment plan?
No. The president qualified as a corporate officer with knowledge and authority, but Virginia found no willful failure. He hired an accounting firm that helped complete the audits and directed payment…
Was an April 2014 claim timely for a corporate estimated payment deemed paid and self-assessed on September 15, 2009?
No. With no return filed, the estimated payment and self-assessment were deemed made on September 15, 2009. The protective-claim period expired September 17, 2012, so the corporation's April 2014 requ…
Could a Virginia resident subtract pension income from another state without proving that state previously taxed the plan contributions?
No. The pension was included in the Virginia resident's federal adjusted gross income, and she did not prove that the other state had previously taxed contributions that the federal government had not…
Could a federal contractor buy Army property tax-free merely because the solicitation named it purchasing agent and advanced government funds?
Not on the facts supplied. Calling the contractor a purchasing agent and advancing federal funds did not prove that the United States' credit was directly bound. Virginia could not determine who was t…
Could an office-furniture seller accept Form ST-11 after Virginia said manufacturing machinery may be bought exempt?
No. Virginia's email said machines used in manufacturing may qualify; it did not approve office furnishings. The seller knew the furniture was not used in production and directed the customer to use F…
Could a Virginia resident claim credit for North Carolina tax on gain from investment land, and did the special border-state rule apply?
Yes, under the general credit. The investment land was a capital asset, so the Virginia resident could claim credit for North Carolina tax on the 2014 gain. The special border-state rule did not apply…
Could taxpayers avoid Virginia assessments while contesting IRS adjustments if they filed no amended Virginia returns or proof of a revised federal result?
No. Virginia upheld the 2009, 2010, and 2013 assessments because the taxpayers did not report the IRS changes or provide enough evidence of a revised federal determination. If the IRS later changed it…
Was a military spouse exempt from Virginia income tax when she claimed another domicile but had a home, job, voter registration, and license in Virginia?
No. Virginia found the spouse was a Virginia domiciliary because she showed no continuing connections to the claimed state and established a home, employment, voter registration, and a driver's licens…
Could a Virginia resident use Maryland rental income and tax to claim the special border-state credit without Virginia's ordinary limitation?
No. Maryland rental income reported on Schedule E did not qualify for Virginia's special border-state rule. Virginia correctly limited each 2011-2013 credit to the Virginia tax on Maryland net income,…
Could severe illness extend Virginia's refund deadline when a 2010 joint return claiming a refund was filed in June 2014?
No. The 2010 return had to be filed by May 2, 2014 to preserve the refund, but the wife and husband's estate filed it in June. Virginia law required a fiduciary or authorized agent to file for a disab…
Could taxpayers deduct long-term care premiums paid in 2009 and 2010 on their 2011 Virginia return after the earlier refund periods expired?
No. Under the taxpayers' cash method, long-term care premiums were deductible only in the year paid. Their 2011 return could include the 2011 premium, not premiums paid in 2009 or 2010, and the three-…
Could late 2005-2009 overpayments be credited to 2012-2013 assessments when disability prevented the taxpayer from filing until March 2014?
No. Applying an overpayment to later tax is still subject to the refund deadline. The taxpayer filed the 2005-2009 returns in March 2014, after every limitation period had expired, and disability did …
Could a taxpayer overturn a Virginia assessment based only on saying it was larger than taxes owed in other years when no 2010 Virginia return had been filed?
No. Virginia's best-information assessment was presumed correct, and comparing it with other years did not prove the 2010 liability was wrong. The taxpayer had 30 days to file a 2010 Virginia return s…
Could taxpayers subtract a 2011 long-term gain from selling real property under Virginia's qualified-technology-business subtraction?
No. Virginia's subtraction required gain attributable to an investment in a qualifying Virginia technology business. The taxpayers' gain came from selling real property, and they had no qualifying wri…
Could Virginia residents subtract foreign salary, foreign investment gains, and the 2011 portion of a 2010 Roth IRA conversion from federal adjusted gross income?
No. The amounts were included in the taxpayers' 2011 federal adjusted gross income while they were Virginia residents, and Virginia law supplied no applicable modification. That included foreign earni…
Did a taxpayer remain a Virginia domiciliary in 2011 despite owning a Virginia home and maintaining family and business connections there?
No. Although the taxpayer still owned a Virginia home and had family, business, and vehicle connections there, his long-running State A home, license, vehicle registration, voter registration, nonresi…
Could a married couple avoid the $4,000-per-contract Virginia prepaid-tuition deduction limit because the nonowner spouse was over age 70?
No. Only the listed purchaser-owner could claim the prepaid-tuition deduction. Because the husband owned both contracts and was under 70, each deduction was limited to $4,000 per year despite the wife…
Could preparing a 2011 Virginia return in tax software prove it was filed when the Department had no return, confirmation number, or payment record?
No. Tax software preparation did not prove that the Virginia return was transmitted or received. With no return, confirmation number, or payment proof, Virginia could assess from the IRS transcript at…
Did a taxable lump-sum death payment qualify for Virginia's annuity death-benefit subtraction when it came from a § 403(b) retirement plan?
No. Even though an insurance company issued a taxable lump-sum death payment, the documents showed it came from an IRC § 403(b) retirement plan. Virginia's subtraction applied to qualifying annuity-co…
What productions, expenses, payroll, and application steps qualified for Virginia's Motion Picture Production Tax Credit under the 2015 guidelines?
Under these historical guidelines, an eligible production generally needed at least $250,000 of qualifying Virginia expenses. The refundable base credit was 15%, or 20% in a designated distressed area…
Was an out-of-state trust a Virginia resident trust after its family moved to Virginia, and could LLC income still create Virginia tax?
The trust was not a Virginia resident trust after the Virginia-resident trustee resigned on December 26, 2013, but that did not eliminate Virginia tax exposure. Depending on whether it remained a gran…
Did a federal filing extension preserve a Virginia refund when the original 2010 state return was not filed until September 2014?
No. A federal extension did not establish a Virginia extension, and filing the original state return after the extended due date negated the state election. The refund period reverted to the May 2, 20…
Were fees to reactivate disconnected Internet service subject to Virginia communications sales tax despite the Internet-access exemption?
Yes. Internet access itself was excluded from the tax, but reactivating disconnected service was a taxable connection or reconnection of communications service. The charge was not an exempt incidental…
Was a hospital's one-time sale of laboratory equipment exempt as an occasional sale even though the hospital was registered for other retail sales?
Yes. The hospital's sales-tax registration covered its cafeteria and gift shop, not the laboratory assets, so the one-time equipment sale qualified as an occasional sale. A refund was due only after t…
Could a restaurant replace Virginia's reconstructed alcoholic-beverage sales audit with bank-based reports that ABC had not yet verified?
Not yet. Virginia could use ABC reports to reconstruct sales because the restaurant lacked adequate daily records. It would accept revised bank-based MBAR figures only after ABC verified them within 6…
Could a mobile repair business overturn an estimated Virginia sales-tax audit when its records were stolen and it supplied no proof of exempt services or sales?
No. With no returns or sales records, Virginia could estimate taxable sales from ticket books, bank statements, corporate returns, and prior audit data. Unsupported claims about exempt services did no…
What Virginia tax interest rates applied during the second quarter of 2015?
Virginia's second-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 …
How should a city resolve BPOL and machinery-and-tools liabilities when it classified the taxpayer as a manufacturer but both sides lacked complete records?
Virginia remanded the case. The city had to credit every payment the taxpayer could verify, while the taxpayer had to provide records separating the activities and receipts of multiple entities. If an…
Could taxpayers carry a 2010 overpayment into 2011 when their original 2010 return was filed after Virginia's refund deadline?
No. The same three-year limitation that barred a cash refund also barred carrying the overpayment forward. Because the original 2010 return was filed in June 2014, after the May 2, 2014 deadline state…
Did returning to Virginia for about two weeks within six months of moving away prevent a taxpayer from proving a domicile change?
No. Although returning to Virginia within six months was prima facie evidence that the taxpayer had not abandoned Virginia domicile, the full record showed a genuine move from State B to State A. Virg…
Could taxpayers use Virginia's Historic Rehabilitation Tax Credit subtraction to restore a partnership-interest loss disallowed by the IRS?
No. Virginia's subtraction applied to gain or income recognized from allocating or applying Historic Rehabilitation Tax Credits, not to a loss on selling a partnership interest that the IRS disallowed…
Could taxpayers apply a January 2012 estimated payment to 2012 after it had already been credited and claimed for 2011?
No. Local and Department records showed that the January 2012 payment was applied to 2011 under the estimated-tax schedule and the taxpayers claimed it on their 2011 return. It could not also be credi…
Could an employer reduce estimated Virginia withholding assessments by filing its annual return and supplying W-2 and payroll records?
Yes. Virginia abated the 2009 estimated assessment after finding that an annual return had been filed, and it returned the 2010 and 2011 assessments for adjustment because the employer's W-2 forms and…
Did a taxpayer prove that computer-controlled medication management systems had to be classified as computer equipment for local BTPP tax?
No. The systems combined computers and peripherals with medication drawers and shelving, and the taxpayer did not prove the computer components could be reprogrammed and used separately. The county's …
Did a business owner prove that a city's BPOL and BTPP assessments were wrong based on separate businesses, contracting, out-of-state work, and property value?
Only in part. The taxpayer did not document separate businesses, contractor work, excluded insurance proceeds, or eligibility for an out-of-state BPOL deduction, so the BPOL assessments were upheld. T…
Could Virginia excuse a refund claim filed several weeks after the three-year deadline because the taxpayer was traveling and unfamiliar with the law?
No. The original 2010 return was filed in June 2014, after the May 2, 2014 refund deadline stated in the ruling. Va. Code § 58.1-499 D gave the Department no discretion to excuse the late filing based…
Did a military spouse prove that she retained another state's domicile and qualified for relief from Virginia income tax for 2011?
No. The taxpayer did not prove that she retained the same out-of-state domicile as her military spouse. Living and working in Virginia, registering her vehicle there, and obtaining a Virginia driver's…
Could taxpayers avoid Virginia assessments based on final IRS changes merely because they were still contesting the federal audit?
No. Virginia does not look behind the IRS's final determination and could assess the unreported federal changes at any time because the taxpayers did not file amended Virginia returns. If the IRS late…
Did a federally taxable annuity death benefit qualify for Virginia's subtraction when the payment came from a retirement plan?
No. Virginia's subtraction was intended for qualifying federally taxable lump-sum death benefits from annuity contracts with insurance companies, not payments from retirement plans. The 2010 assessmen…
Could S corporation vehicle depreciation be claimed as a Virginia fixed-date-conformity subtraction instead of through federal income?
No. Ordinary depreciation under IRC § 167 had to flow through the S corporation's federal Schedule K-1 and the taxpayers' federal adjusted gross income; it was not a separate Virginia fixed-date-confo…
How did Virginia classify and situs an engineering-services company's BPOL receipts, and could it appeal a vehicle BTPP assessment?
Virginia found the company was a business-service provider, not a contractor, for 2009-2010 and ordered a classification-based refund. It remanded 2011-2012 classification and situs for records, denie…
Would the Virginia Department order a county to issue a machinery-and-tools-tax refund after two prior determinations?
No. The Department said it had fulfilled its duties by issuing a final determination and a reconsideration determination, and it would not direct how the county implemented them. If the county's inact…
What federal tax changes did Virginia adopt for 2014 returns when it advanced its Internal Revenue Code conformity date?
Virginia advanced its fixed conformity date from January 2, 2013 to December 31, 2014 for tax years beginning in 2014. It adopted the Tax Increase Prevention Act of 2014 but retained specified Virgini…
Did a salesperson's mileage schedule and meal receipts substantiate the unreimbursed employee expenses claimed on a 2013 Virginia return?
Yes. The mileage itinerary excluded the stated home-to-first-client commute, accounted for the employer's flat reimbursement, and documented travel between clients; the taxpayers also supplied the bus…
Did a technical-services company prove that its 2010 BPOL receipts belonged outside the city, and was interest due on later refunds?
Only in part. The taxpayer had not yet proved that its 2010 service receipts should be sitused outside the city, so that issue was remanded for 30 days of evidence. The city nevertheless had to pay st…
Were sales of prewritten measurement software retail or wholesale sales for Virginia BPOL classification purposes?
No. For BPOL purposes, the prewritten measurement software was not physically transferred goods, wares, or merchandise and therefore was neither a retail nor wholesale sale. It was classified as a bus…
Did pollution-control equipment certified after January 1 qualify for Virginia's local property-tax exemption for that same year?
No. The equipment had to be certified by the January 1, 2013 tax day to receive the pollution-control property exemption for 2013, and its March certification was too late. The case was remanded for t…
Must a nonprofit Virginia hospital have a religious affiliation for its property to qualify for the hospital-and-charity tax exemption?
No. Religious affiliation was not a requirement under the authorities discussed. The hospital still had to satisfy three factual conditions, including exclusive hospital use and operation exclusively …
Was a home-based worker paid by a foreign company operating a licensable Virginia business rather than working as an employee?
Yes. Form 1099 treatment, Schedule C business income and expenses, a home-office deduction, and 40-hour weekly work from the home or field supported independent-business status. The county's 2006-2011…
Did Virginia's seven-year collection limit bar a 2014 collection effort on sales-tax assessments converted to a responsible officer in 2004?
No. The converted bills were governed by the 20-year collection period in effect when the 2003-2004 assessments were issued, not the seven-year period in the 2015 statute. Virginia's 2014 collection e…
How did Virginia tax a country club's 20% service charges, minimum quarterly food charges, and fertilizer reimbursements?
Virginia removed tax from the club's mandatory service charges of 20% or less and from quarterly charges imposed when members bought too little food. Fertilizer reimbursements were taxable retail sale…
Were hotels' mandatory 20% service charges on banquet and meeting meals subject to Virginia sales tax?
No. Mandatory gratuity or service charges of 20% or less on the hotels' meal charges were excluded from taxable sales price; only the portion above 20% was taxable. Virginia reversed the assessments a…
Was a deed transferred after confirmation and pursuant to a Chapter 11 plan subject to Virginia state and local grantor's tax?
No. Because the affiliate's deed transfer occurred after confirmation and pursuant to the Chapter 11 plan, federal law barred Virginia's state and local grantor's tax. The Department ordered its porti…
Was a post-confirmation deed transfer required by a Chapter 11 plan subject to Virginia state and local grantor's tax?
No. The affiliate's property transfer occurred after confirmation and pursuant to the Chapter 11 plan, so 11 U.S.C. § 1146(a) barred the state and local grantor's tax. Virginia ordered its portion ref…
Did a trust administered outside Virginia have to file a Virginia fiduciary return when its creator and primary beneficiary had Virginia ties?
Yes. The Virginia decedent's will exercised a power of appointment and created the trust, making it a resident trust. Although its trustee and property were outside Virginia, its primary beneficiary l…
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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.