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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How did Virginia resolve estimated withholding assessments when an employer had missing returns and incomplete payroll records?
Virginia ordered the 2009 assessment adjusted using the W-2 information supplied. The 2010 assessments remained based on the employer's own annual reconciliation unless better records were produced. V…
Was a private country club's mandatory 20% service charge on banquet meals subject to Virginia sales tax?
No. The country club qualified under the broad restaurant definition used for the meal-charge exclusion, so its mandatory service charge of 20% was not taxable. Only a portion above 20% would be taxab…
Were a bottle maker's cartoning equipment, alleged ghost assets, and idle machinery subject to local machinery-and-tools tax?
The cartoning equipment was exempt because it served shipping rather than the manufacturing process. Virginia did not overturn the county's treatment of alleged ghost assets and idle machinery because…
Were cable-television converter boxes subject to a Virginia city's business tangible personal property tax?
No. Virginia classified the cable converter boxes as intangible property under Va. Code § 58.1-1101 A 2a, so the city could not impose business tangible personal property tax on them. The case was rem…
Could a national securities exchange use Virginia's financial-corporation apportionment method?
Yes, if more than 70% of its gross income came from qualifying financial-service fees. Virginia treated the exchange's transaction, issuer, and some market-technology services as financial services; a…
Did Virginia voting, driver's licenses, a vehicle, and an investment home make foreign residents Virginia domiciliaries for 2009?
No. Although the taxpayers owned a Virginia investment home, registered to vote, obtained Virginia driver's licenses, and registered a vehicle, they retained their established foreign domicile and had…
Was a Virginia refund claim timely when an overseas taxpayer filed on July 1, three years after the automatic extended due date?
Yes. Because the taxpayer was overseas on the original May 1 due date, Virginia's July 1 extension applied automatically. The return claiming a refund was filed exactly three years after that extended…
How did Virginia's 2015 guidelines treat first-time home buyer savings accounts, tax subtractions, eligible withdrawals, and penalties?
An account holder could designate qualifying financial accounts, subtract federally taxable account earnings from Virginia income, and use distributions for a qualified beneficiary's Virginia down pay…
What did Virginia's pre-2016 guidelines require to qualify for, calculate, and claim the Research and Development Expenses Tax Credit?
For tax years beginning before 2016, Virginia offered a generally refundable credit for qualified research conducted in Virginia above a calculated base amount. The guide used 15% and 20% rates on cap…
Could nonresidents use Virginia 529 programs, deduct contributions on a Virginia return, and avoid creating Virginia domicile?
Yes. The inVEST, CollegeWealth, and CollegeAmerica programs were open nationwide, and a nonresident with Virginia-source income could deduct eligible contributions when computing Virginia taxable inco…
How should an information-security company situs service receipts for BPOL tax when it had a Virginia headquarters and several data centers?
The Virginia headquarters and the staffed out-of-state management center were definite places of business, but mere servers at the other data centers were not. Service receipts had to be sitused first…
How much of a nonresident employee's wages from a Virginia LLC was Virginia-source income when his work-location records were doubtful?
Virginia treated 123 of 260 workdays in 2010 and 115 of 260 in 2011 as Virginia workdays. The taxpayers' claim that all services were performed from another state was not persuasive given the husband'…
Could a live-performance business overturn Virginia use-tax audit items without records showing electronic delivery, out-of-state assets, or tax already paid?
Not without proof. The taxpayer initially failed to document electronic software delivery, assets that allegedly never entered Virginia, and tax already paid on an asset. Virginia remanded the audit f…
Which advertising-business purchases remained subject to Virginia consumer use tax after the taxpayer supplied additional audit records?
Virginia removed many documented purchase lines, but kept consumer use tax on DVDs, exhibit cases, brochures, pens, and videos tied to the advertising business's media and promotional services. Other …
Could Virginia residents keep a credit for Maryland tax on reciprocal wages after Maryland's refund deadline had expired?
No. Maryland-Virginia reciprocity made the residents' Maryland wages exempt from Maryland tax, so the Virginia credit did not apply. Virginia issued its assessment within three years of the return due…
Could taxpayers subtract gains from Virginia bonds when unrelated capital losses had already offset all of those gains in federal adjusted gross income?
No. Virginia's subtraction applied only to Virginia-obligation income included in federal adjusted gross income. Because unrelated current and carried-over capital losses had already offset all of the…
Did a merchant mariner abandon Virginia domicile by working at sea and leasing a residence in another state while retaining Virginia ties?
No. The taxpayer's out-of-state lease and maritime employment did not show a permanent abandonment of Virginia. He retained Virginia voter registration, a Virginia-resident spouse, return visits, powe…
What Virginia tax interest rates applied during the first quarter of 2015?
Virginia's first-quarter 2015 rates were 5% for tax underpayments and 5% for tax overpayments. The reduced rate for qualifying disputed assessments after the nine-month point was 0%, while the corresp…
Were cable-television converter boxes subject to a Virginia city's 2013 business tangible personal property tax?
No. Virginia held that cable converter boxes were property used in a cable television business and that the 1984 statutory change classified them as intangible property. The case was remanded to the c…
Did an inherited Virginia home, vehicle registration, driver's license, and federal-return address make a long-term foreign resident taxable as a Virginia resident?
No. The taxpayer had lived and worked abroad since 2006, held foreign residency status, participated in professional and civic life there, and filed a foreign tax return. Virginia found that he change…
Did Virginia's manufacturing exemption cover a propane storage tank and stair handrails on an exempt raw-material silo?
No. The propane itself was an exempt production supply, but the tank merely stored it and was taxable. The raw-material silo qualified as part of integrated manufacturing, but its stair handrails only…
Were granite countertops and glass activity walls in an indoor athletic facility taxable as business tangible personal property?
No. The countertops and glass walls were attached to the building, essential to the concession and activity areas, and intended as permanent additions. Virginia classified them as real-property fixtur…
Could a Virginia part-year resident claim a credit when a neighboring state taxed all of her wages, including wages also taxed during her Virginia-resident period?
Yes. The neighboring state's return taxed the taxpayer's entire wage income, not merely wages from her pre-Virginia residency period. Because those earned wages were also subject to Virginia tax durin…
Were walk-in bathtubs, stairway wheelchair lifts, and outdoor ramps exempt as durable medical equipment without a physician's prescription or work order?
No. The products met Virginia's durable-medical-equipment criteria, but a sale was exempt only when purchased by or on behalf of an individual under a licensed physician's prescription or work order. …
How did Virginia tax an out-of-state company's equipment leases, maintenance contracts, delivery, Internet access, and third-party billing?
The out-of-state lessor had to register and collect tax on Virginia leases. Half of a flat parts-and-labor maintenance contract was taxable; qualifying installation and transport charges were exempt; …
Was electronically delivered software exempt when it was an integral part of a taxable medical hardware system?
No. Although electronically delivered software is generally nontaxable by itself, this software and its related services were integral to a taxable medical hardware system. Virginia included the charg…
Must Virginia finish collecting an assessed tax within seven years, or only begin a collection effort within that period?
Virginia's position was that it must make or institute a collection effort within seven years after assessment, but it need not finish collection within those seven years. Once some collection action …
How did Virginia resolve two sales/use-tax audits involving fixed assets, return reconciliations, wrong tax rates, exemption certificates, and customer-paid use tax?
Virginia sent both paid audits back for document review and adjustments. Reconciliations and several exemption certificates supported reductions; fixed-asset tax required more seller proof; customer-p…
How did Virginia income-tax filing change when it began recognizing same-sex marriages in October 2014?
Virginia began recognizing same-sex marriages valid under any state's law for Virginia income-tax purposes. Legally married couples could file jointly or as married filing separately, and couples who …
Were a surgery center's required software training, bulk eye-surgery devices, distilled water, and documented purchases exempt from Virginia sales tax?
Mostly no. Required training was taxable as part of the medical-records system; bulk-purchased eye devices were not bought for named patients; and distilled water was not an exempt controlled or nonpr…
Did transformers, electrical distribution, compressed air, bulk gases, a machining center, and its isolated foundation qualify for Virginia's manufacturing exemption?
Yes. Virginia found the listed equipment directly used in manufacturing: 87% of the general electrical system served production, the compressed air and gases powered production, the machining center c…
What Virginia tax interest rates applied during the fourth quarter of 2014?
Virginia's fourth-quarter 2014 rates were 5% for tax underpayments and 5% for tax overpayments. The reduced rate for qualifying disputed assessments after the nine-month point was 0%, while the corres…
Did a protective claim preserve disputed Land Preservation Tax Credits and transferees' ability to amend 2011 returns beyond the normal deadlines?
Yes. Virginia found undue hardship and treated the protective claim as tolling the five-year carryover while the easement-credit dispute remained pending. The donor and known or future transferees rec…
Did conservation easements qualify for Virginia land-preservation credits when the tracts had already been proffered as open space for residential developments?
No. The tracts had already been set aside as open space through rezoning proffers within residential developments, making the later easements nonqualified donations. Their development value had alread…
Was a Virginia corporate refund return timely when filed within one year after an IRS adjustment to NOL carrybacks, despite the ordinary three-year period?
Yes. The IRS finalized adjustments to 2001-2002 NOL carrybacks in August 2012, and the corporation filed its amended 2000 Virginia return in March 2013. That was within the special one-year period for…
Could a taxpayer carry underclaimed 2008-2009 Virginia prepaid-tuition deductions into 2010 when each year's contributions were already fully deductible?
No for the prior-year amounts, but Virginia allowed $6,000 for 2010. The taxpayer had two contracts with $3,300 and $2,700 annual contributions, both below the $4,000-per-contract limit. Because the o…
Could Virginia attribute another LLC's sales to the taxpayers' business and treat financed piano inventory as personal withdrawals?
No. Evidence showed the taxpayers' LLC and the manager's LLC were separate legal entities, so the other LLC's sales could not be attributed to the taxpayers. Third-party financing was a normal way to …
Did a Maryland piano seller have to collect Virginia tax merely because a separate Virginia store used the same name?
No. Virginia found no evidence that the Maryland seller and same-named Virginia store were affiliated or the same legal entity, and the seller did not meet the then-applicable sufficient-activity test…
Could Virginia assess one piano retailer for untaxed sales made by a separate Maryland company using the same name?
No. The evidence showed the Virginia LLC and the Maryland piano company were separate legal entities with different owners, despite using the same name and sharing connections to a management company.…
Could a California domiciliary who was an actual Virginia resident claim a Virginia credit for California tax on income earned outside both states?
No. Virginia treated the taxpayer as a California domiciliary and Virginia actual resident, and did not allow a Virginia credit for California tax on income from outside Virginia. She could amend with…
Did a military spouse remain a Virginia domiciliary in 2009 after selling her Virginia home and moving abroad with the service member's orders?
No. The spouse sold her Virginia home and vehicles, moved to the foreign duty station, established a home there, used the foreign address on her federal return, and let her Virginia driver's license e…
Were airline ground-support equipment, repair parts, labor, and maintenance contracts exempt from Virginia sales tax?
Yes when sold to a qualifying scheduled common-carrier airline for direct use in its service. Ground-support equipment and repair parts were exempt, separately stated installation and repair labor was…
Were naval-equipment sales Virginia sales when the equipment was built and first tested elsewhere but delivered to Virginia warehouses and a vessel?
Yes. Virginia used destination, not title passage or acceptance testing. Equipment delivered to a federal warehouse was received in Virginia; contractor warehouses were transportation stops, but deliv…
Was an adult whose parents moved to Virginia still a Virginia domiciliary after a permanent foreign transfer, marriage, home purchase, and residence visa?
No. The taxpayer was already an adult when her parents moved to Virginia, and by 2008 her permanent foreign job, home, marriage, and residence process established a new domicile. She had never lived, …
Did wages of a Virginia-resident employee who traveled nationwide belong in an out-of-state company's Virginia payroll-factor numerator?
It depended. If the employee performed no services in Virginia, the wages were not Virginia compensation. If some work occurred in Virginia, wages stayed outside the numerator when State A directed th…
Could a taxpayer overturn a late-penalty assessment and IRS-based estimated assessments after missing the appeal deadline and failing to file returns or records?
Not on the existing record. The 2008 appeal was filed well after Virginia's 90-day deadline, and the 2009-2011 estimates remained presumed correct because returns and supporting records were missing. …
Could a Virginia part-year resident claim credit for New York tax on wages earned after moving to Virginia while continuing to work in New York?
Only if she could prove she was not also a New York resident while domiciled in Virginia. A Virginia part-year resident may receive the credit for tax paid to another state where she was a nonresident…
Could Virginia adjust federal itemized deductions when the taxpayer's Schedule A amounts and supporting records did not substantiate the claimed deductions?
Yes. Virginia matched the state-and-local-tax reduction to Schedule A, recalculated overstated job mileage, and disallowed unsupported property-tax and charitable deductions. The taxpayer received one…
Could an advertising firm remove allegedly isolated printing, software, and asset purchases from Virginia's audit samples without transaction records?
No. Printing-related services were taxable with the printed property, and the firm did not document that software and other purchases were electronically delivered, isolated, or unusual. As a service …
Did Virginia's industrial-processing exemption cover a waste collector's bins, trucks, and equipment used to sort and bale recyclable paper and metal?
No, on the facts presented. The bins and collection trucks were taxable property used in a waste-disposal service. The sorting and baling operation also failed the industrial-processing test because t…
How did Virginia tax furnished apartment rentals shorter or longer than 90 days, and who paid tax on the furniture?
The provider had to register and collect sales tax on furnished accommodations rented for less than 90 continuous days. Stays of 90 days or more were not taxable; month-to-month stays required collect…
Did Virginia's agricultural sales-tax exemption cover rented water-treatment equipment and salt used to irrigate greenhouse plants for sale?
Yes. The greenhouse grew plants for wholesale and retail sale, and the equipment treated irrigation water to prevent iron from yellowing the plants. Virginia found the rented treatment units and the s…
Were a hotel's mandatory banquet gratuities of 20% taxable when part was retained by the house and the hotel was not treated as a conventional restaurant?
No. Virginia's statute excluded mandatory gratuities up to 20% of the meal price without requiring the full amount to be distributed to employees, and the exemption covered hotels and other places ser…
Was a September 2013 refund claim for tax year 2009 timely when the taxpayers paid by the original due date and filed within Virginia's extension period?
Yes. Because the taxpayers paid the full estimated balance by the May 2010 due date and filed their original return before the six-month extended due date, the three-year refund period ran from that e…
Could an S corporation holding company subtract gain from distributing portfolio-company stock because it lacked a unitary relationship with that company?
No. The company had employees and property, so it was not a passive investment pass-through entity. Managing and disposing of investments was its normal business, and it did not provide clear and coge…
Did an economic-obsolescence appraisal prove that a county's percentage-of-original-cost machinery valuation exceeded fair market value?
No. The county uniformly used a statutory percentage-of-original-capitalized-cost method and thoroughly considered the appraisal. The appraisal did not adequately support its economic-obsolescence and…
Were dollar-for-dollar warehouse operating-expense reimbursements excluded from BPOL gross receipts as agency funds or loan repayments?
No. The reimbursements were part of the operator's cost-plus warehouse-management receipts. The operator lacked stated client-vendor contracts and segregated accounting required to show agency, and th…
Did pharmaceutical salespeople, Virginia clinical trials, and employee recruiting and lobbying create Virginia corporate-income-tax nexus?
The ordinary sales solicitation appeared protected by P.L. 86-272, but Virginia could not decide the overall nexus question on the submitted facts. The company had to test whether clinical-trial provi…
How did a vending operator with machines at both nonprofit schools and for-profit businesses have to report Virginia sales tax?
The nonprofit-only rule did not apply because some machines were at for-profit businesses. Under the historical rates in the ruling, the operator generally had to remit 7% on the wholesale cost of all…
Did documentation support refunds for Virginia sales tax allegedly paid in error to two vendors during an audit period?
Only in part. Virginia found the records sufficient for Vendor A and allowed a refund with interest, but denied the Vendor B claim because the taxpayer did not prove that tax had been paid erroneously…
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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.