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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Were ceiling-track movable office partitions tangible personal property for resale, or real-property installations making the fabricator liable for use tax on materials?
They were treated as real-property installations. The partitions were attached to ceiling and floor systems, adapted to long-term office use, and not shown to be temporary. The contractor therefore co…
Could a retailer overturn an estimated Virginia sales-tax assessment without keeping sales, invoice, bank, or register records?
No. The retailer discarded records after a few months and could not substantiate claims about meat costs, gradual growth, a competitor's closure, invoices, deposits, or reported sales. Virginia found …
Did a Virginia seller owe Virginia sales tax when out-of-state manufacturers shipped products directly to buyers' locations outside Virginia?
No. The products never entered Virginia, and title and possession passed to the buyers outside Virginia with no use in the state. The sales therefore fell outside Virginia's retail-sales-tax jurisdict…
Did a military spouse prove she shared the service member's out-of-state domicile and qualified for Virginia withholding refunds?
Not on the record submitted. The spouse bought a Virginia home, obtained a Virginia driver's license, registered vehicles in Virginia, used a Virginia address on federal returns, and produced no evide…
Was a lump-sum nonqualified pension payment taxable by Virginia when a part-year resident received it after moving into the state?
Yes. For a part-year resident, Virginia attributed income to the state when it was received during the Virginia-resident portion of the year. The husband's earlier out-of-state employment did not chan…
Did taxpayers receive refunds after paying assessments caused by a reduced transferred Land Preservation Tax Credit?
No. Virginia treated the protective refund claim as an appeal on the merits and denied it. A separate Department determination had already upheld the lower conservation-easement valuation, so the resu…
Did Virginia cancel a 2008 assessment caused by reducing a transferred Land Preservation Tax Credit?
No. A separate Department determination had already upheld the lower conservation-easement valuation as the most accurate appraisal. Because the taxpayers' transferred credit depended on that valuatio…
Did taxpayers receive a 2008 refund after paying an assessment caused by a reduced transferred Land Preservation Tax Credit?
No. Virginia treated the protective refund claim as an appeal on the merits and denied it. A separate Department determination had already upheld the lower conservation-easement valuation, so the resu…
Did housing, subsistence, and other military compensation count when phasing out Virginia's subtraction for basic military pay?
No. Virginia's subtraction and its $15,000-to-$30,000 phaseout used only statutory military basic pay. Housing and subsistence allowances and other compensation shown on a W-2 were not basic pay. The …
What late-filing penalty policy did Virginia announce for surplus-lines brokers filing annual Form 802?
For the policy announced in 2014, Virginia capped the $50-per-day Form 802 late-filing penalty at $250 for a first offense and $500 for a second offense. A third or later offense remained subject to t…
Could a Virginia resident claim an other-state tax credit for West Virginia tax paid on slot-machine winnings?
Generally no. Slot-machine winnings were not compensation for services and therefore were not earned income. They qualified as business income only if the taxpayer proved that gambling was pursued ful…
Could Virginia decide BPOL and BTPP appeals when the county omitted the required BPOL notice and the taxpayer failed to give 30 days' direct-appeal notice?
No. The county's letter omitted the mandatory BPOL appeal language, but the taxpayer also failed to give the county 30 days' advance notice before treating the local appeal as denied. Virginia lacked …
Could a Virginia corporation exclude all related-party royalties from the add-back because its affiliate filed returns in other states?
No. The exception covered only the portion of royalty expense corresponding to the affiliate's income actually apportioned and subjected to tax in other states, not every royalty shown on those return…
Were cable converter boxes issued to customers exempt intangible property rather than assets subject to local Virginia BTPP tax?
Yes. Virginia's 1984 legislative history expressly reclassified cable tuners and converters as intangible property. The Department rejected the city's machine classification and returned the case for …
Were cable converter boxes issued to customers exempt intangible property rather than assets subject to local Virginia BTPP tax?
Yes. Converter boxes were used in the cable-television business and Virginia's 1984 legislative history expressly reclassified tuners and converters as intangible property. The Department returned the…
Which cable-provider assets were exempt intangible property and which remained subject to local Virginia BTPP tax?
Cable converter boxes were exempt intangible property, so the city had to remove them from the 2008 BTPP assessment. The provider did not prove that headend equipment, optical electronics, modems, or …
How should someone who moved from Maryland to Virginia in November 2009 file, and could he claim credit for Maryland wage tax?
He should file 2009 Form 760PY and report only income received during the Virginia-resident period, with prorated exemptions and standard deduction. Because Virginia-Maryland reciprocity exempted a Vi…
How did Virginia apply the true-object test and resale exemptions to mixed tasks under a federal prime contract and subcontract?
Virginia applied the true-object test to each lowest-level mixed task, not the 16-task instruction as a whole. Tasks 3, 14, and 16 primarily sought tangible personal property; their services facilitat…
Did low-wage service work disqualify a disabled federal retiree from Virginia's disability-income subtraction?
No. After reconsidering the federal-annuity rules and additional evidence, Virginia found that the taxpayer's minimum-wage service work was not comparable to his prior federal-government work. He ther…
Were cellular-phone activation fees taxable communications services, and could the provider add a separate audit issue after the appeal deadline?
The phone-linked fees were not taxable communications services because they arose only with a phone purchase, were refunded with a returned phone, and were not charged when customers used their own de…
Could a taxpayer challenge a 2000 Virginia assessment in 2012 by demanding that the Department first prove it was correct?
No. The assessment was issued June 6, 2003, but the taxpayer did not appeal until November 2012, long after Virginia's 90-day deadline. Department records also showed earlier notices to the same addre…
How did Virginia treat unsupported affiliate classifications, corporations without Virginia nexus, and royalties paid to related companies?
Virginia removed affiliates that lacked nexus and positive apportionment factors from the audit and allowed a royalty add-back exception only for the portion tied to affiliate income taxed by other st…
Could Virginia reduce transferred land-preservation credits when its appraisal valued a conservation easement far below the donor's appraisals?
Yes. Virginia accepted its independent appraisal's approximately $1.6 million easement value rather than the donor's approximately $9.6 million or $12.8 million values. The Department found the donor'…
Could a Virginia corporation exclude all related-party royalties from the add-back based on other-state filings or a valid business purpose?
Not on the record presented. The corporation had to provide the affiliate's out-of-state returns so the auditor could calculate the portion of royalties actually covered by the subject-to-tax exceptio…
How did Virginia sales tax apply to ATM installation, sign replacement, repairs, and delivery for financial institutions?
Virginia treated a business primarily furnishing and installing ATMs or financial-institution security property as a retailer for post-June 2011 work, requiring it to collect tax on the property rathe…
Which Virginia dealers had to make the June 2014 accelerated sales-tax payment, and how did payment, reconciliation, and hardship relief work?
For June 2014, a dealer with at least $48.5 million of taxable sales or purchases in the prior fiscal year generally had to prepay 90% of its June 2013 sales-and-use-tax liability. Payment was due Jun…
Was solar electricity sold under a power-purchase agreement exempt while leasing the photovoltaic equipment remained taxable in Virginia?
Yes, on the facts presented. Electricity sold to host customers under a power-purchase agreement qualified for the exemption for electricity delivered through lines. An unmetered customer agreement wh…
Did a customer's later use-tax payment remove an untaxed sale from a Virginia seller's audit sample?
No. A customer's later use-tax payment did not erase the seller's duty to collect tax or remove the sale from the audit sample. Virginia kept those sales in the sample but allowed one-time credits for…
When did purchased idle manufacturing equipment become taxable machinery and tools, and which owner's cost controlled its valuation?
Altered machinery was subject to M&T tax when it was necessary and actually used in the buyer's manufacturing process. Equipment bought in April 2012 but not operational until February 2013 was treate…
When would Virginia remove disputed hardware-store transactions from an audit sample or accept a claimed nonprofit exemption?
Virginia removed a documented 44-day customer account from the sample and taxed those sales separately, while sending an unusually large truss sale for review under a larger sample. Unsupported nonpro…
Were permanently installed gas pumps fixtures to real estate or business tangible personal property subject to a Virginia city's BTPP tax?
They were fixtures to real estate, not taxable BTPP. The pumps were connected to the station's electrical wiring and underground tanks, were essential to the site's use as a gas station, and were inte…
What counted as a small quantity of domestic-use propane, and was the Virginia rule applied per sale or by averaging transactions?
Virginia generally treated a small portable propane cylinder—such as a 20- or 34-pound tank or smaller, filled to capacity—as a small quantity. The test applied to each sale, not an average across a m…
Did improved systems and business changes justify waiving a second-audit Virginia use-tax penalty when compliance was only 30%?
Not by themselves. Virginia removed documented purchases and transfer entries from the audit and would recompute the use-tax compliance ratio. A second-audit penalty would be fully waived if the revis…
Would appointing a Virginia resident to a limited co-trustee committee make three out-of-state trusts Virginia resident trusts?
No. The trusts were created outside Virginia by non-Virginia grantors, owned no Virginia property, and were administered in another state. The Virginia co-trustee could not act individually and would …
Did an out-of-state engineering LLC have to file a Virginia pass-through return when occasional site visits created no positive apportionment factor?
No, on the stated facts. The LLC had no Virginia property or payroll, and its service-sales factor was outside Virginia because more than half of the service costs were incurred at its out-of-state of…
Could a nonresident carry forward Virginia pass-through losses when no corresponding federal net-operating-loss deduction remained?
No. Virginia allowed a net-operating-loss deduction only to the extent a corresponding deduction was available federally. Because the prior losses had been absorbed by other federal income and no fede…
Was a husband who owned a Virginia home, license, vehicles, and voter registration still a nonresident when his permanent ties remained elsewhere?
Yes, he remained a nonresident for 2009. Although he owned a Virginia home and held a Virginia driver's license, voter registration, and vehicles, he spent fewer than 183 days in Virginia and had not …
Did a merchant mariner abandon Virginia domicile by taking an indefinite out-of-state job and using motels or a training center between voyages?
No. Although the mariner had indefinite employment and a post-office box in another state, he never established a permanent abode there and retained major Virginia ties: his wife, voter registration, …
Could existing leasehold interests reduce the property value used for Virginia grantor tax when the fee and leases were sold together?
Yes. Because the purchase documents and deed preserved the leasehold interests instead of merging them into the purchaser's fee ownership, the leases remained encumbrances whose value was excluded fro…
Was a Tennessee installer of blinds, drapes, shades, valances, and cubicle curtains a retailer or a consuming contractor on Virginia jobs?
It was a consuming real-property contractor, not a retailer, because it did not maintain enough inventory of window treatments or component materials to meet Virginia's retailer definition. It owed us…
When were software sold to manufacturers, electronically delivered programs, custom software, modifications, and cloud services exempt in Virginia?
Software used primarily to direct or control production or quality control could qualify for the manufacturing exemption, while administrative monitoring software was taxable. Custom programs and sepa…
Was the full price of an amusement-center party package taxable when it bundled attraction admissions, a room, hosting, and food?
Yes. A single-priced party package that included attraction admissions and taxable food was taxable in full, even if customers primarily wanted the party experience. Virginia nevertheless removed pack…
What Virginia tax interest rates applied during the second quarter of 2014?
Virginia's second-quarter 2014 rates were 5% for tax underpayments and assessments and 5% for tax overpayments and refunds. The reduced rate for qualifying assessments under administrative appeal was …
Could Virginia abate pass-through withholding assessments when the LLC had paid enough tax into the wrong employer-withholding account?
Yes. The LLC had remitted enough employer withholding to cover its 2008-2011 pass-through withholding, so Virginia abated the assessments and refunded the 2011 overpayment with interest. But partners …
Did Virginia's railroad-rolling-stock exemption apply when a bank bought rail cars from the manufacturer and leased them to the user?
No. The statute exempted railroad rolling stock only when sold or leased by its manufacturer. Once a financial institution bought the cars and became the lessor, the exemption did not apply—even thoug…
Which equipment at a nonutility Virginia solar facility qualified for the manufacturing sales-tax exemption?
The non-public-service company qualified as a manufacturer because it produced electricity for sale. Solar panels, inverters, wires and cables carrying electricity, and step-up transformers were direc…
Was a Virginia tax appeal filed by fax two days after the 90-day deadline considered timely?
No. The assessment was dated November 5, 2013, so a complete administrative appeal was due February 3, 2014. The taxpayer's fax arrived February 5—two days late—and Virginia treated the application as…
Were LLC members liable for their shares of unreported partnership income even if another member controlled the books and they received no benefit?
Yes. Because the LLC was taxed as a partnership, each member was responsible for tax on the member's distributive share of increased income, regardless of who controlled bookkeeping or whether the mem…
How should Virginia taxpayers report a 2008 NOL that was used under the federal five-year carryback but remained available under Virginia's shorter rule?
They could not subtract the NOL directly from 2010 federal adjusted gross income or make FAGI negative. The Virginia-available carryover had to be claimed as a fixed-date conformity subtraction, limit…
Could a Virginia resident avoid a 2010 income-tax assessment by claiming wages were exempt and IRS information lacked federal paperwork approval?
No. Employment income was taxable, the resident's income exceeded Virginia's filing threshold, and the Department could use IRS information to estimate liability when she did not provide adequate reco…
Could buyers of a transferred land-preservation credit avoid interest because Virginia later reduced the easement value or the seller promised indemnity?
No. Virginia timely assessed the couple after the donor and Department agreed to a lower easement value, and statutory interest on the resulting underpayment was mandatory. The donor's private indemni…
Could a Virginia locality deny the BPOL out-of-state deduction merely because the contractor used payroll apportionment to situs receipts?
No. A government contractor using payroll apportionment could still deduct the portion of Virginia-sitused receipts attributable to business in states or countries where it owed an income or income-li…
Could a government contractor recover BPOL tax and claim a current deduction for out-of-state receipts when it used payroll situs?
Yes. Virginia held that payroll apportionment did not eliminate the deduction for qualifying business where the contractor owed income-based tax. It remanded the 2008-2011 refund claims and 2012 deduc…
Could a business-service provider using payroll situs claim BPOL deductions and refunds for qualifying out-of-state receipts?
Yes. Payroll apportionment did not bar the out-of-state deduction. Virginia remanded the 2008-2012 refund and assessment dispute so the county could identify qualifying receipts from states where the …
Were LLC members liable for underreported partnership income when another member kept the books and employees were paid cash?
Yes. Partnership treatment made each LLC member responsible for the member's distributive share of increased income, despite another member's bookkeeping control or the absence of an economic benefit.…
Did tax software's automatic annuity death-benefit subtraction prove that a Virginia taxpayer qualified for the refund?
No. Virginia's approval of tax-preparation software meant the program met processing requirements, not that every tax calculation was correct. The annuity subtraction required a qualifying insurance-c…
Would out-of-state employees who commuted to Virginia and rented an apartment become Virginia residents?
No, based on the proposed facts. They would retain their out-of-state homes, families, licenses, registrations, banking ties, and intent to return, and would spend no more than 183 days in Virginia. B…
Did leasing homes outside Virginia establish a new domicile when the taxpayer retained Virginia property, licensing, and registration ties?
No. Even if the taxpayer began abandoning Virginia in 2009, she did not establish a new permanent or indefinite domicile in either state where she temporarily leased housing during 2010. She retained …
Did Virginia's 2% Land Preservation Tax Credit transfer fee apply to a sale by individual owners, and could alleged telephone advice excuse it?
Yes. The 2% fee applied to any transfer arising from a sale of Land Preservation Tax Credits by any taxpayer, not only to pass-through-entity transactions. Form LPC-2 said the same. Virginia would not…
Could an advertising business reduce a consumer-use-tax assessment without records supporting its tax-paid, resale, and sampling objections?
No. Virginia assessments are presumed correct, and the taxpayer bears the burden of proving an error. The advertising business received extra time but supplied no records supporting its claims that pu…
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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.