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 Virginia definitively decide that a paper mill's winders, slicers, conveyors, packaging stations, and shipping equipment were subject to machinery-and-tools tax?
No definitive item-by-item ruling was made. The stated facts did not show that packaging or shipping equipment was directly used in paper manufacturing, and the winders and slicers also did not appear…
Was a business that bought replacement parts and resold them to mining companies a BPOL wholesaler rather than a retailer or service provider?
Yes. The business took title to replacement parts, paid vendors, and resold the parts to mining companies that incorporated them into industrial processing operations. Virginia treated those sales as …
Did a corporate general partner's voting control make three partnerships part of its BPOL affiliated group under the brother-sister test?
No. The brother-sister test counted ownership held by individuals, estates, or trusts, not the corporation's interest as general partner. Although four shareholders owned all of the corporation, their…
Could a gasoline station avoid sales tax it failed to collect on prepaid telephone cards because it did not know the sales were taxable?
No. Virginia had treated the initial retail sale of telephone calling cards as taxable tangible personal property since July 1, 2004. A dealer that failed to collect the tax remained liable for it, an…
What did Virginia Tax Bulletin 14-1 say about the enhanced federal EITC and other fixed-date conformity adjustments for 2013 returns?
Virginia extended conformity to the enhanced federal Earned Income Tax Credit for tax years 2013 through 2017, allowing eligible individuals to compute the Virginia credit without a special adjustment…
Were bidis cigarettes that had to be listed in the Virginia Tobacco Directory, making the retailer's contraband-cigarette penalty valid?
Yes. The Portsmouth Circuit Court found that bidis met Virginia's statutory definition of cigarettes and that the unlisted bidis were contraband cigarettes. The retailer failed to prove otherwise, so …
Did Virginia's Taxpayer Bill of Rights automatically apply to audits and assessments of taxes administered by cities and counties?
No. The Taxpayer Bill of Rights protected processes administered by the Virginia Department of Taxation, not taxes that local officials administer, such as real estate, tangible personal property, and…
Did buying through a GSA Schedule make a federal systems contract an indefinite-delivery contract whose task orders received separate true-object tests?
No. The GSA Schedule was only the procurement vehicle; the separate system contract controlled the taxable transactions and was not shown to be an indefinite-delivery contract. Because that 2002 contr…
Were optional Internet-delivered document services and separately stated customer-specific programming taxable when a business also sold printed materials?
No. Optional electronic-document viewing and PDF-transfer services were independent from printed-material sales, delivered through the Internet without tangible property, and exempt. Separately stated…
Did moving to a foreign country establish a new domicile when the taxpayer retained an available Virginia home, voter registration, and driver's license?
No. Although the taxpayer and her husband established a home and employment in another country, their Virginia residence remained available, and she obtained Virginia voter registration and renewed a …
Did a hotel preserve its sales-tax appeal and overstate the 90-day exemption for continuously contracted railroad room blocks?
No relief was granted. The hotel's letter arrived within 90 days but was not a complete appeal because it supplied no documentation or legal grounds, so the application was time-barred. Virginia never…
Which equipment was subject to Virginia local machinery-and-tools tax, and what factual issues did the county have to reconsider?
Virginia found the coal silo was not used in manufacturing, while fire-suppression equipment built into the kiln system was taxable machinery and tools. It sent the case back to the county to verify t…
Could a part-year resident receive Virginia's standard deduction after failing to substantiate the larger itemized deductions claimed on her federal return?
Yes. Virginia disallowed the unsupported itemized deductions, but the substantiated amount was below both the federal and Virginia standard deductions. Following the IRS approach used when reviewing f…
Could a retailer rely on a 1997 public document to avoid tax on telephone calling cards sold after Virginia changed the law in 2004?
No. Effective July 1, 2004, Virginia's statutory definition of tangible personal property expressly included telephone calling cards on their initial sale. That change displaced the exemption stated i…
Did foreign software-license revenue and related technical services qualify for Virginia's corporate foreign-source-income subtraction?
Yes. Software was intangible property for Virginia income-tax purposes, and the taxpayer's foreign contracts granted customers licenses to use proprietary software. Development, integration, training,…
Could taxpayers keep a $4.4 million conservation-easement valuation when Virginia's independent appraisal valued the easement at about $500,000?
No. Virginia found that the Department's independent appraisal more accurately accounted for the floodplain, creek setback, wetlands, access limits, and other development constraints. It upheld the ap…
Could a corporation exclude all related-party royalty and interest payments from Virginia's add-back merely because the affiliate filed income-tax returns in other states?
No. Virginia limited the exception to the portion of the payments corresponding to the portion of the affiliate's income subjected to tax in other states, as shown by the affiliate's apportionment and…
Did returning to a foreign home and job end Virginia domicile when the taxpayer kept a Virginia home, license, vehicles, voting ties, and family connections?
No. Although the taxpayer returned to a permanent home and full-time work in Country A, he kept his Virginia residence, renewed his Virginia driver's license, maintained vehicle and voting ties, and l…
Were a graphic-design firm's brochures, signs, booklets, and exhibit panels exempt professional advertising services rather than taxable property sales?
Mostly no. Virginia kept brochures, signs, booklets, spec sheets, and other jobs in the audit because the available invoices and work statements did not prove professional media-advertising services. …
Does propane sold to individuals for grills, temporary residential heating, patios, or recreational vehicles qualify for Virginia's domestic-consumption exemption?
Yes, when the propane is for an individual's nonbusiness use and the dealer can substantiate that use. Virginia treated grilling, outdoor cooking, temporary heating of residential spaces or patios, an…
What happens when neither a business nor the city provides a clear record supporting a local property-tax assessment, and who controls an offer in compromise?
Virginia remanded the 2010 assessment because neither the taxpayer nor the city supplied a clear factual and documentary record, and the assessment was more than 600% above the adjusted 2011 amount. T…
Is the full price of a children's party package taxable when one charge covers amusement admission, pizza, drinks, supplies, and party coordination?
Yes. When the single party-package price included play time plus pizza, drinks, a T-shirt, invitations, and party supplies, Virginia treated the entire charge as taxable. The primary purpose being amu…
Did an acquisition create a new Virginia consolidated-return election when the buyer itself was not subject to Virginia income tax?
No new election arose. Because the buyer was not subject to Virginia income tax before or after the acquisition, the acquired group's existing consolidated election stayed in effect. The buyer's Virgi…
Were fuel sales to nonprofit volunteer fire departments exempt as government purchases under Virginia's 2010-2011 motor-vehicle-fuel sales tax?
No. Virginia treated the volunteer fire departments as nonprofit organizations, not governmental entities, and the nonprofit retail exemption no longer applied after the tax shifted to the wholesale l…
Did restaurant franchise royalties qualify for Virginia's unrelated-member add-back exception when the holding company had no comparable direct third-party license?
No. Even accepting that the holding company indirectly derived substantial revenue from unrelated franchisees, the exception also required comparable rates and terms. The holding company had no direct…
Could a corporation exclude all royalties paid to an affiliate from Virginia's add-back because the affiliate reported royalty income in other states?
No. Virginia limited the subject-to-tax exception to the portion of the affiliate's royalty income actually apportioned and subjected to tax in other states. It also refused to consider the valid-busi…
Which reconstruction-contractor purchases could be removed from a Virginia use-tax audit when invoices were missing, mismatched, or showed duplicates?
Virginia removed transactions supported by adequate records and entries shown to be duplicates. It kept purchases where invoices were missing, did not match the audited item, showed no sales tax, or i…
Were gaming points cards and online console memberships subject to Virginia retail sales tax or communications sales tax under the 2013 rules?
No. Virginia treated the cards and memberships as ways to secure online access, not as sales of tangible personal property. It also found that the products were not communications services. Sales in t…
Did a country club owe use tax when employees ate leftover banquet food for free and the club recorded an internal $2 meal allowance?
No. The customers' banquet meals had already been sold and taxed, employees received leftovers without charge, and the $2 amount was only an internal accounting entry that did not affect wages. Virgin…
When could gelatin embolization pledgets be sold tax-free to for-profit and nonprofit Virginia hospitals or clinics?
For-profit hospitals and clinics could buy the devices exempt only when each purchase was specifically for an identified individual patient; bulk purchases did not qualify. Qualifying nonprofit hospit…
Does an employer's failure to withhold enough Virginia tax excuse an employee from filing a resident return and paying the remaining tax?
No. An employer's insufficient withholding did not reduce the employee's duty to report income, file the Virginia return, and pay the full tax. Because the assessment used the best information availab…
Could Virginia residents claim Virginia's other-state tax credit for capital-gains tax paid to India on the sale of Indian real estate?
No. Virginia's credit applied only to income tax paid to another U.S. state, not to a foreign country. The U.S.-India income tax treaty covered specified federal and Indian national taxes and did not …
Did annuity income received from insurance companies in both 2010 and 2011 qualify for Virginia's death-benefit subtraction?
No. Virginia required a federally taxable death benefit from an insurance-company annuity contract that was awarded to the beneficiary in a lump sum. Although the taxpayer's payments came from insuran…
Could an Office of Personnel Management survivor annuity qualify for Virginia's death-benefit subtraction if the beneficiary chose a lump sum?
No. The payment came from a federal retirement plan rather than an annuity contract between a customer and an insurance company. Virginia said that source disqualified the benefit even if the taxpayer…
Did a Form 1099's annuity label make periodic federal retirement survivor payments eligible for Virginia's death-benefit subtraction?
No. The payments came from a federal retirement plan, not an annuity contract between a customer and an insurance company, and they were not paid as a lump-sum death benefit. The Form 1099's annuity l…
Did monthly federal retirement survivor payments qualify for Virginia's annuity death-benefit subtraction when they were not paid as a lump sum?
No. Virginia required the qualifying death benefit to come from an annuity contract, be awarded to the beneficiary in a lump sum, and be federally taxable. The wife received continuing monthly payment…
Did Virginia's mistaken allowance of a federal retirement survivor subtraction for 2007 require the same subtraction for 2008-2010?
No. The periodic federal retirement survivor payments did not meet the annuity-contract and lump-sum requirements. Virginia also found that the earlier 2007 review did not supply binding written advic…
How did Virginia calculate the related-party royalty add-back exception, including royalties subjected to New Jersey's gross-receipts-based tax?
Virginia limited the exception to the portion of affiliate royalty income actually subjected to tax in each state, not 100% of the gross payments. For New Jersey, where the tax base was effectively gr…
Did federal income from deemed partnership sales of Virginia Land Preservation Tax Credits also increase the partner's Virginia taxable income?
No. Virginia law provided that transferring Land Preservation Tax Credits did not create gain or loss, so the partner could subtract the federal income created by the IRS's deemed-sale treatment. But …
Did assembling purchased electronic components into custom military devices qualify as manufacturing for Virginia BPOL tax?
Yes. Although many components had other uses and the process used ordinary tools, the company assembled numerous parts into integrated custom systems whose components were enclosed and not readily ide…
Are separately stated vehicle diagnostic charges exempt when the repair shop also sells and installs replacement parts?
Only standalone diagnosis was exempt. When testing identified a faulty part and the customer authorized replacement, Virginia treated the transaction's true object as the consequential sale of the par…
Which Virginia military-pay subtractions applied when extended-duty combat pay was excluded federally but later National Guard pay was taxable?
The basic-pay and combat-pay subtractions did not apply. Pay earned during extended active duty was already excluded federally as combat pay, while the taxable pay earned later was not extended-duty o…
Could a business that bought homes, hired contractors to renovate them, and resold them be classified as a BPOL contractor?
Yes, potentially. Virginia's BPOL rules included a person who regularly engaged others to perform construction work and a business improving its own real estate for resale. The county had to decide th…
What Virginia tax interest rates applied during the first quarter of 2014?
Virginia's first-quarter 2014 rates were 5% for tax underpayments and 5% for tax overpayments. The reduced rate for qualifying assessments under administrative appeal was 0%. The corresponding federal…
How should Virginia BPOL receipts be assigned when a mobile consultant works from multiple residences?
The consultant's multiple residences were each definite places of business because he maintained no separate office. Receipts should be assigned, where possible, to the residence where each engagement…
Was a Section 501(c)(3) research nonprofit exempt from Virginia local BPOL tax?
Yes. Because the organization was recognized under Section 501(c)(3), qualified under the cited charitable-nonprofit rule, and reported no unrelated business taxable income, Virginia concluded that al…
Could an air-charter operator bypass local BPOL appeals by requesting a Virginia advisory opinion?
No. Virginia Tax would not decide the air-charter BPOL exemption through an advisory opinion while assessments were disputed and the taxpayer had not used the required local appeal process. The taxpay…
How could Virginia BPOL tax apply to recreation-center events, lodging packages, and sales by a nonprofit?
BPOL treatment depended on the activity. A developer's race fees were taxable gross receipts unless it proved a genuine agency relationship with the nonprofit; temporary vendors could face an itineran…
Did a servicemember who lived in Virginia owe Virginia income tax for 2009 and 2011?
Not under the assessments as issued. Virginia treated the servicemember as a nonresident in 2009, so her military pay was protected and her nonmilitary work performed outside Virginia was not Virginia…
Was leasing and possibly operating a commercial tractor a Virginia BPOL contractor business?
No contractor classification applied. Leasing the commercial tractor was a BPOL business service, and operating it to haul goods would also be a business service. Virginia remanded the assessment beca…
Which Virginia corporate audit adjustments survived review for a group with intercompany loans and merchandise sales?
Virginia could examine and correct older net-operating-loss carryforwards when computing taxable income for open years, but most disputed intercompany adjustments had to be reversed. The documented le…
Did a Virginia historic venue owe sales tax on space rented for weddings and other events?
Yes. Because the historic plantation regularly rented rooms, facilities, and other spaces to transients for events, Virginia treated the charges as taxable accommodations. The full rental charge was t…
Could a Virginia corporation net a related entity's bad debts and cash discounts against its factoring-expense add-back?
Not on the return and appeal presented. Virginia treated factoring losses as related-party intangible expenses and found no exception allowing the corporation to net the related entity's bad debts and…
Could a Virginia widow subtract monthly FERS survivor-annuity death benefits from taxable income?
No. The Virginia subtraction required federally taxable death benefits from an annuity contract between a customer and an insurance company, awarded as a lump sum. The widow's 36 monthly FERS survivor…
What filing rules did Virginia Tax Bulletin 13-13 impose on same-sex married couples in 2013?
Historical only. Tax Bulletin 13-13 required same-sex spouses to file separate Virginia returns as single individuals, using pro forma federal returns and separate deductions, exemptions, credits, and…
Were a hotel's bank transfers, loans, and real-property rent all taxable BPOL gross receipts?
Not all of them. Virginia found that the hotel had sufficiently shown most disputed deposits were transfers between its own bank accounts, and its real-property rental receipts could be excluded from …
How did Virginia tax mortgage-fraud-related deposits when the taxpayer documented some payments to a business partner?
Virginia removed from taxable income the deposits the taxpayer documented as later paid to her husband's business partner, but treated the undistributed balance as her income. Dismissal of criminal ch…
Did dismissal of criminal tax charges require Virginia to erase the related income-tax assessment and refund garnished amounts?
No. Dismissal of the criminal charges did not by itself invalidate the civil income-tax assessment. Because the taxpayer supplied no documentation showing how the mortgage-fraud-related bank deposits …
Was a Virginia resort's lump-sum corporate membership fee subject to sales tax?
Yes. The resort's single three-year membership charge bundled taxable lodging and accommodations with taxable golf-cart use and other benefits. Virginia required sales tax on the entire lump-sum membe…
Was a company that sold and permanently installed made-to-order shelving and cabinets a retailer or a contractor?
It was a contractor. Temporarily storing made-to-order shelving and cabinets for particular jobs did not constitute retail inventory, and a small supply of trim and modification parts did not contain …
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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.