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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Could a vertically integrated manufacturer obtain a Virginia BPOL exemption and a prorated refund after transferring its local operations?
Potentially, but more proof was required. Virginia held that the appeal was timely and that a vertically integrated business can qualify as one manufacturing business when its manufacturing is substan…
Did a military spouse preserve her out-of-state domicile and qualify for a refund of 2009 Virginia wage withholding?
Yes. Although the spouse moved to Virginia and began working before her marriage, Virginia found that the full facts showed she maintained State A domicile, shared that domicile with her service-membe…
Could a Virginia taxpayer reverse an audit assessment for itemized deductions without providing the requested supporting records?
No, not without substantiation. Virginia upheld the 2007 and 2008 assessments because the taxpayer did not provide records supporting the itemized deductions and an assessment is presumed correct unti…
Could a nursing assistant keep unreimbursed vehicle-expense deductions without records substantiating the business use?
No. Virginia upheld the 2007 and 2008 assessments because the taxpayer did not provide the requested records substantiating business use of her personal vehicle. The assessment was presumed correct, a…
Did prior return processing or use of Virginia-approved tax software prevent a later assessment for an overstated out-of-state tax credit?
No. Virginia upheld the additional tax and interest because earlier processing did not establish that the return was correct, and software approval tested conformity with processing requirements rathe…
Did Virginia use tax remain due on Tennessee equipment rentals when Tennessee properly taxed the continuous rental first?
No tax remained due on the contested rentals. Virginia concluded Tennessee had the first right to tax the continuous rental agreements and allowed a Va. Code § 58.1-611 credit for Tennessee sales tax.…
Could a Virginia resident defeat a 2007 nonfiler assessment by showing only that she filed a federal return?
No. Virginia did not dispute that the taxpayer filed federally, but a resident required to file a federal return generally also had to file a Virginia return. Because she did not provide the requested…
Could manufacturing lines qualify as idle machinery without advance written notice to the county?
Possibly under the separate one-year test, even though the manufacturer failed the advance-notice test. Virginia remanded because neither side had established whether there was a reasonable prospect t…
Could an interior-design company receive separate BPOL classifications for design services and its substantial furniture sales?
Potentially. Virginia found the city could classify the company as a business service based on how it held itself out, but its furniture sales appeared substantial enough to be a separate retail busin…
Can a Virginia taxpayer avoid assessments for incorrect itemized deductions by blaming the return preparer?
No. Virginia upheld the 2007 and 2008 assessments because taxpayers remain responsible for the accuracy of their returns, and this taxpayer knew or should have known she had not incurred the expenses …
Must a Virginia restaurant copy diplomats' exemption cards, and which contested meals, purchases, penalties, and interest remained taxable?
No card copy was required: recording each diplomat's exemption number was enough, and validated diplomat meals were removed. Church meals and unsupported restaurant purchases and assets remained in th…
Will Virginia cancel a resident income-tax assessment when the taxpayer does not provide the requested domicile evidence?
Not without evidence. Because the taxpayer did not provide the domicile information requested during the audit or appeal, Virginia found no basis to adjust the 2007 assessment. The Commissioner allowe…
Did temporary job transfers outside Virginia establish that a taxpayer abandoned his Virginia domicile for 2007?
No. Virginia held that temporary job assignments outside the state, even for years, did not prove the taxpayer intended to establish a permanent home elsewhere. His Virginia driver's license, Virginia…
Can a Virginia taxpayer avoid assessments for incorrect itemized deductions by blaming the return preparer?
No. Virginia upheld the 2007 and 2008 assessments because taxpayers remain responsible for the accuracy of their returns, and this taxpayer knew or should have known he had not incurred the expenses u…
Is labor to cut customer-furnished bricks into shapes for masonry arches taxable fabrication in Virginia?
Yes. Virginia treated cutting contractor-furnished bricks to specified shapes as taxable fabrication because it changed the bricks' form. Real-property contractors are the users and consumers of the m…
Could a Virginia watercraft business defeat retail and watercraft tax assessments by asserting that it made no sales during the audit period?
No. Virginia upheld the assessments because sales and rental agreements, registration records, and commingled transactions showed that the business made taxable sales and rentals during the audit peri…
When can a Virginia seller treat human allograft and porcine xenograft soft-tissue products as sales-tax exempt?
The human allograft could be sold exempt as a Schedule VI controlled substance to qualifying licensed practitioners and medical facilities, with physician or DEA documentation. The porcine xenograft c…
Are a Virginia tire shop's separately stated off-site road-service charges exempt repair labor when the service call results in a tire sale?
No. When an off-site call resulted in a tire sale, Virginia treated the technician's travel-based road-service charge as part of the taxable sales price, even though it was hourly and separately state…
Was a 10% shareholder who served as secretary and treasurer personally liable for the corporation's unpaid Virginia withholding tax?
No. Virginia found that the minority shareholder was not a responsible corporate officer for the unpaid withholding tax because the evidence did not show he had a duty to file or pay it, authority to …
Which dealers had to make Virginia's June 2011 accelerated sales-tax payment, how was it calculated, and what deadlines and waivers applied?
For June 2011, dealers and direct-payment permit holders with at least $5.4 million of taxable sales or purchases in the prior July-to-June fiscal year generally had to prepay 90% of their June 2010 s…
Could a satellite installer buy equipment for resale tax-free when it installed the equipment before transferring it to the programming provider?
No. The installer owned the equipment when purchased and made an intervening taxable use by installing it before transfer, so it owed sales or use tax on that purchase. Its later transfer to the progr…
What documentation did a Virginia IT seller need to remove claimed government, electronic-software, and installation-service sales from an audit?
The seller needed contemporaneous records proving each exemption. Virginia upheld every challenged exception because the documents did not show a direct federal sale or resale, did not reliably certif…
Does a Virginia steel contractor consume materials it fabricates and delivers under one construction contract when other contractors install them?
No. A contractor is the taxable user or consumer only of property it installs or otherwise uses in performing its real-property work. Separately priced bollards, anchor bolts, lintels, plates, and sim…
Was VSL#3 medical food exempt from Virginia sales and use tax as a prescription drug, nonprescription medicine, or reduced-rate food?
No. Virginia found that VSL#3 was food rather than a medicine or drug, its labeling did not claim to diagnose, cure, treat, or prevent disease, and the submitted facts did not show it qualified as foo…
Did a nonprofit sale lose its Virginia exemption because the certificate used the customer's legal name while the invoice used its trade name?
No. Virginia confirmed through its registration system that the invoice name was the nonprofit customer's trade name, while the complete certificate used its legal name. Because the goods were shipped…
Did a military spouse qualify for a 2009 Virginia withholding refund when she and the service member had different domiciles before Virginia?
No. Virginia found that the spouse maintained State A domicile, but the service member had not abandoned State B domicile before the move to Virginia. Because the 2009 military-spouse protection requi…
Could a Virginia restaurant obtain review of an underreported-sales assessment by supplying deposit and loan records with its appeal?
Yes, the Department sent the audit back for review of the new documents, but it did not cancel the assessment immediately. Because bank deposits exceeded reported sales and adequate explanations were …
Could Virginia residents reopen the 2004 refund period after another state assessed tax on the same rental income in 2009?
No. The March 2009 amended Virginia return came after the general May 2, 2008 deadline, and none of the exceptions reopened 2004. The other state's assessment was not a Virginia assessment, a 2009 fed…
Is artwork held by a Virginia gallery on consignment inventory subject to the gallery's local merchants' capital tax, and how is purchased art valued?
No. Artwork held by a gallery on consignment remained owned by the artist and was not the gallery's inventory for merchants' capital tax. Artwork the gallery actually purchased for resale would be inv…
What Virginia filing and payment relief applied to taxpayers affected by the April 8 and April 16, 2011 severe storms?
Virginia generally moved qualifying state return and payment deadlines falling from April 16 through May 2, 2011 to June 1, 2011 for storm-affected taxpayers whose needed records were in designated di…
Could a Virginia seller reduce an audit assessment by supplying valid resale certificates after the audit?
Yes, in this appeal. The seller submitted two exemption certificates after the audit, the auditor reviewed them, and Virginia revised the assessment accordingly. But certificates must be complete and …
Was a Virginia software-support agreement taxable when it mainly provided remote labor but allowed the vendor to supply loaner equipment?
Yes. Virginia treated the agreement as a parts-and-labor maintenance contract because it expressly allowed the vendor to provide loaner equipment in some circumstances. Even though loaners could requi…
Were spouses full-year Virginia residents for 2006 even though one did not obtain Virginia employment until October?
Yes. Virginia found that the couple's licenses, Virginia apartments, vehicle registration, and earlier part-year filing showed Virginia domicile throughout 2006. A later Virginia job start and one par…
Did Virginia properly add back interest paid to an affiliate and reorder a corporation's net-operating-loss deductions?
Virginia reversed the interest addback because the lending affiliate held no intangible property, so the cited related-party addback did not apply. But the corporation had not filed the required state…
Could a federal IT contractor buy build-out furniture for resale tax-free and exclude that order from Virginia's projected audit sample?
No. The order's true object was a federal facility reconstruction and build-out, so the contractor consumed the furniture in a real-property contract even though the government reimbursed it or took t…
Are a manufacturer's computers, vehicles, furniture, and other assets automatically excluded from Virginia local machinery-and-tools tax?
No. Classification depends on how each asset is actually used, where it is located, and whether the taxpayer documents transfers or disposals. Computers and software directly used in manufacturing can…
Was a national trust bank a bank under Virginia's Bank Franchise Tax Act even though its Virginia office did not accept deposits?
Yes. The Norfolk Circuit Court held that AMG fit the Bank Franchise Tax Act's specific definition of a bank as a national banking association doing business or having an office in Virginia. The court …
Could a taxpayer reduce a Virginia assessment without filing the 2007 resident, part-year, or nonresident return needed to calculate liability?
Not on the existing record. The taxpayer admitted some Virginia-source income but had not filed a return or supplied enough information to determine residency and liability, so the assessment remained…
Could a corporation allocate stock-sale gains outside Virginia apportionable income because the investee was not part of a unitary business?
No. Although Virginia agreed the corporation and investee were not unitary, the investment served an operational rather than passive function. The corporation licensed its technology for stock, suppli…
Could a city impose consumer utility tax when an affiliate bought natural gas and caused it to be delivered through pipelines it did not own?
Yes. Virginia treated the affiliate as a pipeline distribution company because it bought the gas and caused it to be transmitted by pipeline, even without owning or operating the pipeline. The 2001-20…
Can Virginia residents calculate the other-state tax credit before subtracting a historic-rehabilitation credit granted by that state?
No. Virginia limited the credit to the tax actually paid to the other state after that state applied its historic-rehabilitation credit. The residents could not use the higher pre-credit liability, be…
Did a federal-contract joint venture create a Virginia definite place of business merely by using a member's office address for nine months?
No. Virginia advised that merely sharing a member's Virginia office address did not create a definite place of business when the joint venture had no employees, property, phone, records, signage, adve…
After moving away, would sellers owe Virginia tax on contingent payments from an S-corporation sale and installments from their Virginia home?
It depended on the federal character of each payment. Gain or interest from selling S-corporation stock as an intangible not used in a Virginia business generally would not be Virginia-source after th…
Were a restaurant tenant's permanently attached leasehold improvements real property rather than taxable business tangible personal property?
Yes. Concrete, masonry, doors, windows, plumbing, HVAC, electrical work, trim, and built-in furnishings were annexed and adapted to the premises, and the lease showed attached improvements became the …
Are scuba-tank compressed-air fill-ups taxable sales of tangible personal property in Virginia?
Yes. Virginia treated the measured, filtered, and compressed air placed into scuba tanks as tangible personal property and the compression process as fabrication. The customer's true object was the co…
Was Virginia's projected sales-and-use-tax audit sample valid when its error factor included deposit payments from outside the sample month?
No. The one-month sample's error factor included deposit payments made in earlier periods, so those transactions were not part of the sample population. Their inclusion invalidated the percentage of e…
Was a Virginia facility that assembled raw materials into prefabricated home components a manufacturer for local property-tax purposes?
Yes. The facility transformed wood, steel, insulation, concrete, and other raw materials into substantially different foundation walls, trusses, wall panels, and interior walls. Its manufacturing acti…
Which purchases and sales of a Virginia marketing firm qualified for advertising or out-of-state printed-material exemptions, and could it limit the audit?
Virginia removed only one purchase backed by an invoice showing shipment to Washington, D.C. It upheld tax on promotional crayons and stickers, administrative supplies, and printed materials lacking p…
Did an independent truck driver owe city BPOL tax when he lived there but leased and drove his tractor for an out-of-state motor carrier?
Yes, he conducted a licensable business, and because he had no other definite place of business, Virginia treated his city residence as the business situs. The motor carrier's exemption did not automa…
Must a Virginia circuit-court clerk use assessed value for deed recordation tax when an appraisal and consideration indicate a lower market value?
No. Assessed value carried a strong presumption, but the clerk could rely on clear and cogent appraisal or other reliable evidence showing it did not reflect fair market value on the transaction date.…
Did a used-car dealer owe use tax on cutoff devices installed in financed cars before transferring the devices to a sister company?
Yes. The customer contract said the device remained dealership or assignee property, and the dealer controlled and maintained it as a delinquency deterrent. Installing the device was a taxable use bef…
Did a married couple prove their interest, dividends, and pension income was exempt because the tribal-member spouse lived on a reservation?
No. Although the wife was a tribal member and the couple lived on the reservation, Virginia found no evidence that the disputed interest or dividends came from reservation pursuits or that the pension…
Did a tribal member prove that interest, dividends, and pension income were exempt because he lived on an Indian reservation?
No. Virginia said reservation residence alone did not exempt the disputed income. The taxpayer did not show that the interest or dividends came from reservation-based institutions or pursuits, or that…
What Virginia tax interest rates applied during the second quarter of 2011?
Virginia's second-quarter 2011 rates were 6% for tax underpayments and assessments and 6% for overpayments and refunds. Calendar-year 2010 estimated-tax additions kept the first-quarter 5% rate throug…
Did a couple operate their short-lived 2007 import business for profit despite losses and closing before year-end?
Yes. Virginia found the couple organized and operated a new import business with registrations, online sales accounts, supplier and reseller agreements, relevant experience, and a website. Unexpected …
Did Virginia's manufacturing exemption cover machinery used to fabricate custom countertops that the business also installed in real property?
No for the 2003-June 2009 audit period. Virginia treated the taxpayer's primary business as fabricating and installing countertops as a real-property contractor, not industrial manufacturing, so its m…
Could City 1 impose 2009 BTPP tax on a business aircraft that used its hangar more than any other location but stayed there less than six months?
No. Although the aircraft was registered and based at City 1's airport and spent more time there than anywhere else, it was hangared there for less than six months in 2009. Virginia found it was not n…
Could buyers of devalued Virginia land-preservation tax credits claim additional credits that the sellers had retained instead of transferring?
No. Virginia held that only taxpayers who earn or purchase land-preservation credits may claim them. The buyers could claim only the devalued amount of the credits actually transferred in 2005 and 200…
Could recipients claim Virginia's disability-income subtraction when neither spouse was the permanently disabled individual for whom the payments were approved?
No. Virginia did not dispute that the payments were disability income under the cited federal definition, but the state subtraction also required the claimant to be absent from work because of permane…
What did the Frederick County final order published as P.D. 11-55 decide about the corporation-income-tax case?
The court recorded that the company and the Virginia Department of Taxation had settled, dismissed the action with prejudice, and ordered it removed from the active docket. The published order does no…
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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.