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 notices of intent and information requests preserve appeals of Virginia nonfiler assessments without complete appeals filed within 90 days?
No. Virginia had not received complete appeals stating the taxpayer's grounds and relevant facts within 90 days of either assessment, so both appeals were barred. The taxpayer also provided no objecti…
Could a late Virginia appeal defeat assessments by arguing that wages were not taxable and no federal return meant no federal adjusted gross income?
No. The appeal was filed after the 90-day deadline, and Virginia also rejected the wage-tax and no-return arguments as having no basis in fact or state law. The 2002-2006 assessments remained due. The…
Could Virginia assess additional 2005 and 2006 income tax after the ordinary three-year period when taxpayers did not report IRS changes?
Yes. Virginia's ordinary three-year assessment limit did not protect the taxpayers because they failed to file amended Virginia returns within one year after the IRS made final changes. Under Va. Code…
Could a taxpayer reverse a paid Virginia assessment without providing records substantiating the itemized deductions claimed?
Not yet. Virginia upheld the assessment because the taxpayer supplied no records supporting the itemized deductions despite repeated requests, and the assessment was presumed correct. The Department a…
For Virginia BPOL purposes, did converting a sole proprietorship into a single-member LLC create a new business owing a full-year license fee?
Yes. Virginia treated the single-member LLC as a legal entity different from the owner's former sole proprietorship, so it was a new business for 2009 and the city properly charged the license fee. Th…
What Virginia tax rate applied when a grocery store removed food from resale inventory and gave it away as customer samples?
Eligible food products used as samples were subject to Virginia's reduced food tax rate regardless of whether they were served as-is, needed utensils, were heated, or were combined with other foods. I…
Did a letter filed on the adjusted 90th-day deadline preserve a Virginia sales-tax appeal when it omitted the grounds and relevant facts?
No. Although February 7, 2011 was the adjusted deadline, the taxpayer's letter did not constitute a complete appeal because it omitted the grounds and relevant facts required by Va. Code § 58.1-1821. …
Did Virginia treat a children's birthday-party package as a taxable sale of property or an exempt service?
Historically, Virginia treated the package as an exempt service because the party experience was the true object, so the taxpayer did not collect sales tax on the package price but owed tax or use tax…
What proof did a Virginia homeowner need to claim same-lender recordation-tax treatment on a mortgage refinance?
The homeowner had to show that the refinancing lender was the mortgage company then holding the existing deed-of-trust debt. Because she had not supplied the original and refinanced deeds of trust, Vi…
How did Virginia's move to December 31, 2010 federal conformity affect 2010 Virginia income tax returns?
Virginia generally advanced its Internal Revenue Code conformity date from January 22 to December 31, 2010 for tax years beginning in 2010. Taxpayers still had to make Virginia adjustments for specifi…
Did a timely notice of intent preserve a Virginia sales-tax appeal or avoid the 20% post-amnesty penalty when no complete appeal followed?
No. A notice of intent did not satisfy or extend the 90-day deadline for a complete appeal stating the grounds and relevant facts. Because no complete appeal was filed, Virginia treated the liability …
Could an estate beneficiary transfer unused Virginia Land Preservation Tax Credits after both donor-credit holders died?
No. The donors could claim the credit on their final income tax returns, but any unused carryover was extinguished at death. Virginia read Va. Code § 58.1-513(C) to require lifetime acts by the credit…
Did a mortgage refinance qualify for Virginia's same-lender recordation-tax rule when the old lender was a limited-partnership subsidiary of the new lender?
No. The original lender was a limited-partnership subsidiary of the refinancing lender. Virginia treated the two companies as separate legal entities, so the new loan was not made by the lender then h…
Did Virginia waive late-filing penalties for a retailer that filed omitted sales-tax returns during amnesty but could not fully pay them?
No. Filing the omitted returns eliminated the original audit assessment and left no audit penalty to waive, but returns placed on a payment agreement remained late and were properly assessed late-fili…
Did a motel operator prove that a city's business-property assessments included its parent's assets or exceeded fair market value?
Not on the existing record. The city relied on a fixed-asset list supplied by the motel's accountant, and the taxpayer did not prove that the assessment included parent-owned property or used incorrec…
Did the military-spouse income-tax exemption apply when the spouse moved to Virginia before marriage and had a different domicile from the service member?
No. Virginia found that the spouse established Virginia domicile when she moved there in June 2007, before marrying the service member in January 2009. The service member retained State A domicile. Be…
Could a Virginia seller remove assessed sales by providing exemption certificates during its appeal after the audit?
Yes for the six contested lines addressed. Although certificates obtained during or after an audit were accepted only when valid for the specific transactions, the seller's appeal certificates were co…
Could estate beneficiaries subtract lump-sum survivor annuity death benefits from Virginia taxable income?
Yes. The payments qualified because each came from an annuity contract between the deceased annuitant and an insurance company, was paid to a beneficiary in a lump sum, and was subject to federal inco…
Did a Virginia longarm quilter have to collect sales tax on labor when customers supplied the quilt top, backing, and batting?
Yes. Joining and quilting the customer-supplied layers changed tangible personal property and therefore constituted fabrication. Virginia required the quilter to collect sales tax on the full sales pr…
Could a multistate service company using payroll apportionment claim Virginia's BPOL deduction for gross receipts from business conducted in other states?
Potentially. The company had to situs total receipts to the local definite place of business first, using payroll apportionment because specific situs was impractical. It could then deduct an apportio…
Did federal protection for multistate vessel pilots prevent Virginia tax on a nonresident pilot's partnership income from work in Virginia waters?
No. The federal rule protected compensation for piloting duties from tax outside the pilot's residence state, but the pilot association reported its fees less expenses as partnership ordinary income. …
Did Virginia's manufacturing exemption cover a food processor's renovation forklifts, floor scrubbers, storage racks, furniture, and maintenance purchases?
No on the remaining contested items. Virginia upheld tax because the forklifts were first used for building renovation, floor scrubbers and maintenance items were ancillary rather than directly used i…
Which subcontracted hosting, maintenance, and exhibit costs could a Virginia government contractor remove from its use-tax audit?
Virginia removed both groups at issue. Hosting and maintenance were nontaxable because the subcontractor kept the application on its server and delivered no tangible property. The exhibits were tangib…
Which sales, purchases, exemptions, and credits did Virginia allow or reject in a quarry's multi-issue 2004-2007 tax audit appeal?
Virginia ordered several specific sales and purchase adjustments, made others conditional on verification, and rejected many claims that lacked invoices, valid exemption certificates, use records, DEQ…
Were antibacterial hand soaps, gels, sprays, lotions, wipes, sanitizers, and foams exempt Virginia nonprescription drugs?
No. Virginia classified the labeled products as cosmetics or toiletry articles because their primary purposes were cleansing, grooming, softening, or promoting attractiveness. Alcohol or triclosan use…
Were F.O.B.-origin sales from a Virginia concrete plant exempt because the buyer's interstate carrier delivered the products to North Carolina?
No. The sales terms made the buyer responsible for shipping and ended the seller's delivery obligations after loading and approval at the Virginia plant. The buyer's carrier appeared to act as a contr…
Did an employee abandon Virginia domicile by moving to another state for work while keeping a Virginia home, vehicles, and driver's license?
No. Although the taxpayer moved and rented an apartment in State A, he kept his Virginia house and vehicle registrations and renewed a Virginia driver's license in 2007. Virginia found that he had not…
Could a Virginia county impose BPOL tax on real-property lessors operating inside a town that could not itself tax those lessors?
Only with the town's permission. The county's pre-1974 tax history allowed it to tax real-property lessors generally, while the town's history did not. But a county BPOL tax ordinarily does not apply …
Could a Virginia county impose BPOL tax on real-property lessors operating inside a town that could not itself tax those lessors?
Only with the town's permission. The county's pre-1974 tax history allowed it to tax real-property lessors generally, while the town's history did not. But a county BPOL tax ordinarily does not apply …
Did four 15-ton refrigeration units installed at a warehouse become real-property fixtures or remain business tangible personal property?
Virginia did not make a final fixture classification. The city erred by focusing on the seasonal tenant's production use rather than the owner's intent, but the owner had not supplied objective eviden…
Could a Virginia county tax all BPOL gross receipts of a tree-service and construction company whose county office performed only administration?
No. The company had definite places of business in both the city and county, but its county office performed only ancillary recordkeeping and administration. Services were directed and controlled from…
Was a taxpayer an actual Virginia resident in 2005, making her State A retirement income taxable, when evidence indicated more than 183 Virginia days?
Yes on the existing record. Virginia concluded that the taxpayer maintained a Virginia abode for more than 183 days in 2005, making her an actual resident even if State A domicile continued. Her feder…
Under Virginia's original 2011 prepaid wireless E-911 guidelines, which transactions carried the fee and how did dealers collect and report it?
Beginning January 1, 2011, the historical guidelines imposed a $0.50 fee on each retail purchase of prepaid wireless calling service, including prepaid unlimited service and bundled sales containing p…
Could a county tax blue-book aircraft values when the resident claimed he owned only FAA titles for aircraft that no longer physically existed?
Not without proof of tangible aircraft. FAA records showed titles in the resident's name, but local mobile property tax applied to physical property that could be perceived and was sitused in the coun…
Could a manufacturer deduct related-member factoring losses under Virginia's subject-to-tax or valid-business-purpose exceptions?
Virginia did not allow a full subject-to-tax exception because only the affiliate income apportioned to and taxed by other states qualified. But it granted the valid-business-purpose exception: the le…
How did Virginia's related-member addback rules apply to pre-2004 factoring, post-2004 factoring losses, and interest on receivables financing?
Pre-2004 factoring and loan transactions were not subject to addback because the statutes were not yet effective. For 2004 and later, factoring losses were intangible expenses subject to addback unles…
How did Virginia tax a glass contractor's government sales when glass was sold alone versus furnished and installed in real property?
Glass sold without installation to a federal, Virginia, or Virginia local government was exempt when bought on an official purchase order and paid directly from public funds. But when the contractor f…
Did an out-of-state parent owe Virginia corporate income tax from licensing intangibles to a related seller whose Virginia activity was solicitation?
No Virginia income tax was due on the stated facts. The related seller's two Virginia employees only solicited orders, and the other subsidiaries had no Virginia factors. The parent's intangible licen…
Did a government contractor's staffed trailer on a military base create a definite place of business and situs for BPOL service receipts?
Yes. Although the trailer had no public sign, mail, solicitation, or advertised phone number, the contractor maintained a continuous presence, furniture, computers, a phone, meetings, and administrati…
Under Virginia's superseded 2010 motion-picture-credit guidelines, which productions and expenses qualified and how was the refundable credit claimed?
Under these superseded guidelines, qualifying productions spending at least $250,000 in Virginia could receive a 15% base refundable credit, a 5% distressed-area bonus, resident-payroll credits of 10%…
Did a government contractor's staffed trailer on a military base create a definite place of business and situs for BPOL service receipts?
Yes. Although the trailer had no public sign, mail, solicitation, or advertised phone number, the contractor maintained a continuous presence, furniture, computers, a phone, meetings, and administrati…
Under Virginia's historical 2011 tobacco-products-tax guidelines, what rates, licensing, filing, invoice, and reporting rules applied?
Under these historical guidelines, Virginia taxed moist snuff at $0.18 per ounce, loose-leaf tobacco at package-based rates from $0.21 to $0.70 for units up to 24 ounces with a formula above that weig…
Did a contractor's vehicle-storage facility create a city definite place of business, and where were its receipts and trucks taxed?
The city storage facility was not a definite place of business because storage, daily employee meetings, assignments, and truck loading did not establish the required regular and continuous business a…
Could an individual Virginia S-corporation shareholder subtract DISC dividends passed through from the S corporation?
No. Virginia's corporate statute allowed a qualifying DISC-dividend subtraction in computing corporate taxable income, but the pass-through rule limited an individual owner to modifications authorized…
Could a Virginia resident filing separately claim dependent exemptions allocated by agreement with a nonresident servicemember spouse?
Yes. Although the couple filed a joint federal return, Virginia law allowed them to allocate federal dependent exemptions between their separate Virginia returns as they mutually agreed. Because they …
Did Virginia allow a 2006 college-savings deduction when checks were mailed in December 2006 but posted to the accounts in January 2007?
Yes. The checks were mailed on December 29, 2006 for unconditional delivery to the institution administering the children's Virginia college savings accounts, although they posted January 3, 2007. The…
Could Virginia refund a federal-refund offset after the taxpayer proved she was not a 2002 Virginia resident but filed after every refund deadline?
No. Virginia accepted that the taxpayer was domiciled elsewhere in 2002 and abated the unpaid balance, but her May 2010 refund request came more than two years after the February 2008 offset payment a…
Was a legally separated husband an actual or domiciliary Virginia resident in 2006 and 2007 despite a Virginia business, license, vehicles, and family home?
No. Evidence rebutted the auditor's credit-card-based day count and showed the husband spent only 68 days in Virginia in 2006 and 72 in 2007, so he was not an actual resident. The full circumstances a…
Did an occupational healthcare provider have to charge Virginia sales tax on its medical services, and how were its supplies treated?
The provider did not have to charge sales tax on the described professional medical services. But as a practitioner and service provider, it was the consumer of tangible personal property used to perf…
Under Virginia's 2010 rules, how were manufactured homes, modular homes, setup materials, installation contracts, and resale certificates taxed?
The historical treatment depended on the home and transaction. Manufactured homes generally entered the motor-vehicle tax system, with qualifying setup components included in that taxable sales price.…
Was injectable tuberculin antigen exempt from Virginia sales and use tax when a licensed medical practice bought it for professional use?
Yes. The Department treated the injectable tuberculin antigen as a prescription drug and Schedule VI controlled substance, distinct from the taxable TB tine testing device addressed in an earlier ruli…
Did a real-property transfer into a combined business entity qualify for Virginia's merger, parent-subsidiary, or partnership recordation-tax exemptions?
The Department could not approve the claimed exemptions because the entity did not provide enough documents to prove that the transfer met the statutory merger, parent-subsidiary, or partnership condi…
Was a husband working and living overseas a Virginia domiciliary resident in 2006 because his family, home, and driver's license were in Virginia?
No. Although the husband had a Virginia home used by his family and had obtained and renewed a Virginia driver's license, the Department found he had established domicile in the foreign country and ha…
Were subscriptions to an online commercial-information database, upgraded data packages, and web workflow tools taxable in Virginia?
No. The core online database, upgraded electronic data packages, and web-based workflow add-ons were nontaxable service transactions because customers received no tangible personal property or softwar…
Could a federal IT contractor invalidate Virginia's audit sample or claim resale treatment for hardware tied to government contracts?
Not on the record presented. Virginia upheld the audit sample because recurring computer-hardware purchases made the large transaction representative rather than isolated. The taxpayer also had not co…
Were wastewater-treatment chemicals exempt as pollution-control property, and did customer direct-payment permits protect prior sales?
The wastewater chemicals remained taxable because the company had not shown that its wastewater system was certified pollution-control equipment. But direct-payment permits from two customers were val…
What Virginia tax underpayment and overpayment interest rates applied in the first quarter of 2011?
Virginia's state tax underpayment and overpayment rates were both 5% for the first quarter of 2011, two percentage points above the corresponding 3% federal rates. The 5% underpayment rate also applie…
Did an amended S-corporation return and explanatory note adequately report an IRS increase to a shareholder's federal adjusted gross income?
No. The taxpayer amended the S-corporation return but did not file an amended individual return or clearly explain how the IRS adjustment changed his federal adjusted gross income. The Department foun…
Are charcoal briquettes sold for outdoor home cooking exempt from Virginia sales tax as fuel used for domestic consumption?
No. Virginia's domestic-consumption exemption specifically covered artificial or propane gas, firewood, coal, and home heating oil. Although the regulation said domestic use could include cooking, it …
What annual cap applied to Virginia Land Preservation Income Tax Credits issued during calendar year 2011?
Virginia set the calendar-year 2011 Land Preservation Income Tax Credit cap at $108,424,000. Under the statutory CPI-U formula, the Department calculated that the relevant 12-month average had risen a…
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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.