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 a one-year job, rented housing, and bar admission in another state establish that an individual had abandoned his Virginia domicile for 2006?
No. The taxpayer's one-year employment, temporary living arrangements, retained Virginia driver's license and vehicle registration, use of a Virginia address on tax returns, and return to Virginia sho…
Was an individual still domiciled in Virginia for 2007 when he had moved to another state and only a Virginia address on federal information statements linked him to Virginia?
No. The taxpayer had moved back to State A before 2007, established a permanent home and driver's license there, kept his business interests there, and spent most of the year there. Because the only 2…
Are custom-fitted sports mouth guards exempt from Virginia sales tax as dental services, durable medical equipment, or prosthetic devices?
No. The sports mouth guards were taxable tangible personal property, not exempt durable medical equipment or prosthetic devices. The dental-supply retailer could sell them to dentists tax-free for res…
Could a Virginia town obtain a Communications Sales and Use Tax Trust Fund share for qualifying 2006 revenue that it had not timely reported?
Yes. The town proved through an independent CPA's verification and town-treasurer records that it had collected qualifying telecommunications or cable revenue in fiscal year 2006. Under the adjustment…
Did Virginia repair and maintenance work performed by third-party providers create corporate income-tax nexus for an out-of-state coordinator?
It depended on each provider's relationship with the taxpayer. Purchasing Virginia services from an unrelated independent contractor and reselling them would not itself create nexus for a corporation …
How should a hotel calculate Virginia's continuous-occupancy exemption when an airline rents a changing number of rooms each day?
The hotel had to apply a rolling daily count rather than start each 90-day measurement period on the first of the month. Each day began a new continuous-occupancy period. Using that approach, the airl…
Did a six-month filing extension move the three-year Virginia refund deadline when the taxpayer did not file by the extended due date?
No. Under the rules applicable to the 2004 return, the extension became void when the taxpayer failed to file by November 1, 2005. The three-year refund period therefore ran from the original statutor…
Did spending more than 183 days in another state, claiming its homestead exemption, and registering to vote there end a couple's Virginia domicile?
No. Although the couple spent most of each year in State A, claimed its homestead exemption, registered to vote there, and obtained State A identification cards, they kept Virginia driver's licenses, …
Can a Virginia dealer offset an audit assessment by claiming its customers paid use tax on the same untaxed sales?
Only with verification. The dealer remained liable because it had no exemption certificates or direct-payment permits and did not prove that its customers correctly paid use tax on the same sales. A c…
Must a Virginia auctioneer collect sales tax on storage-unit lien auctions, and did later Live Chat advice cancel the audit liability?
Yes. An auctioneer generally must collect Virginia sales tax on taxable property sold at storage-unit lien auctions; those sales were not exempt occasional sales. Alleged oral advice was undocumented,…
Was a privately held REIT a Virginia captive REIT when no partner owned more than 50% and the general partner lacked majority voting or value control?
No. Although the REIT was not publicly traded and received more than 25% of its income from real-property rents, no single partner owned more than 50% of the fund, and the general partner's decision-m…
Were purging compounds used to clean plastic injection lines between production runs exempt from Virginia use tax as manufacturing supplies?
No. The compounds cleaned injection lines only after production stopped and before the next run, generally every one to four days. Virginia treated that activity as general maintenance rather than an …
Were injectable dermal fillers used for HIV-treatment-related facial lipoatrophy exempt from Virginia sales and use tax as prosthetic devices?
No. Virginia found that the temporary dermal filler restored facial volume and improved appearance but did not replace a missing body part or bodily function. It therefore remained a cosmetic treatmen…
Which Virginia software, support, training, and hosted-access charges were taxable when some software was delivered on CD and some electronically?
The initial CD-delivered software package was taxable in full, including bundled training and support, because its true object was tangible software. Electronically activated add-on modules, electroni…
How did Virginia apply its per-account college-savings deduction to multiple VEST portfolios, CollegeAmerica funds, rollovers, and a missed prior-year deduction?
Virginia allowed up to $4,000 per qualifying savings trust account each year, with excess contributions carried forward. Separate VEST portfolios could be separate accounts, but multiple funds inside …
Were safety supplies sold to Virginia manufacturers exempt merely because production workers used them?
No. Most listed safety, first-aid, lighting, spill-control, and accident-prevention items were taxable because they were not an immediate part of production. Reflective vests used by forklift drivers …
Did a federal extension preserve Virginia refund claims when the taxpayers filed their 2005 return after Virginia's six-month extended due date?
No. For tax year 2005, Virginia's six-month extension required the original return to be filed within the extended period. Filing after that date negated the extension, so the three-year refund period…
Did a service member remain domiciled outside Virginia after registering to vote, obtaining a driver's license, and registering a car in Virginia?
No. The Department found that the service member's Virginia voter registration, driver's license, and vehicle registration, combined with little evidence of continuing ties to his former state, showed…
Did a poultry processor prove it was a vertically integrated manufacturer for Virginia local property-tax classification?
Not yet. Virginia agreed that a vertically integrated business may be classified by its substantial manufacturing activity as a whole, rather than only by activity at one county facility. But the poul…
How did Virginia estimate a cash restaurant's taxable sales when it lacked guest checks, Z-tapes, and other supporting records?
Virginia could reconstruct sales because the restaurant did not keep adequate records, and bank deposits plus cash-paid expenses could not verify all cash receipts. The auditor's 15% gross-profit-marg…
Could Virginia estimate a restaurant's underreported sales from ABC cash-register records and projections?
Yes. Virginia used sales calculated by Alcoholic Beverage Control from the restaurant's cash-register receipts and worksheets, then projected results for other audit months. Because the taxpayer provi…
Could Virginia estimate a restaurant's sales from ABC records when returns were missing or underreported?
Yes. Virginia relied on sales calculated by Alcoholic Beverage Control from the restaurant's cash-register receipts and worksheets, then used comparisons and projections for the audit periods. The tax…
Were a motel's through-the-wall heating and cooling units fixtures taxed as real estate or business tangible personal property?
Virginia did not make the final fixture classification. It found the units were not double taxed, but the city had improperly focused only on how easily they could be removed. The city had to reconsid…
Could one Virginia city tax all 2006 receipts from a call center, fulfillment center, and IT center located in three localities?
No. Virginia found the fulfillment and IT centers were definite places of business separate from the call center. One city could tax only receipts attributable to services performed or otherwise situs…
Were a fulfillment center and IT center separate definite places of business, and how should 2005 BPOL receipts be assigned among them and a call center?
Yes. Virginia found the fulfillment and IT centers were definite places of business in their own localities, so not all Virginia receipts automatically belonged to the call-center city. But the record…
How could a multistate business prove Virginia's BPOL deduction for out-of-state receipts when payroll apportionment was used to situs gross receipts?
The business first had to use payroll apportionment to assign receipts to the county, then show some evidence that employees at that Virginia office earned or helped earn receipts from customers in st…
What evidence supported Virginia's BPOL deduction for out-of-state receipts when payroll apportionment was used?
The taxpayer first had to apportion gross receipts to the city, then show evidence that employees at that office earned or helped earn receipts from customers in states where it filed an income tax re…
Could individual taxpayers claim a 2005 recyclable-materials equipment credit, or use certified unused credit amounts in later years?
The Department upheld disallowance of the credit claimed on the taxpayers' 2005 individual return. It nevertheless said unused credit tied to the recycler's certified 2005 equipment purchase could be …
What purchases and transaction rules qualified under Virginia's historical 2010 Energy Star and WaterSense sales-tax holiday guidelines?
Under these historical guidelines, specified Energy Star appliances and WaterSense-labeled products costing $2,500 or less per item were exempt during Virginia's four-day October holiday when purchase…
Could single-use sinus catheter systems be sold tax-free to licensed physicians in Virginia?
Yes, but only for patient-specific purchases. Virginia allowed the catheter systems to be sold exempt to a licensed physician when the physician provided documentation showing the system was purchased…
Were boom lifts, welders, and similar tools rented by contractors to install manufacturing equipment exempt from Virginia sales tax?
No. The contractors' lifts, welders, and similar tools were used before production could begin and were not an immediate part of manufacturing, so their rentals or purchases were taxable. Contractors …
Did a Virginia franchise-store operator prove that certain food sales qualified for the reduced sales-tax rate?
Not yet. The operator's studies and appeal documents did not reconcile with its returns or prove that the assessed food sales qualified for Virginia's reduced rate under the 80% prepared-food rule. Th…
Did Virginia sales tax apply to rentals of pools, a gymnasium, and outdoor sports facilities when no tangible property was included?
No. The pools, indoor gymnasium, and outdoor sports facilities were real property rather than tangible personal property. Because the rentals for camps and team practices included no tangible property…
Was an overseas worker a Virginia domiciliary in 2006 despite having a Virginia driver's license, voter registration, and mailing address?
No. The taxpayer's indefinite overseas employment, long-term residence from 1995 through 2009, permanent home, and foreign driver's license established domicile in Country A for 2006. Virginia licensi…
Did a military spouse who moved to Virginia solely to accompany an active-duty spouse remain domiciled in their shared prior state for 2009?
Yes. Virginia found that the service member had established domicile in State A through legal-residence certificates, a driver's license, and the absence of meaningful continuing ties to the home-of-r…
Could a corporate group created by a merger of equals elect a new Virginia filing status for the 2008 tax year?
Yes. The two groups had no prior substantial ownership in each other, and the target represented about 54% of their combined value—above the Department's 45% merger-of-equals threshold. The new affili…
Did interest on obligations issued directly by a Federal Home Loan Bank qualify for Virginia's U.S.-obligation subtraction?
Yes. After reconciling the taxpayers' partial Forms 1099 and federal-return schedules, Virginia found that interest on notes, bonds, and other obligations issued directly by a Federal Home Loan Bank q…
Did an out-of-state mobile-content services company owe Virginia corporate income tax when it had Virginia users but no property, employees, or costs here?
No Virginia corporate income tax was due on the stated facts. The Department could not determine whether electronically connecting marketers to Virginia users created nexus or only a de minimis contac…
Were mastectomy bras sold for use with prosthetic breasts exempt from Virginia sales tax as durable medical equipment or related supplies?
No. The mastectomy bras did not qualify as durable medical equipment because they did not serve the medical purpose required by the statute. They also were not exempt supplies for a breast prosthesis …
Did an electrical contractor owe Virginia use tax on materials delivered in Virginia after its vendor charged another state's 7% sales tax?
Yes. The materials were delivered in Virginia for use in real-property contracts, so the contractor owed Virginia's 5% use tax even though the vendor had charged and remitted another state's 7% sales …
Could a Virginia resident subtract an entire IRC § 457 plan distribution because Pennsylvania had taxed his employee contributions to the plan?
Not the entire distribution. Virginia allowed a subtraction for the portion attributable to employee contributions that Pennsylvania had already taxed, but investment income remained taxable when dist…
Could the Virginia Tax Commissioner waive a city's penalty when a business's accountant filed its machinery and tools tax return one day late?
No. The Tax Commissioner could review certain local business tax assessments, but a locally imposed late-filing penalty was not an assessment of tax under the governing appeal statute. Virginia law le…
Were loyalty-program membership fees taxable when members received future purchase discounts but no free merchandise?
No. New documentation showed that the loyalty membership transferred no merchandise when sold and promised only future discounts: $10 during the member's birthday month, $15 after four points, and $25…
What Virginia tax interest rates applied during the fourth quarter of 2010?
Virginia's fourth-quarter 2010 rates were 6% for tax underpayments and 6% for tax overpayments. The corresponding federal underpayment and noncorporate overpayment rates were 4%. For taxpayers with ye…
Which lost-pet recovery products and service packages were taxable under Virginia sales and use tax?
Pet-recovery service fees were nontaxable, including lump-sum packages with an incidental microchip or implantation, because customers' true object was database and recovery assistance. Stand-alone sa…
Did years of losses show that a Virginia couple's horse-breeding and hippotherapy operation was not conducted for profit?
No. After weighing the federal profit-motive factors, Virginia found that the couple operated the horse and hippotherapy venture for profit during 2002 through 2006. The wife's expertise and full-time…
Were charges for coordinating drayage, rentals, and other vendor services for customer-owned trade-show exhibits subject to Virginia sales tax?
No. For customer-owned exhibits, the customer's true object was the company's expertise in coordinating third-party support services, so the drayage and rental charges assessed in the audit were remov…
Could a couple deduct losses from a horse farm that trained and sold horses for fox hunting despite losses and no separate bank account?
Yes. Virginia found the farm was conducted for profit based on the wife's horse expertise, the couple's 139 to 152 monthly work hours, advertising and sales efforts, adequate books, cost reductions, a…
Did attending college and living in student housing outside Virginia prove that a taxpayer changed domicile for 2006?
No, not on the evidence provided. Virginia generally did not treat a dorm or college apartment, or temporary student employment, as proof of a permanent new domicile. The taxpayer asserted ties to ano…
Could a North Carolina resident claim a Virginia nonresident credit for North Carolina tax on Virginia S-corporation income?
No. Virginia's nonresident credit depended on the taxpayer's home state granting Virginia residents a substantially similar credit. North Carolina did not allow an income-tax credit to nonresidents, s…
Did a W-2, an exchange agreement, and an unsigned letter faxed by the deadline count as a timely Virginia refund return?
No. The May 1, 2008 fax did not request a stated refund, lacked the taxpayer's signature, omitted a completed prescribed return and deduction information, and did not disclose the amount of the Sectio…
Did ten years of indefinite foreign residence establish a new domicile despite a Virginia home, license, and absentee voting?
Yes. The taxpayer had lived and worked abroad since 1997, maintained a family home there, held indefinite employment, became an official resident, and planned citizenship. Those facts outweighed retai…
Did a paint manufacturer make a taxable Virginia use of color cards shipped with paint to a retailer for customer selection?
No. The cards were bundled with paint outside Virginia, delivered by common carrier, and unpacked and placed in display racks by the retailer. The manufacturer's representatives were not responsible f…
Which audited sales could an industrial supplier remove using exemption certificates obtained or corrected after the transactions?
Only some sales. Certificates obtained after the transactions received closer scrutiny and had to match each customer's actual use. Virginia allowed removal of two packaging sales to one customer for …
Were banquet rooms, equipment, and setup charges taxable when a Virginia caterer served nonprofit customers?
Generally yes. Nonprofit status did not exempt room accommodations, and no qualifying written Department advice supported abatement. Audio/visual and similar equipment rentals were taxable unless the …
Could a Virginia resident claim all dependent exemptions when filing separately from a nonresident military spouse?
Yes. A Virginia resident and nonresident military spouse who filed jointly for federal purposes but separately in Virginia could allocate dependent exemptions as they mutually agreed. Proportional all…
Were chemicals used directly to purify, disinfect, stabilize, and protect water sold by a Virginia utility exempt from sales and use tax?
Yes, based on the described uses. Virginia treated the water utility as an industrial processor and found every listed chemical appeared to be used directly in treatment, to preserve the water's integ…
Did a hotel's purchase of assets from a special-purpose affiliated LLC qualify for Virginia's occasional-sale exemption?
Undetermined. The LLC was a separate legal entity, so its parent's regular hotel-development business did not automatically defeat the exemption. But the record did not show whether the parent or LLC …
Could Virginia residents claim an other-state credit for Kentucky income tax paid at the partnership level on a member's behalf?
Yes. Kentucky temporarily taxed partnerships and LLCs as corporations but gave individual members a credit for their proportionate entity tax. The professional LLC reported the husband's share, and th…
Who had to collect Virginia sales tax when the supplier billed and collected from large retailers but paid distributors to service the accounts?
The supplier did. Although independent distributors delivered and serviced the accounts, the Pennsylvania supplier recorded the large-retailer sale, collected the retailer's receivable, reduced the di…
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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.