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 a medical practice's bulk purchases of knee viscosupplementation devices, splints, and other durable medical equipment exempt from Virginia sales tax?
No. Virginia treated the knee viscosupplementation products as medical devices rather than drugs, and none of the bulk purchases qualified as equipment bought on behalf of identified individual patien…
Was a Virginia consumer use-tax appeal timely when the letter was dated one day after the 90-day deadline?
No. The June 18, 2008 assessment had to be appealed by September 16 under the 90-day period quoted in the ruling, but the appeal letter was dated September 17. Virginia treated the protest as time-bar…
What does Virginia Ruling of the Tax Commissioner P.D. 09-4 conclude about Manufacturer of permanent aesthetic injectable implants does not meet exemption qualifications?
No. Although the prescription implant was an FDA Class III medical device administered by physicians, it treated facial wrinkles for cosmetic purposes. It did not replace a missing body part or body f…
What does Virginia Ruling of the Tax Commissioner P.D. 09-3 conclude about Taxpayer prepares direct mail advertising materials?
No, on the stated facts. Customers took title and possession at the producer's out-of-state dock, assumed risk of loss before delivery to the U.S. Postal Service, and exercised no ownership right over…
Could a biodiesel or green-diesel producer claim Virginia's credit after it had already been producing fuel for three years before 2008?
No. Virginia interpreted the credit as available only during a producer's first three years of biodiesel or green-diesel production. A producer already operating for at least three years before Januar…
Did Virginia pass-through withholding apply to a disregarded single-member LLC or to Virginia-source income allocated to a U.S. Virgin Islands resident?
No in both situations described. A single-member LLC disregarded for federal income-tax purposes was also disregarded for Virginia income tax and did not pay PTE withholding. A qualifying U.S. Virgin …
What does Virginia Ruling of the Tax Commissioner P.D. 09-2 conclude about Lease payments and capital purchases included in the lease payments.?
The real-property portion was not taxable, but the furniture-and-fixtures portion was. The lessor had to support an allocation between tangible personal property and realty; otherwise the full lease p…
Could an irrevocable non-grantor trust qualify for Virginia's Land Preservation Tax Credit and use it against fiduciary income tax?
Yes, if the donation met every applicable requirement. A non-grantor trust counted as a landowner and taxpayer and could claim the credit against fiduciary income tax. The easement still had to satisf…
Could a municipality use sales-tax revenue from a 10,000-square-foot public-facility expansion to repay newly issued bonds?
No. The proposed 10,000-square-foot addition to a 63,000-square-foot facility was below the statute's 50% expansion threshold. The planned bonds also would be issued after June 30, 2007, outside the l…
What does Virginia Ruling of the Tax Commissioner P.D. 09-17 conclude about Salary related to prior employment does not affect Taxpayer's right to subtraction?
Yes. Federal law treated the retiree as an employee and reported the taxable value of excess group-term life-insurance coverage as Form W-2 wages. Because his total W-2 income for 2006 was below $15,0…
Was a museum and trade-show exhibit fabricator a retailer, a real-property contractor, or an industrial manufacturer for Virginia sales tax?
Mostly a retailer, but with project-level exceptions. Exhibits, traveling displays, furniture, graphics, and signs generally remained tangible personal property, so component materials transferred to …
What does Virginia Ruling of the Tax Commissioner P.D. 09-15 conclude about Tax applies to the charges for the fabrication of tangible personal property?
Yes. Cutting contractor-owned bricks into different shapes so they fit masonry arches changed their form and was taxable fabrication. The contractors were users and consumers of the bricks and purchas…
Did franchisee royalty payments passed through a restaurant corporation let its related trademark subsidiary qualify for Virginia's unrelated-party add-back exception?
No. Although the corporation passed most franchise royalties to its related intangible holding company, the franchise agreements licensed trademarks from the corporation itself. Because the subsidiary…
Could a city impose its grandfathered telephone-company BPOL rate or service receipts tax on a cellular provider with a local retail kiosk?
Not on the cellular-service receipts. The city's ordinance used a narrow telephone-company definition that did not cover the PCS provider, and its service was directed and controlled from headquarters…
What does Virginia Ruling of the Tax Commissioner P.D. 09-12 conclude about Qualified Settlement Funds?
Yes. The trustee elected to treat the disputed-claims reserves as disputed ownership funds, and their cash-only assets made them qualified settlement funds for federal tax. Because federal rules treat…
Did a California shareholder owe Virginia nonresident tax on pass-through income from an S corporation with a Virginia office?
Yes. The S corporation's Virginia-source income remained Virginia-source income when passed through to the nonresident shareholder, even though he worked only in California. Because he filed no Virgin…
What does Virginia Ruling of the Tax Commissioner P.D. 09-10 conclude about Taxpayers failed to pay the tax due reported on the return?
Yes. Virginia taxed the pension distributions because the couple received them after becoming Virginia residents, even though the employment and pension accrual occurred in another state. Virginia did…
Where were a petroleum wholesaler's purchases sitused for BPOL when fuel was delivered from terminals outside its city office?
Purchases were sitused at the definite place from which goods were delivered to customers, not the city sales office or customer location. Fuel delivered from outside terminals could not be thrown bac…
Could a Virginia corporation allocate outside the state income from a 50%-owned partnership operating only in another state?
Not on the evidence provided. Virginia generally treated partnership income as operational and apportionable, including the partner's share of partnership property, payroll, and sales. The corporation…
Did a traveling artist abandon Virginia domicile by owning homes and studios elsewhere while retaining a Virginia home, license, and voter registration?
No. Despite homes, studios, vehicles, and business ties in other states, the artist kept a preexisting Virginia residence, renewed a Virginia driver's license in 2003, remained registered to vote, con…
Were an RFID system vendor's bundled design, testing, training, and implementation charges taxable with the hardware under Virginia's true-object test?
Yes. Virginia found that the contracts' true object was the tangible RFID system, so the design, development, testing, training, and other implementation services were taxable as components of the sys…
Were Internet-downloaded music and a shower chair sold to an individual exempt from Virginia sales tax?
Yes. Documented music downloads were nontaxable Internet-delivered service transactions, and the shower chair qualified as durable medical equipment because shower seating was listed in the regulation…
What Virginia tax interest rates applied during the first quarter of 2009 to assessments, refunds, estimated-tax additions, and local taxes?
For January 1 through March 31, 2009, Virginia's state interest rates were 7% for tax underpayments and assessments and 7% for tax overpayments and refunds, reflecting federal 5% rates plus two percen…
What cigarette-stamp penalties and challenge procedures did Virginia announce effective December 1, 2008?
Virginia announced a graduated enforcement schedule for retailers and wholesalers that were not stamping agents and held fewer than 3,000 unstamped packs: a warning for 1-30 packs, $50 per pack for 31…
Did a Virginia affiliated group elect consolidated filing when its first return checked 'combined' but was computed and later filed consistently as consolidated?
Yes. Although the affiliated group's initial return checked the 'combined' box, it was computed using the consolidated method and the group consistently filed consolidated returns afterward. Virginia …
Under Virginia's 2009 household-employer rules, who could elect annual income-tax withholding and what filing steps applied?
For wages paid on or after January 1, 2009, a household employer could elect annual Virginia income-tax withholding if employment consisted exclusively of household service in the employer's private h…
Was a Medicare Part D plan administrator exempt from Virginia corporate income tax when its premiums were federally exempt from gross-premiums tax?
Virginia did not decide whether the company was subject to gross-premiums tax; that determination belonged to the Bureau of Insurance. If the Bureau found the company subject to that tax, it would be …
How did Virginia resolve a government contractor's challenges to audit sampling, purchase exceptions, purchasing-agent status, penalty, and interest?
Virginia partly granted the appeal. It allowed the audit sample to be revised if the contractor supplied records for the commercial-contract portion, corrected several invoice and sample errors, and w…
When could an IRC § 501(c) organization sell food or event tickets that included food without collecting Virginia sales tax under the 2008 policy?
Effective October 1, 2008, an IRC § 501(c) organization could sell food or tickets including food without collecting Virginia sales tax if it was not otherwise required to register as a dealer, paid t…
How did Virginia treat gain and net operating losses after a corporate group made an IRC § 338(h)(10) election for a subsidiary sale?
Virginia followed the federal IRC § 338(h)(10) election and treated the subsidiary as selling its assets, so the gain belonged in the subsidiary's separately computed Virginia income and was apportion…
Must a lessor charge Virginia sales tax on a separately stated reimbursement of local personal property tax collected from a lessee?
No. Virginia's sales-price definition excluded separately stated local property taxes collected by a lessor. When the lessor separately billed the lessee for the allocated personal property tax in add…
Were fluorescent-lamp recycling kits taxable retail products when their price included the container, prepaid shipping, and recycling?
No, the customer-facing charge was exempt. Virginia found that buyers wanted compliant shipping and recycling of mercury-containing lamps, while the box or bucket was only the means of providing that …
How could a corporate group aggregate jobs, document partial-year hires, and amend returns for Virginia's MBFJTC?
Virginia allowed aggregation across the taxpayer's own facilities when operations were related or hires occurred in the same continuous 12-month period, and allowed qualifying affiliates to aggregate …
Did warranty work performed in Virginia by unrelated distributors, retailers, and contractors exceed an out-of-state seller's P.L. 86-272 protection?
No, on the stated facts. Virginia treated the unrelated distributors, retailers, and contractors as independent vendors from whom the taxpayer purchased repair services and effectively resold them to …
Could trust beneficiaries reduce Virginia inheritance tax on a 2007 remainder by the actuarial value of life interests taxed after the decedent's 1962 death?
No. Virginia treated the old inheritance tax as a tax on each beneficiary's succession to an interest, not as a tax on the trust property itself. Earlier tax on the wife and daughter's temporary incom…
Could Virginia taxpayers claim 2004 depreciation on a business automobile after electing federal IRC § 179 expensing for the vehicle in 2003?
No. Virginia conformity included IRC § 179, so the taxpayers' 2003 federal election to expense the business automobile also controlled their Virginia income-tax calculation. The vehicle's cost belonge…
Were structural steel and an HVAC system exempt when a Virginia church bought them but hired a contractor to install them in a worship facility?
No. Virginia's church exemption covered building materials only when the church purchased and installed them without contracting for installation. Because the church supplied the structural steel and …
How did Virginia's post-July 1, 2006 government-contractor true-object rule apply to a liquid-nitrogen plant contract, subcontractors, refunds, and modifications?
Virginia applied the true-object test to each order executed on or after July 1, 2006. The supplied statement of work primarily required delivery of a liquid-nitrogen production plant, so the contract…
Did Virginia's temporary multifuel-stove exemption cover outdoor residential furnaces, their operating parts, and refunds of tax already collected?
Only qualifying furnaces were exempt. Virginia's July 1, 2007-July 1, 2012 exemption covered residential heating furnaces capable of burning alternative fuels, but not furnaces limited to wood or foss…
How did Virginia tax Internet-only e-learning, later CD delivery, analysis services, and mixed invoices?
Internet-only courses, mentoring, reference libraries, and downloads were not taxable when no tangible media was provided. If a course was later delivered on CD-ROM, the entire fee became taxable. Ana…
Were carrier maintenance fees and separately stated on-site modular-home trim-out labor exempt from Virginia sales tax?
Virginia split the result. Carrier maintenance fees were taxable because they were only indirectly related to delivery. Separately stated factory trim-out labor performed on-site after contractors joi…
Did one officer working from a Virginia home create Virginia-source income for an out-of-state corporation?
Yes. The officer lived and worked from a Virginia residence, performed duties other than sales solicitation, and had Virginia income tax withheld. That single employee created a positive Virginia payr…
What Virginia tax interest rates applied during the fourth quarter of 2008?
For October 1 through December 31, 2008, Virginia's state interest rates were 8% for tax underpayments and assessments and 8% for tax overpayments and refunds, reflecting federal 6% rates plus two per…
Did buying a home and opening a business office in another state end the taxpayer's Virginia domicile for 2005 and 2006?
No. Although the taxpayer established significant ties to another state, Virginia found that she did not abandon her Virginia domicile during 2005 or 2006 because she retained a home, driver's license…
Could a Virginia resident subtract pension distributions from another state's retirement system?
No. Virginia taxed the resident's New Hampshire pension because the contributions had not been subject to New Hampshire income tax, so the statutory subtraction did not apply; federal law also barred …
Was the corporation's former president personally liable for its unpaid Virginia withholding tax?
No. Virginia discharged the responsible-officer penalties because the evidence showed that the former president lacked both sufficient knowledge of the withholding failure and authority over the corpo…
Could a permanently disabled taxpayer subtract third-party sick pay reported on Form W-2 from Virginia taxable income?
No. Virginia denied the subtraction because third-party sick pay reported as wages on Form W-2 was classified as temporary sick pay, not qualifying disability income, even though the taxpayer proved a…
Was the taxpayer a Virginia domiciliary resident for the 2005 tax year?
No. After weighing all the evidence, Virginia found that the taxpayer had abandoned Virginia domicile and established domicile in another state before 2005, so the 2005 individual income-tax assessmen…
Must a corporation add back the Texas Business Margin Tax when computing Virginia taxable income?
No. Virginia ruled that the Texas Business Margin Tax was not based on, measured by, or computed with reference to net income, so it was not required to be added back under Va. Code § 58.1-402 B 4.
Did P.L. 86-272 protect a remote seller whose carriers performed setup and whose related Virginia stores accepted returns?
Not necessarily. Virginia found that related-store return services exceeded P.L. 86-272 protection and that carrier setup or inspection could also exceed it, but the Department lacked enough facts to …
How did Virginia tax broadcast servers, software, support, maintenance, installation, and delivery sold by an out-of-state provider?
Virginia exempted the portion of servers used directly to broadcast signals but taxed their editing and storage use. Tangible or installed conversion software was taxable; separately sold electronic d…
Did Virginia tax Internet access or telecommunications purchased by Internet service providers after the 2007 federal amendments?
Virginia said its retail sales tax did not apply to telecommunications services and its communications sales tax excluded Internet access and telecommunications used by an Internet access provider to …
How did an annual lump-sum premium affect Virginia's long-term-care insurance credit and deduction for 2006 and 2007?
The full annual premium paid in November 2006 covered the first 12 months, so the ruling applied the entire eligible payment to the 15% credit in 2006 rather than prorating two months. The 2007 annual…
Which purchases by a federal IT contractor were taxable in Virginia's audit, and which qualified for service, government, export, maintenance, or research exemptions?
Virginia granted some audit adjustments for government-system property, professional services, documented out-of-state delivery, qualifying R&D, and certain maintenance contracts, but upheld other ite…
Were unrelated financing loans taxable when an office-equipment lessor documented them in the same master agreement as taxable leases?
No. The separately negotiated financing was a loan unrelated to the equipment lease, so its proceeds were not taxable lease gross proceeds even though both transactions appeared in the same master agr…
Did owning a Virginia home through a qualified personal residence trust and holding Virginia licenses make a long-term foreign couple Virginia domiciliaries?
No. A Virginia QPRT residence and Virginia driver's licenses indicated possible Virginia domicile, but the couple's continuous foreign residence, voting, permanent-residency status, home, and license …
Did missionaries living and working abroad owe Virginia nonresident tax because Virginia churches issued their Forms 1099-MISC?
No. The married taxpayers lived and performed their missionary work outside Virginia, so payments reported by Virginia church organizations were not Virginia-source income. They were not required to f…
Did an irrevocable trust have to file a Virginia fiduciary return when its parties, administration, governing law, and property were outside Virginia?
No. Based on the stated facts, the trust was not a Virginia resident trust and had no Virginia property or Virginia-source income. It therefore was not required to file a Virginia fiduciary income-tax…
Could each corporation in a Virginia consolidated group claim up to $100,000 of Land Preservation Tax Credits against the group's joint liability?
Yes. Each corporation in the consolidated group was a separate taxpayer for the $100,000 annual Land Preservation Tax Credit limit, and each member's credits could offset the group's joint liability r…
Could a seller accept nonprofit or school exemption certificates for bulk prepared food delivered without serving staff to schools and day-care providers?
Yes, when the school or day-care customer qualified for an exemption and gave a valid certificate. Virginia treated the bulk food as tangible personal property because the seller delivered it without …
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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.