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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Who owed Virginia tax on modular homes and related materials bought by a dealer that installed modular buildings as a contractor?
The contractor did. Virginia treated it as the consumer of modular buildings and installation materials, so it had to ensure the proper sales tax was paid or remit use tax itself. The ruling applied t…
Did construction materials stored temporarily in Virginia qualify for exemption when shipped to embassy projects in countries imposing VAT?
Potentially yes. A country imposing VAT rather than retail sales tax satisfied the ruling's sales-tax-free requirement, but the contractor still had to prove that the Virginia-stored materials were in…
Which equipment used by a Virginia cabinet manufacturer qualified for the industrial manufacturing or pollution-control exemptions?
Only the knife grinder qualified on the facts presented. Virginia upheld tax on shipping lifts, administrative bar-code scanners, post-production label printers, and a sawdust diverter that lacked the…
Did Virginia's government exemption remove use tax from materials a contractor installed in government real-property projects?
No. A real-property contractor was the taxable consumer of structural materials used in government projects. It also could not claim a dealer's bad-debt credit, while limited audit items remained open…
Did a timely notice of intent preserve a Virginia sales-tax appeal when the taxpayer did not submit the grounds for relief within 90 days?
No. A notice saying the taxpayer disagreed and was gathering data was not a complete administrative appeal. Because the taxpayer did not fully state its grounds within 90 days of assessment, the right…
Could financial hardship allow a Virginia income-tax refund when the original returns were filed after the three-year refund deadline?
No. Although tax had been overwithheld, Virginia could not issue refunds for 2000-2003 because the original returns were filed after the three-year limitation period. Financial hardship did not change…
Which Energy Star and WaterSense products qualified for Virginia's historical 2008 sales tax holiday, and what transaction rules applied?
These expired guidelines exempted specified Energy Star appliances and WaterSense-labeled products costing $2,500 or less when bought for noncommercial home or personal use during the October 2008 hol…
How did Virginia tax an aviation school's inoperable aircraft and claimed occasional-sale purchases of aircraft paintings?
Inoperable aircraft were removed from retail sales tax and became subject to the 2% aircraft tax when airworthy and licensable. The paintings stayed taxable because the school supplied no documents pr…
Did Virginia retail sales tax apply when an aviation school bought inoperable aircraft for students to restore?
No. Inoperable aircraft were governed by Virginia's aircraft sales and use tax rather than retail sales tax. The ruling applied the 2% aircraft tax when the restored aircraft became airworthy and subj…
Did a Virginia pass-through entity have to withhold for two C-corporation members domiciled outside Virginia?
Yes, if the corporations' commercial domiciles were outside Virginia and the entity allocated them Virginia-source taxable income. The corporations received credit for the withholding and still had to…
Could a New Jersey cigarette importer ship unstamped brands into Virginia as a manufacturer or exclusive distributor?
Not without proof. The company could not be a Virginia exclusive distributor because its principal office was in New Jersey. It had to document, brand by brand, that it met the tobacco-product-manufac…
Could an LLC or S corporation claim Virginia's age deduction, and did a senior living only on Social Security need to file?
No entity could claim the age deduction because it was limited to individuals. A person age 65 or older whose sole income was Social Security could subtract benefits included in federal adjusted gross…
Did keeping a Virginia apartment and driver's license prevent a taxpayer working and living abroad from changing his domicile?
No. The Virginia apartment and renewed driver's license indicated continuing ties, but the taxpayer's permanent residency, foreign home, vehicle, license, employment, and absence from Virginia showed …
Did a nonresident owe Virginia tax on S-corporation investment income when a lower-tier partnership owned undeveloped Virginia land?
No for 2003-2004. The Virginia land created nexus through the pass-through structure, but all income-producing investment activity and costs occurred outside Virginia, so the S corporation had no Virg…
Did P.L. 86-272 protect an animal-medication seller whose Virginia manager administered staff and whose veterinarian trained customers?
No. Sales representatives' solicitation activities were generally protected, but the district manager's administration and the veterinarian's customer training were separate business functions. Togeth…
Did a reverse triangular merger or the buyer's lack of knowledge eliminate the target corporation's earlier withholding-tax liability?
No. The target corporation survived the reverse triangular merger and remained liable for its earlier withholding tax. Pursuing a former officer would not relieve the corporation, and the later owners…
Could a person domiciled in another state exclude military pension income after living in Virginia for more than 183 days?
No. The taxpayer was a Virginia actual resident because he maintained an abode and lived in Virginia for more than 183 days. His military pension was taxable, and the claimed subtraction failed becaus…
Were two receivables subsidiaries taxable in Virginia when their parent serviced and factored accounts through them?
Corporation B was not taxable because it lacked Virginia nexus and positive apportionment factors. Corporation C had nexus through its related parent's Virginia collection work, but whether it had Vir…
Did a federally exempt governmental investment board owe Virginia income tax or pass-through filing through its real-estate LLCs?
No, if each LLC met the requirements in the cited IRS ruling. Its income would be excluded from the exempt board's federal taxable income and therefore from Virginia tax, and the LLCs would not file V…
How should an online social network source advertising revenue when some servers and website-maintenance activity were in Virginia?
The company had to compare the income-producing costs for each advertising fee. Virginia server storage and maintenance counted as Virginia activity, while sales, development, loading, operations, and…
Did a Virginia city's former E-911 tax apply to hundreds of internal phone lines that could not access the local exchange or emergency center?
No. The former E-911 tax applied only to lines accessing the local exchange system and public safety answering point, not private internal communications lines. The city's October 2003-December 2005 a…
When were software service, travel, installation, and modification charges separate from a taxable prewritten-software license?
Independent post-installation work orders for services or travel were removed from the audit, but lump-sum project charges stayed taxable without a valid split between exempt installation or modificat…
Was procurement software custom and electronically delivered when it was licensed for sublicensing to federal customers?
No. The software targeted a broader federal-procurement market and was intended for sublicensing, so it was not designed only for one customer. With no proof of electronic delivery, Virginia treated i…
Did an ISP's servers, software, and distribution equipment qualify for Virginia's Internet-service-provider exemption?
Yes. Subscriber-created news, reviews, articles, and blogs counted as proprietary content, so the bundled email, content, and Internet service qualified. Access-service equipment was exempt; administr…
Did a contract reference to website URLs prove that prewritten software was delivered electronically and exempt from Virginia tax?
No. The URL clause showed that modules would be integrated into a website, but it did not prove the software itself was downloaded. Without stronger delivery records, Virginia upheld the tax on the so…
Did vendor mistakes relieve a Virginia purchaser from use tax on repair parts and goods delivered from out of state?
No. The purchaser was ultimately responsible for Virginia tax when sellers failed to collect it. Repair parts were retail sales, and unidentified or other-state charges on goods delivered in Virginia …
Did a hotel's management arrangement, long-term guests, or Chapter 11 filing invalidate its Virginia sales-tax assessment and officer conversion?
No. The hotel lacked records proving another company operated it or that guests stayed at least 90 continuous days. Its unpaid returns and the partner's knowledge and authority also supported converti…
Were combined shipping-and-handling charges and claimed resale leases exempt in a Virginia audit of an imaging-equipment dealer?
No, not on the records presented. Combined shipping and handling was taxable because transportation was not separately stated, and a resale certificate alone did not prove the fixed-asset leases were …
Were laser access, computer training, and patient-billing charges taxable for two Virginia vision businesses?
The laser agreement was a taxable equipment rental because the physician controlled and operated the laser. Required computer training was part of the taxable equipment sale, while customized patient-…
How did Virginia's 2008 clothing and school-supply sales tax holiday apply price limits and transaction rules?
These historical guidelines exempted each listed school-supply item priced at $20 or less and each qualifying clothing or footwear article priced at $100 or less during the August 1-3, 2008 holiday. T…
What did the Chesterfield County Circuit Court decide in Ross L. McDonald's case against the Virginia Department of Taxation?
The court entered judgment for the Virginia Department of Taxation on every allegation. It granted a motion to strike part of Ross McDonald's complaint after his proof and then found, after all eviden…
Did a letter saying Virginia's nonfiler assessment was overstated constitute a complete administrative appeal without the promised return and proof?
No. A bare assertion that the assessment was overstated, without the promised return, detailed errors, facts, authority, or supporting records, was not a complete appeal. Virginia allowed 30 more days…
Did owning a Virginia house for his parents and obtaining a Virginia license make a long-term overseas worker a Virginia resident?
No. The house, tax mail, and driver's license indicated Virginia ties, but the taxpayer spent little time there, lived abroad with his wife and children, worked outside Virginia, and did not use the h…
Could a travel agency limit county BPOL gross receipts to commissions when its financial records also showed grossed-up travel sales?
Potentially, but the agency had not proved the correct amount. Funds handled solely as an agent can be excluded from BPOL gross receipts, while resold travel packages may be included. Detailed transac…
Did a nonresident limited partner owe Virginia tax on income from a Virginia family partnership holding land and tangible assets?
Yes. The partnership did not qualify as a passive intangible-investment entity because it held Virginia land, coins, and interests in land-owning LLCs. It was headquartered and operated in Virginia, s…
Did a MERS mortgage assignment prevent Virginia's same-lender recordation-tax exemption on a later refinancing?
No. The exemption depended on refinancing with the lender that actually held the deed of trust, not on whether the assignment appeared in county land records or the MERS database. Tax was exempt up to…
Were nonexclusive software-license fees exempt from Virginia use tax when the taxpayer accessed the software electronically and received no tangible copy?
Yes, but not under the custom-software exemption. The nonexclusive license allowed the dealer to license the program to other customers, so it was not designed and developed only for one customer. Sti…
How should a Virginia HVAC business tax installed equipment, resale inventory, customer tax refunds, and installer transactions?
Installed HVAC made the business the taxable consumer, so it owed tax on purchases and should not charge customers sales tax. Bulk resale inventory could be bought exempt, with use tax due when withdr…
Did a satellite provider with a cable franchise and fiber crossing public rights-of-way owe Virginia's Public Rights-of-Way Use Fee?
Yes. The cable franchise and fiber crossing public rights-of-way made the provider a cable operator subject to the fee. Its ordinary appeal was late, and the protective refund claim failed because the…
Was medical equipment sold with one segment of a combined practice exempt as an occasional sale or business reorganization?
No. The transaction was a sale of one business segment, not a qualifying stock reorganization, and the medical practice lacked separate books, bank accounts, and pre-sale premises needed to establish …
Could an insurer claim old use-tax overpayments as return credits and exempt agent-incentive brochures and annual reports?
Only with proper proof and reporting. The insurer had to document overpayments, claim them on the correct return line within three years, and support printed-material exemptions. Internal agent brochu…
Could a federal museum contractor buy exhibits and installation materials exempt using the agency's government exemption certificate?
It depended on the contract. Property resold to the agency could be bought for resale, while materials consumed in services or real-property work were taxable. Exemption also applied when the contract…
How did Virginia treat facility-service sales, exemption certificates, missing invoices, and penalties when the taxpayer supplied mixed documentation?
Virginia allowed line-item adjustments supported by valid certificates, permits, invoices, or proof of tax payment, but unsupported exemptions and credits remained taxable. Penalties stayed because fi…
Could a correctional-services vendor use government certificates for food sold to staff and remove unsupported purchases and audit penalties?
Mostly no. Government certificates did not exempt food and coffee consumed by correctional employees. Virginia removed documented tax-paid assets and purchases, but unsupported exemptions and credits …
Which university food-service sales, reimbursements, and purchase claims survived a Virginia audit when documentation was mixed?
Virginia allowed documented line-item adjustments but kept tax on sales lacking valid exemption proof, meals consumed by government employees, reimbursed operating expenses, and numerous unsupported p…
Could a Virginia refreshment-service company reduce its sales-and-use-tax audit by showing that tax was paid or that transactions were exempt?
Only in part. Virginia adjusted the audit where the company supplied adequate supporting documents, but sustained numerous sales and purchase exceptions when returns contradicted the claim that tax wa…
Was Virginia's petroleum storage-tank fee part of taxable off-road-fuel sales price, and how could the seller recover other tax overpayments?
Yes. The storage-tank fee was a separate statutory charge directly connected with the fuel sale, not part of the motor-fuel excise tax, so it entered taxable sales price. Other recovery required vendo…
Which document-management fees, copier purchases, resale items, and printing materials were exempt in Virginia?
Qualifying copy-center management contracts were exempt services, good-faith resale-certificate sales were removed, and high-speed copiers and copy ingredients qualified. Other resale and intracompany…
Could Virginia residents claim a foreign-source-income subtraction passed through from an S corporation in 2005?
No. Virginia had repealed the individual foreign-source-income subtraction for taxable years beginning in 2003. Only modifications allowed under the individual statute could pass through from an S cor…
Were a mechanical contractor's purchases exempt merely because its work was performed at a Virginia semiconductor plant?
Not automatically. Virginia returned the purchases for item-by-item audit review because the contractor had not explained how each item was used directly in manufacturing. Future exempt contractor pur…
Could a Virginia resident defeat IRS-based assessments by filing self-created corrected 1099s and claiming the income was not constitutional income?
No. Virginia began with federal adjusted gross income and relied on IRS information. The taxpayer needed IRS documents confirming the original information returns were wrong and the corrected forms we…
How did Virginia's modular-home guidance address dealer registration, tax responsibility, the 60% base, and installed buildings?
Retail modular buildings were taxed on 60% of the final sales price, with registered sellers collecting tax and consumers owing use tax if they did not. A manufacturer or retailer that furnished and i…
Who owed Virginia sales or use tax when modular-home manufacturers, retailers, customers, or contractors handled the sale and installation?
Responsibility depended on who made the retail sale and who permanently installed the home. Under the rules stated in 2008, retail sales used a 60% taxable base, while the installing party was general…
Could a Virginia printer reduce an untaxed-sales audit sample because customers self-assessed tax or later shipped goods outside Virginia?
No. Virginia upheld the sample because customer self-assessment and large-dollar sales did not make it unrepresentative. Delivery to Virginia distribution centers was a taxable first use even when goo…
Was a Virginia countertop fabricator-installer a retailer or a using-and-consuming real-property contractor?
Virginia treated the business as a using-and-consuming real-property contractor, not a retailer. Countertops were not comparable to cabinets under the listed-item rule, and fabrication mainly for inst…
Which machine-shop sales and purchases qualified for Virginia sales-tax exemptions in P.D. 08-97?
Virginia treated the job-shop machine shop as an industrial manufacturer and removed its router and manufacturing supplies from the audit. Sales to government contractors and software lacking proof of…
Could a Virginia taxpayer replace a sample audit with a detailed audit because it expected a lower liability?
No. Virginia upheld the sample-based assessment because the taxpayer did not prove the sampling method invalid; unsupported exempt sales and improperly taxed maintenance contracts remained in the samp…
Were equipment invoices labeled as low-rate-program fees taxable handling charges or excluded interest?
They were excluded interest charges. After reviewing the invoices and finance contracts, Virginia removed the low-rate-program fees from the sales-and-use-tax audit.
How did Virginia tax lump-sum medical-equipment repair bills and combined shipping-and-handling charges?
Lump-sum parts-and-labor repair charges were taxable, but Virginia conditionally removed labor from this first audit after verified corrected invoices separately stated it. Combined shipping and handl…
Were a cancelled log-home sale and a fee for changing the delivery date subject to Virginia sales tax?
The cancelled contract was removed from the assessment, but the delivery-date change fee remained taxable. It paid for administrative rescheduling work, not delivery from seller to buyer, so it was pa…
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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.