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 Virginia use a locality's meals-tax audit to assess a restaurant for underreported alcoholic-beverage sales?
Yes. Virginia upheld the assessment because the locality's two-year sample accounted for prices, waste, breakage, spillage, and mixers, and a Department review of the restaurant's records produced con…
Did Virginia sales tax apply to a repair shop's marked-up fee for nontransferable shop supplies?
No. The repairer was the taxable user of shop supplies and paid tax when buying them. Because the supplies were not transferred to customers, the separately listed cost-recovery fee was not a sale, ev…
Did Virginia sales tax apply to a lump-sum equestrian package that included horseback riding, lodging, meals, and other activities?
No. Virginia found that customers' true object was horseback riding, making the lump-sum package an exempt service. The retreat owed tax on food, restaurant meals, lodging, and other inputs used to pr…
Could a Virginia nonfiler invalidate an income-tax assessment by challenging the IRS information behind it?
No, not on the record presented. Virginia upheld the 2004 assessment because the taxpayer provided no objective evidence that the income information lawfully obtained from the IRS was incorrect.
Could a Virginia resident subtract Canadian and German income after the foreign-source subtraction was repealed?
No. Virginia denied the 2006 subtraction and refund because the foreign-source-income subtraction had been repealed, and the cited federal treaties did not limit Virginia's tax on resident income.
Could Virginia individuals subtract foreign-source income passed through from an S corporation after the individual subtraction was repealed?
No. Although the income met Virginia's foreign-source definition and corporations had a subtraction, individuals could receive only pass-through modifications authorized for them. Their subtraction ha…
When do CDs, videos, and photography qualify for Virginia's advertising sales-tax exemption?
Virginia denied the exemption. A sales-presentation CD was not disseminated to the public, and the taxpayer did not show that the video or photography was created for a specific advertising campaign.
Were a catalog stand and company-logo planner guides exempt Virginia advertising materials?
No. The bound catalogs could be displayed without the stand, so the stand did not qualify as necessary support for printed materials. The planner guides remained taxable administrative tools because n…
Did Virginia conform to federal GO Zone bonus depreciation and the special five-year net-operating-loss carryback?
Yes. Virginia conformed to IRC § 1400N, so the 50% GO Zone depreciation deduction flowed through without a Virginia fixed-date adjustment and the special five-year GO Zone loss carryback was allowed.
Which manufacturing assets were subject to a Virginia city's machinery-and-tools tax in P.D. 08-88?
Virginia treated pollution-control equipment, shipping sealers, and qualifying offsite autopackers as intangible property outside the machinery-and-tools tax. The shared storage rack remained fully ta…
What Virginia tax assessment and refund interest rates applied during the third quarter of 2008?
Virginia's rates were 7% for both tax underpayments and assessments and tax overpayments and refunds from July 1 through September 30, 2008. The corresponding federal rates were 5%.
Could a Virginia county use a corporation's state income-tax sales factor to measure BPOL receipts and deny its out-of-state deduction?
No. The corporate income-tax sales factor was an unreliable measure of BPOL gross receipts. The company could deduct receipts from customers in states where it owed and filed income or income-like tax…
Which startup, repair, computer, and software costs belonged in a manufacturer's local machinery-and-tools tax base?
Test-run materials were part of machinery's capitalized cost, and unsupported capitalized repair costs stayed included. Computers and software were taxable only when used directly in manufacturing; th…
Could a Virginia city impose BPOL tax on a cable provider's receipts from services performed at its city office?
Yes. The staffed city office was a definite place of business and directly handled orders, payments, equipment, repairs, and local-access functions. Receipts tied to those services were sitused to the…
Could a Virginia county impose gross-receipts BPOL tax on an ancillary plan room for an out-of-state subscription publisher?
No gross-receipts tax applied. The plan room was a definite place of business but only an ancillary subscriber convenience; the publishing, information, and sales services were performed and controlle…
Was an LLC owned by two nonprofit utility-notification centers exempt from Virginia local BPOL tax?
Yes, on these specific facts. The LLC was exclusively owned and operated by two federally exempt business leagues to perform their mandated notification-center work, and no profit inured to the LLC or…
Were a federal Medicare Part B carrier's service revenues exempt from Virginia local BPOL tax?
Yes. Virginia found the Medicare Part B carrier so closely connected to the federal government's administration of the program that it was a federal instrumentality immune from local BPOL tax on those…
How did Virginia classify a vertically integrated manufacturer's city assets for local personal-property tax?
Virginia classified the single integrated business as a manufacturer. Machinery and tools directly used to transform soybeans into oil and feed were subject to city M&T tax; most other qualifying capi…
Was a home-infusion pharmacy a retailer of IV drugs and medical supplies when an affiliate separately provided nursing services?
Yes. The pharmacy sold IV medications and medical supplies for home use, while a separate legal entity provided nursing and therapy services. Its purchases of the drugs and supplies were therefore exe…
When were controlled drugs bought in bulk by a Virginia cardiac center exempt from sales tax?
The exemption depended on invoice proof. Purchases naming a licensed physician or the physician's DEA number were removed from the audit; purchases billed only to the cardiac center remained taxable.
Could a taxpayer limit Virginia's audit extrapolation to 2003-2004 because its purchasing practices allegedly changed?
No. Virginia upheld the sample across the full audit period because government-contract purchases were part of normal business activity and the taxpayer did not show that the sampled transactions were…
Did Virginia sales tax apply to a nonprofit's event tickets when the ticket price included a catered meal?
Yes. Although admission alone was exempt, the ticket entitled the buyer to a taxable catered meal, making the full ticket price taxable. Documented tax paid to vendors could receive limited audit cred…
Did a notice of intent preserve a Virginia tax appeal when the taxpayer did not file a complete appeal within 90 days?
No. A notice of intent was not a complete appeal. Because the taxpayer did not file the required grounds and relevant facts within 90 days of assessment, the appeal was time-barred and collection resu…
Could vendor documentation reduce Virginia use tax on invoices that combined shipping and handling into one charge?
Yes, in part. Combined shipping and handling was generally taxable, but written vendor breakdowns or confirmation that a fee was shipping only supported adjustments. Remaining sampled errors were stil…
How did Virginia resolve an audit appeal challenging the purchase sample, software transactions, fixed assets, and compliance penalty in P.D. 08-73?
Virginia upheld the audit sample and most challenged purchases, but ordered several adjustments: electronically delivered software was removed, jellybeans were recalculated at the lower food-tax rate,…
What Virginia state and local tax legislation did the Department summarize for the 2008 General Assembly session?
This was a broad historical guide, not a taxpayer-specific ruling. It summarized 2008 legislation through March 13, including federal conformity, income-tax credits and administration, sales-tax exemp…
Did manufacturing prototype cellular phones and circuit boards for a customer qualify for Virginia's production exemption?
Yes. New agreement and facility evidence showed that the prototypes were industrially manufactured products made for sale to the customer, not merely preproduction work, so Virginia removed the relate…
Could Virginia residents claim a 2006 credit for another state's tax on partnership income that was taxable there in 2005?
No. The credit belongs to the year when the income was taxed by both states, not the later year when the other state's tax was paid. Virginia correctly denied the credit on the 2006 return, but the co…
Did taking a permanent job and leasing a home in another state end a taxpayer's Virginia domicile when his family, home, licenses, and registrations remained in Virginia?
No. Employment and a leased residence in State A showed some intent to relocate, but the taxpayer kept a Virginia home with his wife, renewed his Virginia driver's license, registered vehicles and rem…
Could an individual appeal a Virginia converted assessment more than a year after the 90-day deadline because he learned of the tax lien later?
No. The individual had 90 days from the April 6, 2006 assessment date, making July 5, 2006 the deadline. His June 29, 2007 appeal was untimely, and neither the statute nor the appeal guidelines create…
Could Virginia extend a contractor's consumer-use-tax audit to six years and tax separately stated mileage and road-service charges on vehicle repairs?
Yes. Because the contractor had not filed consumer use tax returns and could not document tax paid on purchases, Virginia properly used a six-year audit period. Mileage and road-service charges incurr…
Who could claim a Virginia land preservation credit when estate executors donated an easement over land specifically devised to a beneficiary?
The beneficiary. Virginia title to specifically devised real estate passed to him at the decedent's death, while the executors held only power to convey the easement. If he met Va. Code § 58.1-512, he…
Were a Virginia wholesaler's purchases of fuel-grade ethanol exempt from retail sales and use tax when customers would blend it into motor fuel subject to the Fuels Tax?
Yes. Because the wholesaler's customers would pay Virginia Fuels Tax when the ethanol was blended with motor fuel, the ethanol was fuel subject to that tax and qualified for the retail sales-and-use-t…
How did Virginia's communications tax apply to long-distance service, cellular content, permanent digital downloads, and qualifying prepaid calling services?
Long-distance and per-minute cellular content were communications services subject to tax unless an exclusion or exemption applied. Qualifying digital products downloaded for permanent reuse were excl…
Did an out-of-state credit-card issuer owe Virginia corporate income tax when it marketed to Virginians but had no Virginia property, payroll, employees, or agents?
No for the prior years presented. Virginia said the company's marketing contacts made the nexus question unclear, but the issuer was a financial corporation with no Virginia property, payroll, employe…
Could Virginia uphold estimated income-tax assessments when resident nonfilers ignored information requests and did not prove the IRS data wrong?
Yes. Virginia could estimate the tax, assess at any time for unfiled returns, and presume its assessments correct. Because the taxpayers did not respond or prove the IRS information wrong, the assessm…
Was a nonresident baseball player's signing bonus Virginia-source income when the bonus was earned by signing, not by performing services in Virginia?
No. Virginia correctly rejected the player's claimed subtraction from federal adjusted gross income, but the bonus was not Virginia-source income for the nonresident apportionment factor because it wa…
Did a screen-printing and embroidery retailer qualify for Virginia's industrial manufacturing exemption or avoid tax because the Department audited it years after opening?
No. The business primarily sold custom apparel to end users and was classified as retail, not industrial manufacturing, so its equipment purchases were taxable. Most of the assessment also involved un…
Did a Virginia flower-bulb seller owe use tax when it removed unsalable bulbs from resale inventory and donated them to charities?
Yes. Removing bulbs from tax-free resale inventory and donating them was a taxable use, measured by the bulbs' cost price, unless another exemption applied. The separate exemption for qualifying catal…
Did Virginia's research-and-development exemption cover a missile contractor's JP-10 fuel valve, insulation rings, and rocket-motor casting tooling?
Yes. Each item was integral to experimental missile or rocket-motor work and used exclusively in the specified project: the valve regulated test fuel, the rings held rockets during static firing, and …
What Virginia filing and payment relief applied to taxpayers affected by the April 28, 2008 tornadoes?
Virginia automatically gave qualifying individuals and businesses in nine listed localities 30 additional days to file returns and pay taxes due from April 28 through June 2, 2008 when tornado damage …
Did keeping a Virginia house and mailing address prevent former residents from proving they changed domicile to another state?
No. Despite retaining a Virginia home and receiving financial mail there, the taxpayers proved by the preponderance of the evidence that they abandoned Virginia domicile and established domicile in an…
Were Virginia income-tax assessments barred when the taxpayer appealed 1997-1999 late and had never filed a 2000 return?
No. The 1997-1999 appeal missed the former three-year administrative window. The 2000 appeal was timely, but because no 2000 return was filed Virginia could assess at any time, and the taxpayer suppli…
Could an auto-body-supply seller remove audited sales when it accepted resale certificates for paint, thinner, equipment, and shop supplies?
Mostly yes. Virginia removed sales supported by valid resale certificates that the seller accepted in good faith at the time of sale. It kept two sampled sales because the certificate was obtained mor…
Were separately stated fuel surcharges, offloading fees, and demurrage all exempt Virginia transportation charges?
No. Separately stated fuel surcharges supplemented freight and were exempt transportation charges. Offloading was taxable handling after delivery, and demurrage for driver wait time caused by delayed …
Could a corporation abate a late-filing assessment by proving its return was postmarked on the extended due date?
Yes. The corporation proved that its return was postmarked February 15, 2006, the extended due date, so Virginia treated it as timely filed under Va. Code § 58.1-9. Because the return and corporate ta…
How should spouses file when they ended their Virginia domiciles on different dates during 2005?
They had to file an amended Virginia part-year resident return, not treat the entire year as nonresidents. Virginia taxed each spouse as a domiciliary resident through the date that spouse's Virginia …
What purchases and retailer procedures qualified under Virginia's historical Hurricane Preparedness Sales Tax Holiday guidelines?
Under these expired guidelines, listed hurricane supplies priced at $60 or less per item and portable generators, generator cords, inverters, and inverter cables priced at $1,000 or less per item were…
What was Virginia's statewide Land Preservation Income Tax Credit cap for calendar year 2008?
Virginia set the calendar-year 2008 Land Preservation Income Tax Credit cap at $102,287,000. The Department calculated that the relevant CPI-U average had increased about 2.29% from the statutory 2006…
Was an employee of Virginia's land-preservation foundation a state employee for the historical $15,000 salary subtraction?
Yes. Virginia found that the foundation performed administrative, executive, and regulatory functions for the Commonwealth, so its employee was a state employee for Va. Code § 58.1-322(C)(24). The his…
Could a sole proprietor challenge 1990-1995 converted tax assessments through an administrative appeal filed in 2007?
No. The latest assessment was issued March 9, 1995, and under Virginia's policy then in effect the administrative appeal was due by March 9, 1998. The 2007 filing was untimely, so Virginia denied abat…
Did a nonresident owe Virginia tax on pass-through income from an S corporation doing business in Virginia?
Yes. The federal S election controlled Virginia treatment, so the corporation's Virginia-source income passed through to its nonresident shareholders. The corporation's improper C-corporation return a…
Could Virginia keep a wife's share of joint refunds for her husband's business tax liabilities from before their marriage?
No. Although Virginia did not adopt the federal innocent-spouse rule, Department policy did not hold one spouse liable for the other's tax debts from years before they filed jointly. The wife was enti…
Were digital-jukebox music packages, song access, downloads, and support services subject to Virginia sales tax?
The music packages, extra song downloads, per-play fees, database access, and background music were nontaxable services because no tangible property changed hands. But one-half of the separately bille…
Did Virginia salespeople create collection nexus for an out-of-state modular-home manufacturer before it registered for sales tax?
Yes. Traveling sales representatives, including one living in Virginia, actively solicited customers and created sufficient statutory and constitutional nexus. The pre-registration assessment was corr…
Could a dealer replace Virginia's estimated food-sales assessment with supplier invoices and mixed-beverage reports?
No. Virginia could not verify that the supplier invoices were a complete purchase record, and the alcohol regulator had not audited food sales and found the mixed-beverage reports incomplete. With ina…
Could an interior designer receive separate BPOL classifications for design services and independent furniture retail sales?
Potentially. Furniture sold as part of design work was business-service revenue, while substantial independent furniture sales could qualify for a retail BPOL classification. Because the designer had …
Were a lumber manufacturer's forklifts exempt when more than half of each forklift's use occurred in production activities?
Yes. One forklift was used entirely in exempt production, and the other was used 60% in exempt activities after Virginia counted yard movements of unfinished goods as part of the integrated manufactur…
Did a taxpayer establish a new domicile outside Virginia despite retaining a Virginia driver's license during 2004?
Yes. Her full-time out-of-state job, leased apartment and vehicle, minimal time in Virginia, and later replacement of her Virginia driver's license showed that she abandoned Virginia domicile. Virgini…
Was optional travel-protection insurance separately billed by a Virginia vacation-rental manager subject to sales tax?
No. Guests could choose whether to buy the separately stated insurance, the rental manager did not include it in the accommodation charge, and the insurance contract was between the guest and insurer.…
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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.