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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Was an out-of-state domiciliary an actual Virginia resident when she owned a Virginia home but spent fewer than 184 days in the state?
No. The taxpayer's daily log, receipts, and other evidence sufficiently showed she spent fewer than 184 days in Virginia in both 2004 and 2005. She was not an actual resident, so Virginia abated the p…
Is separately stated labor for crimping custom hydraulic hoses, air-conditioning hoses, and battery cables taxable fabrication in Virginia?
Yes. Crimping components into new custom hoses and battery cables changed tangible property into replacement products and was fabrication, not repair. Virginia therefore taxed the total fabrication ch…
Could the Tax Commissioner reduce estimated city BPOL and meals-tax assessments for a caterer with incomplete records?
Only the BPOL issue could be considered administratively. The Tax Commissioner lacked authority over the city's meals-and-beverage tax. For BPOL, the caterer had not disproved the estimated receipts, …
Was a holding company's office property exempt from county BTPP tax because its separate subsidiaries conducted manufacturing?
No. The holding company was a separate legal and taxable entity from its manufacturing subsidiaries and performed no manufacturing itself, so its office property could not be classified as exempt inta…
Was a 2003 Virginia nonfiler's statement that he moved abroad enough to overturn the residency assessment?
No. The taxpayer said he changed domicile to another country in September 2003, but he did not answer repeated requests for supporting information. Because he failed to prove both abandonment of Virgi…
How did Virginia revise a corporation's 1998 property factor when the audit included construction in progress and unreconciled Virginia property?
Virginia kept federal tax basis as the starting point, revised the numerator using the taxpayer's reconciled Virginia property records, and removed construction in progress from both the numerator and…
Did a nonresident owe Virginia tax because his employer was in Virginia when he performed all work in another state?
No. Wages from the Virginia employer were not Virginia-source income because the nonresident performed every workday in another state. His other S corporation also lacked Virginia nexus and Virginia-s…
Could a Virginia resident overturn a 1998 assessment by claiming the Department illegally obtained erroneous IRS information?
No. Virginia was authorized to receive IRS information, and the taxpayer did not dispute receiving the additional income or show that the tax computation was wrong. The challenged data fields did not …
Could Virginia residents defeat an assessment based on IRS adjustments by arguing the federal assessment was not lawful?
No. Virginia lawfully used IRS information to adjust the residents' federal adjusted gross income starting point, and the taxpayers did not prove that the federal information or Virginia assessment wa…
Did a Virginia advertising agency owe tax on photo-production labor and brochures printed for a client campaign?
Yes. Photo-retouching and computer labor were taxable because the transaction's true object was the finished image or print. The agency also owed tax on client brochures because Virginia treated adver…
Did a contractor owe Virginia use tax when vendors omitted tax from fabrication labor and equipment-rental damage-waiver fees?
Yes. Fabrication labor and equipment-rental damage-waiver fees were taxable, and the purchaser remained liable even though the vendors failed to collect tax. The loader assessment could be removed onl…
Did a Virginia dental practice owe use tax on the full invoice price of teeth-whitening kits and supplies?
Yes. Dentists are consumers of property used in their practices, and the invoices listed teeth-whitening kits, toothpaste, and other tangible items. Virginia taxed the full sales price and rejected th…
Could a Virginia country club buy printing for its bimonthly newsletter without sales or use tax?
Yes. The bimonthly newsletter qualified as an exempt publication because it was issued at intervals under three months and was available to the general public at facilities open to nonmembers. Virgini…
Did one Virginia employee selling an out-of-state energy company's services create Virginia sales-tax or corporate-income-tax duties?
No collection or corporate-income-tax duty arose on the stated facts. The company sold services rather than tangible property, so it was not a sales-tax dealer, and one employee merely soliciting thos…
Could a Virginia dealer remove audited sales by producing customer exemption certificates?
Only in part. Virginia removed sales covered by a complete exemption certificate accepted in good faith and ordered a refund with interest. It rejected a second customer's incomplete, post-audit resal…
Were maritime-crane modification, repair, and transport activities contracting or a business service for Virginia BPOL tax?
They were business services. The cranes were machines and tangible personal property rather than real-property structures, so modifying and repairing them was not contracting for BPOL purposes. Transp…
Did fuel stored and lifted at a third-party city terminal create BPOL liability and a late penalty for a petroleum wholesaler?
No. The petroleum business's throughput agreement provided temporary commingled storage and distribution services, not leased premises. With no office, staff, records, continuous presence, or advertis…
Did shared individual ownership and a management agreement make medical-service companies one affiliated group for the BPOL receipts exemption?
No. The companies lacked the required direct stock-ownership relationship with the medical group. An individual's ownership and a management agreement did not create statutory affiliation, so receipts…
Could legally separated spouses file a joint Virginia nonresident return when the husband lived elsewhere but the wife remained a Virginia resident?
No. The husband proved he was domiciled outside Virginia in 2004, but the wife remained a Virginia resident. A resident and nonresident spouse could not file a joint nonresident return; the husband's …
Did new financial records overturn Virginia's assessment involving a taxpayer-controlled finance subsidiary and intercompany loans?
No. The additional records did not show that the finance subsidiary conducted an independent business or that its intercompany loans matched unrelated-party terms. Virginia denied reconsideration and …
Was software used to plan production, and a thermal oxidizer awaiting pollution-control certification, exempt from Virginia sales and use tax?
No. The production-planning software was an administrative tool used indirectly, not software that immediately directed or controlled production. The thermal oxidizer also remained taxable because it …
Could a landowner entitled to a Virginia Land Preservation Tax Credit of $1 million or more request less than $1 million and avoid DCR review?
Yes. A landowner did not have to request the full allowable credit. By entering an amount below $1 million on Form LPC-1, the taxpayer could apply only to the Tax Department without DCR verification, …
After Virginia's 2007 policy change, did contractors installing sod, plants, or silt fence collect sales tax from customers or pay tax on their materials?
Qualifying real-property and landscape contractors became users and consumers: they paid sales or use tax on installed sod, plants, silt fence, and similar materials instead of collecting retail tax f…
Did Virginia waive a supermarket's penalty after inspectors found 117 unstamped cigarette packs and the store claimed their stamps had faded?
No. Inspectors found no physical stamp evidence on 117 packs, and possession above 30 packs triggered a statutory presumption of tax evasion. Virginia had already reduced the initial assessment under …
Were dental implants exempt when a dental practice could not document on invoices that each implant was purchased for a specific patient?
No. The practice could not prove that the audited implants were purchased for specific patients because the invoices lacked patient identification and its internal order forms had been discarded. Virg…
Was a chemical used to clean paper-mill calendar rollers between production runs exempt as a manufacturing supply?
No. Immunol cleaned calendar-stack rollers before or after paper production, not during the production process. Virginia treated that use as taxable general maintenance even though clean rollers prote…
Did a contract chip-mill operator owe Virginia forest products tax when customers owned the logs and chips and claimed to pay the tax themselves?
Yes. Operating a chip mill made the taxpayer the statutory manufacturer liable for forest products tax, even though customers retained title to the logs and chips. Any tax customers paid was erroneous…
Did Virginia's 2007 five-percent Motor Vehicle Repair Labor and Services Tax remain valid in Northern Virginia and Hampton Roads?
No. The guidelines described a five-percent regional tax on motor-vehicle repair labor and services, but the Virginia Supreme Court ruled the authorizing provisions unconstitutional on February 29, 20…
Were two classified federal IT contracts treated as service contracts or sales of tangible property for Virginia use tax?
They were sales of tangible personal property. The government's acquisition and control of computer systems and hardware was the true object, so resale items were removed from the audit. Other purchas…
Did two trusts remain Virginia resident trusts after moving administration and assets away when one Virginia resident remained on each trustee committee?
No, for Trusts B and C. A Virginia resident's membership on each multi-trustee committee did not make the trust resident when no trustee could act alone and the committee operated and was controlled o…
Did common-carrier delivery into Virginia and a shared independent delivery witness create corporate income tax nexus for an out-of-state petrochemical trader?
No. On the accepted facts, the trader had no Virginia property, payroll, or solicitation. Common-carrier delivery and a delivery witness acting independently for both buyer and seller did not create t…
Could a city apply its grandfathered three-percent telephone BPOL rate to a cellular PCS provider that did not offer landline local-exchange service?
No. The PCS provider was a telephone company, but the city's grandfathered three-percent rate applied only to the local-exchange landline service covered by its 1972 ordinance. The city could apply th…
Was a cabinet fabricator a real-property contractor when customers separately hired and paid an independent installer?
No. Because the fabricator neither installed the cabinets nor had a contractual duty to install them, it sold tangible personal property at retail and owed tax on the full sales price. Virginia allowe…
Could a retired physician claim Virginia's Neighborhood Assistance credit for donated clinic services when the clinic lacked DSS approval for 2005?
No. The physician's donated services appeared substantively eligible, but the clinic or county was not approved by DSS to allocate credits for 2005. Virginia denied that portion, then ordered a separa…
Were corn, wheat, barley, and rye exempt from Virginia sales tax when individuals bought the grain to burn as home-heating fuel?
No. Virginia's domestic-fuel exemption specifically covered artificial or propane gas, firewood, coal, and home heating oil. Grain did not qualify merely because customers burned it for home heat. A s…
Did internally manufactured wireless demonstration equipment remain exempt resale inventory after it was capitalized and never sold?
No. The taxpayer withdrew the units from resale inventory, used them in labs, trade shows, and customer demonstrations, amortized them, and recorded them as fixed assets. That was a taxable use, and t…
Could Virginia consider a retailer's exemption certificates when its administrative appeal was filed after the 90-day deadline?
No. The retailer filed its appeal after the 90-day statutory deadline, so the Tax Commissioner could not consider whether the customer exemption certificates supported the sales. The assessments were …
Under Virginia's 2007 policy, did a Virginia Internet and phone seller tax third-party gift orders by the buyer's transaction or only by the recipient's destination?
Virginia required the seller to keep collecting Virginia tax under its constructive-possession policy unless it had approval to collect the recipient state's tax or a statutory use exception applied. …
Could a Virginia resident claim credit for California tax paid through a partnership's unified nonresident return when California gave no credit there?
Yes. Although California generally offered a reciprocal credit, it did not allow that credit on the partnership's unified nonresident return. The taxpayer documented his share of California income and…
Could a new Virginia corporate group choose either predecessor group's filing method after a near-equal merger of previously unrelated affiliated groups?
Yes. Pending regulations, a new group could choose the acquirer's or target's prior Virginia filing method when neither group had a substantial prior interest in the other and the target represented m…
Did all royalties paid to a parent escape Virginia's add-back merely because the parent reported the royalty income on returns in two other states?
No. Reporting gross royalty income on another state's return did not prove that all of it was taxed there. The exception matched only the parent's apportioned shares taxed in those states—2.453% total…
Could a semiconductor manufacturer sell equipment tax-free to unrelated lessors for immediate exempt leaseback using resale certificates?
Yes, conditionally. Each lessor could give the manufacturer Form ST-10 for the resale purchase, even though the later leaseback was exempt rather than taxable. The manufacturer could give each lessor …
Which products qualified under Virginia's 2007 Energy Star Sales Tax Holiday, and can these guidelines be used for current sales?
Historically, eight listed Energy Star product types costing $2,500 or less qualified when bought for noncommercial personal use during the four-day October holiday. The source states that the recurri…
What did Virginia's original pass-through entity withholding guidelines require for nonresident owners, and are those rules still current?
Historically, covered pass-through entities paid five percent of nonresident owners' Virginia-source income, subject to exemptions and alternatives such as a unified return. These guidelines are super…
What Virginia tax underpayment and refund interest rates applied during the fourth quarter of 2007?
Virginia's October 1-December 31, 2007 rates were 10% for tax underpayments and assessments and 10% for tax overpayments and refunds. Federal rates remained 8%, and Virginia added two percentage point…
How did Virginia require nonresident owners to correct pass-through entity returns and report Virginia-source income for 2003-2005?
The entities had to correct their Virginia apportionment and issue amended K-1s, while the spouses had to file nonresident—not part-year—returns reporting their shares of Virginia-source income. ASC h…
Could Virginia reduce telecommunications minimum tax after an audit when the company missed the 18-month deadline to correct SCC-certified gross receipts?
No. The Tax Department had to use gross receipts certified by the State Corporation Commission, and the company did not seek SCC review within 18 months. The deadline applied even though the tax probl…
Did the BPOL exemption for a title insurance agent cover separate real estate settlement-service receipts unrelated to insurance premiums?
No. The exemption protected title-insurance agency activity tied to the insurance company's direct gross premium income, not the agent's separate settlement and other noninsurance services. Virginia u…
Did a taxpayer abandon Virginia domicile during 2002 by leasing a home from his daughter in another state after his Virginia employer entered bankruptcy?
No. His temporary return to another state did not show abandonment of Virginia domicile, especially because he kept Virginia ties, sought Virginia work, used a Virginia address for unemployment, and r…
Which separately stated airline catering and aircraft services were taxable when the provider worked with airline-owned food, equipment, and supplies?
Separately stated services performed independently on airline-owned property—including much cleaning, loading, kit assembly, security checks, and paperwork—were not taxable. Services connected to the …
How should a disregarded LLC calculate Virginia BPOL receipts when its corporate owner reports the LLC's out-of-state business on income tax returns?
The LLC could deduct its own receipts from business in jurisdictions where its corporate owner filed an income or income-like tax return reporting those receipts. It had to start with worldwide receip…
Did occasional short-term rental of an owner's second home owe BPOL tax, and did the Virginia Tax Commissioner decide the transient occupancy tax?
The private-home rental was exempt from BPOL tax. The Tax Commissioner did not decide whether transient occupancy tax was due because that tax fell outside the Commissioner's advisory jurisdiction; th…
Could a media-buying business exclude client money paid to media vendors from BPOL gross receipts as pass-through agency funds?
No. The business did not prove contracts linking clients and vendors, did not document a separate or fiduciary accounting system, and reported the client payments as federal gross income with vendor c…
When could a federal contractor buy property tax-free as the government's designated purchasing agent, and did contract pricing method matter?
The exemption applied only when the government officially designated the contractor as purchasing agent and the government's credit was directly bound. The result did not depend on whether the contrac…
Did a Virginia home-based employee soliciting orders create sales tax nexus while the out-of-state manufacturer remained protected from income tax?
Yes for sales tax, but not corporate income tax on the stated facts. Employee solicitation created sales tax nexus and required registration and collection on Virginia sales. Because the employee's wo…
Did Virginia's reduced food tax rate apply to packaged bulk groceries sold to nursing homes, correctional facilities, hotels, and other businesses?
Yes, under the 2007 rules. Packaged staple foods and cold prepared foods in closed containers, not sold hot or for immediate consumption, qualified as food for home consumption regardless of whether t…
Did additional information overturn Virginia assessments when the taxpayer spent over 200 days in Virginia and still lacked support for claimed losses?
No. Virginia found the taxpayer was an actual resident in 2000-2001 based on more than 200 days of presence and upheld 2002-2003 assessments because he did not provide partnership returns or other req…
Could a using and consuming contractor offset its own use tax with sales tax it wrongly collected from customers and remitted to Virginia?
No. A using and consuming contractor could not use sales tax improperly charged to customers to satisfy its own tax on materials. Refund or credit required proof that the contractor bore the tax or re…
Was an administrative appeal timely when its letter was dated before the 90-day deadline but the delivery service received it afterward?
No. The delivery service's receipt date controlled the filing date. Although the appeal letter was dated January 10, 2007, the carrier date was February 7, after the January 16 deadline. Virginia ther…
Could the donated portion of a bargain sale to the National Park Service qualify for Virginia's land credit without a perpetual deed restriction?
Yes, conditionally. The National Park Service qualified as a conservation donee, and federal park statutes sufficiently assured perpetual preservation even without a deed restriction. Only the bargain…
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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.