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 owning a Virginia vacation home, registering a car, and obtaining a Virginia driver's license make the taxpayer domiciled in Virginia?
No. The Virginia home and vehicle were used for vacations, and the taxpayer obtained the Virginia license for convenience. More importantly, he kept a permanent home, employment connection, vehicles, …
Was a medical-equipment service contract exempt when a resale certificate was obtained after audit and the contract named a third-party vendor as purchaser?
No. A certificate obtained after audit was subject to heightened scrutiny and did not by itself prove that the third party validly bought the contract for resale. The agreement between that vendor and…
Did claims of age, inefficiency, technological obsolescence, and low resale proceeds prove that a county overvalued manufacturing machinery?
No. A machinery-and-tools assessment was presumed correct, and the manufacturer supplied no appraisal or other clear evidence that the county's statutory percentage-of-original-cost method produced a …
Which federal modular-building transactions were exempt leases of tangible property rather than taxable real-property construction?
Virginia removed line items where contracts showed temporary or relocatable buildings leased directly to the federal government and intended for removal, making them exempt tangible-personal-property …
Did an advertising company prove that CD presentation, video testimonial, and photography invoices qualified for Virginia's advertising exemption?
No. The company offered general assertions, a website, and an appreciation letter, but did not tie the disputed CD, video, and photography work to a documented public advertising campaign. Because the…
Could Virginia residents defeat assessments based on IRS changes when they filed no timely state amendments and supplied no proof the federal data was wrong?
No. The 2003 appeal was filed after the cited 90-day deadline. For 2004 and 2005, the residents had not timely reported the IRS changes and offered no evidence that the federal information or Virginia…
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…
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 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 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…
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…
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…
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.
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.
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 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…
Could a retail chain remove a large untaxed sale from Virginia's audit sample when it lacked a valid exemption certificate?
No. The retailer lacked a valid exemption certificate or other support for the untaxed sale, and the transaction appeared consistent with its normal business. A large dollar amount or large effect on …
Could a Virginia resident remove IRS-reported trucking income by stating that another person owned the business?
No. The taxpayer said her involvement with the other person's trucking business ended in 2001, but she did not prove that the 2003 IRS information or Virginia assessment was wrong. Because Virginia be…
Could a Virginia resident avoid filing by claiming the Department unlawfully received insufficient IRS income information?
No. The Tax Commissioner-signed IRS exchange agreement satisfied the federal written-request requirement, and IRS data showing federal adjusted gross income supplied a factual basis for the assessment…
Did checks paid to another state's revenue department prove that a taxpayer was not a Virginia resident?
No. Checks sent to another state's revenue department could reflect nonresident tax and did not establish domicile. Virginia asked for evidence bearing on residence, employment, spouse, property, vehi…
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…
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 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…
Did a retailer's lower appraisal overturn a county's business tangible personal property valuation?
No. The taxpayer and county used accredited appraisers but reached different values because one included capitalized acquisition and installation costs. Appraisals are subjective, and the local assess…
Did a taxpayer's lower appraisal overturn a county's business tangible personal property valuation?
No. Both sides submitted professional appraisals, but appraisal differences were subjective and the county's assessment was presumed correct. The county had exercised due diligence by hiring an outsid…
Were payments to a nonresident member from Virginia franchise LLCs treated as Virginia-source income?
Yes, on the available record. The taxpayer signed a loan agreement as an LLC member, and the return information and agreement indicated payments tied to the Virginia partnerships' income or net sales …
Could a dealer remove audited sales by obtaining customer resale certificates after the audit began?
No. Certificates obtained after an audit begins are not accepted in good faith automatically and must withstand greater scrutiny. The submitted resale certificates involved unregistered customers, inv…
Could a technology consultant remove a three-month software license fee from Virginia's sales-tax audit sample as an unusual purchase?
No. Virginia found that the software license purchase was not isolated: it covered up to 3,000 workspaces for three months and was reasonably part of a technology consultant's normal operations. The p…
Did business growth during part of an audit period require Virginia to adjust a sales and use tax sample's extrapolation or error factor?
No. The sample covered months before and after the company's growth, and its error factor was applied across an audit period that likewise included lower- and higher-revenue months. Growth alone did n…
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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.