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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When could Virginia residents claim an other-state tax credit for income passed through from a limited partnership or LLC?
It depended on the entity and activity. General partners were treated as conducting the business; a limited partner's facts could fail the resident credit's continuous, regular, profit-motivated busin…
Did a couple become Virginia domiciliaries merely by living there temporarily and listing Virginia as their permanent passport address?
No. Their State A ties, lack of a Virginia home or family ties, and conduct showed no acquisition of Virginia domicile; the passport address was used for expediency. But domicile was separate from act…
Did customers' direct payment of use tax excuse a registered dealer's failure to collect tax on sales lacking exemption certificates?
No. A registered dealer still had to collect Virginia tax on sales unsupported by valid exemption certificates, so customer self-assessment did not remove those sales from the audit sample. Credits we…
Did a country club owe use tax on sod that its golf-course renovation contractor furnished and installed without charging sales tax?
Yes. Virginia treated the contractor as a retailer for the sod even though its other renovation work was a real-property service. Because the contractor did not collect sales tax on the furnished and …
Was a church trustee's musical equipment exempt from local business tangible personal property tax when it was also used in a band business?
No. Although a duly designated church trustee could be treated as holding property for the church, the exemption required exclusive charitable, religious, or educational use. The taxpayer also used an…
Was a buyer liable for a seller's unpaid Virginia use tax when it acquired the business assets without obtaining tax clearance or withholding funds?
Yes. The buyer neither obtained Department certification that the seller's liabilities were paid nor withheld enough purchase money to cover them. Under Va. Code § 58.1-629, the buyer became personall…
Could restaurants buy foil wraps, bamboo skewers, napkin bands, and carryout foil pans tax-free for resale?
Yes. The foil wraps, bamboo skewers, paper napkin rings or bands, and lidded foil carryout pans were furnished with meals and discarded after one customer's use. Virginia treated them as part of the m…
Should Virginia remove one of two annual production charges from a one-year audit sample when including both distorted the projection?
Yes. Although sampling was a valid audit technique, Virginia found that including both annual video-production charges in the September 2003 through August 2004 purchase sample distorted its result. T…
Could a cut-your-own Christmas tree farm buy weed eaters and similar equipment tax-free when used to make fields accessible to customers?
No. The weed eaters and similar equipment were used to make the Christmas-tree fields accessible for customer visits, not to produce trees for market. Unlike equipment that affected crop growth or pro…
Could retailers defeat reconstructed Virginia sales-tax assessments without adequate records or support for claimed exempt sales?
No. With missing returns and no verifiable records, Virginia could reconstruct sales from the best information available. The retailers supplied no evidence that the method was unreasonable and no sup…
Were delivery charges for mobile-mixed concrete taxable, and what documentation supported exempt government sales?
Yes. Charges connected with concrete mixed at the job site—including short-load and transportation charges—were taxable even when separately stated. Government sales required qualifying direct billing…
Was a Virginia corporate income tax return filed on Monday, October 17 timely when its extended October 15 deadline fell on a Saturday?
Yes. Virginia's weekend rule moved the extended due date from Saturday, October 15 to Monday, October 17, so the return was timely and the late-filing penalty and associated interest were abated. The …
Did an active-duty servicemember become taxable as a Virginia resident merely because military orders transferred him to Virginia?
No. The servicemember documented that he retained his State A domicile and entered Virginia under military orders. Because he did not establish Virginia domicile and his only income was active-duty mi…
Did an automotive alternator remanufacturer qualify as a manufacturer whose wholesale sales from the place of manufacture were exempt from local BPOL tax?
Yes. Virginia found no basis to reverse its earlier manufacturer classification because alternators were rebuilt at the county facility and the subsidiary was integrated with its manufacturer's busine…
Did a Maryland commission-based sales-service company have Virginia corporate income tax nexus through one Virginia sales representative?
Yes. The Virginia employee regularly solicited sales for third-party clients rather than selling the employer's own tangible goods. Virginia treated that activity as the company's business service, no…
What Virginia returns were required when an out-of-state limited partnership's only Virginia activity was owning leased commercial property?
The partnership had to file a Virginia pass-through information return because its leased Virginia property produced Virginia-source income. That character passed to both owners: the individual genera…
Could Virginia refund an overpayment claimed on a 2002 individual income tax return filed after the three-year refund deadline?
No. The 2002 return was due May 1, 2003, so the refund claim had to reach the Department by May 1, 2006. Because the couple filed in June 2006, Va. Code § 58.1-499 D barred the refund, and the Tax Com…
How did Virginia calculate a resident couple's credit when some other-state tax was paid through a partnership's unified nonresident returns?
Virginia recognized the wife's share of tax paid through the partnership's unified returns, but each state's credit had to be calculated separately and was limited to the lesser of tax paid or Virgini…
How did Virginia sales and use tax apply to modular duplexes and site-work materials installed for a U.S. Navy construction project?
The contractor's proposed calculation was rejected. Assuming the duplexes qualified as modular buildings, the 60% taxable base applied only to the factory-built units, with the installer treated as th…
Did a commercial printer owe Virginia litter tax when it printed envelopes, stationery, brochures, letterhead, and business cards but not newspapers or magazines?
No. Merely printing images on paper did not make the company a manufacturer or seller of covered paper products, and it did not print newspapers or magazines. Virginia ended its litter-tax filing obli…
Was a permanently implanted birth-control device exempt from Virginia sales and use tax as durable medical equipment?
No. The device failed two mandatory durable-medical-equipment criteria: it could not withstand repeated use and was not appropriate for home use because a trained medical practitioner had to implant i…
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…
Were feed, supplies, and resale horses exempt when a Virginia horse breeder also used the horses for paid riding lessons, training, or shows?
Not for the paid lessons and other business uses. Feed, hay, and supplies were exempt only for horses used exclusively in qualifying breeding or raised exclusively for market, and using resale horses …
Could a business obtain separate retail and wholesale BPOL treatment without records reconciling its claimed wholesale receipts to tax returns?
Not on the evidence submitted. The county could not reconcile the claimed wholesale activity to the business's federal and local returns, and the taxpayer supplied no contrary proof on appeal. The ret…
Could a Maryland commuter recover Virginia tax withheld in error for 1997 through 2000 when the refund claims were not filed until April 2006?
No. Maryland reciprocity meant the commuter's wages were not subject to Virginia withholding, but he had not given his employer the required exemption certificate. More importantly, his April 2006 ref…
Could Virginia residents claim the credit for taxes paid to another state for Canadian federal income tax on wages?
No. Virginia's credit applied to qualifying income tax paid to another U.S. state, not to Canada or a Canadian province. The U.S.-Canada treaty provision cited governed specified federal taxes and did…
Did Virginia use tax apply to lease payments after equipment moved from California when California tax had been correctly paid upfront on the full lease value?
No. The lessee had correctly paid California sales tax on the full value of the five-year lease when the lease began. After the equipment moved to Virginia, that payment qualified for Virginia's other…
Did an out-of-state publisher create Virginia sales-tax nexus by retaining title to books stored and sold through an independent Virginia distributor?
No under the specific 2007 facts. Although the publisher retained title to books in the distributor's Virginia warehouse and qualified as a dealer, the distributor sold in its own name and was not sub…
Did a notice of intent preserve a Virginia tax appeal when the complete administrative appeal was not filed within 90 days of assessment?
No. The assessment was dated December 22, 2006, making March 22, 2007 the deadline. A March 21 notice stating that a complete appeal would follow did not satisfy or extend the 90-day period, so the ap…
Were leases and other transactions between separately incorporated affiliates exempt as intracompany transfers for Virginia sales tax?
No. Virginia records showed that the taxpayer and its affiliates were separate legal entities, not departments of one company. Transactions for consideration between them—including rentals of tangible…
What Virginia income tax filing and payment relief was available to people affected by the April 2007 Virginia Tech tragedy?
Affected victims, families, emergency responders, Virginia Tech students, and employees received until November 1, 2007 to file and pay 2006 Virginia individual income tax otherwise due May 1, includi…
Did the daily-commuter exception eliminate Virginia filing when a worker moved into Virginia and established an abode during the same year?
No. The taxpayer qualified as an out-of-state commuter only before she established a Virginia abode. Her November 1 move and continued residence showed Virginia domicile for the rest of 2003, so she c…
Who owed Virginia communications sales tax on satellite TV and pay-per-view services supplied to hotels and their guests?
The service company had to register, charge communications sales tax to the hotel, and calculate tax on what the hotel remitted after its commission. Satellite TV and pay-per-view movies, music, and g…
Under Virginia's 2007 guidance, could a retailer advertise that it would pay, absorb, or discount an amount tied to the customer's sales tax?
Generally no. Virginia treated both direct promises to pay the customer's sales tax and discounts advertised as equal to the tax as prohibited absorption advertising, potentially a Class 2 misdemeanor…
Could Virginia reconstruct a government contractor's sales and use tax from a prior audit when the contractor lacked records for the current period?
Yes. With inadequate current records, Virginia could use the prior audit as the best available information. Unsupported claims about underground-phone-line contracts did not justify revision, but mixe…
Was a corporate general manager personally liable for unpaid Virginia withholding tax when he knew of the failure and could sign company checks?
Yes. Evidence showed that the general manager ran day-to-day operations, signed payroll and Virginia withholding checks, knew the returns and tax were unpaid, and had authority over bank disbursements…
How did Virginia's 2007 guidance allocate its earned income tax credit when spouses filed separate Virginia returns?
Each spouse could claim only a proportional share of the Virginia EITC, based on that spouse's share of the earned income used to qualify for the federal credit. The combined Virginia credit was 20% o…
Did a Virginia country club have to charge sales tax on dyed diesel sold to members for pleasure boats?
Yes. The club could buy the fuel exempt for resale, but it had to collect and remit 5% retail sales tax when selling dyed diesel to members for pleasure watercraft. Because that use was exempt from Vi…
Was an auto dealer's combined environmental-disposal and shop-supply charge taxable when it actually represented only shop supplies?
No, on the verified facts. Virginia abated the assessment because the combined invoice label actually represented only nontaxable shop-supply charges, not an environmental disposal fee. Dealers must p…
Would using a separate affiliated Virginia distribution center create Virginia income-tax or sales-tax nexus for an internet retailer?
Not by itself, under the stated 2007 facts. Virginia found no corporate-income-tax nexus because the retailer had no Virginia property or payroll and its activities remained within P.L. 86-272. It als…
Was a bail bondsman's deed of trust securing the Commonwealth exempt from Virginia recordation tax?
No exemption applied. The deed of trust secured real estate the bail bondsman already owned; it did not convey the property to Virginia. The conveyance exemption in Va. Code § 58.1-811(A)(3) therefore…
Were software royalties and maintenance fees exempt when the vendor said delivery was electronic but its contracts allowed tangible media?
No. Virginia upheld tax on both the software royalties and maintenance revenue because the agreements allowed or did not rule out tangible delivery. To support electronic-only treatment, the invoice, …
Did a customer's direct pay permit shift tax on a mechanical contractor's materials and operated equipment to the customer?
No. Virginia treated the contractor as the user and consumer of materials used in real-property, painting, sandblasting, and other service work. The customer's direct pay permit did not cover the cont…
Could a mechanical contractor avoid Virginia tax on job materials and operated equipment by relying on its customers' direct pay permits?
No. Virginia treated the contractor as the user and consumer of materials used in real-property, painting, sandblasting, and other service contracts, so it owed sales or use tax on those purchases. It…
Did Virginia approve a manufacturer's refund claim for use tax paid on property allegedly covered by the manufacturing exemption?
Not yet. Virginia found the protective refund claim timely, but the manufacturer still had to prove both that it remitted the use tax and that the property qualified for the manufacturing exemption. T…
Was a custom digital film exempt from Virginia use tax when an amusement facility bought it for an attraction?
Yes. Virginia held that the custom digital film qualified for the audiovisual-work exemption because the amusement facility acquired it for commercial exhibition and incorporated it into an attraction…
Did Virginia use tax apply to tools first received and controlled in Virginia before being sent to out-of-state power plants?
Yes. Virginia treated possession and control of the tools in Virginia as the first taxable use, even though the manufacturer later sent them to power plants in other states. Later out-of-state deliver…
Did Virginia's communications-tax internal-use exclusion cover administrative support communications bought by a provider and by a separate affiliate?
Only for the provider itself. Communications services used by a communications provider in its retail stores, engineering offices, switching centers, call centers, and corporate support functions qual…
Could a home-infusion pharmacy buy IV medications and other patient products for resale despite providing nursing support?
Yes. Virginia found that patients sought the IV medications and that the company's nursing and support services were incidental, so patient products could be bought for resale. Prescription IV drugs a…
Were a home-infusion pharmacy's IV medications treated as exempt product sales rather than taxable supplies consumed in a service?
Yes. Virginia found that patients sought the IV medications themselves and that the pharmacy's support services were incidental. The pharmacy could buy medications and related products for resale; pre…
Was a multi-pharmacy home-infusion company's true transaction the sale of exempt IV medication rather than a medical service?
Yes. Virginia found that patients sought IV medications and that the company's nursing, dietician, and support services were incidental. The pharmacies could buy patient products for resale, prescript…
Which pallets, shrink-wrap, and printing plates qualified for Virginia's manufacturing exemption at poultry facilities?
Pallets and shrink-wrap applied at the processing plant as the final production step were exempt. The same items used after off-site storage at separate distribution facilities were not manufacturing-…
Did Virginia sales tax apply when a hotel guest redeemed loyalty points for a complimentary room or when the hotel received money from the program fund?
No. A hotel did not collect Virginia sales tax when a guest redeemed loyalty points for a complimentary room, and money redistributed from the segregated program fund was not a separate taxable sale. …
What cigarette-stamp compliance and penalty procedures did Virginia announce in Tax Bulletin 07-3?
The superseded bulletin required licensed agents to stamp cigarettes within one business day, described limited unstamped-sale exemptions, and announced graduated penalties and proof procedures for un…
What Virginia tax underpayment and refund interest rates applied during the second quarter of 2007?
Virginia's April 1-June 30, 2007 rates remained 10% for tax underpayments and assessments and 10% for tax overpayments and refunds. The corresponding federal rates were 8%, and Virginia added two perc…
Did Virginia sales tax apply when a broker arranged private-home rentals for race fans only two weekends per year?
No, under the stated 2007 facts. The broker did not own or operate the homes, and homeowners renting only for two race weekends made occasional sales rather than regularly furnishing transient lodging…
How did Virginia's move to December 31, 2006 federal conformity affect 2006 income-tax returns?
Virginia conformed to federal tax law as of December 31, 2006 for tax years beginning in 2006, except it still disallowed specified bonus depreciation and five-year carrybacks of 2001 or 2002 net oper…
Could Virginia refund 2000 and 2001 tax paid in error after the statutory refund deadline expired?
No. Even though the Maryland resident's wages were described as exempt from Virginia tax and her preparer had filed incorrectly, the 2000 and 2001 refund claims were outside Va. Code § 58.1-1823. The …
Could a poolside cabana include Virginia sales tax in posted item prices instead of adding it separately?
Yes, by specific permission. Virginia allowed the cabana to include retail sales tax in posted prices beginning May 1, 2007 because ordinary point-of-sale collection was impractical. Signs had to say …
Could a poolside cabana include Virginia sales tax in posted item prices instead of adding it separately?
Yes, by specific permission. Virginia allowed the cabana to include retail sales tax in posted prices beginning May 1, 2007 because ordinary point-of-sale collection was impractical. Signs had to say …
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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.