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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Can Virginia disallow both Schedule C business expenses and Schedule A itemized deductions on an audit, and uphold the resulting assessment, if the taxpayer never sends in records to support them?
Yes. Virginia starts its individual income tax computation from federal adjusted gross income (FAGI), and the Department has authority under Va. Code §§ 58.1-219 and 58.1-310 to examine and adjust bot…
Could Virginia disallow a resident's 2022 and 2024 Schedule C deductions when the taxpayer failed to provide the requested audit records?
Yes. Virginia may examine and adjust federal adjusted gross income when reported amounts appear inconsistent with federal law. Because the taxpayer supplied no support for the Schedule C deductions, b…
Did Virginia consider the merits of a Schedule C assessment appeal received after the 90-day administrative deadline?
No. The assessments were issued October 22, 2025, making January 20, 2026 the final day for a timely appeal. The Department received the appeal on February 24, 2026, so the Tax Commissioner denied it …
Could Virginia disallow resident taxpayers' 2024 Schedule C deductions when they failed to provide the requested audit records?
Yes. Virginia may examine and adjust federal adjusted gross income when reported amounts appear inconsistent with federal law. Because the taxpayers supplied no support for their Schedule C deductions…
Could Virginia disallow a resident's 2022-2024 Schedule C deductions when the taxpayer failed to provide the requested audit records?
Yes. Virginia may examine and adjust federal adjusted gross income when reported amounts appear inconsistent with federal law. Because the taxpayer supplied no support for the Schedule C deductions, t…
Can Virginia disallow federal Schedule C business-expense deductions and uphold an income tax assessment when a taxpayer under audit fails to provide documentation to support those deductions?
Yes. Just like the near-identical companion ruling P.D. 26-49, the Tax Commissioner upheld the Department's authority to disallow undocumented Schedule C deductions and adjust federal adjusted gross i…
Can Virginia disallow federal Schedule C business-expense deductions and uphold an income tax assessment when a taxpayer under audit fails to provide documentation to support those deductions?
Yes. Just like the near-identical companion ruling P.D. 26-49, the Tax Commissioner upheld the Department's authority to disallow undocumented Schedule C deductions and adjust federal adjusted gross i…
Can Virginia disallow federal Schedule C business-expense deductions and uphold an income tax assessment when a taxpayer under audit fails to provide documentation to support those deductions?
Yes. The Tax Commissioner upheld the Department's authority to examine and adjust federal adjusted gross income (FAGI), including Schedule C deductions, when the reported amounts cannot be verified, a…
If I concede that the business I reported on Schedule C did not exist, can Virginia still uphold the assessment disallowing those deductions?
No -- Virginia is not bound by your federal Schedule C, and here there was nothing left to salvage. After the Department disallowed the taxpayer's 2022 through 2024 Schedule C deductions for lack of d…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayers' Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayer's Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayers' Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayer's Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayers' Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. The Department can examine and disallow Schedule C deductions on a Virginia return, and because an assessment is 'prima facie correct,' the taxp…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayers's Sc…
Can Virginia disallow or adjust the Schedule C business deductions on my state return, and what happens if I don't give the auditor documentation?
Yes. Virginia can examine and disallow the federal Schedule C deductions on your state return; the taxpayers' argument that the Department has no authority over Schedule C was rejected. Because Virgin…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayer's Sch…
Can Virginia disallow my Schedule C deductions on audit, and will it credit tax withheld from my wages that it added to my income?
Mostly no, but with a small win. Virginia is not bound by your federal Schedule C: the Department disallowed the taxpayer's 2022 through 2024 Schedule C deductions for lack of documentation, and becau…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayers's Sc…
How long do I have to claim a Virginia individual income tax refund, and does relying on my accountant extend that deadline?
You have three years from the return's original due date to claim a Virginia income tax refund, and the deadline is strict. The Department denied a 2020 nonresident refund claim filed in June 2024 -- …
When a Virginia dealer or marketplace facilitator sells to a government agency, what does it need to accept the ST-12 exemption certificate and not charge sales tax?
A Virginia dealer can sell tax-free to a federal, state, or local government buyer once it has EITHER a required official purchase order paid from public funds OR a properly completed, signed Form ST-…
When does Virginia's 90-day deadline to appeal a tax assessment start, and does a later bill restart the clock?
Virginia strictly enforces a 90-day deadline to appeal a tax assessment, measured from the date on the official 'Notice of Assessment' -- not from a later consolidated bill or statement of balance due…
As a combined Virginia filer, can I keep a large one-time gain from selling Virginia assets out of my apportionment factor by consolidating accounts or using an alternative apportionment method?
No. A multinational combined filer recognized a large gain when it sold a subsidiary's Virginia assets, spiking that subsidiary's Virginia sales factor. The Department refused both a Va. Code § 58.1-4…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayer's Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayer's Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayer's Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayers's Sc…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayer's Sch…
Is Virginia bound by my federal Schedule C, and who has the burden when the Department disallows my deductions on audit?
No -- Virginia is not bound by your federal Schedule C. This is one of a series of materially identical Virginia Schedule C desk-audit determinations. Here the Department disallowed the taxpayer's Sch…
My company was coded as a retailer but now sells mostly wholesale -- does Virginia force me onto the single sales factor, and must I amend my federal return to fix the Virginia one?
No on both counts. Virginia's single-sales-factor apportionment applies only to a 'retail company' whose PRIMARY activity falls in NAICS retail Sectors 44-45. Where the taxpayer showed about 68% of it…
Does a Virginia hotel have to charge sales tax on a separately stated credit card surcharge and on cancellation fees for rooms and events?
Credit card fees: yes. Cancellation fees: usually no. A hotel's separately stated credit card surcharge added to taxable room rentals, banquets, and catering is itself taxable, because the 'true objec…
If a corporate officer is personally assessed for a company's unpaid sales tax and withholding, what happens to the appeal when it's filed after the 90-day deadline because they had moved?
Too late -- the appeal was rejected. A corporate officer was personally assessed 'converted' penalties equal to his company's unpaid sales/use and withholding taxes. He appealed, but filed his applica…
Must a wholesaler include inventory it stores in Virginia awaiting sale in its corporate income tax property factor, or can it exclude it because it says it does not 'use' the inventory here?
Include it. A multistate wholesaler stored purchased coal in a Virginia stockyard until it had enough to fill a sales contract, then shipped it out of state. It later sought a refund, arguing it did n…
Can a direct pay permit holder claim a use-tax refund based on an estimated accrual percentage, and must the Department run an audit to find the overpayment?
No refund. A manufacturer with a Virginia direct pay permit computed its use tax using an 'estimated accrual percentage,' later decided it had overpaid, and asked for a refund. The Commissioner denied…
Can the Virginia Tax Commissioner hear an appeal of local tangible personal property (car) tax assessed on an individual's personal vehicle?
No -- the Department has no jurisdiction. A car owner whose personal vehicle had been stolen appealed the county's tangible personal property (car) tax to the Tax Commissioner. The Commissioner issued…
When a Virginia refund depends on an amended federal return, does the one-year clock run from when you filed the federal amendment or from when the IRS accepted it?
Denied -- filed too late. When a Virginia refund depends on a change to your federal return, you have one year from the 'final determination date' to file the amended Virginia return. For a change mad…
Does Virginia's occasional sale exemption let a police department sell service handguns and service animals to retiring officers without collecting sales tax?
It depends on how often they sell. Virginia's 'occasional sale' exemption can exempt a police department's sales of service handguns (to retiring officers) and service animals (to their last handler) …
Can the Virginia Tax Commissioner hear an appeal of a local business tangible personal property (BTPP) tax assessment, and what must the taxpayer do first?
The Tax Commissioner dismissed the appeal for lack of jurisdiction. Local business tangible personal property (BTPP) tax is assessed and administered by the locality, and there are two separate local …
Did Virginia's 2020 and 2022 budget (appropriation) acts unconstitutionally raise the cigarette and tobacco taxes? (Companion ruling to P.D. 26-11.)
No refund. This March 4, 2026 determination is one of four materially identical rulings (with P.D. 26-11, 26-13, and 26-14) rejecting a cigarette stamping agent's argument that Virginia's 2020 and 202…
Can Virginia double the cigarette and tobacco tax inside a budget (appropriation) act, and is the resulting tax refundable? (Companion ruling to P.D. 26-11.)
No refund. One of four materially identical March 4, 2026 rulings (with P.D. 26-11, 26-13, and 26-15) denying a cigarette stamping agent's refund claim -- here for June 2020 through June 2024. The Com…
Is Virginia's cigarette and tobacco tax increase unconstitutional because it was passed inside the state budget (appropriation) act? (Companion ruling to P.D. 26-11.)
No refund. This is one of four materially identical rulings the Commissioner issued on March 4, 2026 (with P.D. 26-11, 26-14, and 26-15), rejecting a cigarette stamping agent's claim that Virginia's c…
Can Virginia disallow a corporation's net operating loss carryforward for lack of documentation, and how are NOLs inherited in a bankruptcy reorganization treated?
A taxpayer win. A consolidated corporate group carried forward a net operating loss (NOL) from years before its 2009 bankruptcy reorganization. The Department disallowed the NOL deduction on audit for…
Was Virginia's cigarette and tobacco tax increase invalid because it was enacted through the state budget (appropriation) act instead of a standalone tax bill -- and can a stamping agent get a refund?
No refund. The Virginia Tax Commissioner upheld the 2020 and 2022 Appropriation (budget) Acts that doubled the cigarette tax (1.5¢ to 3¢ per cigarette, i.e. 30¢ to 60¢ per pack) and the tobacco produc…
When must a Virginia company add back royalties paid to a related intangible holding company, and when do the subject-to-tax, unrelated-member, conduit, consolidation, or valid-business-purpose exceptions apply?
Mostly upheld. A franchisor's operating company paid royalties to a related intangible holding company (IHC) and tried to fully exclude them from Virginia's related-party intangible-expense add-back. …
When a retailer pays royalties to its own intangible holding company, can the unrelated-member, subject-to-tax, or conduit exceptions excuse Virginia's related-party intangible-expense add-back?
Mostly denied, with a partial remand. A retailer-franchisor paid trademark royalties to its wholly owned intangible holding company (IHC) and tried to escape Virginia's related-party intangible-expens…
Can a Virginia taxpayer add previously unreported net Virginia modifications to a net operating loss carryforward after the loss years are closed, and does the unrelated-member exception excuse the related-party royalty add-back?
Denied. A corporate group that owns multi-tiered pass-through operating companies (LPs) paid trademark royalties to a related affiliate, added them all back on its Virginia returns, then sought a refu…
If you mail a Virginia return but the Department never receives it, does mailing count as filing for the three-year refund deadline?
Denied. The taxpayer filed a 2019 Virginia return in April 2024 claiming a refund, but Virginia's three-year refund window (Va. Code § 58.1-499 D) had already closed on May 1, 2023. The taxpayer said …
If you file a Virginia return years late, can an amended return or a delayed IRS 'final determination' still get your overpayment refunded?
Denied. A couple filed their 2018 and 2019 Virginia returns years late—the 2018 return in December 2023 and the 2019 return in April 2024—each reporting an overpayment. Virginia's three-year refund de…
If I move to Virginia partway through the year, am I taxed as a full-year resident -- and can I get a credit for the income tax I paid to my old state?
You are taxed only as a part-year resident. This taxpayer moved from another state to Virginia in 2020; the Department had assessed her as a full-year Virginia resident, but the Commissioner held she …
What documentation does Virginia require to keep a Schedule C business-expense deduction, and can the Cohan rule or a federal Tax Court win on another year save undocumented expenses?
Mostly denied, with one small win. Virginia disallowed a sole proprietor's Schedule C business-expense deductions for 2021 because the taxpayers couldn't prove they had actually paid the expenses. On …
If the U.S. Tax Court later proves the IRS adjustment wrong, can Virginia still refund the tax it assessed on that adjustment, or do its filing deadlines control?
Denied—right on the merits, too late on the deadlines. The IRS adjusted the taxpayers' 2018 federal return, so Virginia assessed additional tax in March 2022 and later collected it by applying part of…
Can a company avoid Virginia's add-back of intercompany interest it paid to an affiliate if the loans had a real business purpose?
Yes -- with clear and convincing evidence. Virginia normally makes a corporation add back interest it pays to a related company when the interest is connected to intangible property (§ 58.1-402 B 9 a)…
Does sending a 'notice of intent to appeal' preserve my Virginia tax appeal, or must I file the complete application for correction within 90 days?
Barred as untimely. A commercial bakery wanted to challenge a retail sales and use tax audit, arguing the Department wrongly taxed items it used for quality-control testing, sanitizing, and cleaning. …
If I'm a Virginia resident working remotely from home for an out-of-state employer, can I claim a Virginia credit for the income tax that state charged me?
Denied. A Virginia resident who spent early 2021 working remotely from his Virginia home for an out-of-state employer claimed a credit on his Virginia return for the income tax he paid that state. The…
The company I invested in sent my Qualified Equity and Subordinated Debt Investments Tax Credit paperwork to the wrong address, so I missed the April 1 deadline. Can I still get the credit?
Denied -- the deadline is hard, and it does not matter that a third party dropped the ball. This investor applied for Virginia's Qualified Equity and Subordinated Debt Investments Tax Credit for a 202…
Can Virginia extend or pause its three-year refund deadline for a taxpayer who couldn't file on time because of illness or disability?
Denied for the closed years. A taxpayer filed his 2018, 2019, and 2020 Virginia returns together in May 2024, seeking refunds; Virginia paid the 2020 refund but denied 2018 and 2019 as outside the thr…
Does the six-month filing extension give me three more years to amend for a refund, even if I filed my original return before the original due date?
Denied. Taxpayers timely filed their 2020 Virginia return, then filed an amended return seeking a refund, which the Department rejected as too late. They argued the amendment was within three years of…
My business was audited for sales and use tax and hit with an estimated assessment I think is arbitrary. Can Virginia estimate my tax if my records are incomplete, and are bank and credit-card statements enough proof?
The assessment was upheld -- Virginia can estimate your tax when your records are incomplete. This taxpayer was a Virginia "consuming contractor" audited for sales and use tax over March 2017 through …
Is Virginia's April 1 deadline for the Qualified Equity and Subordinated Debt Investments Tax Credit firm, and does mailing the application before the deadline count?
Denied. Investors sought Virginia's Qualified Equity and Subordinated Debt Investments Tax Credit (Form EDC) for a 2024 investment. They said they mailed the application in March 2025, but the Departm…
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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.