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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A cigarette sales tax assessment was converted from my company to me personally as its officer. I signed the paperwork setting up the company, but claim my former employer tricked me into it and ran the fraudulent purchases -- am I still personally liable?
Yes, on these facts -- signing the documents that actually set up the business (a lease, a federal ID number application, a wholesale account) made her the purchaser of record, and a claim that a form…
Our timeshare condominium's owner's association owns and furnishes every unit -- can the association claim the household goods exemption from business tangible personal property tax since individual owners actually use the furniture as their vacation home?
No -- Virginia's household goods exemption from business tangible personal property (BTPP) tax requires the property to be OWNED (not just used) by an individual or family incident to maintaining an a…
The Department assessed us for failing to withhold tax on workers we treat as independent contractors, using VEC data -- can we still make our case that they're properly independent contractors?
Yes -- the case was sent back to the Department's audit staff because the auditor relied on Virginia Employment Commission (VEC) worker-classification data without independently applying the legal tes…
We run a water park and paid business tangible personal property tax on our rides, theming, and lockers -- can we get a refund by showing these items are fixtures to the real estate, not taxable personal property?
Yes -- under Virginia's three-part fixture test (annexation, adaptation to use, and intent to permanently improve the realty), a water park's ride structures, ride equipment, theming, and even its loc…
I was president and a minority shareholder of a restaurant company that fell behind on sales tax -- can the Department make me personally liable for the company's unpaid tax as a 'responsible officer' even though I didn't handle the company's finances or tax filings?
No -- Virginia's responsible-officer penalty under Va. Code § 58.1-1813 requires the individual to have had the specific corporate duty to pay or report the tax, actual knowledge of the failure, AND t…
We're an electrical contractor who was assessed sales tax on the fire alarm and suppression systems we install -- but we think those systems become part of the building, not taxable personal property -- who's right?
The contractor was right -- fire alarm and suppression systems that are hard-wired into a building's electrical network, required for a certificate of occupancy, and intended to remain permanently ins…
I accepted resale exemption certificates from my distributors even though their listed business type didn't exactly match what they bought -- do I still qualify for the resale exemption?
Mostly yes -- if the resale certificate is complete, signed, and dated, a dealer doesn't need the customer's listed business type to exactly match the products sold; it's enough that a dealer could re…
The Department already ruled our easy-return-label and logo-setup fees are taxable -- can we get that determination reconsidered by arguing the returned goods leave Virginia, and that a logo setup is really an 'alteration'?
No -- the Tax Commissioner denied reconsideration and reaffirmed both prior conclusions: easy-return-label charges are taxable because they're tied to the ORIGINAL Virginia sale, not the eventual out-…
Our national-bank affiliate has no Virginia office of its own, but its employees work out of a sister company's Virginia office doing sales, marketing, and loan-solicitation support -- does that make the bank subject to Virginia's bank franchise tax?
Yes -- a bank doesn't need to accept deposits, make loans, or maintain its own office in Virginia to be subject to the bank franchise tax; simply having employees conduct sales, marketing, and custome…
We're a federally chartered stock savings bank with five Virginia office locations -- are we subject to Virginia's bank franchise tax?
Yes -- a federally chartered bank organized under U.S. law that operates offices in Virginia and provides banking services (accepting deposits, making loans) qualifies as a 'bank' subject to Virginia'…
My land-clearing business uses the same equipment for both taxable brush-clearing services and tax-exempt timber harvesting -- how much of an exemption can I claim, and who has to prove the split?
Only a 20% exempt proration -- because the equipment was used for both exempt timber harvesting-for-sale and taxable general land-clearing/mulching work, and the taxpayer failed to prove a higher exem…
The Department used a single representative month to calculate our use tax assessment, and the audit took a long time to close -- can we get the sample thrown out and the interest waived?
No -- a taxpayer who didn't object to the audit's sample period when it was first proposed, and who provides no documentation showing the sample was unrepresentative or the resulting assessment wrong,…
I moved to another state for a new job and lived there all year, but I kept my Virginia driver's license and car registration -- am I still a Virginia resident for income tax purposes?
No -- physically living and working in another state for a full year doesn't by itself establish that you've abandoned your Virginia domicile; you must prove BOTH an intent to abandon Virginia permane…
We filed our 2016 Virginia return late because of serious medical problems, asking to apply the overpayment to 2017 -- does a severe illness extend the three-year deadline to claim a refund or credit?
No -- Virginia's three-year statute of limitations for claiming a tax refund (or, as here, applying an overpayment as a credit to a later year) is applied strictly with no exception for a taxpayer's s…
The Department disallowed our itemized deductions and Schedule E expenses when we didn't respond to a documentation request in time -- can we still get the medical expense deduction back by showing we already sent proof?
Not automatically -- when the Department has no record of receiving documentation a taxpayer claims to have already submitted, the taxpayer must resubmit it (here, by a firm deadline) or the disallowa…
We harvest timber and later use lime and tractors to reseed the land afterward -- does Virginia's tax exemption for forest-product harvesting equipment cover that reseeding work too?
No -- Virginia's sales and use tax exemption for forest-products harvesting only covers equipment and supplies used DIRECTLY in removing timber from the harvest site (and related pre-transport steps),…
Our audit assessed us for materials markup we billed customers, disputed our resale-exemption purchases, and applied compliance and amnesty penalties -- what can we still get corrected?
Partially -- a contractor who proves specific items were genuinely purchased for resale (not its own use) can get those line items corrected, but tax actually collected from customers must be remitted…
We bought a veterinary practice and didn't know we had to charge sales tax on retail items like flea powder and pet food -- can we just remit the difference between what we paid vendors and what we charged customers, instead of the full amount?
No -- a veterinarian selling non-treatment retail items (like flea powder, pet food, or medicine sold apart from professional services) must collect and remit sales tax on the FULL marked-up retail pr…
The county's determination letters on our BPOL and BTPP tax appeal were signed by a deputy, not the Commissioner of the Revenue -- does that mean the county's decision isn't actually final and appealable yet?
Correct -- a county's determination letter on a BPOL or BTPP tax appeal isn't a valid 'final local determination' unless it's signed by the actual Commissioner of the Revenue (or chief assessing offic…
We're a staffing/recruiting firm and our locality denied our BPOL exemption for benefits paid to contract employees at seven different clients -- does the amount of control each client exercises over our placed workers matter?
It depends entirely on the facts of each individual client engagement -- a staffing firm's BPOL exemption for benefits paid to contract employees requires proving the firm's workers were assigned to S…
We're out-of-state headquartered with one Virginia location, and we say we were never contacted about an audit before getting an assessment -- does the Department have to actually redo the audit if we dispute getting notice?
No -- when the Department has extensive documented correspondence (emails and mailed letters over more than a year) with an employee at the taxpayer's own headquarters showing the audit was properly i…
My wife held an F visa and was a nonresident alien for federal tax purposes -- does that mean her wages earned while we lived in Virginia are exempt from Virginia income tax?
No -- a spouse's status as a nonresident alien under federal tax law (including on an F visa) has no bearing on whether her wages are taxable as Virginia income, once Virginia's own residency rules --…
The IRS flagged that I never filed a Virginia return, but I was living and working in another state that year with employer-provided housing -- am I still on the hook as a Virginia resident?
No -- working and living in another state under employer-provided housing doesn't establish that you've abandoned your Virginia domicile if the arrangement's permanence is unclear and you kept strong …
I graduated college in another state, got a job and leased apartments there, and filed that state's tax return -- but I kept voting in Virginia elections -- does that mean I never actually left Virginia for tax purposes?
No, the domicile change failed -- continuing to register and actually vote in Virginia elections is treated as VERY strong evidence a person still considered Virginia their permanent home, and that al…
The Department audited us for SIX years and reclassified our 1099 subcontractors as employees just because we couldn't produce invoices and business licenses -- is that enough proof, and can they really go back that far?
Partially in the taxpayer's favor on both fronts -- a worker's status as an independent contractor can't be decided just because the business couldn't produce specific paperwork like invoices or busin…
As a locality, can we tax nonprofit hospital-affiliated wellness centers, physical therapy clinics, home health agencies, and diagnostic labs under BPOL, business personal property, or real property tax just because they compete with for-profit businesses doing the same thing?
No -- a locality cannot tax a genuine IRC § 501(c)(3) nonprofit organization's BPOL gross receipts just because its activities resemble or compete with for-profit businesses, and cannot 'look behind' …
I claimed unreimbursed employee expenses plus business expenses for my rideshare driving and refereeing side jobs, using bank statement notations and oil-change mileage receipts as proof -- why did the auditor disallow almost everything?
No, generally not -- vague documentation like a bank statement with 'business consultant' scribbled next to a charge, or mileage recorded only between oil changes (with no breakdown of business versus…
My business has to make Virginia's 'accelerated sales tax payment' in June -- how is it calculated, when is it due, and can I get a waiver?
Virginia requires dealers whose taxable sales and/or purchases met a set threshold in the prior fiscal year ($10.0 million for the payment due in June 2021 onward, confirmed by the 2021 Appropriation …
I missed the April 1 deadline to apply for Virginia's Qualified Equity and Subordinated Debt Investments Tax Credit -- can I still get the credit, or at least apply it to next year's investment pool?
No -- an individual investor lost her appeal after filing her application for Virginia's Qualified Equity and Subordinated Debt Investments Tax Credit six weeks past the April 1 deadline (she filed Ma…
I'm a member of an LLC that claimed a federal research tax credit -- can I still subtract my share of the research expenses on my Virginia individual return?
Yes -- an individual member of an LLC won his appeal after the Department disallowed his Virginia subtraction for his proportional share of the LLC's qualified research expenses. As a general rule, Vi…
I bought into an LLC from a previous owner who took a Virginia bonus-depreciation addition in an earlier year -- can I still claim the offsetting Virginia subtraction in a later year, even though I wasn't the original owner?
Yes -- a husband and wife who acquired an ownership interest in an LLC from a prior owner won their appeal of a disallowed fixed-date-conformity (FDC) depreciation subtraction. Virginia doesn't confor…
I got a sales tax refund based on a retroactive exemption certificate -- why did Virginia calculate less interest on it than I expected?
A multinational tech company that qualified for a data-center sales tax exemption won its appeal: the Department had wrongly applied a special rule (Va. Code § 58.1-623 E) that limits interest on a re…
The IRS adjusted my old federal return years ago and I never amended my Virginia return -- can Virginia still assess me now, and can I settle the bill for less?
Yes, Virginia can assess tax with no time limit at all if a taxpayer never files the Virginia amended return required after an IRS adjustment, and no, an offer to settle for less doesn't work when the…
My employer withheld Maryland income tax from my wages even though I live in Virginia -- can I claim a Virginia credit for the Maryland tax withheld?
No -- a Virginia resident who commuted to a job in Maryland lost her appeal after claiming a Virginia credit for Maryland income tax her employer had withheld. Virginia has a reciprocal agreement with…
I moved to Virginia partway through the year -- the Department assumed I was a full-year Virginia resident, but I filed a part-year return. Who's right?
A couple who moved to Virginia from another state in 2016 won their appeal after the Department initially assumed they were full-year Virginia domiciliary residents and adjusted their part-year return…
I never filed my Virginia return because my taxes were too complicated, and the Department assessed me based on IRS data -- can I get the penalty and interest waived?
No -- a couple who never filed a 2017 Virginia return, and were assessed based on IRS-supplied income data after the Department got no response to its requests for information, lost their bid to have …
A cigarette distributor's own sales records show I bought more cigarettes tax-free for resale than I reported selling -- can the Department assess me on that difference even without my own sales records?
Yes -- a convenience store lost its appeal of a sales tax assessment on cigarettes, which the Department calculated using the DISTRIBUTOR's own purchase records rather than the store's, because the st…
What does Virginia Ruling of the Tax Commissioner P.D. 21-40 conclude about Net Operating Loss (NOL) : NOL Deduction (NOLD) - Amendments to Carryback Provisions - Tax Cuts and Jobs Act (TCJA) - Coronavirus Aid, Relief and Economic Security Act (CARES Act)?
NO, the refund/NOL carryback was correctly denied -- even though the federal CARES Act let this taxpayer carry its 2018 NOL back to 2016 for federal purposes, Virginia's conformity to the Internal Rev…
What does Virginia Ruling of the Tax Commissioner P.D. 21-39 conclude about Residency: Domicile - Failure to Abandon Virginia Domicile; Administration : Written Advice - Previous Audit Abatement?
The taxpayer remained a Virginia domiciliary resident for 2015-2017 despite claiming to live and work in another state, because he kept a Virginia home, vehicle registration, and driver license, and, …
What does Virginia Ruling of the Tax Commissioner P.D. 21-37 conclude about Deduction: Itemized - Documentation, Unreimbursed Business Expenses, Employee Business Expenses, Health Sanitation Supplies, Tax Preparation Fees, Work Clothing?
The Department upheld the disallowance because the taxpayers provided zero supporting documentation across every expense category -- work clothing, health-sanitation supplies, Form 2106 travel costs, …
What does Virginia Ruling of the Tax Commissioner P.D. 21-36 conclude about Allocation and Apportionment : Alternative Method - Non - Business Income, Pass-Through Entities - Factor Attributes Pass Through To Owners?
NO, both assessments are upheld -- a corporation that holds an interest in a pass-through entity (including an LLC treated as a partnership) must fold that entity's own property, payroll, and sales in…
I live in Maryland most of the year but still own a home and vote in Virginia -- can I claim a Virginia credit for the Maryland tax I paid?
Yes -- because the taxpayer was a "dual resident," the Virginia-Maryland reciprocal agreement didn't apply, and he was entitled to claim a credit for the tax he paid to Maryland. He spent 290 nights i…
What does Virginia Ruling of the Tax Commissioner P.D. 21-32 conclude about the credit for tax paid to another state when a couple is a dual resident of Virginia and another state?
The Department reversed itself and ordered the couple's credits for tax paid to another state reinstated. Being a ‘dual resident’ -- domiciled in Virginia while also treated as a resident of another s…
What does Virginia Ruling of the Tax Commissioner P.D. 21-34 conclude about Subtractions : Foreign Source Income - Tax Cuts and Jobs Act (TCJA)?
NO, Virginia does not offer the same 8-year federal installment option for TCJA repatriation tax, because that federal provision is just a payment mechanism, not part of computing FAGI/FTI, which is t…
What does Virginia Ruling of the Tax Commissioner P.D. 21-31 conclude about Residency : Part-Year - Moved to Virginia?
The Department agreed the taxpayer should be treated as a part-year Virginia resident, not a full-year resident, because he moved to Virginia in August 2017; he must file Form 760PY reporting only the…
What does Virginia Ruling of the Tax Commissioner P.D. 21-30 conclude about Administration : Appeal - Reconsideration; Residency : Domicile - Different States, Decree of Divorce?
Two separate issues. For 2014: the taxpayer's request to reconsider an earlier determination (P.D. 19-79) arrived well after the 45-day deadline, so that assessment stands regardless of the merits. Fo…
Can a taxpayer get a Virginia income tax refund by amending her return more than three years later, based on a correction made to her other state's return?
No -- the refund was denied as time-barred, because the one-year exception for changes made by another state only applies when that change actually decreases Virginia tax, and here the State A rate co…
When a pass-through entity files a unified (composite) return for its nonresident partners, must the tax be computed at the highest individual rate instead of each partner's own bracket, and does that income include guaranteed payments for services performed outside Virginia?
The Department's rate adjustment was correct -- a unified/composite return must be taxed at the single highest Virginia individual income tax rate under § 58.1-320, not at each partner's own lower bra…
What does Virginia Ruling of the Tax Commissioner P.D. 21-27 conclude about Net Operating Loss (NOL) : NOL Deduction (NOLD) - Election to Forego Carryback?
YES, the Taxpayer's election to forego the two-year NOL carryback was valid -- even though it did not attach a separate election statement to its Virginia return, checking the 'forego carryback' box o…
What does Virginia Ruling of the Tax Commissioner P.D. 21-26 conclude about a dealer's failure to file a retail sales and use tax return?
The statutory assessment was upheld: the dealer was required to file a sales tax return for the period even though no tax may have been due, and the assessment stands as due and payable unless the dea…
Can a Virginia taxpayer get an income tax refund after the statute of limitations has run because their tax preparer made a filing error?
No -- the refund was denied as time-barred because the return was not filed until October 2019, more than three years after the May 2, 2016 deadline, and the Taxpayers could not prove their preparer h…
Did this taxpayer succeed in proving he had changed his domicile from Virginia to Maryland, and could he still get credit for the Maryland tax he paid?
NO, the taxpayer did not establish a change of domicile to Maryland -- he failed to provide the Department with documentation supporting his claimed Maryland domicile, so the Virginia resident assessm…
Can a Virginia resident claim a credit for tax paid to Pennsylvania on fees earned as trustee and power of attorney for a family member, even though the Pennsylvania-Virginia reciprocity agreement doesn't apply and the income was reported as 'other income' on the federal return?
YES, the Taxpayer was entitled to the credit -- although the Pennsylvania-Virginia reciprocity agreement did not apply because the Taxpayer was not an employee earning 'compensation,' the fees she ear…
Was a Virginia individual income tax refund claim for the 2015 tax year timely when the amended Virginia return was filed more than three years after the original return but within one year of a related amended federal return?
YES, the refund was allowed -- although the Department initially denied it as filed too late, the amended Virginia return was actually timely because it was filed within one year of the taxpayer's ame…
Can Virginia uphold an estimated sales and use tax assessment against a contractor who refused to give the auditor its purchase records?
YES, the estimated assessment was upheld as properly issued -- the Taxpayer, a real property contractor, refused to provide purchase records during the audit, so the Department was authorized under Va…
Can a business avoid Virginia use tax on purchased software by claiming it was delivered electronically, if its own invoice and vendor emails do not clearly document that electronic delivery?
No -- the Tax Commissioner upheld the use tax assessment because the taxpayer's documentation (a vendor email referencing the purchase order, plus a sales invoice) did not meet Virginia's minimum proo…
Can a taxpayer still get a refund of a 2014 Virginia income tax overpayment if the return claiming it wasn't filed until December 2019?
No -- the refund was time-barred. The Taxpayers had three years from the original May 1, 2015 due date (since they never validly elected the extension by filing or paying on time) to claim a refund, s…
What does Virginia Ruling of the Tax Commissioner P.D. 21-17 conclude about an appeal of a sales tax audit assessment filed after the 90-day deadline, where the taxpayer also asked for a conference to submit more records?
NO relief was granted -- the Taxpayer's appeal was filed on May 18, 2020, well after the December 30, 2019 deadline set by the 90-day limit in Va. Code § 58.1-1821, so it was barred as untimely, and s…
What happens if a Virginia taxpayer appeals a sales and use tax audit assessment but the appeal letter does not allege specific errors or cite any legal authority?
The appeal was denied as incomplete because the Taxpayer's letter did not allege any errors in the assessment or cite any legal authority, and on the merits the audit assessment was upheld as correct.
What does Virginia Ruling of the Tax Commissioner P.D. 21-15 conclude about Residency : Part year - Income Allocation; Administration: Interest - Accrual; Administration : Reliance on Tax Preparer - Tax Preparation Software?
Both parts of the assessment were upheld: the Taxpayers had to allocate the retirement income they received on or after their self-reported February 1 move date to their period of Virginia residency (…
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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.