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 a federal civilian employee a Virginia resident for 2015 after obtaining a Virginia license, spending less than six months abroad, and returning to Virginia?
Yes. The taxpayer established Virginia domicile in 2014 and did not prove abandonment when he lived abroad for less than six months and returned. He also spent more than 183 days in Virginia during 20…
Could medical disability, an assessment-period waiver, or an IRS credit-transfer notice extend Virginia's three-year deadline for refunds claimed on late original returns?
No. Virginia required a fiduciary or agent to file for a disabled taxpayer and did not toll the refund period. Assessment waivers did not extend original-return refund claims, and the IRS notice did n…
Did creating a new parent company let a Virginia affiliated group replace its separate-return election with consolidated filing?
No. A new parent and reorganization did not create a new election or extraordinary circumstances; the group remained bound by its established method. A later change could be possible under the statuto…
Were points used only to activate games and rides taxable when sold with food in an entertainment center's value-deal and birthday-party packages?
No. The points were neither admission charges nor taxable meal-related charges, gave no entitlement to food, and activated only games and rides. Including them in a package with food did not make them…
What proof did Virginia require before refunding use tax paid on software claimed to have been delivered electronically?
An invoice, contract, sales agreement, or comparable evidence had to expressly confirm electronic delivery and that no tangible software medium was or would be supplied. The taxpayer failed to provide…
Could a Virginia business remove sales-tax audit items through an appeal without providing invoices, exemption certificates, or other supporting records?
Not on the existing record. Virginia required suitable transaction records and a complete appeal supported by essential documentation. The taxpayer had supplied none, so it received one final 30-day p…
Could part-year Virginia residents subtract all of a spouse's 2015 wages when Form W-2 data showed he earned wages after the couple moved into Virginia?
No. Part-year residents owed tax on income attributable to their Virginia residency period. Because the husband earned wages after the August move, subtracting 100% was incorrect. The estimated assess…
Did a taxpayer abandon Virginia domicile after moving to another state for work even though she retained a Virginia driver's license and voter registration?
Yes. She leased a home, worked, registered and garaged vehicles, used the other-state address for federal tax documents, and remained there until an unexpected 2017 job loss. Considering all facts, Vi…
Was a Virginia LLC that bought, renovated, and sold two properties subject to the BPOL contractor rate even though it argued it did not accept construction contracts?
Yes. A business that improves real estate for its own account and sale is treated at the contractor rate, including a speculative builder that engages others to perform the work. The LLC's purchase, r…
Were separately stated fees to pick up, remove, and recycle an old mattress taxable when offered only with the sale and delivery of a new mattress?
Yes. The services were offered only in connection with new-mattress sales, making the pickup, removal, and recycling fees part of the taxable sales price. Separately stating the charges did not change…
Could a retired federal CSRS employee claim a Virginia subtraction equivalent to the subtraction for Social Security or Railroad Retirement benefits?
No. Virginia courts had already rejected the claim that denying CSRS retirees an equivalent subtraction violated 4 U.S.C. § 111. The Commissioner found Dawson v. Steager involved a different compariso…
Did Virginia's BPOL exemption for newspapers, magazines, newsletters, and similar publications cover a free online food blog earning advertising income?
No, in the Department's opinion. Strictly construing the exemption in its 1988 tangible-media context, the Department found a blog was not an 'other publication' of the same kind as a newspaper, magaz…
Could a cable-company subsidiary use payroll apportionment to move county subscriber receipts to its out-of-state parent and affiliates for BPOL tax?
No. The subsidiary was a separate taxable entity, its only definite places of business were in the county, and it was responsible for providing subscriber access under local franchise agreements. All …
Could the Virginia Department decide a BPOL appeal when the city's supposed final determination lacked the revenue commissioner's signature or delegated authority?
No. The employee-signed letter was not a valid final local determination because it lacked the commissioner's signature and evidence of express delegation. The case returned to the city; after a valid…
Does a Virginia locality's farm-equipment BTPP exemption automatically cover aeroponics operations?
Not automatically. Business tangible personal property (BTPP) tax is a local tax, and a Virginia locality may, by ordinance, exempt farm equipment and even define what 'farm' and 'farm equipment' mean…
How did Virginia require taxpayers to apply the IRC § 163(j) business-interest limitation and the state's additional 20% deduction?
Virginia generally followed the federal limitation, allowed a current Virginia deduction equal to 20% of federally disallowed business interest, and required later reconciliation. Corporate groups had…
How would Virginia tax installment gain from an S-corporation stock sale before and after the seller became a nonresident?
Gain included in FAGI while the seller remained a Virginia resident was fully taxable. After genuine nonresidency, installments from stock not employed in a Virginia trade or business were not Virgini…
If a disregarded telecommunications LLC is owned by a corporation in a combined Virginia filing group, is its minimum tax compared with its own hypothetical tax or the group's combined liability?
The group's combined liability controls. Although the telecommunications company was a disregarded single-member LLC, its corporate owner belonged to an affiliated group that elected combined Virginia…
Can a corporation amend its Virginia sales factor and claim a refund without also amending the related federal return when taxable income did not change?
Yes, potentially. The Department held that failing to amend the related federal return did not prevent Virginia from accepting the amended 2013 return because the taxpayer said the pass-through entity…
Can I appeal a county's business tangible personal property tax assessment directly to the Virginia Department of Taxation without first appealing to the county?
No. The Department lacked jurisdiction because the taxpayer appealed the county's 2018 vehicle assessment directly to the state without first filing a local administrative appeal. A BTPP taxpayer must…
Did a worker domiciled in another state become a Virginia resident by keeping a Virginia home for at least 183 days, and could he claim credit for tax paid elsewhere?
Yes. Although the worker remained domiciled in another state, he maintained a Virginia place of abode for at least 183 days in 2015 and was therefore a Virginia actual resident subject to tax on his i…
Was a military spouse a Virginia resident in 2014, and could she avoid the assessment because Department live-chat advice told her not to file?
Yes on residency, but the assessment had to be abated. The taxpayer's Virginia license, vehicle registrations, long-term Virginia home, prior resident return, and weak evidence of a continuing domicil…
How did Virginia resolve a corporate audit involving an ineffective NOL carryback waiver, fixed-date conformity, and disputed property, payroll, and sales factors?
It was a mixed result. The Department upheld its NOL carryback and carryforward adjustments because the corporation had not attached the required statement electing to forgo the two-year carryback, an…
Was a Virginia cable, internet, and telephone provider entitled to a sales-and-use-tax refund for thousands of equipment purchases without item-specific proof of exempt use?
No. Cable-television and internet amplification, transmission, and distribution equipment could qualify for Virginia's exemption, but telephone-service equipment did not qualify after the public-servi…
Are easy-return-label fees, logo setup and embroidery, combined shipping-and-handling charges, and a resale sale taxable in Virginia?
Mostly yes. Easy-return-label fees were taxable because they paid for purchaser-to-seller return delivery, not exempt seller-to-purchaser transportation, and remained tied to the original merchandise …
Can a corporation treat income from its 17% interest in an operating LLC as a passive investment, exclude the LLC's factors, and allocate the income outside Virginia?
No. The Department held that the corporation had to include the retail LLC's income or loss and its appropriate property, payroll, and sales factors in the corporation's Virginia apportionment calcula…
Could Virginia assess the bank's 2013 franchise tax late, include minority interests in 2014 capital, and deny subsidiary-surplus deductions and credit carryovers?
No, not as audited. The Department held the 2013 bank franchise tax assessment untimely. For 2014, it reversed the addition of noncontrolling minority interests because those interests were not among …
Did a contractor's previously denied real-estate construction contracts appear eligible for Virginia's refund of the 0.3% state sales-tax increase that took effect July 1, 2013?
Potentially yes. The Commissioner found that the contracts submitted on appeal appeared dated before April 3, 2013 and bona fide, so the auditor had to review the contracts and invoices. Refund eligib…
Could a corporation obtain Department review of 2015, 2016, and 2018 county business-personal-property assessments after filing its local appeal in November 2018 and adding new software and equipment issues?
Only partly. The 2015 and 2016 local appeals were filed after their one-year deadlines, so the Department lacked jurisdiction over those years. The 2018 appeal was timely, but because the taxpayer rai…
How must a Virginia locality calculate the BPOL out-of-state deduction when a multistate service business first situses contract receipts among offices using direct labor?
First situs each contract's receipts to a definite place of business using direct labor. Then, from receipts assigned to the Virginia locality, deduct specifically identifiable amounts attributable to…
Was manufacturing machinery subject to a Virginia city's machinery and tools tax merely because it was on site on tax day, even though it was not yet operational or producing goods?
No. The Department's advisory opinion said the machinery was not yet being used in manufacturing while it remained nonoperational and produced no products. Until it became operational in the manufactu…
If I move to Maryland but keep my Virginia driver's license, have I abandoned my Virginia domicile for income tax?
She did not abandon it. A taxpayer who moved to Maryland still owed Virginia tax as a domiciliary resident for 2015 because she couldn't prove she had truly given up her Virginia domicile. To change d…
Can a Virginia resident claim the out-of-state tax credit for the D.C. Unincorporated Business Franchise Tax, and is denying it unconstitutional double taxation?
No. Virginia's credit for taxes paid to another state (Va. Code § 58.1-332) applies only to a broad-based income tax similar to Virginia's -- and the District of Columbia's Unincorporated Business Fra…
If a person is not a Virginia resident but works part of the week in Virginia, does he still owe Virginia income tax on his Virginia earnings?
Yes -- even as a nonresident he owed Virginia income tax on his Virginia-source income. The IRS flagged that the taxpayer may have had to file a 2016 Virginia return; when he did not respond to the De…
If the IRS never adjusted my return, can Virginia still deny my business expense, itemized, and alimony deductions?
Yes -- Virginia can adjust your deductions even if the IRS never touched your federal return. In an audit, the Department denied a taxpayer's business expense and itemized deductions for 2016 and 2017…
Did a taxpayer who kept Virginia ties and never answered the Department's domicile questionnaire remain taxable as a Virginia domiciliary resident?
Yes -- the assessment was upheld and the taxpayer remained a Virginia domiciliary resident. After the IRS flagged that the taxpayer may have owed Virginia tax for 2014 and no return was on file, the D…
Can a Virginia resident claim the foreign pension credit for withholding on returned foreign retirement contributions, and does following the tax form instructions protect them?
No, on both points. Virginia's foreign pension credit (Va. Code § 58.1-332.1) applies only to a foreign country's tax on genuine pension or retirement income included in your federal adjusted gross in…
Can a cigarette wholesaler avoid use tax on resale purchases when its exemption certificates are incomplete or belong to another supplier?
Partly. A cigarette wholesaler assessed use tax on exempt resale purchases wins relief only for sales it can properly document. The Department accepted the wholesaler's sales invoices (rejecting the a…
What records do I need to keep unreimbursed employee expenses -- mileage, work clothing, cell phone -- as Virginia itemized deductions?
The taxpayers lost on the records they had, but got one more chance. A married couple's unreimbursed employee-expense itemized deductions -- vehicle mileage, work clothing and laundry, and cell phone …
Did a 5-year employer transfer to another state end my Virginia domicile if I kept my Virginia home, license, and voter registration?
No -- he remained a Virginia domiciliary resident for 2015. A taxpayer transferred by his employer to another state (State A) for about five years bought a home and built community ties there, but he …
If my W-2 shows state wages and Virginia withholding but the income is excluded difficulty-of-care pay, does Virginia tax it?
No -- and the Department reversed its adjustment and issued a refund. A care provider's Medicaid-waiver 'difficulty of care' payments are excluded from federal gross income under IRC § 131 and IRS Not…
Is a servicemember's spouse who registers to vote, gets a Virginia driver's license, and lives in Virginia still exempt from Virginia income tax under the Servicemembers Civil Relief Act?
The military spouse lost. The Servicemembers Civil Relief Act can let a servicemember's spouse keep an out-of-state domicile while stationed in Virginia, but only if the spouse actually maintains that…
Are nonmonitored fire alarm systems taxable, and can a taxpayer pull a vendor's untaxed purchases out of an audit sample by calling them a one-time glitch?
Nonmonitored fire and alarm systems are taxable sales of tangible personal property (only separately stated installation is exempt), so the contractor's purchases of subcontracted fire safety systems …
Can a Virginia resident subtract an employer's moving-expense reimbursement that was already excluded from federal income?
No. Virginia has no subtraction for moving-expense reimbursements. Virginia income tax starts from your federal adjusted gross income (FAGI), and a qualified moving-expense reimbursement paid under an…
Can an S corporation shareholder claim a Virginia subtraction for the business-expense deduction the company had to give up to take the federal tip credit?
No. Shareholders of an S corporation cannot subtract, on their Virginia returns, the business-expense deduction the corporation had to give up to claim the federal tip credit under IRC Section 45B. Th…
In figuring Virginia's insurance retaliatory tax, does a fee another state charges only its own domestic insurers count against a Virginia insurer operating there?
No -- and the assessment was abated. Virginia's insurance retaliatory tax (Va. Code § 38.2-1026) raises the costs Virginia charges a foreign insurer only when a Virginia-domiciled insurer would pay MO…
If I work abroad on an employer-sponsored visa but keep a Virginia driver's license and voter registration, have I abandoned my Virginia domicile?
No. A Virginia taxpayer who took an indefinite executive job abroad still owed Virginia income tax as a domiciliary resident for 2014 because he couldn't prove he intended to abandon his Virginia domi…
Did a military-academy student change domicile from Virginia to another state when a parent moved there and the student stayed there temporarily during a shutdown?
No. The taxpayer's father moved to another state, and the taxpayer stayed there temporarily during a 2013 government shutdown, but he intended to return to the military academy when it reopened. Most …
Can a Virginia resident claim a state subtraction or credit for Mexican tax on Mexican rental income that was not fully usable as a federal foreign-tax credit?
No. The taxpayer conceded that Virginia's ordinary out-of-state credit and its foreign-country credit for qualifying retirement income did not apply. Virginia's federal conformity starts with federal …
Can a Virginia S corporation shareholder subtract his share of qualified research expenses that the corporation could not deduct federally because it claimed the research credit?
Yes. An S corporation claimed the federal qualified-research credit, which under IRC § 280C(c) prevented a matching federal deduction for expenses equal to the credit. Because S corporation items flow…
Does taking a job in another state for one year end Virginia domicile when the taxpayer keeps Virginia ties and shows little evidence of establishing a new permanent home?
No. The taxpayer showed employment in another state but little else demonstrating a new permanent or indefinite domicile. He kept his Virginia driver's license and filed Virginia resident returns for …
Can a Virginia resident obtain abatement of an individual income-tax assessment by broadly arguing that Virginia's tax system is discriminatory or regressive?
No. The taxpayer admitted Virginia residency and income but sought abatement of a 2013 assessment by arguing broadly that Virginia's income-tax system was discriminatory, regressive, and inequitable t…
Can Virginia resident S corporation shareholders claim the credit for tax paid to another state for D.C. corporate franchise tax paid by the corporation?
No. Although the shareholders' protective refund claims were timely, the Department denied them on the merits. Virginia's credit for tax paid to another state applies to qualifying income taxes, while…
When will Virginia accept resale documentation for exempt sales, and when can it uphold an estimated sales-tax assessment because a dealer's records cannot be reconciled?
Virginia gave the seller narrow relief for Customer A because a prior Department determination had accepted an undated resale letter without clearly limiting that acceptance to the earlier audit; thos…
Can a Virginia taxpayer appeal a local BPOL assessment to the Department when the locality's purported final determination was not properly signed or explained?
Not yet. The Department ruled that the county's letter was not a valid final local determination because it appeared not to have been signed by the Commissioner of the Revenue or an expressly designat…
Can Virginia licenses, vehicle registration, a home, and voter registration establish Virginia domicile when an overseas taxpayer was not yet physically living there?
No. The taxpayer had previously established domicile in State A and moved overseas for work with her spouse. Although she owned a second home in Virginia and obtained Virginia driver's licenses, vehic…
Are purchases and leases of computer equipment between affiliated Virginia companies exempt as internal transfers when the entities charge each other?
No. Virginia treated the automotive dealership and its affiliate as separate entities, not two locations of one company. Department records showed the dealership had reported under its own FEIN since …
Does taxable scholarship money used for living expenses count as salary when applying Virginia's $15,000 state-employee salary subtraction limit?
No, not when the scholarship funds are not compensation for services. The taxpayer earned $10,000 in W-2 wages as a Commonwealth employee and received $17,500 in scholarships. A $1,500 tuition scholar…
Can Virginia abate resident income tax when a taxpayer remained domiciled in Virginia but reasonably relied on the Department's earlier written advice saying otherwise?
Yes. The taxpayer's long State A lease and vehicle registration did not outweigh his retained Virginia driver's license, vehicle and voter registrations, Virginia voting, and Virginia address for tax …
Can a person living and working in D.C. remain domiciled in Virginia, and which D.C. taxes qualify for Virginia's out-of-state credit?
Yes. The taxpayer lived and worked in D.C., had D.C. tax withheld, and filed a D.C. resident return, but she kept a Virginia driver's license and voter registration, received tax documents at a Virgin…
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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.