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 retirement-plan loan offset taxable by Virginia when employment ended before the move but the full distribution and offset occurred after becoming resident?
Yes. Ending employment while still a Texas resident did not itself create the taxable plan-loan-offset distribution. The promissory note required repayment before a full distribution or deduction of t…
Could taxpayers exclude a 2013 retirement distribution by claiming the husband lived elsewhere or that another state had taxed the underlying contributions?
No. The couple's own returns reported a July 2012 move to Virginia and full-year Virginia residence in 2013, while a questionnaire showed the husband spent 275 nights in Virginia. Their home, licenses…
Should Virginia residents subtract Arkansas-source income from federal adjusted gross income or claim a credit for Arkansas income tax paid?
They had to use a credit, not a subtraction. Virginia taxes a resident's federal adjusted gross income subject to specific state modifications, and no modification generally removes income merely beca…
Could a school-system independent contractor claim Virginia's subtraction for federal and state employees earning $15,000 or less?
No. Va. Code § 58.1-322.02(16) allowed the first $15,000 of salary for a federal or state employee whose total annual salary from all employment was $15,000 or less. The husband performed work for a l…
How did Virginia adjust a 2014 net operating loss carried to 2012, and did Schedule E income qualify for Maryland's border-state credit?
Virginia required a state-specific NOL computation rather than simply copying the federal Schedule 1045 amount. The federal NOL had to be adjusted for Virginia fixed-date conformity items, and itemize…
Was income earned by a bona fide tribal member from work pursued on the tribe's Virginia reservation exempt even if the member lived off reservation?
Yes. Virginia clarified that the exemption turned on bona fide tribal membership and income derived from activities pursued on that tribe's reservation, not on the member also residing there. A tribal…
What 2018 estimated-tax penalty relief did Virginia provide to qualifying farmers, fishermen, and merchant seamen?
Virginia automatically waived the 2018 estimated-tax underpayment penalty for qualifying farmers, fishermen, and merchant seamen who filed their return and paid all tax due by April 15, 2019 instead o…
What Virginia tax interest rates applied during the second quarter of 2019 to assessments, refunds, disputed assessments, estimated tax, and local taxes?
For April 1 through June 30, 2019, Virginia's ordinary state interest rates were 8% on tax underpayments and assessments and 8% on noncorporate overpayments and refunds, reflecting federal 6% rates pl…
Did tax paid to vendors excuse untaxed employee sales or Virginia use tax when records were missing and an out-of-state tire vendor never remitted the tax?
No. Attire and tools resold to employees were taxable retail sales; the contractor should buy them under resale certificate, then collect and remit tax from employees. Current invoices could not prove…
How did the Veterans Benefits and Transition Act change Virginia tax residency elections for military spouses beginning in 2018?
Beginning with taxable year 2018, a qualifying military spouse could annually elect the service member's state residence for tax purposes even when the spouses previously had different domiciles. The …
How did Virginia's 2019 emergency conformity law affect 2018 income-tax returns, GILTI, business interest, NOLs, and individual refunds?
Virginia advanced its fixed conformity date to December 31, 2018, generally adopting the Tax Cuts and Jobs Act and Bipartisan Budget Act rules for 2018, while preserving listed exceptions such as bonu…
Could Virginia source nearly all of an online-services company's receipts to Virginia under the costs-of-performance rule even though more than 95% of its sales were to out-of-state customers?
Yes. The Supreme Court of Virginia upheld the Department's use of costs-of-performance sourcing because the company's online content was developed by Virginia employees and stored on Virginia servers.…
Can a Virginia cigarette wholesaler reduce an estimated sales-tax assessment by producing signed resale certificates and sales invoices after the audit?
Yes, for the documented sales. The Commissioner accepted customer-signed resale certificates and invoices as sufficient wholesaler records and ordered those sales removed from the assessment. Cigarett…
Are an auto auction's sales of total-loss vehicles to foreign buyers exempt from Virginia retail sales tax as motor-vehicle sales, resale transactions, or foreign exports?
No, not on the documentation presented. The Tax Commissioner upheld retail sales tax because the salvage or nonrepairable vehicles no longer had valid DMV titles, the foreign buyers' multijurisdiction…
Could a cigarette wholesaler overturn reconstructed sales with unsigned invoices and resale certificates first supplied on appeal for inactive or nonfiling customers?
No. Virginia wholesalers must keep purchaser name, address, registration number, date, goods, price, and separate wholesale and retail records. The taxpayer's unsigned cash invoices lacked verificatio…
Can a business appeal a city's partial denial of a BPOL tax refund directly to the Virginia Department of Taxation?
Not immediately. A city's denial of part of a BPOL refund is an appealable event, but the taxpayer must first file a local appeal within one year of the denial. The city's existing letter was not a va…
Were fees for game-terminal software activation codes taxable when the codes were sent electronically and no tangible property accompanied them?
No. The terminal software was already installed, and an operator paid only for an electronically transmitted code that activated or renewed access. Virginia treated the code as an electronically deliv…
Which BPOL assessments could a taxpayer still challenge when the county issued late and supplemental assessments during a local appeal?
The county had to abate the 2013 BPOL assessment because it was issued outside the three-year assessment period. The taxpayer's appeal time for the original 2015 and 2016 assessments had expired, so t…
Can a Virginia taxpayer use the government-employee salary subtraction for a federal retirement annuity reported on Form 1099?
No. The subtraction applies to qualifying salary earned as a federal or state employee, not a federal retirement annuity reported on Form 1099. The Department also rejected reliance on return instruct…
Does an out-of-state rental-listing website create Virginia corporate income tax nexus by employing one Virginia salesperson?
Not on the limited facts presented. The Department said the Virginia salesperson appeared not to create nexus if the employee only solicited and signed contracts subject to out-of-state approval and a…
Is a Virginia seller of topsoil, mulch, stone, compost, and soil mixes a real-property contractor when it only sells and delivers the materials without installing them?
No. The Tax Commissioner treated the business as a retailer because its invoices showed sales and delivery of tangible products but no installation or other work on real property. The special contract…
Does selling a financial-planning company that uses proprietary spreadsheets and software qualify for Virginia's technology-business capital-gain subtraction?
No. A financial-planning and investment-management company did not become a qualified technology business merely because proprietary spreadsheets, forms, charts, graphs, and other programs were includ…
May part-year Virginia residents exclude income earned before moving to Virginia when calculating the credit for low-income individuals?
No. For the credit for low-income individuals, a part-year resident starts with federal adjusted gross income and may make only the Virginia additions and subtractions authorized by statute. Income ea…
Does a notice saying a taxpayer plans to appeal preserve Virginia's 90-day tax-appeal deadline if it gives no grounds or supporting facts?
No. A complete Virginia administrative appeal had to state the taxpayer's grounds and relevant facts within 90 days after the assessment was mailed. The taxpayer's letter was only a notice of intent, …
Did a taxpayer successfully abandon Virginia domicile after moving for an indefinite job, listing the Virginia home for sale, and relocating with a spouse?
Yes. The Commissioner found that the taxpayer changed domicile in March 2014 by leaving for indefinite employment, physically relocating with his spouse, listing the Virginia home for sale, using the …
Are home-staging design fees exempt from Virginia sales tax when furniture-rental and design charges appear separately on the same invoice?
No. Interior-design services are exempt when sold alone, but listing design and furniture-rental charges separately on the same invoice still created a taxable lump-sum transaction under 23 VAC 10-210…
Must a Virginia wedding planner collect sales tax on planning fees and pass-through vendor charges for catering, cakes, salon work, and officiants?
Generally no on the documented facts. The Commissioner found that the planner was not a caterer because it did not prepare, deliver, or serve food, and that its true object was nontaxable event-planni…
Does a county's later partial reduction of a BPOL assessment create a new appealable event and restart the local appeal deadline?
No. The appealable events were the original 2013 and 2014 assessments, not the county's November 2016 partial reductions. Because the taxpayer did not file local appeals by December 31, 2014 and Decem…
Is a manufacturer's data-center property exempt from local BTPP tax when the center supports manufacturing but also runs segregated government IT and call-center services?
Partly. Data-center property supporting the manufacturer's overall operations, including manufacturing, was capital used in manufacturing and not subject to local BTPP tax. Property segregated for a g…
Can a nonprofit appeal a city's refusal to recognize a BPOL exemption before the city issues an assessment or takes another appealable action?
No. The Department lacked jurisdiction because the city had not issued or increased an assessment, denied a refund, or taken a business-classification action. A conclusion that the nonprofit's gross r…
Are a provider's broadband recovery fee, service activation fee, and early termination fee subject to Virginia's communications sales and use tax, or barred by the Internet Tax Freedom Act?
The fees are taxable and the Internet Tax Freedom Act does not bar the tax. A provider of local telephone and high-speed Internet access appealed a communications sales and use tax assessment (Decembe…
Were broadband recovery, activation, and early-termination fees taxable when charged only with Internet access service?
Yes. Virginia treated the broadband recovery, activation, and early-termination fees as taxable communications services even though they accompanied Internet access. The Internet Tax Freedom Act did n…
Can a cigarette retailer defeat a Virginia sales-tax assessment based on distributor purchase records without providing resale, sales, or inventory documentation?
No. Distributor records showed tax-free cigarette purchases exceeding the retailer's reported sales, and the retailer produced no resale certificates, sales records, or inventory documentation explain…
What Virginia tax interest rates applied during the first quarter of 2019 to assessments, refunds, disputed assessments, estimated tax, and local taxes?
For January 1 through March 31, 2019, Virginia's ordinary state interest rates were 8% on tax underpayments and assessments and 8% on noncorporate overpayments and refunds -- the federal 6% rates plus…
Will the Department order a BPOL refund for internet-access receipts under the Internet Tax Freedom Act when the locality claims it was grandfathered?
The Department declined to order a refund, so the city's denial stood. A taxpayer sought refunds of BPOL tax paid to a city for 2013-2015 on gross receipts from internet access services, arguing the f…
Can the Department of Taxation hear an appeal of a locality's personal property (car) tax on an individual's personal vehicle?
No -- the Department has no jurisdiction over this appeal. A taxpayer appealed a city's 2018 tangible personal property tax on his personal vehicle, arguing it should be adjusted because he left Virgi…
Is a bank board member's director compensation subject to the local BPOL (business license) tax?
The director's fees can be subject to BPOL tax. A Virginia city asked whether an individual who serves on a bank's board of directors is conducting a "business" for the local Business, Professional an…
Are insurance-company payments to an affiliated pharmacy exempt from BPOL tax as transactions between members of an affiliated group?
Yes -- those payments are exempt from BPOL tax. A city asked the Department whether payments a health insurance company makes to an affiliated pharmacy qualify for the affiliated-entity exclusion. In …
Is a Land Preservation Tax Credit application timely if the taxpayer says it was mailed on time but the Department never received it until after the deadline?
No -- the credit was denied because the application was not received by the deadline. Taxpayers claimed the Land Preservation Tax Credit on their 2016 return for a donation made November 21, 2016. Und…
Can a Virginia taxpayer subtract research expenses disallowed federally because of the R&D credit even if the research was done outside Virginia, and must it file an amended Virginia return?
Yes to the subtraction, and yes it must file an amended Virginia return. An S corporation filing a Virginia pass-through return asked whether it may subtract the business-expense reduction caused by c…
If a taxpayer filed separate federal and Virginia returns, can Virginia hold him to a later amended joint return he never signed?
No -- the assessment was revised in the taxpayer's favor. He originally filed his 2013 Virginia return separately from his spouse; the Department later received an amended 2013 joint return, processed…
After an assessment was upheld because a business never produced its records, can it get one more chance to provide them?
Yes -- the Department granted one final opportunity to provide the records. A gas station and convenience store operator had a retail sales and use tax assessment (January 2013 through April 2017) uph…
What is Virginia's income tax subtraction for investing in a certified Virginia REIT, and who qualifies?
Virginia allows an individual and corporate income tax subtraction for income from an investment made on or after January 1, 2019 and before December 31, 2024 in an entity the Department has certified…
When can the Department hear a business tangible personal property tax appeal, and what happens if the taxpayer used the wrong local appeal route or appealed before assessments were issued?
The Department had no jurisdiction over either part of the appeal. A freight-transportation taxpayer was assessed business tangible personal property (BTPP) tax by a county for 2015 and anticipated as…
Could Virginia estimate 2014-2016 income tax from available information when a resident failed to file returns, and did reliance on a preparer excuse penalties?
Yes. After the taxpayer failed to respond adequately or file returns for 2014-2016, Virginia could estimate liability from IRS and other information in its possession. Reliance on a tax professional d…
Could taxpayers obtain a refund on a 2010 Virginia return first filed in October 2014 by measuring the deadline from an extended due date?
No. Because the original 2010 Virginia return was filed after the extended due date, the extension was not valid for measuring the refund period. The taxpayers had three years from the original May 2,…
Did a three-year foreign work assignment change a taxpayer's Virginia domicile for the 2014 income-tax year?
No. The taxpayer's three-year foreign employment commitment and temporary immigration status did not show an intent to remain abroad permanently or indefinitely. He also retained two Virginia residenc…
Could a Virginia business appeal its wholesale-versus-retail BPOL classification directly to the Tax Commissioner based on the county auditor's letter?
No. The county's decision to classify all receipts as retail was an appealable event, but the auditor's letter was the initial audit decision—not a response to a local appeal—and it was not signed by …
Can a contractor get audited purchases removed from a use tax assessment by later producing documents proving sales tax was already paid, and can the interest be waived?
The contested purchases were removed, but the interest stayed. A construction company sought reconsideration of a retail sales and use tax audit (July 2009 through June 2015). The auditor had held sev…
How did Virginia's 2018 Worker Retraining Tax Credit guidelines define eligible retraining and the new manufacturing-student training credit?
For taxable years 2018 and later, an employer could claim 30% of eligible worker-retraining expenditures, subject to certification and special per-employee caps for private-school courses. A manufactu…
Did an IT-services company prove a Virginia NOL carryforward and out-of-state cost-of-performance claim for a 2012 refund?
Not yet. Fixed-date conformity adjustments left the company with positive Virginia federal taxable income for 2011, so no Virginia NOL carried to 2012. Its aggregate payroll and property data did not …
Did Virginia's net-operating-loss carryforward method apply to a corporation filing separate Virginia returns?
Yes. Virginia held that the cited NOL calculation method applies to corporations filing separate, consolidated, or combined returns. It upheld the prior adjustment to the taxpayer's carryforward and d…
How did Virginia correct a corporation's foreign-source-income expenses, foreign partnership loss, and currency amounts in its sales factor?
Virginia remanded the foreign-source-income expense calculation for review of the corporation's separate-company pro forma data. It removed the partnership loss and required the corporation's share of…
Did a military spouse become domiciled in Virginia after buying a home and obtaining a Virginia driver's license?
No. Although the couple bought a Virginia home and the spouse obtained a Virginia driver's license, she kept substantial ties to the prior state and later surrendered the Virginia license. Virginia fo…
How did Virginia limit a resident's credit for Delaware income tax when Delaware computed nonresident tax using an allocation percentage?
Virginia limited the credit to the lesser of Delaware tax paid or Virginia tax on the Delaware income actually subject to tax. It applied Delaware's allocation percentage to Delaware net taxable incom…
Was a taxpayer a Virginia resident when he spent only 161 days there but kept a long-term job, home, license, vehicles, and voting ties?
Yes. The taxpayer was not an actual resident because he spent only 161 days in Virginia, but he remained a domiciliary resident. His long-term Virginia job, home, voter registration and voting, vehicl…
Could a cigarette retailer abate tax on purchases above $40 by citing fraud allegations involving a different distributor?
No. Distributor records showed untaxed purchases for resale, and the retailer provided no documentation proving that purchases above $40 were fraudulent. A police investigation involving another distr…
Could a cigarette retailer defeat a reconstructed sales-tax assessment by claiming that distributor purchases were fraudulent?
No. Distributor records showed untaxed cigarette purchases for resale, and the retailer produced no sales, resale, or fraud documentation to overcome the assessment. The police report had been closed …
Could a corporation subtract fees for technical services performed abroad and challenge Virginia's use of later refunds to pay old assessments?
No. Virginia limited qualifying foreign technical fees to fees incidental to foreign property rental or licensing, not compensation for stand-alone technical services. It also upheld the statutory off…
How should a monitored-security dealer be classified for BPOL, and where were receipts from customers served by its city office sitused?
Virginia classified the company as one business-service provider, not a contractor plus separate retail and wholesale businesses. Equipment and installation were ancillary to selling monitoring servic…
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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.