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.
No Virginia rulings match these filters
Try a different search term or clear the filters.
I charge customers one lump sum for delivering and setting up furniture in their home -- can I treat that as exempt installation and delivery, or is it taxable because I combined two charges into one?
The assessment was upheld -- the retailer lost on both arguments it raised. A home furnishings retailer invoiced customers a single lump-sum fee covering delivery and setting up furniture in their hom…
I rent portable toilets and provide waste removal service with them -- is the whole charge taxable, and can I still get credit for government sales, out-of-state sales, and taxes I already paid, even though I didn't have the paperwork ready during the audit?
Mixed result. A portable toilet rental and service company was audited and challenged its assessment on five separate fronts. FIRST -- and the one issue fully decided against the taxpayer -- the Depar…
The Department refunded my overpaid sales tax but wouldn't pay me the interest because I couldn't show I'd passed it on to my customer -- but my company merged with that customer, so there's no longer a separate customer to refund. Do I still get the interest?
Yes -- the taxpayer wins. Virginia normally won't pay interest on a sales tax refund to a DEALER unless the dealer agrees to pass that interest on to the PURCHASER who actually bore the tax (Va. Code …
I install and service fire alarm and sprinkler systems and mistakenly charged my customers sales tax instead of paying use tax myself -- can I get credit for the sales tax I already collected and remitted, against the use tax the Department now says I owe?
A near-twin of this corpus's P.D. 24-111 -- same legal analysis, same one-time-credit relief, different contractor. A business that installs, maintains, and inspects fire alarms, sprinkler systems, fi…
My county overvalued my personal vehicle for tangible personal property tax -- can the state Department of Taxation review that assessment for me?
No -- the Department has no jurisdiction to review it at all, regardless of the merits. Two individual taxpayers appealed a county's assessment of tangible personal property tax on their personal vehi…
My city assessed excessive tangible personal property tax on my personal vehicle for 2024 -- can the state Department of Taxation review that?
No -- another light companion to this corpus's P.D. 24-96-0 and P.D. 24-92-0, reaching the identical jurisdictional dismissal, this time against a CITY rather than a county. A taxpayer appealed a city…
A county assessed business tangible personal property tax on my trucking company's vehicles, and I disagreed with the situs and the tax rate used -- I wrote asking the county to explain the assessment and then appealed to the state when they wouldn't budge, but why won't the state hear it?
The Department dismissed the appeal for lack of jurisdiction -- the taxpayer never actually filed a local appeal, only asked the county for information. An interstate trucking business was assessed co…
My county overvalued my personal vehicle and didn't properly notify me of the assessment -- can the state Department of Taxation review either problem?
No, on both counts -- this is a light companion to this corpus's P.D. 24-96-0, reaching the same jurisdictional dismissal for a single individual taxpayer. A taxpayer appealed a county's tangible pers…
My county says our theme park's rides are taxable personal property because they can technically be removed, and denied our refund for over-reported disposed assets by calling our accounting errors 'willful' -- are they right?
A win for the taxpayer on both fronts. A themed amusement park challenged its county's denial of business tangible personal property (BTPP) tax refunds for 2017-2020 on two separate issues. FIRST, the…
I provide broadband internet service and the Department denied part of my sales tax refund on equipment purchases because I sell wholesale, not retail -- but a court case said that shouldn't matter. Does my refund get reconsidered?
Yes -- the case is being sent back for reconsideration under a changed legal standard, though not every issue went the taxpayer's way. A broadband internet provider sought a refund of sales and use ta…
My county's BPOL assessment didn't count my sales reps' home offices as business locations, denied my computer-equipment resale deduction because I sold through a government contractor instead of directly to the government, and refused my out-of-state deduction for states where I could have filed a return but chose not to -- can I fix any of this on appeal?
A mixed, multi-issue result -- a genuine win on procedure and a new doctrine opened on home offices, but losses on two deduction claims. A computer products and services business appealed county BPOL …
I manufacture personalized debit and credit cards and ship them directly to cardholders on a dealer's instructions, and the dealer gave me a resale certificate after the fact -- can I get a refund of the sales tax I already collected and remitted?
Mixed, sent back for further review rather than decided outright. A manufacturer of personalized debit and credit cards sold its products to a dealer, which directed the manufacturer to mail the finis…
I fabricate and sell vinyl fencing and decking, but I also install it myself for customers -- how does Virginia decide whether I owe sales tax as a retailer or use tax as a contractor, and can I get credit for sales tax I mistakenly collected?
A dual-role fabricator of vinyl fencing, decking, pergolas, and screen porches was reclassified from retailer to real property contractor, because the primary purpose rule looks at where MOST of a fab…
I fabricate and sell vinyl fencing and decking, but I also install it myself for customers -- how does Virginia decide whether I owe sales tax as a retailer or use tax as a contractor?
A near-twin of this corpus's P.D. 24-87 -- same legal analysis, same audit period, same day, a different taxpayer. A fabricator of vinyl fencing, decking, pergolas, and screen porches that both sold f…
I filed my Qualified Equity and Subordinated Debt Investments Tax Credit application a couple weeks late because I thought the deadline was April 15 -- can the Department still grant the credit?
No -- the deadline is strict and doesn't bend for an honest mistake about the date. An individual invested in a qualified business venture during 2023 and applied for Virginia's Qualified Equity and S…
I invested in a qualified Virginia business but didn't get the required certification paperwork from the company in time -- can I still get the equity investment tax credit if I attach my documents to my income tax return instead of filing the separate credit application form?
No on both counts -- the deadline is strict, and attaching supporting paperwork to your income tax return doesn't substitute for filing the actual credit application. An individual invested in a quali…
I filed my Qualified Equity and Subordinated Debt Investments Tax Credit application a couple weeks late because I thought the deadline was April 15 -- can the Department still grant the credit?
No -- this is a byte-for-byte twin of this corpus's P.D. 24-84, same day, same outcome, a different taxpayer. An individual invested in a qualified Virginia business during 2023, filed Form EDC for th…
My company paid royalties to an affiliate that were taxed in other states -- can I exclude the FULL amount from Virginia's intangible expense add-back, or only the portion that was actually apportioned and taxed there?
Only the portion actually apportioned to and taxed by another state -- not the full royalty amount, even if all of it was included in the affiliate's taxable income elsewhere. A corporation paid royal…
My auto repair shop charges customers separately for diagnostic testing before we fix their car -- is that diagnostic charge taxable if we also sell replacement parts in the same job?
Yes for this audit period -- a byte-for-byte twin of this corpus's P.D. 24-78, same audit period (July 2019-June 2022), same day, a different auto dealership with a repair shop. Diagnostic testing bil…
My auto repair shop charges customers separately for diagnostic testing before we fix their car -- is that diagnostic charge taxable if we also sell replacement parts in the same job?
Yes, for this audit period -- but a 2023 law change now exempts these charges going forward. An auto dealership's repair shop separately charged customers for diagnostic testing performed before repai…
I have exemption certificates from my customers, but they're either in a slightly different business name or dated after the sale -- can I still get my sales tax refund?
It depends on whether the Department can independently verify the customer actually qualified -- a name mismatch or a certificate dated after the sale doesn't automatically kill the exemption, but it …
My facility uses chemicals along with certified pollution control equipment to treat wastewater -- are the chemicals themselves exempt from sales and use tax?
Yes, but only for the chemicals the taxpayer could show were actually certified as pollution control property -- and only because of that certification, not automatically. A paper mill with an on-site…
My spouse is a deployed servicemember and I filed our Virginia income tax return late -- does the combat zone extension excuse my late-filing penalty, and what about interest and other penalties?
Partially -- the late-filing penalty was abated because of the combat zone extension, but other penalties and interest that accrued BEFORE the deployment began still applied. A taxpayer's husband, a m…
The Department said my company's R&D tax credit application was missing information and needed more time to fix it, but I never got the notice -- can I still get the credit if I submit the missing information after the deadline?
No -- the Nov. 15 completion deadline applies regardless of whether the taxpayer actually received the Department's notice about missing information. A corporation filed Form MRD to claim the Major Re…
The Department's audit used a sample year to estimate my sales/use tax liability across a six-year period -- can I challenge the sample year, and does new documentation I've since found reduce my bill?
The sample methodology itself was upheld, but new documentation the taxpayer found after the audit WAS credited, reducing the liability. A fiber optic cable installation and repair contractor was audi…
My employer's office is in Virginia, but I worked remotely from my home state and my employer withheld Virginia tax anyway -- am I entitled to a full refund even though I also excluded that income on my home state's return?
Yes -- what matters is WHERE the work was actually performed, not where the employer's office is located, and the Department can't rely solely on another state's tax return to deny a Virginia refund. …
I'm active-duty military stationed outside Virginia claiming a different home state -- is claiming a tax credit on my other state's return enough by itself to prove I'm not a Virginia resident?
No -- claiming a credit on another state's return for taxes paid to Virginia doesn't, by itself, prove you're not a Virginia domiciliary resident; you need actual evidence like a State of Legal Reside…
The Department's audit says my subcontractors should have been classified as employees, but the audit report just says I told them what job to do -- is that enough to support the assessment?
No -- and the Department overturned this misclassification assessment because the audit's reasoning was too thin. A drywall and painting LLC was audited and told three of its subcontractors should hav…
I lived and worked in Maryland for over two years and filed a Maryland resident return -- can Virginia still tax me as a resident because I kept my house and driver's license here?
Yes -- Virginia can still tax you as a domiciliary resident if you never actually abandoned your Virginia connections, even after living and working elsewhere for years. A taxpayer and his family move…
I came to Virginia on a student visa, worked here for a few years, then moved back to my home country before returning later on a work visa -- was I still a Virginia resident, and did a 1099 issued to my old Virginia address make me taxable here, for the year I was living abroad?
No to both -- the assessment was abated. The Department flagged that a taxpayer may have owed 2019 Virginia income tax, based on IRS information; no Virginia return was on file, and when he didn't ful…
My landscaping business had several workers found misclassified in the same audit -- doesn't Virginia's '72-hour single offense' rule mean I only owe one penalty total, not one per worker?
No -- Virginia's misclassification civil penalty applies separately to EACH misclassified worker, even when every misclassification is discovered in the same audit and treated as a single 'offense.' A…
I sold an out-of-state rental property and had to report depreciation recapture as income -- can I subtract the part attributable to years before I moved to Virginia, since I never got a Virginia tax benefit from those deductions?
No -- Virginia doesn't allow a subtraction for IRC § 1250 depreciation recapture just because some of the underlying depreciation deductions were taken before you were a Virginia resident. A married c…
I mailed my Virginia return years ago, but the Department has no record of ever receiving it and now says my refund claim is too late -- does it matter that I can't prove when I mailed it?
No -- without proof the Department actually received (or that the taxpayers can otherwise establish timely mailed) an earlier return, the later-filed return controls, and the refund claim was time-bar…
The IRS adjusted my federal return and I think the IRS got it wrong -- can Virginia hold off on assessing me while I keep fighting the IRS?
No -- the assessment was upheld. The IRS notified the Department that it had adjusted a taxpayer's 2019 federal return (reducing her itemized deductions after a 2022 examination), and because no amend…
I moved for a new job in another state, but I still own a Virginia vacation home and briefly got a Virginia driver's license during the move -- does that make me a Virginia resident for tax purposes?
Not necessarily -- a Virginia driver's license and a Virginia vacation home are only two factors among many, and here they didn't outweigh the rest of the evidence pointing to a genuine move. The Depa…
The Department's audit says my painting subcontractors should have been classified as employees, but the audit report just concludes they were 'employees' without walking through the actual control/investment/relationship factors -- can that stand?
No -- and the Department overturned this misclassification assessment for the same reason it has in similar cases: the audit's conclusion wasn't backed by a real factor-by-factor analysis. A single-ow…
My tax preparer e-filed my return and I mailed an amendment years ago, but Virginia has no record of either -- shouldn't the Department have told me my return was missing, instead of letting the refund deadline quietly expire?
No -- Virginia's tax system puts the burden on the taxpayer to make sure a return is actually filed and received, and the Department has no duty to proactively notify anyone that a return is missing. …
I thought Virginia's filing extension was automatic, and I had other personal hardships that delayed my filing -- can I still get my refund even though I filed my return more than three years after the original due date?
No -- personal hardship and a misunderstanding about Virginia's extension don't extend the refund deadline. A taxpayer filed her 2019 Virginia individual income tax return in June 2023 seeking a refun…
I'm taxed by Virginia as a domiciliary resident and by Maryland as an actual resident -- Virginia gives me credit for Maryland's STATE income tax, but why won't it credit the Maryland COUNTY (local) tax I also had to pay?
It doesn't -- Virginia's out-of-state tax credit does not extend to Maryland's local county income tax, only the state-level tax, and the Department has already settled this question against this same…
My corporation emerged from Chapter 11 bankruptcy before Virginia could have assessed any 2020 corporate income tax, and the Department never filed a proof of claim -- doesn't that mean this later tax assessment is barred?
No -- a tax liability that didn't even exist until AFTER the company emerged from bankruptcy couldn't have been discharged in that bankruptcy, so the Department's failure to file a proof of claim does…
The IRS adjusted my income and I'm actively challenging that adjustment in federal Tax Court, with no decision yet -- does Virginia have to wait for the Tax Court before it can assess tax based on the IRS's number?
No -- Virginia assesses tax based on the IRS's adjustment as it currently stands, even while a taxpayer's Tax Court challenge to that adjustment remains undecided. A taxpayer filed an amended 2019 Vir…
A construction audit reclassified 11 of my subcontractors as employees, but I think several genuinely were independent contractors (and one wasn't even really a worker) -- does the Department analyze each worker individually, or as one group?
Individually -- the Department evaluates each worker's own facts, and here that approach cleared four more of eleven reclassified construction workers. A Virginia construction LLC was audited and told…
A drywall business audit reclassified our subcontractors as employees based only on a general statement that we controlled the work -- is that conclusion enough to support the assessment?
No -- and the Department overturned this drywall business's misclassification assessment for the same reason it has in closely related cases: the audit's conclusion wasn't backed by a genuine factor-b…
A nonprofit I used to help run years ago still lists me as a contact on its Department tax account, and the Department is trying to hold me personally liable for taxes it never paid -- can they do that just because I never got removed from the paperwork, especially since a nonstock nonprofit doesn't even have 'owners' to transfer things to?
No -- simply being listed as a tax account contact isn't enough evidence to hold someone personally liable, and the Department abated this assessment for lack of proof. A nonprofit organization failed…
I bought prototypes of a medical device along with the software and intellectual property needed to run it, structured as an 'Intellectual Property Purchase Agreement' -- can I argue the tangible prototypes were just an inconsequential part of an intangible IP purchase, so the deal isn't fully taxable?
No -- when the tangible property, software, and intellectual property are all inextricably tied together in a single deal for a physical device, the whole purchase price is taxable. A Virginia IT comp…
My sales tax audit closed before I could submit all my documentation -- can I still get more time to provide records on appeal, and what happens to unrelated bills I discovered separately while reviewing my online account?
A limited second chance, but with firm deadlines and boundaries. A purchasing-agent company that supplied hardware, software, and services to an owner's mobile communications operating companies was a…
My electronics recycling company uses a forklift for both exempt manufacturing work and other non-exempt tasks -- can I still get the sales tax exemption on it if I can show it's used mostly in the exempt process, even if I didn't have that proof during the audit itself?
Yes -- and here, evidence submitted AFTER the audit closed was enough to win the exemption. An electronics dismantling and recycling business was audited for 2013-2019 and assessed sales and use tax o…
I'm a home builder and bought sand and dirt for my projects -- since dirt and sand come from the ground and are basically real property, shouldn't my purchases of them be exempt from Virginia sales and use tax?
No -- once sand, dirt, or similar material is excavated from the ground, it becomes tangible personal property and is fully subject to Virginia sales and use tax, regardless of its origin as part of t…
I paid royalties to an affiliate and added them back to my Virginia taxable income, but claimed a partial exception because some of the affiliate's income was taxed elsewhere -- can I get a refund for the FULL add-back instead of just that partial exception?
No -- the Virginia Supreme Court's decision in Kohl's Department Stores forecloses a full exception, allowing only the portion of the intangible expense that was actually subject to another state's PO…
The Department disallowed our manufacturing parent's single sales factor election by looking only at its Virginia operations, adjusted our sales factor using our own public financial data without explanation, and disallowed our research-expense and jobs-credit subtractions with no stated reason -- can all of that really be upheld?
No to nearly all of it -- three separate audit adjustments were reversed for the same taxpayer. A corporate group filed combined Virginia returns for 2015 and 2016, with the parent using Virginia's mo…
The IRS has determined my federal tax debt is currently uncollectible -- doesn't Virginia's conformity to federal law mean the Department has to stop collecting on my old Virginia assessments too?
No -- an IRS determination that your federal tax debt is uncollectible has no effect on Virginia's own, separate collection authority. An individual with unpaid Virginia income tax assessments spannin…
I factored my accounts receivable to a related entity, which then sold interests in them to unrelated investors to fund my operations -- can I exclude the factoring costs from Virginia's intercompany intangible expense add-back?
No -- none of the three available exceptions applied, and a fourth procedural route was never properly used. A corporation factored its accounts receivable to a related entity (IHC), which then securi…
I'm an active-duty servicemember with a Virginia 'home of record,' but I bought a home, got a driver's license, registered to vote, and registered my vehicles in the state where I was actually stationed -- am I still a Virginia domiciliary resident just because Virginia is listed as my home of record?
No -- 'home of record' and legal domicile are different things, and this servicemember's real, affirmative connections to his duty-station state controlled. A military servicemember had listed Virgini…
What documentation do I need to support charitable contribution and Schedule C business expense deductions if the Virginia Department of Taxation asks for it in an audit?
You need real substantiation, not just copies of your federal schedules -- for noncash charitable donations, at minimum a donee receipt (and above $500, a written record of acquisition and cost basis,…
Can a medical diagnostic laboratory buy reagents used to test blood and urine samples exempt from Virginia sales tax under the medicines-and-drugs exemption for hospitals and clinics?
No -- even though the reagents may meet the Drug Control Act's definition of a drug, the medicines-and-drugs exemption under Va. Code § 58.1-609.10(9) only covers purchases by a hospital, nursing home…
If I move out of Virginia but keep my Virginia driver's license and vehicle registrations, will Virginia still treat me as a domiciliary resident for income tax?
No, not automatically -- the Department found the taxpayer had genuinely established domicile in another state (leasing homes there, filing that state's tax returns, and voting there) even though he k…
If I collect sales tax from a customer by mistake, can I keep it instead of remitting it to Virginia, since I'm a contractor who normally shouldn't charge tax?
No -- Virginia law requires any dealer who collects sales tax from a customer to remit it to the Department, even if it was erroneously or illegally collected, and a contractor's later claim of 'cleri…
If a vendor mistakenly charges another state's sales tax on a purchase used in Virginia, does that satisfy my Virginia use tax obligation?
No -- Virginia's credit for tax paid to another state only covers tax legitimately owed to that state because of a taxable use there before the property was delivered into Virginia; it doesn't apply w…
Does Virginia sales tax apply to a credit card processing fee a seller charges a customer buying tangible personal property?
Yes -- a credit card processing fee charged in connection with the sale of tangible personal property is part of the taxable sales price under Va. Code § 58.1-602, and it doesn't matter that the fee i…
Can I subtract my National Guard pay and basic military pay from Virginia taxable income if my W-2 was issued under a reserve-unit employer ID number?
Yes, potentially -- Virginia's subtraction for Virginia National Guard pay, capped at 39 days' pay or $3,000 and limited to captain (O-3) and below, can still apply even if your W-2 was issued through…
Browse Virginia rulings by topic
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.