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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I install traffic-management and tolling equipment on highway gantries for VDOT — is that equipment 'real property' I owe use tax on, or does it stay tangible personal property I can buy and resell tax-exempt to the government?
The equipment stayed tangible personal property, not real property -- because it was designed for easy removal and a short 5-to-7-year service life rather than to last for the life of the highway gant…
My audit was closed using estimates from my tax returns because I couldn't produce records in time — now that I actually have the records, can I get a fresh look?
Yes — because the Taxpayer now says the previously missing records are available, the Department is sending the case back to field audit staff for a fresh review, rather than treating the earlier best…
I manufacture and sell window blinds from Virginia showrooms, sometimes with installation by an outside company -- do I collect sales tax, pay use tax, or both, and how do I tell which applies?
It depends on whether a particular sale includes installation, and — for the seller's overall business — which activity (installed jobs or plain retail sales) makes up most of its gross receipts. A ma…
I sold dental prosthetics tax-exempt to a customer who checked the medical-exemption box on their certificate -- why did the state still assess me use tax on those sales?
Because the durable medical equipment exemption only applies when the seller can show, at the time of the sale, that the specific item was purchased for a particular, identifiable patient -- and this …
I manufacture and install signs, including for churches -- am I taxed as a contractor consuming the materials, or as a retailer selling tangible personal property, and does selling to a church change anything?
A manufactured sign is taxed as tangible personal property sold at retail, not as a contractor's consumed materials — and selling one to a church doesn't make it tax-exempt. A Virginia sign manufactur…
My solar company's sales tax assessment includes sales I say were shipped to out-of-state customers, but I couldn't produce the invoices during the audit -- can I still get the assessment corrected if I find the paperwork now?
The assessment stands for now, but the taxpayer gets one final 30-day opportunity to prove its case. A solar power systems company was audited and assessed sales and use tax on sales, purchases, and a…
I run a flooring company that sells and installs floor coverings, and treated every sale as a taxable retail sale -- now I owe use tax too. If I later resell inventory I already paid tax on, how do I avoid paying tax on it twice?
A retail flooring company that sold and installed floor coverings, treating every transaction as a taxable retail sale, was correctly assessed use tax because it was actually a 'dual operator' under 2…
My business is on its third consecutive audit and I didn't provide records this time either -- do I still get a final chance to submit them, and does the exceptions list matter?
This ruling is a near-identical companion to the same-day P.D. 24-117 -- same period (May 2018-April 2021), same '3rd generation' repeat-audit fact pattern, same statutes, and the same outcome. A busi…
My business is being audited for the third time in a row, and this time I couldn't produce records during the audit -- can I still fix the estimated assessment by providing the paperwork now?
The estimated assessment stands for now, but the taxpayer gets one more chance. A business undergoing its third consecutive ('3rd generation') sales and use tax audit failed to provide adequate record…
My auditor denied my pollution control equipment refund because I didn't have Form ST-11A -- but I have an environmental permit from the state instead. Does that count?
Yes -- in this case, it did. A Virginia brewery sought a use tax refund on equipment it said qualified for Virginia's pollution control exemption (Va. Code § 58.1-609.3 9), which exempts equipment 'ce…
I sold IT equipment to a government contractor who said it was buying as an agent of the federal government under a cost-reimbursement contract -- is that sale exempt from Virginia sales tax?
No -- and the audit sample challenge also failed. A government IT contractor made untaxed sales of hardware, software, and consulting to another contractor ('Customer 1'), treating the sales as exempt…
I ran my security-installation business as a retailer for years and charged my customers sales tax, but my auditor says I should have paid use tax as a contractor instead -- do I now owe use tax ON TOP OF the sales tax I already collected and paid over?
The underlying use tax assessment was correct, but the taxpayer may get real relief through Virginia's brand-new one-time credit. A business that sells and installs security gates, access control syst…
My HVAC company wants to offer long-term equipment leases through an affiliate -- does the installer pay tax as a contractor, does the affiliate collect sales tax on the lease payments, and is that double taxation?
Three separate tax obligations, not one overlapping one. An HVAC company installs equipment for Virginia homeowners and, as a consuming contractor, pays sales tax (or accrues use tax) on its own purch…
My company sells cloud-based practice management software (billing, records, patient messaging) to healthcare providers -- do I need to charge Virginia sales tax or communications tax on subscriptions?
Exempt from both taxes. A Virginia business offering healthcare providers three cloud-based subscription applications -- billing/claims management, a records manager, and a patient messaging/portal tr…
I fabricate and deliver septic tanks to job sites where my customers hook them up -- am I an installer who doesn't owe sales tax, or a retailer who does? And can prior phone advice from the Department protect me either way?
The fabricator was a retailer, not an installer, and owes the sales tax -- three separate arguments all failed. A septic tank fabricator delivered finished tanks to job sites and placed them into hole…
I fabricate and sell steel products, and a separate contractor I hire does the rebar tying and shop drawings, billed separately on my invoice -- do I have to charge sales tax on those separately stated labor charges too?
Yes -- the labor charges are taxable, and the refund was denied. A steel and rebar fabricator forms raw materials into custom products to customer specifications, then has an independent contractor pe…
I run two wood-pellet fuel production plants in Virginia -- which of my machinery, conveyors, storage domes, and pollution-control equipment qualify for the sales tax manufacturing exemption?
Mostly exempt, with specific carve-outs -- this advance ruling walks through a wood-pellet fuel producer's equipment at two Virginia plants, item by item, under the industrial manufacturing exemption …
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…
My auditor included a one-off equipment lease I don't normally enter into in my sample exceptions, which then got extrapolated across my whole audit -- can I get that specific transaction excluded as unusual?
No -- the transaction stayed in the sample, and the assessment (already paid) was upheld. A Virginia furniture retailer leased product-imaging (photography) equipment from a vendor to photograph its p…
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 …
My customer arranges and pays a common carrier to pick up goods at my Virginia warehouse and ship them out of state — is that sale exempt as interstate commerce, or does it depend on who arranged the pickup and where title transfers?
It depends entirely on WHERE title to the goods transfers, not merely on the fact that a common carrier is involved. A Virginia manufacturer/dealer asked about two scenarios where its customers pay a …
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…
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…
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…
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…
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…
I bought equipment to test my manufactured products for quality control before final assembly -- does that equipment qualify for Virginia's manufacturing sales tax exemption?
Yes -- because the testing happened DURING the manufacturing process, before final assembly, not afterward. A manufacturer of electronic telecommunications components requested a refund of sales tax p…
I have a general ledger and trial balance showing my company overpaid sales and use tax due to an accounting error -- is that enough documentation to get a refund?
No -- summary-level general ledger and trial balance data isn't enough on its own; Virginia requires transaction-level documentation to support a refund. A manufacturer of medical devices sought a ref…
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…
My medical diagnostic lab buys reagents that meet the legal definition of a 'drug' under Virginia's Drug Control Act -- does that mean my purchases qualify for the sales tax exemption on medicines and drugs?
No -- even though the reagents meet the legal definition of a 'drug,' a diagnostic testing laboratory isn't the kind of business the medicine-and-drugs exemption is written for. A Virginia operator of…
I rent portable toilets and separately itemize service charges (set up, pick up, off-road delivery, extra service) from the toilet rental itself -- are those itemized service charges exempt from sales tax, and does it matter that a Department employee told me decades ago how to handle this?
No, itemizing the service charges separately doesn't make them exempt -- they're taxable right along with the toilet rental itself. A Virginia portable-toilet rental business was assessed sales and us…
The Department denied my sales/use tax refund claim as untimely because of when the package reached a regional postal facility, and separately said my power of attorney form wasn't properly signed -- do either of those actually defeat my refund claim?
Neither defeats the claim -- the taxpayer's own mailing receipt proved timely filing, and a power of attorney defect is irrelevant to whether a refund claim itself was validly filed. A taxpayer's repr…
My restaurant's sales tax audit found that our point-of-sale records didn't match our filed returns, and that we'd collected sales tax from customers but hadn't remitted some of it -- I submitted extra invoices after the audit closed, but the Department says the assessment still stands. Why?
The assessment stands, minus what the extra invoices could actually fix -- because the core problem (a sales-records gap the business never explained) was never resolved. A Virginia restaurant and bar…
Does a wedding venue owe sales tax on its whole rental fee if tables and chairs are included, even if the customer doesn't stay overnight?
Yes, the whole lump-sum fee is taxable -- not because of overnight lodging (there was none), but because the venue's rental fee included tangible personal property (tables and chairs), and Virginia ta…
Are vaccines that a veterinarian buys and gives to a client's dog, cat, or horse exempt from Virginia sales and use tax?
Yes -- companion-animal (canine, feline, equine) vaccines qualify as "drugs" under Virginia's Drug Control Act, and when purchased and administered by a veterinarian within a veterinarian-client-patie…
If I couldn't produce detailed invoices during a Virginia sales tax audit, can I still get another chance to provide them on appeal?
Yes, but only once and only for a limited time -- when a first-generation sales and use tax audit had to estimate tax due because the taxpayer couldn't produce detailed invoices or exemption certifica…
If I buy custom cabinets with installation from an out-of-state contractor who fabricates and pays tax on the materials in their own state, do I owe Virginia use tax too?
Not necessarily -- when a Virginia buyer purchased custom cabinets with installation from an out-of-state contractor (based in Pennsylvania) that fabricated the cabinets and paid sales/use tax on the …
If I fix an incomplete exemption certificate on appeal and the Department can verify the customer, will the sale come out of my audit?
Sometimes -- of three customers whose original exemption certificates were incomplete, only one (where the appeal submission let the Department actually verify the customer's active registration in it…
If I submit exemption certificates for the first time on appeal (not during the audit itself), will they be accepted, and can I get compliance penalty waived on a repeat sales tax audit?
It's an uphill climb -- exemption certificates submitted for the first time on appeal (rather than at the time of sale) face greater scrutiny and must affirmatively prove the customer's use was valid,…
Does a nonprofit "pay what you can" restaurant have to collect Virginia sales tax on the meals it serves?
Yes -- a nonprofit's purchase exemption certificate doesn't cover the SALES it makes, and Virginia's separate exemption for nonprofit food/meal sales only applies when those sales happen on fewer than…
Is equipment used to remove waste from a manufacturing process covered by Virginia's manufacturing sales tax exemption, and does a customer's direct-pay permit cover a repair contractor's own equipment purchases?
No to both -- Virginia's manufacturing exemption doesn't cover equipment used to dispose of a facility's waste or pollutants (an excavator used exclusively to remove waterjet-process waste material wa…
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 didn't respond to an auditor's records request during a cigarette sales tax audit but later provide documentation on appeal showing the estimate was too high, will it be considered?
Yes, at least in part -- a gas station operator who didn't respond to an auditor's document request during a wholesaler-data-driven cigarette compliance audit still got some relief on appeal: document…
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…
If I rent inflatable party equipment with an attendant, or rent to a church, is the rental exempt from Virginia sales tax?
No on both counts here -- providing an attendant to monitor an inflatable for safety doesn't change the true object of the transaction, which remains the rental of tangible personal property, because …
Does Virginia's agricultural sales tax exemption cover the construction materials and equipment for an indoor, hydroponic vertical farm?
Only partly, and it depends item-by-item on whether the property becomes a permanent part of the building or stays independent tangible personal property. Virginia's agricultural production exemption …
Can I get a Virginia refund-denial determination reconsidered if I still think the Department misapplied its own policy, without new facts or a change in law?
Not just by re-arguing your original position -- Virginia's reconsideration process under 23 VAC 10-20-165 F requires showing one of four specific things: misstated facts, a change in law, a misapplie…
Once Virginia's DEQ certifies equipment as pollution control equipment, can the Department of Taxation still deny the sales tax exemption, or does the length of use matter?
No, the Department cannot second-guess a valid DEQ certification -- once the Virginia Department of Environmental Quality certifies specific tangible personal property as pollution control equipment u…
If Virginia denies my refund request for tax paid on DEQ-certified pollution control equipment because of restrictions in a Department cover letter, can I win that denial on appeal?
Yes -- on the same day it issued a companion ruling for this taxpayer, the Department reversed a refund denial that had relied on restrictive cover-letter language in a 'Notice of Sales Tax Exemption,…
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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.