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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Did one employee providing legal services from a Virginia home create withholding and corporate-income-tax duties?
Yes on the presented facts. The out-of-state employer had to withhold Virginia income tax because its employee worked in Virginia. Her legal services also appeared to exceed Public Law 86-272's solici…
Could a Navy contractor buy office equipment tax-free for task orders whose true object was renting temporary office facilities?
Yes. The task orders principally rented temporary office trailers, furnishings, and equipment to the Navy. Janitorial, sewage, utility, maintenance, and a minor administrative-assistant service made t…
Did Virginia decide whether a former CEO met the responsible-officer test for a company's unpaid meal tax?
No responsible-officer ruling was necessary. The company, its former CEO, the bankruptcy trustee, Virginia, and other parties entered a court-approved settlement releasing pre-agreement claims once th…
Was a restaurant LLC member personally liable for the companies' unpaid Virginia sales and withholding taxes?
Yes. Virginia found the taxpayer signed checks and tax returns, identified himself as president and managing owner, had authority over tax payment, and later operated the restaurant. He did not prove …
Did removing one floor-repair transaction from a Virginia restaurant audit eliminate the whole sales-tax assessment?
No. Virginia had already removed the floor-repair service because the contractor, not the restaurant, was the consumer of the repair materials. The Department issued the tax-and-interest refund for th…
Which Virginia audit items and penalties were removed for a meal-service provider?
Virginia removed four documented sales to exempt clients. That revision raised the fifth-audit sales-tax compliance ratio from 62% to 99.9%, so the ordinary sales-tax audit penalty was waived. The wai…
Did a subcontract stating that the subcontractor would pay tax prove Virginia tax was paid on a contractor's purchases?
No. A quote and subcontract assigning tax responsibility did not prove the tax was actually paid. The contractor could not reconcile tax amounts to the purchases and supplied no original invoices. Bec…
Was a safe provided with armored transportation and cash-management services taxable to the customer?
No customer sales tax applied to the bundled service. The true object was secure transportation and cash management, and the customer's use of the safe merely extended that exempt service. The armored…
Could a corporate group deduct factoring losses from receivables sold to a related bankruptcy-remote entity?
Yes. The group proved by clear and convincing evidence that third-party lenders required the bankruptcy-remote receivables structure to obtain financing and comply with a revolving-credit covenant. Vi…
Could a Virginia manufacturer include executive pay when testing the wage requirement for single-sales-factor apportionment?
Yes. Because Virginia Employment Commission wage data included executive compensation reported by many employers, a manufacturer could include executive wages in its own average-wage calculation when …
Could a corporation exclude all royalties and interest paid to an affiliate because the affiliate filed income-tax returns elsewhere?
No. Filing an affiliate's gross royalty and interest income in other states did not exempt 100% of the payments. Virginia limited the exception to the portion corresponding to the affiliate's income a…
Were an airport duty-free store's international-traveler sales exempt from county BPOL tax?
No. Federal law protected bonded duty-free merchandise from specified duties, sales taxes, and property taxes, but did not preempt a local privilege tax measured by the store's gross receipts. The cou…
Were an airport duty-free store's international-traveler sales exempt from county BPOL tax?
No. Federal law protected bonded duty-free merchandise from specified duties, sales taxes, and property taxes, but did not preempt a local privilege tax measured by the store's gross receipts. The cou…
Were equipment and field flags used to spread biosolids on farms exempt as agricultural production property?
No. Although spreading biosolids helped nourish farmland, the business was not a farmer, did not own the land, and did not itself produce an agricultural product for market. Virginia therefore denied …
Could a taxpayer receive Virginia's 2011 research credit after filing Form RDC more than ten months late?
No. The taxpayer claimed the 2011 Research and Development Expenses Tax Credit on its return before filing Form RDC or receiving certification, then submitted the application more than ten months afte…
Which fringe benefits and payroll charges qualified for Virginia's Motion Picture Production Tax Credit?
It depended on the expense and credit component. Paid leave and taxable meal or lodging per diems counted as wages; employer unemployment tax and employer FICA did not. Workers' compensation, pension,…
Could a nonresident alien claim Virginia's standard deduction without claiming federal itemized deductions?
Generally no. Virginia continued its policy that a nonresident alien cannot claim the Virginia standard deduction even when no federal itemized-deduction amount is reported, because federal law requir…
Was a nonprofit's amended 2008 return timely after Virginia collected part of its corporate tax assessment?
Yes. Although the ordinary three-year period had expired, Virginia's collection of part of the assessment counted as payment. The nonprofit filed its amended return shortly afterward, raised only the …
Could Virginia residents claim an out-of-state tax credit for New York's Metropolitan Commuter Transportation Mobility Tax?
No. New York's MCTMT applied only to payroll or self-employment earnings connected with the metropolitan commuter district and funded that district's transportation authority. Virginia found it was no…
Did a military spouse and servicemember remain domiciled outside Virginia for 2010 income-tax purposes?
No. The spouse established Virginia domicile after moving in 2007: she worked full time, obtained a Virginia license and vehicle registration, voted in Virginia, and bought a home with the servicememb…
Did switchgear powering a qualifying Virginia data center count as exempt enabling hardware?
Yes, in whole or in part. Switchgear that distributed power to exempt servers, routers, and related computer equipment was enabling hardware under the data-center exemption. If it also powered taxable…
Were cloud-hosting and voice-routing services subject to Virginia retail sales tax or communications tax?
The hosted cloud, add-on, and maintenance services were exempt from retail sales tax because customers received no tangible personal property. But electronically routing voice, data, or audio and prov…
Was a business officer personally liable for unremitted sales and withholding taxes despite bankruptcy and a claimed IRS lien?
Yes. The officer admitted knowing of the business's sales and withholding liabilities and having authority to pay them. Virginia treated the collected taxes as trust funds and found that filing bankru…
Did a husband who worked and lived in another state remain a Virginia resident for 2010 and 2011?
No. The husband took an indefinite out-of-state job, established a home there, obtained that state's driver's license, registered a vehicle there, and spent no more than 183 days in Virginia in either…
Did equipment leased to a wholesale Internet-backbone provider qualify for Virginia's Internet-service equipment exemption?
No. Virginia interpreted the exemption as limited to retail online-service providers that sell end-user subscribers a paid package including Internet access, email, proprietary information, and other …
Was a taxpayer who moved for work in 2009 still a Virginia resident required to file for 2010?
No. The taxpayer moved for an indefinite job, established a home in the other state, surrendered his Virginia driver's license, obtained the other state's license, and registered to vote and registere…
How did Virginia tax installed countertops, sinks, and vanity bowls after the July 2010 law change?
Installed countertops sold on or after July 1, 2010 were taxable retail sales, with separately stated installation exempt, and the prior auditor's contractor guidance for earlier periods was not erron…
Was a hospital-owned nonprofit laundry cooperative exempt from city BPOL and business-property taxes?
No. The cooperative was a separate legal entity with its own employees, management, laundry operations, charges, and economic benefit to its hospital owners. It did not qualify as an IRC § 501 nonprof…
What purchases qualified under Virginia's historical Energy Star and WaterSense sales-tax holiday?
Under these historical guidelines, specified Energy Star appliances and WaterSense-labeled products costing $2,500 or less per item were exempt during the four-day October holiday when bought for nonc…
Did the Paynes obtain relief for an amended 2004 Virginia tax return filed after the limitations period?
No. The Isle of Wight County Circuit Court found that Virginia properly denied Michael and Rhonda Payne's amended 2004 tax return because it was filed beyond the statute of limitations. The court ente…
Was a company buying future receipts and making business loans a financial-services provider subject to county BPOL tax?
The company appeared to be a financial-services provider, not a buyer and seller of tangible property, because it advanced cash against future card receipts, bought receivables, and made loans. But Vi…
Did a Virginia-based employee developing consulting test methods create corporate-income-tax nexus for an out-of-state company?
Probably yes. Developing test methods in a Virginia home office for the company's consulting and training services went beyond protected sales solicitation and produced a positive Virginia payroll fac…
What Virginia tax interest rates applied during the fourth quarter of 2013?
Virginia's fourth-quarter 2013 rates were 5% for tax underpayments and 5% for tax overpayments. The reduced rate for qualifying assessments under administrative appeal was 0% after the statutory nine-…
Could a service company use direct labor to situs city BPOL receipts and deduct receipts from out-of-state customers?
Potentially yes, but the city had to review the evidence. The company's contract-level direct-labor method appeared capable of situsing receipts where services were performed, so payroll apportionment…
Did small Virginia limited-partnership interests create apportionment or income-tax consequences for a corporation and pension trust?
The corporation's interests met Virginia's four-part standard for avoiding attribution of the partnerships' property, payroll, and sales factors because the interests were 10% or less, general partner…
Were a telecommunications company's 2004 and 2005 protective refund claims timely filed or eligible for reconsideration?
No. Virginia had denied the original protective claims on May 4, 2009, so an addendum filed seven days later was a new claim, not an amendment to a pending one, and it met none of the reconsideration …
Were mandatory dealer advertising and training fees taxable as part of an HVAC manufacturer's product sales price?
Yes. The 2% marketing-group fees were mandatory until each dealer reached a $10,000 annual cap, were calculated from product sales, shared invoice discounts, and funded advertising and training that p…
Which commonly controlled out-of-state dealers had to begin collecting Virginia sales tax on September 1, 2013?
Historical rule: an out-of-state dealer was presumed required to collect Virginia sales and use tax when a commonly controlled person maintained a Virginia distribution center, warehouse, fulfillment …
How much of related-party royalties escaped Virginia's add-back when affiliates paid tax elsewhere or licensed third parties?
The taxpayer received a full exception for royalties paid to IHCA and IHCB because their substantial unrelated-party licensing met the statutory third-party exception. For IHCC, only the portion corre…
Which related-entity management fees qualified for Virginia's BPOL intercompany-receipts exemption?
Only fees from ASC and VALP7 qualified. The taxpayer and ASC had identical 100% ownership, while three common owners held about 95% identical interests in the taxpayer and VALP7, satisfying both broth…
Could a consolidated group exclude nonallocable expenses tied to Subpart F and gross-up income from Virginia's foreign-source subtraction formula?
No for 2008-2010. Virginia required the subtraction formula to include all deductions not definitely allocable from the relevant Forms 1118, even when some related income—Subpart F dividends or foreig…
Did the Servicemembers Civil Relief Act preserve a husband's out-of-state domicile for Virginia tax in 2009 and 2011?
No. Military orders alone did not preserve the husband's former domicile after his conduct showed a Virginia change: he filed resident returns, obtained and renewed a Virginia driver's license, regist…
Could an employer reduce its withholding audit for snow-removal contractors while avoiding employer and fraud liability?
Only in part. Virginia removed three in-period snow-removal invoices that documented payments to subcontractors, but the employer's incomplete records could not establish that other individual payees …
Could an employer reduce a withholding assessment or shift all liability and fraud penalties to its former officer?
No. Later payroll documents did not prove a lower withholding rate for July 2006-September 2010 because the employer could not identify the employees or supply period records. The corporation remained…
Did a pass-through telecommunications company owe Virginia's 2008 minimum tax after Virginia Cellular?
Yes. Although Virginia Cellular had held the earlier statute insufficient to impose the minimum tax on pass-through telecommunications companies, the 2009 General Assembly enacted House Bill 2378 retr…
Were certified pit liners, storage tanks, and silt fence bought after July 1, 2006 still exempt pollution-control equipment?
Yes. Virginia reversed its earlier view that the DMME-certified pollution-control exemption expired July 1, 2006. A later Department ruling and 2013 legislation clarified that the exemption continued …
Did a corporation substantiate 2006-2008 charitable carryovers and related-party interest and factoring deductions?
Not yet. Virginia upheld the auditor's partial add-back of related-party factoring fees and would not consider a valid-business-purpose exception because the corporation had not followed the statutory…
Was a corporation formed under tribal law automatically exempt from Virginia corporate income tax and filing?
No automatic exemption was established. Virginia treated the tribally chartered entity as a corporation subject to state income tax because it was unclear whether the IRS considered it an integral par…
Did cold deli trays and party platters packaged with lids qualify for Virginia's reduced food-tax rate?
Yes. Virginia Tax Bulletins 05-7 and 99-11 treated cold deli trays and party platters packaged in containers with lids or tops as food for home consumption, whether sold in single or multiple serving …
Could a convenience store overturn a sales-tax assessment by disputing the audit sample without producing supporting records?
No. The auditor compared returns, cash-register receipts, and sales spreadsheets over a three-month sample and found the store's spreadsheets did not reconcile to gross sales reported on its returns. …
Could a cable wholesaler claim the manufacturing exemption for machinery used by its separately incorporated sister company?
No. The wholesaler bought and owned the machinery, but its separately incorporated sister company used it to manufacture specialized products. The purchaser itself performed no manufacturing and could…
Was a Virginia sales-tax appeal timely when postmarked nine days after the 90-day deadline?
No. The assessment was dated July 24, 2012, making October 22 the last day to file a complete administrative appeal. The taxpayer's October 31 postmark was nine days late. Virginia strictly enforced t…
Did Maryland-Virginia reciprocity exempt a Maryland resident's Virginia wages when she also had Virginia S-corporation income?
Yes. Maryland-Virginia reciprocity kept the taxpayer's Virginia wages exempt even though she also had Virginia-source S-corporation income. She could not claim a Virginia credit for Maryland tax, but …
Could a beneficiary subtract monthly survivor-annuity payments as Virginia annuity death benefits for 2007-2009?
No. Virginia limited the historical subtraction to federally taxable death benefits paid in a lump sum under an annuity contract between a customer and an insurance company. The beneficiary received m…
Could a Virginia locality issue one group BPOL license to itinerant merchants and exempt merchants at sponsored events?
Yes, conditionally. A locality could create an umbrella subclassification for itinerant merchants operating together for five or fewer days and divide the $500 fee, because no merchant's charge exceed…
Could Virginia hear county BPOL and BTPP appeals when the county gave incomplete appeal notice and the taxpayer skipped required notice?
No. The county's letter omitted the required appeal and collection notice, so it was not a proper final local determination. The taxpayer also had not given the county the required 30-day notice befor…
How did Virginia's annual withholding option work for employers whose workers performed only household service?
Beginning with wages paid on or after January 1, 2013, a qualifying household employer could elect annual Virginia income-tax withholding without the former $5,000 quarterly-payroll cap. The employer …
Could Virginia estimate a grocery store's taxable nonfood sales when the store had no records for most of the audit period?
Yes. With no records for 2009-2011, Virginia could use the best information available. Auditors reasonably projected nonfood sales from two agreed observation days, a 6% barcode-error test, and untaxe…
Were free promotional tobacco products and early-payment cash discounts included in the manufacturer's sales price for Virginia's 2010 tax?
No for the 2010 assessment. Free promotional products had no sale for consideration and therefore no manufacturer's sales price on which to calculate the tax. Cash discounts allowed and taken for earl…
Was an LLC's sole officer personally liable for sales-and-use-tax and litter-tax liabilities discovered after the business closed?
No. Although the taxpayer was the LLC's sole officer and owner, the audit did not identify the sales-and-use-tax and litter-tax liabilities until 18 months after the business had closed and its debts …
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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.