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 reseller of related companies' mobile service a telephone company for a Virginia city BPOL tax?
No. The reseller lacked an SCC certificate and FCC authorization and did not operate wireless sites, towers, switching equipment, or other mobile-service facilities. Its licensed partners supplied the…
Were a bottle manufacturer's palletizing and wrapping equipment, transferred molds, and rebuilt machinery taxable as Virginia machinery and tools?
The palletizing and wrapping equipment was not taxable machinery and tools because the evidence showed it packaged finished bottles for shipping, not that it directly served manufacturing or product q…
Could a taxpayer add computational-error refund claims after its original Virginia protective claim had already closed?
No. The taxpayer added the computational-error issue after its original litigation-based protective claim had closed, so Virginia treated the submission as a new claim. The 2004 claim came after the t…
Could a taxpayer add an independent computational-error issue to a still-pending Virginia protective refund claim without amended returns?
Yes. Because the taxpayer added the computational-error issue before the original protective claim was finally resolved, Virginia treated it as timely and decided it on the merits. The April submissio…
Were charges to clean, test, package, and sterilize customer-owned used catheters taxable in Virginia?
No. Hospitals and clinics mailed their used catheters to the out-of-state provider, which cleaned, decontaminated, reconditioned, tested, packaged, labeled, and sterilized them before return. Because …
Did a closed Virginia plant show that most of its machinery was idle and excluded from 2011 machinery-and-tools tax?
The Department concluded that the affidavit and news reports showed the disputed equipment stopped operating by December 31, 2009, remained idle on January 1, 2011, and did not return to use during 20…
Could Virginia estimate a grocery store's taxable sales from two observation days when six years of returns and records were missing?
Yes. The store had filed no sales-tax returns for more than six years and could not produce register tapes, journals, ledgers, ST-9 forms, or supported accounting records. Virginia could use the best …
Could taxpayers defeat a Virginia resident assessment by demanding proof after ignoring requests prompted by a federal return using a Virginia address?
No. Virginia lawfully used federal information showing a Virginia address, requested records to determine liability, and assessed from the information available when the taxpayers did not respond. Bec…
Did a notice of intent to protest preserve Virginia's 90-day deadline for a complete sales-tax appeal?
No. A complete appeal stating the grounds and relevant facts was due within 90 days of the June 1, 2012 assessment, by August 30. A notice of intent or incomplete appeal neither satisfied nor extended…
Did repair parts and supplies for a paint manufacturer's integrated tank power-wash system qualify for Virginia's manufacturing exemption?
No. The system cleaned production tanks after a batch ended, generally every one to three days. Although the cleaning protected the color, chemistry, and integrity of later batches, it did not occur d…
Was a federally registered interstate motor carrier exempt from county BPOL tax when its local office also arranged hauling by independent providers?
Yes. The company proved that it was a motor carrier formerly certified by the Interstate Commerce Commission and currently registered with the relevant federal transportation authority. Virginia's BPO…
Could a city impose consumer utility tax on natural gas used by a combined-cycle power plant, and did the gas supplier qualify as a pipeline distribution company?
Yes. The plant used natural gas to run combustion turbines and captured their heat to make steam for another turbine, so the gas was used to furnish heat. The supplier qualified as a pipeline distribu…
What temporary Virginia tax penalty relief did Tax Bulletin 12-7 provide to taxpayers affected by Hurricane Sandy?
Virginia waived specified late-filing and late-payment penalties for affected individuals and businesses that filed returns or made payments between October 29 and November 9, 2012. A taxpayer had to …
Could a Virginia resident claim a credit for Maryland withholding on wages protected by reciprocity, and could Virginia waive the resulting penalty and interest?
The Maryland withholding did not create a Virginia credit because the resident's wages were not subject to Maryland income tax under the reciprocity agreement. Virginia upheld the tax and mandatory in…
Did a distributor create Virginia corporate-income-tax nexus by holding title to inventory at a related Virginia manufacturer's plant for three to seven days?
Yes. Corporation B took title to finished inventory and held it at Corporation A's Virginia plant for three to seven days before common-carrier shipment. Inventory counted in the Virginia property fac…
Was an individual paid to provide foster-care services from a home necessarily engaged in a business subject to county BPOL tax?
The ruling did not decide that the individual was engaged in a taxable business. The facts showed that a tax-exempt foster-care provider paid the individual to perform services at a definite place of …
Was a 2008 amended machinery-and-tools tax return timely when the county learned of the representative's authorization only after the limitation period expired?
Yes. The taxpayer's service contract had been assigned to the representative before the representative filed the amended return on December 29, 2011. The county's later receipt of evidence proving tha…
Did living and working in another state end a taxpayer's Virginia domicile and qualify him for Virginia's credit for tax paid to that state?
No. Although the taxpayer maintained a home and worked in State A, he kept and regularly returned to a Virginia residence, received financial documents there, renewed a Virginia driver's license, and …
What Virginia tax, filing, apportionment, and withholding duties applied when nonresident owners and their pass-through entities participated in sporting events in Virginia?
The entities had Virginia income-tax nexus because bringing owners, staff, and equipment into Virginia for competitions exceeded protected solicitation under P.L. 86-272. They had to file pass-through…
Were cable-television converter boxes taxable as city business tangible personal property for 2008 through 2010?
No. Virginia's 1984 statutory amendment removed tuners and converters from the cable-property list subject to local taxation, and contemporaneous Department guidance classified them as intangible pers…
Were cable-television converter boxes taxable as local business tangible personal property for 2008 through 2010?
No. Virginia's 1984 statutory amendment removed tuners and converters from the cable-property list subject to local taxation, and contemporaneous Department guidance classified them as intangible pers…
Were tire-disposal fees taxable, was the audit sample valid, and did Virginia correct overstated discount and unreported-sales adjustments?
Tire-disposal fees were part of the taxable sales price, and the three-month sample was properly extrapolated. But the audit overstated later unreported sales by adding back discount deductions in mon…
Did revised depreciation schedules prove that a retailer's replaced, obsolete, or allegedly disposed assets should be removed from city BTPP assessments?
Not yet. The retailer did not prove that the city's 2007-2009 fixed-asset assessments were wrong: some items remained on site or in use, disposal records were missing, and federal returns had not been…
Were a bowling alley's monthly payments to an affiliate taxable equipment lease payments or nontaxable loan reimbursements?
They were taxable lease payments. The affiliate owned the bowling equipment, retained title, and allowed the bowling alley to use it for monthly consideration equal to the affiliate's loan payment. Co…
Did an out-of-state heavy-equipment business have Virginia sales-tax nexus through rentals, deliveries, repairs, and sales, and how far back could the audit reach?
Yes, beginning no later than December 2009. Erroneously charging North Carolina tax did not itself create Virginia nexus, but owning equipment rented to Virginia customers did, reinforced by company-v…
Could a multistate bank replace Virginia's prescribed single-property-factor method with a method that included mortgage loans?
No. Virginia had already allowed the bank an alternative single-property-factor method because the standard deposit-based formula produced an unconstitutional result for its Virginia mortgage office. …
Could new Virginia residents claim Virginia's other-state credit for California tax on a 2010 installment payment from a business interest sold before they moved?
No. California sourced the installment gain to the taxpayers' California residence at the time of the 2007 sale, while Virginia taxed the 2010 payment because they were Virginia residents when they re…
Which purchase and sales audit items had to be revised when a distributor showed duplicate invoices, sampling issues, and mixed-quality resale certificates?
Virginia ordered multiple audit revisions. Duplicate purchase invoices were removed, and the purchase sample population was expanded to include reviewed accounts with no deficiencies. Some resale cert…
What purchases and transaction rules qualified under Virginia's historical Energy Star and WaterSense sales-tax holiday guidelines?
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…
Could taxpayers use the same 2008 net operating loss on their 2007 Virginia return after carrying the entire loss back to 2006 federally?
No. The taxpayers carried their entire 2008 net operating loss back to 2006 on the federal return, reducing federal adjusted gross income used by Virginia. Virginia had no independent provision allowi…
Was a former officer personally liable for a corporation's unpaid income tax when he resigned before the asset sale, return due date, and filing?
No. The officer resigned on June 1, 2009, before the June 26 asset sale that created deferred revenue and intangible-property gain, before the October return due date, and long before the corporation …
Did customer meetings by employees of an out-of-state design consultant create Virginia income-tax nexus, payroll, sales-factor, and withholding duties?
The ruling could not decide corporate-income-tax nexus because the business did not describe what employees did during Virginia customer meetings or how frequent and regular any unprotected activity w…
Did federal protection for a nonresident vessel pilot's compensation prevent Virginia tax on partnership income passed through by the pilots' association?
No. The federal rule protected compensation for piloting duties, but the association filed as a partnership and reported its fees less expenses as ordinary income. That character passed through to the…
Could a photocopy and visual-communications business rent a printer tax-free under Virginia's industrial manufacturing exemption?
No. Virginia treated photocopying and quick-copy operations as nonindustrial service activities, not industrial manufacturing. The printer also failed the separate high-speed-duplicator exemption beca…
Were laptop data-card charges, regulatory cost-recovery fees, and activation or reactivation fees subject to Virginia communications sales tax?
Regulatory cost-recovery fees and activation or reactivation fees were taxable, including connection fees related to Internet service. The record did not establish whether the laptop-connect and data-…
What Virginia tax interest rates applied during the fourth quarter of 2012?
Virginia's fourth-quarter 2012 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-…
How should a county calculate Virginia's BPOL out-of-state deduction when payroll apportionment was used to assign a multistate company's gross receipts?
The county had to follow the three-step method in P.D. 12-89: identify interstate participation by employees at the Virginia office, directly deduct receipts that could be specifically tied to that pa…
Did a city have to consider an independent appraisal showing lower fair market value for business computers and peripherals?
Yes. Virginia law allowed business computers and peripherals to be valued by percentages of original cost or another method reasonably expected to determine actual fair market value. An independent pr…
Could a taxpayer appeal a city BTPP assessment to the Tax Commissioner while the city was still requesting information and had not denied the local appeal?
No. The city's request for additional information was not a final local determination because it did not deny the taxpayer's appeal in whole or in part. The appeal had also been pending for less than …
Did a taxicab business qualify for reconsideration by claiming that Virginia's final BTPP valuation determination misstated its facts and law?
No. Virginia had upheld the city's use of a recognized pricing guide with physical-condition adjustments. On reconsideration, the Department found that any factual misstatements resulted from the taxp…
Could a Virginia manufacturer apportion income and exclude government equipment shipped overseas from its Virginia sales-factor numerator?
Conditionally. Foreign installation work and property appeared to exceed protected solicitation, but Virginia needed more facts to decide whether the activity was more than de minimis and created fore…
Could a minister deduct an amount equal to a tax-exempt housing allowance as an unreimbursed employee business expense on the Virginia return?
No. Ordinary and necessary employee business expenses may qualify as federal itemized deductions, but the minister's housing allowance had already been excluded from federal gross income under IRC § 1…
Did moving to another state with a military spouse end a taxpayer's Virginia domicile for 2008?
No. The taxpayer lived and worked in State A near her military spouse, but filed there as a nonresident, admitted she remained a permanent Virginia resident, kept a Virginia driver's license and vehic…
Could taxpayers reopen a 2004-2006 residency determination after the 45-day reconsideration deadline or appeal 2007-2009 assessments after 90 days?
No. The July 12, 2010 determination for 2004-2006 could be reconsidered only if a qualifying request arrived within 45 days, but the taxpayers waited until May 13, 2011. Their December 2010 assessment…
Did an out-of-state S-corporation law firm have Virginia-source income when its Virginia office provided only administration and support?
Yes. The Virginia office's property and employee created positive property and payroll factors, so the S corporation had Virginia-source income and had to apportion its total nondividend income. For e…
Could an estate recover a 2005 Virginia overpayment when illness delayed the original return until December 2009?
No. The taxpayer's illness could require a fiduciary or authorized agent to file on her behalf, but Virginia law did not suspend the refund limitation period for mental or physical disability. Because…
What did the Warren County Circuit Court order in Early A. Caudle's case against the Virginia Department of Taxation?
The court sustained the Department's demurrer because the plaintiff did not object and dismissed the case with prejudice. The short published order does not describe the underlying tax dispute or stat…
Did a professional athlete become domiciled in Virginia during a brief visit before moving to a permanent job abroad?
No. The athlete had abandoned Virginia for State A in 2004 and moved to Country A for a permanent professional-sports job in January 2008. Although he obtained a Virginia driver's license, registered …
Could a developer recover recordation tax on a released portion of a deed-of-trust loan when it filed the refund claim more than three years later?
No. Paying recordation tax when the deed of trust was recorded counted as an assessment, so the taxpayer had three years from that date to file its protective refund claim. The deed was recorded in Ja…
Could taxpayers claim Virginia's disability-income subtraction for police-retirement benefits already excluded from federal adjusted gross income?
No. The District of Columbia police-retirement disability benefits were treated as excluded from federal income and did not enter the taxpayers' federal adjusted gross income. Virginia's subtraction c…
Was Virginia's two-sample sales audit of a metal fabricator flawed, and should customer-paid use tax remove a sale from the sample?
The sampling method was valid. Virginia used separate three-month samples before and after a substantial increase in retail sales, and the fabricator offered no evidence disproving the sampled transac…
Could in-home child-care providers keep their claimed business deductions when their records commingled business and personal expenses?
No. Virginia conforms to the federal starting point but may adjust federal adjusted gross income when reported deductions are inconsistent with federal law. The providers supplied invoices, bank state…
Could a development holding company combine its LLCs in one Virginia use-tax audit, and were sign posts and a carpet runner taxable?
The LLCs had to be treated as separate legal entities. Virginia returned the audit so each LLC could be registered and, if warranted, separately audited and assessed within the limitations period. The…
Were stage-equipment rentals exempt because a naval air station or nonprofit event organizer paid for them, and was the purchase sample invalid?
No. The company was the taxable user and consumer of stage equipment used to provide entertainment and production services. It did not prove a government purchase made through official purchase orders…
Could a tire seller avoid Virginia sales-tax audit items with late exemption certificates, claimed delivery labor, or tax collected after the sampled sales?
Mostly no. The seller was liable for tax when it failed to collect Virginia tax or hold valid exemption certificates. Incomplete certificates, an undocumented handling charge, and an unsupported claim…
Under Virginia's 2012 motion-picture credit guidelines, which productions and expenses qualified, how large were the credits, and how were they claimed?
Under these 2012 guidelines, an approved production spending at least $250,000 in Virginia could receive a refundable base credit of 15% of qualifying expenses, plus a 5% distressed-area bonus and sep…
Did a restaurant owe use tax on contracted floor repairs and on a second purchase supported only by unclear, unreconciled invoices?
The floor-repair charge was not taxable to the restaurant. The contractor installed cement board, sealant, tile base, and grout as a real-property repair and was the taxable user of those materials, s…
Could a taxpayer use overpayments from 2004-2006 returns filed in December 2010 to offset 2007 tax and avoid Virginia penalty and interest?
No. The three-year refund deadlines for 2004, 2005, and 2006 expired before the taxpayer filed all six returns on December 5, 2010, so those old overpayments could not be refunded or used as requested…
Did a restaurant microbrewery's 67% on-site beer sales conclusively defeat Virginia's industrial manufacturing exemption for its brewery equipment?
Not conclusively. The auditor reasonably treated 67% on-site beer sales as evidence that brewing was incidental to the restaurant, but sales volume was not the only permitted measure of the business's…
Could Virginia residents subtract a 2008 gain from foreign real property because the foreign country taxed it and federal law allowed a foreign tax credit?
No. Virginia began with the couple's federal adjusted gross income, which included the gain, and the General Assembly had repealed the state's foreign-source-income subtraction for taxable years begin…
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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.