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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Were flat fees paid to a company that managed retirement facilities' dietary departments taxable sales of food?
No. The management company procured, prepared, and served the food while retaining its possession and ownership, so it transferred no tangible personal property to the retirement facilities. Virginia …
Were per-patient fees for operating a healthcare facility's dietary department subject to Virginia sales tax?
No, under the provider's current scenario. It bought raw food, paid tax on the purchases, retained title, prepared and served meals in the customer's facilities, and charged one per-patient daily fee …
Should deed and grantor taxes use the sale consideration when the property's assessed value was higher?
Not automatically. Virginia recordation and grantor taxes use the greater of consideration or the property's actual value. Assessed value has a strong presumption of accuracy, but the circuit-court cl…
Could a city use a vehicle pricing guide to value taxicabs for local business-property tax?
Yes, if the method is uniform within the taxicab class and reasonably estimates fair market value. Virginia found the city's guide-based method facially acceptable and said using a different method fr…
Did a military spouse qualify for Virginia income tax protection when she obtained a Virginia driver's license and established domicile in Virginia?
No. The military-spouse protection required the spouse and service member to share the same out-of-state domicile. Virginia found that the spouse acquired Virginia domicile in 2007 after establishing …
When were a caterer's sales to nonprofits or governments exempt, and which exemption certificates could support the sales?
Virginia treated catered food as a taxable service because food preparation accompanies the sale. Nonprofits generally owed tax unless their statutory exemption expressly covered taxable services, and…
Could an HVAC contractor avoid use tax by saying its vendors included sales tax inside sheet-metal invoice prices?
No. Virginia requires sales tax to be shown separately on the transaction record, and the purchaser remains liable when it cannot establish that sales or use tax was paid. A notarized vendor statement…
Could taxpayers subtract unemployment benefits again when calculating the income limit for Virginia's age deduction?
No. Virginia said the federal unemployment exclusion was already recognized in federal adjusted gross income and required no fixed-date-conformity adjustment. Although Virginia allowed a separate subt…
Could a yarn manufacturer buy nonreturnable strapping exempt when it passed to customers with shipped products?
Yes, under the resale exemption—not the manufacturing packaging exemption. Virginia treated strapping as a taxable transportation device rather than material that places goods into a wrapper or contai…
Could Virginia consider a consumer-use-tax appeal filed one day after the ruling's stated 90-day deadline?
No. Virginia strictly enforced the 90-consecutive-day appeal period and said the faxed appeal arrived one day after the deadline, so it could not consider the merits. The taxpayer had paid the origina…
Was a Virginia nonfiler's assessment unsupported when the Department relied on wage, dividend, and interest data from the IRS?
No. IRS information showed 2008 wage, dividend, and interest income and gave Virginia a factual basis to estimate tax when the taxpayer filed no return or response. The assessment was presumed correct…
Which cleaning, storage, forklift, and furniture items qualified for relief in a food manufacturer's use-tax reconsideration?
Virginia denied relief for floor scrubbers used between production runs and racks storing finished goods because neither was an immediate part of production. Forklift lease charges remained taxable du…
Was a corporate president personally responsible for unpaid business taxes when another manager had the specific filing and payment duty?
Apparently not on the facts presented. Although the president later knew of the liabilities, could prevent future failures, and may have willfully left some known amounts unpaid, the studio manager—no…
Could Virginia decide whether a minimally involved vice president would be personally liable before any business taxes were converted?
Not on the record provided. No business tax had yet been converted to the taxpayer, so the appeal was premature and Virginia treated it as a ruling request. Minimal involvement did not itself prove an…
Were an owner and a retired corporate secretary personally liable for a closed business's unpaid Virginia taxes?
No on the facts presented. The 50% owner was not an officer or employee with a specific corporate duty, and the ruling understood that person's converted assessments had already been canceled. The ret…
Were pallets used to ship imported finished rugs exempt as manufacturing or packaging materials?
No. Adding a hanger or label to an imported finished rug did not create a new product, so that work and the related pallets belonged to taxable distribution rather than manufacturing. Pallets were tra…
How should a Virginia contractor assign out-of-state construction receipts and job-site wages in its apportionment factors?
Virginia sent the assessment back for more work. The contractor had not documented all direct and headquarters costs by contract well enough to prove where the greater cost of performance occurred for…
For BPOL tax, could a gas producer remove value added after gas entered transit at the county wellhead?
Yes. Because the gas was placed in transit at the county wellhead for sale elsewhere, BPOL gross receipts had to reflect fair market value at that point, not later value added before sale. Sale procee…
What did Virginia's original Barge and Rail Usage Tax Credit guidelines require before they were superseded?
Under these superseded guidelines, a qualifying international trade facility could claim $25 for each full TEU moved by barge or rail above its prior-year volume instead of by highway. The claimant ha…
What did Virginia's original 2012 International Trade Facility Tax Credit guidelines require before they were superseded?
Under these superseded guidelines, a company with at least a 10% increase in qualifying Virginia port cargo could elect either $3,000 per qualified full-time employee or 2% of qualifying capital inves…
How far back could a Virginia town recover communications and E-911 taxes billed despite its government exemption?
The town was never subject to Virginia communications sales tax or E-911 tax as a political subdivision, but the billing-error remedy limited this claim to the two years before its September 7, 2011 r…
Could taxpayers deduct motor-home loan interest even without Form 1098 or real-estate tax on the vehicle?
Yes. A lender did not have to issue Form 1098 because a motor home generally is not real property, and paying real-estate tax was not the test. The motor home contained sleeping space, a kitchen, and …
Could Virginia estimate a floor-covering dealer's sales tax from a prior audit when current records were inadequate?
Yes. The dealer supplied unsigned federal returns and monthly income statements but did not reconcile them to reported taxable sales or provide other valid data. Virginia therefore allowed the auditor…
Could Virginia keep an itemized-deduction adjustment after the IRS withdrew it and the ordinary assessment period expired?
No. Virginia could assess the unreported income change at any time because the taxpayer failed to report the final federal change, and the taxpayer accepted that part. But once the IRS withdrew its it…
Did federal qualified-funeral-trust treatment require Virginia to tax the trust at its lowest fiduciary rate?
No. Federal QFT status required a Virginia fiduciary return, but Virginia conformity did not import a federal lowest-rate treatment that conflicted with state law. Virginia taxed the trust's total Vir…
Did federal qualified-funeral-trust treatment require Virginia to tax the trust at its lowest fiduciary rate?
No. Federal QFT status required a Virginia fiduciary return, but Virginia conformity did not import a federal lowest-rate treatment that conflicted with state law. Virginia taxed the trust's total Vir…
Did one Virginia home-based salesperson create corporate-income and employee-withholding obligations for an out-of-state seller?
Corporate-income tax depended on the salesperson's actual duties. If all Virginia activity stayed within solicitation, ancillary activity, or de minimis conduct protected by P.L. 86-272, the seller wo…
Did Wendy's qualify for Virginia's related-member royalty add-back exception when its affiliate received unrelated royalties indirectly?
Yes. Oldemark owned Wendy's marks and received a 3% royalty through Wendy's, while Wendy's sublicensed the marks to related and unrelated restaurants at 4%. Because at least one-third of Oldemark's gr…
Did Virginia servers and a salesperson create income-tax nexus for an out-of-state online marketing company?
Apparently yes. Even if the salesperson stayed within protected solicitation, the company's Virginia-owned servers delivered online profiles and marketing services rather than merely supporting sales …
Could a grocery store overturn estimated tax and penalties after collecting sales tax but failing to file and remit it?
Not on the existing record. The store lacked sales and accounting records, so Virginia accepted an observation-based estimate and the taxpayer did not prove it unreasonable. The 50% fraud penalty rema…
Were management fees between an S corporation and tiered family partnerships exempt BPOL affiliated-group receipts?
No for fees involving the first- and second-tier partnerships. The commonly owned S corporations met the brother-sister affiliated-group test, but the S corporation and first-tier partnerships failed …
Did additional construction-business records reduce a couple's 2004 and 2005 Virginia income assessments?
Yes, in part. The appeal records still did not support the amounts originally reported, but they showed that the audit had allowed no construction-business expenses and justified revisions. Virginia a…
Could a Virginia day care center remove use tax from fixed-asset purchases by stating that sales tax had already been paid?
No. The day care center said sales tax had been paid on several fixed-asset purchases but provided no supporting documents. Because Virginia imposes use tax on tangible personal property used in the s…
Did an out-of-state part-year return change Virginia's finding that a taxpayer became domiciled in Virginia in May 2007?
No. The other state's part-year return confirmed that the taxpayer left that state in April 2007 but did not show where she established domicile afterward. Virginia retained its finding that she becam…
Could a Virginia resident employed by NATO exclude qualifying foreign earnings from 2010 Virginia taxable income?
Yes. The taxpayer documented that NATO—not a United States agency—employed her under a three-year contract as a NATO International Staff member throughout 2010. Virginia therefore allowed the IRC § 91…
Was a well-drilling truck rated at 26,001 pounds or more subject to Virginia retail sales and use tax?
No. Virginia held that a truck, tractor trailer, or semitrailer with a GVWR or GCWR of at least 26,001 pounds remained exempt from retail sales and use tax even though the motor vehicle sales and use …
Could a manufacturer replace a city's original-cost machinery valuation with the price paid in a bankruptcy sale?
Not automatically. Virginia held that the city's percentage-of-original-cost method complied with the machinery-and-tools statute, and a bankruptcy purchase price did not necessarily establish fair ma…
Could retired U.S. citizens abandon Virginia domicile by moving permanently to a foreign country?
Yes. U.S. citizenship did not prevent the couple from abandoning Virginia domicile and establishing domicile in a foreign country. Virginia found that the wife changed domicile when she moved there in…
How did Virginia allocate deductions and treat another state's National Guard pay when resident and nonresident spouses filed separately?
Virginia returned the itemized-deduction allocation for correction because the audit had included the nonresident spouse's combat pay in its proportional calculation. But the Virginia resident's State…
Did certification as a pollution-control facility exempt a Virginia landfill business from city BPOL tax?
No. Virginia held that Va. Code § 58.1-3660 exempts certified pollution-control real and tangible personal property from local property tax; it does not exempt the privilege of operating a business fr…
What Virginia tax interest rates applied during the second quarter of 2012?
Virginia's second-quarter 2012 rates were 5% for tax underpayments and 5% for overpayments. The reduced rate for qualifying assessments under administrative appeal was 0% after nine months until the D…
Must Virginia deed and grantor's tax use assessed value when it exceeds the sale consideration?
Not always. Recordation and grantor's tax use the greater of consideration or actual value, and assessed value carries a strong presumption of accuracy. But a circuit-court clerk may consider clear an…
Who qualified for Virginia's original Port Volume Increase Tax Credit, how was it calculated, and how did taxpayers apply?
Under these superseded 2012 guidelines, a manufacturer or distributor of manufactured goods generally had to own the cargo, use a Virginia port, and increase cargo volume at least 5% over its base yea…
When do disability-plan payments stop qualifying for Virginia's disability-income subtraction?
At mandatory retirement age. Before then, qualifying employer-plan payments for absence caused by permanent and total disability could support Virginia's disability-income subtraction, up to the statu…
Did a supplier have to collect Virginia retail sales tax on installed components included in a manufactured home's taxable sale price?
No, if the home remained tangible personal property on a temporary foundation, the components were included in its sales price subject to motor vehicle sales and use tax, and the supplier held a valid…
Were bidis cigarettes for Virginia tax purposes, and could an unlisted brand trigger the 500% contraband penalty?
Yes. Virginia found that bidis contained nicotine and functional tobacco, were burned in ordinary use, and looked and were packaged like cigarettes, so they met the cigarette-tax definition. Because t…
Could a Virginia resident exclude New York wages from Virginia income or claim credit without supplying the New York return?
The wages were not excluded. Virginia could tax all income of its resident, including New York earnings. The taxpayer could potentially claim an other-state credit, limited to the lesser of New York t…
Did a military spouse have to marry or live with the servicemember in their domicile state to receive Virginia's 2009 spouse exemption?
No. The marriage location and the fact that the couple had not lived together in their domicile state did not control. The spouse proved she shared and maintained the servicemember's State A domicile …
Did an Arlington County court hold that the Gardiners were entitled to Virginia's other-state income-tax credit?
Yes. The Arlington County Circuit Court granted the Gardiners' motion for summary judgment, denied the Virginia Department of Taxation's cross-motion, and declared that the Gardiners were entitled to …
Could a couple defeat a 1999 Virginia assessment by asserting that they had filed a return when the Department had no record of it?
Not without evidence. Virginia had the couple's federal transcript and Forms W-2 but no record of a 1999 Virginia return, so their assertion that they had filed did not justify abatement. The Departme…
Were a Virginia telephone cooperative and its taxable subsidiary exempt from Virginia corporate income tax?
Not on the submitted record. A Virginia-chartered telephone company operating exclusively as a local mutual association without accumulating profits or paying dividends could qualify for the statutory…
Did owning and renting residential property make a Virginia taxpayer liable for litter tax?
No. Virginia's litter tax applied to manufacturers, wholesalers, distributors, and retailers of listed products. The taxpayer only owned and rented residential property and did not produce or sell tho…
What annual cap applied to Virginia Land Preservation Income Tax Credits issued during calendar year 2012?
Virginia set the calendar-year 2012 Land Preservation Income Tax Credit cap at $111,054,000. The Department calculated that the relevant CPI-U average was about 11.05% above the 2006 base period. This…
Could an ice cream shop use Virginia's reduced food tax rate for food sold for immediate consumption?
No. Ice cream shops could use the reduced rate for eligible food for home consumption, regardless of retailer type, but food and beverages sold for immediate consumption remained fully taxable. Virgin…
Could a military spouse claim the servicemember's State A domicile when her own records showed State B domicile?
No. The spouse's State B home, homestead exemption, vehicle registrations, and prior federal and Virginia filings showed that she established State B domicile before the marriage. She did not prove St…
Was filling a scuba tank with compressed air a taxable sale of property or a nontaxable service in Virginia?
It was a taxable sale of tangible personal property. Filtering and compressing air with specialized machinery made it measurable and perceptible, and the customer's true object was obtaining compresse…
Were missionaries domiciled abroad Virginia residents for 2007 because they kept Virginia ties?
No. Considering all the evidence, Virginia found the couple had established domicile in the foreign country in 1993 and had not abandoned it, despite a Virginia house, family address, voter registrati…
Did buying and using another state's transferable tax credit count as tax actually paid for Virginia's other-state credit?
No. Virginia treated both earned and purchased credits as reductions of another state's liability, not actual tax payments. Even if the transferable credit was property, its use was limited to the tax…
When were Virginia software-license renewals and electronically delivered upgrades taxable?
A renewal of prewritten software originally delivered by CD, DVD, or other tangible media was taxable. A custom-program renewal was exempt, and a prewritten-program renewal was exempt when the origina…
How did Virginia's advance to December 31, 2011 federal conformity affect 2011 income tax returns?
Virginia advanced its fixed conformity date from December 31, 2010 to December 31, 2011 for tax years beginning in 2011. It still required specified adjustments for bonus depreciation, five-year NOL c…
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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.