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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How did Virginia treat a multistate maintenance contract, late exemption certificates, professional services, and post-amnesty penalties?
Virginia removed the support-contract portion covering equipment permanently outside the state but taxed the Virginia equipment portion. It rejected a late ISP certificate without proof of the full st…
How did Virginia tax an internet cafe's phone-access cards, complimentary food, estimated assets, and equipment or software fees?
Virginia taxed access cards advertised for both telephone and Internet use because telephone calling cards were tangible personal property and the cafe did not prove Internet-only sales. Complimentary…
Must a corporation add back Kentucky's Limited Liability Entity Tax when computing Virginia taxable income?
No. Kentucky's Limited Liability Entity Tax was measured by gross receipts or gross profits and excluded most ordinary business expenses, so Virginia did not treat it as a tax based on or measured by …
Could a vendor exempt sales to federal prime contractors without timely certificates, contract statements of work, or reviewable classified records?
Not on assumptions alone. Thirty-one unclassified-contract sales lacked resale certificates and remained taxable unless the vendor used a final 120-day evidence period to prove resale or another exemp…
Which healthcare affiliates had Virginia BPOL filing duties, and where were their service receipts sitused?
Each Virginia affiliate with office space, property, records, phone, mail, and public business presence had a definite place of business and would file if its locality taxed the activity. Affiliates w…
Was a separated spouse liable for a joint Virginia return her spouse electronically filed without her agreement?
No. Virginia did not generally adopt the federal innocent-spouse provision, and spouses who actually file jointly are each liable for the full return. But the evidence showed that this taxpayer never …
Which 2011 tax rate applied to setup components sold with a manufactured home versus sold later?
Setup components attached to or bought at the manufactured home's initial sale, becoming an integral part and included in its sales price, used the then-3% motor-vehicle sales-and-use-tax rate. Compon…
Were machines testing raw pouch film and completed sanitary products exempt production-line quality-control equipment?
Yes. Testing raw film after plant-site storage counted as handling raw material within production, even though the tensile tester stood behind the main machine. Testing bagged sanitary products for me…
Were breast implants used for augmentation exempt as prosthetic or durable medical devices?
No, not for the augmentation uses assessed. Virginia had already excluded implants purchased for qualifying reconstructive surgery. The contested implants enlarged underdeveloped breasts, restored vol…
Which mortgage, charitable, mileage, uniform, and professional-dues deductions survived Virginia's documentation review?
Virginia adjusted second-mortgage interest to the documented amount and allowed donated furniture, books, tools, electronics, and other items individually worth $500 or less with proper receipts. It d…
Did two employees living in Virginia create corporate income-tax nexus when they performed all work under an out-of-state contract?
No. The corporation had two Virginia-resident employees and registered for wage withholding, but it had no Virginia property, sales, service contracts, or employee activity. Both employees performed t…
Was AMG National Trust Bank subject to Virginia bank franchise tax rather than corporate income tax?
Yes. The Norfolk Circuit Court held that AMG was a bank under the Virginia Bank Franchise Tax Act, subject to bank franchise tax and exempt from corporate income tax. It ordered refunds of all corpora…
Could a multistate partnership use separate accounting for Virginia real-estate investments instead of the statutory apportionment formula?
No. A different result under separate accounting did not prove that Virginia's statutory formula was unconstitutional or inequitable. The partnership supplied no clear and cogent evidence of gross dis…
Which graphic-printing audit items did Virginia remove after reviewing late certificates, invoices, shipment records, and customer facts?
Virginia removed line items 2, 5, and 6 because records showed out-of-state shipments or an art charge tied to those shipments, and removed items 35 and 43 because customer information supported resal…
Could a taxpayer overturn years of Virginia assessments by claiming he had no federal adjusted gross income under his reading of federal law?
No. Appeals for 1995, 1996, 1998-2001, and 2005 were filed after Virginia's 90-day deadline and were barred. The 2007 appeal was timely, but the taxpayer admitted receiving income and supplied no obje…
Did an entire spray-paint booth qualify as exempt manufacturing equipment because it controlled finishing conditions?
No, not as a complete unit. The booths created controlled temperature, humidity, drying, dust, and contaminant conditions, but ordinary walls, floors, and ceilings did not play an immediate production…
Was inbound freight from furniture manufacturers exempt when separately passed through to customers, and was a mail-based sample audit valid?
The inbound freight was taxable. Virginia's separately stated transportation exemption covered delivery from the seller to the final purchaser, not shipping from a manufacturer to the dealer or its wa…
Could a Virginia National Guard captain claim combat, extended-active-duty, and Guard-pay subtractions without deducting the same income twice?
Yes, multiple military subtractions could apply, but the same income could not be subtracted twice and only compensation included in FAGI was eligible. Virginia kept the basic-pay calculations, allowe…
Could a tire dealer avoid tax on disposal fees because Department staff later gave incorrect verbal and online guidance?
No. Virginia's published 1994 bulletin required sales tax on tire-disposal fees connected with tire sales, even when separately stated. The dealer had no written proof of the alleged verbal advice dur…
Were a water utility's treatment purchases exempt because they processed water or because Virginia Health required them?
Direct-use treatment items could be exempt, but a government mandate alone was not enough. After repeal of the broad public-service-corporation exemption, chemicals, machinery, tools, equipment, and s…
Were a water utility's treatment purchases exempt because they processed water or because Virginia Health required them?
Direct-use treatment items could be exempt, but a government mandate alone was not enough. After repeal of the broad public-service-corporation exemption, chemicals, machinery, tools, equipment, and s…
Did a husband become domiciled in Virginia because he spent substantial time there caring for his ill wife?
No. He kept an out-of-state driver's license, vehicles, voting, residence, and federal-return address, while his extended Virginia stays were tied to his wife's medical treatment. Although he maintain…
Was an interstate trust bank exempt from Virginia corporate income tax when it was subject to the bank franchise tax but had no approved apportionment method?
Yes. The Norfolk Circuit Court held that AMG was a bank subject to Virginia's bank franchise tax and therefore exempt from corporate income tax, even if its bank-franchise-tax liability was currently …
Could a contractor buy school construction materials tax-free using the locality's exemption form and purchase-order instructions?
No. The contractor permanently installed materials into school real property and was their taxable user, not a reseller. It supplied no proof that the school system officially appointed it as purchasi…
Were separately stated labor charges for installing movable home-theatre systems subject to Virginia sales tax?
No. The home-theatre systems were taxable sales of tangible personal property, but the disputed invoice lines represented installation of that equipment. Virginia's regulation exempted separately stat…
Could invoice lines labeled shipping and handling be exempt if they actually represented only common-carrier delivery?
Potentially, but documentation was required. A lump-sum charge combining exempt transportation-out and taxable handling was generally fully taxable, while vendor or carrier records could segregate or …
Could an advertising company remove separately stated services, invalidate the audit sample, or limit review to three years after not filing returns?
No. The audited invoices did not prove exempt advertising for specific media campaigns; several sample invoices were not in the exceptions, and the disputed ones involved taxable tangible property or …
Could Virginia Taxation hear a business's direct BPOL and BTPP appeal when no complete final local appeal covered the disputed years?
Not yet. The business's 2011 correspondence did not identify specific BTPP years and amounts and no final county determination existed, while the 2010 BPOL protest remained locally pending and the cou…
Did an out-of-state employer owe Virginia withholding for employees working in Virginia, and could a self-created document pay the assessment?
Yes, withholding was required because employees performed services for wages in Virginia, regardless of the employer's out-of-state location. After the proprietor filed no returns and refused record a…
Could a full-year Virginia resident and part-year-resident spouse claim a credit for tax paid on wages earned in another state?
Yes. The couple supplied the other-state return, and wages or business income taxed by both states could qualify. The credit was limited to the lesser of the other-state tax actually paid or Virginia …
Did attending college, working part time, and filing a resident return in another state end a student's Virginia domicile?
No. The student attended college, worked part time, received statements, and filed a resident return in the other state, but excluded investment income from that return in a way that raised doubt abou…
Did employment and utility bills in another state prove domicile there while the taxpayer kept Virginia licenses, vehicles, and a home under construction?
No. Employment and utility bills supported presence in the other state, but the address had been reported as rental property, no 2007 federal return established a permanent abode there, and the Virgin…
Could a military spouse claim the 2009 Virginia exemption when both spouses had established Virginia domicile before moving back to another state?
No. Both spouses had established Virginia domicile through their condominium, licenses, voter registrations, and vehicle ties, and no evidence showed another domicile before December 2009. The refund …
Were separately charged pumping services taxable when supplied with rented portable toilets, and did the taxpayer prove its claimed rental exemptions?
Pumping the taxpayer's rented portable toilets was taxable because it was inextricably tied to the lease, even when separately stated. Pumping campers or customer-owned toilets was not taxable. Virgin…
Were specialized HVAC equipment and a backup generator fixtures taxed as real estate, or tangible personal property subject to local BTPP tax?
The generator and transfer switch were taxable BTPP because their stated need and primary use for the taxpayer's technical operations showed an intent to treat them as personal property. The HVAC evid…
Did buying a home and spending most of the year abroad establish a new domicile when the taxpayers kept extensive Virginia business and personal ties?
No. Although the taxpayers bought a foreign home and spent most of 2007 and 2008 there, they returned for long periods to run Virginia businesses, renewed Virginia licenses, kept registered vehicles, …
Was a prepaid phone card subject to Virginia's prepaid wireless E-911 fee when one price covered both landline and wireless calls?
Yes. The cards supplied prepaid wireless service subject to the fee and landline service not subject to it for one nonitemized charge. Under Virginia's 2010 guidelines, that combined purchase was subj…
Could a military spouse claim Virginia's 2009 exemption after obtaining Virginia licenses, vehicle registration, and voter registration?
No. Virginia found that by 2008 she had abandoned relevant connections with the service member's home state and established Virginia domicile through her license, vehicle, voter registration, residenc…
Did a taxpayer establish domicile abroad with her transferred spouse when she kept a Virginia home and commuted to an adjacent-state employer?
No. Although she sold the prior home and traveled abroad with her spouse, she owned and used a Virginia home, registered a vehicle, renewed her Virginia license, and spent more days in Virginia than a…
Did the taxpayer prove that three software purchases were electronically delivered without any taxable tangible medium?
Only in part. Two Vendor 1 items remained taxable because the records did not prove electronic delivery was the sole method: one transaction referenced a CD and ground shipment, and the other lacked a…
Could a corporation carry 2004-05 net operating losses forward without attaching Virginia elections, or offset later assessments after refund deadlines expired?
No. Virginia required a statement with each original loss-year return to elect out of the carryback period; later conduct did not substitute for that election. Because no statements were attached, the…
Were a manufacturer's pollution-control and recycling equipment and capitalized replacement costs properly included in local machinery-and-tools tax?
The fines bin was machinery and tools because it collected waste wood used to power and heat the plant. The pollution-control equipment could also qualify if its waste supplied plant power, but the re…
Was a person domiciled in another state still a Virginia resident after living and working in Virginia for 190 days?
Yes. Although the taxpayer remained domiciled in another state, he lived and worked in Virginia for 190 days in 2007. Because he maintained a Virginia abode for more than 183 days, he was an actual Vi…
Did foreclosure-related loss of records excuse taxpayers from substantiating itemized and vehicle-expense deductions?
No. Virginia upheld the 2007 and 2008 assessments because the taxpayers did not provide enough support for their itemized, employee-vehicle, and business-truck deductions. Losing records during a late…
Could Virginia disregard a final IRS income adjustment because the taxpayer said the return preparer made the underlying error?
No. Once the IRS adjustment became final, Virginia used the resulting federal figures and would not revisit the taxpayer's claim that a preparer mishandled an education-expense deduction. Because the …
Could a restaurant use Virginia's reduced food rate for hot takeout meals after collecting the full rate from customers?
No. Hot meals and beverages sold for immediate consumption did not qualify as food for home consumption merely because customers took them away or reheated them. The restaurant collected the full 5% t…
Did a letter and amended pass-through return satisfy Virginia's duty to report an IRS change to an individual's income?
No. The taxpayer's letter and amended pass-through entity return did not provide enough information to recompute the individual's Virginia tax and did not replace the required amended individual retur…
Did the Servicemembers Civil Relief Act exempt a military spouse who had established her own Virginia domicile?
No. Virginia denied the refund because the spouse's conduct showed that she had abandoned her prior-state domicile and established a separate Virginia domicile. Her Virginia voter registration, Virgin…
What state and local tax legislation did Virginia's Department of Taxation summarize for the 2011 General Assembly session?
This was a broad historical guide, not a taxpayer-specific ruling. It summarized 2011 legislation through the April 6 reconvened session, including electronic filing and delivery rules, fixed-date IRC…
When did Virginia tire installers have to collect the tire recycling fee, and what rate applied after July 1, 2011?
Beginning July 1, 2011, a Virginia tire installer working under an agreement with a tire retailer that had not collected the retail sales and use tax also had to collect and remit the tire recycling f…
Did Virginia's railway common-carrier exemption cover locomotive cab heaters and a voice event recorder?
The cab heaters were exempt because they repaired or replaced locomotive components and were indispensable and immediately used in safe transportation. The voice event recorder and its repairs were ta…
What 2011 Virginia exemptions applied to small sales of eggs and farm products at farmers markets and roadside stands?
Effective July 1, 2011, qualifying small producer sales at farmers markets and roadside stands were exempt when annual sales there did not exceed $1,000 and the product and egg-source conditions were …
Did attending college, voting, paying in-state tuition, and interning in another state end a student's Virginia domicile?
No. Virginia found that the student had not clearly abandoned his Virginia domicile. His out-of-state tuition status, voting, internship, and part-year return supported a change, but college housing a…
Could taxpayers offset a 2006 Virginia assessment with a late 2005 refund after the IRS shifted passive losses between years?
Mostly no. Because the taxpayers did not amend their 2005 and 2006 Virginia returns within one year after the final IRS change, Virginia would not offset the 2006 assessment with the otherwise related…
What dealer discount applied to Virginia Tobacco Products Tax returns beginning with the June 2011 return?
Virginia reinstated the 2% dealer discount for accounting for and remitting the Tobacco Products Tax, beginning with the June 2011 monthly Form TT-8 return due July 20, 2011. The bulletin updated the …
When did Virginia treat a tax return or payment sent by commercial delivery service as timely filed?
Effective July 1, 2011, Virginia treated state and local tax returns and payments sent by a recognized commercial delivery service like U.S. mail when they were in a sealed envelope or container beari…
Could a city split a multioffice service business's BPOL receipts 50/50 with a county when the taxpayer's records did not verify situs?
Not on the record presented. Virginia remanded the case because neither the business nor the city conclusively established where the service receipts belonged, the corporate income-tax sales factor wa…
What Virginia tax interest rates applied during the third quarter of 2011?
Virginia's third-quarter 2011 rates were 6% for tax underpayments and 6% for overpayments, reflecting corresponding 4% federal rates plus two percentage points. Taxpayers with a June 30, 2011 year-end…
Could a taxpayer deduct mortgage interest when the deed, mortgage records, and Form 1098 did not clearly distinguish him from his identically named father?
Not on the evidence submitted. Because the taxpayer and his father had the same name, the deed and payment records did not establish which man owned the home or owed the mortgages, while Form 1098 use…
Could Virginia residents claim the out-of-state tax credit for D.C. unincorporated business franchise tax paid by a single-member consulting LLC?
No. Virginia reaffirmed its longstanding position that the District of Columbia unincorporated business franchise tax did not qualify for the Va. Code § 58.1-332 credit. The Tax Commissioner declined …
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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.