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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Which Virginia tax applied to an unlimited 30-day cellular plan funded directly or with retail-taxed prepaid calling cards?
An unlimited 30-day voice and text plan was generally subject to the Communications Sales and Use Tax because it was not sold in predetermined units or dollars that decreased with use. Retail sales ta…
Could parents deduct contributions to custodial Virginia college-savings accounts when the children, not the parents, owned the accounts?
No. Virginia's deduction required the contributor to be listed as the savings-account owner. The applications created UGMA/UTMA custodial accounts with the children as beneficiaries and the wife only …
Which charges were taxable when a wholesaler rented beverage-gas tanks and sold carbon dioxide or nitrogen for drinks?
Tank and container rentals were taxable. Carbon dioxide and nitrogen that became part of fountain drinks or beer could be sold exempt with a valid resale certificate. If rental and gas charges were no…
How did Virginia sales tax apply to automotive core charges, later core returns, exchanges, and partial refunds?
All core charges were taxable when imposed because they were part of the sales price. Tax was refundable when the part and core charge were fully refunded, proportionally refundable with a partial par…
Did Virginia use tax apply to equipment rentals when a Tennessee vendor charged tax but the contractor took possession in Virginia?
Yes. Each rental agreement was taxed where the contractor took possession when that agreement was made. Seven agreements identified Virginia pickup locations, so Virginia tax applied despite Tennessee…
When did Virginia retail sales and use tax apply to dyed diesel and other fuel not subject to the Virginia Fuels Tax?
Retail sales and use tax generally applied to fuel not subject to the Virginia Fuels Tax, including dyed diesel and other nonhighway fuel, unless a specific exemption and valid certificate applied. De…
Could an affiliated corporate group elect combined Virginia returns beginning with its first full taxable year in 2009?
Yes. The taxpayer and its Virginia affiliate became an affiliated group in May 2008, but 2009 was the first full taxable year in which the group was subject to Virginia income tax. They could elect co…
Could a corporate officer avoid personal tax liability because an accountant incorrectly advised that the dissolving corporation owed no tax?
No. The president and sole shareholder knew a final return was required, paid other creditors and himself, reserved no funds for tax, and wound up the corporation. Virginia found the nonpayment volunt…
Was a 1996 Virginia refund claim timely when the amended return was filed in 2000 but the IRS accepted the NOL carryback in 2007?
Yes, on the specific facts. The taxpayers filed the federal and Virginia amended returns in January 2000. Virginia delayed processing while the IRS reviewed the net-operating-loss carryback; the IRS u…
Could a Virginia resident claim credit for New York tax on salary earned while telecommuting from Virginia for a New York employer?
Yes. New York taxed the salary under its convenience-of-the-employer rule and did not credit Virginia tax, while Virginia law did not prohibit its own resident credit. Virginia allowed a credit for th…
Was a taxpayer domiciled in Virginia for 2005 because he had obtained a Virginia driver's license and registered to vote?
No. The taxpayer had lived abroad since 2003, his child lived and attended school there, he owned no Virginia property, and he reported self-employment income as foreign earned income using the foreig…
Did spouses establish domicile outside Virginia for 2005 despite keeping Virginia licenses, vehicle registrations, and withholding?
Yes. After their Virginia employer failed, the spouses filed bankruptcy, lost their Virginia home, rented a permanent home in another state, received financial documents there, and sought work there a…
Were dental crowns, cements, sealants, resins, and similar products exempt as prescription or nonprescription drugs?
Generally no. Virginia relied on FDA classification: items classified as medical devices did not qualify for the prescription or nonprescription drug exemptions merely because they contained drugs or …
Was a custom digital orthophotograph taxable because the completed image was delivered on a CD?
No. The true object was the professional photogrammetric work—flight, photography, triangulation, scanning, geometric correction, and production of the digital image—not the CD used to deliver it. Vir…
Did a real-property contractor owe use tax when vendors failed to separately charge tax on materials, pumping, countertops, and government-job purchases?
Yes. A real-property contractor was the user and consumer of materials used in its contracts and had to accrue use tax when vendors did not collect it. Unsupported statements that tax was included or …
What enforcement rules and penalties did Virginia's 2010 cigarette-tax guidelines establish for unstamped and contraband cigarettes?
The guidelines required stamping agents to stamp cigarettes before shipping them to Virginia wholesalers or retailers and set escalating unstamped-pack penalties for agents and other persons: $2.50 pe…
Could a fiscal agent file Virginia income-tax withholding in aggregate for thousands of consumer-directed home-care employers?
Yes, conditionally. Virginia allowed the fiscal agent to file one aggregate withholding return only if it was also permitted to file aggregate federal withholding and the unified Virginia filing cover…
Could taxpayers obtain refunds for long-term-care premium deductions claimed on late 2003 and 2004 amended returns and a missing 2006 return?
The 2003 and 2004 refunds were barred because the amended returns were filed after Virginia's three-year deadline, and a later policy change did not extend that period. The Department lacked authority…
Did retired spouses establish domicile outside Virginia despite lengthy return visits and a Virginia-registered automobile?
Yes. The spouses sold their Virginia home, established a permanent home in another state, registered and voted there, moved or disposed of their vehicles, obtained that state's driver's licenses, and …
Could Virginia proportionally allocate deductions and a dependent exemption between a resident spouse and a nonresident servicemember?
Virginia had to restore the dependent exemption because the spouses had mutually assigned it to the resident spouse, so it was separately accounted for. But Virginia correctly allocated untraced itemi…
Did a taxpayer establish foreign domicile by 2006 despite retaining an unrenewed Virginia driver's license and automobile?
Yes. The taxpayer moved abroad in 2002, pursued an advanced degree as part of obtaining permanent status, secured permanent employment, leased a home, bought a local car, sold her Virginia rental prop…
Did a taxpayer remain domiciled in Virginia while living abroad on a renewable temporary work permit during 2006?
No. The taxpayer sold his Virginia home and cars, moved his family and property abroad, held a renewed apartment lease and work permit, obtained foreign licenses and a vehicle, joined local organizati…
Did nonresident partners have Virginia-source income from a Virginia limited partnership, and could prior losses offset the 2005 income?
Yes, the husband had Virginia-source pass-through income because the limited partnership held assets and conducted business in Virginia, and partnership items retained their source and character when …
Were a nonprofit children's museum's birthday-party packages taxable sales of property or exempt service transactions?
They were exempt service transactions. Under the true-object test, customers bought the facilitated museum birthday experience, not the decorations, craft supplies, goodie bags, or other property incl…
Could a sheet-metal contractor overturn an audit sample, obtain credits, or limit the audit period based on alleged Department advice?
No. The contractor did not prove that the audit sample was unrepresentative, that it was entitled to credits for tax paid on items later sold, or that it had received qualifying erroneous written advi…
Did a communications-equipment seller prove that Virginia's three-month audit sample was flawed or that a detailed audit and more customer-use-tax credits were required?
No. The taxpayer selected a block sample instead of the Department's broader Invoice Capture Tool procedure and did not prove that the three-month sample was unrepresentative or flawed. A detailed aud…
Could Virginia recover a refund created when federal refund offsets were credited to a taxpayer and later reversed?
Yes. Federal refund offsets were temporarily credited to the taxpayer after his older Virginia assessments had been abated, producing refund checks that he cashed. The federal government later reverse…
Did affiliated bankruptcy-remote receivables companies have Virginia corporate-income-tax nexus or Virginia-source income?
On the stated facts, the bankruptcy-remote receivables companies did not appear to have Virginia nexus. Under Virginia's regulatory cost-of-performance method, they also had no Virginia property, payr…
Was a computer fee taxable when computers were supplied with online tutorial services, and who owed tax on the computers?
The fee charged to educational institutions was not taxable because the true object was online tutorial service and students could use another computer. But the provider was the taxable user and consu…
Did Virginia tax apply when vendors shipped goods directly to a company's franchisees outside Virginia under out-of-state delivery contracts?
No. The contracts required delivery to recipients outside Virginia, and the transactions were not completed until the goods were physically delivered there. Virginia agreed that those sales qualified …
Were exemption certificates alone enough to support a retailer's exempt sales, and were cardboard roof protectors exempt packaging?
No on both issues. Properly completed exemption certificates did not eliminate the retailer's duty to provide transaction records showing that the purchases qualified, including whether exempt-organiz…
Which purchases qualified for Virginia's manufacturing exemption in a furniture manufacturer's use-tax audit?
Virginia granted limited adjustments but upheld most contested tax. Items merely essential, facilitative, used for maintenance, or used after production were not directly used in manufacturing; in-hou…
Could reservation residents subtract the husband's interest, dividends, and pension when the sources were outside the reservation?
No. Virginia protected income earned solely from pursuits on the reservation, not investment income from outside banks, funds, and corporations or a pension generated by off-reservation employment. Wr…
Could reservation residents subtract the wife's wages, investment income, and pension from Virginia income?
The investment and pension subtractions were denied: outside banks and investment providers produced off-reservation income, and the pension arose from off-reservation employment. The wife's temporary…
Could a Virginia reservation resident subtract interest, dividends, and a pension tied to off-reservation employment?
No. Virginia's policy protected income earned by a reservation resident solely from pursuits on that reservation, but not income from outside institutions or off-reservation employment. The taxpayer's…
When did the Fairfax County Circuit Court say a dealer acted in good faith when accepting a sales-tax exemption certificate?
The court said a dealer could establish good faith and reasonable care if the certificate facially covered a potentially exempt use, or if the dealer's actual knowledge reasonably supported the purcha…
Were spouses who moved out of Virginia in February 2007 full-year residents, and how did they report income before and after the move?
No. The couple proved they spent fewer than 183 days in Virginia and established a new domicile when they bought and moved into an out-of-state condominium in February 2007, followed by other abandonm…
Did one executive's Virginia home office create a definite place of business and BPOL-taxable receipts for a foreign online-game company?
Apparently not on the facts presented. Although an executive continuously worked from a Virginia home office, the foreign online-game company did not hold itself out as operating there, and most busin…
Could a surviving annuitant claim Virginia's disability-income subtraction when the recipient was not permanently and totally disabled?
No. Although the husband received payments reported as disability income after his disabled former spouse died, Virginia required the taxpayer claiming the subtraction to be absent from work because o…
Did Virginia's forest-products harvester exemption cover equipment and supplies used by a woodland-renovation land-clearing business?
No. Virginia's agricultural statute did not create a general exemption for farming-related work. The forest-products provision covered persons engaged in severing forest products for sale or for use i…
Did Virginia's occasional-sale exemption apply when equipment moved from a liquidated company through an owner to a successor business?
Mostly. Virginia treated the transfers as sales, but the owner's transfer of four documented pieces of equipment to the successor business qualified as an occasional sale because the owner did not use…
Was a communications provider the taxable user of customer-premises equipment even though it separately charged customers tax on equipment leases?
Yes. The customers' true object was communications service, not the equipment, so the provider was the taxable user of equipment capitalized and used to deliver that service. The separate communicatio…
Did retaining an unrenewed Virginia driver's license make a Foreign Service officer and spouse Virginia domiciliaries after they left the state?
No. The couple had established Virginia domicile while living and working there from 2001 to 2003, but they abandoned it when the officer transferred overseas, they gave up their apartment, the spouse…
Did spouses who established another-state domicile still owe Virginia tax on the husband's salary for days he worked in Virginia?
Yes. Virginia accepted that both spouses had changed domicile to another state for 2006 despite retaining a Virginia home, licenses, voter registrations, and one vehicle. But the husband worked in Vir…
Did valid resale exemption certificates protect a Virginia dealer from tax on paper and office-supply sales to two customers?
Yes. The dealer timely received signed resale certificates containing the information Virginia law required, and the certificates stated that purchases were for resale unless a purchase order said oth…
Were lump-sum charges for electrostatic powder coating of customer-owned products taxable fabrication in Virginia?
Yes. Virginia treated electrostatic powder coating embedded by heat as fabrication that changed the form or state of customer-owned tangible property. The full lump-sum labor-and-material charge was t…
Did plastic strapping used to secure lumber bundles for shipment qualify as exempt packaging or property bought for resale?
No. Virginia narrowly defined packaging as placing goods in a package or container. Plastic strapping merely wrapped and restrained lumber bundles for transport, making it a taxable transportation dev…
Did a microarray scanner used only to study competing technology and develop a new scanner qualify for Virginia's R&D exemption?
Yes. The manufacturer did not use the purchased scanner in manufacturing or administration. It analyzed the scanner's technology solely to help develop its own comparable product. Virginia treated tha…
Could Virginia estimate restaurant cash sales and untaxed purchases when the operators' records were missing or unverifiable?
Yes. Missing register tapes, sales logs, bank statements, and purchase records allowed Virginia to reconstruct the restaurants' liabilities from the best information available. The credit-card-based c…
Did invoice language saying tax was included relieve a flooring contractor from use tax when the vendor did not separately state or remit Virginia tax?
No. The invoices said tax was included but did not separately state a Virginia sales-tax charge, the seller was not registered to collect Virginia tax, and no evidence showed remittance. The contracto…
Was an installer of athletic floor tiles and other permanently installed property a retailer or a using and consuming contractor in Virginia?
Virginia treated the installer as a using and consuming contractor. It did not maintain the retail or wholesale place of business and inventory required for retailer treatment, and it sold no products…
Could a Virginia contractor exclude receipts earned in other localities from the BPOL tax base of the county containing its principal office?
Only with supporting evidence. The contractor had not proved a continuous physical presence creating a definite place of business at its out-of-county worksites. It received 30 days on remand to docum…
How did Virginia sales tax apply to supermarket rewards, retailer-funded discounts, nominal prices, and manufacturer-funded coupons?
Retailer-funded rewards generally reduced the taxable sales price. A free item earned through qualifying purchases was not taxed again at redemption, reward tickets and points worked like retailer cou…
Could a permanently disabled Virginia taxpayer subtract third-party sick pay reported as wages on Form W-2?
No. Although the taxpayer was permanently and totally disabled, the insurer reported the payments as wages on Form W-2. Virginia classified them as temporary sick pay, not qualifying disability income…
Did a Virginia orthopaedic-implant seller owe use tax on instrument kits removed from resale inventory and provided free to hospitals?
It depended on the hospital. Instrument kits removed from resale inventory and donated to a § 501(c)(3) organization were exempt. If a hospital lacked that designation, the seller owed use tax on the …
When could a Virginia government contractor buy property tax-free as the government's purchasing agent?
Only when the contractor was officially designated to buy in the government's name and the government's credit was directly bound to vendors. The documents and actual conduct had to make the governmen…
Could individual owners claim Virginia's recyclable-materials processing equipment credit for equipment purchased by a business in 2005?
Not on the 2005 individual return. Virginia's authority for individuals to claim the credit had expired after 2003, and pass-through eligibility did not return until tax years beginning in 2008. The a…
Could Virginia attribute related-company management fees and embedded royalties directly to nonresident owners on their individual returns?
Not by the audit method used. Virginia said § 58.1-446 addresses corporate adjustments and did not support attributing the full management fees directly to the individual owners. The at-cost managemen…
Did a professional athlete abandon Virginia domicile by obtaining another state's license and voter registration while training and playing elsewhere?
No. Virginia found that the couple remained domiciliary residents for 2004-2006. The husband's other-state driver's license, voter registration, training, and four-month lease did not outweigh the Vir…
Was a corporation's president and sole owner personally liable as a responsible officer for unpaid Virginia corporate income tax?
Yes. Virginia found that the president and sole owner had authority over tax filings and payments, knew the 2006 tax was due, and did not prove that funds or control were unavailable. Her history of s…
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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.