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 an out-of-state company that furnished and installed fences in Virginia a retailer required to collect Virginia sales tax?
Yes. The company met Virginia's retailer criteria for fence sellers and had enough Virginia activity to register and collect tax. Its other-state contractor theory and tax-credit claim lacked proof. T…
Was a parts-and-labor maintenance contract for machinery used directly in manufacturing exempt from Virginia sales tax despite a late exemption certificate?
Yes. The exemption certificate obtained after the contract sale was not valid for that transaction, but Virginia independently confirmed that the contract serviced exempt machinery used directly in ma…
Did a Virginia property owner receive recordation-tax refunds when a deed to a relative was followed by foreclosure the next day?
Only in part. The deed validly conveyed valuable rights when recorded, so the state and local tax based on property value was not refundable merely because foreclosure followed the next day. But Virgi…
Could an ice cream parlor keep the difference after collecting Virginia's general sales tax rate but filing returns at the reduced food rate?
No. Although an ice cream parlor could charge the reduced rate on eligible food packaged for home consumption, this business actually collected the general rate and remitted only the reduced-rate amou…
Could a full-time worker subtract Civil Service Retirement System disability payments on a Virginia return?
No. A claimant had to receive disability income and be absent from work because of permanent and total disability. The taxpayer worked full time in competitive retail-food employment, performed ordina…
Could taxpayers deduct Schedule C expenses for an information technology activity that won no contracts, kept no separate books, and included personal purchases?
No. Virginia upheld the assessments because the taxpayers did not operate the information technology activity in a businesslike manner and claimed personal expenses as business deductions. They won no…
Could taxpayers deduct both the expenses of a construction business and the cost of renovating and landscaping their personal home?
Only in part. Virginia found that the wife's construction company was operated for profit, so eligible business expenses could be claimed. But renovation and landscaping costs for the taxpayers' perso…
Which subcontractor-furnished landscaping, concrete, and refrigeration items remained taxable in a Virginia general contractor's audit?
Virginia partly revised the audit. Landscaping subcontractors performing real-property work were the taxable users of installed plant and irrigation materials, so those items were removed. Concrete en…
Did a parent's purchase and accounting transfer of equipment to its subsidiary count as one Virginia sales-tax transaction?
No. The vendor sale to the parent and the parent's transfer to its subsidiary were separate transactions because intercompany accounting entries were consideration. The parent could buy the equipment …
Did a taxpayer establish a new domicile outside Virginia despite retaining a Virginia home, license, vehicles, and voter registration?
Yes. Although the taxpayer retained several Virginia ties, he lived and worked in the other state with his wife, used that address for federal tax and financial records, claimed it for withholding, jo…
Could a Virginia contractor use its mining customers' exemption certificates for equipment used at mine, gas-well, and reclamation projects?
Not on the record provided. The contractor did not prove that the audited equipment was used directly in qualifying mining, gas, or legally required well-area reclamation activities. It also could not…
Did Virginia's occasional-sale exemption cover equipment transferred to a subsidiary in a corporate spinoff?
Yes. The transfer of all electronic-medical-records assets and equipment to a subsidiary for stock was a reorganization of the business and qualified for Virginia's occasional-sale exemption. The tran…
Could a restaurant overturn a reconstructed sales-tax audit after it deducted voluntary gratuities twice and disputed overpayment credits?
No. Virginia upheld the audit method because the restaurant repeatedly deducted voluntary gratuities twice and did not prove the reconstruction unreasonable. The auditor used tax collected, backed out…
Could a physician-owned medical corporation exempt bulk controlled-drug purchases when its invoices named only the corporation?
Not without more proof. Virginia's exemption could cover controlled drugs purchased for licensed physicians' professional use, including through qualifying physician-owned corporations. But these invo…
How did Virginia revise a ship repair facility's use-tax audit, and how could it recover sales tax paid to vendors on exempt property?
Virginia revised the paid audit to remove or credit several items and ordered a refund with interest. For separate sales tax paid to vendors on qualifying ship-repair property or nontaxable mobile off…
How did Virginia tax a nonresident's S-corporation income and wages after rejecting the auditor's intercompany pricing adjustment?
Virginia overturned the auditor's claim that the related companies' service fees improperly shifted income because the out-of-state S corporation had economic substance and charged comparable fees. Bu…
Did a panel seller provide enough evidence to remove set-up fees and sales allegedly picked up outside Virginia from its audit?
Only in part. Virginia removed documented set-up fees because they were construction services rather than retail panel sales. But it kept the sales-without-installation items because the invoices show…
Was a missionary domiciled in Virginia because she kept a Virginia driver's license, voter registration, bank account, and mailing address?
No. Virginia found that the taxpayer was domiciled in the foreign country during 2006. She had sold her former home and car, moved or stored her property, established a permanent home abroad, and rema…
Did a disabled taxpayer lose Virginia's disability-income subtraction by spending a few hours per week stocking an antique-shop stall?
No. Virginia found that the taxpayer's limited antique-stall activity was not substantial gainful activity. She spent only three to five hours per week obtaining and arranging inventory, worked irregu…
Did a couple who abandoned Virginia domicile still have to file Virginia returns because they owned rental real estate in the Commonwealth?
Yes. Virginia found that the couple abandoned their Virginia domicile in 2004 after moving for employment, selling their home, and establishing homes elsewhere. But because they continued to own Virgi…
Which servers, power, cooling, monitoring, software, security, and building items qualified under Virginia's 2010 data-center sales-tax exemption?
Most listed operational equipment qualified if used in a data center meeting the investment, job, wage, and memorandum requirements. Virginia treated computing, network, power, cooling, control, rack,…
Did a U.S. citizen living abroad become a Virginia domiciliary by using his parents' address and holding a Virginia license, voter registration, property interest, and vehicle?
No. Virginia found that the taxpayer remained domiciled abroad in 2005. He had lived there for decades, maintained a permanent home and license there, worked there full time, and visited Virginia for …
Could taxpayers obtain a Virginia refund more than one year after an IRS closing agreement by relying on later notices or equitable recoupment?
No. The taxpayers filed their amended Virginia returns more than one year after the IRS closing agreement became final. A later notice confirming the same changes and later interest notices did not cr…
Could a registered consumer-use-tax taxpayer overturn an estimated assessment after filing no returns, producing no records, and submitting an incomplete appeal?
No. Virginia upheld the estimate because the taxpayer filed no use-tax returns and produced no business records despite repeated audit requests. Its protest also failed to become a complete appeal wit…
Could spouses have different Virginia domicile results for the same year after moving together to another state?
Yes. Virginia found that neither spouse was an actual resident because their records supported fewer than 183 Virginia days. The wife had changed her domicile by switching her license and voter regist…
Did a taxpayer establish domicile outside Virginia even though his wife, home, vehicle, doctor, and more of his days remained tied to Virginia?
Yes. Virginia found that the taxpayer became domiciled in the other state in 2005 after his parents died and he returned there. He bought another home, maintained and renewed that state's license, vot…
Under Virginia's historical 2010 motor-vehicle-fuel sales-tax guidelines, who collected the tax, what entered the tax base, and what filing and record rules applied?
These historical guidelines required distributors to collect a 2.1% tax on fuel sold to retail dealers for retail sale in the covered transportation districts. Beginning July 1, 2010, transportation a…
Could a mechanical contractor remove Virginia audit items using permits, late or undated exemption certificates, and cost estimates?
No. Virginia kept every contested item in the audit. Purchase orders and federal permits were not the state certification required for pollution-control equipment; a late, undated manufacturing certif…
Which floors, HVAC, electrical, hydraulic, pneumatic, ventilation, gas, paint-booth, freezer, and inspection items qualified for Virginia's manufacturing exemption?
The result was item-specific. Virginia exempted direct production systems such as hydraulics, qualifying chillers, production pneumatic lines, milling-room downdraft ventilation, production natural ga…
Could a video post-production company remove bundled application software from computer value and reclassify specialized equipment for local property tax?
Not on the evidence provided. Virginia agreed that qualifying application software can be treated as intangible property even when bundled with hardware and not separately billed, but the company had …
Did an equipment rental company qualify as a short-term rental business when less than 80% of annual rental receipts came from periods of 92 days or less?
No. For 2007 and 2008, the company failed the statutory test because less than 80% of its annual gross rental receipts came from transactions lasting 92 consecutive days or less, including extensions …
What state and local tax legislation did Virginia's Department of Taxation summarize for the 2010 General Assembly session?
This was a broad historical guide, not a taxpayer-specific ruling. It summarized 2010 legislation enacted through the April 21 reconvened session, including a shorter state collection period, expanded…
How did Virginia's move to January 22, 2010 federal conformity affect the domestic production deduction and earned-income credit for tax year 2010?
For tax year 2010, Virginia advanced its Internal Revenue Code conformity date to January 22, 2010 but kept two specific differences. Virginia allowed only two-thirds of the federal IRC § 199 domestic…
What Virginia tax interest rates applied during the third quarter of 2010?
Virginia's third-quarter 2010 rates were 6% for tax underpayments and 6% for tax overpayments. The corresponding federal underpayment and noncorporate overpayment rates were 4%. For taxpayers with yea…
Was payroll apportionment automatically required to split a cable provider's BPOL gross receipts between two local offices?
No. Virginia treated payroll apportionment as a last-resort method used only when it is impractical or impossible to attribute service receipts under the general definite-place-of-business rules. The …
Did a military spouse abandon Virginia domicile by following her active-duty husband to another state for two years?
No. Virginia found that the spouse had established Virginia domicile in 2000 and did not abandon it during the two-year duty assignment. She kept the Virginia home where her children lived, retained a…
Did a federal employee change domicile when his paid education program moved him from Virginia to college and work assignments in two other states?
Yes. Virginia found that the employee changed domicile to the college state in August 2004. Employer records showed he lived and worked in the two other states, spent little time in Virginia, and file…
How did Virginia resolve a couple's domicile, college-savings, pension, age-deduction, and appeal-interest claims for 2006 and 2007?
Virginia reached a mixed result. The couple were Virginia domiciliaries, their pension subtraction lacked federal-return and other-state tax proof, and the wife's age deductions were unavailable under…
Did foreign and out-of-state work assignments end a taxpayer's Virginia domicile when his family, home, licenses, and registrations stayed in Virginia?
No. Employment and housing abroad and in another state did not prove abandonment of Virginia domicile. The taxpayer's spouse and children stayed in the Virginia home; he retained Virginia vehicles, a …
Did a taxpayer's statement that he lived and worked outside Virginia in 2003 justify removing the state's income-tax assessment?
Not yet. The taxpayer said he lived and worked outside Virginia in 2003, but he retained a Virginia driver's license, voter registration, vehicle registration, and a Virginia address receiving federal…
Did Virginia property, vehicles, a license, and voter registration make a taxpayer living and working abroad a Virginia domiciliary in 2006?
No. The taxpayer took several steps associated with Virginia domicile, including property ownership, registered vehicles, a driver's license, and voter registration. But he remained employed full time…
Could Virginia convert a bankrupt corporation's unpaid use and withholding taxes to its president and majority shareholder?
No, on these facts. Although the taxpayer's titles and ownership gave him authority, Virginia found that he was not under the relevant duty to pay the taxes, lacked actual knowledge before other debts…
Could a phone-system installer credit sales tax wrongly collected from customers against use tax owed on cable installed in walls?
No. Cable permanently installed in walls made the business a consuming contractor liable for tax on the cable's cost. Sales tax wrongly collected from customers could not offset that use-tax liability…
Was a cabinet fabricator a retailer when its office showed unsaleable sample cabinets and it bought primary materials for accepted jobs rather than general inventory?
No, for the installed cabinets on these facts. Unsaleable sample cabinets on office walls did not create a showroom, and materials purchased for accepted jobs did not satisfy the general inventory req…
Was a medical practice's one-time sale of imaging-center fixed assets taxable when the practice made no regular retail sales and was not required to register?
No. Virginia treated the fixed-asset transfer as an exempt occasional sale. The radiology practice did not regularly sell tangible personal property, was not required to register for retail sales tax,…
Did Virginia waive the penalty on 31 unstamped cigarette packs bought from a licensed stamping agent?
Yes. An inspection found 31 unstamped packs, but the retailer produced purchase receipts and a signed affidavit from the licensed Virginia stamping agent that sold them. Virginia accepted that evidenc…
Did a lumber manufacturer's strapping machine and reusable strapping qualify as exempt packaging materials?
No. Virginia treated the strapping as a transportation device used to bundle, restrain, and secure lumber for shipment, not material that placed the product into a protective wrapper or container. The…
Did Virginia remove use tax assessed on a manufacturer's software, checks, forklift, maintenance supplies, and other purchases?
No. The manufacturer did not document that disputed software, laser checks, repair items, rentals, petroleum products, or supplies were returned or used exemptly. Its forklift was used more than 80% o…
Could Virginia assess masonry contractors purchaser use tax on third-party charges for cutting their bricks?
No. Cutting the contractors' bricks changed their shape and was taxable fabrication, so Virginia could assess the fabricator sales tax on the service. But under the circuit-court decision applied here…
How did Virginia's July 2010 power-of-attorney process send tax correspondence to taxpayer representatives?
Effective July 1, 2010, Virginia used Form R-7 to register representatives for an Authorized Agent number and revised Form PAR 101 to designate them for a tax matter and period. Both forms were needed…
Did a couple establish domicile outside Virginia despite keeping a historic Virginia home, mail address, and old driver's licenses?
Yes. The couple kept a historic Virginia home, received mail there, visited regularly, and had renewed Virginia licenses in 2003. But the husband began working in the other state in 2002, they bought …
Did years of losses make a professional bass-fishing operation a nonbusiness hobby for Virginia income-tax purposes?
No. The operation had not made a profit since starting in 2002, and both spouses had substantial full-time employment, but the full record showed a profit objective. The husband brought decades of tou…
Did stacks of statements, education records, and mileage logs substantiate a taxpayer's deductions without a reconciliation to the return?
Not yet. Credit-card and bank statements, education printouts, curricula, and mileage logs did not clearly identify which transactions supported each claimed deduction, and the taxpayer supplied no re…
How did Virginia resolve seven years of delinquent returns after comparing the taxpayers' filings with IRS records?
Virginia reached a split result. IRS return information matched the taxpayers' Virginia filings for 1999 through 2003, so those state returns were accepted and the assessments adjusted. Their 2004 and…
Did Virginia federal conformity let a qualified funeral trust use the lowest state income-tax rate regardless of its income?
No. Federal qualified-funeral-trust treatment required a Virginia fiduciary return, but conformity did not import a federal lowest-rate rule that contradicted Virginia statutes. Sections 58.1-360 and …
Could a landowner increase transferred conservation credits by reappraising an easement as if a litigated downzoning had never existed?
Not on the second appraisal submitted. Although the downzoning was later held void from the beginning, a hypothetical buyer on the 2003 donation date would have known only that litigation was pending,…
Did three appraisals and an aborted asset sale prove a county's 2008-2009 machinery-and-tools values exceeded fair market value?
No. The county uniformly valued machinery using a percentage of capitalized cost. Two appraisals valued the whole company rather than only machinery and tools; the county considered a third equipment-…
Did a Virginia direct-mail advertiser owe use tax on postcards printed outside Virginia and mailed without its possession or use in the state?
No. Advertising status made the company the consumer of property it used in Virginia, but it did not possess, take title to, or exercise rights over these postcards in the Commonwealth. The out-of-sta…
Did a Virginia advertiser use postcards in the state when an out-of-state printer sent them directly into the mail?
No. The Virginia advertiser supplied designs and mailing lists, but an out-of-state printer produced and prepared the postcards for mailing. The advertiser did not take possession or title or exercise…
Which Virginia dealer discounts were reduced or suspended beginning with returns filed in mid-2010?
Beginning mainly with the June 2010 return due July 20, mandatory-EFT sales-tax dealers lost their discount, while other sales, vending, and digital-media filers moved to lower tiered discounts. Disco…
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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.