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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Did a retired business owner change domicile outside Virginia despite keeping a Virginia home, business interests, cars, and a later Virginia license renewal?
Yes. The taxpayer retired, moved to State A, obtained its license, registered to vote and register a car there, and developed community ties. He retained a Virginia home, minority business interests, …
Did buying a Virginia townhouse and obtaining a Virginia driver's license establish domicile when the taxpayer kept his spouse, home, vote, car, and license in another state?
No. The taxpayer worked in Virginia, bought a townhouse, and obtained a Virginia license, but kept his primary home and spouse in State A, returned there when possible, and maintained its license, veh…
Did shared credit-card activity prove that an out-of-state domiciliary spent more than 183 days in Virginia?
No. The auditor used credit-card activity to estimate Virginia days, but the taxpayer showed that employees of his Virginia business and a family member also used the account. That evidence refuted th…
Could one spouse be a Virginia actual resident while the other remained a nonresident when they shared a credit-card account?
Yes. The couple conceded that the wife was a Virginia actual resident, but the husband's calendar and other documentation showed fewer than 183 Virginia days. The auditor had attributed the wife's sha…
Did obtaining a Virginia driver's license and using a relative's Virginia mailing address establish domicile for a person living and working abroad?
No. The taxpayer had established Country A domicile for employment in 2000 and took no steps to abandon it in 2004. He used his sister's Virginia address because overseas mail was poor, visited the Un…
Were bulk purchases of Mirena and Implanon exempt controlled drugs when used by a medical practice?
Yes. Unlike a non-drug IUD addressed in an earlier ruling, Mirena and Implanon release medication. The FDA classified them as prescription drugs, and the Virginia Board of Pharmacy treated them as Sch…
Did SRLY rules limit post-acquisition losses of a Virginia affiliate or parent losses incurred before the group had Virginia nexus?
No. Company X's post-acquisition short-year loss was not a SRLY loss because it already met the ownership requirements for group membership, even though no other group member then had Virginia nexus. …
Did disability income paid by the Virginia Retirement System qualify for Virginia's disability-income subtraction?
Yes. Virginia allowed up to the statutory $20,000 subtraction because the VRS income statement treated the payments as disability income under IRC § 72 and the supporting documents showed qualificatio…
Could a Virginia military officer subtract combat-zone pay that exceeded the federal exclusion and remained in federal adjusted gross income?
Yes, but only for the qualifying amount still included in federal adjusted gross income. Enlisted combat pay excluded federally cannot also produce a Virginia subtraction. Officers can have compensati…
Could a startup real estate business deduct losses beyond current property income when its operations showed a genuine profit motive?
Yes. The wife was a licensed realtor, the couple kept separate business records, advertised properties, held open houses, spent about 25 hours weekly on the activity, and expected appreciation. Startu…
Could an out-of-state construction affiliate join a Virginia consolidated return based on a final billing and solicitation visits in 2003?
No. The affiliate's 2003 receipt was a final billing for Virginia work completed earlier, and no Virginia performance costs occurred in 2003, so the receipt did not enter the Virginia sales-factor num…
Did farm exemption certificates protect sales of rodenticides, horse feed, and supplies, and were auction donations taxable livestock purchases?
Yes. Completed Form ST-18 certificates supported exempt farmer purchases of rodenticides, horse feed, and related agricultural supplies, and fencing had already been removed. Separate auction document…
Did Virginia use tax apply to freight-in charges on apparel bought only for resale when the freight cost entered the taxable retail price?
No. Freight-in normally becomes part of a product's taxable sales price, but these charges related only to apparel bought for resale and the retailers made no intervening use. The freight was built in…
Did a Virginia driver's license, family mailing address, and visits establish Virginia domicile for a long-term Country A resident?
No. The taxpayer had lived in Country A since 1989, kept no Virginia home or registered vehicle, used family in Virginia to receive tax mail, and visited regularly. A Virginia license was strong contr…
Could a communications-equipment seller replace Virginia's audit sample or avoid tax because customers failed to disclose an exemption repeal?
No. Virginia found the three-month sales sample proper and declined a taxpayer-prepared detailed audit that would require extensive invoice and certificate verification. Customers were supposed to not…
Were installed audiovisual systems retail sales of tangible property, and how did Virginia tax installation labor, supplies, and wiring?
The systems were retail sales of tangible personal property, so the seller had to collect tax on the total system charge while separately stated installation was exempt. The seller owed tax on tools, …
Were a corporation's president and secretary personally liable for unpaid 2006 sales tax when another manager handled filing until December 1?
Only for November 2006. Virginia found that before December 1 the president and secretary lacked the duty, knowledge, and willful conduct required for personal liability, so March, April, May, June, a…
Could a corporation exclude all related-member royalties and interest from Virginia's add-back merely because the affiliate filed returns in other states?
No. The exception covered only the portion of the payments corresponding to the affiliate's income or capital actually apportioned and subjected to tax in another state, not the gross amount shown on …
Could a hotel-room content provider register once and remit Virginia's 10% Digital Media Fee for participating lodging facilities?
Yes, subject to detailed conditions and possible revocation. The content provider could register once, list each participating lodging facility as a business location, file one monthly Form DM-1, and …
Could a truss seller remove delivery and design charges from its Virginia audit and receive credit for tax paid to vendors?
Only in part. The seller received 45 days to prove a reasonable delivery amount for this audit, but future exempt delivery charges had to be separately stated. Truss design services remained taxable e…
Was a 1997 Virginia amended return timely for a credit after another state finally taxed part of a retirement lump sum?
Yes. Virginia followed the IRS closing agreement treating the 1997 lump sum as capital gain, a category eligible for the other-state tax credit. The other state's audit became final on October 25, 200…
Did a taxpayer abandon Virginia domicile in July 2005 despite retaining a Virginia home and some vehicle registrations?
Yes. The taxpayer moved into a State A residence in July 2005 and declared that date on his Virginia part-year return. Later actions—including surrendering his Virginia driver's license, obtaining a S…
Could a couple choose the federal home-sale gain exclusion for their former Virginia residence when another home also qualified?
Yes. The couple had used both the Virginia and State A homes as principal residences for at least two years within the relevant five-year periods. IRC § 121(f) allowed them to elect which qualifying s…
How did Virginia's 2009 clothing and school-supply sales tax holiday guidelines apply price limits and transaction rules?
These historical guidelines exempted each listed school-supply item priced at $20 or less and each qualifying clothing or footwear article priced at $100 or less during the three-day August holiday. T…
Could a holding company carry pre-Virginia net operating losses into its new Virginia consolidated group?
Yes. A loss generated before the holding company had Virginia nexus was not barred merely for that reason. The available NOL had to be computed as if the company filed separate federal returns before …
Did owning a Virginia vacation home, registering a car, and obtaining a Virginia driver's license make the taxpayer domiciled in Virginia?
No. The Virginia home and vehicle were used for vacations, and the taxpayer obtained the Virginia license for convenience. More importantly, he kept a permanent home, employment connection, vehicles, …
Could Virginia residents subtract combat pay already excluded federally and claim the full $15,000 extended-duty subtraction?
No. The record did not show any combat pay remaining in federal adjusted gross income, so there was nothing for Virginia's combat-zone subtraction to remove. The husband also received basic military p…
Could a Virginia resident subtract military pay earned in Virginia before a later combat-zone deployment?
No. Pay earned while the service member was stationed in Virginia before deployment was not attributable to combat-zone service. His later combat pay was already excluded from federal adjusted gross i…
Could taxpayers add a 30% Virginia depreciation deduction for property fully expensed under IRC § 179 when no federal bonus depreciation was claimed?
No. The couple fully expensed the 2004 business property under IRC § 179 and claimed no federal bonus depreciation. Virginia's fixed-date conformity rules adjusted federal bonus depreciation; they did…
Did a nonresident owe Virginia tax on income passed through from a Virginia LLC and S corporation?
Yes. The Virginia LLC and S corporation operated in Virginia, and the LLC apportioned all its income to Virginia. Under federal-conformity and pass-through rules, the income kept its Virginia-source c…
Did a countertop fabricator owe use tax on solid-surface materials it installed when customers also charged sales tax?
Yes. Selling and installing kitchen countertops was a real-property construction service, making the fabricator the consumer of all installed materials. It owed sales or use tax on their cost, and the…
Was a nursery's seasonal white poly film exempt agricultural material or taxable greenhouse construction material?
It depended on the use. Disposable film draped seasonally over movable steel supports to protect plants could qualify like exempt shade cloth. Film covering propagation houses with plumbing, electrici…
Were a farm's grinder and excavator exempt when used for storm cleanup, property repairs, ponds, fencing, and soil material?
No. The equipment was used for storm-debris cleanup, ponds, erosion work, fence lines, a stream crossing, and other real-property activities—not agricultural production for market. The planned recycli…
How many food or food-included events could qualifying nonprofits hold without collecting Virginia sales tax after July 1, 2009?
Qualifying organizations eligible under Va. Code § 58.1-609.11 could make exempt food sales or sell event tickets including food on no more than 23 occasions per year, while meeting the other occasion…
What state and local tax legislation did Virginia's Department of Taxation summarize from the 2009 General Assembly session?
This historical Department guide summarizes tax legislation enacted through the General Assembly's February 28, 2009 adjournment. It covers general administration, income and recordation tax, sales an…
Was a federal systems contract a sale of property because ordering used a GSA Schedule, and were software purchases taxable?
The contract was for continuous systems support services, not a property sale. Using a GSA Schedule did not make the agency contract an indefinite-delivery contract or require order-by-order treatment…
Could a corporation exclude all affiliate royalties from Virginia's add-back and subtract dividends allocated to another state?
No. The royalty exception covered only the portion corresponding to affiliate income actually apportioned and taxed in other states, not 100% of gross royalties reported there. The auditor also correc…
Were hotel owners Virginia residents for 2005-2007 when they kept Virginia property but spent fewer than 183 days there?
No. The couple established State A domicile through their full-time hotel business, home, vehicles, and the husband's license and voting registration. Virginia property and the wife's Virginia license…
Did producing hand-painted and digitally printed decorative art and custom frames qualify as manufacturing for local Virginia taxes?
Yes. The hand-painted reproductions, industrial color-print process, and custom frame fabrication transformed paper, paint, ink, chemicals, wood, metal, and glass into substantially different products…
Were contracted college and military food-service programs BPOL retail businesses or professional and specialized occupations?
The contracted meal programs were professional and specialized occupations because the colleges or military were the customers and meals were part of a managed service. Direct sales to individual patr…
When did Virginia exempt charges for butchering or processing customer-supplied food from sales tax?
Effective July 1, 2009, fabrication of customer-supplied meat, grain, vegetables, or other food was exempt when consumed by the purchaser or family, purchased by a qualifying § 501(c)(3) or (c)(4) org…
What interest rates did Virginia apply to state tax assessments and refunds in the third quarter of 2009?
Virginia's third-quarter 2009 rate was 6% for state tax underpayments and 6% for overpayments. The bulletin also applied the 6% rate through October 15, 2009 for certain estimated-tax additions of tax…
Could a taxpayer defeat a Virginia assessment by arguing that only federal-connected work and money are taxable?
No. Virginia starts with federal adjusted gross income and taxes resident income unless a specific Virginia modification applies; taxability is not limited to federal-connected employment or money. Th…
Could a late 2003 Virginia overpayment claim offset a 2004 assessment after an IRS correction moved retirement income between years?
No. The federal correction became final on October 20, 2006, and Virginia said the amended 2003 return had to be filed by October 22, 2007. The couple waited until April 2008. Even though the same ret…
Could a 2003 overpayment reported on an August 2007 original return be credited against a 2004 Virginia assessment?
No. The three-year period for the 2003 overpayment expired May 1, 2007, and the taxpayer filed the original return on August 29, 2007. Calling the request a credit or carryforward rather than a refund…
Could a taxpayer challenge old Virginia assessments in 2008 when the latest assessment had been issued in May 2001?
No. For these pre-August 15, 2003 assessments, Virginia's then-existing policy accepted an administrative appeal within the three-year period for a judicial remedy. The latest assessment was dated May…
Did a couple abandon Virginia domicile after moving, buying a home, and operating a business in another state while retaining Virginia ties?
Yes. The couple established a permanent home and demanding business in another state and proved an intent to remain there indefinitely. Keeping an unsold Virginia house, an old Virginia registration, …
Could Virginia refund a 2003 overpayment when the original return was filed in April 2008 after the refund deadline?
No. Virginia's refund statute required the return or written claim within three years of the timely filing deadline. The April 2008 original return came after the applicable period, even considering t…
How did Virginia tax purchases under federal ID/IQ task orders and an IT integration subcontract, and did computer assembly qualify as manufacturing?
Virginia applied the true-object test at the task-order level where the ID/IQ agreements did not reveal what would be purchased. Several documented government orders were exempt property sales, subjec…
Did contract and FTP records prove that prewritten software was electronically delivered and exempt from Virginia sales tax?
Yes. The statement of work expressly required electronic delivery, and an email showed the software files were uploaded to an FTP server for customer download. That met Virginia's minimum proof that n…
Could a hotel lower the use-tax value of used furniture acquired with the property below the cost basis used on its books and tax returns?
Not on the existing record. The hotel had assigned $2,062,500 to the used furniture, fixtures, and equipment on its depreciation schedule and federal partnership return, so Virginia treated that amoun…
Did periodic Virginia logistics work subject an out-of-state support company to Virginia income tax or inclusion in a combined return?
No, on the stated facts. Employee logistics work in Virginia appeared to exceed protected solicitation, and the record was insufficient to decide whether the contacts were de minimis. But the company …
Did a taxpayer change Virginia domicile in June 2005 after moving to State A for a non-temporary job while retaining a Virginia driver's license?
Yes. The taxpayer stopped renting in Virginia, established a State A home, registered his car there, and accepted employment that was not shown to be temporary. Although retaining a recently renewed V…
Could Virginia residents subtract a New York state pension when their employee contributions had not been taxed by New York?
No. Virginia's subtraction applied only to the extent retirement contributions had been subject to another state's income tax after being deductible federally. The couple's prior New York returns show…
Did part-year Virginia residents have to prorate S-corporation capital gain that documentation showed arose after they moved away?
No. Virginia generally treated property or business income as earned evenly through the year unless the taxpayer documented a specific timing. On reconsideration, the couple supplied records clearly s…
How did Virginia tax S-corporation income after a couple moved away, merged the Virginia company, and performed no later Virginia work?
The original Virginia S corporation had nexus for all of 2004 because it operated in Virginia before the move and remained in existence until a September merger. Its income had to be divided between t…
Was a brick maker's separately stated minimum-load charge an exempt delivery charge or a taxable service?
It was exempt. A third-party carrier charged for a full truckload even when the shipment used less capacity, and the brick maker used the minimum-load line to recover the difference between actual fre…
Were a contractor's water-treatment materials, Maryland-taxed purchases, administrative supplies, and equipment charges exempt from Virginia use tax?
No. The contractor provided no required pollution-control certification, and municipal water-treatment authorities did not qualify for the claimed industrial manufacturing exemption. Maryland tax paid…
Was a medical-equipment service contract exempt when a resale certificate was obtained after audit and the contract named a third-party vendor as purchaser?
No. A certificate obtained after audit was subject to heightened scrutiny and did not by itself prove that the third party validly bought the contract for resale. The agreement between that vendor and…
Were a permanent structure housing a production crane and magnesium-chloride dust-control equipment exempt manufacturing property?
No. Steel, panels, fasteners, paint, tools, and rentals used to build a crane-housing structure were plant construction permanently affixed to realty, not component parts of exempt machinery. Magnesiu…
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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.