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 long do I have to claim a Virginia individual income tax refund, and does relying on my accountant extend that deadline?
You have three years from the return's original due date to claim a Virginia income tax refund, and the deadline is strict. The Department denied a 2020 nonresident refund claim filed in June 2024 -- …
Must a wholesaler include inventory it stores in Virginia awaiting sale in its corporate income tax property factor, or can it exclude it because it says it does not 'use' the inventory here?
Include it. A multistate wholesaler stored purchased coal in a Virginia stockyard until it had enough to fill a sales contract, then shipped it out of state. It later sought a refund, arguing it did n…
Can a direct pay permit holder claim a use-tax refund based on an estimated accrual percentage, and must the Department run an audit to find the overpayment?
No refund. A manufacturer with a Virginia direct pay permit computed its use tax using an 'estimated accrual percentage,' later decided it had overpaid, and asked for a refund. The Commissioner denied…
When a Virginia refund depends on an amended federal return, does the one-year clock run from when you filed the federal amendment or from when the IRS accepted it?
Denied -- filed too late. When a Virginia refund depends on a change to your federal return, you have one year from the 'final determination date' to file the amended Virginia return. For a change mad…
I withdrew money from my Thrift Savings Plan, and part of my contributions were already taxed by another state — can I subtract that portion on my Virginia return?
Yes, partially — Virginia allows a subtraction only for the portion of a retirement distribution that traces back to contributions that were both deductible for federal tax purposes AND already taxed …
My e-filed corporate return was rejected and refiled a day late because I forgot a schedule -- does that shorten my three years to file an amended return, and do I have to add back interest on a loan I used to buy stock?
The corporation won on both issues. First, its 2013 return had been electronically filed on the extended due date but was automatically rejected by Virginia's e-filing system for missing a required sc…
Is a corporation's NOL carryback refund time-barred by a late-submitted federal Form 870 when the Department never finally denied the original, timely refund claim?
Yes, the refund is allowed -- the corporation won. It timely filed a 2008 return with a net operating loss and, in October 2012, timely applied to carry the loss back to 2006 and 2007. The Department …
Does the ISP equipment exemption cover wholesale Internet access and 100%-exempt mixed-use claims, and can a refund be denied for unverified transactions?
Refund denied. This is one of three materially identical companion determinations the Department issued the same day (May 12, 2020) to related Internet service providers -- see P.D. 20-80 (the fuller …
Does the ISP equipment exemption cover wholesale Internet sales and 100%-exempt mixed-use claims, and can a refund be denied for unverified transactions?
Refund denied. This is one of three materially identical companion determinations the Department issued the same day (May 12, 2020) to related Internet service providers -- see P.D. 20-80 (the fuller …
Does the Internet service provider (ISP) equipment exemption cover wholesale Internet sales and mixed-use equipment, and can a refund be denied for unverified transactions?
Refund denied. The Internet service provider (ISP) equipment exemption (Va. Code Sec. 58.1-609.6 2) reaches only equipment used to provide Internet access to end-user subscribers -- retail ISPs -- not…
Does the ISP equipment exemption cover wholesale Internet access and 100%-exempt mixed-use claims, and can a refund be denied for unverified transactions?
Refund denied. This May 5, 2020 determination is part of the same materially identical series of Internet service provider refund rulings as P.D. 20-80 (the fuller companion) and P.D. 20-81 and 20-82 …
Are monthly charges for contractor-owned standby generators at Virginia grocery stores taxable equipment leases or exempt power services?
They were exempt service charges. The contractor owned, installed, monitored, maintained, fueled, and ultimately removed the generation systems; the grocery operator never possessed or could buy them …
Did a contractor's previously denied real-estate construction contracts appear eligible for Virginia's refund of the 0.3% state sales-tax increase that took effect July 1, 2013?
Potentially yes. The Commissioner found that the contracts submitted on appeal appeared dated before April 3, 2013 and bona fide, so the auditor had to review the contracts and invoices. Refund eligib…
If a taxpayer filed separate federal and Virginia returns, can Virginia hold him to a later amended joint return he never signed?
No -- the assessment was revised in the taxpayer's favor. He originally filed his 2013 Virginia return separately from his spouse; the Department later received an amended 2013 joint return, processed…
Could a federally disregarded LLC belong to a BPOL affiliated group and exclude service fees received through a wholly owned LLC chain?
Yes. Federal disregarded-entity status did not prevent the LLCs from forming a BPOL parent-subsidiary affiliated group. Service fees paid by the downstream corporation were therefore excluded from BPO…
Was property at a manufacturer's data center exempt from local business tangible personal property tax when it supported manufacturing and separate government IT services?
Partly. Property supporting the manufacturer's operations was not subject to local business tangible personal property tax, even though no manufacturing occurred at the data center. Property dedicated…
Did military assignments outside Virginia change a service member's domicile when he kept Virginia licensing, registration, and voting ties?
No. Military orders and leases in other states did not by themselves change domicile. The service member showed neither a new domicile elsewhere nor abandonment of Virginia, where he kept a driver's l…
Can an airline's block of hotel rooms qualify for Virginia's 90-day sales-tax exemption when different employees use different rooms each day?
Yes, for the minimum number of rooms occupied on every day of a continuous 90-day period. The same employee did not have to stay in the same room; if occupancy fell to zero on any day, however, no roo…
Did Virginia's broadcasting-equipment exemption cover equipment sold to a satellite system that transmitted programming only to paying subscribers?
No. Virginia required dissemination to the general public unless the system was a specifically listed cable technology. The customer's satellite service sent signals only to subscribers and was not wi…
Did Virginia order a city to refund BPOL tax on internet-access receipts under the federal Internet Tax Freedom Act?
No. The Department maintained that the Internet Tax Freedom Act applied to BPOL and that BPOL was a gross-receipts tax, not an exempt net-income tax. But it declined to decide whether the city's tax w…
Did delayed voter registration and licensing prevent a taxpayer from proving that he changed domicile from Virginia before 2009?
No. The taxpayer bought and occupied a home in the other state in 2008, later registered to vote and obtained its driver's license, and explained that his Virginia address was leased property and his …
Could a commissioned officer count all of July and taxable hazardous-duty pay in Virginia's 2013 combat-zone subtraction?
Yes. Any service in a combat zone for part of a day qualified the entire month of July. For 2013, the subtraction also included the officer's taxable hazardous-duty pay, along with the monthly basic-p…
Could a taxpayer receive a 2012 Virginia income tax refund when the original return was filed in December 2016?
No. The 2012 return had to be filed by May 2, 2016 to claim the overpayment, but the taxpayer filed it in December 2016. Virginia's three-year refund statute gave the Department no discretion to pay t…
Could a taxpayer use historic rehabilitation credits that accompanied an LLC partnership interest assigned by the prior owner?
Yes. Virginia generally does not allow a historic rehabilitation credit to be transferred by itself, but the taxpayer received the prior owner's LLC partnership interest. Under IRC § 704 and Virginia …
Could a taxpayer use historic rehabilitation credits that accompanied an LLC partnership interest assigned by the prior owner?
Yes. Virginia generally does not allow a historic rehabilitation credit to be transferred by itself, but the taxpayer received the prior owner's LLC partnership interest. Under IRC § 704 and Virginia …
Could a beneficiary use historic rehabilitation credits allocated to trusts that had matured before the credit distribution?
Yes. Because the taxpayer had reached the trusts' maturity ages before the credit distribution, IRC § 678(a) treated him as owner and the trusts as disregarded grantor trusts. He could use their histo…
Could alleged oral advice that a taxpayer had five years to file preserve a late 2012 Virginia refund claim?
No. The original 2012 return was filed in December 2016, after the May 2, 2016 refund deadline. The alleged five-year advice was not documented in writing, and Va. Code § 58.1-1835 applies to assessme…
Was a March 2017 Virginia estate tax refund claim timely after the IRS accepted the estate's Form 890-AD in December 2015?
No. The federal change became final when the IRS accepted Form 890-AD on December 7, 2015, so the estate had until December 7, 2016 to amend its Virginia return. Filing in March 2017 was late; the lat…
Did a worker change domicile after moving from Virginia for a permanent out-of-state job, making Virginia wage withholding refundable?
Yes. The worker accepted permanent employment, obtained housing and a driver's license, registered a car, and took steps to sell Virginia property. Although his wife and some assets remained in Virgin…
Was a private leaseholder exempt from recordation tax on a deed of trust signed jointly with a tax-exempt authority?
No. The joint deed of trust was not exempt, and because the regional authority could not be charged, the private taxpayer owed the required tax. The purchase-option price did not prove value, so the c…
Could a Virginia resident receive credits for tax paid through composite nonresident returns, and was Virginia's assessment timely?
Yes, with state-by-state documentation. Virginia found the taxpayer entitled to credits for tax paid through composite returns in Hawaii, Mississippi, and Montana. The April 21, 2017 assessment was st…
Could a taxpayer obtain review of a late refund claim after fully paying a Virginia assessment?
Yes. Although the ordinary refund period for the late 2010 return had expired, the taxpayer had fully paid the March 19, 2014 assessment and pursued the claim within three years. Virginia treated the …
Could federal income tax withheld from an IRA distribution reduce the Virginia tax due after an IRS audit adjustment?
No. The IRA distribution was included in federal adjusted gross income and no Virginia tax had been withheld. Virginia provides no deduction for federal income tax withheld from retirement income, so …
Was a corporate secretary and store manager personally liable for the company's unpaid Virginia sales and withholding taxes as a responsible officer?
No. Although she was a 50% owner, corporate secretary, and store manager, the evidence showed her husband alone controlled bookkeeping, tax preparation, filing, and payment. She lacked the required ta…
Could a Virginia resident claim a Virginia credit for Maryland tax withheld from wages earned while commuting to work in Maryland?
No. The Virginia-Maryland reciprocal agreement exempted a Virginia resident's Maryland wages from Maryland income tax when the taxpayer was not a Maryland resident. The taxpayer had to request a Maryl…
Does Virginia's three-year refund deadline also prevent a taxpayer from applying an old income-tax overpayment as a credit to a later year?
Yes. The court held that receiving an overpayment by check and applying it as a credit are functionally the same recovery. Because the taxpayer claimed his 2011 overpayment more than three years after…
Did filing both part-year and nonresident returns prove that a couple abandoned Virginia domicile during a brief 2015 absence?
No. The couple's filing history showed Virginia residence before and after an absence of less than six months, creating prima facie evidence that they never abandoned Virginia domicile. Because they d…
Could an online retailer with Virginia fulfillment inventory close its registration and recover tax collected since voluntarily registering in 2015?
No. Owning goods for sale at a Virginia fulfillment center required registration under the inventory-nexus rule effective June 1, 2017. The retailer also could not recover tax collected since its Augu…
Could Virginia assess 2012 tax more than three years after the return due date when taxpayers had not reported an IRS increase in federal income?
Yes. The ordinary three-year limit did not apply because the taxpayers failed to file a Virginia amended return within one year of the IRS change. Va. Code § 58.1-312 A 3 then allowed Virginia to asse…
Was an IRA distribution received before a taxpayer became a Virginia resident included in her Virginia part-year resident income?
No. After reviewing new documentation, Virginia found that one taxable IRA distribution was received in May 2013, before the taxpayer became a Virginia resident in June. That distribution was excluded…
Could an auto-parts and paint retailer rely on customers' resale certificates for consumable shop supplies when the certificates appeared valid and resale was plausible?
Yes. Virginia found that the retailer could reasonably conclude from the certificates and its knowledge of the customers' businesses that the disputed supplies might be resold. Its acceptance of the r…
Were corporate refund claims timely when Virginia amended returns were filed more than one year after IRS closing agreements became final?
No. The IRS closing agreements became final when the taxpayer received notice that the Commissioner of Internal Revenue had signed them. Both Virginia amended returns were filed more than one year lat…
Can an employee claim Virginia withholding credit when the employer's reported payment cannot be verified?
Yes, if the employee proves the employer actually deducted Virginia tax from wages. Va. Code § 58.1-468 protects an employee when withheld tax was not remitted, but the taxpayer had not supplied verif…
Were new RVs financed by a bank still the dealer's taxable inventory for Virginia merchants' capital tax?
Yes. RVs titled in the dealer's name and held by the bank only as collateral were dealer-owned inventory; true consignments would not be. Virginia upheld the county's rate but remanded because the cou…
Could California residents amend a Virginia nonresident return for a reciprocal tax credit after California changed their 2011 liability?
Yes. California's September 2015 adjustment made the taxpayers eligible to claim Virginia's reciprocal nonresident credit, and their May 2016 amended Virginia return was within the special one-year pe…
Could a credit-card finance company use retailer assignments to claim Virginia sales-tax bad-debt credits on customer defaults?
No. Virginia strictly read the bad-debt statute to benefit the retail dealer that made the sale, reported it, and remitted the tax. The finance company bought or originated the accounts and bore the d…
Did a federally taxable lump-sum annuity death benefit qualify for Virginia's income subtraction even though it was not life-insurance proceeds?
Yes. The payment came from an annuity contract with an insurance company, was paid to the beneficiary in a lump sum, and was federally taxable. Those facts met Va. Code § 58.1-322 C 32; the payment di…
Could an employee claim a Virginia withholding credit for tax his employer allegedly should have withheld after March 2014?
No. An employee may receive credit when an employer actually deducts Virginia tax but fails to remit it, but this taxpayer did not prove any deduction after March 2014. Unemployment eligibility, a sub…
Could taxpayers avoid Virginia's three-year refund deadline by carrying a late-claimed overpayment forward as a credit?
No. Virginia applies the same three-year limitation to refunds and overpayment credits. The Department had no record of the 2011 return before January 2016, and a signed April 2012 copy plus preparer …
Could a taxpayer use the federal claim-of-right method on his 2015 Virginia return after repaying income reported in 2014?
Yes. Virginia follows an individual's federal IRC § 1341 election. The taxpayer claimed the credit in the repayment year, attached the Virginia and federal computation schedules, and reported the bene…
Who determines actual property value for Virginia recordation tax when the purchase price, appraisal, and assessment differ?
The circuit-court clerk makes the factual valuation, and Virginia generally defers unless the result is unreasonable. A recent assessment strongly indicates fair market value, but the clerk may consid…
Did a lower purchase price and appraisal automatically require recordation-tax refunds when the clerk used the property's assessed value?
Not automatically. A recent assessment strongly indicated fair market value, and an appraisal alone did not prove the clerk unreasonable. Virginia asked the clerk to reconsider all reliable evidence; …
Should one-time tornado fence repairs stay in a manufacturer's audit sample, and did its new-gauge project qualify as research and development?
The tornado repairs were isolated and unrelated to normal meter manufacturing, so Virginia removed them from the sample and taxed them separately. The new-gauge project qualified as research and devel…
Did a purchase price near half the assessed value and a lower appraisal automatically reduce Virginia recordation tax?
Not automatically. A recent assessment strongly indicated fair market value, and an appraisal alone did not prove the clerk unreasonable. Virginia requested a review of all reliable evidence; any stat…
Did Virginia tax wages earned during a roughly 150-day Virginia work stay by a West Virginia domiciliary resident?
No. The taxpayer established West Virginia domicile and stayed in Virginia for only about 150 days, below the actual-resident threshold. Virginia's reciprocal agreement exempted her Virginia wages as …
Could a Virginia wholesaler remove sampled sales from an audit using corrected resale certificates and supporting customer records?
Yes. After greater scrutiny of certificates obtained or corrected during and after audit, Virginia removed the sales for Customers 1, 2, 3, 5, 6, and 7. The Department verified the claimed resale uses…
Was software exempt when specific vendor records proved it was downloaded, despite freight for promotional materials and a guide?
Yes. A vendor certification, dated download history, and email with the product serial number proved the software itself was delivered electronically. Virginia revised the paid audit assessment and or…
Did a former Virginia resident owe 2014 Virginia tax on out-of-state wages and an early retirement withdrawal from a Virginia business?
No. She had established a home and employment in another state and was neither a Virginia domiciliary nor actual resident. Her out-of-state wages and retirement withdrawal were not Virginia-source inc…
Could a Virginia corporation subtract health-insurance premiums that were not federally deductible because it claimed the federal Small Business Health Care Tax Credit?
No. Virginia starts with federal taxable income and allows only the additions and subtractions authorized by state statute. Although Virginia expressly permits a subtraction for wages disallowed becau…
Did a lower deed price and private appraisal require Virginia to override the county clerk's assessed-value calculation of recordation tax?
Not automatically. A recent property assessment strongly indicated fair market value, and a private appraisal plus disagreement did not by itself show the clerk's valuation was unreasonable. Virginia …
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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.