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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Does a Virginia hotel have to charge sales tax on a separately stated credit card surcharge and on cancellation fees for rooms and events?
Credit card fees: yes. Cancellation fees: usually no. A hotel's separately stated credit card surcharge added to taxable room rentals, banquets, and catering is itself taxable, because the 'true objec…
If a corporate officer is personally assessed for a company's unpaid sales tax and withholding, what happens to the appeal when it's filed after the 90-day deadline because they had moved?
Too late -- the appeal was rejected. A corporate officer was personally assessed 'converted' penalties equal to his company's unpaid sales/use and withholding taxes. He appealed, but filed his applica…
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…
Does Virginia's occasional sale exemption let a police department sell service handguns and service animals to retiring officers without collecting sales tax?
It depends on how often they sell. Virginia's 'occasional sale' exemption can exempt a police department's sales of service handguns (to retiring officers) and service animals (to their last handler) …
Does sending a 'notice of intent to appeal' preserve my Virginia tax appeal, or must I file the complete application for correction within 90 days?
Barred as untimely. A commercial bakery wanted to challenge a retail sales and use tax audit, arguing the Department wrongly taxed items it used for quality-control testing, sanitizing, and cleaning. …
My business was audited for sales and use tax and hit with an estimated assessment I think is arbitrary. Can Virginia estimate my tax if my records are incomplete, and are bank and credit-card statements enough proof?
The assessment was upheld -- Virginia can estimate your tax when your records are incomplete. This taxpayer was a Virginia "consuming contractor" audited for sales and use tax over March 2017 through …
Does the sales-and-use-tax research-and-development exemption cover a testing lab's purchases -- including common hardware -- or is its 'pass/fail' testing just non-exempt quality control?
The taxpayer won -- a Richmond Circuit Court held the testing lab's purchases were exempt research and development, and ordered the $75,041.41 assessment corrected with a refund plus interest. E-Labs,…
In Virginia, is computer software taxable, and how are software maintenance contracts taxed -- especially when they are bundled with computer hardware?
Partly for the taxpayer. Virginia treats software delivered electronically as an exempt service and software delivered on a physical medium (or bundled with a taxable sale of hardware) as taxable tang…
When can a Virginia hotel stop charging sales tax on a long-term guest's room, and what proof does it need if the exemption is questioned on audit?
The assessment was upheld. A Virginia hotel may treat room charges as exempt only AFTER a guest has stayed 90 continuous days -- not before. Virginia exempts rooms furnished to a transient for more th…
Does an out-of-state advertising firm owe Virginia use tax on the direct-mail postcards and letters it creates and has a third party print and mail to Virginia residents?
No Virginia sales or use tax is due on these facts. An out-of-state advertising business that develops and creates direct-mail pieces from customer data, and hires out-of-state vendors to print and ma…
Does an out-of-state publisher owe Virginia sales or use tax on magazine subscriptions, advertising services, mailed advertising postcards, and electronic newsletters and email lists sold to Virginia customers?
Nothing the out-of-state publisher sells is subject to Virginia sales or use tax on these facts. Virginia exempts sales of newspapers, magazines, and other publications issued at intervals of three mo…
I'm a contractor who charged my customers sales tax on real-property installation jobs but should have paid use tax on my own materials. Can Virginia give me credit for the sales tax I already remitted?
Relief granted -- the contractor gets a one-time credit. A garage-door seller/installer was assessed consumer USE tax on materials it bought and consumed on Virginia real-property installation jobs; a…
My sales and use tax audit didn't credit use tax I already paid, and it covers months after I closed my business. Can I get the credit and have the closed months removed?
Partial relief -- the case is sent back to the auditor. A consuming contractor was assessed sales and use tax on untaxed purchases and raised two points. First, it wanted credit for use tax it had acc…
My POS vendor didn't charge tax on the software and setup services bundled with the equipment. Are those exempt, and can I claim tax I say I already paid?
The assessment was upheld. A restaurant and entertainment venue was audited and contested three items -- all lost. (1) POS system: the venue bought a point-of-sale package bundling tangible equipment,…
We cut, bend, and shear metal for customers. Does that make us a manufacturer that can buy equipment exempt from Virginia sales tax?
The assessment was upheld -- the manufacturing exemption was properly denied. A steel and metals retailer-wholesaler claimed the exemption for cutting, bending, and shearing equipment, and the Departm…
As a manufacturer, can I buy tooling made for a specific customer without paying Virginia sales tax, and then hand that tooling over to the customer tax-free?
Both steps are tax-free, the Department ruled. A Virginia packaging manufacturer can (1) buy customer-specific tooling and dies -- cutting dies, printing plates -- exempt under the manufacturing exemp…
How long do I have to ask Virginia to reconsider a final determination, and can I get reconsideration by re-arguing the same points?
Too late -- the assessment stands. A Virginia dealer asked the Department to reconsider a determination that had upheld its sales and use tax assessment (the dealer hadn't provided enough records to e…
My customers bought for resale, but I collected their exemption certificates late -- some after the audit started. Will Virginia still honor them?
Partly upheld, partly reduced -- and how each certificate fared turned entirely on WHEN it was received and whether the buyer could be verified. A tobacco distributor tried to knock out an audit asses…
The Department issued a bigger second assessment after my audit waiver expired, and it won't drop a sampled sale where the customer paid the tax. Are either of those right?
Mixed -- the taxpayer won a refund on the late second assessment but lost the sampling argument. An engineering firm was audited (Oct 2018-Sept 2021) after the auditor found its sales were sourced to …
My resale certificate is undated, and for another customer I never collected tax but they say they paid it. Will Virginia honor either?
Mixed result -- one customer's exceptions removed, the other's upheld. A specialty coffee roaster was audited and assessed on sales where it hadn't collected tax or obtained an exemption certificate. …
As a veterinary supplier, are the animal vaccines and the regenerative medical devices I sell to veterinarians exempt from Virginia sales and use tax?
Split result. Animal vaccines that veterinarians buy and administer ARE exempt from Virginia sales and use tax, but regenerative medical devices are NOT. Vaccines qualify because Virginia exempts a ve…
I didn't keep my restaurant's register tapes, and the auditor estimated my tax. Can I still knock it down by claiming exempt nonprofit sales and that my prices included the tax?
The estimated assessment was upheld -- the restaurant's missing records sank every argument. A restaurant with incomplete books was audited (April 2019-March 2022); because it hadn't kept its cash-reg…
I paid Virginia sales tax by mistake on exempt purchases and later got a use tax audit bill. Can I credit that overpaid tax against the audit, and what if the vendor is gone?
No — the audit assessment was upheld and both the credit and the refund were denied. A technology-services company was audited and assessed use tax on untaxed purchases; during the audit it asked for …
Are the turbines, cables, foundations, and software a contractor buys to build an offshore wind farm exempt from Virginia sales and use tax under the manufacturing exemption?
Mostly yes. This is an advisory ruling for a contractor building an offshore wind farm about 24 nautical miles off Virginia's coast (in federal waters) that it will transfer to a utility once complete…
If a marketplace facilitator already collected Virginia sales tax on my sales, can I still get a refund of tax I also remitted — even if I file the claim on the last day of the three-year deadline without the amended return?
No — the refund was denied on a strict deadline technicality, even though the seller appeared to have paid twice. An out-of-state dealer sold tools to Virginia customers through a marketplace facilita…
Which of my factory purchases qualify for Virginia's manufacturing exemption — and can the Department waive interest on tax I should have collected?
A mixed result, remanded. A metal fabricator audited for 2017-2020 challenged the sales/use tax on two welding machines and 80% of two forklifts, and asked the Department to waive interest on tax it f…
I collected Virginia sales tax that I think was exempt for research and development — can I get a refund from the Department before I pay my customer back?
No — the refund was denied. An automation company built a prototype robotic tote-sorting system for a retailer's Virginia warehouse and collected/remitted Virginia sales tax on the components, labor, …
My diagnostic lab was denied a Virginia sales tax refund on reagents for January 2017 — do reagents qualify for the medicines and drugs exemption?
No — the refund was denied. This is one of four materially identical April 2025 rulings (P.D. 25-54 (the full write-up), 25-60, and 25-61) in which an operator of medical diagnostic laboratories in Vi…
My diagnostic lab was denied a Virginia sales tax refund on reagents for 2016 — do reagents qualify for the medicines and drugs exemption?
No — the refund was denied. This is one of four materially identical April 2025 rulings (P.D. 25-54 (the full write-up), 25-60, and 25-62) in which an operator of medical diagnostic laboratories in Vi…
My diagnostic lab was denied a Virginia sales tax refund on reagents for 2014-2015 — do reagents qualify for the medicines and drugs exemption?
No — the refund was denied. This is one of four materially identical April 2025 rulings (P.D. 25-54 (the full write-up), 25-61, and 25-62) in which an operator of medical diagnostic laboratories in Vi…
I didn't give the auditor my records, so Virginia estimated my sales tax from my federal returns — can the estimate itself be challenged as overstated?
Partly — the estimate itself was justified, but the Department found the auditor's own methodology flawed in two of three areas even though the taxpayer proved nothing. A Virginia dealer failed to pro…
Are the reagents a medical diagnostic laboratory buys to test blood and urine specimens exempt from Virginia sales tax under the medicines and drugs exemption?
No — the refund was denied. An operator of medical diagnostic laboratories in Virginia sought a sales and use tax refund for the period February 2017 through December 2018, including tax it had accrue…
My auto repair shop was audited for 2020-2022 — aren't separately stated diagnostic labor charges exempt from Virginia sales tax?
Mostly no — the diagnostic-labor charges stayed taxable because the exemption postdates the audit period, though the taxpayer won two smaller points. An automotive repair shop and used car dealer was …
I paid sales tax when I bought HVAC systems that were installed into my building — wasn't that really a nontaxable contractor job, and can I get the tax refunded?
No refund — the paperwork showed a taxable retail sale, not a contractor transaction. A buyer paid sales tax on HVAC equipment and supplies purchased from a vendor between September 2016 and May 2018,…
My audit appeal just asked for a credit for tax I over-collected from related companies — why was it rejected, and why did the compliance and amnesty penalties stick?
Everything was upheld — the request wasn't a valid appeal, the credit wasn't available this way, and both penalties were proper. A dealer's SECOND audit (July 2014 through April 2017) assessed untaxed…
My company rents equipment from an LLC I own — just book entries, no money changes hands. Are those intercompany rentals really subject to Virginia use tax?
Yes — the assessment was upheld. A general contractor operating in Virginia and State A rented construction equipment from a State A LLC whose SOLE MEMBER was the contractor itself. The 'rentals' were…
We're a home builder assessed use tax on purchases of sand — isn't sand part of the land (real property), not tangible personal property, so no sales or use tax applies?
The builder lost again — sand stops being real property the moment it's dug up, so its purchases were taxable. A custom home builder was audited for February 2016 through February 2022 and assessed us…
Our customer gave us a manufacturing exemption certificate, so we didn't charge sales tax on the equipment we sold them — doesn't accepting the certificate in good faith protect us in an audit?
The dealer lost — a certificate claiming the WRONG exemption is invalid, and good-faith protection never attaches to an invalid certificate. A dealer and renter of construction equipment was audited f…
We didn't know our farm's venue rentals were taxable, so we never filed returns — can the auditor really go back six years instead of three, and do we owe the 20% amnesty penalty?
The six-year reach-back stands — innocent ignorance doesn't shrink it — but the 20% amnesty penalty stays off as long as the payment plan stays current. A farm that rents out its venue was audited for…
The auditor sampled one year, found a vendor's mistake, and multiplied it across six years — can we make the Department use the actual invoices instead of an extrapolated estimate?
The sample was thrown out — but not for the reason the taxpayer argued, and the do-over could RAISE the bill. A contractor headquartered in another state (State A) was audited for July 2015 through Ju…
Our data center equipment qualifies for Virginia's exemption, but we buy in bulk and can't produce invoices matching each item shipped from our out-of-state warehouse to the Virginia facility — can other records support our refund?
The refund denial was upheld — the exemption doctrine was on the taxpayer's side, but the paperwork wasn't. A communications company providing high-speed satellite broadband and secure networking held…
We refused to sign the auditor's waiver, but the audit still grew from three years to six — and can't our purchases share our sister company's manufacturing exemption since we jointly bought the equipment?
A split result with a clean rule: a nonfiler's audit can reach BACK six years without the taxpayer's consent — but it cannot be stretched FORWARD past the set period without a mutual agreement, and re…
My event venue rental packages include tables and chairs along with the space — does that make the whole rental taxable in Virginia, even without food or an overnight stay?
Yes — bundling any tangible personal property, like tables, chairs, or seating, into a single lump-sum venue-rental charge makes the ENTIRE charge taxable, and here the taxpayer couldn't prove otherwi…
I fabricate metal gates, fencing, and railings and then install them myself — am I a taxable retailer or a tax-exempt real-property contractor in Virginia?
It depends on which activity makes up the majority of your gross receipts — and here, incomplete records meant the taxpayer couldn't prove either way, so the auditor's sampled assessment stood. A meta…
I told Virginia my sales tax assessment was 'overstated' — why wasn't that enough to get my appeal reviewed?
Because 'the assessment is overstated' is a conclusion, not grounds for an appeal, so the Department found no complete appeal was ever filed and closed the case. A real property and plumbing contracto…
I appealed my Virginia sales tax audit assessment by disputing the audit method, but the Department closed my case without addressing it — why?
Because the appeal never identified any specific error or cited any legal authority, so it wasn't a 'complete appeal' and the Department closed the case with the assessment intact. An auto-glass, repl…
I run a zipline and whitewater-rafting outfitter — do I owe Virginia sales tax on guided tours, or only on unguided equipment rentals?
Unguided equipment rentals are taxable, but GUIDED activities are exempt as a service — as long as any meals or other taxable items are separately itemized from the guided-tour charge. An outdoor recr…
My interior decorator separately billed for labor and marked up the furniture she sold me — is either charge exempt from Virginia sales tax?
The labor charge is exempt because it was separately stated, but the markup on the furnishings stays taxable because it's part of the goods' 'sales price.' A bank was audited for October 2015 through …
I hired an out-of-state vendor to create and mail marketing materials directly to potential customers in Virginia — do I owe Virginia use tax on that service?
No — because the business never made any use of the printed materials in Virginia itself, the out-of-state advertising vendor's direct mail charges weren't subject to Virginia use tax. An insurance pr…
I manufacture an implant and instrument kit sold to physicians, not directly to patients — do sales tax exemptions for medical devices even apply, and does the 'true object' test matter here?
The exemption depends entirely on whether each sale is tied to a specific, identified patient — bulk sales to practitioners are taxable, and the 'true object' test doesn't even come into play because …
I mistakenly charged sales tax instead of paying use tax as a contractor — now that Virginia law changed in 2024, can I get credit for the sales tax I already collected and remitted against my use tax assessment?
Possibly, but only through a case-by-case review the Department is now sending back to the auditor — a brand-new law effective July 1, 2024 (Va. Code § 58.1-1812 C) lets contractors get a one-time cre…
Do hotels have to charge sales tax on meeting-room rentals, and are nonprofit organizations exempt from that tax?
Generally no on both counts, with conditions — meeting-room rentals aren't taxable as long as no overnight accommodation or tangible personal property is bundled into the charge, and that exemption al…
The auditor estimated my sales and use tax liability instead of using my actual sales figures — can I get that assessment overturned just by arguing it was based on an estimate?
No — arguing that an assessment is 'based on an estimate' isn't enough to overturn it when the dealer itself failed to provide the complete records the law requires. A Virginia retail dealer was audit…
My nonprofit stables horses and rents out conference space to support our educational programs — do we owe sales tax when we charge horse owners for stabling?
No — charges to customers for horse stabling are exempt as a service, but the nonprofit providing that service still owes sales tax on the feed, medications, and other supplies it buys to care for the…
I sell prepared school lunches to preschools, daycares, and private schools — do I need to charge sales tax, and does it matter whether the parent or the school pays?
It depends entirely on WHO is buying, not which school the food goes to — sales to a parent are always taxable, even for a nonprofit or religious school, while sales to the institution itself can be e…
I'm a remodeling contractor who charged sales tax to my customers the way the old law required — now that the law has changed and I'm being assessed use tax on the same materials, can I get credit for the sales tax I already collected?
Possibly, through a case-by-case review the Department is sending back to the auditor — this is one of the Department's first rulings applying the brand-new one-time credit created by Virginia Code § …
The auditor's sample included some materials I bought knowing a customer would immediately buy them from me — can I get those specific purchases removed from an estimated assessment?
Yes, partially — two of the three disputed purchases were removed from the audit sample because the Taxpayer proved it knew, at the moment of purchase, that a specific customer would immediately buy t…
My audit includes a building permit charge and two big-box retailer purchases I say were already taxed — plus a broader dispute over use tax on materials I already collected sales tax on. What can be fixed?
Mixed result — the case is being sent back for review of the new one-time erroneous-sales-tax credit, one disputed audit exception (a building permit) was removed outright, but two other disputed reta…
I install garage doors and collected sales tax from my customers the whole time — now I'm assessed use tax on the same materials. Is there any relief?
Possibly — this is another case-by-case referral for Virginia's brand-new one-time erroneous-sales-tax credit, applying the same doctrine as several companion rulings issued the same week. A garage do…
I sell and install floor coverings and cabinetry, collecting sales tax on everything — now I'm being assessed use tax too on the materials I installed. Is there any relief now that the law has changed?
Possibly, through a case-by-case field audit review under Virginia's brand-new one-time credit — but the underlying use tax assessment itself was correct, because this business was a 'dual operator' u…
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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.