Virginia Tax Changes - January 2025

Virginia Sales & Use Taxes—Virginia pollution control exemption eligibility.

The Virginia Department of Taxation found that a brewery seeking a refund, based on eligibility for the pollution control exemption under Va. Code Ann. §58.1-609.3(9) for several tangible personal property items used in its facilities from April 2019 through December 2020, had properly supported its refund request by providing a federal operating permit issued by the Virginia Department of Environmental Quality (DEQ). The DEQ is one of the state agencies authorized to verify pollution control equipment for exemption purposes. Therefore, the refund request is returned to audit staff to issue a refund for exemption-qualifying purchases. The auditor previously had denied the refund because the brewery had not provided Form ST-11A. The Department currently requires consumers to issue this certificate to make exempt purchases of qualifying pollution control equipment, machinery, and other tangible personal property from vendors. To apply for Form ST-11A for exemption certification, consumers must submit a written request on business letterhead and provide the required information. (Virginia Public Document Ruling No. 24-116, 11/14/2024.)

Virginia Sales & Use Taxes—Virginia HVAC system leases taxable as tangible personal property.

The Virginia Department of Taxation ruled that leases of heating, ventilation, and air conditioning (HVAC) systems to residential customers from a taxpayer's commonly controlled company are taxable since the agreement between the parties specifies that the HVAC units are tangible personal property. In so concluding, the Department noted that a Virginia Supreme Court case that provides three general tests in determining if an item of tangible personal property should be considered as a fixture stipulates that such tests are only used "in the absence of any specific agreement between the parties as to the character of a chattel upon the freehold." Additionally, if a residential customer exercises the option to purchase the HVAC unit during or after the lease, that is a separate transaction subject to tax based on the purchase price. Further, the taxpayer was a consuming contractor in transactions involving furnishing and installing the HVAC units, and must either pay tax on the purchases or accrue and remit consumer use tax on the untaxed purchases. (Virginia Public Document Ruling No. 24-110, 11/14/2024.)

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