Va. Code » Title 58.1. Taxation » Subtitle III. Local Taxes » Chapter 37. License Taxes
Virginia Code

Va. Code Ann. § 58.1-3732 (2026)

Exclusions and deductions from "gross receipts."

✓ current as of May 2026
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A. Gross receipts for license tax purposes shall not include any amount not derived from the exercise of the licensed privilege to engage in a business or profession in the ordinary course of business.

The following items are excluded:

1. Amounts received and paid to the United States, the Commonwealth or any county, city or town for the Virginia retail sales or use tax, for any local sales tax or any local excise tax on cigarettes, or amounts received for any federal or state excise taxes on motor fuels.

2. Any amount representing the liquidation of a debt or conversion of another asset to the extent that the amount is attributable to a transaction previously taxed (e.g., the factoring of accounts receivable created by sales which have been included in taxable receipts even though the creation of such debt and factoring are a regular part of its business).

3. Any amount representing returns and allowances granted by the business to its customers.

4. Receipts which are the proceeds of a loan transaction in which the licensee is the obligor.

5. Receipts representing the return of principal of a loan transaction in which the licensee is the creditor, or the return of principal or basis upon the sale of a capital asset.

6. Rebates and discounts taken or received on account of purchases by the licensee. A rebate or other incentive offered to induce the recipient to purchase certain goods or services from a person other than the offeror, and which the recipient assigns to the licensee in consideration of the sale goods and services shall not be considered a rebate or discount to the licensee, but shall be included in the licensee's gross receipts together with any handling or other fees related to the incentive.

7. Withdrawals from inventory for purposes other than sale or distribution and for which no consideration is received and the occasional sale or exchange of assets other than inventory whether or not a gain or loss is recognized for federal income tax purposes.

8. Investment income not directly related to the privilege exercised by a business subject to licensure not classified as rendering financial services. This exclusion shall apply to interest on bank accounts of the business, and to interest, dividends and other income derived from the investment of its own funds in securities and other types of investments unrelated to the licensed privilege. This exclusion shall not apply to interest, late fees and similar income attributable to an installment sale or other transaction that occurred in the regular course of business.

B. The following shall be deducted from gross receipts or gross purchases that would otherwise be taxable:

1. Any amount paid for computer hardware and software that are sold to a United States federal or state government entity provided that such property was purchased within two years of the sale to said entity by the original purchaser who shall have been contractually obligated at the time of purchase to resell such property to a state or federal government entity. This deduction shall not occur until the time of resale and shall apply to only the original cost of the property and not to its resale price, and the deduction shall not apply to any of the tangible personal property which was the subject of the original resale contract if it is not resold to a state or federal government entity in accordance with the original contract obligation.

2. Any receipts attributable to business conducted in another state or foreign country in which the taxpayer (or its shareholders, partners or members in lieu of the taxpayer) is liable for an income or other tax based upon income.

Code 1950, § 58-266.1; 1950, p. 155; 1956, c. 242; 1964, c. 424; 1968, c. 619; 1970, cc. 231, 547; 1974, cc. 196, 438; 1975, cc. 23, 621; 1976, cc. 521, 719; 1977, c. 320; 1978, cc. 772, 799, 817; 1979, cc. 565, 568, 570; 1980, cc. 318, 736; 1981, cc. 419, 636; 1982, cc. 348, 548, 552, 554, 558, 633; 1983, c. 554; 1984, cc. 247, 675, 695; 1992, c. 632; 1996, cc. 715, 720; 2002, c. 346; 2007, cc. 85, 834.

Notes of Decisions
Cited in 3 cases, 2009–2015 · leading case: Ford Motor Credit v. Chesterfield Cnty., 707 S.E.2d 311 (Va. 2011).
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Ford Motor Credit v. Chesterfield Cnty., 707 S.E.2d 311 (Va. 2011). · cites it 10× “1, the deduction requirement of Code § 58.1-3732(B)(2), and the Commerce Clause's fair apportionment requirement.”
Nielsen Co. v. Bd. of Arlington Cnty., 767 S.E.2d 1 (Va. 2015). · cites it 43× “Deducting Receipts From The Pool Of Taxable Gross Receipts Once the pool of taxable gross receipts is created, certain receipts "shall be deducted" from that pool even though they "would otherwise be taxable.”
Ford Motor Credit Co. v. Chesterfield Cnty., 90 Va. Cir. 457 (Chesterfield Cir. Ct. 2009). · cites it 43× “See Va. Code Ann. § 58.1-3732 (B)(2). The Department of Taxation’s regulation interpreting this provision clarifies that “[a] Virginia taxpayer is liable for income or other tax based upon income [on receipts attributable to business conducted in another state or foreign…”
Va. Code Ann. § 58.1-3732(B): 2 cases
Ford Motor Credit Co. v. Chesterfield Cnty., 90 Va. Cir. 457 (Chesterfield Cir. Ct. 2009). “See Va. Code Ann. § 58.1-3732 (B)(2). The Department of Taxation’s regulation interpreting this provision clarifies that “[a] Virginia taxpayer is liable for income or other tax based upon income [on receipts attributable to business conducted in another state or foreign…”
Nielsen Co. v. Bd. of Arlington Cnty., 767 S.E.2d 1 (Va. 2015). “Deducting Receipts From The Pool Of Taxable Gross Receipts Once the pool of taxable gross receipts is created, certain receipts "shall be deducted" from that pool even though they "would otherwise be taxable.”
Va. Code Ann. § 58.1-3732(B)(2): 3 cases
Ford Motor Credit v. Chesterfield Cnty., 707 S.E.2d 311 (Va. 2011). “1, the deduction requirement of Code § 58.1-3732(B)(2), and the Commerce Clause's fair apportionment requirement.”
Nielsen Co. v. Bd. of Arlington Cnty., 767 S.E.2d 1 (Va. 2015). “Deducting Receipts From The Pool Of Taxable Gross Receipts Once the pool of taxable gross receipts is created, certain receipts "shall be deducted" from that pool even though they "would otherwise be taxable.”
Ford Motor Credit Co. v. Chesterfield Cnty., 90 Va. Cir. 457 (Chesterfield Cir. Ct. 2009). “See Va. Code Ann. § 58.1-3732 (B)(2). The Department of Taxation’s regulation interpreting this provision clarifies that “[a] Virginia taxpayer is liable for income or other tax based upon income [on receipts attributable to business conducted in another state or foreign…”
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