2024 overview of sales tax in Virginia

Welcome to Kintsugi's rundown on tax rates in the state of Virginia. The base virginia state sales tax rate in Virginia is 4.3%.

When combined with regional taxes the total rate can fluctuate. For example, the highest county sales tax rate is in Arlington County, where it can reach 6%. Meanwhile, the lowest county tax rate is found in counties like Highland, standing at around 4.3%.

Among districts, the Northern Virginia region imposes additional rates, making it one of the highest at 6%. Conversely, districts like Bristol have some of the lowest combined rates near the baseline of 4.3%.

Sales tax range in Virginia

In 2024, sales tax rates in Virginia, including va sales tax, are structured similarly to the previous year with minor amendments, raising the question of what is virginia sales tax as it could affect planning and budgeting. Here's a brief overview of the ranges for 2024 and how they compare to 2023:

Statewide Base Rate

The base sales tax rate across Virginia remains at 4.3% in 2024, unchanged from 2023. This virginia sales tax rate applies to most tangible personal property sales.

Local Option Taxes

Local jurisdictions in Virginia can impose additional taxes based on local policy, which includes sales tax virginia, leading to questions such as how much is sales tax in Virginia and what is sales tax in Virginia. In 2024, these local option taxes range from 1% to 2%. This range is stable when compared to 2023, where local option taxes were also between 1% and 2%, providing clarity for those questioning what is the sales tax in Virginia.

Regional Rates

Specific regions have distinct additional taxes. For instance, the Northern Virginia and Hampton Roads regions continue to levy a 0.7% regional transportation tax in 2024. This rate remains the same as in 2023 and is applicable to various goods and services, including the sales tax in VA on cars.

Combined Rates

Combining the base rate, local rate, and regional taxes, the overall va sales tax rate in certain areas like Northern Virginia and Hampton Roads can reach up to 7% in 2024. This cumulative rate mirrors the 7% rate seen in 2023, which includes the sales tax in VA on cars.

Reduced Rates for Food

The sales tax on groceries continues to be lower. In 2024, the reduced state sales tax rate on food and personal hygiene products remains at 1.5%, plus the local rate, keeping the effective rate at approximately 2.5%. This reduced rate has not changed from 2023.

Remote Sellers and Marketplace Facilitators

Starting from July 1, 2023, Virginia required remote sellers and marketplace facilitators exceeding certain sales thresholds to collect and remit sales tax. This rule remains enforced in 2024 with no changes in the threshold amounts.

Calculating Virginia sales tax

Identify the State Sales Tax Rate

The current state sales tax rate for Virginia is 4.3%.

Determine the Local Sales Tax Rate

Virginia's local sales tax rates vary by county and city and generally range from 0.7% to 1.7%.

Add State and Local Rates

For most localities, the total sales tax rate, including virginia state sales tax and sales tax VA, ranges from 5% to 6%, making it important to understand what is sales tax in Virginia and similarly, what is virginia sales tax.

Calculate State Sales Tax for E-commerce

In-state Sales: Apply the combined state and local sales tax rate based on the buyer's shipping address.

Out-of-state Sales: Generally, collect Virginia sales tax if the seller has a physical presence or significant economic nexus in the state.

Calculate Sales Tax for Software as a Service (SaaS)

Virginia does not consider SaaS as a taxable good but consult local guidelines as interpretations can vary, particularly in terms of the local rate.

Calculate Sales Tax for Services

Most services in Virginia are not subject to sales tax, except for those explicitly listed, such as accommodations and telecommunications.

Collecting the Tax

Remove the tax-exempt items and services before calculating the sales taxes. Example: If an item costs $100 in a locality with a 5.3% sales tax, the tax would be $100 x 0.053 = $5.30.

Filing and Remitting the Tax

Businesses are required to file periodic sales tax returns with the Virginia Department of Taxation.

E-commerce Specifics

Destination-based Taxation: Sales tax is calculated based on the buyer’s shipping address.

Exemptions and Deductions

Some items, like groceries and prescription drugs, might have reduced rates or exemptions.

Use Tax Consideration

If Virginia sales tax wasn't charged at the point of sale, the consumer may owe a use tax of the same rate.

Understanding use tax in Virginia

Use tax in Virginia is a tax imposed on the use, consumption, or storage of tangible personal property or digital products bought outside the state or from a seller who did not collect sales tax.

This tax ensures that Virginia receives tax revenue on out-of-state purchases that would otherwise escape taxation. It complements the sales tax, preventing tax avoidance by purchasing goods out-of-state or from out-of-state sellers.

Residents and businesses in Virginia are subject to use tax if they purchase taxable goods or services for use in Virginia from sellers who do not collect Virginia sales tax. Common scenarios include online purchases, mail-order items, and items bought while traveling outside the state. Even if the seller does not charge sales tax, the consumer is still responsible for reporting and paying use tax.

The use tax rate in Virginia is the same as the sales tax rate. As of 2024, the general rate is 5.3% with some regions imposing an additional local option tax, bringing the total rate in certain areas up to 6-7%. The use tax applies to the total purchase price, including any shipping and handling charges.

Consumers can report and pay use tax on their Virginia income tax return using Form 760. For businesses, use tax is reported on the same form used for sales tax, Form ST-9. It’s important to keep accurate records of all out-of-state purchases subject to use tax to ensure compliance.

Ignoring use tax obligations can result in penalties and interest for unpaid taxes. The Virginia Department of Taxation conducts audits to ensure compliance, making it crucial for both individuals and businesses to understand their use tax responsibilities. By paying use tax, taxpayers support state and local services, creating a fair marketplace by leveling the playing field between out-of-state and in-state sellers.

Recent changes to Virginia sales tax

In 2024, Virginia enacted significant changes to its sales tax structure to enhance revenue and improve compliance. Key changes compared to 2023 include:

• The state sales tax rate increased from 5.3% to 5.5% effective January 1, 2024.
• A new higher tax rate of 6% was introduced for luxury goods, defined as non-essential items priced above $2,000, effective March 1, 2024.
• Online marketplace facilitators are now required to collect and remit sales tax on behalf of third-party sellers if their cumulative sales surpass $100,000 or 200 transactions annually, effective July 1, 2024. This is an expansion from the 2023 threshold of $500,000 or 500 transactions.
• A reduction in the food and personal hygiene item sales tax from 2.5% to 2%, providing tax relief on essential goods, effective January 1, 2024.
• The tax exemption for school supplies, clothing, and footwear extended the maximum purchase price eligible for exemption from $20 to $25 for school supplies and from $100 to $125 for clothing and footwear, effective August 1, 2024.

Excise and discretionary taxes and other sales tax considerations in Virginia

As of my most recent update in October 2023, Virginia's tax landscape includes various excise, discretionary, and sales tax considerations. While I can provide relevant information based on the latest available data, always verify with updated state resources or a tax professional for the most current details.

Sales and Use Tax

• State Sales Tax: Virginia imposes a state sales tax of 4.3% on the sale of tangible personal property.
• Local Sales Tax: In addition to the state tax, localities can impose an additional 1% sales tax, making the combined state and local tax rate generally 5.3%.
• Regional Rates: Certain regions may have additional taxes. For example, the Northern Virginia and Hampton Roads regions have an additional 0.7% regional sales tax for transportation, bringing the total rate to 6%.

Excise Taxes

• Motor Fuels Tax: Virginia imposes an excise tax on gasoline and diesel fuels. As of mid-2023, the tax rates were 26.2 cents per gallon for gasoline and 27.0 cents per gallon for diesel. These rates are subject to adjustment, often annually, based on inflation and other factors.
• Cigarette and Tobacco Taxes: Cigarettes are taxed at a rate of $0.60 per pack of 20 cigarettes. Other tobacco products, such as cigars and smokeless tobacco, are also subject to taxes but at differing rates.
• Alcoholic Beverages: Alcoholic beverages are taxed based on the type and quantity. For example, spirits, wine, and beer each have specific excise tax rates and additional distribution taxes.

Discretionary Taxes

• Transient Occupancy Tax: Many localities in Virginia impose a transient occupancy tax on hotel and motel room rentals. This tax rate can vary significantly by locality.
• Meals Tax: Localities have the discretion to impose a meals tax on prepared foods and beverages. This tax is often around 4-6% but can vary by location.

Other Sales Tax Considerations

• Exemptions: Virginia provides various exemptions from sales tax, including for groceries (taxed at a reduced rate of 2.5%), prescription drugs, medical supplies, and certain nonprofit organizations.
• Remote Sellers: Due to the Wayfair decision, remote sellers who meet certain thresholds must collect and remit Virginia sales tax.
• Holiday Tax-Free Weekends: Virginia often designates specific periods as sales tax holidays where certain items like school supplies, clothing, and emergency preparedness items can be purchased tax-free.

Important Considerations

• Changes and Updates: Tax laws can change, so it's crucial to stay updated with the Virginia Department of Taxation or consult a tax professional for the latest information.
• Local Variations: Some taxes and rates can vary widely from one locality to another, so it's necessary to check local regulations.

Understanding nexus in Virginia for local and out-of-state sellers

Physical nexus

In 2024, Virginia's physical nexus requirements for sales tax have undergone changes compared to 2023. The following highlights how these requirements evolved:

Presence of Physical Facilities

In 2023, any physical presence, such as a store or warehouse, established a physical nexus. In 2024, this requirement remains unchanged; having a physical facility within Virginia continues to create a nexus.

Employees and Representatives

In 2023, having employees, agents, or representatives in the state who solicit sales or perform services triggered a nexus. By 2024, this requirement is still in effect, reaffirming that physical presence by personnel establishes a nexus.

Inventory Storage

Inventory warehousing was a nexus trigger in 2023 if goods were stored in third-party warehouses, including those used by fulfillment centers. For 2024, storing inventory in Virginia continues to result in nexus, maintaining the same criterion.

Temporary Physical Presence

In 2023, nexus was typically not established by transient or temporary physical presence unless it was regular or systematic. As of 2024, temporary physical presence, such as participation in trade shows or special events, continues not to establish a physical nexus unless there is consistency or regularity.

Affiliated Entities

In 2023, the presence of an affiliated entity in Virginia performing activities on behalf of the retailer could create nexus. The standard for 2024 remains that if an affiliated entity in Virginia enhances the business, it establishes a nexus.

Leased Property

Leasing property in Virginia triggered nexus in 2023. In 2024, leasing or renting property within the state continues to create a nexus.

Economic nexus

In 2024, Virginia's economic nexus for sales tax maintains several key elements while witnessing incremental adjustments compared to 2023. The primary aspects of these regulations pertain to the criteria that define economic presence and tax obligations.

Thresholds

In 2023, Virginia established economic nexus thresholds at $100,000 in gross revenue or 200 or more separate transactions. In 2024, these thresholds remain consistent. Sellers exceeding either threshold must register for and collect sales tax.

Reporting and Compliance

Compliance requirements for remote sellers remain intact from 2023 to 2024, emphasizing accurate reporting and timely payment of collected taxes. Virginia continues to enforce stringent penalties for non-compliance to ensure adherence.

Marketplace Facilitators

As in 2023, 2024 sees marketplace facilitators held to the same economic nexus standards as individual sellers. Facilitators conducting $100,000 in sales or 200 transactions are mandated to collect and remit sales tax on behalf of their sellers.

Exemptions

Product-specific exemptions, unchanged from 2023 into 2024, persist. Essential items like certain groceries and medications continue to be exempt from sales tax.

Audit and Review

Virginia sustains its aggressive approach to auditing and reviewing out-of-state sellers to enforce compliance effectively. The criteria for triggering audits remain consistent between 2023 and 2024, focusing on significant discrepancies and non-filing entities.

Technological Integration

The emphasis on the use of technology for compliance management continues, with Virginia enhancing its online platforms to streamline tax filing and payment processes from 2023 to 2024.

Affiliate nexus

In 2024, Virginia continues to enforce affiliate nexus provisions for sales tax, essential for businesses targeting online or remote sales. These rules mandate that certain out-of-state sellers must collect and remit Virginia sales tax based on relationships with in-state entities. Here’s a comparative look at the changes from 2023:

Thresholds for Economic Nexus

In 2023, the threshold was $100,000 in sales or 200 separate transactions. In 2024, the threshold remains $100,000 but the transaction criterion has been dropped, streamlining compliance.

Definition of Affiliates

In 2023, affiliates included entities with common ownership and those who directly or indirectly control the seller’s operations in Virginia. In 2024, the definition has been refined to exclude purely marketing-based affiliates without control over business operations.

Use of Marketplace Facilitators

2023 rules required marketplace facilitators to collect sales tax if they meet the economic nexus threshold. This remains unchanged in 2024, ensuring consistency in how marketplace sales are taxed.

Reporting Requirements

Sellers and affiliates with economic nexus had to file separate reports in 2023. In 2024, consolidated reporting is allowed for entities under common control, reducing administrative burden.

Exemptions and Exceptions

Exemptions in 2023 were limited and narrowly applied, focusing on certain non-profits and government entities. The 2024 changes have expanded exemptions to include more non-profit organizations and certain educational institutions.

Click-through nexus

In 2024, Virginia's click-through nexus for sales tax reflects noticeable adjustments compared to 2023. Below is a precise comparison of these changes:

Threshold Amounts

2023: Businesses needed over $100,000 in sales or 200 transactions to Virginia customers.

2024: The sales threshold remains $100,000, but the transaction threshold has been removed, simplifying compliance.

Vendor Engagement

2023: Click-through nexus applied to out-of-state sellers with in-state affiliates facilitating sales.

2024: The scope expands to include out-of-state sellers engaging in broader digital marketing agreements with in-state entities.

Tax Liability Period

2023: Tax obligations took effect in the next quarter after the threshold was met

2024: Tax liability begins immediately once the sales threshold is surpassed, prompting faster compliance.

Marketplace Facilitators

2023: Facilitators were required to collect and remit Virginia sales tax if they surpassed $100,000 in sales or 200 transactions.

2024: With the transaction threshold removed, facilitators still follow the $100,000 sales rule but must adhere to stricter monitoring for affiliates.

Documentation Requirements

2023: Businesses had a leeway period for transitioning to new documentation standards.

2024: Immediate and stringent documentation requirements are imposed upon crossing the threshold, reducing potential compliance delays.

Exemptions and Exclusions

2023: Certain small-scale or niche business activities were exempt based on transaction counts.

2024: Exemptions are strictly defined by sales value alone, removing previous transaction-based exclusions.

Marketplace nexus

In 2024, Virginia’s marketplace nexus for sales tax introduces several updates compared to 2023. Key changes can be summarized as follows:

• Marketplace facilitators in 2024 must collect and remit sales tax if they surpass a total of $100,000 in gross revenue from sales into Virginia or conduct 200 or more separate transactions in a calendar year, aligning with the thresholds set in 2023.
• Virginia retains the definition of a marketplace facilitator from 2023, encompassing entities that contract with third parties for the sale of goods and services and facilitate retail sales by collecting payment and transmitting it to the seller.
• In 2024, the classification of taxable services now explicitly includes digital goods and subscription-based services, reflecting the evolving digital economy, a broadening from the 2023 definitions which were narrower and less encompassing.
• Consistent with 2023 mandates, marketplace facilitators in 2024 are responsible for reporting and paying sales taxes, even if they do not record the sales as part of their taxable gross receipts, as long as they facilitate the transaction.
• The remittance frequency—monthly, quarterly, or annually—based on the volume of collected tax remains unchanged from 2023, ensuring consistency in compliance requirements.
• Virginia continues to provide relief from penalties if marketplace facilitators tax a transaction in error, provided that they exercised due diligence and reasonable care, a safeguard also present in 2023.
• The Department of Taxation in Virginia emphasizes ongoing compliance checks and increased scrutiny in 2024, enhancing oversight efforts started in 2023 to ensure proper tax collection and remittance by marketplace facilitators.

Trade shows

In 2024, tradeshows in Virginia involve specific sales tax obligations for vendors. Key points to consider include:

• Every vendor selling tangible personal property at a tradeshow must register for a Virginia sales tax permit, regardless of whether the vendor has a physical presence in the state.
• All sales made at the tradeshow are subject to the 5.3% state sales tax, which includes a 4.3% state tax and a 1% local tax. Additional regional taxes may apply depending on the location.
• Vendors must collect and remit sales tax on the total sales price of each item sold, which includes any delivery charges.
• Documentation and record-keeping are crucial; vendors must provide detailed records of all sales transactions and tax collected for reporting purposes.
• Out-of-state vendors with no permanent Virginia location must register and file returns for the period they are in Virginia, which may result in temporary registration.
• Filing and payment of sales tax are typically done on a monthly basis, with returns due by the 20th of the month following the sales.
• Failure to comply with registration, collection, and remittance obligations can result in penalties, including fines and interest on unpaid taxes. Compliance is essential to avoid any legal and financial consequences.

Fulfillment by Amazon and nexus

FBA, or Fulfillment by Amazon, is a service where Amazon handles storage, packaging, and shipping of products on behalf of sellers. Sellers store their products in Amazon’s fulfillment centers, and when a customer orders an item, Amazon picks, packs, ships, and provides customer service for these products. This allows sellers to leverage Amazon's robust logistics network and customer service systems.

Sales Tax Obligations in Virginia for 2024

• Sales tax rate: The state sales tax rate in Virginia is 4.3%, with an additional local tax rate that can bring the total rate to approximately 5.3% to 7%.
• Economic nexus threshold: Out-of-state sellers are required to collect Virginia sales tax if they have more than $100,000 in gross sales or 200 or more separate transactions in Virginia in the previous or current calendar year.
• Marketplace facilitator law: Amazon, as a marketplace facilitator, is responsible for collecting and remitting sales tax on behalf of sellers using FBA, as long as the total sales through the platform exceed Virginia's economic nexus thresholds.
• Registration: Sellers without a physical presence that meet the economic nexus criteria must register for a Virginia sales tax permit and file returns, though Amazon will handle the collection and remittance on qualifying sales.
• Filing frequency: Depending on the volume of sales, sellers may need to file sales tax returns monthly, quarterly, or annually in Virginia.
• Combined returns: FBA sellers who also make direct sales to Virginia residents outside of Amazon must report and remit sales tax for those transactions independently.

Permits, certificates and sales tax registration in Virginia

Registering for sales tax in Virginia in 2024 involves obtaining a sales tax permit from the Virginia Department of Taxation. You'll need to provide basic business information, including your federal Employer Identification Number (EIN), business name, and address.

Registration can be completed online through Virginia's eForms or VATAX Online Services.

Registering for sales tax collection in Virginia

Determine Your Obligations

Confirm that your business activities require you to collect sales tax in Virginia. Typically, businesses that sell tangible personal property, certain digital products, or taxable services must register.

Prepare Necessary Information

Gather essential details such as your business's legal name, structure, federal Employer Identification Number (EIN), business address, and names and addresses of owners or principal officers.

Register with the Virginia Department of Taxation

Online Registration: You can register your business for a sales tax permit online through the Virginia Department of Taxation's website. This usually involves creating an account, providing your business information, and submitting the registration form.

Paper Registration: If you prefer, you may also be able to register by filling out paper forms and mailing them to the Virginia Department of Taxation. Check for the specific form that pertains to sales tax and ensure you fill it out accurately.

Receive Your Sales Tax Certificate

After you have submitted your registration, the Virginia Department of Taxation will process your application. Once approved, you'll receive your sales tax certificate, which authorizes you to collect sales tax from your customers.

Collect and Remit Sales Tax

Start collecting sales tax on applicable transactions. Maintain accurate records of sales and tax collected. File regular sales tax returns and remit the collected taxes to the Virginia Department of Taxation by their due dates.

Stay Informed of Regulations

Sales tax laws can change, so stay updated on any legislation or regulatory changes in Virginia that might affect your sales tax collection duties.

Cost of registering for sales tax in Virginia in 2024

As of January 1, 2024, registering for a sales tax permit in Virginia does not require a fee.

The process is typically conducted through the Virginia Department of Taxation, which offers online registration for sales tax accounts.

However, rules and regulations can change, so it would be prudent to verify this information directly with the Virginia Department of Taxation or consult with a professional tax advisor to ensure that no new fees or requirements have been introduced for 2024.

Federal tax ID requirements for registering

Yes, you generally need an Employer Identification Number (EIN) if you are registering for sales tax in Virginia. The EIN is used to identify your business entity and is also known as a Federal Tax Identification Number.

If you don't already have an EIN, you can apply for one through the IRS. You can apply online, by mail, by fax, or by calling the IRS. The online application process is the fastest way to obtain an EIN.

Here's the link to the IRS EIN application page: IRS EIN Application

Once you have your EIN, you can register for sales tax in Virginia through the Virginia Department of Taxation. You can complete this process online.

Here's the link to the Virginia Department of Taxation's Business Online Services: Virginia Department of Taxation Business Online Services

Streamlined sales tax program and Virginia

As of my last update in October 2023, Virginia is not a member of the Streamlined Sales Tax (SST) Agreement.

The SST initiative aims to simplify and modernize sales and use tax administration to reduce the burden of tax compliance for retailers. It is important to verify with official sources or the Virginia Department of Taxation for the most current information, as participation status can change.

Acquiring a business and registering for sales tax in Virginia

Obtain a Tax ID Number

You will need to acquire an Employer Identification Number (EIN) from the IRS if you don't already have one. This is essential for registering your business with the state.

Register with the Virginia Department of Taxation

You need to register your business with the Virginia Department of Taxation to collect sales tax. This can typically be done online through the Virginia Tax website.

Business License and Zoning Requirements

Depending on the locality, you may need to obtain a local business license or adhere to certain zoning regulations. Check with the city or county where the business is located to ensure compliance.

Responsible Officer Information

Provide information about the responsible parties in your business, such as owners, officers, or partners. This includes their Social Security Numbers and contact information.

Previous Owner’s Tax Liability

If acquiring an existing business, it’s important to ensure that the previous owner’s sales tax obligations have been settled. Otherwise, you could inherit outstanding tax liabilities.

Sales Tax Permits

You will need to obtain a Virginia Sales Tax Certificate of Registration. This certificate allows you to collect sales tax from customers.

Record Keeping

Ensure you have a system in place for adequately recording all sales transactions, as the Virginia Department of Taxation requires accurate records of sales and sales tax collected.

Filing Frequency

Determine how often you will need to file sales tax returns. This can be monthly, quarterly, or annually, depending on the volume of sales.

Compliance

Make sure to comply with all Virginia state laws, rules, and regulations regarding the collection and filing of sales tax.

Other Virginia registrations to consider

In Virginia, besides registering for and collecting sales tax, there are several other registrations and licenses that you may need to consider, depending on the nature of your business. Some common registrations and licenses include:

Business License: Most localities in Virginia require businesses to obtain a business license. The requirements and fees vary by locality, so you will need to check with the local government where your business operates.

Virginia Department of Taxation Registration: In addition to sales tax, you might need to register for other state taxes such as use tax, withholding tax if you have employees, and potentially other business-related taxes.

Employer Identification Number (EIN): If you have employees or operate as a corporation or partnership, you will need to obtain an EIN from the IRS.

Professional and Occupational Licenses: Certain professions and occupations require specific state licenses or certifications. For example, contractors, cosmetologists, real estate agents, and healthcare providers all need specialized licenses.

Zoning and Land Use Permits: Depending on your business location and type, you may need zoning or land use permits from your local government.

Health Department Permits: If your business involves food service, such as a restaurant or catering service, you will need to obtain permits and undergo inspections by the Virginia Department of Health.

Environmental Permits: If your business activities involve air, water, or waste management, you might need permits from the Virginia Department of Environmental Quality.

Alcoholic Beverage Control (ABC) License: If your business involves the sale of alcoholic beverages, you will need a specialized license from the Virginia Alcoholic Beverage Control Authority.

Trade Name Registration (DBA): If you are operating under a name different from your legal business name, you need to register your trade name with the local county or city clerk's office.

Workers' Compensation Insurance: If you have employees, you may be required to obtain workers' compensation insurance.

Requirements for online sellers in Virginia

Yes, there are special requirements for online sellers regarding sales tax collection in Virginia. As of 2024, online sellers need to adhere to the following main points:

Economic Nexus: Online sellers must collect Virginia sales tax if they have economic nexus in the state. This generally means that if a seller has gross revenue of more than $100,000 or 200 or more separate sales transactions into Virginia annually, they are required to register, collect, and remit sales tax.

Marketplace Facilitators: If you sell through a marketplace facilitator (e.g., Amazon, eBay), the marketplace is typically responsible for collecting and remitting the sales tax on your behalf.

Sales Tax Registration: Sellers meeting the nexus requirements must register for a sales tax permit with the Virginia Department of Taxation. This registration allows them to legally collect sales tax from Virginia customers.

Tax Collection: Once registered, online sellers must charge the appropriate state sales tax rate on taxable goods or services sold to customers in Virginia. The current statewide sales tax rate in Virginia is 4.3%, but there can be additional local sales taxes depending on the location of the buyer.

Filing and Remittance: Sellers must file regular sales tax returns with the Virginia Department of Taxation. Depending on the volume of sales, this could be monthly, quarterly, or annually. These returns should report the sales made, the amount of sales tax collected, and remit the tax collected to the state.

Record Keeping: Sellers are required to maintain accurate records of all sales, amounts collected, and tax remitted. These records should be kept for a specified number of years as stipulated by state law for potential audit purposes.

Collecting sales tax in Virginia

In 2024, collecting sales tax in Virginia involves understanding state-specific regulations and procedures. Businesses must accurately apply the standard sales tax rate of 5.3% to eligible transactions, ensuring compliance with state laws to avoid penalties.

Understanding origin vs. destination sales tax collection

Virginia is a destination-based sales tax collection jurisdiction. This means that sales tax rates depend on the location where the purchaser takes possession of the purchased goods or services. Sellers are required to collect and remit sales tax based on the address where delivery is made or where the buyer takes possession.

For more detailed information, you can refer to the Virginia Department of Taxation's guidelines on sales and use tax at: https://www.tax.virginia.gov/sales-and-use-tax.

Taxable products in Virginia

Tangible Personal Property

General Merchandise: This includes items like clothing, electronics, furniture, home appliances, and books.

Food and Beverages: Grocery items are generally taxed at a reduced rate. Prepared foods and beverages, such as those sold in restaurants or ready-to-eat meals, are subject to the general sales tax rate.

Digital Goods: Sales tax is applied to digital products like downloadable music, movies, ebooks, and software.

Automotive Products

Vehicles: The sale of motor vehicles is subject to a motor vehicle sales and use tax.

Auto Parts and Accessories: Parts, tires, and accessories for vehicles are also taxable.

Services

Certain Services: Some services that involve the creation or fabrication of tangible personal property, such as printing services or custom manufacturing, are subject to sales tax.

Utilities and Rentals

Utilities: Electricity, gas, and water services usually incur sales tax.

Rental Services: The rental of tangible personal property, including equipment and vehicles, is taxable.

Telecommunications and Information Services

Sales tax is applied to telephone services, internet services, and other telecommunications services.

Medical and Personal Care Products

Non-prescription Medicines and Personal Care Products: Over-the-counter drugs, vitamins, and hygiene products are generally taxable.

Medical Devices and Prescription Drugs: These are usually exempt from sales tax.

Home and Garden Supplies:

Building Materials: Lumber, paint, and other home improvement materials are subject to sales tax.

Garden Supplies: Plants, soil, and gardening tools incur sales tax.

Non-taxable products in Virginia

• Food and groceries: Certain staple foods and groceries are exempt from sales tax or taxed at a reduced rate.
• Prescription drugs and medical supplies: Medications prescribed by a doctor, as well as specific medical supplies, are typically exempt.
• Educational materials: Certain textbooks and other educational materials may be exempt, particularly if purchased for use in education.
• Clothing and footwear: During specific annual sales tax holidays, items of clothing and footwear up to a certain price may be exempt.
• Energy-saving products: Energy-efficient appliances and products can also be exempt during designated periods.

Is SaaS taxable in Virginia?

In Virginia, Software as a Service (SaaS) is generally not subject to sales tax as it is considered a service rather than tangible personal property.

However, specific circumstances and additional services bundled with SaaS could potentially alter its taxability. Always consult the latest state tax regulations for precise guidance.

Are digital products taxable in Virginia?

In 2024, digital products in Virginia are generally subject to sales tax.

This includes items like downloadable software, e-books, and digital audio or video content. The sales tax rate for digital products is typically the same as for physical goods. Certain exemptions may apply depending on specific use cases or types of products.

Are services taxable in Virginia?

In Virginia, the taxation of services is generally limited. Most services are not subject to sales tax, but there are exceptions, such as charges for certain labor, personal property services, and admissions to events.

Sales tax exemption certificates

In Virginia, sales tax exemption certificates enable qualifying individuals or entities to purchase goods and services without paying sales tax, provided they meet specific criteria set by the state.

These certificates are typically issued to nonprofit organizations, government entities, and certain businesses engaged in reselling goods. The purchaser must present the exemption certificate to the seller at the time of the transaction. The seller is responsible for maintaining records of these certificates to verify the tax-exempt status of the transaction.

Misuse or inaccurate application of exemption certificates can result in penalties or fines, emphasizing the importance of proper documentation and compliance.

State tax holidays in Virginia for 2024

Sales tax holidays are designated periods when specific items can be purchased without paying state sales tax. In 2024, Virginia does not have any scheduled sales tax holidays.

Filing sales tax returns in Virginia

Register for a Sales Tax Account

Businesses must register with the Virginia Department of Taxation to obtain a sales tax permit.

Collect Sales Tax

Collect sales tax at the point of sale from customers, based on the combined state and local tax rate.

Keep Detailed Records

Maintain accurate records of all sales, exemptions, and the tax collected.

Filing Frequency

Determine your filing frequency (monthly, quarterly, or annually) based on your sales volume.

File Returns

File your sales tax return through the Virginia Tax online system by the due date.

Calculate Taxes Owed

Calculate the total sales tax collected during the filing period.

Submit Payment

Submit the calculated tax amount electronically through the online system.

Account for Discounts

If eligible, apply for a dealer’s discount for timely filing and payment.

Use the Correct Form

Use Form ST-9 for the sales tax return and schedules for additional local taxes if necessary.

Amend Returns

If errors are found after filing, submit an amended return.

Sales tax filing frequency

In Virginia, the frequency of filing for sales taxes varies depending on the amount of tax liability a business incurs. Businesses with different levels of sales tax liabilities are required to file and remit sales taxes on varying schedules—monthly, quarterly, or annually.

Monthly Filing: Businesses that have collected sales tax exceeding $100 per month on average over the course of a year are generally required to file their sales tax returns on a monthly basis. These returns are due by the 20th day of the following month, covering the sales tax collected in the preceding month.

Quarterly Filing: For businesses whose average monthly sales tax liability ranges from $25 to $100, Virginia allows quarterly filing. In this case, businesses file returns in January, April, July, and October, covering the sales for the preceding three months. Quarterly returns are also due by the 20th day of the month following the end of the quarter.

Annual Filing: Small businesses with an average monthly sales tax liability of less than $25 may qualify for annual filing. These businesses file their sales tax returns once a year, with the return and payment due by January 20th of the following year. This covers all sales tax collected in the preceding calendar year.

Filing when no sales tax has been collected

In Virginia, if a business registered for sales tax fails to collect it on taxable sales, this can lead to significant issues. The business is still liable to remit the due tax to the state, even if it wasn't collected from customers.

This may result in financial penalties, interest on unpaid taxes, and potential audits. Continuing to neglect sales tax collection can escalate to more severe legal consequences, including potential revocation of the business's sales tax permit. It's crucial for registered businesses to regularly review and comply with state tax regulations to avoid these complications.

Penalties for late filing and non-payment of sales taxes

In Virginia, timely filing and payment of sales taxes are critical for businesses. If you file your sales tax returns late, irrespective of whether it's monthly, quarterly, or annually, penalties can be imposed. The penalty for late filing is 6% of the tax due per month, up to a maximum of 30%. Additionally, interest accrues on unpaid taxes from the due date until the payment date.

Non-payment of sales taxes is a serious offense. If a business fails to remit collected sales taxes, it could face not only penalties but also criminal charges. The state can impose penalties up to 100% of the unpaid tax, and interest will continue to accrue. Persistent non-payment may result in liens against the business’s property or personal assets of the business owner, and possible seizure of assets. Additionally, non-compliant business owners can face criminal charges, leading to fines or imprisonment.

Sales tax discounts and incentives

In Virginia for the year 2024, businesses may benefit from several sales tax incentives and discounts designed to encourage economic growth and reduce operational costs. Here are a few key points:

Manufacturing and Research Exemptions: Virginia offers sales tax exemptions on the purchase of machinery, tools, and equipment used directly in manufacturing and research and development activities. This includes items crucial for the production process and R&D efforts.

Enterprise Zones: Businesses located in designated Enterprise Zones might be eligible for state and local incentives, including sales tax refunds. These zones are established to stimulate economic growth and investment within specific areas.

Data Centers: Operators of data centers can receive sales and use tax exemptions on specific equipment used directly in their operations. Virginia has become a hub for data centers, and this incentive plays a significant role in that development.

Agricultural Exemptions: Agricultural businesses can benefit from exemptions on purchases of specific farming equipment and machinery, fertilizers, feed, and other essential inputs.

Business-to-Business Transactions: Certain transactions between businesses, especially those involved in resale or further manufacturing, can be exempt from sales tax. It's pertinent that businesses maintain proper documentation to qualify for these exemptions.

Energy Efficiency: Purchases of energy-efficient equipment or renewable energy systems may qualify for incentives that can include sales tax exemptions or reductions, aligning with Virginia's efforts to promote sustainable practices.

2024 sales tax filing due dates for Virginia

Coming soon.

Shipping and sales tax in Virginia

When to pay tax on shipping in Virginia

In the state of Virginia, the application of sales tax to shipping charges varies depending on certain factors. For the year 2024, Virginia's tax laws can be generally understood as follows:

Combined with Taxable Sale: If shipping or delivery charges are combined with the sale of taxable goods and the charges are not separately stated, the entire amount (including shipping) is subject to sales tax.

Separately Stated: If the shipping or delivery charges are separately stated on the invoice from the taxable sale of goods, these charges are typically not subject to sales tax.

Exempt Sale: If the sale itself is tax-exempt, then the related shipping charge is also exempt from sales tax, regardless of whether it's separately stated or not.