RATE OF SALES TAX:
5.30%
LOCAL & COUNTY MAXIMUM RATES:
0.70%
Table of Contents
What are the taxable goods and services?
The first step in sales tax compliance is determining whether the products or services your company sells are taxable in Virginia.
Traditional Products and Services
Physical property, such as furniture, home appliances, and automobiles, is subject to sales tax in Virginia.
Prescription and non-prescription medications, as well as gasoline, are tax-free.
Virginia levies a reduced rate on grocery purchases, with State and Local Tax rates of 1.5 and 1.0%, respectively.
Digital Products and Services
A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.
Businesses in Virginia are not required to collect sales tax on the sale of digital goods or services.
Virginia, on the other hand, has one exception to this policy. Businesses are required to collect sales tax on pre-written computer software offered online.
How to Register for Sales Tax in Virginia
If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.
This enables your company to collect sales tax on behalf of the municipal and state governments.
You will need the following information to register:
Business location; address; EIN and basic information; sales tax kinds that your company must pay
Basic information about the owner
A Resale Certificate might help you save money.
When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.
Sales Tax Collection
After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.
When computing sales tax, consider the following types of transactions:
Store Sales Shipping Within-State Sales Outside-State Sales
Retail Sales
For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.
Here’s an illustration of how this situation may look:
In Norfolk, Virginia, Mary owns and operates a bookshop. Because books are taxable in Virginia, Mary charges her clients a flat-rate sales tax of 6.000% on all purchases. This includes the state sales tax rate of 4.300% in Virginia, the city sales tax rate of 1.000% in Norfolk, and the local district tax rate of 0.700% in Mary.
Sales inside the state
The state of Virginia has a scheme known as origin-based sales taxation. This implies that long-distance purchases inside Virginia are taxed based on the buyer’s address. This regulation applies to sales taxes levied by the state, county, and city.
Consider the following scenario:
Steve operates his own eBay electronics company from his Richmond, Virginia home. A buyer from (city name B) discovers Steve’s eBay website and buys a $350 set of headphones. Steve calculates the sales tax for this transaction using Virginia’s state tax rate of 4.300% + Richmond’s municipal tax rate of 1.000%. The entire cost is $368.55 ($18.55 sales tax) at a total sales tax rate of 5.3%.
Out-of-State Purchases
Businesses in Virginia must only pay sales tax on out-of-state sales if they have a presence in other states.
Nexus indicates that the company has a physical presence in another state.
Common nexus types include:
A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.
Submit Your Sales Tax Return
You’re ready to submit your sales tax return now that you’ve obtained your Virginia seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.
How to File a Claim
Businesses in Virginia are required to file sales tax forms and make sales tax payments online.
How Frequently Should You File?
The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.
For at least the first 12 months, the state of Virginia requires all companies to submit monthly sales tax filings. If the State judges after 12 months that the firm is collecting less than $100.00 in sales tax per month, the sales tax return will be submitted quarterly.
Deadlines for Filing
The deadline for all Virginia sales tax returns is the 20th of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day.
Penalties for Filing Late
If the sales tax payable is $150.00 or more, Virginia adds a late filing penalty of 6% each month, up to a maximum of 30% of the tax stated on the tax return.
The late filing penalty is $10.00 if the amount of sales tax payable is less than $150.00.