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“The sales tax for businesses in most areas of Virginia is 5.3%”

What Does Virginia Sales Tax For Businesses Mean?

Unless any exemption or exception is specified, all sales, leases, and rents of tangible personal property in or for use in Virginia, as well as lodgings and certain taxable services, are subject to Virginia sales and use tax. Additionally, the sales tax rate for eCommerce businesses in most areas of Virginia is different. Now, let’s move on to see how much is the sales tax in Virginia.

How Much Is The Virginia Sales Tax For Businesses?

In most parts of Virginia, the sales tax rate is 5.3 percent. As listed below, several areas have an additional regional or municipal tax. Food for home consumption (such as groceries) and certain essential personal hygiene goods are taxed at a reduced rate of 2.5 percent throughout Virginia.

Virginia Sales Tax

Threshold Limit

5.3%

$100,000 economic sales threshold limit and 200 transaction threshold limit

Therefore, this is what Virginia sales tax for businesses is all about. Now, the question arises: do you need to collect this tax for your eCommerce business? Let’s see.

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By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.

Do You Need To Collect Virginia Sales Tax For Your Ecommerce Business?

If you have a nexus in Virginia, you must collect sales tax. Depending on the nexus, sellers may be physically or economically affiliated with a state. Having enough tangible presence and activity in a jurisdiction to make paying sales tax there worthwhile is referred to as having a physical nexus. In economic nexus, a company’s total income or the number of transactions exceeds a state’s threshold. The below table shows the sales tax rate in different areas of Virginia.

General Sales Tax Rate

Location

7%

James City Counter

Williamsburg

York Country

6.3%

Charlotte County

Gloucester County

Halifax County

Henry County

Northampton County

Patrick County

6%

Central Virginia:
Charles City, Chesterfield, Goochland, Hanover, Henrico, New Kent, Powhatan, and Richmond City

Hampton Roads:
Chesapeake, Franklin, Hampton, Isle of Wight, Newport News, Norfolk, Poquoson, Portsmouth, Southampton, Suffolk, and Virginia Beach

Northern Virginia:
Alexandria, Arlington, Fairfax City, Fairfax County, Falls Church, Loudoun, Manassas, Manassas Park, and Prince William

5.3%

Everywhere Else

Now let’s see what types of goods and services are taxable under the Virginia sales tax for businesses.

What Types Of Goods & Services Are Taxable?

Goods

Sales tax is legally required to be collected from tangible, physical things sold to a consumer in the state of Virginia. Certain types of protective apparel, certain assistive medical devices, textbooks from learning institutions, and software and data center equipment are all exempt from the tax.

Services

In most cases, Virginia does not collect sales taxes on services. Services that are deemed part of the physical product acquired and are valued in money or in-kind (such as the setup of a purchased piece of machinery) are taxable.

Some services are completely taxed. As an example. Gift and package wrapping services, diaper service, tuxedo rentals, the purchase of packaged or canned programs, limousine service, and a variety of other services are all subject to taxation. 

Therefore, if you are dealing in any of these goods and services, you are subject to pay tax under Virginia sales tax. Now, let’s move on to see the tax collection and tax filing procedure in Virginia.

Read More: West Virginia Sales Tax 2022 For Business: A Complete Guide

Tax Collection

The sales tax rate you pay in Virginia is determined by whether you are based in the state or not.

  • In-State Dealers- Individuals and firms with one or more physical locations in Virginia (such as an office, warehouse, fulfillment center, or other comparable places of business) must register as in-state dealers to collect sales tax.
  • Dealers from other states- Individuals and businesses who are situated outside of Virginia but have a sufficient physical or economic presence in the state to demonstrate nexus must register as an out-of-state dealer to collect sales tax. This includes remote sellers or online retailers who make more than $100,000 in yearly Virginia gross sales or conduct 200 or more transactions with Virginia clients beginning July 1, 2019.
  • Remote vendors and marketplace facilitators- Those with an economic nexus in Virginia (over $100,000 in Virginia gross sales or 200 or more transactions with Virginia customers) must begin collecting and paying sales tax on July 1, 2019. Firms that fulfill the economic nexus criterion but do not have a physical presence in Virginia should register as out-of-state dealers, while businesses that do have a physical presence should register as in-state dealers. When registering, marketplace facilitators must specify that they are marketplace facilitators.

Tax Filing

There are various options for filing and paying your sales tax electronically. You must submit an electronic filing waiver request if you are unable to file and pay online.

  • In-state dealers fill out Form ST-9 and collect sales tax at the rate that applies to your firm (point-of-sale).
  • Out-of-state merchants must file Form ST-8 and collect sales tax at the rate in effect at the time the shipment or delivery is delivered (destination-based sales tax).

If an order cannot be linked to a physical location in Virginia, in-state marketplace facilitators can use destination-based sourcing to calculate sales tax rates.

Dealer Discount: The dealer discount permits you to keep a percentage of the tax paid if you submit and pay on time. The municipal part of the tax is not eligible for a reduction.

How often do you need to file the sales tax return in Virginia?

The Virginia Tax Department will calculate whether you should file monthly or quarterly, based on your tax liability. The 20th of the month following the end of the filing period is when returns are due. Quarterly reporting deadlines are March 31, June 30, September 30, and December 31. Even if you don’t owe any taxes, you must file a return for each period.

What If You Fail To File The Return Before The Due Date?

Penalties and Interest

A penalty of 6% per month is added to the tax payable if you fail to file or pay the full amount of sales tax due by the due date. The maximum punishment is a 30 percent fine. The minimum fine is ten dollars. Even if there is no tax payable, late returns are subject to a minimal penalty.

Interest accrues on the tax until it is paid, at the federal underpayment rate plus 2%.

Need Assistance With Virginia Sales Tax

At Freecashflow.io, our team is dedicated to aiding internet entrepreneurs with tax and accounting concerns. Warner Brothers, Ernst & Young, and Paramount Pictures are just a few of the multibillion-dollar companies for whom our firm has worked. You may count on us for tax and accounting help. Please do not hesitate to contact us if you have any questions or concerns.

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