Virginia Sales Tax Guide

🌄Virginia, known as “Old Dominion,” is one of the most historically significant and naturally splendid states in the union! The College of William and Mary, which is located there, is the second oldest in the country having been founded in 1693. Due to the large military presence in the state, Virginia also houses the country’s largest office building, The Pentagon, as well as the largest shipyard in the country. If you’re one of the proud small business owners who make Virginia home, you’re going to want to be sure your business stays in line with Virginia's sales tax laws. Fear not! That’s why we have assembled this all-in-one guide; so that you can readily meet the sales tax compliance requirements for a small business in Virginia. 

After reading this guide, you will have learned:

• How to be prepared for your call with the Virginia Department of Taxation.
• How to contact the Virginia Department of Taxation.
• When to charge sales tax in Virginia.
• What goods, products, and services are taxable in Virginia.
• When you establish a sales tax nexus with the state of Virginia, and the nuances of various thresholds.
• How to register for a sales tax license in Virginia.
• How to collect sales tax in Virginia.
• How to file and pay sales tax in Virginia.

If, after reading, you still have any questions to help you determine your tax sales obligations in Virginia and how to fulfill them, we are here for your small business bookkeeping needs! 

Virginia Sales Tax Contacts

✅  Do you need to get in touch with the Virginia Department of Taxation?

✅  Are you uncertain about whether to visit, call them, or contact them through their website?  

✅ Do you wonder what information you should have ready before you contact them?

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

The Virginia Department of Taxation is reachable by phone at 804-367-8037. 

You can also send them a message (login required). If you are hoping for the fastest response, we always suggest that you call rather than sending a message. 

When you do call the Virginia Department of Taxation, you will want to have some information on hand. It will save time to have the following information easily accessible before you call: 

• Taxpayer Name
• EIN
• Sales & Use Tax ID Number

If you plan on having a third party contact them on your behalf, you’ll want to be sure to have completed a power of attorney form (PAR-101, PDF). If you don’t have a completed form they won’t be able to assist someone else on your behalf.

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

Virginia Sales Tax Registration

Are you a new business selling tangible property in Virginia? If yes, you are going to want to register your business with the Virginia Department of Taxation so that you can pay your sales tax on time. 

You need not fret as this is a relatively simple process and one for which you’re about to be fully prepared. We are going to outline the steps below so you are totally ready to register for your sales tax license.

Here we go! Remember...

Preparation is key. 

Let’s get started!

How do I register to collect sales tax in Virginia?

You can apply or register for a Virginia sales tax permit by visiting Virginia's VEC site and following the instructions provided.

Virginia prefers online registration but does offer an old school paper-based form (R-1, PDF) you can print and mail in. We suggest new businesses that are able to register online.

What information do I need to register for a Virginia sales tax permit?

Great question!

Before you sign up for a Virginia sales tax permit you’ll want the following information on hand:

• Business name
• Business entity type 
• Description of business activities
• Date business activities began or will begin
• Business address and mailing address
• Business contact information
• Associated business entities 
• NAICS code that best matches the business
• Federal Employer Identification Number (FEIN)
• List of business officers, partners, managing members, and/or trustees

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at Virginia's VEC site. 

How much does it cost to register for a Virginia sales tax permit?

Zilch! Virginia charges precisely $0 to register a new business sales tax permit, or to renew an existing one. Our favorite price! :p

Do I need a Federal Tax ID Number or EIN to register for a Virginia sales tax permit?

Quite right! For anything but a sole proprietorship, you will most assuredly need one. If you don’t already have one and need to get a new EIN, it’s a painless process. You can register for a Federal EIN right here :). 

Which agencies in Virginia do I need to additionally register with?

You may need to check with some of the following agencies or resources: 

• Virginia Department of Labor and Industry
• Virginia Center for Innovative Technology
• Virginia Chamber of Commerce

You’ll want to give this some thought and do a little research or investigating; since every business is unique, and there are such different rules, regulations, and laws that may apply. 

We suggest contacting the Virginia Department of Taxation to verify which additional government agencies you may be required to register with. 

*****

Huzzah!!!

You are now prepared to register for your Virginia sales tax permit in Virginia. 

Let’s summarize what we have covered:  

• Have all the required information easily accessible before registering online.
• Acquire a tax ID or EIN before registering for a Virginia sales tax permit.
• Register online at the Virginia's VEC site.
• Look into what other agencies you may have to additionally register with.

Registering for your Virginia sales tax permit will be stress-free as long as you are prepared. We recommend organizing all the essential information in a folder, preferably using a system like Box.com or Dropbox (something we’re happy to handle for our customers). 

Virginia Sales Tax FAQ

By now, you may have already contacted the Virginia Department of Taxation and applied for a Virginia sales tax permit. 

Once you have a license to collect and remit sales taxes in Virginia, you will probably be asking yourself two questions: 

• When do I charge a sales tax in Virginia?

• What goods and services are subject to sales taxes in Virginia? 

We are going to go over some common questions that our clients have asked. We believe these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations. 

Let’s start with the first question…

What goods and services are considered taxable in Virginia?

The following items are all taxable in the state of Virginia: 

• Sales of tangible goods at retail.
• Repairs or alterations of tangible personal property.
• Property rentals, leases, or licenses [e.g. commercial, mini-warehouse]
• Selling service warranty contracts.
• Short-term rentals for living accommodations (e.g. motel/hotel, beach houses, condos, timeshares, vacation homes, or RV homes).
• Rental/lease of personal goods (e.g.: machinery, vehicles, equipment, or other property).
• Charges for admission to any place of amusement, sport, or recreation.
• Manufacturing or producing goods for retail sales.
• Operating vending machines or amusement rides.
• Most services are exempted

The bottom line is …

Your business must pay taxes on sales of any non-exempt goods, and some taxable services.

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Let’s now review some of our clients’ frequently asked questions:

• Is Virginia an Origin or Destination sales tax State?

• What creates a sales tax nexus in Virginia?

• What is the economic threshold in Virginia?

• Does Amazon have fulfillment centers in Virginia?

• Does Virginia have a Click-Through Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions. 

 Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.   

Is Virginia an origin or destination-based sales tax state?

Virginia is an Origin-based sales tax state. This simply means you’ll want to have your Point-of-Sales system configured to track sales tax based on your location vs your buyer’s location.

Protip: Charge sales tax based on your location rather than your buyer’s location

What creates a tax nexus with the state of Virginia?  

Having nexus, also known as "sufficient business presence,” with Virginia means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Virginia because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Virginia Department of Taxation even if you never step foot in Virginia.   

So, how do you create a sales tax nexus in Virginia?

A business establishes a nexus in Virginia by:

• having a business location in Virginia;
• having property stored in Virginia;
• employing any person in Virginia;
• contracting with a salesperson or other agent in Virginia;
• leasing equipment used in Virginia;
• performing services in Virginia;
• licensing the use of intangible property in Virginia, or transporting property in Virginia using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored, such as in the instance of an Amazon warehouse. 

Does Amazon have fulfillment centers in Virginia?

Yes! Virginia has three fulfillment centers at this time:

• 165 Business Blvd // Clear Brook, VA // 22624-1568
• 5000 Commerce Way // Petersburg, VA // 23803
• 1901 Meadowville Technology Parkway // Chester, VA // 23836

This is relevant if you sell your products on Amazon or are recognized as an Amazon FBA (Fulfillment by Amazon) seller. When Amazon stores your products in one of its fulfillment centers in any state, including Minnesota, this triggers a sales tax requirement. If Amazon is storing your products in a warehouse in Minnesota, you have created a taxing connection with the state of Minnesota.

We can help guide your small business through this! We use tools like A2X to identify where our clients' inventory is currently being held and shipped from so that we can keep them in compliance.

Does Virginia have economic nexus?

Yes! As of July 1st, 2018, remote sellers are liable to pay sales tax beyond a certain threshold. This means that even businesses without a physical presence or traditional nexus can be required to register for, collect, and pay sales taxes.

The threshold for registering is having a cumulative gross revenue of over $100,000 or more than 200 transactions in a year to Virginia purchasers.

For  more information see the Virginia DOT’s remote sellers page here.

Does Virginia have click-through nexus?

No, which means if your business earns revenue by way of referring sales, you don’t have to worry about registering.

Is Virginia a streamlined sales tax state?

No, Virginia has unfortunately not yet joined into this potentially time-saving multi-state streamlined tax program.

More effectively manage your tax needs by keeping this guide handy. 

You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Virginia.

Collecting Sales Tax in Virginia

By now you know if you are a business that has established a nexus with Virginia. So you have an understanding about whether, or when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Virginia sales tax obligations. 

• How do I collect Virginia sales tax?
• Who is eligible for Virginia sales tax exemptions?
• What should I do if my customer is exempt from sales tax in Virginia?
• What happens if I lose a Virginia nontaxable transaction certificate? 

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Virginia.

How do I collect Virginia sales tax?

Because Virginia is an Origin-based sales tax state, your business should charge sales tax at the time of the transaction based on the business location rather than that of the buyer. 

What are the current Virginia sales tax rates?   

Virginia’s state-wide sales tax rate is 5.3% at the time of this article’s writing, with local option taxes potentially adding on to that. Since sales tax rates may change, we advise you to check out the Virginia Department of Taxation Tax Rate page which has the current rate and links to lookup specific municipal rates. Any changes will be reflected on that page.

It always helps to be accurate and up to date with this type of information! :)

What is exempt from Virginia sales tax?

Here is a sample list of exemptions: 

• Non-prepared food taxed at 2.5%
• purchases for resale
• Industrial Machinery
• Medical supplies

And that’s it! Most items of tangible property are taxable in Virginia. They do have a handy page with a detailed list of what is exempt from sales tax in Virginia.

Who is eligible for a Virginia sales tax exemption?

At this point, you should know what products are exempt from sales tax in Virginia. You also want to know who may be exempt. 

Under Virginia law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

• Government agencies
• Non-profit organizations
• Religious groups
• Out-of-state buyers (should their business not have nexus in their home state).

Note that a non-profit status doesn’t instantly confer tax exemption. Same page as above has information on which entities are tax exempt in Virginia.

What should I do if my customer is exempt from sales tax in Virginia?

Purchasers who are tax exempt must have a completed exemption certificate and must present their completed exemption certificate at the time of purchase. It is then incumbent upon the seller to hold on to this exemption certificate. Failure to do so may leave you unable to justify tax exempt sales.

Remember, you always want to collect and file a copy of the exemption certificate. Such certificates must be produced upon request to justify tax-exempt sales in the event of an audit.

What happens if I lose a Virginia sales tax exemption certificate?

Obviously this issue is best to be avoided! Imagine finding out you’ll be audited and discovering you cannot produce an exemption certificate for a buyer... That nightmare scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This is a bad scene and can be avoided by taking proper care of your paperwork... Which happens to be one of our areas of expertise! :) 

Does Virginia have a sales tax holiday?

They do indeed! They roll up multiple tax benefits into their ‘back to school’ timed tax holiday.

***** 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in Virginia state. 

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper! 

Filing and Paying Sales Tax in Virginia

It is time to talk about filing and paying your sales taxes in Virginia. In this section, We are going to cover the following frequently asked questions from our clients:

• When is Virginia sales tax due?
• What are the Virginia sales tax thresholds?
• What if a Virginia sales tax filing date falls on a weekend or holiday?
• How do I file a Virginia sales tax Return?
• How do I correct a Virginia sales tax return?
• What happens if I don’t collect sales tax?
• What happens if I file or pay my sales tax return late?
• Do I need to file a return if I don’t collect any sales tax in Virginia?
• If I close my business, do I need to file a final sales tax return?
• Does the Virginia Department of Taxation offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Virginia sales tax.

When is Virginia sales tax due?

Virginia sales tax payments are due based on the filing interval and type. Filing intervals are based on the company’s tax liability [detailed ahead, be patient! :p] and the type refers to paper vs. online.

The state of Virginia requires payment by no later than the 20th day of the month following the reporting period for paper and electronic filing.

What are the Virginia sales tax filing interval thresholds?

The thresholds for filing intervals are based on the expected or actual tax liability owed:

*anticipated if new business, actual if an existing company

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point-of-Sale Software to see the volume of sales you have generated. 

Don't worry though! The state will let you know when your due dates change. :) 

Keep an eye out for notices in your mail from the State of Virginia so that you don't miss any shift in deadlines.

What if a Virginia sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday, of course ;). 

How do I file a Virginia sales tax return?

Paper: No paper option is available for filing sales tax in Virginia. 

Electronic: File online via form ST-9 (or ST-9P for multiple locations) and submit payment via EFT.

How do I correct a Virginia sales tax return?

Paper: No paper option is available for amending a return in Virginia.

Electronic: File online via form ST-9 (or ST-9P for multiple locations) check “Amended Return” box and submit payment (if necessary) via EFT.

What happens if I don’t collect sales tax?

If you were required to collect sales taxes and failed to do so for whatever reason, that’s a big no-no! Ultimately the business will be held liable for the due tax. Always be sure to collect sales tax at the point of sale. Attempting to collect after the fact will be time-consuming and most likely unsuccessful. 

Protip: You are still responsible for remitting sales taxes even if you failed to collect them. 

What happens if I file or pay my sales tax return late?

Virginia's Department of Taxation charges a penalty for late filing and payment:

Filing later than six months results in a minimum penalty of $10 up to 30% per month of tax due.

Late payment can cause a penalty ranging from 6-30% if the filing is later than six months from its due date.

Do I need to file a return if I don’t collect any sales tax in Virginia?

Yep! Virginia requires businesses file a “Zero-Tax” return even when they have no sales during a taxing period.

If I close my business, do I need to file a final sales tax return?

Absolutely, Virginia requires businesses to file a “Final sales tax” return when closing their doors.

Does the Virginia Department of Taxation offer a discount for filing on time?

Yes! They offer a discount of 1.6% on the first $62,500 of revenue and 0.80% thereafter, plus an additional 1% discount for local taxes. We definitely suggest capitalizing on this option by filing early!

*****

Now that we have covered all our bases for filing and paying sales taxes in the state of Virginia, you should feel more at ease about the process.

Some things to remember:

• Due dates are important. If anything, file and pay your taxes early.
• There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
• You can file and pay your taxes electronically or by mail
• If you need to amend a return, you may do so electronically or by paper.
• If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Virginia.
• You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
• Even if you collect no sales tax, you still need to file a return.
• You need to file a “Final sales tax report” when you close your business.

Now, you are ready to file and pay your sales tax in Virginia. If you have any more questions, feel free to contact us.

Please note: This blog is for informational purposes only and the information is accurate as of 11/7/2019. If you want legal advice on sales tax law for your business, please contact a sales tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.