Bulletin Number
VTB 86-5
Tax Type
Retail Sales and Use Tax
Description
Innovative High Technology Industries and Research
Topic
Exemptions
Date Issued
03-05-1986
In the final step of his plan to foster the growth of innovative high technology industries and research facilities in Virginia, Governor Charles S. Robb signed and thereby adopted on January 9, 1986 an emergency regulation of the Department of Taxation which sets forth in detail the broad sales and use tax exemptions available to such businesses under Virginia law. A copy of the emergency regulation is attached to this bulletin.
Specifically, the emergency regulation states that a business producing a high technology or technologically innovative product, including systems, for sale or resale is generally entitled to the industrial manufacturing exemption provided by Virginia law. The exemption available for manufacturers covers machinery (including computers), tools (including computer software), raw materials, fuel or other energy sources for production, and product packaging materials, provided that such items are used directly in production. As such, Virginia's manufacturing exemption is one of the most comprehensive in the nation.
In addition, the emergency regulation states that a business or other entity engaged in high technology research and development activities will generally be entitled to an exemption from the sales and use tax for the tangible personal property used directly and exclusively in such activities. Virginia is one of only a handful of states that provides such an exemption.
As Virginia's sales and use tax law is favorable to high technology businesses, it is foreseen that the emergency regulation will be an important factor when such businesses consider relocating to Virginia. This is particularly true when the exemptions set forth in the regulation are viewed in light of Virginia's overall favorable tax climate, including the state's 1984 repeal of the intangible personal property tax and its progressive approach to the allocation and apportionment of the income of multistate and multinational corporations under the Virginia corporation income tax.
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