The Virginia Retail Sales and Use Act establishes a tax on the sale, lease or rental of tangible personal property or the use or consumption of tangible personal property in Virginia, as well as taxable services in Virginia.
A seller is subject to the sales tax imposed on gross receipts from retail sales. "Retail sales" means sales made for any purpose other than for resale. The tax may also apply to the furnishing of transient accommodations and the lease or rental of personal property. Code of Virginia § 58.1-603.
The seller is responsible for collecting the tax from the customer on each taxable sale. The tax must be separately stated and added to the sales price or charge. The general sales tax rate for Virginia is 5.3% (4.3% state tax and 1 % local tax). There is an additional 0.7% state tax imposed in the localities that make up Northern Virginia and Hampton Roads, making the rate in these areas 6% (5% state tax and 1% local tax).
In Bulletin 5-78, sales of eligible food items are subject to a reduced sales tax rate of 2.5% (1.5% state tax and 1% local tax).
Northern Virginia Region
The additional 0.7% regional rate in Northern Virginia applies to the Cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park; and in the Counties of Arlington, Fairfax, Loudoun, and Prince William.
Hampton Roads Region
The additional 0.7% regional rate in Hampton Roads applies to the Cities of Chesapeake, Franklin, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach, and Williamsburg, and the Counties of Isle of Wight, James City, Southampton, and York.
Retail Sales Tax
In-state dealers - Generally, in-state dealers (individuals or businesses) are those making Virginia sales while having one or more physical locations in Virginia. Businesses subject to the Virginia Retail Sales Tax must file a monthly return (Form ST-9), by the 20th of the month after the sales occurred. A return must be filed for each period, even if there are no sales to report. Based on your tax liability, we may change your filing frequency from monthly to quarterly. If your filing frequency is changed, we will notify you prior to the effective date.
Out-of-State dealers - Some dealers make Virginia sales but are physically located outside of Virginia. "Out-of-state dealers" refers to individuals or businesses that, in most cases, are physically located outside of Virginia but make qualified sales, leases or rentals into Virginia. If an out-of-state dealer has sufficient nexus with Virginia (meaning a significant connection or link to Virginia according to Virginia law), the dealer must register with Virginia to collect Virginia Use Tax on their Virginia sales. For further information on nexus criteria, refer to Code of Virginia §58.1-612.
Out-of-state businesses that do not have sufficient nexus with Virginia may still choose to register with Virginia to collect the tax as a courtesy to their Virginia customers. Whether required to register or not, any out-of-state dealer registered to collect Virginia Use Tax must remit the collected tax to Virginia on a monthly basis, unless a different filing frequency has been established by Virginia Tax.
Businesses subject to the Virginia Use Tax must file Form ST-8, Out-of-State Dealers Use Tax return, by the 20th of the following month. A return must be filed for each period, even if there are no sales to report. Based on your tax liability, Virginia Tax may change your filing frequency from monthly to quarterly. If your filing frequency is changed, we will notify you prior to the effective date.
Registering for Retail Sales and Use Tax
New businesses can register for retail sales and use taxes online or by completing the Business Registration Application (Form R-1). Once registration is complete, businesses receive Form ST-4, Certificate of Registration. The ST-4 must be prominently displayed at the registered location.
If your business is already registered with Virginia Tax, and you need to add the tax type to your registration, log in to your Business Account and add the new tax type. If you don't have a Business Account, enroll now.
Businesses filing the ST-9 must file all returns and payments electronically.
Out-of-state sellers should submit their monthly sales tax report on Form ST-8, Virginia Out-Of-State Dealer's Use Tax Return, by the 20th of the month after the sales occurred, whether or not the business has had taxable sales for the month. You will automatically be mailed forms preprinted with your account information unless you file electronically or use tax software to prepare your returns.
Temporary Waiver of Electronic Filing Requirement
If you are unable to make the necessary changes to file and pay electronically you may request a temporary waiver. Submit your request in writing by completing the Sales Tax Electronic Filing Waiver Request.
Direct Pay Permit
A Direct Payment Permit allows certain companies to purchase goods without paying the sales or use tax at the time of purchase. These companies agree to pay the tax due directly to Virginia Tax, and allocate the local tax so that no county or city will lose any revenue. Direct Payment Permits are typically issued to manufacturers, contractors, or mine operators that store tangible personal property within the Commonwealth for use both in and outside of Virginia.
Businesses who meet the qualifications set forth in Code of Virginia § 58.1-624 may apply to the Tax Commissioner for a permit. If approved, the business would file form ST-6.
A discount on the amount of sales tax due is allowed when eligible businesses file and pay the tax in a timely manner. Dealers can keep a portion of the tax they have collected; however, the discount is not allowed on the local portion of the tax. In addition to the retail sales and use tax, a dealer's discount is available for the following taxes:
- Vending Machine Tax
- Digital Media Fee
- Tobacco Products Tax
- Motor Vehicle Fuel Sales Tax
Penalty and Interest
If you fail to file or pay the full amount of sales tax due by the due date, a penalty of 6% per month is added to the tax owed. The maximum penalty is 30%; the minimum penalty is $10. The minimum penalty applies to late returns even if there is no tax owed.
Interest is added at the federal underpayment rate plus 2% and accrues on the tax until paid.
Common Exemptions and Exceptions to the Retail Sales and Use Tax
In general, all sales, leases, and rentals of tangible personal property, as well as accommodations and certain taxable services, are subject to Virginia Sales and Use Tax, unless an exemption or exception is established.
There are specific instances where a tax exemption may apply without the need of an exemption certificate. The most common exemptions and exceptions to the Retail Sales and Use Tax are:
In many cases, in order to sell, lease, or rent tangible personal property without charging sales tax, a seller must obtain a certificate of exemption from the buyer.
The sales-for-resale exemption prevents tax from being charged multiple times on the same item. The sales tax is intended to be applied to the final sale to the consumer at retail; therefore, this exemption prevents the tax being applied on goods as they are distributed before being sold at retail.
A dealer who makes a sale without charging applicable sales tax must retain a copy of the exemption certificate on file to substantiate the sale was indeed tax exempt under the law. To verify that a business providing a dealer with a sales exemption certificate is registered to collect retail sales and use tax in Virginia, please call Virginia Tax at 804.367.8037.