Registering and Collecting the Tax
Who must register for a sales or use tax account?
Any individual, firm, organization or business that meets the definition of "dealer" as set forth in Virginia law and regulations. A dealer is generally defined as a person or business engaged in the business of selling at retail or distributing tangible personal property in Virginia. The definition also applies to dealers who rent, lease or furnish items that are subject to the tax in Virginia, or who stores such items for use or consumption in Virginia. Virginia dealers register for sales tax accounts, and out-of-state dealers register for use tax accounts.
Is a dealer from another state required to collect the tax on sales to customers in Virginia?
An out-of-state seller must register with Virginia Tax and collect the tax on sales to Virginia customer if the seller has sufficient nexus, or contact, with Virginia. If the seller does not have nexus with Virginia, there is no requirement to collect the tax or register for a use tax account. For further information on nexus criteria, see Va. Code § 58.1-612.
I'm already registered for corporate income tax, but I plan to begin making retail sales soon. Do I need to register again?
If your business is already registered, log in to your Business Account and add the new tax type to your registration. If you don't have an online services account, enroll now. Or, add the new tax type by mail using Form R-1.
I just opened a small store. When should I register for my sales tax account?
Because you are required to display your certificate of registration, you should have registered before your first day of business. As your store has already opened, you must register as soon as possible. As a general rule, new businesses should register no later than the anticipated date that sales will begin.
Do I have to pay sales tax to Virginia Tax before I actually collect it from my customers?
With the exception of high-volume dealers who are subject to accelerated payment requirements, dealers usually pay the tax over to Virginia Tax after they collect it from their customers. However, dealers become subject to the tax when a sale is made. A "sale" is any transfer of title or possession of tangible personal property. Therefore, when title or possession is transferred to the customer, the dealer becomes liable for the tax, even if he has not received payment from the customer.
Filing and Payment
When are returns and payments due?
Monthly returns are due by the 20th day of the following month. Quarterly returns are due by the 20th day of the month following the close of each calendar quarter. You must file a timely return, even if there is no tax due.
How often do I need to file?
All newly registered accounts are placed on a monthly filing status for their first year of reporting. After that time, Virginia Tax will automatically change the status to quarterly if the average monthly liability is less than $100.
I filed my last return a few days late. There was no tax due, but I still got a bill for a $10 late filing penalty. Why?
Once you open a sales or use tax account, you must file a return for each period, even if there is no tax due, as long as the account remains open. Virginia law imposes a minimum late filing penalty of $10, even on zero returns.
I sell building supplies, and many of my customers are contractors who buying supplies for their clients' jobs. Should I charge sales tax on the items they purchase?
Yes. As contractors, your customers are considered to be the users of the building materials they purchase. Therefore, Virginia law requires that you charge sales tax on such purchases.
I'm a contractor who specializes in home remodeling. Since I have to pay sales tax on the supplies I purchase for each job, can I then charge my clients sales tax on those materials?
No. As a real estate contractor, you are considered to be the user of the materials under Virginia law. Therefore, you must pay sales tax on your purchases of building supplies. The law does not allow you to charge your clients sales tax on the materials for which you have already paid the tax.
Government Employees and Government Credit Cards
Should a hotel or restaurant charge sales tax for meals and lodging expenses incurred by federal government employees who are traveling on business?
If a federal employee is traveling on government business and payment for meals and lodging is made directly by the federal government pursuant to a purchase order (by direct billing to the government or use of a government credit card), no tax will apply. However, if the federal employee pays for meals and lodging with personal funds no exemption is available even if the employee will be reimbursed by the government. No exemption for meals and lodging is available to state or local government employees.
How should dealers handle government credit card transactions?
Refer to Virginia Tax's guidelines for federal government credit card purchases.
Are labor charges subject to sales tax?
Although labor is generally taxable, the tax does not apply to separately stated labor charges for repairing, renovating, applying, or installing tangible personal property.
Leases and Rentals
Does sales tax apply to equipment rentals?
The sales tax generally applies to the lease or rental of any tangible property. However, if you rent equipment with an operator, the tax will not apply.
Does Virginia law allow any sales and use tax exemptions for nonprofit organizations?
Yes. For complete information on exemptions for nonprofit entities, refer to our Sales and Use Tax Exemptions for Nonprofit Organizations.
Shipping and Handling Charges
Are shipping charges taxable?
Separately stated shipping charges, including postage, are not subject to Virginia sales tax. However, shipping charges that are combined with handling or other fees as a single charge are subject to the tax.
I recently purchased some books from a catalog. The invoice listed the price of the books, plus a fee for "shipping and handling," and the seller charged sales tax on the total of these items. Why did I have to pay sales tax for shipping?
Although separately stated shipping charges are exempt, handling charges are subject to the Virginia sales tax. Because the shipping in this transaction was combined with a handling fee as a single charge, the entire amount of charge is taxable.
I own a restaurant. Should I charge sales tax on tips?
If the seller charges a mandatory gratuity that amounts to 20% or less of the sales price of the meal, the tip is not subject to sales tax. A mandatory gratuity charged by the seller that exceeds 20% of the sales price of the meal is subject to the tax to the extent it exceeds 20%. Tips that are given wholly at the discretion of the customer are not subject to the tax, regardless of the amount.