So, you need to know about sales tax in The Old Dominion. Look no further!
Whether you’ve fully set up shop in Virginia, or simply ship there once in a while, it’s important you know whether your business is liable to their sales taxes. This guide will tell you everything you need to know, plus direct you to the right places for handling any sales tax responsibility you may have.
What’s taxable in Virginia?
Tangible products, as you might guess, are physical items. Virginia taxes most tangible products, but there can be exemptions! To be absolutely clear about which products are subject to sales tax, and which are exempt, check Virginia Department of Revenue.
Do you have nexus in Virginia?
The word “nexus” refers to a commercial connection in the state. Nexus determines the following questions for a state tax agency: Do you do business here, what kind, and how much? And when you do have nexus, that means you’re obligated to collect tax on your sales there.
So the first question for you to answer is whether you have nexus in Virginia.
You probably have nexus in Virginia if any of the following points describe your business:
- A physical presence in Virginia: a store, an office, a warehouse or distribution center, storage space, you, an employee, a representative, etc.
- A significant amount of sales in Virginia within twelve months. *
* This is called an economic nexus, a sales tax nexus determined by economic activity, i.e. - the amount of sales you make in a particular state. Any kind of economic activity could trigger the nexus, once your total sales reach a certain threshold amount.
The threshold in Virginia is $100,000 in annual sales or 200 separate sales transactions, whichever your business reaches first. To learn more about how this works, check out the Ultimate Guide to US Economic Nexus.
How to register for sales tax in Virginia
Okay, so you have nexus! Now what?
The next crucial step in complying with Virginia sales tax is to register for a sales tax permit. It’s actually illegal to collect tax without a permit. So to get all your ducks in a row, start with tax registration first.
You can find directions about how to register in Virginia on their Department of Revenue website.
When registering for sales tax, you should have at least the following information at hand:
- Your personal contact info
- Your business contact info
- Social security number (SSN) or Employer Identification Number (EIN)
- Business entity (sole-proprietor, LLC, S-Corp, etc.)
- Bank account info (account number and routing number) where you’ll deposit the collected sales tax
How to collect sales tax in Virginia
Now it’s time to tackle the intricate stuff! Tax rates can vary based on the location of your business and the location of your customer, plus the levels of sales tax that apply in those specific locations.
The state-wide sales tax in Virginia is 6%.
There are additional levels of sales tax at local jurisdictions, too.
Virginia has an origin-based sales tax system, which keeps it simple for you. If you’re a local business, then you must charge the tax rate according to your location in Virginia. So that would be the state-wide 6%, plus any local taxes if necessary.
If you have more than one location in Virginia, then charge the sales tax rate of where the sale occurred.
If you’re not based in Virginia but have nexus in the state, you may charge only the 6% use tax rate. * Use tax is similar to sales tax, but charged only by “remote sellers” — businesses like you, who aren’t based in a state but have nexus there.
Check out Quaderno's Sales Tax Calculator see your product's tax rate, amount, and final price in Virginia.
* Important to note for remote sellers: This is not always true. While some states allow out-of-state retailers to charge a flat use tax rate, other states have peculiar rules for remote sellers. Contact the state’s Department of Revenue to be sure.
Sales tax on shipping charges in Virginia
Virginia doesn’t apply sales tax to any shipping costs, as long as the shipping costs are clearly listed and separated from the price of the item(s) you’re selling. Be sure to always mark the cost of the product and the cost of the shipping on two different lines of the bill.
When to file taxes in Virginia
When you register for sales tax, Virginia will assign you a certain filing frequency. You’ll be asked to file and pay sales tax either monthly, quarterly, or annually.
Usually the frequency they choose is based on the amount of sales tax you collect from buyers in Virginia. High-revenue businesses file more frequently than lower volume businesses, for example.
Virginia sales tax returns are due on the 20th day of the month following the reporting period. If the due date falls on a weekend or holiday, then your sales tax filing is generally due the next business day.
How to file taxes in Virginia
When tax time rolls around in Virginia, whether it’s monthly or annually, you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
Virginia requires that any seller with a sales tax permit file a sales tax return on your due date, even if you don’t have any sales tax to report or pay. Even if you didn’t make a single sale in Virginia during the reporting period, you should must do a “zero tax filing.”
Other Virginia tax info
If you miss a filing or payment deadline, certain penalties can apply. Such a pain! Check the state’s website for up-to-date penalty fees.
On a brighter note, you could be eligible for sales tax discounts in Virginia! Usually these discounts are designed to save you a bit of money, as a reward for complying with the sales tax system. Check the state’s website for up-to-date discount policies.
Sales Tax Holidays
One final tricky aspect about Virginia sales tax are the sales tax holidays. During these days of the year, you aren’t required to charge sales tax, and buyers will expect to not be charged. Check the state’s website for current sales tax holidays.