A Deep Dive Into Virginia’s Sales Tax Rules

Virginia’s sales tax is a tax applied to the sale or lease of tangible personal property and some services within the state. It is a source of revenue for state and local governments, funding public services such as education, transportation, and public safety. The tax is collected by businesses at the point of sale and then remitted to the Commonwealth.

This tax framework is structured to apply to final consumption. Therefore, items purchased for resale by a business are not subject to the tax, as the tax will be collected when the item is sold to the end user.

Virginia Sales Tax Rates and Taxable Transactions

The sales tax in Virginia is composed of a statewide base rate and a mandatory local option tax. The state’s base sales tax rate is 4.3%, and a 1% local tax applies across the entire state, bringing the minimum combined sales tax rate to 5.3% in most locations.

Various regions have additional local and regional taxes, resulting in combined rates of 6%, 6.3%, or 7% in certain localities. For example, the combined rate is 7% in James City County, Williamsburg, and York County. For remote sellers, Virginia is a “destination-based” sourcing state, meaning the applicable sales tax rate is determined by the location where the buyer receives the goods.

A transaction is subject to Virginia sales tax if it involves the retail sale, lease, or rental of tangible personal property, which is any physical item that can be seen, weighed, measured, or touched. This includes goods such as furniture, electronics, clothing, and vehicles. Most services are not subject to sales tax unless they are provided in connection with the sale of tangible personal property. Virginia also imposes a use tax on property purchased from outside the state for use within Virginia when no Virginia sales tax was paid. The use tax rate is the same as the sales tax rate.

Common Sales Tax Exemptions

Virginia law provides several exemptions from the retail sales and use tax. One of the most widely applicable exemptions is for food purchased for home consumption and essential personal hygiene products. These items are taxed at a statewide rate of 1%, as they are exempt from the 4.3% state tax but are still subject to the 1% local tax.

This exemption is distinct from the tax treatment of prepared foods. Meals sold by restaurants, hot prepared foods from a grocery store deli, and other food items intended for immediate consumption are fully taxable at the combined state and local rate.

Medical-related purchases also represent a category of exemptions. Prescription medicines, nonprescription drugs, and durable medical equipment such as wheelchairs and braces purchased by individuals for their own use are exempt from sales tax.

Certain agricultural supplies and machinery used directly in the production of agricultural products for market are exempt. Additionally, items sold to the federal and state governments or their political subdivisions are not subject to sales tax if the purchasing entity provides the seller with a governmental exemption certificate, Form ST-12.

Business Registration for Sales Tax Collection

Before a business can legally collect sales tax from customers in Virginia, it must register with the Virginia Department of Taxation. This process culminates in receiving a Sales Tax Certificate of Registration (Form ST-4), which must be displayed at the business location.

To register, a business will need to provide several pieces of information, including:

• Federal Employer Identification Number (FEIN)
• Legal business name and any trade names
• The physical address of the business
• The structure of the business (sole proprietorship, LLC, etc.)
• The North American Industry Classification System (NAICS) code for the business’s primary activity
• The date the business will begin making taxable sales in Virginia

A business can use this information to complete the Business Registration Application (Form R-1) on the Virginia Tax online portal.

There is no fee to register for a sales tax permit in Virginia, and the registration does not need to be renewed.

Filing and Paying Virginia Sales Tax

After registering, businesses are assigned a monthly or quarterly filing frequency based on their anticipated tax liability. The Virginia Department of Taxation will notify the business of its assigned frequency, which can be adjusted if the tax liability changes.

The due date for all sales tax returns and payments is the 20th of the month following the close of the filing period. A return must be filed for every period, even if the business had no sales and no tax is due; failure to do so can result in a minimum penalty of $10.

Businesses are required to file returns and make payments electronically through the Virginia Tax online portal using the consolidated Form ST-1. The form requires detailing gross sales, exempt sales, and then calculating the state and local tax portions separately.

Virginia offers a dealer’s discount to businesses that file their return and pay the tax on time, allowing them to retain a small portion of the state sales tax they collected. The discount amount is calculated based on the volume of taxable sales and applies only to the state portion of the tax, not the 1% local tax.