Virginia State Sales and Use Tax Requirements
Understand your business's sales and use tax responsibilities in Virginia. This guide explains how nexus, product taxability, and local rates shape compliance.
Virginia imposes a statewide sales tax on the retail sale, lease, or rental of tangible personal property and certain services. A complementary use tax applies to goods and services purchased tax-free from outside Virginia but used or consumed within the state. The use tax ensures that out-of-state purchases are taxed at the same rate as items bought within Virginia, creating a level playing field for local and remote sellers.
Who Must Collect Virginia Sales Tax
A business must collect Virginia sales tax if it has a connection, or “nexus,” with the state. A physical nexus is established if a business maintains an office, warehouse, or other place of business in Virginia. Having employees, agents, or independent contractors conducting activities on the business’s behalf within the state also establishes a physical nexus.
Virginia also establishes nexus through economic activity, which primarily affects remote and online sellers. A remote seller must register and collect sales tax if, in the previous or current calendar year, it had more than $100,000 in gross revenue from sales to Virginia customers. This requirement also applies if the seller engaged in 200 or more separate sales transactions with Virginia customers.
Marketplace facilitators, such as Amazon or Etsy, are responsible for collecting and remitting sales tax on behalf of their third-party sellers. This rule applies if the marketplace meets the same economic nexus thresholds of $100,000 in sales or 200 transactions. This shifts the collection burden from the individual seller to the larger platform that facilitates the sale.
What is Taxable in Virginia
In Virginia, the sales tax applies broadly to the retail sale of tangible personal property, which includes most physical goods. This encompasses items from vehicles and furniture to clothing and electronics. The tax also extends to certain services, such as hotel accommodations and the furnishing of meals.
The state provides several exemptions from the sales and use tax. A significant exemption applies to groceries and certain essential personal hygiene products. These items are taxed at a reduced statewide rate of 1%.
Other exemptions support public welfare and specific industries. Prescription medicines and durable medical equipment sold under a doctor’s prescription are exempt from sales tax. Purchases made directly by the federal government are also exempt. Virginia law includes exemptions for machinery and tools used directly in manufacturing, as well as items used for agricultural production.
Virginia Sales and Use Tax Rates
The total sales tax rate in Virginia combines a statewide rate with an additional local tax. The base statewide sales tax rate is 4.3%. Nearly all cities and counties in Virginia also levy a 1% local option sales tax, bringing the most common combined rate to 5.3% for most transactions.
Certain regions within Virginia have an additional regional tax, which results in a higher combined rate. These special tax districts can push the total sales tax to 7% in some areas. Because of these local and regional additions, the exact tax rate a customer pays depends on the location of the sale.
Virginia operates on a destination-based sales tax system for most transactions. This means the applicable tax rate is determined by the “ship-to” address where the purchaser takes possession of the goods. A business shipping products to customers across the state must calculate and collect the specific combined rate in effect at the customer’s delivery location.
Registration, Filing, and Remitting
Before registering, a business must gather several pieces of information, including:
- The Federal Employer Identification Number (FEIN)
- The legal business name and any trade names
- The primary business address
- The North American Industry Classification System (NAICS) code
- The names and addresses of the owners, partners, or corporate officers
A business can register for a sales tax account through the Virginia Tax online portal. The process involves creating an online services account and then completing the Business Registration application, also known as Form R-1. Submitting this form establishes the business’s sales tax account with the state.
After registration, businesses must file sales tax returns and remit the tax collected. The Virginia Department of Taxation assigns a filing frequency, such as monthly or quarterly, based on the business’s volume of taxable sales. The due date for all filers is the 20th day of the month following the end of the reporting period. All sales tax returns are filed using Form ST-1 through the Virginia Tax online portal.