Motor Vehicle Rental Tax FAQs
How do I register for Motor Vehicle Rental Tax?
There are two ways in which to register a rental business:
Virginia Department of Taxation
P.O. Box 1114
Richmond, Virginia 23218-1114
fax (804) 367-2603
Once registration is complete, the rentor will receive a letter of confirmation and a Certificate of Registration (under separate cover), which must be displayed prominently at the appropriate place of business. Note: The Certificate of Registration is not transferable and valid only for the designated rentor and place of business.
Do I need to register each location of my business separately?
No. Each Rentor (i.e., business) should register only once. The taxable rental activity for all of the Rentor's locations in Virginia will then be included on a single return filed each month. However, the Rentor must provide copies of its Rental Tax Certificate of Registration to each location, so that the location can display a certificate, as required by law.
What is my 15-digit account number?
Upon registration you will receive a confirmation letter listing your 15-digit Virginia Tax Account Number. It will also be listed on the reverse side of your Certificate of Registration. The account number will be in the following format:
17-[9-digit Federal Employer Identification Number)F-001
For example: 17-999999999F-001
How do I file my Rental Tax return?
Effective July 1, 2016, you must file and make payments electronically using the MVR-420 eForm and accompanying Schedule MVR-42B. If you are unable to file and pay electronically, you must submit an Electronic Filing Waiver Request.
Payments can be debited from your checking account or made by ACH Credit through your bank.
When you have received confirmation that your return/payment has been accepted, there will be an option for you to save a Starter Return. This will enable you to store your account and banking information for reuse each month.
When are the return and payment due?
Each return should contain all transactions that occurred during the calendar month. The return is due to the Department no later than the 20th day of the following month. For example, a Form MVR-420 for the month of July is due on August 20.
How do I enter my Local Tax information?
In order for the Local Tax fields to populate, you must first complete the MVR-420B, Virginia Schedule of Local Motor Vehicle Rental Taxes. Once completed, click the ‘Review Form' button in the bottom right hand corner of the screen. The gray boxes on the MVR-420 tab should now be populated and the tax due calculated.
What is MVR-420B?
MVR-420B is the Virginia Schedule of Local Motor Vehicle Rental Taxes. This form lists the gross proceeds and tax due for all rentals delivered to each county, city or town. For example, if your business location is in Henrico County and a rental is delivered to your customer in Richmond City, the 4 percent Local Tax collected on that transaction would go to Richmond City. Therefore Richmond City would be listed on your Form MVR-420B. This schedule is required for all Motor Vehicle Rental Tax returns, except those with no tax due.
What is the Motor Vehicle Rental Tax?
The Motor Vehicle Rental Tax ("Rental Tax") is a tax levied on the rental of motor vehicles in Virginia, whether from a rental business or from an automobile dealership or other establishment, for a period of less than 12 months. The Rental Tax appears as separate charge on your rental invoice.
What is the tax rate?
The tax is assessed to the customer at a single rate that contains three separate components:
- 4 Percent Rental Tax: This tax is imposed on the cost for rental of motor vehicles with a gross vehicle weight rating or gross combined weight rating of 26,000 pounds or less.
- 4 Percent Local Tax: This component, also called Additional Rental Tax," is levied on the rental cost for motor vehicles, regardless of weight, but does not apply to motorcycles and mobile homes.
- 2 Percent Rental Fee: The final component of the Rental Tax is also imposed without regard to vehicle weight, and does not apply to motorcycles or mobile homes.
What are the funds used for?
The revenues from the 4 percent Rental Tax are dedicated to the Rail Enhancement Fund. The revenues from the 4 percent local tax are distributed to the city, town, or county where the vehicle was delivered to the customer. The revenues from the 2 percent fee are dedicated to the General Fund to pay the debt service on bonds issued for the Statewide Agencies Radio System ("STARS").
Are there any exemptions from the Rental Tax?
The following transactions are not subject to the Rental Tax:
- Fee arrangements between the holder of a permit issued by the Department of Motor Vehicles for taxicab services and the driver or drivers of such taxicabs. (Source: Va. Code § 58.1-1735)
- Fee arrangements between a licensed driver training school and a student in that school, whereby the student may use a vehicle owned or leased by the school to perform a road skills test administered by the Department of Motor Vehicles. (Source: Va. Code § 58.1-1735)
- Rentals of self-contained mobile computerized axial tomography scanners to a nonprofit hospital or a cooperative hospital service organization as described in § 501(e) of the Internal Revenue Code. (Source: Va. Code § 58.1-1737)
- Rentals of self-contained mobile units designed exclusively for human diagnostic or therapeutic service to a nonprofit hospital or a cooperative hospital service organization established for research in, diagnosis of, or therapy for human ailments as described in § 501(e) of the Internal Revenue Code, or a nonprofit corporation as defined in § 501(c)(3) of the Internal Revenue Code, established for research in, diagnosis of, or therapy for human ailments. (Source: Va. Code § 58.1-1737)
- Rentals to private nonprofit institutions of learning for the sole purpose of use in driver education instruction that is a part of such institution's curriculum for full-time students. (Source: 24 VAC 20-100-210)
- Rentals to the United States, the Commonwealth or political subdivisions of the Commonwealth for their exclusive use if the purchases are pursuant to required official purchase orders to be paid for out of public funds. A United States government credit card or a Commonwealth of Virginia credit card may also be used if the credit of the federal or state government is bound and billings are sent directly to and paid by the government. (Source: Va. Code § 58.1-1737)
- Rentals to any person for the purpose of re-rental. The person who will be re-renting the vehicle must have a valid rental certificate of registration in order for a transaction to qualify for this exemption and the rentor must keep adequate documentation of such certificate of registration.
How are distributions of local revenues from the Rental Tax handled?
An EDI payment is remitted by DOA on the 25th of each month for taxes collected in the preceding month.
Is there a detailed report? If so, how can we obtain it?
The Department of Taxation sends a detailed report listing the rentors and their corresponding distribution amounts on or around the 10th of each month. The report is sent via the External Entity Secure Message Center (EESMC). Any locality wishing to receive these reports must be registered for EESMC and there can only be one contact for all reports received by EESMC. If you would like to register, please contact contact IRMS.SUPPORT@tax.virginia.gov.
How is the basis determined for each locality's share of the Rental Tax?
As provided under current law, the local tax is assigned based on the point of delivery. For example, if a customer enters into a rental contract in Virginia City A and picks up the vehicle in City A, the local portion of Rental Tax associated with the transaction will be allocated to City A. If, however, the customer enters into a contract with a dealer in Virginia City A, who then delivers the car to the customer in Virginia County B, the local tax will be allocated to County B.
How is the basis determined in the case of a one-way rental?
Again, the determination is made under current provisions. If, for example, a customer takes possession of a rental vehicle in Virginia County C, drives to a location in another state and surrenders the vehicle there, the local portion of the Rental Tax associated with the transaction will be allocated to Virginia County C. Conversely, if the customer takes possession of the vehicle in another state, drives to a location in Virginia County C and surrenders the vehicle there, no local Rental Tax revenue will be generated or allocated to Virginia County C for that transaction.
Where should local officials direct their questions about the Rental Tax?
Local Officials should direct their questions to (804) 404-4180, or to RentalTaxUnit@tax.virginia.gov.