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Retail Sales and Use Tax
Tax Law and Regulations
Where can I get detailed information about the Virginia sales and use tax requirements?
Registering and Collecting the Tax
How do I register for a sales or use tax account?
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.
How are the discount factors computed for the Retail Sales and Use Tax returns?
Legislation enacted by the General Assembly suspended the dealer discount for dealers whose monthly tax liability exceeds $20,000 and reduced the dealer discount for all other dealers. Those dealers whose liability is less than $20,000 per month are allowed a dealer's discount of 1.6%, 1.2%, or 0.8% of the first three percent of the Retail Sales and Use Tax collected, depending on the dealer's monthly taxable sales.
To compute the dealer discount, the dealer would multiply the state Retail Sales and Use Tax due by seventy-five percent, because the discount is only allowed on the first three percent of the four percent state Retail Sales and Use Tax, and then multiply the result by either 1.6%, 1.2%, or 0.8%, depending on the dealer's monthly taxable sales, to get the amount of the discount. To allow the dealer to calculate the dealer's discount in one step, TAX has provided discount factors on the worksheets for the Retail Sales and Use Tax returns. The discount factors equal the dealer discount percentages multiplied by seventy-five percent, or .012, .009, and .006.
For more information regarding the change in the dealer discount, please see Virginia Tax Bulletin 10-5
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 the Department 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 Virginia Code Section 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?
You will need to register your sales tax account in iReg, or by filing Form R-1. You will be asked to provide information about your existing account so that we can cross-reference your new account information in our files.
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 the Department of Taxation 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 the Department 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
Where can I get sales and use tax returns?
Beginning with the July - September 2013 return (due October 21, 2013), businesses that file retail sales tax returns on a quarterly basis are required to file and pay the tax electronically using one of our online filing systems. Monthy filers have been required to file and pay electronically since July 2012.
Use Tax, Consumer's Use Tax, and other sales tax forms are available in the Forms Library.
When are my 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, the Department will automatically change the status to quarterly if the average monthly liability is less than $100.
Does the Department of Taxation have to receive my return and payment by the due date?
If you file electronically using one of our online filing systems, you must file your return and payment online no later than the due date. In cases where the due date falls on a Saturday, Sunday, or legal holiday, the due date is automatically extended to the next business day.
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 recently registered for an account and it's almost time to file my first return, but I haven't received my preprinted forms. Can I just wait until the forms arrive, or should I file by the due date? How can I file without forms?
You must file a timely return, even if you haven't received your preprinted forms. To file your return online, use our fee VATAX Online for Business service. To file a paper return, download forms and instructions from this website.
Consumer's Use Tax
What is consumer's use tax?
Consumer's use tax is the "other half" of the Virginia retail sales and use tax requirements. Typically, you incur the consumer's use tax if you made more than $100 in purchases during the year for which you did not pay sales tax. Common instances of these types of transactions are purchases from the Internet, mail-order catalogues and cable television shopping channels. The tax also applies to tax-free purchases you make outside of Virginia, such as buying furniture at an outlet in another state and having it shipped to Virginia. The tax is 5 percent of the cost of regular non-food purchases and 2.5 percent on purchases of food for home consumption. Report the tax by filing Form CU-7 by May 1 each year, or by reporting it on Schedule ADJ.
I purchased furniture from a store in North Carolina and had it shipped to my home in Virginia. The seller did not charge any sales tax. Will I have to pay tax in Virginia?
Yes. As explained in the previous question, you are responsible for the consumer's use tax on your purchase, because the seller did not collect sales tax from you at the time of purchase.
Can a business be subject to consumer's use tax?
Yes. A business is subject to the tax on any tangible personal property purchased for use or consumption in Virginia, upon which no sales tax is collected at the point of sale. Businesses that are not required to register for retail sales and use taxes should report consumer's use tax on Form ST-7. Otherwise, include the taxable items in your totals on your retail sales or use tax return.
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 the Department of Taxation'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.
Last Updated 5/15/2013 7:30