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Sales and Use Tax Changes effective July 1, 2013 -
Frequently Asked Questions

Retail Sales and Use Tax

Legislative Background

Why were the Retail Sales and Use Tax rates changed?

House Bill 2313, enacted by the 2013 General Assembly on April 3, makes several important changes to Virginia tax law.  Effective July 1, 2013, the bill increases the state sales tax rate statewide and in specific regions.  Other provisions in the bill impose a Regional Congestion Relief Fee on the recordation of conveyances of real estate in certain localities, increase the vehicle titling taxes administered by the Department of Motor Vehicles, and create a new Transient Occupancy Tax for localities in the Northern Virginia region.

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New Tax Rates

Effective July 1, 2013, two increases take place for the state sales tax rate:  a statewide increase of 0.3 percent, and an additional increase of 0.7 percent for localities in the Northern Virginia and Hampton Roads regions.  The local sales tax rate will remain at 1 percent statewide.

As of July 1, the combined state and local rates for the Retail Sales and Use Tax are:

   State Tax  Local Tax  Total State & Local Tax
  Northern Virginia Region  5% 1% 6%
  Hampton Roads Region 5% 1% 6%
  All Other Localities 4.3% 1% 5.3%

Similarly, the Vending Machine Sales Tax rates as of July 1, 2013 are:

   State Tax  Local Tax  Total State & Local Tax
  Northern Virginia Region 6% 1% 7%
  Hampton Roads Region 6% 1% 7%
  All Other Localities 5.3% 1% 6.3%

What localities are included in the Northern Virginia region?

Localities in the Northern Virginia region are the Cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park, and the Counties of Arlington, Fairfax, Loudoun, and Prince William.

How can I tell whether my business is located in the Northern Virginia region?

Every city and county in Virginia is identified by a Federal Information Processing Standards (FIPS) code.  The Department of Taxation already uses FIPS codes on sales and use tax returns for dealers to allocate local taxes to the proper jurisdiction.  The affected localities and corresponding FIPS codes for the Northern Virginia region are:

Alexandria City 51510
Arlington County 51013
Fairfax City 51600
Fairfax County 51059
Falls Church City 51610
Loudon County 51107
Manassas City 51683
Manassas Park City 51685
Prince William County          51153

If you are not sure whether your business is located in one of these cities or counties, check the address in our FIPS Lookup.

What localities are included in the Hampton Roads region?

Localities in the Hampton Roads region are the Cities of Chesapeake, Franklin, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach and Williamsburg, and the Counties of Isle of Wight, James City, Southampton and York.

Tax Bulletin 13 - 8, issued June 13, 2013, removes the Counties of Gloucester and Surry from the list of affected localities in the Hampton Roads Region. These counties are not located in the Hampton Roads Planning District (Planning District 23).

How can I tell whether my business is located in the Hampton Roads region?

Every city and county in Virginia is identified by a Federal Information Processing Standards (FIPS) code.  The Department of Taxation already uses FIPS codes on sales and use tax returns for dealers to allocate local taxes to the proper jurisdiction.  The affected localities and corresponding FIPS codes for the Hampton Roads region are:

Chesapeake City 51550
Franklin City 51620
Hampton City 51650
Isle of Wight County 51093
James City County 51095
Newport News City 51700
Norfolk City 51710
Poquoson City 51735
Portsmouth City 51740
Southampton County           51175
Suffolk City 51800
Virginia Beach City 51810
Williamsburg City 51830
York County 51199

If you are not sure whether your business is located in one of these cities or counties, check the address in our FIPS Lookup.

What taxable transactions are subject to the additional state sales tax rate of 0.7 percent on and after July 1, 2013?

The new tax rates (6 percent combined state and local taxes) apply to taxable transactions made in localities in the Northern Virginia and Hampton Roads regions.  This means that dealers located in those regions, as well as dealers located out-of-state who deliver goods in those regions, will collect tax at both the increased statewide and regional rates beginning July 1, 2013.   

Will the local Sales and Use Tax rates also change on July 1, 2013?

No.  The rate changes affect only the state portion of the tax.

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Effective Date of the Changes

The new rates take effect on July 1, 2013.  This means that dealers will begin to collect tax at the new rates on sales made on or after July 1.

When will dealers begin to report and pay Retail Sales and Use Tax revenues to the Department of Taxation at the new rates?

For dealers whose accounts have a monthly filing status, reporting and payment of tax under the new rates will begin with their returns for the month of July 2013, due by August 20, 2013.  For dealers whose accounts have a quarterly filing status, reporting and payment of tax under the new rates will begin with their returns for the quarter ending September 30, 2013, due by October 21, 2013.  NOTE:  Electronic filing and payment requirements for quarterly filers also take effect for the return for the quarter ending September 30, 2013.

If a customer places an order for a custom item before July 1, 2013, but the item will not be available for delivery until after July 1, will the tax be computed under the rates in effect at the time of the order, or at the rates effective when the item is delivered?

Tangible personal property delivered to a purchaser and paid for on or after July 1, 2013 is taxable at the higher rate, regardless of when the property was ordered.  For example, if the item is ordered on June 10, 2013, but paid for and delivered on July 10, 2013, the tax should be imposed at the new rates.

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Impact of the Changes

Do the tax rate changes affect the tax on sales of food for home consumption; i.e., items that are subject to the 2.5 percent combined “food tax” rate?

The Retail Sales and Use Tax rate changes apply only to items that were subject to the former combined tax rate of 5 percent.  The “food tax” rate of 2.5 percent will remain the same after July 1, 2013.

How do the Retail Sales and Use Tax rate changes affect the Meals Tax?

The Meals Tax is a local tax, and is not affected by the state sales tax rate increases that take effect on July 1, 2013.  Only the state portion of the sales tax imposed on the sale of a meal will increase on that date.

Will individual Consumer’s Use Tax filers be affected by the new rates?

Yes.  Individual filers will compute their Consumer’s Use Tax at the new rates, beginning with purchases made on and after July 1, 2013.

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Information and Resources

Will the Department of Taxation offer any other resources to help dealers prepare for the tax rate changes?

Yes.  The agency plans to produce an educational video and a statewide webinar to help dealers learn more about the upcoming changes. Watch our Sales Tax Changes page for updates.

Will the Department of Taxation publish Guidelines regarding the sales tax rate change?

Yes.  Guidelines have been published on the Virginia Regulatory Town Hall.

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Regional Congestion Relief Fee

Which localities are affected by the Regional Congestion Relief Fee?

The Regional Congestion Relief Fee will be imposed on conveyances of real estate in the Northern Virginia region, beginning July 1, 2013.  The fee is imposed on the consideration or value in addition to any other required recordation taxes and fees at the rate of $0.15 per $100 or fraction thereof.  The fee will be paid by the grantor at the time the deed is recorded in the local Circuit Court. 

Localities in the Northern Virginia region are the Cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park, and the Counties of Arlington, Fairfax, Loudoun, and Prince William.

Are there any exemptions from the Regional Congestion Relief Fee?

The Regional Congestion Relief Fee, imposed under Code of Virginia § 58.1-802.2, qualifies for the same exemptions allowed for the Grantor’s Tax imposed under Code of Virginia § 58.1-802.  For details on the exemption available, see Code of Virginia § 58.1-811.

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Last Updated 6/14/2013 13:10

 

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