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Sales and Use Tax

Retail Sales and Use Tax

General Provisions

The Virginia Retail Sales and Use Act establishes a tax on the sale, lease or rental of tangible personal property or the use or consumption of tangible personal property in Virginia, as well as taxable services in Virginia.

A seller is subject to the sales tax imposed on gross receipts from retail sales. "Retail sales" means sales made for any purpose other than for resale. The tax may also apply to the furnishing of transient accommodations and the lease or rental of personal property. Code of Virginia § 58.1-603.

The seller is responsible for collecting the tax from the customer on each taxable sale. The tax must be separately stated and added to the sales price or charge. The general sales tax rate for Virginia is 5.3 percent (4.3 percent state tax and 1 percent local tax). There is an additional 0.7 percent state tax imposed in the localities that make up Northern Virginia and Hampton Roads, making the rate in these areas 6 percent (5 percent state tax and 1 percent local tax). 

In Bulletin 5-78, sales of eligible food items are subject to a reduced sales tax rate of 2.5 percent ( 1.5 percent state tax and 1 percent local tax).

Northern Virginia Region

The additional 0.7 percent regional rate in Northern Virginia applies to the Cities of Alexandria, Fairfax, Falls Church, Manassas and Manassas Park; and in the Counties of Arlington, Fairfax, Loudoun and Prince William.

Hampton Roads Region

The additional 0.7 percent regional rate in Hampton Roads applies to 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.

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Retail Sales Tax

In-state dealers – Generally, in-state dealers (individuals or businesses) are those making Virginia sales while having one or more physical locations in Virginia. Businesses subject to the Virginia Retail Sales Tax must submit a monthly return to the Department, Form ST-9, by the 20th of the month after the sales occurred. A return must be filed for each period, even if there are no sales to report. Based on your tax liability, the Department may change your filing frequency from monthly to quarterly. If your filing frequency is changed, you will be notified prior to the effective date.

Beginning with the July - September 2013 return, due October 21, 2013, quarterly filers must submit their returns and payments electronically.  To meet this requirement, the returns must be filed using eForms, Business iFile or Web Upload.  Monthly filers have been required to file and pay electronically since July 2012.

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Use Tax

Out-of-State dealers – Some dealers make Virginia sales but are physically located outside of Virginia. “Out-of-state dealers” refers to individuals or businesses that, in most cases, are physically located outside of Virginia but make qualified sales, leases or rentals into Virginia. If an out-of-state dealer has sufficient nexus with Virginia, (meaning a significant connection or link to Virginia according to Virginia law,) the dealer must register with Virginia to collect Virginia Use Tax on their Virginia sales. For further information on nexus criteria, refer to Code of Virginia §58.1-612.

Out-of-state businesses that do not have sufficient nexus with Virginia may still choose to register with Virginia to collect the tax as a courtesy to their Virginia customers. Whether required to register or not, any out-of-state dealer registered to collect Virginia Use Tax must remit the collected tax to Virginia on a monthly basis, unless a different filing frequency has been established by the Department.

Businesses subject to the Virginia Use Tax must file Form ST-8, Out-of-State Dealers Use Tax return, by the 20th of the following month. A return must be filed for each period, even if there are no sales to report. Based on your tax liability, the Department may change your filing frequency from monthly to quarterly. If your filing frequency is changed, you will be notified prior to the effective date.

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Registering for Retail Sales and Use Tax

Businesses can register for Retail Sales and Use Taxes by completing the Form R-1 Business Registration Application, or by registering online. Once registration is complete, businesses receive Form ST-4, Certificate of Registration. The ST-4 must be prominently displayed at the registered location.

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Filing Procedure

How to File and Pay Your Sales Tax Online (Demo)
Are you using Internet Explorer 8 or an earlier version?  Use this version of the demo.

Beginning with the July - September 2013 return, (due October 21, 2013), quarterly filers of the ST-9 must submit their returns and payments electronically.  Monthly filers have been required to file and pay electronically since July 2012. 

To meet this electronic filing requirement, you must file your return using eForms, Business iFile or Web UploadLearn more about these three options (link takes you to a short video).

Out-of-state sellers should submit their monthly sales tax report on Form ST-8, Virginia Out-Of-State Dealer’s Use Tax Return, by the 20th of the month after the sales occurred, whether or not the business has had taxable sales for the month. You will automatically be mailed forms preprinted with your account information unless you file electronically or use tax software to prepare your returns.

Temporary Waiver of Electronic Filing Requirement

If you are unable to make the necessary changes to file and pay electronically you may request a temporary waiver. Submit your request in writing by completing the Sales Tax Electronic Filing Waiver Request form.

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Dealer Discount

A discount on the amount of sales tax due is allowed when eligible businesses file and pay the tax in a timely manner. Dealers can keep a portion of the tax they have collected; however, the discount is not allowed on the local portion of the tax. In addition to the Retail Sales and Use Tax, a dealer’s discount is available for the following taxes:

  • Vending Machine Tax
  • Digital Media Fee
  • Tobacco Products Tax
  • Motor Vehicle Fuel Sales Tax

Please refer to the corresponding instructions for additional information on computing the discount, as discount factors vary by tax type.

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Penalty and Interest

If you fail to file or pay the full amount of sales tax due by the due date, a penalty of 6 percent per month is added to the tax owed. The maximum penalty is 30 percent; the minimum penalty is $10. The minimum penalty applies to late returns even if there is no tax owed.

Interest is added at the federal underpayment rate plus 2 percent and accrues on the tax until paid.

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Direct Pay Permit

A Direct Payment Permit allows certain companies to purchase goods without paying the sales or use tax at the time of purchase. These companies agree to pay the tax due directly to the Department, and allocate the local tax so that no county or city will lose any revenue. Direct Payment Permits are typically issued to manufacturers, contractors or mine operators who store tangible personal property within the Commonwealth for use both in and outside of Virginia.

Businesses who meet the qualifications set forth in Code of Virginia § 58.1-624 may apply to the Tax Commissioner for a permit. If approved, the business would file form ST-6.

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Common Exemptions and Exceptions to the Retail Sales and Use Tax:

In general, all sales, leases and rentals of tangible personal property, as well as accommodations and certain taxable services, are subject to Virginia Sales and Use Tax, unless an exemption or exception is established.

There are specific instances where a tax exemption may apply without the need of an exemption certificate. The most common exemptions and exceptions to the Retail Sales and Use Tax are:

Exemption Certificates

In many cases, in order to sell, lease or rent tangible personal property without charging Sales Tax, a seller must obtain a Certificate of Exemption from the buyer.

The sales-for-resale exemption prevents tax from being charged multiple times on the same item. The sales tax is intended to be applied to the final sale to the consumer at retail; therefore, this exemption prevents the tax being applied on goods as they are distributed before being sold at retail.

A dealer who makes a sale without charging applicable Sales Tax must retain a copy of the exemption certificate on file to substantiate the sale was indeed tax exempt under the law.

Download Exemption Certificates

Learn more about exemptions for nonprofit organizations

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Consumer Use Tax for Businesses

The use tax applies to the use, consumption or storage of tangible personal property in Virginia when the Virginia sales or use tax was not paid at the time of purchase. The use tax is computed on the cost price of the property, which is the total amount for which the property was purchased, including any services that are a part of the purchase, valued in money or otherwise, and includes any amount for which credit is given the purchaser or lessee by the seller.

Mail with Form ST-7 and Form ST-6B, if applicable, with your payment to the following address:

Virginia Department of Taxation
P.O. Box 26627
Richmond, Virginia 23261-6627

This return is due by the 20th day of the following month after the close of the reporting period. Returns are not required to be filed for periods in which no use tax is due.

If you have questions concerning this tax or how to file the returns, please call (804) 367-8037.

Vending Machine Sales Tax

General Liability: A tax is imposed on dealers who place vending machines for the sale of tangible personal property. The tax is computed on the cost price (or manufactured cost) of tangible personal property sold through the vending machines. This tax does not apply to non-vending machine dealers such as service station operators who use vending machines at their businesses to sell merchandise. These dealers are subject to the retail sales tax provisions.

Registration: Every individual, partnership, corporation, etc., desiring to engage in the business of placing vending machines for selling tangible personal property must file a Business Registration Application, Form R-1, or register online. A separate application must be filed for each locality in which vending machines are placed. Code of Virginia § 58.1-614(E)

Filing Procedure: Vending Machine tax return, Form VM-2, must be filed for each period showing the cost price or manufactured cost of tangible personal property sold through vending machines during the preceding period. The dealer must pay the amount of tax due at the time the return is filed.

Generally, dealers are required to file returns monthly and must submit the return by the 20th of the month following the end of the period. The Department determines annually which dealers should file and pay on a quarterly basis. Quarterly returns must be filed on or before the 20th of the month following the close of each quarterly period ending March 31, June 30, September 30 and December 31.

A return, voucher and schedule should be filed as soon as possible after the close of the reporting period but not later than the 20th day of the following month. A return must be filed for each reporting period even if no tax is due.

The VM-2 Package contains Form VM-2, Virginia Vending Machine Dealer’s Sales Tax Return; Form VM-2V, Virginia Vending Machine Dealer’s Sales Tax Voucher; Form VM-2A, Virginia Vending Machine Dealer’s Sales Tax Worksheet; and VM-2B, Schedule of Local Taxes.

Tax Rates: The tax rate is 6.3 percent (5.3 percent state tax and 1 percent local tax) of wholesale purchases. In addition, there is an additional 0.7 percent state tax imposed in the localities that make up Northern Virginia and Hampton Roads, making the rate in these regions 7 percent (6 percent state tax and 1 percent local tax).  Dealers may also request authorization from the Tax Commissioner to report tax based on gross sales.

The additonal regional tax in Northern Virginia applies to the Cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park, and the Counties of Arlington, Fairfax, Loudoun, and Prince William.  the additional regional tax in Hampton Roads applies to 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.

For additional information refer to Code of Virginia § 58.1-614.

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Motor Vehicle Fuel Sales Tax

In accordance with the provisions of Virginia Senate Bill 503, the administration and collection of the Motor Vehicle Fuel Sales Tax imposed in certain transportation districts will transition from the Virginia Department of Taxation to the Department of Motor Vehicles (DMV), effective July 1, 2013.  If you are a registered distributor, no action is required by you with the Department of Taxation. We will automatically close your Motor Vehicle Fuel Sales Tax account at the end of June 2013.  Please contact DMV for information regarding transactions or issues for periods beginning on or after July 1, 2013.

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Prepaid Wireless E-911 Fee

Beginning January 1, 2011, a Prepaid Wireless E-911 fee of 50 cents is imposed on each retail purchase of prepaid wireless calling service. Dealers who sell prepaid wireless service must collect and remit the new fee, beginning with the month of January 2011.  Learn more.

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Tire Recycling Fee

General Liability: The fee is levied for each new tire sold at retail in Virginia. The fee may be passed on to the retail customer if separately stated.

Fee Rate: Beginning July 1, 2011, the fee is 50 cents per tire, with certain exemptions (see below).

Registration: To register for the Tire Recycling Fee, retailers must file a Business Registration Application, Form R-1, with the Department of Taxation, or register online.

Filing Procedure: Every tire retailer must file the Tire Fee return, Form T-1, quarterly. The return is due and the fee payable on or before the 20th of the month following the end of each quarter of the calendar year. Quarterly periods end March 31, June 30, September 30 and December 31.

The fee imposed under § 58.1-641 shall not apply to new tires for:

  • Any device moved exclusively by human power;
  • Any device used exclusively upon stationary rails or tracks; or
  • Any device used exclusively for farming purposes, except a farm truck.

For additional information please refer to Code of Virginia §58.1-640-644 

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Digital Media Fee

General Liability: A fee is imposed on the in-room rental or purchase of digital media offered in guest rooms rented out for continuous occupancy for fewer than 90 days, such as hotels and motels.

Administering the Digital Media Fee

All charges for digital media are subject to the Digital Media Fee, with certain exemptions (see below). The fee is charged in addition to the cost of the rental of the room and is collected by the Provider, who then remits it to the Department.

A “Provider” is any person who offers the sale of digital media to guests in temporary lodgings located in Virginia. Digital Media providers must register with the Department.

Providers are required to collect the Digital Media Fee on taxable charges for digital media unless presented with a valid Retail Sales and Use Tax exemption certificate that exempts the customer from the Retail Sales and Use Tax on charges for the temporary lodging. In such cases, the Digital Media Fee shall not be collected.

As the Digital Media Fee is a fee on the purchase of a service, certificates of exemption from the Retail Sales and Use Tax on a purchase of tangible personal property will not relieve a customer from paying the Digital Media Fee.

Exemptions:  The following are exempt from the Digital Media Fee, provided a valid exemption certificate is presented to exempt them of the Retail Sales and Use Tax on the lodging accommodation:

  • Federal government agencies, when the reservation is made and paid for by the agency; and
  • Nonprofit entities holding a valid exemption certificate issued by the Department, which specifically states it is valid for the purchase of “taxable services.”

Registration: Dealers must file a Business Registration Application, Form R-1, or register online.

Filing Procedure: Each Provider is required to file a monthly Form DM-1, Digital Media Fee Return, and remit the Digital Media Fee due on or before the 20th day of the month following the month in which the fee is billed. The Digital Media Fee must be reported on Form DM-1; the Digital Media Fee cannot be reported on the Provider’s Form ST-9, Retail Sales and Use Tax Return.

Tax Rate: The tax rate is 10 percent of the sales or rental price.

For additional information please refer to Virginia Tax Bulletin 09-5.

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Public Facilities

The Public Facilities Act provides a mechanism that allows a portion of the state sales tax revenues attributable to sales in new, renovated, or expanded public facilities in certain localities to be returned to the locality in which the facility is located. The locality is only entitled to the sales tax revenue generated by transactions taking place in the facility.

All businesses or persons making sales at the facility must register with the Department and report their sales and use tax on Form ST-9, Retail Sales and Use Tax Return.

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Last Updated 9/26/2014 11:51

 

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