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:
1. Complete Form R-1 and mail/fax to:Registration Unit Virginia Department of Taxation
P.O. Box 1114, Richmond, Virginia 23218-1114, FAX Number (804) 367-2603; or
2. Register online.
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
Are there any changes in the way I collect the Rental Tax for DMV versus the Department of Taxation?
No. There are no changes in the way you will collect the tax. What will be different for you is the appearance and layout of the new Form MVR-420 and where you send it.
What differences will I see in the new Form MVR-420?
The layout of the form will be similar to but slightly different from the RT 420 return you have used for the DMV. These revisions were necessary to make the new form compatible with the automated processing systems utilized by the Department of Taxation. For example, the Department of Taxation will be using different line numbers for entries and some different terminology. The term “Additional Tax”, for example, will be replaced by the term “Local Tax”.
If I have a surplus of DMV forms, can I continue to use these to file my Rental Tax returns due August 20, 2012 and after?
No. Do not use any DMV RT 420 forms to file with the Department of Taxation. Beginning with the first Rental Tax return due to the Department of Taxation on August 20, 2012, you must use the new Form MVR-420. The Department of Taxation will be sending you a new Form MVR-420 each month.
How can I obtain the new Form MVR-420 and instructions?
All existing customers will be pre-registered based on information provided to the Department of Taxation from the DMV. The new return, Form MVR-420, has been mailed to each of these registered taxpayers, and is also available online.
Where do I send my July 2012 Rental Tax return and when is it due?
File your July 2012 tax return with the Department of Taxation using the new Form MVR-420, or file your return and make your payment online using eForms, our new online filing service.
Can I sign up to file my return online using my current login for iFile?
Rental Tax returns cannot be filed using iFile. However, you may use eForms to file your return and pay your tax electronically. 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. In addition, you may use Web Upload to upload your tax return and payment files from your computer directly to our processing system.
I am using eForms to file my MVR-420, but 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 and do I need to complete it if I file a paper return?
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.
Can I pay my Rental Tax using ACH Credit?
Yes. For details, see the Electronic Payment Guide.
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.
When does the transition of the administration of the Rental Tax to the Department of Taxation take effect?
The Department of Taxation will take over the administration of the Rental Tax effective July 1, 2012. This means that returns and payments for the month of July 2012, due on August 20, 2012, will be filed with this agency.
Will the Rental Tax rates or other provisions change on July 1?
No. There are no changes to the actual Rental Tax provisions; the administration of the tax will merely move from the Department of Motor Vehicles to the Department of Taxation. For further information, see FAQs for Rentors.
How will distributions of local revenues from the Rental Tax be handled for the quarter ending June 30, 2012?
The distribution of local revenues for the quarter ending June 30, 2012 will be handled by the Department of Motor Vehicles, according to its normal distribution procedures.
Will there be any changes in the distribution of local Rental Tax revenues for periods beginning July 1, 2012?
The Department of Taxation is in the process of developing distribution procedures for the local share of Rental Tax revenues. We will contact localities with detailed information once the procedures are finalized, and publish additional information on this website as needed.
Will there be any changes in determining the basis for each locality’s share of the Rental Tax?
No. As provided under current law, the local tax will be 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 will the basis be determined in the case of a one-way rental?
Again, the determination will be 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 804.786.3183, or to RentalTaxUnit@tax.virginia.gov.
Last Updated 4/11/2013 16:3