TAX BULLETIN 20-8
Virginia Department of Taxation
August 10, 2020
NEW REGIONAL SALES AND USE TAX IN CENTRAL VIRGINIA REGION
Effective October 1, 2020, a new 0.7 percent regional retail sales and use tax will be levied in the localities within Planning District 15 (the “Central Virginia regional tax”). The localities within Planning District 15 include the City of Richmond and the Counties of Charles City, Chesterfield, Goochland, Hanover (including the Town of Ashland), Henrico, New Kent, and Powhatan. The sales and use tax levied in these localities will total 6.0 percent, comprised of the 4.3 percent state tax, the 0.7 percent regional state tax, and the 1.0 percent local option tax.
Background
The retail sales and use tax is imposed at a total combined rate of 5.3 percent statewide. The tax consists of the 4.3 percent state tax and the 1.0 percent local option tax.
In the Northern Virginia and Hampton Roads regions, a 0.7 percent regional tax is also imposed to fund transportation, resulting in a combined rate of 6.0 percent in these regions. See the Guidelines for the Retail Sales and Use Tax Changes Enacted in the 2013 General Assembly Session (Public Document 13-103) for more information.
An additional one percent sales and use tax is levied in the City of Williamsburg and the Counties of James City and York (the “Historic Triangle”). The rate of the tax in these three localities totals 7.0 percent, comprised of the 4.3 percent state tax, the 0.7 percent Hampton Roads regional tax, 1.0 percent Historic Triangle tax, and the 1.0 percent local option tax. See Tax Bulletin 18-3 for more information.
An additional one percent local sales and use tax is levied within Halifax County, effective July 1, 2020. The rate of the tax in Halifax County is 6.3 percent, comprised of the 4.3 percent state tax, the 1.0 percent local option tax, and the 1.0 percent additional local tax. See Tax Bulletin 20-6 for more information.
New Regional Tax in Planning District 15
Chapter 1235 of the 2020 Acts of Assembly imposes a new regional state sales tax of 0.7 percent in localities within Planning District 15 in order to fund transportation within the planning district. The localities within Planning District 15 include the City of Richmond and the Counties of Charles City, Chesterfield, Goochland, Hanover (including the Town of Ashland), Henrico, New Kent, and Powhatan.
Sales made on or after October 1, 2020 will be subject to the new tax rate. Items delivered to a purchaser and paid for on or after October 1, 2020 will be taxed at the 6.0 percent rate, regardless of when the property was ordered. The increased rate will not apply to property delivered prior to October 1, 2020, but paid for on or after October 1, 2020. Also, the increased rate will not apply when a taxable sale or lease payment is paid for in full prior to October 1, 2020, even though delivery may occur on or after October 1, 2020, or the paid-in-full lease payment covers a lease period beginning on or after October 1, 2020.
When goods are purchased from a business that does not collect the sales tax or goods are purchased tax-free while outside Virginia and brought into Virginia, the goods are generally subject to the consumer use tax, including the Central Virginia regional use tax.
Food Purchased for Home Consumption
The rate of tax on food purchased for home consumption is unaffected by the law change and will remain at the current 2.5 percent (1.5 percent state and 1 percent local) rate statewide.
Essential Personal Hygiene Products
Effective January 1, 2020, the retail sales and use tax rate on qualifying essential personal hygiene products was reduced to 2.5% statewide. “Essential personal hygiene products” means “nondurable incontinence products such as diapers, disposable undergarments, pads, and bed sheets; and menstrual cups and pads, panty liners, sanitary napkins, tampons, and other products used to absorb or contain menstrual flow.” Please see Tax Bulletin 19-8 for more information. The Central Virginia regional tax will not apply to essential personal hygiene products.
Sourcing Rules
The Central Virginia regional tax is sourced in the same manner as the local option sales and use tax, the Northern Virginia and Hampton Roads regional taxes, the Historic Triangle tax, and the additional Halifax tax.
For intrastate sales, the local option sales tax is generally sourced to the city or county of the place of business of the dealer collecting the tax. In-state dealers should collect the Central Virginia regional tax on sales made in places of business located within Planning District 15, even if the goods are delivered outside of Planning District 15. Likewise, in-state dealers not located within Planning District 15 should not collect the Central Virginia regional tax, even if the goods are delivered into Planning District 15.
1. When tangible personal property is purchased at the place of business of the seller, the sale is sourced to that place of business, even if the goods are ultimately delivered to the purchaser at another location.
Example 1:
Dealer A makes a sale to a customer on October 1, 2020 at his place of business within Powhatan County. The sale is sourced to Powhatan County. Dealer A should collect 6.0 percent (4.3 percent state, 1.0 percent local, and 0.7 percent Central Virginia regional) sales tax on the purchase.
Example 2:
Dealer B makes a sale to a customer on October 1, 2020 at his place of business in Hanover County. Dealer B has the goods shipped to the customer’s home in the City of Roanoke. The sale is sourced to Hanover County. Dealer B should collect 6.0 percent (4.3 percent state, 1.0 percent local, and 0.7 percent Central Virginia regional) sales tax on the purchase.
2. When tangible personal property is purchased remotely (by telephone, Internet, or mail order) from an in-state dealer with a place of business in Virginia, the sale is sourced to the location in which the order was first taken, even if the goods are ultimately delivered to the Customer at another location.
Example 3:
Customer C orders merchandise from Dealer D on November 1, 2020 by placing a call to Dealer D’s store, located in New Kent County. The goods will be shipped to Customer C’s home in the City of Charlottesville. The sale is sourced to New Kent County. Dealer D should collect 6.0 percent (4.3 percent state, 1.0 percent local, and 0.7 percent Central Virginia regional) sales tax on the purchase.
Example 4:
Customer E orders merchandise from Dealer F on November 1, 2020 by placing a call to Dealer F’s store, located in Rockingham County. The goods will be shipped to Customer E’s residence in New Kent County. The sale is sourced to Rockingham County. Dealer F should collect 5.3 percent (4.3 percent state and 1.0 percent local) sales tax on the purchase.
3. Pursuant to 2019 Acts of Assembly, Chapters 815 and 816, remote sellers and marketplace facilitators that conduct or facilitate sales of greater than $100,000 or numbering at least 200 transactions annually to Virginia customers are required to register to collect the sales and use tax, including the Central Virginia tax. Remote sellers and marketplace facilitators should consult the Department of Taxation’s online lookup tool to determine the correct local tax rate. See Guidelines for Remote Sellers and Marketplace Facilitators (Public Document 20-43) or the Department of Taxation’s Economic Nexus Page for additional information.
When tangible personal property is purchased remotely from an out-of-state dealer or marketplace facilitator that is registered to collect Virginia sales tax and it is not received by the purchaser at the dealer’s business location, the sale is sourced to the city or county of destination. (See 23 Virginia Administrative Code § 10-210-2070). Similarly, remote sellers and marketplace facilitators accepting and processing orders to Virginia customers through a website or electronic application may also use destination sourcing if unable to associate the order with a physical place of business in Virginia. See Guidelines for Remote Sellers and Marketplace Facilitators for additional information.
Example 5:
Customer G orders merchandise from remote seller Dealer H’s website on November 1, 2020, which has a place of business and warehouse in North Carolina. Dealer H has economic nexus with Virginia as a result of conducting greater than $100,000 of sales to Virginia customers last year and is therefore required to register to collect the Virginia sales tax. The invoice indicates that the merchandise will be shipped to Customer G’s residence in Henrico County. Because Dealer H’s place of business and warehouse are located outside of Virginia, the sale is sourced to the location where the merchandise is delivered, Henrico County. Dealer H should collect 6.0 percent (4.3 percent state, 1.0 percent local, and 0.7 percent Central Virginia regional) sales tax on the purchase.
The result would have been the same if Dealer H had a fulfillment center or warehouse in Virginia but accepted and processed the order through its website and was unable to associate the order with a physical place of business in Virginia.
4. When tangible personal property is leased from an in-state lessor, the sale is sourced to the lessor’s place of business.
Example 6:
Customer I enters into a rental agreement with a lessor with a place of business in Goochland County. The equipment will be used for a highway construction project in Dinwiddie County. The sale is sourced to the lessor’s place of business in Goochland County. The lessor should collect the tax at the rate of 6.0 percent (4.3 percent state, 1.0 percent local, and 0.7 percent Central Virginia regional).
Transient Accommodations
The Central Virginia regional tax applies to rentals of accommodations to transients on and after October 1, 2020. Accommodations i) furnished to transients on or after October 1, 2020, and ii) paid for on or after October 1, 2020, are taxed at the 6.0 percent rate in the Central Virginia region localities, regardless of when the rental was reserved. The increased tax rate will not apply to accommodations furnished to transients prior to October 1, 2020, but paid for on or after October 1, 2020; nor will it apply when the accommodations are paid for in full prior to October 1, 2020, even if the accommodations are not furnished to the transient until on or after October 1, 2020.
Example 7:
Customer J reserves a stay in a summer rental house in Goochland County for the first week in November 2020. Customer J makes the reservation and pays for the accommodation in full on September 15, 2020. Even though the accommodation will not be furnished to Customer J until after October 1, 2020, as the accommodation is paid in full prior to October 1, 2020, the accommodation is subject to sales tax at the rate of 5.3 percent (4.3 percent state and 1.0 percent local). The accommodation would not be subject to the Central Virginia regional tax.
Example 8:
Customer K reserves a stay in a bed and breakfast inn in Hanover County for the first week in November 2020. Customer K makes the reservation and pays a deposit on September 15, 2020. Customer K pays the remaining amount at the end of the stay in November. As the accommodation was furnished to Customer K after October 1, 2020, and paid in full after October 1, 2020, the accommodation is subject to sales tax at the increased rate of 6.0 percent (4.3 percent state, 1.0 percent local, and 0.7 percent Central Virginia regional).
Filing of Returns
The Central Virginia regional tax will be reported on dealers’ retail sales and use tax returns and on business’ consumer’s use tax returns. Returns for July, August, and September 2020 are not affected by the legislation. Monthly and quarterly filers should use the new returns for periods beginning with the month of October 2020.
Additional Information
This Tax Bulletin and the Department’s Public Documents are available on-line in the Laws, Rules & Decisions section of www.tax.virginia.gov. If you have any questions regarding this Tax Bulletin, please contact the Department at (804) 367-8037.