Virginia sales tax for businesses

Whether you are running a boutique in Richmond’s Carytown, a bustling hardware store in Virginia Beach, or a family-owned restaurant in Alexandria, understanding the local tax landscape is essential for your business. Virginia sales tax can be a complex puzzle for entrepreneurs, especially with varying regional rates and specialized local levies. This guide simplifies those regulations, turning your compliance requirements into a manageable part of your daily operations.

What is the Virginia sales tax?

Virginia’s state sales tax rate is 4.3%, but the total rate you collect can be higher because local sales and use tax rates also apply. As a result, sales tax varies by location (where the sale happens or where the merchandise is delivered/received) and can also vary based on the type of item sold, rented, or leased.

Note: Local rates frequently change. For the latest local rates, consult the Virginia Department of Taxation. You can also use the Virginia Sales Tax Rate Lookup to find the rates for a specific address, or any Virginia city or county. 

While this article focuses on Virginia, it is important to note that if your business grows to operate in other high-tax jurisdictions, such as Seattle at 10.35% or Tacoma at 10.4%, DAVO by Avalara provides the same automated support across different state requirements. 

How to calculate Virginia sales tax?

To calculate the tax, you multiply the total sales price of the taxable item by the combined state and local rate for the jurisdiction where the item is delivered. Here’s a simple formula:

Sale amount × (combined tax rate ÷ 100) = Sales tax

A good example is if you operate a coffee shop in Norfolk and sell a $20 item with a local combined rate of 6%, you would calculate: 

$20 × 0.06 = $1.20

Your total charge to the customer would be $21.20.

If you operate in multiple locations, such as one store in Roanoke at 5.3% general sales tax rate and another in Williamsburg at 7% rate, you need to collect at each location’s specific rate. Even small differences can add up over time, so always use the correct rate.

Since Virginia is a destination-based state for most remote sales, the rate is determined by the buyer’s address. For in-store purchases, the rate is based on your physical storefront location. 

Use our “reverse” sales tax calculator

Many local businesses, like cafés and boutiques, prefer to display one flat price that includes sales tax for a better customer experience. If you want your all-inclusive price to stay consistent, a reverse sales tax calculator could be your new best friend.

How it works: Enter the sales tax rate and the total amount you want your customers to pay, and the calculator will display the price you need to enter in your POS.

For example: To charge a flat $10.00 with a 6% combined local tax rate, you’d set your POS price to $9.43. It’s the easiest way to simplify your pricing while making sure your system collects the right amount of tax behind the scenes.

What is subject to sales tax in Virginia?

Most tangible personal property sold at retail in or for use in Virginia is subject to sales tax unless a specific exemption applies. Common examples of taxable items include:

• Clothing and footwear
• Accomodation
• Furniture and home decor
• Electronics and appliances
• Office supplies
• Motor vehicle parts sold over the counter
• Prepared meals from restaurants
• Hygiene products
• Vending machine sales
• Sales at new, renovated, or expanded public facilities in certain localities

Sales tax requirements for Virginia remote sellers

Virginia’s economic nexus legislation requires some remote sellers and all marketplace facilitators who sell or facilitate sales to Virginia customers to register for Retail Sales and Use Tax collection.

• A remote seller with annual direct sales (that aren’t made through the facilitator) to Virginia customers that total more than $100,000 or 200 or more total transactions in the previous or current calendar year must register to collect Virginia sales tax.
• A marketplace facilitator is any business that contracts with a marketplace seller to facilitate the sale of the seller’s products through a physical or electronic marketplace.
• If you conduct all of your sales in Virginia through a marketplace facilitator’s platform, you are considered a “marketplace seller” and do not need to register to collect and pay Virginia sales tax. 

You may qualify as a “remote seller,” a “marketplace seller,” or a “marketplace facilitator,” or any mix of the 3 classifications, depending on your retail sales activities in Virginia.

If you also make direct sales, use your combined direct and facilitated sales to determine if you meet the threshold.

For more details, refer to the Guidelines for Remote Sellers and Marketplace Facilitators.

Does Virginia charge sales tax on services?

In Virginia, services are generally not subject to sales tax if they are charged separately from the sale of tangible property. For example, a pure consulting fee is typically exempt. Likewise, repair services are usually exempt if the labor is listed separately on the invoice from the parts used (see 23VAC10-210-3050). However, there are a few exceptions.

• Services provided in connection with the renting, leasing, or sales of tangible personal property. 
• Services included as part of the “fabrication” or “creation” of a product, such as a custom-made piece of jewelry. 
• Any accommodations furnished to transients by any hotel, motel, inn, or any other similar place furnished for less than 90 continuous days (see 23VAC10-210-730).

Virginia sales tax on food and personal hygiene products

The tax on food in Virginia is split into two categories: groceries and prepared meals. “Food for home consumption” (groceries) and essential hygiene products are taxed at the reduced rate of 1% throughout Virginia. 

Prepared meals at restaurants are subject to the full state sales tax rate. Plus, many cities and counties impose an additional Food and Beverage (meals) tax, which is typically 4%, but can vary. Any retail establishment whose sales of food for immediate consumption constitutes 80% or more of its total sales may not charge the reduced rate.

Items that don’t qualify for the reduced rate include:

• alcoholic beverages;
• tobacco;
• prepared hot foods packaged for immediate consumption on or off premises;
• seeds and plants used to grow food for home consumption.

Certain types of vendors selling food for immediate consumption cannot charge the reduced rate. These include:

• caterers;
• concession vendors;
• entertainment facilities (theme parks, stadiums, etc.);
• fair and carnival vendors;
• gift shops;
• hamburger and hot dog stands;
• honor snack vendors;
• ice cream stands and trucks;
• mobile food vendors;
• movie theaters;
• newsstands;
• vending machine vendors.

The term “beverage” refers to alcoholic beverages as defined in §4.1-100 and nonalcoholic beverages served as part of a meal. The statewide nonalcoholic beverage sales tax rate is 2.5%.

Essential personal hygiene products

Essential personal hygiene products that qualify for the reduced tax rate include nondurable incontinence products and feminine hygiene products. See a full listing of products on the VA Grocery Tax webpage.

DAVO can integrate with POS systems to help restaurants manage their sales tax by automatically setting aside the correct amounts daily. This is especially helpful for businesses that operate in multiple jurisdictions with different local meal tax rates.

What is exempt from sales tax in Virginia?

Certain items and entities are not required to pay sales tax. These sales tax exemptions include:

• Items purchased for resale (accompanied by a valid resale certificate)
• Most prescription medicines and medical devices
• Purchases made by the federal or state government
• Specific agricultural equipment and supplies
• Purchases by qualifying non-profit organizations for their primary mission
• Items sold or leased to public transit authorities

How to manage tax-exempt sales in Virginia?

When you sell to a tax-exempt entity or a fellow wholesaler, you must obtain a completed exemption certificate (Form ST-10) from the buyer. The Virginia Tax website has a Forms Library of other exemption certificates.

It is the business owner’s responsibility to keep these certificates on file. If you are audited and cannot produce the certificate for a tax-exempt sale, you may be liable for the uncollected tax.

Virginia sales tax holiday

Virginia typically holds an annual sales tax holiday to help families with back-to-school shopping. The 3-day sales tax holiday starts the first Friday in August at 12:01 am and ends the following Sunday at 11:59 pm. During the sales tax holiday, you can buy qualifying school supplies, clothing, footwear, hurricane and emergency preparedness items, and Energy Star™ and WaterSense™ products without paying sales tax.

Detailed lists of qualifying items and more information for retailers can be found in the Sales Tax Holiday Guidelines.

How to register for a Virginia sales tax license?

New businesses must register for a sales tax certificate through the Virginia Department of Taxation’s VATAX Online Services. You can register for your sales tax certificate at the same time you register a new business.

You will need: 

• Primary user name and email address
• Your Federal Employer Identification Number (FEIN)
• The legal name of the business
• The physical addresses of all locations in the state. 

Once the application is processed, you will receive a 15-digit Virginia tax account number and your Sales Tax Certificate of Registration (Form ST-4). Applicants can generally expect to receive their account number immediately upon completing the online registration.

If you’re unable to register your business online, download, complete, and mail the paper Form R-1.

How to file Virginia sales tax?

Virginia requires all sales tax returns to be filed electronically using Form ST-1. The state has phased out paper filings for retail sales and use tax. If you are unable to file electronically, you must submit an electronic filing waiver request.

The Taxation Department offers three electronic filing options:

• eForms
  • No login or password required. Simply fill in the required fields.
• VATAX Business Online Services Account
  • Log in to your account
  • Select “File/ Pay Taxes”
  • Fill in the required fields. 
• Web Upload:
  • Web Upload is file-driven, with the ability to save all return and payment information into a single file to upload to the Department. Tax professionals filing returns for multiple businesses may prefer this filing method.

Complete Schedule ST-1A if you have taxable sales and use greater than $0 and your business is registered as:

• In-State Retailer doing business in multiple Virginia localities or In-State Retailer with non-fixed business locations
• Out-of-State Dealer (Remote Seller)

Seasonal filers must submit a return for each month indicated at registration, even if the business had no taxable sales during one of its registered seasonal months.

Do you still have to file if no sales tax is due?

Yes, even if you had zero sales for a particular month or quarter, you are still required to file a “zero-tax” return by the due date. Failure to file a zero return can result in a minimum penalty of $10.

How to pay Virginia sales tax?

Sales tax must be paid electronically. Several free online options are available.

VATAX business online services

• Pay directly from your bank account, ACH Debit, or credit card (card payments may add a convenience fee) 
• Schedule payments up to the due date 

eForms

• No login required 
• Pay directly from your bank account 
• If you need to amend a return, use this option. 

Pay with ACH Credit or Debit

ACH Credit lets you initiate payments from your bank account to Virginia Tax’s bank account. For detailed payment information, see the Electronic Payment Guide.

If you are unable to pay electronically, you must submit an electronic filing waiver request.

Pay with a check

If paying by check, enter the total amount due from Form ST-1 on the payment voucher, and enclose the payment voucher and your check with your return. Make your check payable to the Department of Taxation. Mail to: 

Department Of Taxation

P.O. Box 26627

Richmond, VA 23261-6627

DAVO simplifies payment by automatically collecting the exact amount of sales tax you owe every single day. When it is time to pay the state, DAVO files the return and remits the payment on your behalf, ensuring you never miss a deadline.

Virginia sales tax due dates

Your filing frequency is based on your tax liability: either monthly or quarterly. Sales tax returns are due on the 20th of the month following the close of the filing period, even if there are no sales to report. If the 20th falls on a weekend or holiday, the due date moves to the next business day. 

Quarterly return due dates: 

Dealer sales tax discount

Virginia offers a discount for filing and paying on time: you keep a small percentage of the first three percent of the tax collected as compensation for your timely administrative efforts. 

If you operate a business in other states, learn where else you can take advantage of a vendor discount. With DAVO, this collection allowance is returned to the business in full, sometimes covering the full subscription cost of the service.

What is the Virginia sales tax late payment penalty?

If you miss the filing or payment deadline, Virginia assesses a penalty of 6% per month on the tax owed. The maximum penalty is 30% of the total tax due. Additionally, interest is charged at the corresponding federal rate of 7% plus 2%, accruing on the tax until paid. The current combined interest rate for assessments is 9%, according to Virginia Tax Bulletin 25-7.

Localities may also assess interest on delinquent taxes under Va. Code § 58.1-3916.

Penalty and interest for late filed electronic payment(s) are applicable and will be assessed if not paid with the transmission.

• You may calculate and include the penalty and interest as part of your ACH Credit or Debit transmission.
• If you do not include any penalty and interest with your tax payments, you will be billed for the applicable penalty and/or interest. To pay your bill electronically, you may use either the Quick Pay or Teleplan payment options.

If your bank does not honor any ACH Debit or ACH credit payment to the State, Virginia Tax may impose a penalty of $35, under Code of Virginia § 2.2-614.1. This penalty would be in addition to other penalties, such as for late payment.

How DAVO can help with Virginia sales tax

Managing a gift shop in Charlottesville or a bike shop in Blacksburg should be about serving your community, not worrying about tax deadlines. By automating your sales tax with DAVO, you remove the administrative burden and the risk of late fees – guaranteed. 

Choose your POS system to get started with DAVO.

Virginia Department of Taxation:

https://www.tax.virginia.gov

Contact information:
https://www.tax.virginia.gov/contact-us

RELATED POSTS

Washington Sales Tax 101 Texas sales tax information for businesses Georgia sales tax for businesses