You probably already know that you need to pay taxes for almost every monetary transaction. For every item that you sell or buy, you have to pay sales tax attached to the original price tag. How much is this tax depends on where you are based in the United States. In this article, we are going to talk about sales tax in Virginia, specifically. You should reach out to your accounting service to know more about sales tax in your state.
But before we get to that, let’s talk a little bit about sales taxes in general.
What Are Sales Taxes?
A sales tax is an amount of cash, determined by the item’s worth, which you change or pay at the time when you buy or sell. Whether you’re a small business or a large one, you are responsible for sales taxes as per US law. These rules may vary from state to state.
To put it straightforwardly, sales tax can be alluded to as retail, extract, or advance charges paid by the purchaser and gathered by the merchant. After the seller has collected the buyer’s sales tax, he or she is obligated to deliver this money to the appropriate tax collection agency for registration.
Why Do We Pay Sales Tax And Where Does This Money Go?
Since we are all living in a community and we all need common public services, we all have to pay for these services. We pay for the common goods of the community in which we live by paying sales taxes. These are the areas that utilize these taxes:
- Public Services
- Community Development
- Special Purposes
- Protective Services
All the money collected for the sales tax goes to the government through each seller. Once the buyer makes a purchase and pays the sales tax to the seller along with the original price tag, the seller then gives the total sales tax collected to a government-owned tax collection agency.
This money is then used to build bridges and maintain roads and parks and pay for services for public buildings such as hospitals, fire departments, and police stations.
The Difference In Countries But Not In Obligation
Almost every country in the world will have an obligated law that makes sellers pay sales tax. The consumer or buyer doesn’t necessarily have to pay for the sales tax unless the seller asks them to do so. But the seller has to pay this tax to the proper authorities, or give you a penalty or even a raised interest.
Sales taxes are different because every country has its budget and its own special common community needs.
For example, a country like Germany with paved roads may have lower sales taxes than a country with developing infrastructure. This is because the maintenance of roads is cheaper than the cost of building new infrastructure. Now that the concept of sales tax is clear to you let’s talk about sales tax for your business in Virginia.
Are All Goods and Services Taxable in Virginia?
If you’re a Virginia resident or business owner, you’ve probably wondered whether all goods and services are taxable in the state. The short answer is no; not all goods and services are subject to sales tax in Virginia. In Virginia, the sales tax is usually 5.3%. This rate consists of a state sales tax of 4.3% and a local sales tax of 1%, which is collected by cities and counties. The sales tax rate in Virginia can vary depending on the location, as some areas may have additional local taxes. In this blog post, we’ll explore the ins and outs of sales tax in Virginia, including what is and isn’t taxable.
However, three areas have an additional regional tax. Here is what general sales tax looks like in Virginia:
- Central Virginia: 6%
- Hampton Roads: 6%
- Halifax County: 6.3%
- Northern Virginia: 6%
- Historic Triangle: 7%
- Everywhere Else: 5.3%
Food and personal hygiene items tax is the same at 2.5% everywhere.
Sales Tax Exemptions
Certain goods and services are exempt from sales tax in Virginia. These exemptions include:
- Food purchased for home consumption
- Prescription and over-the-counter drugs
- Clothing and footwear that cost less than $100
- Residential energy sources such as electricity, gas, and oil
- Medical equipment and supplies
- Newspapers and magazines
- Agricultural products and equipment
- Sales Tax Must Retain
It’s important to note that even if a good or service is exempt from sales tax in Virginia, the seller must retain transaction records for at least three years. This is to ensure that sellers aren’t fraudulently claiming exemptions.
Sales Tax Should Be Applied
For goods and services subject to sales tax in Virginia, the tax should be applied on the final retail sale. If you’re a business owner, you should add the appropriate sales tax to the final price of the goods or services you sell. It would help if you used the sales tax rate associated with your location.
Sales Tax Dealer in Virginia
If you’re a business owner selling taxable goods or services in Virginia, you must register with the Virginia Department of Taxation and obtain a sales tax permit. This permit allows you to collect sales tax from your customers and remit it to the state.
Sales Tax Payment Due in Virginia
Sales tax is paid directly to the Virginia Department of Taxation on a monthly basis. The payment due date is the 20th of each month for the previous month’s sales. For example, sales tax collected in January is due by February 20th.
Sales Tax Audit
As a business owner, you may be subject to a sales tax audit by the Virginia Department of Taxation. This ensures that you’re collecting and remitting the correct sales tax amount. If you’re found to be in non-compliance with sales tax laws, you may be subject to penalties and interest.
Sales Tax is a Personal Liability
It’s important to note that sales tax is a personal liability for business owners. This means that if you collect sales tax from your customers but fail to remit it to the state, you could be held personally liable for the unpaid tax, penalties, and interest.
Sales Tax Per Sale
Sales tax is calculated on a per-sale basis in Virginia. This means that each sale is subject to sales tax rather than the total amount of sales made during a period.
Sales Tax Nexus with Virginia
If you’re an out-of-state seller with a nexus with Virginia, you may be required to collect and remit sales tax. A nexus is a connection to the state, such as having a physical location or employees in Virginia.
Sales Tax on Behalf of Marketplace Sellers
If you sell goods on behalf of marketplace sellers, such as through Amazon or eBay, you may be required to collect and remit sales tax on their behalf.
How do You Know What is Taxable and What is Not?
Generally, tangible personal property is taxable, but some items, such as food, medical equipment, and agricultural products, are exempt. Sales tax must be applied on the final retail sale of taxable goods and services. To determine what goods and services are taxable and what is exempt from sales tax in Virginia, you can refer to the Virginia Department of Taxation’s guidelines. Here’s a brief guide on how to know what is taxable and what is not in Virginia:
Taxable Goods and Services
Generally, tangible personal property is subject to sales tax in Virginia. This includes furniture, appliances, electronics, and clothing that cost more than $100. Other taxable goods and services include:
- Prepared food sold for immediate consumption
- Alcoholic beverages
- Admission to entertainment venues such as theaters and amusement parks
- Cleaning and laundry services
- Landscaping and lawn care services
- Repair and maintenance services
It’s important to note that even if a good or service is exempt from sales tax, the seller must retain transaction records for at least three years. Additionally, sales tax must be applied on the final retail sale of taxable goods and services.
How Much is Sales Tax Charged in Virginia?
If you’re a Virginia resident or business owner, you may wonder how much sales tax is charged in the state. In Virginia, the sales tax is usually 5.3%, consisting of a state sales tax of 4.3% and a local sales tax of 1%. This means that if you purchase taxable goods or services in Virginia, you can expect to pay an additional 5.3% on top of the purchase price. It’s important to note that the sales tax rate in Virginia can vary depending on the location, so it’s a good idea to know the rate associated with your specific area. By understanding the sales tax rate in Virginia, you can better plan for your expenses and avoid any surprises at the cash register.
How to Manage Tax-free Sales?
If you’re a business owner in Virginia, you may have customers exempt from paying sales tax. These tax-exempt sales can be a bit tricky to manage, but here are some tips on how to do it:
Obtain a Tax Exemption Certificate: If a customer is exempt from sales tax, they will provide you with a tax exemption certificate, which you should keep on file. The certificate will contain the customer’s name, address, and exemption number.
Verify the Certificate: Before accepting a tax exemption certificate, verifying it is essential. You can do this by checking with the Virginia Department of Taxation by phone or online.
Separate Taxable and Tax-Exempt Sales: Keeping track of your taxable and tax-exempt sales separately is essential. This will make reporting your sales and tax liability easier to the Virginia Department of Taxation.
Train Your Staff: Make sure your employees are trained to identify tax-exempt sales and to handle the exemption certificates properly. This will help to avoid any misunderstandings or errors.
Keep Accurate Records: It’s important to keep accurate records of your tax-exempt sales, including the customer’s exemption number, the date of the sale, and the sale amount.
Report Your Sales: When you report your sales and tax liability to the Virginia Department of Taxation, accurately report your taxable and tax-exempt sales separately.
By following these tips, you can effectively manage tax-exempt sales in Virginia and avoid potential issues with the Virginia Department of Taxation.
What Do You Need In Order to Collect Sales Tax In Virginia?
In case you decide to sell, distribute, or rent out any kind of personal property to any customer within the state of Virginia, you have to register with the appropriate agencies to pay for the sale tax on those. Here is some type of merchants that pay sales tax in Virginia:
- In-state sellers: by and large, people and organizations making deals with at least one actual area in Virginia (like an office, stockroom, satisfaction focus, or comparative business environment) should enlist to pay sales tax as an in-state vendor.
- Out-of-state vendors: for the most part, people and organizations situated outside of Virginia yet with adequate physical or financial presence to set up nexus in Virginia should enroll to pay sales tax as an out-of-state seller. Beginning July 1, 2019, this incorporates far-off vendors or online retailers that make more than $100,000 yearly in Virginia net deals or at least 200 exchanges to Virginia clients. Become familiar with monetary nexus necessities for distant merchants.
- Commercial center facilitators and foreign dealers: that have financial nexus in Virginia (for example, more than $100,000 yearly in Virginia net deals or at least 200 exchanges to Virginia clients) should enroll to gather and pay sales tax beginning July 1, 2019.
For the most part, organizations without an actual Virginia area that meet the monetary nexus edge should enlist as out-of-state sellers. Organizations with a substantial area should enroll as an in-state vendors. Commercial center facilitators should show that they are commercial center facilitators while enlisting.
Other Sales Taxes in Virginia Including Meals Tax
In every part of Virginia, almost all food is treated as grocery. Which means you need to pay sales tax on it. The general sales tax for food in Virginia is at the basic 2.5%. This includes food for home consumption, prepared food like cold sandwiches and salads, and non-alcoholic drinks, including soft drinks.
Prepared hot food for immediate consumption is taxed differently, requiring you to pay a full combined state plus local sales tax rate. Also, the city of Fairfax has a different sales tax for food than any other part of Virginia. In Fairfax, you have to pay a basic 4% sales tax on every kind of food, whether you consume it on the premises or not.
Sales taxes are quite complicated, but we have tried our best to include everything you need to know about them and how they differ within the state of Virginia.
It is always best to hire a professional who can help you know more about sales tax. They can help you collect them and be prompt every time with the payment to the proper tax collection agency for your local area. This will save you time, and it will help you avoid any costly mistakes that can translate into penalties and money lost later on.