Va Sales Tax

Virginia Sales and Use Tax Skill

General reference only. This skill is general tax/accounting reference material for AI-assisted workflows. It has not been reviewed for any specific person's facts, documents, elections, deadlines, residency, filing status, or local procedures. Do not rely on it to file, pay, amend, or take a tax position without review by a qualified professional in the relevant jurisdiction.

Skill Metadata

Confidence Tier Definitions

Every rule in this skill is tagged with a confidence tier:

• [T1] Tier 1 -- Deterministic. Apply exactly as written. No reviewer judgement required.
• [T2] Tier 2 -- Reviewer Judgement Required. Claude flags the issue and presents options. A licensed CPA, EA, or tax attorney must confirm before filing.
• [T3] Tier 3 -- Out of Scope / Escalate. Do not guess. Escalate to a licensed tax professional.

Step 0: Client Onboarding Questions

Before proceeding with any Virginia sales tax analysis, collect the following from the client: [T1]

If the client cannot answer questions 1-4, STOP and gather this information before proceeding. [T1]

Step 1: Tax Rate Structure

1.1 Standard Rate Composition

Virginia's sales tax has a mandatory local component built into the rate structure, unlike most states:

1.2 Regional Rates

Certain regions of Virginia have additional regional taxes:

Northern Virginia jurisdictions (6.0%): Arlington, Fairfax, Loudoun, Prince William counties; cities of Alexandria, Fairfax, Falls Church, Manassas, Manassas Park. [T1]

Hampton Roads jurisdictions (7.0%): Chesapeake, Hampton, Isle of Wight, James City, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach, Williamsburg, York. [T1]

1.3 Sourcing Rules [T1]

Virginia is generally an origin-based sourcing state for intrastate sales:

• Intrastate sales: Sourced to the seller's location for over-the-counter sales. For shipped goods, sourced to the destination. [T1]
• Interstate sales (remote sellers): Destination-based. [T1]
• Delivered sales: Destination-based (the delivery address determines the rate). [T1]

Important: Because Virginia has regional rate differences, the sourcing determination directly affects the rate. A seller in Northern Virginia (6%) shipping to Hampton Roads (7%) charges the 7% rate. [T1]

Step 2: Transaction Classification Rules

2.1 General Rule

Virginia sales tax applies to the retail sale, lease, or rental of tangible personal property and certain enumerated services. Va. Code Section 58.1-603.

2.2 Taxability Matrix

2.3 Grocery Food -- Critical 2023 Change [T1]

Effective January 1, 2023, Virginia eliminated the state portion of sales tax on grocery food:

• Before Jan 1, 2023: Grocery food was taxed at 2.5% (1.5% state + 1% local).
• After Jan 1, 2023: Grocery food is taxed at 1% (0% state + 1% local only).
• In regional tax areas, the regional component is also removed from grocery food. [T1]
• Prepared food remains taxable at the full applicable rate. [T1]
• The definition of "food purchased for human consumption" follows Va. Code Section 58.1-611.1 and generally aligns with the federal SNAP definition. [T1]

Authority: HB 90 / SB 451 (2022 Session); Va. Code Section 58.1-611.1.

2.4 SaaS Taxability -- Virginia's Position [T2]

Virginia taxes SaaS as the sale of tangible personal property delivered electronically:

• Virginia has broadly interpreted its definition of tangible personal property to include electronically delivered software. [T2]
• SaaS is treated as a subscription to use software, which Virginia considers a taxable lease of TPP. [T2]
• The tax applies regardless of whether the software is accessed via browser or app. [T2]
• Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) taxability is less clear and should be evaluated on a case-by-case basis. [T3]

Source: Virginia Tax Ruling PD 19-55; Public Document 19-45.

2.5 Services Taxability [T2]

Virginia taxes only specifically enumerated services:

Step 3: Return Form Structure

3.1 Registration

All sellers with nexus in Virginia must register with Virginia Tax before making taxable sales. Registration is completed through the Virginia Tax Online portal.

Authority: Va. Code Section 58.1-613.

3.2 Filing Frequency

Virginia uses a monthly filing schedule for all active registrants:

Note: Virginia does not offer quarterly or annual filing options for general sales tax filers (unlike many states). All registrants file monthly. [T1]

3.3 Returns and Payment

• Form ST-9 (Retail Sales and Use Tax Return) is the primary return. [T1]
• The return covers both state and local taxes (the local 1% is reported and remitted with the state return). [T1]
• Electronic filing is required for all filers. [T1]
• Payment is due on the same date as the return (20th of the following month). [T1]

3.4 Dealer's Discount

Virginia provides a dealer's discount for timely filing and payment:

• Dealers may retain the greater of $0 or an amount computed as follows: [T1]
  • On collections of the first $62,500 of taxable sales: 1.6% of tax due.
  • The maximum discount is approximately $53 per month (for monthly filers with sufficient sales volume). [T1]
• The discount is available only if the return is filed and payment is made on time. [T1]

Authority: Va. Code Section 58.1-622.

3.5 Penalties and Interest

3.6 Prepayment Requirement [T1]

Virginia does not require sales tax prepayments (unlike some states that require estimated payments mid-month for large filers). [T1]

Step 4: Deductibility / Exemptions

5.1 Virginia Exemption Certificates

5.2 Requirements for Valid Certificates [T1]

Valid exemption certificates must contain:

1. Purchaser name and address. [T1]
2. Virginia sales tax registration number (for resale). [T1]
3. Nature of the exemption claimed. [T1]
4. Description of property being purchased. [T1]
5. Purchaser's signature. [T1]
6. Date of certificate. [T1]

5.3 Good Faith Acceptance [T2]

Virginia relieves sellers of liability when they accept exemption certificates in good faith. However, the seller must exercise reasonable care:

• The certificate must appear valid on its face. [T1]
• The purchase must be consistent with the claimed exemption. [T2]
• If the seller has knowledge that the exemption is invalid, good faith does not apply. [T2]

Authority: Va. Code Section 58.1-623(C).

5.4 Retention Period

Exemption certificates must be retained for 3 years from the date of the last sale made under the certificate. [T1]

6.1 When Use Tax Applies

Virginia use tax is due when:

• Property is purchased from a seller who did not collect Virginia tax. [T1]
• Property purchased for resale is withdrawn for personal/business use. [T1]
• Property is purchased in another state and brought into Virginia for use. [T1]

6.2 Use Tax Rate

The use tax rate equals the applicable sales tax rate (5.3%, 6.0%, or 7.0% depending on region). [T1]

6.3 Credit for Taxes Paid to Other States

Virginia allows a credit for sales/use tax properly paid to another state, up to the amount of Virginia use tax that would be due. [T1]

Authority: Va. Code Section 58.1-611.

6.4 Consumer Use Tax Return

• Businesses: Report on Form ST-7 (Consumer Use Tax Return) or Form ST-9. [T1]
• Individuals: Report on Virginia individual income tax return (Form 760). [T1]

Step 5: Key Thresholds

4.1 Physical Nexus

Virginia follows standard physical nexus principles:

• Place of business (office, store, warehouse) in Virginia. [T1]
• Employees or agents operating in Virginia. [T1]
• Inventory stored in Virginia (including FBA). [T1]
• Regular delivery via company vehicles. [T1]
• Affiliate nexus (related entities with physical presence). [T2]

4.2 Economic Nexus [T1]

Virginia enacted economic nexus effective July 1, 2019.

Authority: Va. Code Section 58.1-612(C).

4.3 Marketplace Facilitator Rules [T1]

Virginia enacted marketplace facilitator legislation effective July 1, 2019 (concurrent with economic nexus).

• Marketplace facilitators meeting the nexus thresholds must collect and remit. [T1]
• Marketplace sellers are relieved of collection obligation for facilitated sales. [T1]
• A marketplace facilitator is defined as a person who facilitates a retail sale by listing or advertising, collecting payment, and/or transmitting payment to the marketplace seller. [T1]

Authority: Va. Code Section 58.1-612(D).

Step 6: Filing Deadlines and Penalties

Refer to Step 3 for filing frequencies and due dates. [T1]

PROHIBITIONS

1. NEVER apply a flat 5.3% rate statewide -- check whether the address is in Northern Virginia (6.0%), Hampton Roads (7.0%), or the rest of Virginia (5.3%). [T1]
2. NEVER advise that grocery food is fully exempt from sales tax in Virginia -- it is taxed at a reduced rate of approximately 1% (local component only, after the Jan 2023 change). [T1]
3. NEVER advise that SaaS is not taxable in Virginia (it is taxable per DOR rulings). [T1]
4. NEVER tell a seller they can file quarterly in Virginia -- Virginia requires monthly filing for all registrants. [T1]
5. NEVER confuse Virginia's mandatory 1% local tax with optional local taxes -- every Virginia transaction includes the 1% local component. [T1]
6. NEVER apply the grocery food reduced rate to prepared food or restaurant meals. [T1]
7. NEVER advise that over-the-counter drugs are taxable in Virginia (they are exempt). [T1]
8. NEVER assume motor vehicle tax is collected by the seller -- it is collected by DMV at titling. [T1]
9. NEVER ignore the data center exemption for qualifying purchases -- it is a significant incentive. [T2]
10. NEVER provide Virginia tax guidance without specifying which regional rate applies to the customer's location. [T1]

Edge Case Registry

7.1 Data Center Equipment Exemption [T2]

Virginia offers a significant sales tax exemption for qualifying data centers:

• Qualifying data centers that make a capital investment of at least $150 million (or lower thresholds in certain localities) and create a minimum number of jobs are exempt from sales tax on computer equipment and hardware purchased for use in the data center. [T2]
• The exemption also extends to electricity purchased for use in the data center. [T2]
• Application and approval through Virginia Economic Development Partnership (VEDP) required. [T3]

Authority: Va. Code Section 58.1-609.3(18).

7.2 Mixed Regional Rate Sales [T2]

When a Virginia seller ships within the state, rate determination can be complex:

• A seller located in a 5.3% jurisdiction shipping to Hampton Roads (7.0%) must charge 7.0%. [T1]
• A seller in Hampton Roads shipping to a 5.3% jurisdiction charges 5.3%. [T1]
• For pick-up orders, the seller's location rate applies. [T1]

7.3 Motor Vehicle Sales Tax [T1]

• Motor vehicles are subject to the standard sales tax rate, but tax is collected by the DMV at the time of titling, not by the dealer. [T1]
• Trade-in allowances reduce the taxable base. [T1]
• The maximum sales tax on motor vehicles was capped historically, but check current law. [T2]

7.4 Manufacturing and Industrial Exemptions [T2]

Virginia provides broad exemptions for manufacturers:

• Raw materials and components that become part of the finished product. [T1]
• Machinery and tools used directly in manufacturing. [T2]
• Fuel used directly in manufacturing (not heating). [T2]
• Pollution control equipment. [T2]

Authority: Va. Code Section 58.1-609.3.

7.5 Nonprofit and Government Exemptions [T2]

• Virginia exempts purchases by federal and state government entities. [T1]
• Qualifying 501(c)(3) nonprofit organizations may apply for an exemption certificate. [T2]
• The exemption is not automatic -- nonprofits must apply to Virginia Tax and receive a certificate. [T1]
• Churches are generally exempt without needing to apply. [T2]

Authority: Va. Code Section 58.1-609.11.

7.6 Occasional or Casual Sales [T1]

Virginia exempts from sales tax the occasional sale of tangible personal property by a person not regularly engaged in the business of selling:

• Three or fewer sales in a 12-month period qualify. [T1]
• Motor vehicles, watercraft, and aircraft are not eligible for the casual sale exemption. [T1]

Authority: Va. Code Section 58.1-602 (definition of "occasional sale").

7.7 Digital Advertising Tax [T2]

Unlike Maryland, Virginia does not impose a separate digital advertising tax. However, digital goods and SaaS remain subject to the standard sales tax. [T2]

7.8 School Supply and Clothing Tax Holiday [T1]

Virginia holds an annual sales tax holiday (typically the first weekend in August):

• School supplies ($20 or less per item): exempt. [T1]
• Clothing and footwear ($100 or less per item): exempt. [T1]
• Energy-efficient products (qualifying Energy Star products, $2,500 or less): exempt. [T1]
• Hurricane and emergency preparedness items: exempt. [T1]

Authority: Va. Code Section 58.1-611.2.

Test Suite

Test 1: Standard Rate Calculation [T1]

Question: A retailer in Richmond (Central Virginia, 6.0% total) sells a $1,000 laptop. What is the sales tax?

Expected Answer: $1,000 x 6.0% = $60.00.

Test 2: Grocery Food Rate [T1]

Question: A consumer buys $300 of groceries in Virginia Beach (Hampton Roads). What tax is due on the groceries?

Expected Answer: After Jan 1, 2023, grocery food is taxed at approximately 1% (local portion only). $300 x 1% = $3.00. The state and regional portions do not apply to grocery food.

Test 3: SaaS Taxability [T2]

Question: A Virginia company subscribes to a $500/month CRM SaaS product. Is Virginia sales tax due?

Expected Answer: Yes. Virginia taxes SaaS. At the applicable rate for the company's location (e.g., 5.3% in standard Virginia = $26.50/month; 6.0% in NOVA = $30.00/month; 7.0% in Hampton Roads = $35.00/month).

Test 4: Regional Rate Determination [T1]

Question: An online retailer in Roanoke (5.3%) ships a $200 order to a customer in Arlington (NOVA, 6.0%). What rate applies?

Expected Answer: 6.0%. For shipped goods, Virginia uses destination-based sourcing, so the buyer's location rate applies. Tax = $200 x 6.0% = $12.00.

Test 5: Economic Nexus [T1]

Question: An out-of-state seller made $50,000 in sales but 210 transactions into Virginia this year. Does the seller have nexus?

Expected Answer: Yes. Virginia uses an OR test. The seller exceeded the 200-transaction threshold, so economic nexus is triggered even though revenue is below $100,000.

Test 6: Sales Tax Holiday [T1]

Question: During Virginia's sales tax holiday in August, a customer buys a $90 pair of shoes and a $110 jacket. Which items qualify?

Expected Answer: The $90 shoes qualify (under $100 threshold) and are exempt. The $110 jacket does NOT qualify (exceeds $100 per-item limit) and is taxable at the full applicable rate.

Test 7: Use Tax on Out-of-State Purchase [T1]

Question: A Virginia Beach (7.0%) resident buys a $2,000 piece of furniture online from a seller who charges 4% sales tax (from another state). What Virginia use tax is owed?

Expected Answer: Virginia use tax at 7.0% = $140. Credit for tax paid to other state: $2,000 x 4% = $80. Net Virginia use tax owed: $140 - $80 = $60.

Reviewer Escalation Protocol

Contribution Notes

• This skill follows the Q1 execution format (Step 0 through Step 7).
• All rules are tagged [T1], [T2], or [T3] per the Confidence Tier Definitions.
• Rate tables are deterministic lookup tables -- no narrative explanation of rates.
• To update this skill, submit a pull request with the specific section, supporting statutory authority, and effective date of the change.
• All changes require validation by a US CPA or EA before merging.

Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, EA, tax attorney, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.

The most up-to-date, verified version of this skill is maintained at openaccountants.com. Log in to access the latest version, request a professional review from a licensed accountant, and track updates as tax law changes.

Source: OpenAccountants — open tax Guides for AI, reviewed by named CPAs/CAs/EAs. Quality: source-cited draft. For always-current figures and named-accountant backing, connect the OpenAccountants MCP server (openaccountants-mcp).