VA

What Every Online Seller Should Know About Sales Tax in Virginia

by Mark Faggiano

Virginia Sales Tax TaxJar

This blog post may now be out of date. For our most up-to-date info on Virginia sales tax, check out our “Virginia Sales Tax Guide for Businesses.”

Updated on November 11, 2015 to reflect changes with Virginia sales tax nexus and fulfillment centers

This post will hopefully make things easier to understand if you’re an online seller wondering if you need to collect sales tax from customers in Virginia. I’ll walk you through the most common examples that our customers experience – including if you’re a Fulfillment by Amazon (FBA) seller. As always, if none of these examples match your own business, or if you still have doubts or questions, contact a tax professional.

Living in a state other than Virginia

If you’re an online seller living in any state other than Virginia and your business has no ties to Virginia (no office, no employee, no inventory, etc.) then you’re not required to collect sales tax from orders delivered to Virginia. Consider yourself lucky. This post is about to get a lot more complicated.

Living and operating your business in Virginia

If you’re an online seller living in Virginia and running your business out of your home (like a lot of us do) then you’re required to register your business with the state and collect sales tax on taxable items delivered to customers in Virginia and then remit that money to the state. How much sales tax you’re required to collect is covered a bit later in the post.

Living out-of-state while using FBA

While, as of this writing, Virginia is home to two Amazon Fulfillment Centers, on October 16th, 2015 the Virginia Department of Taxation issued a letter ruling declaring that only using a fulfillment center in Virginia does not create sales tax nexus. So if you sell on Amazon FBA and have items stored in Virginia, but that’s the only element that ties your business to Virginia, then you, the FBA seller, don’t have sales tax nexus in Virginia.

Read more about the Virginia fulfillment center nexus letter ruling here.

Virginia sales tax rates

The sales tax rate in Virginia is a sum of the state sales tax rate and the local sales tax rate.

The state rate is not always the same. As of July 1, 2013, the state sales tax rate is 4.3 percent except for “the localities that make up the Northern Virginia and Hampton Roads regions.” In those cases the state rate is 5.0 percent.

The local rate, on the other hand, is always 1 percent.

So for example, the sales tax rate in Midlothian, VA is 5.3 percent. The sales tax rate in Falls Church (which is in Northern Virginia) is 6.0 percent.

Collecting sales tax if you’re in-state

Here’s where things get really interesting. Normally, states are considered either origin-based (you collect based on where the seller is located) or destination-based (you collect based on where the buyer is located). Virginia is both.

If you live in VA and operate your business there (you’re what the state refers to as an “in-state dealer”), then you are supposed to collect sales tax based on your business location. Here’s the exact language provided by the state on Page 6 of their Guidelines For The Retail Sales And Use Tax Changes Enacted In The 2013 General Assembly Session (PDF):

va sales tax nexus

You’ll notice I also included the example the state provided in that same section of the document. I’ll use a more real example: let’s say you’re an online seller operating out of your house in Big Stone Gap, VA. Since Big Stone Gap is not located in either Northern Virginia or Hampton Roads the sales tax rate is 5.3 percent (4.3 percent for the state + 1 percent local). In this case you would charge 5.3 percent on all taxable transactions shipped to customers in Virginia  – regardless of where the customer is located.

If you’re a seller located in either Northern Virginia or Hampton Roads, the only difference for you is that you’ll charge 6 percent sales tax on transactions delivered to customers in Virginia because that’s the rate where you live/operate your business. Just like the seller in Big Stone Gap, you only charge one rate for in-state sales.

Collecting sales tax if you’re out-of-state

If you’re out-of-state but have nexus in Virginia due to another nexus-causing factor (such as an office, employee, etc.) then the state says you should collect based on the ship-to destination of the item. Like I did in the last example, here’s the exact language as well as an example of a sale provided by the state on Page 7 of their Guidelines For The Retail Sales And Use Tax Changes Enacted In The 2013 General Assembly Session (PDF):

virginia-out-of-state-sellers-sales-tax

So here are some additional examples:

Example 1: you’re an online seller in Detroit, MI with but have an employee in Virginia. You sell a taxable item to a customer who wants it shipped to their home in Glade Spring, VA. Since Glade Spring is not in Northern Virginia or Hampton Roads then the state says to collect sales tax at a rate of 5.3 percent (based on the destination of the item).

Example 2: you’re the same online seller in Detroit, MI with that employee in Virginia who causes you to have Virginia sales tax nexus. You sell a taxable item to a customer who wants it shipped to their home in Virginia Beach, VA. Since Virginia Beach is in the Hampton Roads region, then the state says to collect sales tax at a rate of 6.0 percent (again, based on the destination of the item).

Filing sales tax returns in Virginia is painful

If your business has to collect based on the destination of delivery then filing your sales tax return for Virginia will be a lot more difficult than if you’re an in-state dealer. The reason is VA wants to see tax collected per local jurisdiction. So it’s up to the seller to go through each sale and determine what local jurisdiction that sale belongs to (particularly tough if you’re out-of-state and have zero sense of what cities are in which counties) and add up tax collected. The good news is that TaxJar does all of that work for you in its local jurisdiction reports. That means less time having to mess around with spreadsheets and figures and more time finding good deals at Target or the next garage sale.

For more information on what you can expect when you files your sales tax return, check out this video from the Department of Taxation:

Summary: if your business has nexus, collect based on shipping address

If you’re an out-of-state seller with zero ties to Virginia, consider yourself lucky and move along. If you’re an in-state seller, register with the state and collect a single sales tax rate for all of your customers in VA. Base the rate on where you live. If you’re an out-of-state FBA seller then register with the state and collect sales tax based on where the item is shipped.

Have any questions? Feedback? Tell me about your experience selling in Virginia in the discussion section below.

Tired of having to calculate sales and tax collected by local jurisdiction? Start your free 30 day trial to TaxJar today.

  • Beth B

    Great info – thanks for making it very clear.

  • A small business owner in VA

    Hello if I sell something to my family members who live out of state should I collect VA sales tax? Thanks for any help.

  • Susie

    I’m trying to register with VA. They give these choices on one of their screens:

    Retail Sales Tax (In-State dealers)
    Use Tax (Out-of-State dealers)

    If I select the top one, when I put in my business address on the next page, it only has DC and VA as state choices.

    But if I select the bottom one, I assume I’ll be registering for Use tax and not Sales tax.

    So what should I do?

    Thanks.

  • YG

    So for in state dealers in virginia with out of state customers. what do i charge them? va sales tax or their location tax?

  • Hi YG,

    This depends on which states where you have nexus. If you don’t have nexus in any other states, then you don’t have to charge your out-of-state customers sales tax. But if you do have nexus in another state, you would charge them the rate based on that state. I hope this helps!

  • Hi Susie,

    A lot of states refer to sales tax collected by out-of-state sellers as “Use tax.” That said, I would contact the Virginia Department of Revenue just to be on the safe side.

    • Bill

      Out of state vendors register to collect “use tax”.

      • Hi Bill,

        That’s correct. For simplicity’s sake we use “sales tax” except when there’s a reason to differentiate between the two.

  • TAXED OUT

    I am a VA based business. I occasionally sell merchandise to clients outside of VA. The merchandise also ships to the customer outside of VA. I run the business out of my home. No inventory and NO OTHER NEXUS in any state but VA. Do I charge sales tax to customers that do not live in VA? Thanks for any assistance!

  • Hi there, You only charge sales tax to customers in states where you have sales tax nexus. It sounds like you only have sales tax nexus in Virginia. I hope this helps!

    • kbellcpa

      I have a similar situation as the person above, but wanted to reconfirm. I live in Virginia and have an online business that I run out of my home. Everything I sell is drop shipped from Wisconsin. Do I need to collect sales tax from Virginia buyers even though merchandise is being shipped from Wisconsin? I called VA dept of taxation and the lady sounded really confused. Does having an online store operated from my computer in my house in Virginia mean that I have a nexus in Virginia? How does my own online website differ from selling on Amazon as you mentioned above? Maybe your article should have been clearer to say if you are selling on Amazon, but don’t live in the state of Virginia, but your merchandise is being drop shipped from Virginia….

  • Leslie W

    Hi, I work for a VA Based business. My question is if you’re selling something online that we’ve offered discounts on, does the sales tax apply to the full retail price or does it apply to the discounted price? Thank you!

  • From our understanding, it’s the actual price at the point of sale, so that would be the discounted price in your case.

  • Bonny

    For that matter, is web design or logo design taxable in Virginia? Or is it considered a service? The client receives digital files.

  • Hi Bonny, from what I can tell services are not taxable in Virginia, but it’s always a good idea to contact the Virginia Department of Revenue or a sale tax expert for specific questions about your business. Here’s more from the VA Department of Revenue: http://www.tax.virginia.gov/content/sales-and-use-tax

  • Etsy shop owner

    Thank you for this article. I Registered my online business (an etsy shop) with Virginia. I also called to speak to a rep at the tax dept about collecting sales tax. That person said even though I’m an online business I need to collect tax for everything I sell, regardless of buyer location. Th other person I spoke to said tha I did not.
    I wish I had found your article sooner. Just to confirm:
    I’m only collecting sales tax from sales I make to Virginia addresses?
    I had an offer to sell wholesale to an online store in New York and I don’t have to collect sales tax, correct?

    • Hi There, We always recommend asking a sales tax pro about specific cases, but in your case it does sound like you only have sales tax nexus in Virginia, which means you only have to charge sales tax to buyers in Virginia. I hope this helps!

      • Etsy shop owner

        Thank you!

  • Heather Thomas

    We’re a little confused, hopefully you can clear this up for me please?! We own a screen print business. We print t-shirts for teams etc. locally as well as out of state, so since this is a “service” there’s no VA state tax for this?? OR am I completely wrong and we charge a VA state tax to all clients IN state? Also, we have our own custom line that we sell online, for this we are retail, we charge a VA state tax for IN STATE customers but not out of state, correct?? Thank you for helping!! 🙂

    • Hi Heather,

      That’s one of those tricky areas where a state may want you to charge sales tax. My best advice is to call up the state of Virginia’s department of revenue and get them to give you a ruling in writing. Here’s their best number:

      Virginia
      Phone Number: 804-367-8037
      Press 4 for Agent then 1 for Sales Tax.

  • Great info.

    What if I sell overseas? Do I collect any VA state/local tax?

    Thanks!

    • Hi Perry,

      You charge the sales tax rate in the state where you have nexus. For example, if you live and operate your business in Virginia, you’d charge the VA sales tax rate to Virginia buyers. If you don’t have nexus in Georgia, then you wouldn’t charge sales tax to buyers in Georgia. So you wouldn’t collect a state’s sales tax on items you sell overseas. That said, you may have to deal with customs and import duties when selling overseas.

  • MilitarySpouse

    Hello, I am a military spouse and we are stationed overseas in Asia. I have an Etsy shop where I sell handmade items and ship to whatever state the customer orders from. My home state of record and where I pay my state taxes to is Virginia. I have not charged sales tax thus far, as my items have only ever been made and shipped from my overseas home. I am confused as it seems the law states the product or my business has to be physically in Virginia to apply VA sales tax. I am just wondering whether I should be charging sales tax and if so who does it go to? I have been unsuccessful finding any info online. Thanks for any insight you can give!

    • HI there,

      This is a great question. We try not to give specific advice on specific situations like this, but we have a great international CPA, Sylvia Dion, who specializes in sellers overseas. She can be contacted at her website, SylviaDionCPA.com. Good luck!

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  • stephanie

    I just started selling as a fba seller on amazon. I am in NY and when I buy the products at retail stores to sell on amazon I pay the sales tax. Does that mean I need to collect it again from my buyer’s. Isn’t that doubling sales tax?

    • Hi Stephanie,

      Unfortunately, the sales tax is on the sale rather than on the item so the state wants you to to collect sales tax regardless if you’ve paid sales tax before! You can, however, apply for a resale certificate so you can buy items without paying sales tax. Just apply at your state’s department of revenue. Here’s a list: http://www.taxjar.com/states

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  • CraigandKatha Hughes

    About to publish my first book…the publisher will handle sales/taxes on his end of retail sales. When I sell directly to friends/family do I need to collect sales tax? (BTW, I am in Virginia)

    • Hey there,

      If you’re selling tangible items at retail you are most likely required to collect sales tax on this items. (And also pay income tax on the income!) On the other hand, and I can’t give you specific advice, if you’re only going to make a handful of sales personally, you might want to take the risk of not going through the hassle of filing and collecting. This whitepaper may help guide you to a decision: http://taxjar.wpengine.com/when-register-sales-tax-license/ Good luck with your book sales!

      • CraigandKatha Hughes

        Great! Thanks for your help!

      • CraigandKatha Hughes

        Great! Thanks for your help!

    • Hey there,

      If you’re selling tangible items at retail you are most likely required to collect sales tax on this items. (And also pay income tax on the income!) On the other hand, and I can’t give you specific advice, if you’re only going to make a handful of sales personally, you might want to take the risk of not going through the hassle of filing and collecting. This whitepaper may help guide you to a decision: http://taxjar.wpengine.com/when-register-sales-tax-license/ Good luck with your book sales!

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