Sales Tax Updates in Virginia

Tax Professionals' Resource
January 4, 2013 — 1,659 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

The sales tax rate in Virginia remains at 4 percent, with most local levels at 1 percent. Food purchased for consumption at home, as defined by the federal Food Stamp Act of 1997, remains taxed at 1.5 percent state level and 1 percent local tax.

Motor Vehicle Rental Tax

As of July 1, 2012, the Motor Vehicles Rental Tax has been collected and administered by the Department or Revenue. The rental tax rate is 4 percent for vehicles under 26,000 pounds, plus an additional 4 percent without regard to weight. The additional tax does not apply to motorcycles and mobile homes.

The Department of Revenue allows motor vehicle renters to file their monthly reports online and pay the tax due electronically. Form MVR-420 can be found at

Prepayment of Sales Tax

One of the larger potential changes in the retail sales tax area has not yet occurred. Gov. McDonnell has promised to propose legislation to repeal the prepayment of sales tax in his upcoming budget request. Since 2009, large retailers are required to prepay their estimated sales tax.

In 2011, retailers with annual sales of at least $26 million were required to prepay. If passed, ending the prepayment requirement will affect approximately 200 retailers.

Possible Gas Sales Tax Change

Another big change may be modifying the Retail Fuel Sales Tax. Since 1986, Virginia has imposed a tax of 17.5 cents per gallon of retail fuel. Gov. McDonnell has proposed to calculate the tax on a percentage basis, as most other taxes are calculated.

At the time the fuel tax was enacted, gas was less than $1.00 per gallon. A fluctuating retail fuel tax is a shift from previous administrations, and may have a large effect on revenue. It certainly will have a large effect on gas prices.

Tax Holidays Extended

Virginia has 2 tax “holidays” in which certain items become exempt from sales tax during the holiday period. Both holidays have been extended to 2017. The Department of Revenue will announce a change in dates.

The energy efficient products holiday extends from October 5 through October 8 and applies to energy saving home products, such as fluorescent light bulbs, energy saving thermostats and larger appliances meeting certain EnergyStar standards. Items under $2,500 will be exempt.

The hurricane emergency preparedness equipment tax holiday runs from May 25 to May 31. The tax holiday applies to small items normally needed in a hurricane situation, such as batteries, flashlights, lanterns, duct tape and bottled water. It can also apply to larger items such as electric generators. A list of exempt items may be found at

Tax Professionals' Resource