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Virginia: New Sales and Use Tax Rates Enacted



Taxpayers subject to Virginia’s sales and use taxes should be aware of a bill signed by Governor McDonnell that includes the following changes to Virginia’s sales and use tax laws:

  • Rate increase from 4% to 4.3%
  • Collection of tax from remote sellers
  • Special 0.7% tax increases in “Planning Districts” meeting certain requirements

Effective July 1, 2013, Virginia’s state sales tax rate will increase from 4% to 4.3%. There will also be an additional 0.7% sales tax imposed in each county and city located within any “Planning District” meeting certain criteria. Planning Districts are regions created by the Virginia Department of Housing and Community Development to encourage and facilitate cooperation between local and state government on issues such as transportation, economic infrastructure development, and resource management. The 0.7% sales tax increase applies to any Planning District that meets the following criteria as of January 1, 2013:

  • A population of 1.5 million or more, as shown in the most recent U.S. Census
  • Not less than 1.2 million motor vehicles registered in the district
  • Total transit ridership of not less than 15 million riders per year across all systems

Currently, only the Northern Virginia and Hampton Roads Planning Districts meet the requirements.
The bill also establishes a procedure for collecting state and local sales and use taxes from remote sellers for sales made in Virginia. The new procedures, which describe filing requirements, rate calculation, notice requirements and relief provisions for erroneous collection, will only take effect if the federal government passes legislation requiring sales tax collection from remote sellers.
Other tax changes include:

  • A 2% additional transient occupancy (hotel) tax in each county and city located in a Planning District with a population of not less than 2 million, at least 1.7 million motor vehicles registered, and not less than 50 million transit riders per year
  • A new $64 per year per vehicle license tax on electric motor, hybrid electric motor or alternative fuel vehicles registered in Virginia
  • A phased-in rate increase, over four years, on the sale of motor vehicles, from 3% to 4.15%

Suggested Action/Contact:

After reviewing this alert, please contact one of the following CohnReznick tax professionals to determine how these sales and use tax changes impact your business.

For more information on CohnReznick’s state and local tax services, visit our webpage.

Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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