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Business And Tax Climate In Virginia



Business And Tax Climate In Virginia

For this month, let’s take a virtual trip to the Mid-Atlantic region of the United States. Commonly known as “The Old Dominion” or “Mother of Presidents”, Virginia was one of the original 13 colonies in the American Revolution and has a vast and storied history. Four of the first five U.S. Presidents were born here, which represents a Virginia Dynasty in national politics. From battles to speeches, to social movements, this land has witnessed to the value of the country. The climate and geography of the state are shaped by the Blue Ridge Mountains and the Chesapeake Bay, providing habitat for much of its flora and fauna.

Business Climate

Virginia’s land is known as the most diverse in the nation because its terrain and climate plays a big role in determining the nature of agriculture and industries in the state. Agriculture and forestry are the largest private industries in Virginia, having a total economic impact of over $91 billion. Many Virginia commodities and products rank in the top 10 among all U.S. states.

One of largest cable service providers, Xfinity by Comcast is based in Virginia, promoting the state as a leading data center market in the U.S. The state is committed to technology and innovation with pushing new boundaries in cloud computing and cybersecurity.

Virginia has been an exceptional location choice for many businesses and rated as top 10 attractive places to expand and grow. Home to the 3rd largest port on the East Coast, Virginia serves a world-class transportation and logistics center. The rapid growth in the population has fueled the real estate market in the state and thus have much more resiliency than many housing markets across the country as a result of COVID-19.

The location of the state makes it desirable for manufacturing companies to grow, including lead chemical plants and tobacco factories which generate 10% of the state’s GDP. government services, wholesale trading, food & beverage processing are some of the state’s top targeted markets.

Tax Climate

The top individual income tax rate is 5.75% and the top corporate income tax rate is 6 %.

Apportionment: Virginia generally uses a 3 factor, double weighted sales factor apportionment method for the apportionment of corporate income taxes, other than for specific exceptions for certain industries. For sourcing of services, it uses the cost of performance method.

Sales Tax Structure

The state sales tax rate is 5.30% which ranks 31st in the country.

Virginia has enacted economic nexus legislation which means having a physical presence in Virginia is no longer a prerequisite for having to collect Virginia sales tax. Under this law, a remote seller is required to register, collect, and remit sales tax if they sell more than $100,000 in annual gross retail sales or 200 or more transactions to Virginia customers. This legislation became effective on July 1, 2019.

The legislation also includes a marketplace facilitator law enacted on July 1, 2019, where a remote facilitator is now required to collect and remit Virginia tax on all marketplace sales if it has more than $100,000 in annual gross sales in the state or 200 individual transactions for delivery in the state during the current or preceding calendar year.

The state does not specifically define digital goods for sales tax purposes and therefore, a seller of Software as a Service (SaaS) product to Virginia customers would not be impacted by the Virginia Law.

In response to the Coronavirus outbreak, Virginia has provided additional information on extending due dates and waiving penalties to manage and help businesses. However, no COVID-19 related guidance has as yet been issued for teleworkers creating nexus (or not) as a result of working temporarily from their Virginia home.

Random Facts

Virginia is the oldest British settlement on North American soil.
The state was named in honor of Queen Elizabeth 1 of England who was known as the “Virgin Queen”.
The Pentagon in Arlington, Virginia is the world’s largest office building, covering 600 acres of land.
The state is sometimes called the “Internet Capital of the World” because it handles 70% of the world’s Internet Traffic.
The first peanuts grown in the United States were grown in Virginia.
The first Thanksgiving in North America was held in Virginia in 1619.
Virginia is the home base for the United States Navy’s Atlantic Fleet.

Have a question? Contact Monika Miles and Team.

Monika Miles

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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