Stable Taxes

A Stable and Competitive Environment

Virginia's corporate income tax has not been raised in forty years, since 1972. At 6 percent, our rate is one of the lowest in the nation. In Virginia, items taxed at the state level are not taxed at the local level, with the exception of the sales and use tax levied by both state and local governments. The combined state and local sales tax is either 5.3 or 6 percent depending upon the locality. Virginia also differs from most states in that its counties and cities are separate taxing entities. A company pays either county or city taxes depending upon its location. If the company is located within the corporate limits of a town, it is subject to town and county levies.

Virginia's long tradition of fiscal discipline has earned the Commonwealth a coveted AAA bond rating, reaffirmed by Moody's, Fitch, and Standard & Poor's in January 2013. In addition, Ernst & Young, in conjunction with The Council on State Taxation (COST), in 2011 deemed Virginia among the top 10 states with the lowest effective tax rates for new capital investments.

Corporate Income Tax

  • Tax rate of 6%, not raised in over forty years
  • Has a three-factor apportionment formula of payroll, property and sales (with sales double-weighted)
  • A single-factor apportionment election based on sales for manufacturing companies
  • Tax credits for job creation and investment in economically stressed areas
  • No franchise or net worth tax

Sales and Use Tax

  • The total tax is is 5.3 percent (4.3 percent state tax and 1 percent local tax). There is an additional 0.7 percent state tax imposed in the localities that make up Northern Virginia and Hampton Roads, making the rate in these areas 6 percent (5 percent state tax and 1 percent local tax).
  • A seller is subject to a sales tax on gross receipts derived from retail sales or leases of taxable tangible personal property.
  • Manufacturers do not pay tax on purchases used for production; distributors do not pay tax on items purchased for resale.

TAX COMPARISON
Taxes Rates
  Virginia U.S. (Median) South Atlantic (Median)
Income Taxes:
Corporate Income Tax 6.00% 6.75% 6.90%
Sales and Use Taxes:
State Tax 4.30% or 5.00% 6.00% 6.00%
State and Average Local Tax (combined) 5.30% or 6.00% 6.80% 6.04%

 

Source: Research Institute of America, State and Local Taxes: All States Tax Guide, 11/20/12 and 3/19/13 and The Tax Foundation, Ranking State and Local Sales Taxes, February 11, 2013

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