How do I calculate how much sales tax I owe?
The basic formula is simple. Take your taxable sales for the filing period and multiply by your sales tax rate. In most of the Richmond area, the combined Virginia state and local rate is 5.3%. So if you had $15,000 in taxable sales during the month, you owe $795 in sales tax.
The harder part is making sure you’ve identified taxable sales correctly. Not everything you sell is taxable in Virginia. Most tangible goods are, but many services aren’t. Sales to tax-exempt organizations with valid exemption certificates don’t count. Neither do resale transactions where the buyer provides a resale certificate. If you sell food for home consumption, that’s taxed at a lower rate of 2.5% rather than the full 5.3%.
If you’re collecting sales tax at the register or on invoices, which you should be, the tax you collected should closely match the tax you owe. They’re not always identical because of rounding on individual transactions, but they should be close. If there’s a significant difference, something is wrong. Either you’re not collecting on all taxable sales, or you’re collecting on things that aren’t taxable.
To pull the numbers, run a sales report for the filing period in your accounting software. Look for the total sales figure, then identify any non-taxable amounts. Your sales tax setup in QuickBooks or whatever system you use should be separating taxable from non-taxable automatically if it’s configured correctly.
Compare your calculated tax liability against the sales tax liability account in your books. That account tracks what you’ve collected from customers. When you remit payment to Virginia, you’re paying down that liability. If the account balance doesn’t match what you’re about to pay, investigate before filing.
Virginia requires most businesses to file monthly if they collect more than a certain threshold. Smaller businesses may file quarterly. The return asks for gross sales, exempt sales, and taxable sales, then calculates the tax due. Working with a Richmond bookkeeper can help make sure your books are organized so these numbers are easy to pull each period instead of a last-minute scramble.
The most common mistakes are including exempt sales in the taxable total, forgetting to account for different rates on different product types, or not reconciling collected tax against calculated tax. Catch those before filing and the calculation itself is just multiplication.
Greater Richmond's Small Business Bookkeeper
The Next Step:
A Short Conversation
Fifteen minutes to tell us what you're dealing with. We'll let you know how we can help and give you a clear price quote.
More Questions
Should I run payroll myself or use a payroll service?
You can run payroll yourself with software, but the time investment and compliance risk grow with each employee. Most small businesses benefit from outsourcing once they reach three to five employees or have complex pay structures.
Read answerWhat is retainage and how do I record it in my books?
Retainage is a percentage of each payment that clients hold back until a construction project is complete. In your books, it's recorded as a separate receivable asset that gets collected when the job wraps up.
Read answerHow do I register for Virginia withholding tax?
Register through Virginia Tax's online iReg system. You'll need your federal EIN and basic business information. Registration is free and you'll receive your withholding account number within a few business days.
Read answerWhat's the difference between catch-up bookkeeping and cleanup bookkeeping?
Catch-up bookkeeping addresses a time gap when your books stopped being maintained. Cleanup bookkeeping fixes quality issues like miscategorized transactions and accounts that don't reconcile. Many businesses need both.
Read answerHow do I track cost of goods sold when I sell online?
Track the landed cost of each product including purchase price, inbound shipping, and packaging materials. Use accounting software with inventory tracking enabled so COGS records automatically when items sell.
Read answerWhat's the best way to track costs for each project?
The best approach is capturing every cost as it happens and assigning it to the right project in your accounting system. This means tracking labor hours, materials, subcontractor bills, and direct expenses separately for each job so you know your actual profit margin on every project.
Read answer
