What business taxes do I need to pay in Virginia?
Virginia has several layers of business taxes. State taxes get most of the attention, but local taxes in places like Richmond, Henrico, and Chesterfield add up and have their own filing requirements.
State income tax depends on your business structure. C-corporations pay a flat 6% corporate income tax to Virginia. Pass-through entities like S-corps, LLCs, partnerships, and sole proprietorships don’t pay at the business level. The income flows to your personal return and you pay Virginia individual income tax, which ranges from 2% to 5.75% depending on your income.
Sales tax applies if you sell taxable goods or certain services. Virginia’s combined rate is usually 5.3% in the Richmond area. You collect it from customers and remit it to Virginia Tax monthly, quarterly, or annually depending on your volume. Restaurants, retailers, and auto shops deal with this constantly. Miss a filing or underpay and penalties stack up quickly.
Payroll taxes kick in when you have employees. You withhold Virginia income tax from their wages and remit it to the state. You also pay Virginia unemployment tax to the VEC. Rates vary based on your industry and claims history, but new employers typically start around 2.5%.
Local business taxes are where Virginia differs from many states. Most localities impose a BPOL tax, which stands for Business, Professional, and Occupational License. It’s based on your gross receipts, not profit. Rates vary by business type and locality. Richmond charges different rates for contractors than it does for retail or professional services. You file annually, usually in the spring, and the tax is due even if you didn’t make money.
Business tangible personal property tax is another local tax. Localities tax your business equipment, furniture, computers, and vehicles. You file a return each year listing what you own, and the county assesses a tax based on the value. This one surprises people who assume property tax only applies to real estate.
You’ll also pay an annual business license fee in most localities. This is separate from BPOL in some jurisdictions and combined in others. It’s usually a flat fee or small percentage, but you still need to renew it each year to stay legal.
Keeping track of all this requires organized books. Working with small business bookkeepers who understand Virginia’s local tax requirements helps ensure nothing gets missed. The state taxes are straightforward. The local taxes are where businesses run into trouble because every county and city has different rules, rates, and deadlines.
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
What 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 answerShould I connect my bank account to QuickBooks or enter transactions manually?
Connect your bank account. Bank feeds save hours of data entry time and reduce typing errors. You'll still need to review and categorize transactions, but you'll start from accurate data instead of hoping you entered everything correctly.
Read answerWhat payroll taxes do Virginia employers need to pay?
Virginia employers pay federal FICA and unemployment taxes plus Virginia unemployment insurance. Budget roughly 8% to 10% of wages for the employer portion. Virginia keeps it simpler than many states with no state disability or paid leave taxes.
Read answerWill I get in trouble with the IRS for falling behind on my books?
Falling behind on bookkeeping itself doesn't trigger IRS penalties. The problem is what happens next. Messy books lead to inaccurate tax returns, missed deductions, and late filings. Those are what create real trouble.
Read answerHow do I separate my personal and business expenses?
Open a separate business bank account and get a business credit card for business purchases only. The setup is simple. Building the habit of keeping transactions in the right accounts is the harder part.
Read answerHow do I know if a project is actually profitable?
Track all direct costs against each job and allocate a share of overhead. Most owners miss their own labor value and fixed expenses, making projects look more profitable than they really are.
Read answer
