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.
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More Questions
What's the difference between bookkeeping and accounting?
Bookkeeping is the recording of financial transactions. Accounting is the analysis and interpretation of those records. Both matter for small businesses, but they serve different purposes and happen at different rhythms.
Read answerHow do I calculate payroll taxes for my employees?
Payroll taxes include federal and state withholding plus Social Security and Medicare. Some taxes come from employee wages while others you pay as the employer. Most small businesses use payroll software or a service to handle the calculations.
Read answerI'm months behind on my bookkeeping. Where do I start?
Start by gathering all your bank and credit card statements for the missing months. Check for urgent deadlines like quarterly taxes or pending loan applications, then work through reconciliation one month at a time starting with the oldest.
Read answerHow often should I update my books?
Weekly is the standard for most small businesses. Monthly is the minimum. Going longer than a month means losing context on transactions and letting errors compound.
Read answerDo I need to send 1099s to all my subcontractors?
Not every subcontractor needs a 1099. The $600 threshold, corporate status, and payment method all determine who gets one. Collect W-9s from subs before paying them so you have the information you need at tax time.
Read answerHow do I handle sales tax when I sell both online and in-store?
In-store sales collect tax at your local Virginia rate. Online sales get more complicated because you charge based on where the customer lives, and you may owe tax in other states once you hit their sales thresholds.
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