Five Virginia Tax Changes

By: Susan VanEpps

Loudoun businesses should be aware of new tax policies that go into effect July 1, 2013. House Bill 2313, passed by the Virginia Assembly and signed into law by Governor McDonnell April 3, changed several policies statewide, and creates a Northern Virginia Transportation Authority Fund.

  1. Sales and use tax increase: The bill raises the state portion of the sales and use tax across most of the Commonwealth from 4 percent to 4.3 percent. The increased revenues will fund road and rail projects. More than $100 million will be dedicated to Phase II of the Dulles Metrorail Extension Project into Loudoun County.
  2. Special rates for Loudoun and the rest of Northern Virginia: The combined state-and-local sales and use taxes on non-grocery retail purchases will increase to 6 percent in Northern Virginia. Retailers will have to adjust their point-of-sale systems and collect sales tax using the new rates beginning July 1.
  3. Regional Transient Occupancy Tax created: All hotel stays in Loudoun and other localities in the Northern Virginia Planning District will increase 2 percent, with the new regional TOT assessed over and above existing local TOT rates.
  4. Vehicle fees and taxes: the titling tax on motor vehicles will increase from 3 to 4.15 percent over the next four years, and hybrid and electric vehicle owners will now pay a $64 annual registration fee. The flat $0.175 per gallon tax on vehicle fuel will be replaced with a 3.5 percent tax on wholesale gasoline sales and 6 percent on wholesale diesel fuel sales.
  5. Alignment with Marketplace Fairness Act: House Bill 2313 would also bring Virginia law in line with the requirements of the proposed Marketplace Fairness legislation. If passed, the federal bill would allow Virginia to require sellers outside the state to collect retail sales and use tax on online sales.

As with any tax law, there’s a lot more detail than what’s listed here. Final guidelines for businesses regarding sales tax changes will be available soon. Specifics on the bill are on the Virginia Department of Taxation’s website.

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