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 since 1938, longer than any other state, by Moody’s, Fitch, and Standard & Poor’s. In addition, 11 counties/county equivalents in Virginia have a Aaa bond rating, more than any other state as reaffirmed by Moody’s in September 2014.
Low utility rates and under 3% union representation
Some of the lowest utility costs in the nation, cooperative local governments, tax saving Enterprise Zones, small business incubators, no franchise tax, and a right-to-work state are just a few of the advantages of locating within the VIAA region.
Virginia 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 a company is located in a town, it pays town and county taxes except for utility taxes which are paid only to the town and the license tax which is paid only to the town unless town law permits the additional collection of a county tax. Localities in Virginia collect a 1% sales tax making the total sales and use tax in Virginia, 5.3%, lower than the national average. Localities do not tax other items taxed at the State level.
Manufacturers pay real estate, machinery and tools, truck and automobile, utility, and sales taxes. Non-manufacturers pay real estate, tangible personal property, truck and automobile, utility, and sales taxes. They also may pay either a merchants’ capital or a license tax.
Virginia’s corporate income tax is 6%, which is less than the national average. No unitary taxes are levied on Virginia companies’ worldwide profits. And, the state is among the lowest in average workers’ compensation costs and unemployment tax burdens in the U.S.
Highlights
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 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% | 6.50% | 6.00% |
| Sales and Use Taxes: | |||
| State Tax | 4.30% or 5.00% | 5.75% | 5.75% |
| State and Average Local Tax (combined) | 5.30% or 6.00% | 6.80% | 6.07% |
Source: Research Institute of America, November 18, 2014 and The Tax Foundation, Ranking State and Local Tax Rates as of January 1, 2014