Virginia Small Business Taxes: The Employer’s Complete 2024 Guide

Feli Oliveros

If you’re starting a new business, Virginia may be an ideal place to set up shop. In 2023, the Mother of States ranked second in CNBC’s top states for business, thanks to its high marks in business friendliness, infrastructure, access to capital, workforce, and education. 

But in order to build a venture that’ll last, you need more than just an ideal business environment. You’ll need to understand your state tax obligations as well. We’re here to help, so keep reading!

What business taxes do you pay in Virginia?

The state taxes that small business owners pay in Virginia are determined by factors like business structure, income, employer status, business activities, and location.

The state of Virginia doesn’t levy franchise taxes against businesses. However, most business owners can expect to pay income taxes, sales tax, employer taxes, and any industry-specific or local taxes that apply to them. Keep reading to learn more about each of these state business taxes and whether they apply to your company. 

Virginia personal income tax

Pass-through entities such as sole proprietorships, partnerships, limited liability companies (LLCs), and S corporations don’t pay income taxes themselves. Their business owners take on the income tax obligations of the company themselves, and they pay the taxes through their personal returns at the state’s individual income tax rates. 

In 2024, Virginia’s state income tax rates range from 2% to 5.75% of taxable income. 

How to file and pay

Personal income tax returns are due by the 15th day of the fourth month following the end of the business’s fiscal year. If your company follows the calendar year, your deadline is May 1 instead. 

State residents use Form 760 to file their income taxes, while part-year residents use Form 760PY and nonresidents use Form 763

Virginia taxpayers may file their personal tax returns electronically using one of the methods approved by the state’s Department of Taxation. Taxpayers with an income tax liability of over $6,000 are required to file electronically. If you don’t meet the $6,000 threshold and prefer to file by mail, send your tax form to the appropriate address listed on the Department of Taxation website.

Those who expect their annual tax liability to exceed $150 will also need to make quarterly estimated tax payments. These payments should be made by May 1, June 15, September 15, and January 15. 

If any of your estimated tax installment payments exceed $1,500 or if your annual income tax liability exceeds $6,000, you’ll need to submit your tax payment electronically through your Virginia online services account, ACH credit, or eForm 760ES. If you don’t meet any of these conditions, you may submit your tax payments by mail if you prefer. You can mail your payment along with payment voucher Form 760-PMT to the address below: 

Virginia Department of Taxation
PO Box 1478
Richmond, VA 23218-1478

More information on Virginia’s individual income tax can be found on the Department of Taxation website

Virginia pass-through entity tax return

Any S corporation, partnership, or LLC taxed as an S corporation or partnership that does business in the state or receives income from Virginia sources must file an income tax return each year. 

Additionally, if your business distributes income to a nonresident or part-year resident owner, you must withhold a portion of that income and pay it to the Department of Taxation. Nonresident owners can expect to pay 5% of their share of taxable income. Part-year residents must prorate their income tax due based on the number of days in the year they live outside of the state. 

How to file and pay

Income tax returns for pass-through entities (Form 502) are due on the 15th day of the fourth month following the end of the company’s fiscal year. For calendar filers, this due date lands on April 15. 

Most companies must file their income tax returns using a software program approved by the state. But if your business meets certain conditions, you may choose to file a simplified version of the income tax return (eForm 502EZ) instead. Pull up the eForm on your browser to determine if you qualify. 

If your business must make withholding payments for any nonresident or part-year resident owners, use eForm 502W to do so. These withholding payments are due at the same time the income tax returns are due, and are not eligible for a deadline extension. 

Learn more about the tax filing requirements for pass-through entities on the Department of Taxation website and in the Tax Commissioner’s guidelines for pass-through entity withholding

Virginia elective pass-through entity tax

Alternatively, S corporations, partnerships, and LLCs that are taxed as such in Virginia may choose to file a single tax return on behalf of the entity each year. This tax election, known as the pass-through entity tax or PTET, also transfers the income tax liability from the company’s business owners to the business itself. 

The pass-through entity tax rate is 5.75% of the entity’s eligible taxable income. 

Although most pass-through entity businesses are allowed to make the PTE election, only the following business owners may claim the refundable PTET tax credits:

  • Natural people subject to Virginia’s individual income tax
  • Estates or trusts subject to the state’s fiduciary income tax

As a result, only the income distributed to these eligible owners is subject to the PTET. If you’re interested in making this election, talk with your tax advisor or accountant to determine whether this tax move is the right one for your business. 

How to file and pay

To make the PTET election, qualifying pass-through entities must do one of the following actions: 

  • Make an estimated PTET payment for the tax year
  • Make a PTET extension payment for the tax year
  • File a PTET return (Form 502 PTET) by the extended due date for the tax year 

Keep in mind that a PTET election only counts for the tax year the election is made. To remain taxed as an entity, pass-through businesses must make the PTET election each year.

All tax returns must be filed electronically using an approved software program.  

PTET returns and withholding payments for nonresidents and part-year residents are due on the 15th day of the fourth month following the end of the fiscal year (April 15 for calendar year filers). Because the state of Virginia provides an automatic six-month filing extension for pass-through entities, you can file your PTET return as late as October 15. However, withholding payments are not eligible for extension and must be submitted by the original April 15 due date.

If you expect your PTET tax liability to be $1,000 or more, you must make estimated tax payments each quarter via ACH credit or the PTET-PMT eForm. These payments are due by the 15th day of the fourth, sixth, ninth, and 12th months of the fiscal year. 

Additional details on the elective pass-through entity tax are available in Tax Bulletin 23-3 and the final guidelines published by the Department of Taxation.

Virginia corporate income tax

C corporations that receive income from Virginia sources, incorporate in the state, or do business in Virginia must pay income taxes as well. 

The corporate income tax rate in 2024 is 6% of a corporation’s Virginia taxable income. 

How to file and pay

Corporate income tax returns (Form 500) are due on the 15th day of the fourth month following the end of the fiscal year (or April 15 for calendar filers). Tax returns for nonprofit corporations are due by the 15th day of the sixth month after the end of their fiscal year. Note that corporate tax returns must be filed each year, even if your business has no income to report or taxes to pay. 

All tax returns and payments should be submitted electronically with an approved software program or via your company’s online Business Account. Payments can also be made electronically via eForm 500V or ACH credit. 

However, corporations that conduct 100% of their business in Virginia and make $40,000 or less in federal taxable income may qualify for a shortened version of the corporate income tax form (eForm 500EZ). To determine if you qualify, open the form in your browser and confirm whether your business meets the form’s list of conditions. 

Corporations with an income tax liability exceeding $1,000 for the year need to make a declaration of estimated income tax and pay estimated taxes by the 15th day of the fourth, sixth, ninth, and 12th months of the fiscal year. All estimated tax payments must be made electronically, either through your Business Account or eForm 500ES

Learn more about Virginia’s corporate income tax on the Department of Taxation website

Sales and use tax

If your business sells tangible personal property or certain taxable services, you may be required to collect retail sales tax at the point of purchase and submit it to the Department of Taxation. Companies that purchase products out of state for use in Virginia must also pay use tax if the seller doesn’t charge Virginia sales tax on the transaction.  

The state’s sales and use tax rate is 5.3% in 2024. However, personal hygiene products and food are taxed at a reduced rate of 1%. 

A full list of the items that are exempt from the state sales tax is available in the tax code of Virginia. If you’re unsure whether your business should collect sales tax in the state, consult your tax advisor. 

How to file and pay

Before your business can collect sales tax in Virginia, you must register with the state (or update your registration, if your business is already registered) through your Business Account. Once you’ve completed the process, you’ll receive a sales tax certificate (Form ST-4) and sales tax account number from the Department of Taxation.

All sellers are assigned a quarterly or monthly filing frequency, depending on their estimated sales tax liability. No matter how often you’re required to file your sales tax returns (Form ST-9), your returns are due by the 20th day of the month following the end of the tax period. So if you’re a monthly filer, for example, your taxes for August are due on September 20. 

Note that tax returns are due even if you didn’t make any sales or collect any taxes during the filing period. 

Submit all tax returns and tax payments electronically via the appropriate eForm, your Business Account, or Web Upload. If you can’t file your returns electronically, you must submit an electronic filing waiver request to file your returns by mail instead. 

Visit the Department of Taxation website to learn more about the Virginia sales and use tax. 

Withholding tax

Companies with employees who perform services in Virginia must withhold a portion of income from each of these employee’s paychecks and pay it to the state. These taxes are often known as withholding taxes or employment taxes

Withholding rates for employees vary because these rates are determined by an employee’s withholding allowances and wages. In 2024, withholding tax rates in Virginia range from 2% to 5.75%. 

How to file and pay

To collect withholding taxes, first you’ll need to register as an employer through your Business Account.

After that, you’ll be assigned a quarterly, monthly, or semi-weekly filing frequency. Use the chart below to see what your filing requirements and due dates would look like based on your estimated withholding tax liability.

Filing frequencyEstimated monthly tax liabilityFiling due datesTax eForms to use
QuarterlyLess than $100Last day of the month following the end of each calendar quarter (April 30, July 31, October 31, January 31)eForm VA-5
MonthlyBetween $100 and $1,000The 25th of the following montheForm VA-5
Semi-weekly$1,000 or moreThe Wednesday or Friday after payday once your withholding tax liability exceeds $500eForm VA-15 and eForm VA-16 (due by the end of the month following the end of the quarter)

Instead of the eForms listed in the chart above, you may file your withholding taxes via Web Upload or your Business Account. Keep in mind that withholding tax returns are due each filing period, even if you have no taxes to report. 

All employers must also submit Form VA-6, along with their copies of Forms W-2 and 1099, by January 31 each year to reconcile their annual tax withholdings. These tax forms should be submitted via eForm or Web Upload. 

If needed, you can find more information on the Virginia withholding tax by going to the Department of Taxation website.

Unemployment insurance tax

Unemployment insurance (UI) taxes cover unemployment benefits for eligible workers who lose their jobs through no fault of their own. In Virginia, employers pay UI taxes if they have at least one employee for 20 or more weeks in a calendar year or if they pay $1,500 or more in wages in any calendar quarter. 

The unemployment tax base rate in Virginia ranges from 0.1% to 6.2% on the first $8,000 that each employee earns. New employers are assigned a 2.5% rate, plus add-ons, until they become eligible for a calculated rate. 

How to file and pay

If you haven’t registered your business as an employer yet, you’ll need to do so through your Virginia Business Account. Once your business has been registered, you’ll receive a new employer packet with the tax reports you’ll need to file as well as additional information about your UI reporting requirements. 

All Virginia employers file wage reports and pay unemployment taxes via eForm, Web Upload, or their Business Account. If you’re unable to file electronically, submit an electronic filing waiver request so you can file by mail instead. Unemployment insurance taxes are due by April 30, July 31, October 31, and January 31.

Further details on the Virginia unemployment insurance tax can be found on the Virginia Employment Commission website

In addition to state taxes, some counties and cities in Virginia charge local taxes on businesses within their jurisdictions.

For instance, many companies are charged a Business, Professional and Occupational License (BPOL) tax based on their gross receipts, business activities, and location. 

Your business may be assessed a local sales tax as well. The state of Virginia has set the maximum local sales tax rate at 0.7%, resulting in an average combined state and local sales tax rate of 5.75%. You can find your company’s sales tax rate using the state’s sales tax rate lookup tool.

Virginia’s Department of Taxation levies taxes on certain industries, business activities, and products as well. These other taxes include: 

  • Apple Excise Tax
  • Bank Franchise Tax
  • Cigarette and Tobacco Products Tax
  • Cattle Assessment 
  • Corn Assessment
  • Cotton Assessment
  • Egg Excise Tax
  • Forest Products Tax
  • Motor Vehicle Wholesale Fuel Sales Tax
  • Peanut Excise Tax
  • Sheep Assessment 
  • Small Grains Assessment 
  • Soft Drink Excise Tax
  • Soybean Assessment 

Since the taxes in this section are dependent on factors like your business location, activities, and industry, it’s best to talk with your tax advisor or accountant for a comprehensive look at your Virginia tax obligations. Working with a tax professional also helps ensure your taxes are paid in full and on time and that you’re able to take advantage of all the tax deductions and credits available to you. 

Virginia business tax breakdown by business type

To help you keep track of which taxes your business is responsible for, below we’ve included a breakdown of business taxes by business entity. 

Keep in mind that all pass-through entities don’t pay federal income taxes at the entity level. Their business owners pay taxes on their share of the company’s income through their personal returns. 

Business typePersonal income taxPass-through entity tax returnElective pass-through entity taxCorporate income taxSales and use taxWithholding taxUnemployment insurance taxFederal income taxes
C corporationNo No No YesYes, if applicableYes, if you hire employeesYes, if you hire employeesYes
S corporationYes (pass-through), if not paying the PTETYes, if not making the PTET electionYes, if it makes the PTET electionNoYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
LLCYes (pass-through), if not paying the PTETDepends on how it’s structuredYes, if it makes the PTET electionDepends on how it’s structuredYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
Partnership Yes (pass-through), if not paying the PTETYes, if not making the PTET electionYes, if it makes the PTET electionNoYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
Sole proprietorshipYes (pass-through)No No NoYes, if applicableYes, if you hire employeesYes, if you hire employeesYes, by way of individual income tax

File your Virginia small business taxes with Gusto

Although keeping up with your state tax obligations will help you stay in business, it’s not your only responsibility as a small business owner. Consider using Gusto’s powerful payroll software to help you file your taxes on time and reduce your admin work in the process. 

Our platform automatically files your payroll taxes in each state every time you run payroll. You’ll also get notified of any tax law changes that are relevant to your business, so you’ll always have the most up-to-date guidelines—no research required.

Learn how Gusto can help you save time, money, and effort in running your business by creating an account today. 

Feli Oliveros Feli Oliveros is a freelance finance and business writer with experience covering personal and small business finance. In 2015 she graduated from UCLA, where she earned her bachelor’s degree in English and minored in Anthropology.
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