Virginia small business taxes

Pay Your Virginia Small Business Taxes

Most small businesses are required to pay state taxes. Learn about your Virginia business taxes and how we can help you stay compliant.

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Paying taxes is part of staying legally compliant and maintaining your good standing. The taxes you may owe depend on your business’s structure, location, and activities. 

In this short guide to business taxes in Virginia, we’ll cover the different taxes your business may be subject to and how to file them. 

With our Worry-Free Compliance Service, we’ll organize and store your important business documents on a personalized dashboard. You can access what you need with the click of a button.

If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses.

Step 1: Establish your Virginia business’s corporate income tax obligations

A business’s tax rate will vary based on its entity structure. Virginia corporations need to file and pay an annual income tax return. All filings and payments need to be done electronically using an approved software product or the Virginia Department of Taxation’s Business iFile system. The Department provides a list of acceptable software products. 

For corporations in Virginia, the business tax rate is 6% of taxable income. The filing deadline depends on whether your business uses a calendar or fiscal taxable year or if it’s a nonprofit:

  • Calendar year—April 15
  • Fiscal year—15th day of the 4th month following the close of your taxable year
  • Nonprofit corporations—15th day of the 6th month following the close of your taxable year

Even if your corporation doesn’t owe any taxes or has no income to report, it still has to file an income tax return using Form-500. If you don’t file by the due date (or extended due date), you’ll owe a 30% late filing penalty fee. There’s an additional penalty of 6% per month if you don’t include your tax payment with the return. 

Pass-Through Entity Income Taxation

Pass-through entities are separate, distinct entities where the owners report their share of the business’s income (and losses) on their personal tax returns. Some examples of pass-through entities include S corporations, limited liability companies (LLCs), limited and general partnerships (LPs/GPs), and limited liability partnerships (LLPs). 

Every pass-through entity that conducts business or receives income in Virginia is required to file an annual Virginia income tax return. However, the income tax due is calculated based on the owner’s tax bracket. The income tax return is due by the 15th day of the 4th month following the close of the business’s taxable year. Electronic filings and payments are required unless the business receives a waiver. 

Step 2: Determine your Virginia business’s employment taxes

Most Virginia employers who pay wages to at least one employee in the state are required to deduct and withhold state income tax from the employee’s wages. This is called a withholding tax and employers must register for it. Even if no withholding tax is owed by the employee, employers must still file the withholding return.

The filing and withholding tax due dates vary based on how much the employer withholds:

  • Employers withholding less than $100 per month must file and pay quarterly
  • You must file and pay monthly if you’re an Employer withholding more than $100 but less than $1,000
  • Employers withholding $1,000 or more must file and pay semi-weekly

Virginia’s income tax withholding rate depends on many different factors about the employee. The Department of Taxation has a useful Employer Withholding Calculator on their website.  Employers must submit returns and payments online using the Department of Taxation’s Business iFile system. 

Step 3: Establish your Virginia business’s additional state tax obligations

There are also a number of other state-levied taxes your Virginia business might need to pay.

Sales Taxes

Generally, all sales, leases, and rentals of tangible personal property (basically anything you can move), accommodations, and certain services are subject to Virginia sales tax. There are exemptions and exceptions to this general rule, which you can find on the Department of Taxation’s website. 

Sales tax rates do vary by location. However, most locations in Virginia impose a 5.3% rate. Regardless of the location, there’s a reduced rate of 2.5% for the sale of food for home consumption (think grocery items) and some personal hygiene products. 

Depending on your sales tax liability, the Department of Taxation will decide whether you file quarterly or monthly. Returns and payments are due on the 20th of the month following the close of the filing period. Even if you don’t owe any sales tax, you still need to file a return. 

You must file and pay your sales tax electronically or get a waiver to file in person or via mail.

Franchise/Privilege Tax

Some states have a franchise tax, which is basically a tax on the privilege of doing business in that state. Virginia doesn’t have a franchise tax for small businesses. 

Unemployment Taxes

The Virginia Employment Commission (VEC) imposes the unemployment insurance tax on employers. This tax provides temporary compensation for individuals who lose their employment through no fault of their own. 

Tax rates for employers are assigned each calendar year and vary based on the employer’s situation. The rate can be anywhere from .1% to 6.2%. For example, new Virginia employers have an initial rate of 2.5%. Tax is due starting on the first $8,000 each employee earns per year. 

As an employer, you’re required by law to file a report and pay unemployment taxes on a quarterly basis.There are several different online filing methods you can use to file and pay your unemployment taxes, including Business iFile. The one you choose will depend on your needs. 

Excise Taxes

An excise tax is a separate tax on certain products. For example, Virginia has a peanut, egg, soft drink, and apple excise tax. This is where small business taxes can get very specific. Depending on what your business does, you may owe more or fewer taxes. 

Step 4: Prepare to file and pay your Virginia business taxes

Virginia’s main taxing agency is the Department of Taxation. They strongly encourage, and in most instances require, electronic tax filing and payment. There are several different online filing options that they accept, so choose the one that works best for you. The main electronic filing option is the Business iFile system. 

To register for Business iFile, you need the following:

  • Your business’s 15 digit tax account number
  • The zip code of your business mailing address
  • Total amount due on the most recently filed tax return

To file your taxes, you need to have your business documents in order, which means keeping track of your business’s income and expenses is incredibly important. You may need to gather anything from receipts to previous tax returns to legal documents. We have different products and services that can help you organize the paperwork and records you’ll need to prepare your taxes. For example, with our ZenBusiness Money App, you can track your invoices and manage your business finances right at your fingertips. Read more about this service below.

Not sure how to stay compliant? Learn more about legal compliance for small business owners.

Do I need an accountant?

Most small business owners do need professional accounting help to do their taxes. A professional will make sure your taxes are done correctly and show you how to file small business taxes in Virginia. There are serious consequences, such as penalties and fines, for missing filing deadlines or making erroneous calculations on your returns. Save yourself the hassle and bring in an accountant or other tax professional to do the work for you.

How we can help

We know taxes can seem overwhelming at first, but with the right tools, information, and some help from a professional, you’ll get them done. We’re here to provide you with resources and services to make tax filing more manageable. Our ZenBusiness Money App that allows you to:

  • Track your payments
  • Add taxes as a line item on your invoices
  • Organize your finances

If your small business is still in the formation phase, our Virginia LLC Formation Services or Corporation Formation Services can help you get started.

You can also take advantage of our blogs, how-to videos, and downloadable guides that are full of information on how to start, run, and grow your small business. 

Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

FAQs

  • How much can a Virginia small business make before paying taxes?

    There’s no minimum amount of income that escapes taxation in Virginia. That being said, not all income is taxable. An accountant can help you determine what income is subject to tax, what isn’t, and what credits and deductions are available to reduce your tax liability (which can potentially be zero).

  • What percentage does a Virginia small business pay in taxes?

    Providing a percentage is nearly impossible since taxes vary from business to business. The structure, location, and transaction types of your business will determine what taxes you need to pay.

  • How does a Virginia small business pay taxes?

    Virginia encourages business owners to pay their taxes online using the different electronic filing options available. In most cases, you must file returns and make payments online or else apply for a waiver to submit via mail.

  • Do I have to file taxes for my small business in Virginia?

    It’s highly likely that your business will have to file taxes in Virginia. Whether it’s an income tax or sales tax, most small businesses must file returns and pay taxes to remain legally compliant.

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