Virginia Business Taxes at a Glance
Virginia's state income tax is familiar, but much of a Virginia business's tax work happens at the local level. Cities and counties levy license taxes on gross receipts, taxes on business equipment, and in many cases taxes on machinery and tools. Federal contractors, technology firms, and data center operators add their own accounting needs. BOMCAS helps Virginia businesses and individuals keep up with both the state and the localities.
Individual Income Tax
Residents of Virginia pay tax on all their income under graduated brackets, while nonresidents pay only on income from Virginia sources. Because the top rate starts at a fairly low level of income, most working households pay much of their tax at the top rate. Virginia starts from federal adjusted gross income with its own additions, subtractions, and conformity decisions, which the General Assembly makes each year.
Virginia has reciprocal agreements for wages with the District of Columbia, Kentucky, Maryland, Pennsylvania, and West Virginia, with conditions for some states. Many Northern Virginia residents work in D.C. or Maryland, and those wages are generally taxed only by Virginia. We prepare Virginia returns and part-year and nonresident filings.
Local BPOL Tax
Most Virginia cities, counties, and towns impose a Business, Professional, and Occupational License (BPOL) tax. It is based on gross receipts, not profit, and the rate depends on the type of business, such as retail, contractors, professional services, or repair. Localities may set thresholds below which only a flat fee or no tax is due. Businesses with offices in more than one locality must assign receipts to each one.
Because BPOL varies by locality, a business moving from one county to another can see a different tax. We help businesses register with the commissioner of the revenue, classify their activities, assign receipts, and file each year.
Business Personal Property and Machinery and Tools Taxes
Virginia localities also tax business tangible personal property, such as furniture, computers, and equipment, based on returns businesses file each year with the commissioner of the revenue. Manufacturers and certain other businesses pay a separate machinery and tools tax on production equipment. Individuals pay personal property tax on vehicles, often with partial state relief.
We maintain fixed asset registers by location so property returns match what the business actually owns and federal depreciation records.
Corporate Income Tax and PTET
Corporations doing business in Virginia pay corporate income tax on apportioned income, and certain industries use special apportionment rules. Partnerships and S corporations file Virginia returns and may need to withhold for nonresident owners.
Virginia's elective pass-through entity tax (PTET) lets qualifying entities pay tax at the entity level, with a refundable credit for owners. It was set to expire but has been extended through tax years beginning before January 1, 2027. At the same time, Virginia's credit for PTET paid to other states expired for 2026, which affects Virginia residents who own interests in multistate pass-throughs. We review both changes each year.
Retail Sales and Use Tax
Virginia's sales and use tax combines a state rate with a local rate, and some regions, such as Northern Virginia, Hampton Roads, Central Virginia, and the Historic Triangle, add regional taxes. Groceries and certain essential personal hygiene products are taxed at a reduced rate. Businesses must register with Virginia Tax and file regularly.
Data center operators may qualify for a sales tax exemption on qualifying equipment, with requirements for investment and jobs. We help businesses register, prepare returns, track regional rates, and document exemptions.
Federal Contractors
Northern Virginia has one of the largest concentrations of federal contractors in the country. Contractors need:
- Timekeeping and labor distribution that supports federal contract requirements
- Indirect cost pools, such as fringe, overhead, and general and administrative expenses
- Job costing by contract and task order
- BPOL treatment of contract receipts by locality
We provide bookkeeping and financial reporting set up for contracting, while your contracts team handles compliance with the government.
Payroll and Virginia Withholding
Virginia employers withhold state income tax and report unemployment insurance to the Virginia Employment Commission. Employees who work in Virginia but live in reciprocal states may file an exemption form. Employers with staff in D.C., Maryland, or other states must withhold for each state correctly. We run payroll, file quarterly reports, and reconcile to the books.
Defense, Data Centers, Ports, and Agriculture
- Government contracting and consulting: cost accounting and BPOL by locality
- Technology and data centers: sales tax exemptions and large fixed asset records
- Agriculture and wineries: farm reporting and alcohol-related licensing records
- Shipbuilding and defense in Hampton Roads: inventory, payroll, and contracting
- Real estate: recordation taxes and rental accounting
Moving to or From Virginia
Many people move between Virginia, D.C., and Maryland. Part-year returns are needed in the year of the move, and both places may have a claim on income from different parts of the year. We help clients organize the move and file correctly.
Books for State and Locality Filings
Virginia bookkeeping should track gross receipts by locality for BPOL, fixed assets by location for property returns, and sales by region for sales tax. We set up the chart of accounts and month-end close to provide each figure.
Get in Touch With BOMCAS About Virginia
Federal contractors, businesses filing BPOL in several localities, and owners deciding on the PTET election can contact BOMCAS for a remote review. City-level pages for Virginia, organized by service, will be published under this section. Return to the BOMCAS home page or see our United States services. This page gives general information only and does not apply the rules to your facts.
Talk to BOMCAS About Your Virginia Taxes
Have a question about your Virginia filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.