VIRGINIA CONSUMER USE TAX

VIRGINIA CONSUMER USE TAX
Small Business Owners … Don’t Get Caught in Non-Compliance

OK, Virginia small business owners … you know all about paying sales taxes, because anything requiring that tax to be collected is done so by Virginia-based sellers/vendors you deal with. Likewise, you are familiar with the sales tax because you are required to collect it from buyers of your goods that are taxable.

Now let’s add another dimension to the world of taxable events … the consumer use tax. Generally, the consumer use tax becomes an issue when you rent, lease or buy tangible items that you didn’t pay sales tax on at the time of purchase. Practically speaking, this typically occurs when you buy something outside the state via the internet, by phone, through mail order or even an out-of-state purchase that you bring back to Virginia to use here.

Note: We’re not talking about “double taxation” on your purchases. They are subject to either sales tax or use tax, not both. Items exempt from sales tax in Virginia are also exempt from consumer’s use tax.

So for example, let’s say you order printer ink cartridges through a website of a company based in Texas and are not charged sales tax. You are required to pay use tax at the same rates as the Virginia sales tax. Sales tax rates in Virginia currently are:

• 6% in Northern Virginia and Hampton Roads regions
• 5.3% anywhere else in Virginia
• 2.5% on eligible food items (More information on eligible food items)

Of course, there are exemptions. Rather than try to list those in this article, why not give us a call to discuss the specifics of your purchases and whether they are taxable or exempt.

The use tax is due for calendar-year filers by May 1. If you are a fiscal-year filer, your due date is the 15^th day of the 4^th month after the close of your taxable year.

Yes, there are penalties and interest charged for non-payment, underpayment or late payments. Click here for more info Penalty and interest … or better yet give us a call or drop an email. We’ll respond promptly.

Summary

Small business owners especially need to be mindful of the need to comply with the requirements to declare purchases subject to use tax and to remit the applicable taxes.

Keep in mind that the Virginia Department of Taxation routinely conducts audits to enforce compliance. That activity is likely to become even more aggressive in this age of borderless commerce that is particularly fueled by the internet. The state has a vested interest in ensuring that businesses of all sizes pay either the sales tax or use tax on purchases that are not exempt.

As ever, we stand ready to help. A phone call or email to Pearson & Co. is all it takes.