Virginia Sales Tax Nexus
Virginia Risk Profile
The Trigger: $100,000 in annual gross receipts.
(Note: Effective July 1, 2022, Virginia repealed the “200 transactions” rule. Nexus is now triggered strictly by the $100,000 revenue threshold in the previous or current calendar year.)
Physical Nexus: Standard triggers include offices, inventory (including FBA), or employees. Virginia also considers “regular solicitation” of sales to be a physical nexus trigger if it involves 12 or more visits to the state per year by representatives, regardless of sales volume.
Effective Date: July 1, 2019.
Look-back Exposure: Generally 3 years. Virginia is an active participant in data-sharing programs and proactively identifies sellers who have physical inventory in the state but have not registered.
Danger Level: MODERATE (The Income Tax Factor)
Virginia’s sales tax is relatively straightforward, but the state’s income tax standards are aggressive. Virginia does not require physical presence for corporate income tax; simply having income sourced from Virginia can trigger a filing requirement even for remote businesses.
The Trap: The Marketplace Threshold
While marketplaces collect tax for you, your marketplace sales must be included when calculating the $100,000 threshold. If your combined direct and marketplace sales exceed $100,000, you are required to register and collect tax on all direct sales, even if those sales alone do not meet the threshold.
Virginia State Tax Nexus Summary
Sales Tax Nexus
Virginia requires remote sellers and marketplace facilitators to register and collect sales tax if they meet economic nexus criteria. You establish nexus if your business meets either of the following thresholds in the previous or current calendar year:
- Remote Sellers: More than $100,000 in gross revenue from Virginia retail sales OR 200 or more separate transactions.
- Marketplace Facilitators: More than $100,000 in gross revenue OR 200 or more separate transactions facilitated for third-party sellers.
If you sell through both your own website and a marketplace, your marketplace sales count toward these thresholds. If the combined total exceeds the limit, you must register and collect tax on your direct (non-marketplace) sales.
Income Tax Nexus
Virginia’s income tax nexus standard is not strictly based on physical presence. A corporation has income tax nexus in Virginia if it has income from Virginia sources, which can include:
- Ownership of real or tangible personal property in Virginia.
- A business, trade, profession, or occupation carried on in Virginia.
- Sales of tangible personal property delivered into Virginia.
If a corporation has income from Virginia sources, it must file a Virginia income tax return, even if it does not have a physical office in the state. Certain protections under Public Law 86-272 may apply to businesses only soliciting orders for tangible property.
Exemptions & Special Rates
Virginia provides specific exemptions and reduced rates for certain categories:
- Groceries: The state tax on groceries was eliminated in 2023, but these items remain subject to a 1% local option tax.
- Prescription Drugs: Generally exempt from sales and use tax.
- Services: Most professional services are exempt, but taxability for digital products and SaaS varies based on the transaction type.
Conclusion
Virginia’s tax laws require careful monitoring of both revenue and transaction counts. If you are shipping goods or providing services to Virginia customers, we recommend a nexus review to ensure you are compliant with both sales tax and corporate income tax requirements.
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