Virginia Corporate Income Tax: Everything You Need to Know

The Virginia corporate income tax is one of the lowest in the country, making this a very business-friendly state.3 min read

The Virginia corporate income tax is one of the lowest in the country, making this a very business-friendly state. The stable tax structures offered by this state has made it a popular home for businesses from around the country.

All About Virginia Taxes

Virginia is well-known for maintaining fiscal practices that are more conservative than those in other states. The tax structure in Virginia is very stable, and it also provides some of the fairest tax rates in the country. Virginia's General Assembly has consistently worked to keep tax rates competitive across multiple industries and to remove tax difficulties.

Virginia's corporate income tax rate has stayed the same since 1972 and is one of the lowest in the country. Another benefit of Virginia's corporate taxes is that items taxed by the state are generally not taxed again locally, with the only exception being sales and use taxes.

Taxable corporate income in Virginia is subject to a 6 percent tax rate. A three-part formula is used to decide what counts as taxable income. This formula takes into account issues such as:

  1. Payroll.
  2. Property.
  3. Sales.

Corporations in Virginia can lower their tax burden by taking advantage of several available credits:

  1. Day care investment tax credit.
  2. Major business facility job tax credit.
  3. Recycling equipment tax credit.
  4. Worker retraining tax credit.

Different Virginia Taxes and Fees

There are several taxes and fees that apply to Virginia corporations outside of the corporate income tax. For example, if your corporation can operate in this state, you must pay an annual registration fee. This fee, based on your corporation's shares, can be as low as $100 and as high as $1,700. If your company is a non-stock corporation formed after 1970, your annual registration fee will be $25.

Virginia requires a state withholding tax for employers that must withhold taxes from payments based on federal law. If federal law requires your corporation to file a withholding return, you must complete three steps in Virginia:

  1. Register for the withholding tax.
  2. File a withholding tax return.
  3. Pay the required taxes to the Virginia Department of Taxation.

If your company has more than three employees, you must fulfill one of three requirements:

  1. Purchase a worker's compensation policy from a private insurer.
  2. Obtain a self-insurance certificate from the Virginia Workers' Compensation Commission.
  3. Possess membership in a licensed self-insurance association.

There are certain circumstances where your business will need to pay an unemployment insurance tax. This tax applies if you pay wages over $1,500 in a quarter or if you have one or more employees for 20 weeks in a calendar year. The unemployment tax rate can range between 0.29 and 6.39 percent. This tax applies to the first $8,000 earned by every employee.

There is a 5 percent sales and use tax in Virginia, and the state returns 1 percent of these taxes to local jurisdictions. Sales taxes apply to both retails sales and tangible personal property leases, unless these sales are exempt from the tax. Sellers that do not automatically collect sales taxes must pay a use tax on purchase. Some purchase made by distributors and manufacturers are exempt from these taxes. Lastly, Virginia applies a utility consumption tax based on electricity and gas usage.

Applying for a Tax Extension

Corporate tax returns in Virginia are due on the 15th day of the fourth month after a tax year's end. When filing based on the calendar year, your return is due on April 15. Tax extensions are available for corporations that are unable to meet this deadline.

Virginia provides automatic tax extensions, meaning you will not need to file an application. Corporations receive an automatic six-month state extension. Some corporations will receive a deadline that is 30 days after a federal extension deadline if this date is later than the state deadline. When a corporation gets approved for a federal extension, it will usually need to file its return by Sept. 15.