Did you know that businesses and individuals located in the Commonwealth of Virginia that don’t pay Virginia retail sales tax when they make on-line purchases of tangible personal property for use in Virginia are responsible for paying Consumer Use Tax?
What is Consumer Use tax?
Consumer Use tax is a tax imposed on the storage, use, or consumption of tangible personal property within Virginia for items purchased from dealers outside of Virginia. The primary purpose of the tax is to prevent Virginia sales tax from placing Virginia merchants at a competitive disadvantage with out-of-state retailers.
Who is responsible for paying Consumer Use tax?
Businesses located in Virginia and individuals that reside in Virginia that make purchases from an out-of-state source and do not pay the Virginia retail sales tax at the time of purchase are responsible for paying consumer use tax, however, if the total amount of purchases were $100 or less for the entire year, and only from out-of-state mail order catalogs you do not have to pay the use tax. If the purchases were for any amount from sources other than mail order catalogs, then you must report these purchases and pay consumers use tax on the total amount of all untaxed purchases from all sources made during the calendar year. Nonprescription drugs and proprietary medicines purchased for the cure, mitigation, treatment, or prevention of disease in human beings are exempt from consumer use tax.
What is the Consumer Use tax rate?
Effective July 1, 2013, the consumer use tax rates are:
- If you are located in Northern Virginia, the rate is 6%
- If you are located in Hampton Roads, the rate is 6%
- If you are located elsewhere in Virginia, the rate is 5.3%
The use tax is computed on the cost price of the property, which is the total amount for which the property was purchased including any services that are a part of the purchase. Cost price does not include separately stated shipping or delivery charges but it does include a shipping and handling charge if listed as a combined item on the sales invoice.
How do you pay Consumer Use tax?
For individuals, you can report and pay this tax on Schedule ADJ with Form 760 Individual Income Tax Return, or Schedule 760 PY ADJ with Form 760PY for part-year Virginia residents.
For businesses, including partnerships and sole proprietorships, report such purchases on Form ST-7 Consumer’s Use Tax Return or Form ST-9 Retail Sales and Use Tax Return. The return is due on or before the 20th day of the month following the period in which the use tax liability was incurred.