Virginia LLC Taxes

If you're interested in forming a Virginia limited liability company (LLC), you’ll need to ensure that you understand the state's tax requirements.

This guide to Virginia LLC taxes provides a detailed overview of the various local, state, and federal tax obligations for LLCs, as well as the necessary steps on how and where to file them properly.

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

How Is an LLC Taxed in Virginia?

Taxation in Virginia isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.

While LLCs typically benefit from pass-through taxation by default (in which revenue passes directly to each member), they can elect to be taxed as one of the following:

• C Corporations: The LLC is treated as a separate entity to its owners, paying taxes on its total profit while the owners also pay personal income taxes on any distributions they take.
• S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay self-employment tax or FICA tax on them.

The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Virginia to help you ensure your LLC navigates them effectively.

Virginia Local Taxes

Some tax regulations vary by locality in Virginia, meaning that the taxes you encounter will depend on where your business is located. 

To help you prepare, we have provided a breakdown of the different local taxes that your LLC may come across.

Local Sales and Use Taxes

Local retail sales and use tax rates range from 0% to 2.7%, depending on the region or city of your business. This local tax applies to businesses that sell, lease, rent, or use tangible personal property or certain taxable services in the state.

So, if your LLC is connected to Virginia, either by having a physical presence or by exceeding the economic threshold, you will need to register with, collect, and remit sales and use tax to the Virginia Department of Taxation (Virginia Tax).

Note that the total sales tax rate is the sum of the state tax rate (5.3%) and local tax rate. For example, James City County, Williamsburg, and York County have a local tax rate of 2.7% on top of the state rate, making the total retail sales tax rate of 8%.

If you sell certain items and services, such as food for home consumption, prescription drugs, certain agricultural products, educational services, and nonprofit activities, you are exempt from local sales and use tax in Virginia. 

Note: You can find the current sales tax rates for each locality by downloading sales tax rates and locality codes provided by the Virginia Department of Taxation. 

Property Taxes

If you own or use real estate or certain types of personal property, you may be subject to local property tax. The property tax is imposed on the value of real estate and certain types of personal property, such as vehicles, boats, and aircraft. The property tax is required at the local level, which means it is administered by cities, counties, and towns in the state.

So, if you're considering starting a business and purchasing property, you must pay property tax to the localities where your property is located.  

To find out how much you owe, your local assessor will first estimate the current value of your property based on the market. Then, they will multiply that value by the tax rate set by your locality and provide you the amount of your property tax that you need to file.

You will usually pay the property tax in two installments, one in June and one in December. However, the due dates and payment methods are different in each locality. 

Note: To find your city or county's website to look up rates, due dates, payment information, and contact information, use the Virginia Tax’s Property Tax Resources Map.

Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant.

Virginia State Taxes

Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in Virginia.

State Income Tax

The state income tax applies to personal income, including income from businesses like sole proprietorships, partnerships, and LLCs treated as pass-through entities.

The tax rates are graduated, which means your tax liability increases as your income level increases. The current breakdown of the state income taxes includes the following:

• 2% for income up to $3,000
• 3% for income between $3,001 and $5,000
• 5% for income between $5,001 and $17,000
• 5.75% for income over $17,000

Keep in mind that your LLC will not actually pay Virginia income tax as a pass-through entity; this is done by individual members.

Corporate Income Tax

If you choose to elect corporate taxation for your LLC, you'll be subject to paying Virginia’s flat 6% corporate income tax on your taxable income.

However, the Virginia Tax will also require your members to pay tax on any dividends or distributions they receive from the LLC. This is known as double taxation since the same revenue stream is effectively taxed twice. It's important to consider this when deciding which taxation method is best for your LLC and its members. 

State Sales Tax

Virginia imposes a general retail sales and use tax of 5.3%, in addition to the local retail sales and use tax. So, if you’re an LLC that sells, leases, distributes, or rents tangible personal property to customers in the state or otherwise meets the definition of a “dealer” and has “sufficient activity” in Virginia, you must register to collect and pay sales tax in the state. 

If you're also selling aircraft, watercraft, and motor vehicles, you should note that their tax rates are not the same as the general sales and use tax rates that apply to most other tangible personal property in Virginia. These rates are fixed and collected by the state and they don’t vary by locality. For more information about the motor vehicle sales tax, refer to the Virginia Department of Motor Vehicles. 

Furthermore, if you’re selling food for home consumption (e.g. grocery items) and certain essential personal hygiene items, you’re taxed at a fixed statewide rate of 1%.

Note: You must obtain a Sales Tax Certificate for your LLC, which you can print through your Business Online Services Account. To register for an account, you must enroll via Virginia Tax’s Business iFile. 

Consumer Use Tax

If you run an LLC and buy taxable items from out-of-state sellers who don't collect Virginia sales tax, or if you purchase tax-free goods but use them for a taxable purpose, you're required to pay consumer use tax at the state level. 

For example, if your LLC buys office supplies from an online retailer that does not charge Virginia sales tax, you must report and pay the consumer use tax on those purchases. 

Similarly, if your LLC buys materials for resale and then uses some of them for your own operations, you must report and pay the consumer use tax on the materials used.

The consumer’s use tax rate is the same as the sales tax rate, which is 5.3% (6% in Northern Virginia and Hampton Roads). You need to pay the consumer use tax before the 20th day of the month after you make the purchase.

Insurance Premiums License Tax

Insurance companies or surplus line brokerages licensed by the Virginia State Corporation Commission’s Bureau of Insurance must pay the insurance premiums license tax. 

This state-level tax is based on the gross amount of premiums you write in Virginia and the type of insurance you offer, such as life, property, casualty, health, and more.

Your LLC is subject to the insurance premiums license tax if you are: 

• Engaged in the business of making contracts of insurance 
• Authorized to solicit, negotiate, and place insurance with eligible or approved surplus line insurers

You must register your LLC with Virginia Tax and pay an initial declaration of estimated insurance premiums license tax before the Bureau of Insurance issues the license. 

Note: To find out more about the premiums license tax for your LLC, visit the Insurance Premiums License Tax section on Virginia Tax’s website. 

Federal Taxes

Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below are some of the main types your LLC may be required to pay for federal tax purposes:

Income Tax

By default, the Internal Revenue Service (IRS) will not treat single and multi-member LLCs as separate entities from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual tax returns and pay federal income tax on them at the personal rate of your tax bracket.

Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied in different ways.

Self-Employment Tax

In addition to income tax, members of single- and multi-member LLCs will need to pay federal self-employment taxes on the share of the business’s profits that they report on their personal tax return at the end of the year.

This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.

Employer Taxes

If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.

Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.

Excise Tax

If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.

Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.

How to File LLC Taxes in Virginia

Below, we’ve outlined the general process an LLC in Virginia will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in. 

Step 1: Gather Your Documentation

To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:

• You and your partner’s Social Security number, date of birth, and residential address
• The previous year’s tax returns
• Your LLC’s Federal Tax Identification Number or Employer Identification Number (EIN)

Then, you’ll need to gather all documentation related to your business’s income, such as:

• Invoices you’ve issued
• Sales transaction logs
• Electronic payment reports from services like PayPal or Stripe

Lastly, assemble all records pertaining to your business expenses, which should cover:

• Lease receipts for your business premises
• Bills for utilities
• Records of office supplies purchases
• Documentation of business-related travel
• Payroll records for employees

Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return. 

Step 2: Find The Right Tax Forms

Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:

• Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
• Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
• C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
• S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day.

Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.

With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.

Step 3: File Your Taxes

The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:

• Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
• State Tax Returns: You will file state tax returns and pay taxes with the Virginia Department of Taxation (Virginia Tax) via eForms, Business Online Services Account, or web upload. 
• Local Tax Returns: This can depend on the tax in question, meaning that you will need to have a look at your local county’s and/or municipality’s tax office(s) in order to determine the exact procedure you will need to follow in order to file your local taxes. 

Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form. 

For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

Keep Your Virginia LLC Compliant

While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant. 

Virginia LLC Annual Registration Fee

Virginia does not require LLCs to file an annual report. Having said that, the state does require you to pay an annual registration fee of $50 in order to keep your LLC active and in good standing with the state.

The annual registration fee is due by the last day of the month in which your LLC was formed. For example, if your LLC was formed on March 15, 2023, your annual registration fee would be due by March 31, 2024.

You can pay the annual registration fee online through the Clerk’s Information System (CIS) or by mail using the Annual Registration Fee Payment Form. 

If you fail to pay the annual registration fee, your LLC will be automatically terminated by the SCC. You will then have to file a Reinstatement Application and pay a reinstatement fee of $100 – in addition to the past-due annual registration fees – in order to restore your LLC’s active status. 

Licensure and Tax Requirements

In Virginia, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:

• Sales Tax Licenses: If your LLC sells, leases, distributes, or rents tangible personal property to customers in Virginia, you will need to register for a sales tax certificate with the Virginia Department of Taxation. 
• Professional Licenses: If your LLC provides specific services that require a license, certification, or other legal authorization, such as accounting, architecture, engineering, law, medicine, etc., you must register as a professional LLC (PLLC) with the SCC.
• Environmental Permits: LLCs that engage in activities that create air emissions, water withdrawal, wastewater and stormwater discharges, or impacts to streams or wetlands must obtain the appropriate environmental permits from the Virginia Department of Environmental Quality (DEQ).

Note: For a full list of the statewide licenses and permits your LLC may need, refer to the Virginia Licenses website. You can also find links to the relevant agencies and departments that issue these licenses.

Virginia LLC Taxes FAQs