State Incentives

Sales & Use Tax Exemptions

The sales and use tax is imposed at the state and local levels in Virginia. The combined state and local Virginia Retail Sales and Use Tax rate is 5.0 percent (4.0 percent state and 1.0 percent local). A seller is subject to a sales tax imposed on gross receipts derived from retail sales or leases of taxable tangible personal property unless the retail sales or leases are specifically exempt by law. When a seller does not collect the sales tax from the purchaser, the purchaser is required to pay a use tax on the purchase unless the use of the property is exempt.

Some important exemptions for manufacturers, distributors and other businesses include:

• Industrial materials that either enter into the production of or become a component part of the finished product 
• Industrial materials that are coated upon or impregnated into the product at any stage of its manufacture or processing 
• Machinery, tools, repair parts, fuel, power, energy or supplies used directly in manufacturing or processing products for sale or resale 
• Materials, containers, labels, sacks, cans, boxes, drums or bags for packaging tangible personal property for shipment or sale 
• Distributors do not pay the tax on items purchased for resale 
• Tangible personal property delivered outside the Commonwealth for use or consumption outside the Commonwealth 
• Tangible personal property delivered to a factor or agent for foreign export 
• Tangible personal property purchased for use directly and exclusively in basic research or research and development in the experimental or laboratory sense 
• Charges for planning, creating or placing advertising in newspapers, magazines, billboards, broadcasting or other media, including providing concept, writing, graphic design, mechanical art, photography and production supervision 
• Tangible personal property used directly to produce any publication issued daily or regularly at intervals not exceeding three months 
• Any publication issued daily or regularly at average intervals not exceeding three months and advertising inserts or supplements and other printed matter distributed with or as part of a newspaper or other nontaxable publication (except that newsstand sales of the same are taxable)
• Custom computer software and separately stated labor charges for modifying prewritten computer programs 
• Broadcasting equipment, commercial radio and television towers and cable television systems 
• Gas, electricity or water delivered through mains, lines or pipes 
• Any fuel used directly in manufacturing, processing, refining or converting in an industrial sense, as well as any fuel used directly and exclusively in basic research or research and development in the experimental or laboratory sense 
• Certified pollution control equipment and facilities used primarily for the purpose of abating or preventing air or water pollution 
• Purchases used directly and exclusively in activities performed in cooperation with the Virginia Commercial Space Flight Authority

For more Information on Sales and Use taxes in the Commonwealth of Virginia, contact the Virginia Department of Taxation (Retail Sales and Use Tax)  at (804) 367-8031.