Sales Tax State Activity Update - September 2004

Virginia Raises Sales Tax Rate

The Virginia Department of Taxation recently issued a notice informing taxpayers that effective September 1, 2004, the sales and use tax rate increases from 4.5% to 5%.

The increased tax rate applies to all sales on and after September 1, 2004. However, the increased rate is not applicable to tangible personal property delivered prior to September 1, 2004, but paid for after September 1, 2004. In addition, the increased rate will not apply when a taxable sale or lease payment is paid for in full prior to September 1, 2004, even though the property is delivered after September 1, 2004, or the paid in full lease payments covers a lease period on or after September 1, 2004.

The new law also includes certain transitional provisions for lessors, who, prior to June 3, 2004 (the date the sales and use tax rate increase legislation was signed by the Governor), entered into bona fide contracts for leases or sale of tangible personal property. Under these transitional provisions, tangible personal property leased under such contracts will still be subject to the 5% tax on and after September 1, 2004, however, the lessee of the property will be entitled to request refunds from tax on the additional 1/2% tax paid as the result of the rate increase.

The notice is available at : http://www.tax.state.va.us/web_pdfs/SalesTax_Rate_Increase_Guidelines.pdf

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