What taxes apply to a new small business?

Virginia Small Business Taxes Overview

Starting a new small business in Virginia requires understanding the key taxes that impact your operations. Proper tax planning supports compliance and financial management from day one.

Common Taxes for New Small Businesses in Virginia

• Virginia State Income Tax: Businesses classified as pass-through entities (such as LLCs, S-corporations, or sole proprietorships) report income on owners' personal tax returns. Virginia imposes a state income tax with rates ranging from 2% to 5.75% depending on income levels.
• Corporate Income Tax: C-corporations operating in Virginia pay a flat 6% corporate income tax on net income. Ensure accurate bookkeeping to track taxable income.
• Sales and Use Tax: If your business sells tangible personal property or taxable services, you must collect Virginia sales tax at a rate of 5.3% (plus local rates where applicable). Register for a sales tax permit with the Virginia Department of Taxation and file regular returns.
• Employment Taxes: If you hire employees, you must handle federal payroll taxes and Virginia state withholding tax. Register for Virginia employer withholding tax and unemployment insurance tax accounts. Maintain proper employee classification and timely payroll tax deposits.
• Business License Tax: Many Virginia localities require businesses to obtain a business license and pay an annual license tax based on gross receipts or a flat fee. Check with your city or county government for specific requirements.

Operational Tips for Managing Business Taxes in Virginia

• Register Early: Obtain your Virginia tax identification numbers promptly to avoid delays in compliance and operations.
• Use Accounting Software: Automate bookkeeping and tax calculations to reduce errors and streamline reporting.
• Stay Updated: As of 2026, tax rates and regulations may change. Regularly review guidance from the Virginia Department of Taxation and local authorities.
• Maintain Records: Keep detailed financial and payroll records to support tax filings and potential audits.
• Consult Payroll Services: For businesses with employees, consider payroll service providers to ensure accurate withholding, tax deposits, and compliance.