Virginia combines a flat 6% corporate tax that hasn't changed in more than 50 years with a personal income tax that reaches its 5.75% top rate at just $17,000. Most of the complexity is local: many cities and counties charge the BPOL tax on gross receipts and tax business equipment. The sales tax is relatively low at 5.3% to 6% in most places.
This guide covers Virginia's business taxes for 2026, with worked examples and comparisons with its neighbors.
Virginia business taxes at a glance
A Virginia C corporation pays a flat 6% on profit. Pass-through owners pay personal rates that reach 5.75% at $17,000 of taxable income, so for practical purposes Virginia has a near-flat 5.75% rate. Many localities charge BPOL on gross receipts, regardless of profit, and tax business tangible personal property each year. Customers pay 5.3% sales tax in most of the state and 6% or more in larger metro areas. LLCs pay $100 to form and $50 a year.
Corporate income tax
| Item | 2026 |
|---|---|
| Corporate income tax rate | 6% flat |
| Minimum tax | None |
- Apportionment: Three-factor formula with double-weighted sales for most businesses; single sales factor for manufacturers, retailers and some other industries.
- Combined reporting: Not required; Virginia allows separate or consolidated returns.
- Credits: Major business facility job tax credit, research and development credit, and port and data center incentives.
- Data centers: Sales tax exemption on equipment for qualifying data centers, central to Northern Virginia's data center cluster.
- Returns: Form 500 is due on the 15th day of the fourth month after year-end.
Personal income tax and pass-through owners
| Taxable income | Rate |
|---|---|
| $0 to $3,000 | 2% |
| $3,000 to $5,000 | 3% |
| $5,000 to $17,000 | 5% |
| Over $17,000 | 5.75% |
- LLC owners, partners and sole proprietors pay these rates on profit.
- S corporation shareholders pay on their share.
- PTE election: Entity-level tax at 5.75%, deductible federally.
- Standard deduction: Raised in recent years to about $8,750 for single filers.
BPOL and local business taxes
| Business category | Maximum BPOL rate |
|---|---|
| Contractors | 0.16% |
| Retail | 0.20% |
| Repair, personal and business services | 0.36% |
| Financial, real estate and professional services | 0.58% |
| Wholesale | 0.05% of purchases |
- Thresholds: Many localities exempt businesses below $100,000 of gross receipts or charge a flat license fee.
- Not all localities charge BPOL: Some counties, including several in rural areas, use a flat fee or no license tax.
- Machinery and tools tax: Localities tax manufacturing equipment separately.
Sales and use tax
| Region | Combined rate |
|---|---|
| Most of Virginia | 5.3% |
| Northern Virginia, Hampton Roads, Central Virginia | 6% |
| Historic Triangle (Williamsburg area) | 7% |
| Groceries | 1% |
- Services are generally not taxed.
- Remote sellers with more than $100,000 of Virginia sales or 200 transactions must collect.
Payroll and property taxes
- Unemployment insurance: Employers pay on the first $8,000 of each employee's wages.
- Paid family and medical leave: Virginia enacted a program in 2025 that is scheduled to begin collecting premiums in a later year.
- Property tax: Real property is taxed by localities at moderate rates. Business tangible personal property and machinery and tools are also taxed locally.
Forming a business in Virginia: fees and ongoing costs
| Item | LLC | Corporation |
|---|---|---|
| Formation filing fee | $100 | $75 or more based on authorized shares |
| Annual registration fee | $50 | $100 or more based on authorized shares |
| Local business license (BPOL) | Varies | Varies |
| Registered agent | Required | Required |
Worked example: $500,000 of profit
| Step | Amount |
|---|---|
| Taxable income | $500,000 |
| Virginia corporate tax at 6% | $30,000 |
| Federal tax at 21% on $470,000 | $98,700 |
| Total income tax | $128,700 (25.7%) |
A professional services firm with $1.5 million of receipts in a locality charging the maximum rate would also pay about $8,700 of BPOL. For a single LLC owner with $150,000 of Virginia taxable income, state tax is about $8,368. At $75,000 it is about $4,055.
How Virginia compares with its neighbors
| State | Corporate rate | Top personal rate | State sales tax |
|---|---|---|---|
| Virginia | 6% | 5.75% | 5.3% |
| Maryland | 8.25% | 6.5% plus county | 6% |
| West Virginia | 6.5% | 4.58% | 6% |
| Kentucky | 5% | 3.5% | 6% |
| Tennessee | 6.5% excise | None | 7% |
| North Carolina | 2% | 3.99% | 4.75% |
Virginia's taxes are notably lower than Maryland's, which shapes business location decisions in the Washington, DC, region. North Carolina's lower and falling rates make it the main competitor to the south.
Choosing an entity in Virginia
- LLC: $100 to form and $50 a year; owners pay up to 5.75%.
- S corporation: Same personal rates, federal payroll tax savings and the PTE election.
- C corporation: 6% plus 21% federally.
Virginia taxes by business type
Government contractors. Northern Virginia's large federal contracting industry pays BPOL on gross receipts, which can be significant on large contracts with thin margins. Arlington and Fairfax County have their own rates and thresholds.
Data centers. Loudoun and Prince William counties host the largest concentration of data centers in the world, supported by sales tax exemptions on equipment and substantial local property tax revenue from servers and buildings.
Retailers. The low 5.3% base rate makes Virginia retail competitive, though grocery stores still collect 1%.
Manufacturers. Manufacturers can elect single sales factor apportionment, but pay the local machinery and tools tax.
Doing business across Virginia
Northern Virginia is part of the Washington, DC, metro area and home to Amazon's second headquarters, defense contractors and technology companies. Richmond is the capital and a financial and legal center. Hampton Roads, including Norfolk and Virginia Beach, has the world's largest naval base and a major port. Virginia has income tax reciprocity with Kentucky, Maryland, Pennsylvania, West Virginia and the District of Columbia, so residents of those places commuting into Virginia generally pay tax only to their home state, subject to conditions.
Tax planning tips for Virginia businesses
Compare BPOL across localities. Neighboring jurisdictions can have very different BPOL rates and thresholds. For a services firm with high receipts, locating in a county with a lower rate or higher threshold can save thousands.
Elect the PTE tax. Virginia's PTE tax makes state tax deductible federally for profitable pass-through owners.
File business tangible property returns. Localities assess equipment based on owner filings, and failing to file can result in estimated assessments and penalties.
Who pays the most in Virginia
Middle-income households and owners pay close to Virginia's top rate, because the 5.75% bracket begins at only $17,000. Professional services firms in localities with high BPOL rates pay tax on receipts even in unprofitable years. Businesses with large equipment holdings, such as contractors and data centers, pay substantial local personal property and machinery and tools taxes. Consumers in the Historic Triangle and other higher-tax regions pay up to 7% sales tax.
Recent changes for 2025 and 2026
- Standard deduction increased and extended.
- Paid family and medical leave program enacted.
- Data center incentives debated as electricity demand grows.
Is Virginia a good state for business?
Advantages
- Flat 6% corporate rate
- Lower taxes than Maryland and the District of Columbia
- Low sales tax in most of the state
- Strong government, defense and technology economies
Drawbacks
- Personal top rate reached at only $17,000
- Local BPOL tax on gross receipts
- Local taxes on business equipment and machinery
- High costs in Northern Virginia
Compliance checklist
- File Articles of Organization or Incorporation with the State Corporation Commission.
- Register with the Department of Taxation for sales tax, withholding and income tax.
- Obtain a local business license and register for BPOL where required.
- Register with the Virginia Employment Commission if you hire.
- Pay the annual registration fee each year.
- File Form 500, 502 or 760 each year.
Compare Virginia with its neighbors below or estimate your taxes in the United States calculator. See LLC taxes for more.