Overview of Virginia State and Local Tax Legislation Changes for Businesses and Executives
In May, we discussed several tax provisions that were passed by the 2022 General Assembly, including the elective pass-through-entity (PTE) level tax, Community of Opportunity income tax credit, aircraft exemption, prescription medicine purchase exemptions for veterinarians, and a new class of personal property allowed for localities.
Here we highlight several other tax changes that may be of interest to individual and/or business taxpayers. As a note, on July 11, 2022, the Virginia Department of Taxation published a reference guide, 2022 Legislative Summary, detailing the state and local tax legislation enacted by the 2022 Session of the General Assembly before July 1.
Individual Income Tax Rebates
The 2022 Budget Bill provided for an individual income tax rebate of up to $250 for single taxpayers and up to $500 for married taxpayers filing a joint tax return. Qualifying taxpayers should receive these rebates this month.
Increase in Standard Deduction
For Taxable Years 2022 and 2023, assuming certain revenue growth targets are met by the state, the standard deduction for individual taxpayers increases from $4,500 to $8,000 for single filers and from $9,000 to $16,000 for married taxpayers filing joint returns. If the growth targets are not met, the standard deduction for the taxable year will be $7,500 for individuals and $15,000 for married filing jointly taxpayers.
Electronic Filing and Payment Requirements for Certain Individual Income Taxes
The 2022 Budget Bill changed the requirement that certain taxpayers subject to the individual income tax who make estimated tax payments remit their individual income tax payments electronically.
Effective for payments due on or after July 1, 2022, payment must be made electronically for any taxpayer year beginning on or after January 1, 2022 if any of the following apply:
- Any installment payment of estimated tax exceeds $1,500;
- Any payment made regarding to a return or an extension of time to file exceeds $1,500; or
- The taxpayer’s total tax liability exceeds or can reasonably be expected to exceed $6,000.
Note, however, the Tax Commissioner can waive the requirement to file or pay by electronic means.
Land Preservation Tax Credit
The land preservation tax credit remains at $20,000 for Taxable Year 2022.
Changes for Sales Tax Collected for and by Accommodations Providers
Effective October 1, 2022, accommodations intermediaries (such as Expedia, Travelocity) that book accommodations for travelers with an accommodations provider such as a hotel, Airbnb, or other short term rental, are required to collect and report the sales tax on room charges and booking fees directly to the Department of Taxation; local transient occupancy taxes must be submitted by them directly to the localities. Previously the accommodations facilitators were required to submit the taxes to the accommodations’ provider for remittance to the taxing jurisdictions. The Department of Taxation has recently released guidelines regarding these and prior year tax changes affecting accommodations providers and intermediaries.
Clarification Regarding Taxable Accommodations
Taxable accommodations for retail sales tax purposes traditionally have included any room or rooms, lodging, or accommodations in any hotel, motel, inn, campground, or any other place in which rooms, lodging, space, or accommodations are regularly furnished to transients for a consideration. The Department of Taxation has interpreted this as applying to rentals of conference rooms, meeting space, and event space if the provider was regularly engaged in renting rooms or space to others. Under the new law, retroactive to September 1, 2021, the term “accommodations” does not include rooms or space offered by a person in the business of providing conference rooms, meeting space, or event space if that person does not also offer rooms available for overnight sleeping. While the law was retroactive to September 1, 2021, no refunds are allowed for any taxes remitted prior to July 1, 2022. This clarifies that event space providers are not required to collect the retail sales tax on rentals of their space which has been an issue of confusion for some time.
Sales Tax Exemption for Food and Essential Personal Hygiene Products
Effective January 1, 2023, the sales tax due on food and essential personal hygiene products is reduced to 1%. Until then, the tax on food purchased for human consumption and essential personal hygiene products is at 2.5% which is comprised of 1.5% state sales tax and 1% local option sales tax. The state portion of the tax is being eliminated.
We will continue to monitor new and changing Virginia and other states’ tax considerations that may impact you and your business.
About the Author
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.