Virginia has one of the nation’s most moderate and stable (no change in Income Tax rates since 1972) tax structures. The State tax assessment on industry is modest and very competitive by comparison to others across the United States. Business, industry and residents all are asked to carry a share of the tax burden; no sector is targeted to assume a disproportionate share.

The following items are NOT taxed at the State level: inventory; machinery & tools; tangible or intangible personal property and most all other assets.

Corporate Income Tax: Companies incorporated in Virginia are taxed at the same rate as companies incorporated outside of Virginia. The rate is 6 percent of the corporation's Virginia taxable income. Virginia fully conforms to the federal Accelerated Cost Recovery System (ACRS).
(Source: Virginia Department of Taxation, 2007)

Intangible Personal Property Tax: Intangible personal property was exempted from taxation in 1984 by the Virginia General Assembly.
(Source: Virginia Department of Taxation, 2007)

(For more information on Virginia’s Tax structure, please click here.)

Unemployment Insurance: Industrial and commercial employers must carry unemployment insurance. New employers must pay a rate of 2.5 percent on the $8,000 wage base until they establish their "experience rating" (usually three years). Tax rates may range from a minimum of 0.1 percent of the first $8,000 of each employee's annual wages to a maximum of 6.2 percent.

Workers' Compensation Insurance: The actual cost of workers' compensation insurance varies by industry and occupation. Selected 2006 rates for Virginia per $100 of payroll are:

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(For more information on Virginia Costs, please click  here.)

The major local taxes in Virginia include the real estate tax, tangible personal property tax, and machinery and tools tax. Many communities levy a modest consumer's tax on utility purchases. Virginia differs from most states in that its counties and cities are separate taxing entities. A company pays either county or city taxes depending upon its location. If the company is located within the corporate limits of a town, it is subject to town taxes in addition to county levies.

Real Estate Tax: Real estate is assessed based on 100 percent of fair market value. Because of rising real estate values and periodic reassessments by localities (every four years in Montgomery County), actual assessment ratios usually are lower than 100 percent. The last assessment was done in 2007. Table 1 provides the real estate tax rate for Montgomery County and the towns of Blacksburg and Christiansburg. If the property is located in either of the towns, real estate tax for both Montgomery County and the town in which the property is located will apply.

Tangible Personal Property Tax: Tangible personal property tax is based on a percentage or percentages of original cost. It includes, but is not limited to, office equipment, furniture and fixtures of non-manufacturing businesses, trucks and automobiles. It does not include merchants' capital. Table 2 lists the 2007 tax rate per $100 of assessed value for Montgomery County and the town of Christiansburg. The town of Blacksburg does not charge a personal property tax.

The assessed value for trucks and automobiles is the loan value as determined from the N.A.D.A. handbook. For other personal property, the assessed value is a percentage of the property's original cost less depreciation.

Machinery and Tools Tax: Machinery and tools used in manufacturing, mining, processing or reprocessing are segregated as a separate class of tangible personal property and taxed at the local level. Businesses subject to the machinery and tools tax are not subject to tangible personal property taxes on office equipment, furniture or fixtures. Table 3 provides the machinery and tools tax assessment rate, the actual tax rate per $100 of assessed value, and the effective tax rate per $100 of assessed value. The machinery and tools taxes are assessed on a declining scale in Montgomery County and the Town of Christiansburg. The first four years are assessed at 60 percent, years five, six, and seven at 50 percent, and year eight to infinity at 40 percent.

Merchants' Capital Tax: Localities may impose a tax on the capital of merchants. Capital is defined as inventory of stock on hand, certain daily rental property, and passenger cars. Money and tangible personal property not offered for sale as merchandise are not considered capital. Table 4 lists the merchants' capital tax assessment rate, the actual tax rate per $100 of assessed value, and the effective tax rate per $100 of assessed value. The towns of Blacksburg and Christiansburg do not impose a merchants' capital tax.

Utility Tax: All localities have the authority to levy a tax on the consumers of public utilities including telephone, gas, water, and electricity. If a town and county charge utility taxes, a company pays the utility tax only to the town. Table 5 and Table 6 list the utility tax rates for Montgomery County, Blacksburg, and Christiansburg.

Business Licenses: Localities may impose a license tax on retail firms, warehousing and distribution firms, service firms, contractors, research and development firms, and many other businesses. The license tax usually is based on gross receipts during the previous tax year; however, it may be imposed on gross purchases or at a flat rate. Localities are prohibited from levying a license tax on the gross receipts of manufacturers when the sales are at wholesale at the place of manufacture. Table 7 lists the 2007 business license rate per $100 of gross receipts for Montgomery County, Blacksburg, and Christiansburg according to the following sectors: retail, business services, contractors, and professional, real estate and financial.

Food and Beverage Tax: Localities may impose a 5% Food and Beverage Tax for any food service establishment in the unincorporated area of the County. Table 7 below lists the tax for Montgomery County. (Montgomery County’s tax is not assessed in the Town limits of Blacksburg or Christiansburg).

Transient Occupancy Tax: Table 8 provides the rate per gross receipts on transient lodging for Montgomery County, Blacksburg, and Christiansburg.