What Is Virginia Payroll Tax?
Virginia payroll tax refers to the state payroll taxes that employers must withhold from employee wages or pay directly to state agencies. These taxes fund unemployment benefits and Virginia individual income tax system.
Virginia payroll tax system is relatively straightforward compared with states that impose separate city or county income taxes. Employers generally manage unemployment insurance through the Virginia Employment Commission and state income tax withholding through Virginia Tax. Virginia counties, cities, and towns do not generally impose a separate local income tax on employee wages.
Most Virginia employers are responsible for the following payroll tax requirements:
- Unemployment Insurance (UI), administered by the Virginia Employment Commission
- Virginia Individual Income Tax withholding, administered by Virginia Tax using the state's withholding tables and employee Form VA-4
- Periodic withholding returns, annual reconciliation, W-2 reporting, and quarterly unemployment wage reporting through the applicable Virginia systems
Virginia Payroll Taxes at a Glance
| Payroll Tax | Paid By | Purpose |
|---|---|---|
| Unemployment Insurance (UI) | Employer | Provides temporary income for eligible unemployed workers |
| Individual Income Tax | Employee (withheld by employer) | Progressive state income tax withheld from employee wages |
| Local Occupational License Tax | Not generally applicable to employee wages | Virginia localities do not generally impose a local payroll income tax on wages |
Understanding who pays each tax and recognizing that Virginia does not generally impose separate county or municipal income tax withholding helps employers avoid unnecessary local payroll registrations while meeting their state unemployment and withholding obligations.
Virginia Employer Payroll Tax Responsibilities
Every employer with workers in Virginia has payroll tax responsibilities beyond simply issuing paychecks. Depending on your business, you'll generally need to:
- Register your business with the Virginia Employment Commission and Virginia Tax.
- Obtain a Virginia unemployment insurance employer account and state withholding tax account.
- Collect a completed Virginia Employee's Withholding Exemption Certificate, Form VA-4, from each employee.
- Withhold Virginia individual income tax from taxable employee wages.
- Pay employer UI contributions using the rate assigned to the unemployment account.
- Apply any unemployment-related add-ons or charges included in the employer's annual rate notice.
- File quarterly unemployment tax and employee wage reports.
- File Virginia withholding returns and remit withheld taxes according to the assigned quarterly, monthly, or eighth-monthly schedule.
- Submit annual Form VA-6 reconciliation and required employee W-2 information by January 31.
- Report every new hire and rehire to the Virginia New Hire Reporting Center within 20 days.
- Maintain payroll records for state compliance.
Many businesses use payroll software with built-in Virginia withholding tables and unemployment calculations, since employers must apply employee Form VA-4 information, payroll frequency, reciprocal-state exemptions, employer-specific UI rates, and assigned payment schedules correctly.
Types of Virginia Payroll Taxes
Unemployment Insurance (UI)
Unemployment Insurance is an employer-funded payroll tax administered by the Virginia Employment Commission that provides temporary financial assistance to eligible workers who lose their jobs through no fault of their own.
Employers pay this tax directly it is never deducted from employee paychecks.
Virginia assigns established employers an experience-based contribution rate using factors such as taxable payroll, unemployment benefits charged to the employer's account, and the balance of the state's unemployment trust fund. New employers generally receive an initial base rate until they develop sufficient experience for an individually calculated rate.
Key Facts
- Paid entirely by employers Virginia has no employee UI contribution
- Calculated on the first $8,000 of each employee's wages for 2026
- New Virginia employers generally receive an initial 2.5% base rate, plus applicable add-ons
- Normal employer base rates generally range from 0.1% to 6.2%
- Established employers receive an individually assigned annual rate based on their unemployment experience
- The final contribution rate may include pool-cost, fund-building, administrative, or other applicable components in addition to the base rate
- Employers that fail to file required reports or pay amounts due may lose access to a favorable experience-based rate
- Most Virginia employers receive a federal FUTA tax credit of up to 5.4% for timely state UI payment, bringing the effective FUTA rate down to about 0.6%
- Must be reported quarterly through the Virginia Employment Commission's employer reporting system
Virginia Individual Income Tax Withholding
Virginia imposes a progressive individual income tax. The state tax rates are 2%, 3%, 5%, and 5.75%, although employers calculate payroll withholding using the official Virginia Employer Withholding Tables rather than simply applying one tax bracket rate to every paycheck.
Employers are responsible for:
- Withholding Virginia income tax from taxable wages using current Virginia Employer Withholding Tables
- Collecting Form VA-4 from new employees and employees who change their withholding elections
- Calculating withholding based on wages, payroll frequency, exemptions, and additional withholding elections
- Applying reciprocal-state exemptions only when the employee provides the required documentation
- Reporting withholding to Virginia Tax
- Depositing withheld taxes on a quarterly, monthly, or eighth-monthly schedule, depending on the amount withheld
- Filing annual Form VA-6 and required employee W-2 information by January 31
Virginia has reciprocal individual income tax agreements with Kentucky, Maryland, Pennsylvania, West Virginia, and the District of Columbia. A qualifying resident of one of these jurisdictions who works in Virginia may generally claim exemption from Virginia withholding by submitting a properly completed Form VA-4. Virginia also provides a limited commuting exemption for certain residents of nearby states when the applicable statutory requirements are met.
Local Occupational License Tax
Unlike states such as Kentucky, Missouri, or Ohio, Virginia counties, cities, and towns do not generally impose a local occupational income tax that employers must withhold from employee wages. Virginia localities may impose business, professional, and occupational license taxes commonly known as BPOL taxes but these are generally business-level taxes based on gross receipts rather than employee wage taxes.
Key rules employers need to know:
- Virginia does not generally require employers to withhold county, city, or town income tax from employee wages
- Employers normally calculate only Virginia state income tax withholding and employer-funded unemployment insurance for state-specific payroll tax purposes
- Local governments may impose BPOL taxes, business-license fees, or other business-level obligations
- BPOL taxes should not be confused with an employee occupational wage tax
- Employers operating in multiple Virginia localities should still review local business registration and licensing requirements
- The employee's physical work location generally affects whether wages are subject to Virginia withholding
- Remote employees working from Virginia may create state withholding and unemployment insurance obligations
- Virginia state payroll registration does not automatically satisfy local BPOL or business-license requirements
Because Virginia does not generally impose local payroll income tax, employers usually do not need to manage separate county or city wage-withholding accounts. Businesses should still distinguish state payroll taxes from BPOL taxes and other local business obligations.
Which Payroll Taxes Are Paid by Employers vs Employees?
| Tax | Employer Pays | Employee Pays |
|---|---|---|
| Unemployment Insurance (UI) | YES | NO |
| Individual Income Tax | NO | Withheld from wages using progressive state withholding tables |
| Local Occupational License Tax | Not generally applicable as a payroll tax | Not generally withheld from wages |
Virginia places the entire unemployment insurance tax burden on employers, while state individual income tax is withheld from employee wages. A separate county or municipal payroll income tax generally does not apply.
Virginia Payroll Tax Rates for Employers
Understanding current Virginia payroll tax rates is essential for calculating payroll accurately. Because established-employer UI rates and applicable add-ons are assigned individually, employers should review their annual Virginia Employment Commission rate notice rather than relying only on the general statewide range.
Virginia Payroll Tax Rates at a Glance
| Payroll Tax | Who Pays | General Rate | Taxable Wage Base |
|---|---|---|---|
| Unemployment Insurance (UI) | Employer | New employers: 2.5% base rate plus applicable add-ons. Normal employer base rates generally range from 0.1%–6.2% | $8,000 for 2026 |
| Individual Income Tax | Employee | Progressive rates of 2%, 3%, 5%, and 5.75%, calculated using Form VA-4 and the official Virginia withholding tables | Applies to taxable Virginia wages, with no UI-style annual wage cap |
| Local Occupational License Tax | Not generally applicable to employee payroll | No general county or municipal income tax withholding on wages | Not applicable |
According to the Virginia Employment Commission's employer guidance, unemployment insurance generally applies to the first $8,000 paid to each employee during the calendar year. New employers receive an initial 2.5% base rate plus applicable add-ons, while normal employer base rates generally range from 0.1% to 6.2%.
Instead of relying on a general statewide estimate, employers should review their annual UI contribution-rate notice, confirm employee Form VA-4 information and reciprocity status, and make sure payroll software reflects Virginia's current withholding tables and assigned filing frequency.
Understanding Taxable Wages
Not every Virginia payroll tax applies to wages the same way. Depending on the tax involved, taxable wages may include:
- Hourly wages
- Salaries
- Bonuses
- Overtime pay
- Commissions
- Certain taxable fringe benefits
UI tax applies only to the first $8,000 of each employee's annual wages, while state income tax withholding generally applies more broadly to taxable Virginia wages without the same wage base cap. Understanding which wage rules and reciprocal-state exemptions apply helps reduce calculation errors.
Virginia Payroll Tax Filing Deadlines
Meeting payroll tax deadlines is just as important as calculating taxes correctly. Late filings or payments can lead to penalties and interest charges.
Unemployment Insurance (Quarterly Wage Report)
| Reporting Quarter | Filing Deadline |
|---|---|
| January – March | April 30 |
| April – June | July 31 |
| July – September | October 31 |
| October – December | January 31 |
State Income Tax Withholding
Virginia withholding filing frequency depends on the employer's estimated or average withholding liability. Employers with less than $300 of withholding per quarter generally file quarterly. Monthly filers generally submit Form VA-5 by the 25th day of the following month. Larger employers assigned eighth-monthly status must generally remit withholding within three banking days after the end of each designated withholding period.
Local Occupational License Tax
Virginia does not generally impose a county or municipal occupational income tax on employee wages, so employers normally do not have a separate local payroll withholding return. Businesses may still have BPOL returns, business-license renewals, or other local filings that follow schedules established by the applicable locality.
If a deadline falls on a weekend or legal holiday, it generally moves to the next business day. Because Virginia withholding payments may be due more frequently than quarterly unemployment reports, employers should track each filing and payment obligation independently.
How to Register for Virginia Payroll Taxes
Before paying employees, businesses typically need to register with the Virginia Employment Commission and Virginia Tax.
State registration: Employers establish a Virginia unemployment insurance account with the Virginia Employment Commission and register for state income tax withholding through Virginia Tax's online business-registration system or Form R-1. Employers can manage many withholding returns and payments through Virginia Tax's online services and eForms.
Local registration: Virginia localities do not generally impose local income tax withholding on employee wages, so employers normally do not need to register with local revenue offices for payroll income tax. Separate BPOL registration, business licenses, permits, or other local requirements may still apply.
During registration, you'll generally need information such as:
- Legal business name
- Federal Employer Identification Number (EIN)
- Business entity type
- Business address and all Virginia work locations
- Owner or responsible party information
- Date employees first performed services in Virginia
- Estimated payroll information
How to File Virginia Payroll Taxes
Filing payroll taxes in Virginia involves managing unemployment insurance and state income tax withholding obligations in parallel. A typical filing process includes:
Step 1: Calculate Employee Wages
Determine each employee's gross wages, including regular pay, overtime, bonuses, commissions, and other taxable compensation.
Step 2: Determine Applicable Local Jurisdictions
Confirm where each employee physically performs services and whether employment is localized in Virginia. Virginia does not generally impose local wage withholding, but the employee's work location and state of residence can determine whether Virginia withholding, unemployment insurance, or a reciprocal-state exemption applies.
Step 3: Calculate Payroll Taxes
Determine your employer UI contribution using the complete rate shown on your current Virginia Employment Commission notice and calculate employee state income tax withholding using Form VA-4 and the current Virginia withholding tables.
Step 4: Withhold Employee Taxes
Deduct Virginia individual income tax from each paycheck when wages are subject to state withholding. Apply a reciprocal-state exemption only after receiving valid employee documentation, and do not deduct unemployment insurance from employee wages.
Step 5: Pay Employer Contributions and Remit Withholding
Pay employer UI contributions through the Virginia Employment Commission's approved employer system and remit state income tax withholding through Virginia Tax according to the assigned quarterly, monthly, or eighth-monthly schedule.
Step 6: File Payroll Tax Returns
Submit quarterly unemployment tax and wage reports, file Virginia withholding returns according to the assigned frequency, and submit annual Form VA-6 with required employee W-2 information by January 31.
Step 7: Maintain Payroll Records
Keep detailed payroll records, employee Form VA-4 certificates, reciprocity documentation, UI contribution-rate notices, wage information, filed returns, and payment confirmations in case of future audits or compliance reviews.
Following a consistent payroll process helps reduce mistakes and makes year-end reporting significantly easier.
Frequently Asked Questions
Who is required to pay Virginia payroll taxes?
Most businesses that hire employees performing services in Virginia are required to register with the Virginia Employment Commission and Virginia Tax. Their responsibilities may include paying employer UI contributions, withholding state income tax, filing payroll reports, reporting employee wages, and maintaining payroll records.
What payroll taxes are employers responsible for in Virginia?
Virginia employers generally have responsibilities related to unemployment insurance and state individual income tax withholding. UI is paid entirely by employers, while Virginia income tax is withheld from employee wages. Virginia localities do not generally impose a separate payroll income tax.
How often do employers file Virginia payroll tax returns?
Unemployment insurance tax and wage reports are filed quarterly. Virginia income tax withholding returns may be filed quarterly, monthly, or on an eighth-monthly schedule depending on the employer's withholding liability and assigned filing status.
How do I register for Virginia payroll taxes?
Employers register for unemployment insurance with the Virginia Employment Commission and establish a state withholding account through Virginia Tax's online business-registration system or Form R-1.
What happens if payroll taxes are filed late?
Late filings or payments may result in penalties, interest charges, estimated assessments, collection action, or other compliance issues. Delinquent unemployment contributions may also affect an employer's assigned state rate or federal FUTA credit. Filing accurately and on time helps avoid unnecessary costs.
Does Virginia payroll tax apply to remote employees?
Yes. An employee who physically performs services from a Virginia location may create Virginia income tax withholding and unemployment insurance obligations even when the employer is located in another state. Employers should review the employee's work location, residence, and eligibility for any reciprocal-state exemption.
Are Virginia payroll tax rates the same every year?
Not always. Virginia's employer-specific UI base rate, unemployment add-ons, withholding tables, filing frequency, and individual income tax rules can change. Employers should review their annual Virginia Employment Commission rate notice and current Virginia Tax guidance before processing payroll each year.
Can payroll software calculate Virginia payroll taxes automatically?
Many payroll platforms automatically calculate Virginia UI contributions and state income tax withholding, apply the applicable wage base and withholding tables, and support reciprocal-state exemptions and filing schedules. Employers are still responsible for ensuring employee Form VA-4 information, residency, work locations, assigned UI rates, and withholding account details are accurate and up to date.
Disclaimer
This article is for general informational purposes only and doesn't constitute legal, tax, or accounting advice. Payroll tax rates, taxable wage bases, withholding tables, reciprocal agreements, filing requirements, and payment schedules can change. Consult a qualified CPA or tax professional for guidance specific to your business.
