What does Virginia Tax Bulletin 21-1 say about the increase to the Litter Tax rate and the new penalty for late payment?

Subject

Increase Litter Tax Rate and Additional Penalty

Plain-English summary

This is Tax Bulletin 21-1, issued by the Virginia Department of Taxation on January 7, 2021. Despite carrying a "P.D." (Public Document) number and appearing in the Department's Rulings of the Tax Commissioner listing, it is not a ruling issued in response to any particular taxpayer's request -- it's a general notice announcing statutory changes to the Litter Tax that apply to all covered businesses statewide.

What changed. Pursuant to 2020 House Bill 1154 (Chapter 782), effective for Litter Tax returns due May 1, 2021: the base annual Litter Tax rate increased from $10 to $20 per Virginia business establishment, and the additional Litter Tax imposed on manufacturers, wholesalers, distributors, and retailers of groceries, soft drinks, carbonated waters, beer, and other malt beverages increased from $15 to $30 per establishment. Separately, pursuant to 2020 House Bill 502 (Chapter 468), a new flat $100 penalty now applies to any late Litter Tax payment, in addition to the existing penalty equal to 100% of the tax due and any interest that accrues under Va. Code § 58.1-1812.

Who is covered. The Litter Tax applies to each Virginia establishment (as of January 1 of the taxable year) from which business is conducted by manufacturers, wholesalers, distributors, or retailers of food (human or pet), groceries, cigarettes and tobacco products, soft drinks and carbonated waters, beer and other malt beverages, wine, newspapers and magazines, paper products and household paper, glass containers, metal containers, plastic or fiber containers, cleaning agents and toiletries, non-drug drugstore sundries, distilled spirits, and motor vehicle parts. Businesses not yet open on January 1 of a given year aren't liable until the following year's return.

Filing mechanics are unchanged. Businesses still file Form 200 and pay by May 1 of the year following the taxable year, regardless of the business's own fiscal year for income tax purposes, and Virginia law provides no extension of time to file or pay.

What this means for you

Manufacturers, wholesalers, distributors, and retailers of covered goods

If you operate one or more Virginia establishments selling any of the enumerated categories (groceries, tobacco, beverages, paper/glass/metal/plastic containers, cleaning products, drugstore sundries, distilled spirits, motor vehicle parts, etc.), your base Litter Tax per establishment doubled to $20 for returns due May 1, 2021 and after.

Grocery, soft drink, and beer/malt-beverage businesses specifically

If your business also falls into the additional-tax categories (groceries, soft drinks/carbonated waters, beer, or other malt beverages), you owe the extra per-establishment tax too, which doubled from $15 to $30 -- so a covered grocery retailer, for example, now owes $50 total per location ($20 + $30) instead of the prior $25.

Anyone at risk of filing or paying late

Missing the May 1 deadline now costs significantly more: the existing 100%-of-tax penalty still applies, but a new flat $100 penalty is added on top of it, plus interest under Va. Code § 58.1-1812 -- meaning even a small Litter Tax liability can generate a penalty far larger than the tax itself if paid late.

Common questions

Q: When did these new, higher Litter Tax rates take effect?
A: For Litter Tax returns due May 1, 2021 (covering business establishments in operation as of January 1, 2020).

Q: What is the new base Litter Tax rate per establishment?
A: $20 per establishment, up from $10 under prior law.

Q: What is the new "additional" Litter Tax rate, and who owes it?
A: $30 per establishment, up from $15, owed by manufacturers, wholesalers, distributors, and retailers of groceries, soft drinks, carbonated waters, beer, and other malt beverages, in addition to the base tax.

Q: What new penalty applies for late payment?
A: A flat $100 penalty now applies to any Litter Tax payment made after the May 1 deadline, on top of the pre-existing penalty equal to 100% of the tax due, plus accruing interest.

Q: Is there any way to get an extension to file or pay the Litter Tax?
A: No. The bulletin states that Virginia law does not provide for an extension of time to file or pay the Litter Tax, and the May 1 deadline applies regardless of a business's own fiscal year.

Q: Is this document a ruling issued for a specific taxpayer?
A: No. It is Tax Bulletin 21-1, a general notice describing a statutory rate and penalty change enacted by the 2020 General Assembly, and it applies uniformly to all businesses subject to the Litter Tax -- it was not issued in response to, or based on the facts of, any individual taxpayer's request.

Citations and references

• 2020 House Bill 1154, Chapter 782 (Litter Tax rate increases to $20 and $30 per establishment)
• 2020 House Bill 502, Chapter 468 (new $100 penalty for delinquent Litter Tax payment)
• Va. Code § 58.1-1812 (interest on delinquent tax payments)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-1-0

Original ruling text

TAX BULLETIN 21-1

Virginia Department of Taxation

January 7, 2021

IMPORTANT INFORMATION REGARDING

VIRGINIA’S LITTER TAX

Increased Litter Tax Rate and Additional Penalty

This bulletin is intended to notify taxpayers of changes to the Virginia Litter Tax effective for returns due May 1, 2021. Pursuant to 2020 House Bill 1154 (Chapter 782) the annual litter tax rate increases from $10 to $20 per establishment and the additional annual litter tax on specific businesses will be increased from $15 to $30 per establishment. In addition, 2020 House Bill 502 (Chapter 468) imposed a $100 penalty for delinquent payment of the litter tax that is added to the existing penalty.

Background

Under existing law, the Litter Tax is imposed on each Virginia business establishment from which a taxable business is conducted on January 1 of the taxable year. Businesses subject to the Litter Tax are required to file Form 200 and pay the tax due by May 1 of the subsequent year. For example, a business subject to the litter tax that is in operation on January 1, 2020 is required to file a Litter Tax return by May 1, 2021.

The May 1 deadline applies regardless of whether a business operates on a calendar or fiscal year basis for income tax purposes. When the return is filed, the full amount of the tax as shown on the face of the return should be paid. Virginia law does not provide for an extension of time to file or pay the tax.

A business not yet open on January 1 of the taxable year will not be liable for the Virginia Litter Tax until the next succeeding calendar year. For example, if a business opens on February 1, 2020, and is subject to the Litter Tax, it will not be required to file a Litter Tax return until May 1, 2022.

Annual Litter Tax Rate Increase

The Virginia Litter Tax is imposed annually on each establishment from which business is conducted by manufacturers, wholesalers, distributors, and retailers of:

Food for human or pet consumption;

Groceries;

Cigarettes and tobacco products;

Soft drinks and carbonated waters;

Beer and other malt beverages;

Wine;

Newspapers and magazines;

Paper products and household paper;

Glass containers;

Metal containers;

Plastic or fiber containers made of synthetic material;

Cleaning agents and toiletries;

Non-drug drugstore sundry products;

Distilled spirits; and

Motor vehicle parts.

Under prior law, such tax applied at an annual rate of $10 per establishment. Effective for Litter Tax returns due May 1, 2021, this annual rate increases to $20 per establishment.

An additional litter tax on each establishment is imposed on manufacturers, wholesalers, distributors, and retailers of groceries, soft drinks, carbonated waters, beer, and other malt beverages. Under prior law, such tax applied at an annual rate of $15 per establishment. Effective for Litter Tax returns due May 1, 2021, this annual rate for the additional tax increases to $30 per establishment.

Additional Penalty

Under existing law, any taxpayer who fails to pay the Litter Tax by the May 1 deadline is subject to a penalty equal 100% of the tax due. In addition, interest accrues at the rate established pursuant to Va. Code § 58.1-1812. Effective for Litter Tax payments due May 1, 2021, an additional penalty of $100 will apply to any late payments. This new penalty applies in addition to the existing 100% penalty and any interest that may accrue.

Examples

Example 1

A manufacturer of paper products has two locations from which it conducts business in Virginia on January 1, 2020. This manufacturer has a Litter Tax liability of $40 ($20 x 2) due May 1, 2021.

Example 2

A grocery retailer has 20 locations in Virginia as of January 1, 2020. The grocery retailer has a Litter Tax liability of $1,000 [(20 x $20) + (20 x $30)] due May 1, 2021.

Example 3

A restaurant opened one location in the City of Richmond on August 1, 2020. This is its only location in Virginia. Since it was not in operation on January 1, 2020, the restaurant will not owe Litter Tax on May 1, 2021. It will not be required to file a Litter Tax return until May 1, 2022.

Example 4

A manufacturer that produces metal containers has one location in Virginia from which it conducts business. The manufacturer has a Litter Tax liability of $20. The taxpayer files its Litter Tax return on June 15, 2021. In addition to the $20 tax, the manufacturer must pay $120 in penalties [($20 x 100%) + $100], for a total liability of $140 plus interest.

Example 5

A distributor of soft drinks has two distribution facilities in Virginia. The distributor has a Litter Tax liability of $100 [($20 x 2) + ($30 x 2)]. The distributor files its return on June 5, 2021. In addition to the $100 tax, the distributor must pay $200 in penalties [($100 x 100%) + $100], for a total liability of $300 plus interest.

Additional Information

This Tax Bulletin is available online in the Laws, Rules & Decisions section of the Department’s website. If you have additional questions, please visit the Department’s website at http://www.tax.virginia.gov or contact the Department at (804) 367-8037.