The Virginia Legislature will consider several sales tax changes during its 2026 session; most notably, House Bill 900 would lower the state's retail sales and use tax from 4.3% to 4% while expanding the tax to cover digital personal property and digital services*. If passed, this bill would go into effect starting January 1, 2027 and the taxable digital products would include the following: digital codes**, digital subscription services***, software, digital audio and audiovisual products, and reading materials delivered electronically. Taxable digital services would include data storage, digital subscriptions, software applications, and website hosting and design. The bill would also add a new phrase – “digital personal property****” – to Virginia’s definition of tangible personal property. The bill is currently with the House and has not yet passed.

The bottom line: SaaS companies selling to Virginia businesses should monitor this bill closely. If passed, B2B digital services, digital subscription services, digital personal property, software applications, data storage, and website hosting would become taxable in January 2027, requiring updates to tax collection processes for Virginia customers.

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Terms

*Digital services refers to the following services: software application, computer-related, website hosting and design, data storage, and digital subscription.

**Digital codes means a code that permits an end user to obtain at a later date a digital subscription service, digital personal property, or both.

***Digital subscription services means a service, including audio and visual streaming services, that for a fee allows the end user to access and use software, reading materials, or other digital data or applications for a defined period of time, and which products the end user does not own or have permanent access to outside of such period of time.

****Digital personal property means property delivered electronically to an end user, including software, digital audio and audiovisual products, reading materials, and other data or applications, that the end user owns or has the ability to continually access, whether by downloading, streaming, or otherwise accessing the content, without having to pay an additional subscription or usage fee to the seller after paying the initial purchase price.