Virginia

Embarking on a home improvement project in Virginia means navigating specific state-level requirements for contractors and understanding how sales tax applies. Virginia has a well-defined system for contractor licensing through the Department of Professional and Occupational Regulation (DPOR), and knowing these regulations is key to a smooth and compliant project.

Contractor Licensing in Virginia: A Threshold-Based System

In Virginia, a contractor's license is required for any project with a total value (materials and labor) of $1,000 or more. These licenses are administered by the Virginia Department of Professional and Occupational Regulation (DPOR) through its Board for Contractors.

Virginia's licensing system categorizes contractors into three classes based on the monetary value of projects they can undertake:

• Class C License: For individual projects valued at $1,000 to less than $10,000, or a total of less than $150,000 in contracts over a 12-month period.
• Requires 2 years of experience.
• Completion of an 8-hour pre-licensing education course.
• Passing a specialty trade exam (if applicable).
• Class B License: For individual projects valued at $10,000 to less than $120,000, or a total of less than $750,000 in contracts over a 12-month period.
• Requires 3 years of experience.
• Completion of an 8-hour pre-licensing education course.
• Passing the Virginia and General portions of the state exam.
• Demonstrating a minimum net worth of $15,000 (or equivalent surety bond).
• Class A License: For projects valued at $120,000 or more, with no monetary restrictions on annual contract volume.
• Requires 5 years of experience.
• Completion of an 8-hour pre-licensing education course.
• Passing the Virginia, General, and Advanced portions of the state exam.
• Demonstrating a minimum net worth of $45,000 (or equivalent surety bond).

Specialty Classifications: In addition to these classes, contractors must designate specific "specialties" that indicate the type of work they are qualified to perform (e.g., Home Improvement Contracting (HIC), Residential Building Contractor (RBC), Electrical Contracting (ELE), Plumbing Contracting (PLB), HVAC, Roofing, etc.). Many specialties require passing an additional trade-specific exam.

Key Requirements for Licensed Contractors:

• Business Entity: Contractors must first set up a legitimate business entity (sole proprietorship, LLC, etc.) and register it with the State Corporation Commission.
• Designated Employee/Qualified Individual: The business must have a designated employee who passes the required exams and meets experience criteria.
• Financial Solvency: Class A and B contractors must meet specific net worth requirements or provide a surety bond.
• 8-Hour Pre-Licensing Course: A mandatory course covering business, safety, and project topics.

Always insist on seeing your contractor's Virginia contractor license number and verify its status and classification.

Sales Tax on Home Service Projects in Virginia

Virginia has a state sales and use tax rate of 5.3%, which includes a 4.3% state rate and a 1% local option tax. Some regions, like Northern Virginia, Hampton Roads, and Richmond, have an additional 0.7% regional tax, bringing the combined rate up to 6.0%. Specific cities or counties might have even slightly higher rates.

The application of sales tax to home service projects in Virginia can be complex, often depending on whether the work constitutes a "capital improvement" or a "repair/maintenance" and how the contractor operates.

• General Rule: Contractors as Consumers (Most Common for Real Property Work):
• Generally, contractors performing services that result in a permanent addition or alteration to real property (your home) are considered the "consumers" of the materials they use.
• This means the contractor pays sales tax on their purchases of materials from suppliers.
• They then DO NOT charge you, the homeowner, sales tax on the final contract price for the installation or service. The sales tax on materials is already embedded in their costs. This applies to activities that are "capital improvements" to real property.
• Retailers Who Also Install (Exception to the Rule):
• Some businesses are primarily retailers that also offer installation services for certain items (e.g., fences, cabinets, countertops, floor coverings, window treatments).
• For these specific items, the business may be considered a "retailer" and would purchase the items tax-exempt for resale and then charge you, the homeowner, sales tax on the total price of the item (which includes the installation labor for that item). However, recent legislation (effective July 1, 2017) has changed this to largely treat even these retailers as "consumers" for sales tax purposes when they install the items.
• Repairs and Maintenance Services:
• If the service is simply a repair, alteration, or maintenance of tangible personal property (e.g., repairing a movable appliance, not part of the structure), then the service itself could be taxable if not separately stated.
• For repairs and maintenance to real property, the general "contractor as consumer" rule applies – the contractor pays tax on materials, and the labor is generally not separately taxed to the customer.

Due to the nuances, it's essential to discuss sales tax application with your contractor and get a clear breakdown in your contract or estimate. For definitive information, refer to the Virginia Department of Taxation's guidelines.

How to Verify Licensing in Virginia

Verifying a contractor's license in Virginia is straightforward through the DPOR's online lookup system.

1. Virginia DPOR License Lookup:

• The Virginia Department of Professional and Occupational Regulation (DPOR) maintains a comprehensive online database where you can search for licensed contractors.
• You can search by license number, individual name, business name, or a combination of criteria.
• The lookup will confirm the license status (active, inactive, suspended), class (A, B, or C), and any specialty classifications. It may also show disciplinary actions.
• DPOR License Lookup Tool: https://dhp.virginiainteractive.org/Lookup/Index (or search "Virginia DPOR license lookup")

1. Virginia State Corporation Commission (SCC) Business Entity Search:

• It's also a good practice to verify that the contractor's business entity is properly registered with the Virginia State Corporation Commission. This ensures they are a legitimate, recognized business in the state.
• SCC Business Entity Search: cis.scc.virginia.gov (or search "Virginia SCC business entity search")

1. Proof of Insurance and Bonding:

• While you can't typically verify insurance or bond details directly through a public DPOR lookup (beyond confirming it's on file), always request a Certificate of Insurance (COI) directly from the contractor's insurance provider. This document will detail their general liability and workers' compensation coverage.
• For Class A and B contractors, you can also inquire about their surety bond.

By utilizing these resources and maintaining clear communication with your chosen contractor, you can ensure your Virginia home project is in capable and compliant hands.

Sources and Resources:

• Virginia Department of Professional and Occupational Regulation (DPOR) - Board for Contractors:
• Official Website: www.dpor.virginia.gov/Boards/Contractors
• License Lookup: https://dhp.virginiainteractive.org/Lookup/Index
• Look for information on "Contractor License Requirements," "Applications & Forms," and "Approved Pre-License Education Schools."
• Virginia Department of Taxation:
• Official Website: www.tax.virginia.gov
• Search their site for "Retail Sales and Use Tax," "Construction Contractors," or specifically "Real Property Contractor Sales and Use Tax" for detailed guidance on how sales tax applies to construction and home improvement services.
• Virginia State Corporation Commission (SCC):
• Business Entity Search: cis.scc.virginia.gov
• PSI (Virginia Exam Administrator):
• For information on contractor licensing exams in Virginia. (Search "PSI Exams Virginia Contractors")