Custodial Taxes

“Custodial Taxes” is a term used to describe taxes collected from consumers by businesses. The business holds the collected funds in trust for the County until they are remitted to the County Treasurer.

Short-Term Rental Taxes

  • Certain rental businesses may be eligible for special treatment that exempts their rental property from business tangible property taxes and assigns them a low business license tax rate. These businesses collect a 1 percent pass-through tax on all short-term rental receipts.
  • As an ongoing business, you must submit an Application for Certification as a Short-Term Rental Business annually on or before February 1. If starting a new business, the Application must be submitted within 30 days of opening the new business.
  • Arlington County Code, Chapter 64 provides more information on Short-Term Rental Taxes.
  • You must submit your short-term rental tax reports quarterly on or before the 20th of April, July, October and January.

Transient Occupancy (Lodging) Taxes

Transient Occupancy Tax (TOT) is an 8.25% tax rate on the total cost paid for each room or space rented in any hotel, motel, or tourist home, and occupied by the same individual for less than 30 consecutive days. The 8.25% rate includes the 5% local County TOT, the 0.25% local tourism TOT, and the 3% state regional TOT (this tax rate increased from 2% effective May 1, 2021).

For more information on TOT, please see Arlington County Code, Chapter 40 , and Code of Virginia §58.1-1743.

Businesses must file their custodial tax returns online via CAPP by 11:59 p.m. ET on the 20th of each month.

Meals, Food & Beverage Taxes

  • Sellers of prepared meals and beverages (but not grocery items) sold or prepared in Arlington must collect a 4 % “Meals, Food and Beverage Tax.” The tax is generally levied on the sale of food and beverages, including alcoholic beverages, whether consumed on or off-premises. (Exceptions include soft drinks served without food on-premises and alcohol sold in sealed containers for off-premises consumption.) This 4% tax is in addition to the appropriate state and local sales taxes.
  • Third party delivery services should be instructed to collect and remit the meals tax to the restaurant that prepared the food. The restaurant, not the third party delivery service, is deemed responsible for remitting the meals tax to Arlington.
  • Restaurants or caterers who prepare and sell meals specifically for commercial airlines charge a 2 % food and beverage tax. 
  • If you’re the owner of a new restaurant or other food establishment, you must file a Certificate of Registration Form with the Commissioner of Revenue’s Business Tax Division.

Note, the exemptions from the Meals, Food and Beverage Tax are much narrower than the exemptions from the State Sales Tax. Most nonprofits, for example, are NOT exempt from paying Meals Tax even though they may be exempt from Sales Tax. If in doubt about an exemption, restaurants and caterers should contact the Commissioner’s office.

Cigarette Taxes

  • Wholesalers who distribute cigarettes to Arlington’s retail businesses collect a monthly Cigarette Tax. The tax rate is $0.40 on each pack of 20 cigarettes and $0.50 for on each pack containing 25 cigarettes.
  • Arlington County Code, Chapter 39 provides more information on the local Cigarette Tax.
  • Businesses must file their custodial tax tax returns online via CAPP by 11:59 p.m. ET on the 20th of each month.

For more information on custodial taxes, contact the Commissioner of Revenue’s Business Tax Division at 703-228-3060.