Virginia – Tax Collection Requirements for In-State Warehouses

SALT Report 1401 – The Virginia Senate passed a bill that creates a presumption that a dealer has sufficient activity within the state to require them to register to collect retail sales and use taxes if any commonly controlled person maintains a distribution center, warehouse, fulfillment center, or office within Virginia and facilitates the delivery of items sold by the dealer to its customers.

The presumption may be rebutted by demonstrating that the activities conducted by the commonly controlled person in Virginia are not significantly associated with the dealer’s ability to establish or maintain a market in Virginia for the dealer’s sales.

The bill would also require any dealer that does not collect Virginia state or local use tax, and delivers items to purchasers with an address in Virginia, to notify the purchaser that Virginia state and local use taxes are due for the purchased items and that Virginia law requires the purchaser to file a use tax return for the non-taxed purchases.

Any dealer that fails to provide a notice would be assessed a penalty of $5 for each incidence unless the dealer shows reasonable cause. The dealer would also be required to provide a written notice to all purchasers by January 31 that lists the total amount paid for their purchases during the preceding calendar year. The notice would only be sent to purchasers who have a billing address in Virginia. The notice must include the date and amount of purchase as described in the bill. Any dealer who fails to send a notice would be assessed a penalty of $10 for each incidence unless the dealer shows reasonable cause.

Further, the bill requires dealers to file an annual statement with the Department of Taxation for each purchaser with an address in Virginia who purchased items from the dealer during the preceding calendar year. The dealer’s statement must include the total amount paid by the purchaser on all purchases made during the previous year.  The annual statement must be filed by March 1 on forms provided or approved by the department.

If the dealer makes more than $100,000 in sales during the preceding calendar year to purchasers with a billing address in Virginia, the department may require the dealer to file their annual statement by magnetic media or another machine-readable form.  A penalty of $10 will be assessed upon the dealer for each purchaser that the dealer does not file the required annual statement, unless the dealer shows reasonable cause.

Finally, the bill contains a severability clause that protects the remaining provisions of the statute if any portion is invalidated by a court.

For Further Information:

Virginia Senate – S.B. 597