A couple of years ago we reported on a brand new Virginia letter ruling stating that simply storing items in a fulfillment center as a 3rd party seller in Virginia does not create sales tax nexus. This was, in particular, great news for Amazon FBA sellers, many of whom only had nexus (the requirement to collect and remit sales tax) in the state due to items in a fulfillment center.
Unfortunately, Virginia has now passed new legislation that contradicts the previous 2015 letter ruling. In other words…
Storing products for sale (such as in a fulfillment center) in Virginia will once again create sales tax nexus for online sellers and other retailers starting July 1, 2017.
What happened in Virginia?
To recap what we’re talking about, back in October of 2015 the state of Virginia issued a letter ruling stating that simply storing goods in a fulfillment center as a 3rd party seller did not constitute nexus. This letter ruling was interpreted by sales tax experts to mean that FBA sellers (at least the ones with no other nexus in Virginia) were no longer required to register for a sales tax permit in Virginia, or to collect and remit Virginia sales tax. You can read all about the letter ruling, including the full text of the letter, at our “Breaking News: Fulfillment Centers Don’t Create Sales Tax Nexus in Virginia” blog post.
Fast forward to now. State laws supercede letter rulings, and the Virginia Assembly just passed H.B. 2058.
Virginia’s new definition of dealer now states that anyone who “owns tangible personal property that is for sale located in this Commonwealth, or that is rented or leased to a consumer in this Commonwealth, or offers tangible personal property, on approval, to consumers in this Commonwealth.”
Here’s a screenshot of the actual law (click it to read the entire law):
In other words, Virginia’s sales tax nexus law is now more in line with most other state’s sales tax laws. You can read what every state has to say about sales tax nexus here.
Thank you to friend of TaxJar and sales tax attorney Mike Dillon of Dillon Tax Consulting for bring this to our attention when it was hot off the presses.
Long story short: A new Virginia law, effective July 1, 2017, states that storing inventory for sale in the Commonwealth of Virginia creates Virginia sales tax nexus.
What do I do now?
As always, if you have specific questions about sales tax in regard to your business, we recommend speaking with a vetted sales tax expert or your own CPA.
If you have inventory stored for sale in Virginia, such as through Amazon FBA, and decide to register and collect sales tax with the state on or before July 1, 2017, you can view our “How to Register for a Sales Tax Permit in Virginia” post for a guide. Or, if you’d rather an expert register you, you can sign up to speak to a sales tax pro here.
In 2015, Virginia took a step to make sales tax a little easier for online sellers. This step was totally out of alignment with other states, who were passing laws to require sales tax collection by more online sellers. While I can’t say for certain why this law was passed, it appears that Virginia lawmakers have decided to fall in line with other states who have strict nexus laws.
Have questions or something to say? Start the conversation in the comments!