Good news for marketplace sellers! The state of Virginia now requires marketplaces to collect sales tax on behalf of sellers on online marketplaces like Walmart or Amazon.
This means that if you sell on a platform like Amazon, then Amazon will collect sales tax from your Virginia buyers on your behalf, and remit it to the state.
But as usual, there are always a few wrinkles here when it comes to eCommerce sales tax.
This post will explain what online sellers need to know about the Virginia marketplace facilitator law, and answer your frequently asked questions.
Overview of the Virginia Marketplace Facilitator Law
Virginia’s marketplace facilitator law states that marketplace facilitators are required to remit sales tax on all sales into the state if the economic thresholds of 200 or more transactions into Virginia, or $100,000 or more in sales, are met.
Quick Facts about the Virginia Marketplace Facilitator Law
- Effective date: July 1, 2019
- Threshold: Virginia’s marketplace facilitator law states that marketplace facilitators are required to remit sales tax on all sales into the state if the economic thresholds of 200 or more transactions into Virginia, or $100,000 or more in sales, are met.
- State law information: Read the full text of the Virginia Marketplace Facilitator Law
- Marketplaces that have adopted this law:
Frequently asked Questions about Marketplace Facilitator Laws
What exactly is a marketplace facilitator in Virginia?
Virginia law defines marketplace facilitators as a “any business that contracts with a marketplace seller to facilitate the sale of the seller’s products through a physical or electronic marketplace, and:
- Engages, either directly or indirectly, in any of the following activities:
- Transmitting or communicating an offer or acceptance between a buyer and a marketplace seller;
- Owning or operating the infrastructure, electronic or physical, or technology that brings buyers and marketplace sellers together; or
- Providing a virtual currency that buyers can use to purchase products from the seller; and
Conducts any of the following activities with respect to a marketplace seller’s products:
- Payment processing;
- Fulfillment or storage;
- Listing products for sale;
- Setting prices;
- Branding sales as those of the marketplace facilitator; or
- Providing customer service or accepting or assisting with returns or exchanges.”
Online sales platforms like Amazon and eBay are considered marketplace facilitators under Virginia law.
A software like WooCommerce or Ecwid that allows online sellers to build and manage their own stores would not be considered a marketplace facilitator.
Does this mean I can stop collecting Virginia sales tax?
It depends. Every business’s sales tax situation is unique to that business.
Let’s look at a couple of common scenarios for businesses who have sales tax nexus in Virginia.
Example #1: You only make sales on online marketplaces.
In this example, you only sell on Amazon and eBay. Because Amazon and eBay are both now collecting sales tax from buyers on your behalf, you are not required to collect sales tax from your buyers. And, in Virginia, if you only make marketplace sales, you can cancel your sales tax registration. (See “Does this mean I can cancel my Virginia sales tax permit?” below.)
Example #2: You sell on online marketplaces and your own online store and/or brick and mortar store.
In this case, you’d still be required to collect sales tax from buyers who purchase from you through your own online store (for example, via your BigCommerce or Shopify store). And you would still be required to collect sales tax from your brick and mortar customers.
Marketplace facilitator laws only cover marketplaces. The state still requires that merchants collect sales tax from buyers via sales channels where the marketplace facilitator laws do not apply.
Does this mean I can cancel my Virginia sales tax permit?
If you only make sales on marketplaces, then the state of Virginia has stated that sellers can log into your online services account or file Form R-3 marking yourself as no longer liable for sales tax.
Final note: It’s important to assess your business before making a decision about cancelling sales tax permits. Are you in a growth stage? Do you plan to expand and think you may have Virginia sales tax collection requirements in the future? Then you may want to hang on to your Virginia sales tax permit rather than cancelling it and going through the administrative hassle of registering again in the future. This business decision is up to you.
Do I still need to file a Virginia sales tax return?
If you are registered to collect sales tax in Virginia (i.e. you have an active Virginia sales tax permit) then the state still requires that you file sales tax returns.
If you only make sales via marketplaces, and all of your marketplaces collect sales tax from buyers on your behalf, then you may only be required to file a “zero return.” (This is a return showing that you do not have any sales tax to remit to the state.) Keep in mind that if you only make sales via marketplaces you can cancel your Virginia sales tax permit (see above) and stop filing.
Does TaxJar handle this for me?
TaxJar AutoFile handles Virginia sales tax automatically
TaxJar AutoFile automatically compiles your sales tax data the way the state of Virginia wants it filed. For example, many states, Virginia included, want sellers to break down their sales tax collected via county, city and other special taxing district.
If a marketplace has collected sales tax on your behalf, TaxJar reports that directly to the state so that the state is aware you have met your sales tax obligations.
If you currently AutoFile your Virginia sales tax returns, you don’t need to do a thing. It’s handled!
TaxJar Reports give you all the info you need to file sales tax manually
If you prefer to file manually, your TaxJar Reports also reflect what the Department of Taxation wants to see on your tax return.
Also don’t worry that you will double pay. TaxJar accounts for sales tax collected on your behalf, and only shows you the amount you owe to the state out of your pocket.
Further reading on Virginia sales tax and marketplace facilitator laws:
- TaxJar’s Marketplace Facilitator FAQ
- State by State: Marketplace Facilitator Laws Explained
- Virginia Sales Tax Guide for Businesses
Do you have questions or something to say about the Virginia marketplace facilitator law? Start the conversation in the comments!Ready to automate sales tax?
To learn more about TaxJar and get started, visit TaxJar.com/how-it-works.