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Virginia has enacted legislation requiring certain remote sellers that utilize in-state facilities to collect and remit Virginia sales tax. Under the new law, a dealer is presumed to have nexus in Virginia if any commonly controlled person maintains a distribution center, warehouse, fulfillment center, office, or similar location in Virginia that facilitates the delivery of tangible personal property sold by the dealer to its customers. Dealers may rebut the presumption if they can demonstrate that the commonly controlled person’s activities in Virginia are not significantly associated with the dealer’s ability to establish or maintain a market in Virginia. “Commonly controlled person” is defined as any person that is a member of the same “controlled group of corporations” as the dealer or any other entity that bears the same ownership relationship to the dealer as a corporation that is a member of the same controlled group of corporations. The law takes effect on the earlier of September 1, 2013, or the effective date of federal legislation that authorizes states to require a seller to collect taxes on sales of goods to in-state purchasers regardless of the location of the seller. If such federal legislation is enacted prior to August 15, 2013, and the effective date of the federal legislation is after September 1, 2013 but on or before January 1, 2014, then the provisions will become effective on January 1, 2014. For an update on this news item, click here to view our news item Virginia Affiliate Nexus Law Becomes Effective September 1, 2013.  (Ch. 590 (S.B. 597), Laws 2012, effective as noted)


A seller of storage systems located outside of Virginia was not required to register for Virginia sales and income tax as the result of installation services provided by a third party. The Virginia Department of Taxation found that the nexus requirements were not met for the seller of the storage systems as the retailer never had a physical presence in the state. The installers of the system were a true third party who received the installation materials from a distributor and then performed the installation independently of the retailer. (Ruling of Commissioner, P.D. 09-44, Virginia Department of Taxation, April 27, 2009)


In response to a taxpayer inquiry, the Virginia Department of Taxation ruled on the tax obligations of an energy service company that assists customers in selling their unused electricity back the energy grid. The company owns and manages a software application that enables Virginia customers to transact with an independent system operator, located outside Virginia, who purchases the unused electricity. However, an employee was hired in Virginia to promote and sell the company’s services to Virginia based organizations. The company requested a ruling regarding whether its activities of hiring a Virginia-based employee created any tax obligations for corporate and retail sales and use tax purposes. Based on the facts presented, it was ruled that since the taxpayer had only one salesperson working in Virginia, it was not an adequate basis to create corporate income tax nexus. In regards to sales and use tax nexus, an obligation is only established when a taxpayer is a dealer and has sufficient contacts with Virginia to require registration. In this case, the company does not qualify as a dealer under the statute because it does not offer tangible personal property for sale at retail, but rather facilitates the sale of unused electricity between two participants. Consequently, the company does not have a sales tax collection obligation. (Ruling of Commissioner, P.D. 07-181, Virginia Department of Taxation)


Virginia has previously made it clear that its state agencies are not allowed to do business with vendors who are not registered to collect and remit sales and use tax in Virginia. Now Virginia is making it clear that its state agencies are not allowed to do business with a vendor if an affiliate of the vendor in question is supposed to, but has not registered to collect and remit sales and use tax in Virginia. (Ruling of Commissioner, P.D. 04-4, January 23, 2004.)



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