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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)


The Tax Commissioner of Virginia has reversed a sales and use tax auditor’s determination that tax was due on a software developer’s charges for prewritten software that was electronically delivered to the customer. Virginia code provides an exemption for electronically-delivered prewritten software, provided that at a minimum, the sales invoice, contract, or other sales agreement expressly certifies the electronic delivery of the software and that no tangible medium for that software has been or is to be furnished to the customer. The Statement of Work of the contract entered into by the software developer and its customer expressly stated that the software would be delivered electronically. Further, the software developer furnished an email that was sent to the customer stating that the software files were uploaded to a public file transfer protocol (FTP) server for download, which is a common method for downloading or transferring data from one computer to another over the internet. Although the software maintenance and support terms set out in a schedule attached to the contract stated that supported methods of electronic transfer include CD-ROMS or diskettes, this language does not apply to the software at issue because these maintenance terms were not integrated into the contract’s Statement of Work. Therefore, the Statement of Work was sufficient to establish that the software was intended for electronic delivery, and the furnished email shows that this intention was carried out. (Ruling of Commissioner, P.D. 09-83, Virginia Department of Taxation, May 28, 2009)


Effective May 31, 2010, sales and use taxes collected by dealers and direct pay permit holders with annual sales of or in excess of $12 million must be filed and remitted monthly by the 20th day of each (current) month. Beginning in June 2010, all eligible taxpayers must file a return showing the gross sales, gross proceeds, or cost price arising from all taxable transactions for the first fifteen days of the current month and for the last fifteen days of the prior month. All applicable taxes arising from these transactions must be remitted at the time of transmittance. Failure to make a full and timely payment will subject the taxpayer to a penalty of 6% of the amount of the tax underpayment, as well as all applicable interest.

Total taxable sales or purchases are to be computed without regard to the number of certificates of registration held by the taxpayer. However, these provisions do not apply to taxpayers who are only required to file the Consumer’s Use Tax Return, Form ST-7.

Any sales and use tax exemptions arising from purchases of production, distribution, and other internet-access equipment made by internet service providers must be handled as refund requests made to the Tax Commissioner. (Ch. 781 (H.B. 1600), Laws 2009, effective April 8, 2009, applicable as noted)


Virginia has modified its occasional sale exemption for nonprofit organizations that are eligible for an exemption on its purchases and otherwise eligible for the occasional sale exemption. The amendment states that the nonprofit organization will be exempt on its sales of 1) food, prepared food and meals, and 2) tickets to events that include the provision of food, prepared food and meals, so long as such sales take place on less than 24 occasions in a calendar year. (Ch. 338 (H.B. 1779), Laws 2009, effective July 1, 2009)


An out-of-state preparer and seller of direct marketing materials was found not liable for Virginia sales and use tax because its customers do not exercise any right or power over the materials in Virginia, and therefore do not use or consume the materials in the State. Further, the transactions are sales made in interstate commerce because title or possession to the materials passes to the purchaser outside of Virginia and no use of the materials is made in Virginia. (Ruling of Commissioner, P.D. 09-3, Virginia Department of Taxation, February 4, 2009)



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